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Gorsuch’s 10th Circuit Work Backs ADR and the FAA, But His Opinions Will Depend on His View of Contracts

Court Decisions

By Russ BleemerMarch 2017 | Print
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The ADR vetting of U.S. Supreme Court nominee Neil M. Gorsuch doesn’t change much: The Tenth U.S. Circuit Court judge still holds the conservative ideological categorization that the broader view of his opinions inspires.

And it also doesn’t say much about how he will rule when a conflict resolution matter comes up before a case at the Supreme Court.

That’s because while Gorsuch has been part of a fair number of cases involving arbitration and mediation in his decade on the appellate bench, his treatment of topics falls along conventional lines: He’s deferential to the Federal Arbitration Act, writing that its boosting of the process is universal.

He’s even had a rare appellate take on mediation confidentiality, and comes out, characteristically, strongly in favor of it.

But in his ADR work, Gorsuch, who was nominated to fill the U.S. Supreme Court vacancy Jan. 31 by President Donald J. Trump, follows an instinct for diving into contract principles, and basing his reasoning on what the parties said they wanted, even if they didn’t always act in support of their own writing.

The result is that the strong business lean attributed to Gorsuch’s jurisprudence is harder to find in his ADR cases. But see, e.g., Sara Randazzo, Judge Neil Gorsuch’s Time on Bench: Several Opinions Favor Businesses Over Consumers, Wall Street Journal (Jan. 31)(available at http://on.wsj.com/2kqPRyz)(describing a Gorsuch arbitration case).

In fact, Gorsuch’s text-centric analysis has produced a range of arbitration commentary, from the view that the potential new justice “may disfavor expansive interpretations of the FAA” (Imre Szalai, “Supreme Court Nominee Gorsuch and Arbitration Law,” Outsourcing Justice: The Rise of Modern Arbitration Laws in America blog (Jan. 31)(available at http://bit.ly/2kIBC61)) to the view that he would support arbitration. George Friedman, “Supreme Court Nominee Gorsuch Seems to be Pro-Arbitration!” Securities Arbitration Commentator blog (Feb. 3)(available at http://bit.ly/2k3TjQj).

While his strong adherence to interpreting the text of the law and the contracts in front of him may encourage a range of the nominee’s potential Supreme Court views, his arbitration opinions don’t indicate how he would lean in the clash between two federal laws such as the one presented in the National Labor Relations Act-Federal Arbitration Act face-off accepted by the Court earlier this year.

Gorsuch, assuming he is confirmed by the U.S. Senate by the start of the Fall 2017 term, would help decide the three cases on the NLRA-FAA faceoff. Confirmation hearings on the circuit judge’s nomination begin March 20 before the Senate Judiciary Committee.

The 49-year-old Gorsuch, who has been on the Tenth Circuit bench in Denver since President George W. Bush nominated him and he was confirmed by the Senate in 2006, has participated in appellate panels that have backed arbitration awards, compelled the process and reversed a failure to compel arbitration.

But the relatively narrow scope of arbitration cases in which the circuit judge has participated, and the issues on which the cases were decided, don’t show a pronounced tilt toward business or consumers, instead adhering to an interpretation of the contract at the center of the matter at hand.

PREFERRED PATH

In his most arbitration-centric decision, Gorsuch’s preferred path is adherence to contract law principles, combined with a customary view of the Federal Arbitration Act among federal judges.

“Everyone knows the Federal Arbitration Act favors arbitration,” Gorsuch wrote in the opening to Howard v. Ferrellgas Partners, No. 13-3061 (10th Cir. April 8, 2014)(available at http://bit.ly/2jTm6Wi). But, he emphasized, “before the Act’s heavy hand in favor of arbitration swings into play, the parties themselves must agree to have their disputes arbitrated.” (Emphasis is Gorsuch’s.)

He continued, “While Congress has chosen to preempt state laws that aim to channel disputes into litigation rather than arbitration, even under the FAA it remains a ‘fundamental principle’ that ‘arbitration is a matter of contract,’ not something to be foisted on the parties at all costs.”

Still, there is little in the 38 arbitration opinions that the Tenth Circuit website produces in a search of Gorsuch’s work—mostly incidental mentions—that rises to the level of significance of the preemption of state law and class waiver issues that have steadily appeared at the U.S. Supreme Court in its recent history.

But Gorsuch may be participating in the decisions on three cases taken by the Court on Jan. 13 that will be argued together in the fall. The cases are expected to settle whether employees can be required, as a condition of employment, to arbitrate their workplace disputes individually, while waiving their rights to a class process.

The long-simmering group of cases is a dispute between interpretations of the National Labor Relations Act and the Federal Arbitration Act, and could officially extend to the employment arena the leading class waiver/mandatory arbitration case in consumer contracts, AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011) (available at http://bit.ly/2eu6jbb)—which Gorsuch was quoting directly in the passage above.

Perhaps central to Gorsuch’s view of the collision between the federal laws is the nominee’s well-publicized animosity toward the so-called Chevron Doctrine, in which the U.S. Supreme Court has backed deference to administrative agency determinations. See Chevron v. National Resources Defense Council, 467 U.S. 837 (1984)(available at http://bit.ly/1EirXXt).

In an immigration law decision last year, Gutierrez-Brizuela v. Lynch, No. 14-9585 (Aug. 23, 2016)(available at http://bit.ly/2kPDvh5), Gorsuch blasted Chevron in a concurrence, writing that its deference to the executive branch agencies in derogation of legislative power runs counter to the Constitution’s separation of powers checks-and-balance system.

That view, assuming fellow justices were to sign on, could potentially control the arbitration outcome in the three employment arbitration cases at the Court. (For more on the Supreme Court cases, see “The Final Round: Supreme Court Readies an FAA-NLRA Showdown,” at page 42 of this issue.).)

But if the Chevron Doctrine doesn’t figure in a Gorsuch view of the current arbitration cases, the National Labor Relations Board’s moves to preserve class actions by forbidding mandatory arbitration may be another hot button for the former U.S. Supreme Court clerk.

CLASS PROBLEMS

Gorsuch has problems with class actions in securities cases.

When he was in private practice, he wrote that “economic incentives unique to securities litigation encourage class action lawyers to bring meritless claims and prompt corporate defendants to pay dearly to settle such claims.” Neil M. Gorsuch and Paul B. Matey, “Settlements in Securities Fraud Class Actions: Improving Investor Protection,” Critical Legal Issues—Working Paper Series No. 128 (Washington Legal Foundation April 2005)(available at http://bit.ly/2kTBDCZ).

Still, despite involvement as a panel member in cases producing about a dozen arbitration opinions or orders, the Howard v. Ferrellgas Partners case discussed above is one of only three arbitration writings exclusively by Gorsuch in his decade-long tenure on the court. One of the three is a dissent.

The Tenth Circuit website revealed Gorsuch’s opinions, and orders with judgments, but didn’t produce unpublished opinions in which Gorsuch may have participated.

In Howard, Gorsuch wrote that the customarily swift determination by a lower court of whether the parties in the suit agreed to arbitration didn’t take place—at all, not fast or slow.

The plaintiff had filed a class action for overcharges against the propane supplier defendant. The defense asked for arbitration, and Gorsuch described how the lower court botched its inquiry. He first noted that the district court, “[u]nsure whether [defendant] Ferrellgas had shown an agreement to arbitrate in its initial motion, … entertained discovery and further motions practice.”

The trial court, Gorsuch reported, found “too many unresolved factual questions remained and proceeded to invite yet more discovery followed by yet more motions practice.”

And nearly a year and half after the defendant filed its motion to compel arbitration, the district court, Gorsuch wrote, “issued an order in which it found that material disputes of fact still prevented it from saying for certain whether or not the parties had agreed to arbitrate. But rather than proceeding to resolve the conflicting factual accounts through trial as the Act requires, the court entered an order denying arbitration outright.” [Emphasis is Circuit Judge Gorsuch’s.]

“That was error,” continued Gorsuch, exhibiting his breezy writing style in an area dry even by circuit law standards, explaining,

In these circumstances, the [Federal Arbitration] Act’s summary trial can look a lot like summary judgment. But when, as in this case, a quick look at the case suggests material disputes of fact do exist on the question whether the parties agreed to arbitrate, round after round of discovery and motions practice isn’t the answer. Parties should not have to endure years of waiting and exhaust legions of photocopiers in discovery and motions practice merely to learn where their dispute will be heard. The Act requires courts process the venue question quickly so the parties can get on with the merits of their dispute in the right forum. It calls for a summary trial—not death by discovery.

Then, Gorsuch spread the blame around for the disastrous approach to arbitration. “Of course, the parties here didn’t exactly help themselves,” he wrote, adding, “They were anything but quick to seek the trial promised by the Act. In fact, they seemed content enough to haggle along together in the usual way of contemporary civil litigation, all about discovery disputes and motions practice and with only the most glancing consideration given to the possibility of trial.”

The case is a war over a contract, and whether and when it took effect. Gorsuch explained that it was unclear from the record whether an oral contract for the propane tank and initial delivery was followed by a written contract for future deliveries containing the arbitration clause, restricting arbitration to the subsequent deliveries.

Regardless, Gorsuch—joined by his two fellow appeals panel members—ruled that with material facts in dispute, the district court should have proceeded to a trial on whether an arbitration agreement existed, and should not have denied the request for arbitration.

He wrote that the Federal Arbitration Act should have shown the path to the case’s resolution. “We appreciate both sides’ evident frustration at how long this case has lingered at the transom without having entered either the door into arbitration or litigation,” Gorsuch concluded, adding,

It’s understandable that everyone might want us to give the case a firm nudge (one way or the other) so the parties’ dispute can finally progress past preliminary venue questions to the merits. But unresolved material disputes of fact block our way—disputes that could and should have been resolved years ago according to the procedures the FAA provides.

BROADER VIEW

Gorsuch took a broader FAA view in a dissent in a 2-1 Tenth Circuit arbitration case, Ragab v. Howard, No. 15-1444 (Nov. 21, 2016)(available at http://bit.ly/2gCL3pn). The dissent—in a case where his panel affirmed a lower court’s ruling that conflicting arbitration agreements in six contracts between two parties should not be arbitrated because there was no meeting of the minds as to conducting the arbitration—appears to be is his most demonstrative view of the FAA’s effect on state laws.

Gorsuch strongly rejects the majority’s use of a New Jersey case that struck arbitration where multiple contracts conflicted on the terms of arbitration. He notes that the New Jersey ruling had little application to Colorado laws, but also explains that it may not pass muster with the Supreme Court for its disregard of the FAA.

The New Jersey ruling, he explains, was a deep dive into the state’s consumer protection laws, in a case where the Tenth Circuit Colorado plaintiff more closely resembled a merchant. But he noted that federal preemption is a big issue: 

Whether or not the FAA would preempt New Jersey’s special ‘extra clarity’ rule for certain kinds of arbitration agreements, that possibility undoubtedly exists and seems to me to counsel against endorsing it without a good deal more careful investigation than the parties offer us in this case.

He wrote that with six of the parties’ interrelated commercial agreements containing arbitration clauses, and other circumstances, “In my view, parties to a commercial deal could have hardly demonstrated with greater clarity an intention to arbitrate their disputes and I see no way we might lawfully rescue them from their choice.”

Procedural holes are frequently filled by the parties, he explained, in providing “easy workarounds that I believe would be more consistent with the parties’ expressed purposes than the course my colleagues chart.”

MORE CASES

Gorsuch was the author of one additional unanimous panel order and judgment on the Tenth Circuit’s website that backed a lower court’s refusal to compel arbitration for a former top executive who was fired by a pharmaceutical company. Genberg v. Porter, No. 13-1140 (May 12, 2014)(available at http://bit.ly/2kpuRs7).

But the bulk of Gorsuch’s arbitration work appearing on the Tenth Circuit website, at www.ca10.uscourts.gov, was as part of a panel where others wrote the opinion or order. Among the opinions, Gorsuch joined his fellow circuit judges in backing a lower court ruling that a suit by a union under the Railway Labor Act belonged in mandatory arbitration. BMWE v. BNSF Railway, No. 12-3061 (March 2, 2010)(available at http://bit.ly/2kpIwif).

In addition, he participated in panels in the following cases but didn’t write the unanimous opinion or order and judgment:

  • An order noting that an arbitration acts as a res judicata bar against a subsequent suit related to the wrongful discharge suit by an ex-Department of Veterans Affairs employee, backing a Merits Systems Protection Board order. Johnson v. DOVA, No. 14-9619 (May 22, 2015)(available at http://bit.ly/2kOYaBK).
  • An order strongly backing a major defense contractor’s mandatory arbitration clause contained in its employment dispute resolution program. Pennington v. Northrop Grumman Space & Mission Systems Corp., No. 07-2250 (March 14, 2008)(available at http://bit.ly/2jTh49F).
  • An affirmance of a Colorado court that overturned an arbitration award against a company which claimed that an arbitration notice presented by its Chinese business partner didn’t put the company on notice of a deadline it missed to participate in the ADR process. CEEG (Shanghai) Solar Science v. Lumos, No. 15-1256 (July 19, 2016)(available at http://bit.ly/2kOUorT).
  • A non-precedential order and judgment as to arbitration backing a lower court that refused to compel arbitration, noting that the defendants seeking ADR didn’t establish that an arbitration agreement existed. Bellman v. i3Carbon, No. 12-1275 (May 2, 2014)(available at http://bit.ly/2kp3FJT).
  • An order, also non-precedential as to the FAA, sending a case to arbitration and entitling the party to attorneys’ fees and costs “incurred in enforcing its right to arbitrate.” The order reversed a federal district court denial of arbitration. The winning defendant in the Tenth Circuit was a builder that sold the plaintiffs two condominiums with a mediation and arbitration clause in the sales agreement. Lamkin v. Morinda Properties Weight Parcel, No. 11-4022 (Sept. 19, 2011)(available at http://bit.ly/2jTdKeS).
  • A case affirming dismissal of an employee’s wrongful termination suit after it had been arbitrated, citing claims preclusion under the arbitration award. Lewis v. Circuit City Stores, 05-3383 (Aug. 31, 2007)(available at http://bit.ly/2keVY6J).
  • A decision reversing two federal district court denials of arbitration against an employer charged by workers with violations of the Fair Labor Standards Act and an Oklahoma labor law, focusing on the scope of an arbitration clause, but in the remand order asking the lower court to consider whether the arbitration agreement preserves FLSA rights. Sanchez v. Nitro-Lift Technologies, 12-7046 (Aug. 8, 2014)(available at http://bit.ly/2kT2Ple).
  • A determination that one of “two factually distinct injuries” related to a commercial contract fell under an arbitration clause, reversing in part a magistrate judge and a federal district court which had found that the case couldn’t be arbitrated. Chelsea Family Pharmacy PLLC v. Medco Health Solutions Inc., No. 08-5103 (June 2, 2009)(available at http://bit.ly/2jtiefT).

MEDIATION SURPRISE

U.S. Circuit Court cases referencing mediation aren’t unusual. Since most cases settle before they get to a courthouse, and long before they reach the appellate levels, the intervention of a third-party neutral is a commonplace part of the recounting of the case histories that ultimately appear before appeals courts.

But it’s unusual for a U.S. Circuit Court to write and rule on mediation mechanics. In fact, Judge Gorsuch, has written about the mechanics and effects of mediation in his decade on the bench at the circuit’s home in Denver.

In Hand v. Walnut Valley Sailing Club, No. 11-3228 (April 4, 2012)(available at http://bit.ly/2jVWsO7), a unanimous Tenth Circuit panel strongly backed mediation confidentiality in an order and judgment written by Gorsuch—a rare pronouncement on mediation and how it works by a federal circuit court.

For fans of mediation, it’s an instructive and fun read for its support of the ADR process, even though the appeals court’s support of a district court dismissal because a litigant abused mediation confidentiality rules was focused on a pleading technicality.

In the unanimous, three-judge panel order, Gorsuch details a move by the plaintiff, a member of the defendant sailing club, to tell “at least” 44 club members and others why a mediation of the plaintiff’s suit against the club failed.

The email sent by the plaintiff “dis­parage[d] the club’s positions and relat[ed] all the details of the mediation, including what the mediator said and the amount of the club’s settlement offer,” the order states.

The plaintiff, according to the Gorsuch judgment, had complained to Kansas’s governor “that a storage shed owned by [the] sailing club didn’t comply with the Americans with Disabilities Act.” The club revoked the plaintiff’s membership, and the plaintiff filed suit.

The plaintiff had claimed ignorance of the mediation confidentiality law, but in dismissing the case, Gorsuch pointed out that the issue hadn’t been briefed in the district court. The Tenth Circuit order says that the plaintiff’s contention that his lack of knowledge of the law was in an accompanying affidavit, and therefore wasn’t sufficient where “both sides’ briefing, all prepared by retained counsel, proceeded on the premise that he knew the mediation was supposed to remain confidential. [The plaintiff had] argued merely that the club’s request for dismissal was a disproportionate sanction.”

That was the sole issue, Gorsuch wrote, that the appeals panel saw as “worthy of mention,” noting that without the briefing, the issue couldn’t be considered.

Nevertheless, that conclusion followed the Tenth Circuit panel’s strong endorsement of mediation confidentiality. “Our review confirms that the district court did not abuse its discretion,” wrote Gorsuch, adding that the plaintiff

committed a serious violation of the confidentiality rule. He didn’t just share a few tidbits about the mediation with a friend, he revealed extensive and prejudicial details about the mediation to over forty people, many likely witnesses in the case. And he did so not accidentally but intentionally. In his deposition, [he] explained that he “absolutely” disclosed mediation information because he believed club members “had a right to know.”

Earlier in the order, Gorsuch backed the U.S. District Court holding that his panel was affirming, and noted that the plaintiff’s disclosures

“demonstrated complete disrespect for the confidential mediation process.” [Citation omitted.] In discussing the importance confidentiality plays under the congressional scheme created by the Alternative Dispute Resolution Act of 1998, see 28 U.S.C. § 652(d) (requiring district courts to “provide for the confidentiality of the alternative dispute resolution processes and to prohibit disclosure of confidential dispute resolution communications”), the court recognized that an assurance of confidentiality encourages parties to participate in mediation with candor and is essential to the success of mediation programs. The need for confidentiality, the court said, is particularly strong where a mediation program is, as here, mandatory, “because participants are often assured that all discussions and documents related to the proceeding will be protected from forced disclosure.” [Citation omitted.]

Still, the Gorsuch-written Hand order isn’t a published opinion and comes with a caveat: “This order and judgment is not binding precedent, except under the doctrines of law of the case, res judicata, and collateral estoppel. It may be cited, however, for its persuasive value consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.”

* * *

Gorsuch also had to address the effect of a mediation settlement agreement in A.F. v. Espanola Public Schools, No. 14-2139 (Sept. 15, 2015)(available at http://bit.ly/2ki2QAa).

The case was mediated under the requirements of the Individuals with Disabilities Education Act. But while the IDEA’s procedures also contemplate moves for further relief under other statutes, that relief can be pursued only after the act’s procedures have been exhausted.

Both parties in the original case took advantage of the mediation step in the act, according to the 2-1 Gorsuch opinion. The case settled.

Then, the plaintiff filed suit on behalf of her daughter under the Americans with Disabilities Act, the Rehabilitation Act, and 42 U.S.C. § 1983, making the same allegations in federal court that she had made in her original administrative complaint, and which were successfully resolved in mediation.

The Gorsuch opinion affirmed a district court decision that said the plaintiff hadn’t exhausted her remedies under the IDEA scheme for the second suit.

The plaintiff claimed that because she had mediated her claim under the IDEA procedure scheme, the procedures’ application to her new claim had been exhausted, or were inapplicable.

Gorsuch’s opinion didn’t take issue with the mediation results itself, and even agreed that the plaintiff’s court case could proceed under the other statutes, so long as it followed the IDEA procedures required for the other laws.

But the opinion said that the IDEA procedure enabling the subsequent suit also required exhaustion of the claims, under the statute’s plain terms. The original mediation wasn’t enough. For those claims using the statute to launch the plaintiff’s subsequent lawsuit, the opinion said, more is required for exhaustion of the IDEA resolution procedures than the mediation for the first IDEA claim.

A dissent stated that a more reasonable interpretation of the IDEA is that a mediated resolution constitutes exhaustion for the pursuit of other permitted claims.

ADR Comfort

The likely new justice: President Trump has nominated Tenth U.S. Circuit Court Judge Neil Gorsuch to the U.S. Supreme Court.

The conflict resolution background: In his decade on the appeals court, the circuit judge has tackled both arbitration and mediation.

The view: Gorsuch’s ADR decision making is wrapped up in his analysis of the contract in the case.

Biography

The author edits Alternatives to the High Cost of Litigation. This article is an updated and expanded combination of posts originally written for the CPR Institute’s blog, CPR Speaks, at https://blog.cpradr.org, on Feb. 1.

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