In a victory for Levin Ginsburg’s client Nano Gas Technologies, Inc., the United States Court of Appeals for the Seventh Circuit reversed the district court’s interpretation of an arbitration award, holding that the defendant could not “wait until he dies” to pay a portion of a damage award. In Nano Gas Technologies, Inc. v. Roe, Case Nos. 21-1809; 1822 (7th Cir., Apr. 25, 2022) the Seventh Circuit ruled that the district court had misinterpreted an arbitration award in concluding that the defendant could satisfy a $500,000 judgment “in such manner as Roe chooses.” In refusing to allow Nano Gas to immediately enforce the underlying arbitration award, the district court interpreted the arbitrator’s “in such manner as [defendant] chooses” language as allowing the defendant to choose when to satisfy the arbitration award, if ever, including by whatever assets he had left at the time of his death. Nano Gas appealed from the district court’s judgment.
Agreeing with Nano Gas, the Appellate Court concluded that, although Mr. Roe “invited ambiguity” through an alternative reading of “in such manner as Roe chooses,” his reading was unreasonable. The Appellate Court recognized that Roe could not “refuse to turn over his only identifiable asset, choose hypothetical forms of payment that may never come to fruition, or require Nano Gas to wait until he dies.” The court agreed with Nano Gas that both the language of the arbitrator’s opinion and common sense resolved this issue. Finally, recognizing that although in certain cases district courts may send a case back to the arbitrator to clarify an award, the Seventh Circuit rejected that procedure in this case because the award’s language compelled only one conclusion.
The panel reversed the district court’s findings regarding Roe’s discretion to satisfy the $500,000 award and remanded to allow Nano Gas to resume enforcing the entire judgment without delay. Levin Ginsburg Shareholder and Chair of Litigation Department, Howard L. Teplinsky, authored the appellate briefs and argued the case on appeal.
On the two-year anniversary of when the world shut down, I found myself reflecting on how my life as a commercial litigator has changed. COVID-19 has disrupted the entire judicial system as we once knew it, forcing courts with already congested dockets to shutter and quickly embrace modern technological advances to enable remote proceedings. With rare exception, Zoom hearings have now become the default, as have years-long delays and undesirable uncertainty—all of which lead to increased costs. While as counsel we have always been faced with the dilemma of how to most effectively and efficiently resolve contentious business disputes consistent with our clients’ objectives, with the COVID-related backlogs courts across the country are facing, arbitration and mediation offer desired alternatives.
Arbitration and mediation are confidential proceedings, whereas litigation is not. Court proceedings are open to the public and copies of nearly all filings are accessible to anyone. Thus, particularly in high-stakes disputes, many businesses prefer the opaque nature of alternative dispute resolution.
What are the primary differences between arbitration and litigation?
• Generally speaking, arbitration is more flexible, less formal, less expensive, simpler, and quicker than a trial.
• Arbitration affords flexibility in the selection of panelists, whereas judge assignments are purely random and, for defendants, depend entirely on where the plaintiff files the case. With arbitration, the parties can select arbitrators with a specific expertise or background in the relevant industry or subject matter of the dispute.
• With arbitration, parties have greater flexibility and control over deadlines and the discovery process. Among other things, parties can limit the types of discovery exchanged as well as the number of depositions.
• Arbitration promotes finality. When the arbitration panel renders a decision, this terminates the dispute (subject to a court’s confirmation of the award, or any of the very limited grounds for challenging an award), whereas the appeal of a court decision can prolong the proceedings for years to come.
What are the primary differences between arbitration and mediation?
• In arbitration, a neutral third-party acts as the judge, hears evidence, and makes a binding decision.
• In mediation, a neutral third-party offers non-binding recommendations and negotiates with the parties to assist them in reaching a resolution. However, unless all parties agree to specific deal points and terms of a resolution, the process is non-binding.
• Parties can agree to mediate a dispute at any point, whereas with arbitration, the hearing typically happens only after motion practice, discovery, and pre-hearing briefing.
The best method of dispute resolution depends on the particular facts and circumstances of your case. Bearing in mind that some disputes are contractually required to be resolved via mediation and then arbitration, having counsel experienced in business disputes is critical to evaluating the risks and benefits of each option. If you would like to discuss these or similar issues in more detail, please contact Katherine A. Grosh at (312) 368-0100 or firstname.lastname@example.org.
Every business with employees should have an employee handbook. An employee handbook is essential because it helps employees to understand what their rights are, what the company’s human resource processes and policies are, standardizes company policies and reduces human resource’s time resolving issues. Handbooks and policies are also often required if an employer wants to take advantage of certain defenses or protections. One very common provision in an employee handbook is a statement advising the employee that nothing contained in the handbook creates a contract between the parties, and the handbook does not alter the “at will” nature of the employment. Recently in Bradley v. Wolf Retail Solutions I, Inc., the United States District Court for the Northern District of Illinois held that because a company’s handbook disclaimed all contract rights, the company could not require its employees to arbitrate their claims, despite the fact that the handbook provided that employees’ claims were to be arbitrated.
In Bradley, the plaintiff filed a class action lawsuit alleging that the employer did not pay overtime under the Fair Labor Standards Act and the Illinois Minimum Wage Law. The handbook contained a dispute resolution provision stating that the employee agreed to mediate any dispute with the company and if not successful, the company and employee agreed to submit the dispute to arbitration. The plaintiff received a digital version of the handbook and signed it by clicking a box next the statement: “I have read, understood and accept the terms and conditions stated in this handbook.” The company filed a motion to compel the plaintiff to arbitrate her claims. The court refused to compel arbitration.
In denying the company’s motion to compel, the court stated that because arbitration is a matter of contract, i.e., the parties must first agree to arbitrate in order to be required to go to arbitration, and a party cannot be compelled to arbitrate a dispute when there’s no valid contract to do so. It was, therefore, incumbent upon the employer to prove the existence of a valid contract to arbitrate. The employer pointed to the dispute resolution provision in the handbook, arguing that the employee acknowledged receipt of the handbook and agreed to the policies therein. The court reasoned, however, that the employer could only rely on the dispute resolution clause in the handbook if the handbook is, in fact, a contract. The court found that because the handbook stated “in no uncertain terms” that it is not an employment contract, the company could not require the employee to arbitrate the dispute.
The question is obvious. How can you force an employee to arbitrate claims, thereby eliminating a public record of the proceedings and keeping the case from a jury, when your handbook does not create any contractual right to do so? Similar to your ability to enforce a non-compete with an at-will employee, a separate arbitration agreement will likely be enforceable if the agreement is a stand-alone contract and where consideration is given for the agreement. The consideration may be in the form of a payment, the right to continued employment, or even the agreement to arbitrate a claim itself can be sufficient consideration. In any event, do not assume that your employees will be compelled to arbitrate, rather than litigate, their class action lawsuits if the “agreement” is contained in the employee handbook where no contract is created. Employers have run into similar problems when an employee uses confidential information, but the only confidentiality provision is within the handbook (which by its nature is not a contract). It is also important to ensure that any arbitration agreement with an employee be carefully crafted to eliminate any class or collective claims.
For more information, please contact:
Howard Teplinsky at: email@example.com or 312-368-0100.