The precise scope of a new law ending forced arbitration and joint-action waivers for victims of workplace sexual misconduct has yet to be determined, but the law presents many interesting questions surrounding federal policy as well as statutory and contract interpretation.
There are several compelling factors supporting a broad reading of the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 that may keep more cases and claims in court and out of arbitration than might otherwise be expected, given courts’ historically strong pro-arbitration stance.
A deeper dive into language chosen for the new law, which amends the Federal Arbitration Act, reveals several conflicting elements that could influence its interpretation. Factors including existing federal law surrounding arbitration agreements, the language of the new law, comments from Congress, and rules of interpretation for both statutes and contracts could bolster the argument that the whole “case” should remain in court—especially claims that are “related” to the sexual misconduct claims the new law covers.
A Question Emerges About Piecemeal Litigation
In February, Bloomberg Law reported on the then-bill (H.R. 4445), identifying a key issue that’s likely to be the subject of future litigation: The language in the law exempts “cases,” not “claims,” from contractual arbitration and joint-action waivers.
Specifically, the bill, which was signed into law this month, states that “no predispute arbitration agreement or predispute joint-action waiver shall be valid or enforceable with respect to a case which is filed under Federal, Tribal, or State law and relates to the sexual assault dispute or the sexual harassment dispute.” (Emphasis added.)
This language raises the question of whether claims will be litigated piecemeal—with the sexual assault and sexual harassment claims staying in court under the new law and the rest of the claims going to arbitration—or whether courts will choose to keep the whole action in court, the story said.
While splitting a case up might ordinarily be the result under FAA case law, several elements of the new law point in the other direction.
Courts Routinely Split Cases to Further Arbitration
The baseline expectation for interpreting the new law would be for courts to read it narrowly, for several reasons.
First, there have been decades of strong pro-arbitration interpretation of the FAA from the courts.
Second, the fact that the new law is written as an exception to the FAA would also seem to point to a narrow reading of the law.
Third, courts aren’t worried about piecemeal litigation and arbitration of cases under the FAA, and have not hesitated to send some claims in a case to arbitration, while keeping others in court. Courts, including the U.S. Supreme Court, haven’t been dissuaded by arguments about inconsistent results or inefficiencies resulting from this approach.
But the question of what the new law means isn’t so simple, as the act’s language and legislative history show.
‘Case’ Is a Broad Term
There are several arguments in favor of defining the term “case” broadly, to encompass multiple claims.
Practically speaking, it’s understood by attorneys to include an entire lawsuit, including all the claims and defenses raised in that action. Indeed, courts number and label dockets with “Case Number,” and that’s understood to mean the entire action.
Similarly, the latest edition of Black’s Law Dictionary defines “case” to mean “a civil or criminal proceeding, action, suit, or controversy at law or in equity.” These are just a few examples, but the idea that “claims” are a smaller part of a “case,” and that “case” is the more expansive term, is a commonly understood concept in the law.
Thus, the door is wide open for an argument that it’s the entire action, and not just any sexual abuse or sexual harassment claim within that action, that’s meant to be free from arbitration requirements and joint-action waivers.
Legislative History Supports Litigating ‘Related’ Claims
Both the House and Senate legislative history surrounding the new law support leaving the whole “case” in court.
The House Judiciary Committee report that accompanied the bill contained a surprising amount of language indicating the drafters’ belief that courts have interpreted the FAA too broadly, stating that the FAA was not originally intended to apply to disputes “between a business and its consumers or workers,” and that the Supreme Court had “drastically expanded the applicability of the FAA” beyond what was originally intended.
On the other hand, senators Joni Ernst (R-Iowa) and Lindsey Graham (R-S.C.) stated that they wanted the law read “narrowly,” and were concerned about attorneys trying to “game the system,” according to Bloomberg Law’s earlier reporting.
But these senators, too, explicitly acknowledged that claims “related” to sexual assault and harassment should be kept in court, and that only “unrelated” claims ought to be arbitrated under contracts that specify arbitration.
That’s consistent with the amendment’s use of the broad term “case” instead of the narrower “claim.”
While it’s debatable whether any of this legislative history would be considered by a court, it seems to provide a strong base for keeping more than just the one count of sexual assault or harassment out of arbitration.
Every Arbitration Clause Is a Matter of Contract
Arbitration clauses are contracts: written agreements between parties, such as employer and employee. They’re often broadly drafted, and a court will always determine a clause’s scope when deciding upon the appropriate forum. Contract language is key.
Canons of contract interpretation might push against the courts’ traditional pro-arbitration position. One such canon is contra proferentem, under which an ambiguous contract is construed against the interest of its drafter. Another canon is that arbitration clauses in employee or consumer contracts are “contracts of adhesion,” a theory that can sometimes lead courts to find contracts unconscionable and therefore unenforceable.
While such arguments haven’t been very successful against arbitration clauses generally under the FAA, the new act might provide another opportunity to raise these arguments, especially in light of the act’s policy goals, including ensuring access to the courts for victims of sexual workplace misconduct.
The only thing that’s clear is that there will be many moving pieces to reconcile. But there’s sound support for keeping an entire “case” out of arbitration if the other claims in that case “relate” to a sexual assault or harassment claim.
Bloomberg Law is analyzing how the enactment of the new forced arbitration law affects lawyers in practice areas like employment, M&A, securities, and commercial law. Click here for the original article on the law’s passage, which will be updated to add links to each follow-up analysis as it is published.
Bloomberg Law subscribers can find related content on our Legislative Resources page; our Practical Guidance: Arbitrability, Practical Guidance: Contract Actions, and Practical Guidance: Contract Defenses pages; and our In Focus: Contract Drafting page.
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