Our June 11th blog post broadly discussed arbitration and the upward trend of including mandatory arbitration clauses in agreements. This week, we analyze the pros and cons of arbitration to elucidate when arbitration clauses are useful and when they are potentially harmful. In arbitration, individuals and entities bring legal claims against one another outside the public court system. Although many aspects of arbitration are similar to a civil court trial, arbitration has a number of key differences. Pros Speed – Arbitration is generally faster than litigation. Whereas litigation often takes years, the arbitration process may only take a few months. However, arbitration can take longer when there are…
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A Beginners Guide to Arbitration – Part 1
Chipotle is currently embroiled in a multi-year wage theft lawsuit. In 2014, approximately 10,000 current and former Chipotle employees filed a class action lawsuit alleging the company failed to compensate employees for work they performed “off the clock”. The employees further claim these off the clock hours are required by Chipotle to meet company-wide labor and payroll budgets. Chipotle responded that 2,814 of the workers should be dismissed from the lawsuit because their employment contracts include a waiver or their right to join class action lawsuits and an agreement to resolve all disputes via arbitration. The United States Supreme Court issued a ruling last month which lends support to…
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5 Things You Need to Know About the Equifax Breach and What to Do About It
(1) What Happened Equifax discovered a breach of personal and financial information on July 29, 2017. They hired security company Mandiant on August 2. The public wasn’t notified until September 9 when Equifax claims it finally understood the scope of the breach. Around 143 million Americans and in some cases, UK and Canadian residents, were affected. The private data that was exposed is crucial to people’s financial identities. Social security numbers, birth dates, and addresses were stolen, leaving those Americans vulnerable to identity theft. In some instances, driver’s license numbers were also stolen. And finally, the credit card numbers of approximately 209,000 people were a part of the breach.…
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North Carolina Business Court Enforces Arbitration Agreement Prohibiting Discovery, Live Testimony, and a Full Hearing
In a January 2016 (unpublished) order, the North Carolina Business Court (NCBC) enforced a contract provision compelling arbitration and prohibiting any discovery prior to the arbitration.[1] In Taggart v. Physicians Pharmacy Alliance, Inc., James Taggart sold his business, Physicians Pharmacy Alliance, Inc. (“PPA”), in a stock purchase agreement. The agreement contains a provision mandating arbitration as to “any claim, controversy, or other matter in question based upon, arising out of, or otherwise in respect of this Agreement.” The agreement further specifies: “[i]t is the desire and intent of the Parties that such arbitration be held without any discovery,…
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Fourth Circuit: Arbitration Agreement in Employee Handbook Not Binding
A recent decision by the United States Court of Appeals for the Fourth Circuit ruled that a North Carolina employee suing under federal and North Carolina law for wage and hour violations was not required to participate in arbitration despite an arbitration clause in her employee handbook.[1] The Fourth Circuit acknowledged that North Carolina law would ordinarily bind the employee via implied consent to the clause, but she signed an acknowledgement form upon receipt of the handbook that expressly stated the handbook provisions did not constitute a binding contract. Rose Lorenzo, an employee of Prime Communications, LP, managed a…
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North Carolina Business Court Reaffirms Breadth of Arbitrators’ Authority in Recent Decision
A recent decision by the North Carolina Business Court (NCBC) re-affirmed long standing precedent that an arbitration award is customarily final and binding, even if it includes an error of fact or law.[1] In the most recent case, Killian/Simonini, LLC argued the arbitrator exceeded his authority by impermissibly including consequential and punitive damages in his award, which were not provided for in the arbitration clause of their operating agreement. Killian/Simonini further argued the North Carolina Limited Liability Act controls and limits the remedy for failure to make capital contribution payments to a LLC to the actual amount of the payments.[2] Therefore, they contended the…
