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Arbitration tops list of key Supreme Court cases for risk managers

Arbitration tops list of key Supreme Court cases for risk managers

The U.S. Supreme Court is considering cases involving arbitration, class actions and other matters of interest to risk managers as it proceeds through its new term.

The justices have already heard arguments in an arbitration case called New Prime Inc. v. Oliveira, which was argued Oct. 3, and a product liability case called Air and Liquid Systems Corp. v. DeVries, which was argued Oct. 10.

And observers will be paying close attention to the role newly installed Associate Justice Brett Kavanaugh plays in deciding liability cases. Because Justice Kavanaugh served on the U.S. Court of Appeals for the District of Columbia Circuit, “he hasn’t had a lot of opportunity to rule on liability cases,” said Glenn Lammi, chief counsel for the legal studies division at the Washington-based Washington Legal Foundation.

At issue in the New Prime case, which was argued before Justice Kavanaugh was confirmed, is the scope of the Federal Arbitration Act’s requirement that courts enforce arbitration agreements and whether it applies to independent contractors. Section 1 of the FAA says that it does not apply to “to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” An independent contractor working for a trucking company sued, claiming that was covered by the exemption.

“It’s definitely an important case” because of the changing economy with an increased dependence on independent contractors, said Mr. Lammi.

“We see the overall arbitration issue as important,” said Sherman Joyce, president of the Washington-based American Tort Reform Association, pointing to the fact that New Prime is one of several arbitration cases the high court is considering this term.

The court will hear arguments Oct. 29 in another arbitration case called Lamps Plus Inc. v. Varela. The question before the justices is whether the Federal Arbitration Act forecloses a state-law interpretation of an arbitration agreement that would authorize class arbitration based solely on general language commonly used in arbitration agreements.

“There’s a world of difference between the federal class action rules and class action arbitration that isn’t subject to those rules that can be very onerous and unfair and lopsided,” said Lawrence Ebner, chairman of the Chicago-based Defense Research Institute’s amicus committee.

In an amicus brief to the court, the institute said the 9th U.S. Circuit Court of Appeals opinion in Lamps Plus “reads an agreement to participate in ‘arbitration’ to mean an agreement to participate in class arbitration” that would “subject numerous defendants to the very financial risks and burdens they sought to contain by contracting for arbitration.”

In Air and Liquid Systems Corp., the issue is whether defendants in a product liability suit can be held liable under maritime law for harm caused by products they did not manufacture, sell or distribute. The case involves sailors who were exposed to asbestos while in the U.S. Navy. Although Air and Liquid Systems Corp. did not manufacture asbestos, a lower court held that it could nonetheless be liable for injuries stemming from asbestos in another product if the company could reasonably foresee that its product would be used with a product that contained asbestos.

Depending on the court’s ruling, the decision “could be very important or very limited,” said Mr. Lammi. If the court determines that the Air and Liquid Systems defense doesn’t apply under maritime law, it could have an impact on state courts dealing with product liability cases, he said.

The court will also examine the scope of the Class Action Fairness Act when it considers Home Depot U.S.A. Inc. v. Jackson, which asks whether an original defendant to a class action claim can remove the class action if it otherwise satisfies the jurisdictional requirements of the statute when the class action was originally asserted as a counterclaim against a co-defendant. No date has been set for oral argument.

Meanwhile, in Merck Sharp & Dohme Corp. v. Albrecht, the court will decide whether a state-law failure-to-warn claim is pre-empted when the U.S. Food and Drug Administration rejects the drug manufacturer’s proposal to warn about the risk after being provided with the relevant scientific data or if such a case must go to a jury for conjecture as to why the FDA rejected the proposed warning. No date has been set for oral argument.






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