Metropolitan News-Enterprise


Monday, October 19, 2020


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Ninth Circuit:

Ninth Circuit Panel Divided on Whether Agreement to Arbitrate Was Formed

Majority: Contract Provision That Alternate Dispute Resolution Was to Be Employed Would Not Support an Order Compelling Arbitration Because There Are Other Forms of ADR, Such as Mediation


By a MetNews Staff Writer


The Ninth U.S. Circuit Court of Appeals has held, in a 2-1 opinion, that an agreement requiring that any disputes between the parties be resolved through alternate dispute resolution would not authorize the District Court to compel arbitration, with a dissent arguing that arbitration is the only form of ADR that is a substitute for litigation—which the contracting parties wanted to avoid—and must have been what they had in mind.

In a memorandum opinion filed Thursday, the majority, acting on an interlocutory appeal, affirmed an order by District Court Judge George H. Wu of the Central District of California denying a motion by defendant Michigan Logistics, a freight company, to require arbitration of the claims against it by Randy Bates, suing on behalf of himself and others similarly situated.

Bates, a former delivery driver for the defendant, asserts that the employer erroneously classifies drivers as independent contractors, rather the employees, and thereby denies them minimum wages, overtime, meal and wage breaks, and business expenses.

The 2010 agreement in question provided that Bates and Michigan Logistics “both agree to resolve any disputes between [them] directly or with an agreed form of Alternative Dispute Resolution” and “agree that neither will engage or participate in a collective or class suit against the other.”

Majority’s View

Thursday’s majority—comprised of Ninth Circuit Judge Marsha Berzon and Sixth Circuit Senior Judge Eugene E. Siler, sitting by designation—declared:

“We hold that the parties did not have an agreement to arbitrate, and so affirm.”

The jurists explained:

“Here, the dispute resolution provision of the parties’ contract does not bind the parties to pursue dispute resolution through a third party, and does not contain any of the elements of a true arbitration agreement….The agreement binds the parties only to ‘resolve any disputes...directly or with an agreed form of alternative dispute resolution.’ ”

Various Forms

There are forms of ADR other than arbitration, they noted, observing:

“Mediation, for instance, is a form of alternative dispute resolution that is not arbitration….The parties’ contractual agreement to agree to some form of alternative dispute mechanism is therefore not an agreement to be bound by arbitration.”

Although Baten initially demanded arbitration, that, standing alone, is not enough to create a post-dispute agreement to settle a dispute in that manner, the opinion says, declaring that under California law, which applies in the case, there must be a meeting of the minds on the specifics. The opinion points out that no agreement was reached as to how the arbitrator would be selected, what rules would govern, or who would pay for the services.

Dissenting Opinion

Dissenting, Ninth Circuit Judge Kenneth Kiyul Lee said:

Randy Baten argues that the parties never agreed to arbitrate because the term ‘Alternative Dispute Resolution’—which is not defined in the agreement—can include mediation or other non-binding forms of dispute resolution. But based on the full context of the Dispute Resolution section, ‘Alternative Dispute Resolution’ can only mean one thing—arbitration.”

Lee provided this reasoning:

“Here, the Dispute Resolution provision makes clear that the parties have ruled out litigation: the parties agree to ‘resolve any disputes...directly’ (i.e.. negotiate and settle the case) or ‘with an agreed form of Alternative Dispute Resolution.’ As the majority points out, the term ‘alternative dispute resolution’ can encompass non-binding dispute resolution such as mediation. But in the context of this provision, the parties could not have intended ‘alternative dispute resolution’ to include mediation because otherwise they would be in a no man’s land where there is no binding way to resolve any disputes.”

Baten understood that the parties had agreed to arbitrate their disputes, he asserted, because when he made a demand for arbitration (in 2018), he specified that it was “pursuant to an Agreement signed on April 5, 2010,” Lee said.

The case is Baten v. Michigan Logistics, Inc., 19-55865.


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