SCOTUS Rules in Arbitration Agreement and Habeas Corpus Cases

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Despite a long list of debated cases awaiting decision, the Court is deciding only two today, neither of them. Dobbs.

Morgan v. Sundance, Inc., is an important case for any civil litigant, but it is especially significant for those who deal with labor disputes potentially governed by arbitration agreements and for those who draft such agreements in the first place. As is well known, the Court has in recent years frequently upheld the primacy of arbitration agreements under the Federal Arbitration Act (FAA). In the Morgan case, a unanimous Court starts over. Ms. Morgan was an hourly employee of a Taco Bell franchise that had signed an arbitration agreement to govern labor disputes. Notwithstanding the arbitration agreement, Morgan went to federal court to file a nationwide “class action” claiming that her employer violated the Fair Labor Standards Act. Sundance, a Taco Bell franchisee, initially defended itself against the lawsuit as if the arbitration agreement did not exist – filing a motion to dismiss (which the district court denied) and engaging in mediation (which failed). Then Sundance decided to stay the litigation and force arbitration under the FAA, nearly eight months after Morgan filed the lawsuit. Morgan then expected to object on the grounds of waiving the right to arbitrate.

Precedent in the Eighth Circuit, where the case was argued below, conditions a finding to waive an arbitration agreement on whether the party knowing the law, “acted inconsistently with that right” and – critical here – “injured the other party by its inconsistent actions”. of Arbitration” to decide the waiver issue. Two Circuits rejected this rule and the Supreme Court granted cert. to resolve this split. Justice Kagan, writing for all justices, agreed with these two Believing that “the FAA’s ‘pro-arbitration policy’ does not authorize federal courts to invent special procedural rules, preferring arbitration”, and does not adjudicate any other matters on the merits, the Court referred é the case for new proceedings focused on whether the employer waived its right to arbitrate by its actions which were inconsistent with it. Regardless of the parties’ preference (in light of prior law in most appellate courts), given the Supreme Court’s ruling that any presumption of arbitration and the fact of harm are irrelevant, the Morgan the case provides clear guidance in several respects, in particular requiring arbitration, if any, at the outset of the dispute, and resisting discovery, as far as possible, until the question of arbitrability be cut. A defense based simply on harm to the opposing party will not work.

If anything, Shinn vs. Martinez Ramirez is indicative of the fact that most federal habeas corpus cases are frowned upon by the conservative majority of the Court and that any case in which parties have been sentenced to capital punishment is likely to produce a conservative/liberal 6-3 split among the judges, and 6 beats 3 each time. Mr. Martinez Ramirez and a co-defendant were convicted of capital murder in an Arizona state court and sentenced to death. The cases against the two were upheld by the Arizona Supreme Court and both were denied relief following the state’s conviction. Each also filed a federal habeas petition under 28 USC §2254, arguing that their trial attorney rendered ineffective assistance by failing to conduct adequate investigations. On appeal of the federal court’s denial of habeas relief, the Ninth Circuit ruled that both defendants were entitled to a hearing in which they could present newly developed evidence that had not previously been presented to the court. state court to seek post-conviction relief. In an opinion by Judge Thomas, writing for himself and the other five “conservatives,” the Court held that, to respect dual federal-state sovereignty, a federal court cannot, under §2254(e) (2), conduct an evidentiary hearing or otherwise consider evidence beyond the state court record based on the state’s attorney’s ineffective post-conviction assistance. In doing so, the majority reiterates that federal habeas review is not “a substitute for ordinary appellate error correction,” but an “extraordinary remedy” that protects only against “extreme malfunctions of state criminal justice systems. The dissent written by Justice Sotomayor focuses on the particular nature of an allegation of ineffectiveness by counsel, which arises from factors over which the defendant has no control, since the issue necessarily arises from whether the did or didn’t do at the state court level. She argues that the majority ignored the precedent and text of federal habeas law in applying the Anti-Terrorism and Effectiveness Death Penalty Act of 1996 to favor state interests over individual constitutional rights.

©2022 Epstein Becker & Green, PC All rights reserved.National Law Review, Volume XII, Number 143

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