Average Joe SCOTUS: Morgan v. Sundance, Inc.

You want to talk about arbitration clauses? Great! This is the SCOTUS case for you.

Back in 2011, AT&T Mobility LLC v. Concepcion, was a SCOTUS case where the majority ruled that arbitration agreements, under the Federal Arbitration Act (FAA), were to be treated the same as any other fucking contract.

The idea was, that once people agreed to arbitration via a contract, they couldn’t just be like, “Fuck this arbitrator, we’re going to court instead.” Presumably, congress also liked the idea of not tying up the courts with a bunch of nonsense that arbitrators could handle.

For those who don’t know, arbitration agreements are basically when two people enter into some sort of relationship, but before they do, they agree that if they have beef with one another which might result in them dragging each other’s asses to court, they’ll use an arbitrator instead. It’s cheaper and easier to settle disputes via arbitration than going to court, plus I’m pretty sure it’s not a matter of public record either, in case you don’t want your private matters on blast.

Your insurance is likely one example. They may have written into the policy that if you disagree with a decision, instead of suing them, you agree to go through arbitration. Whatever the arbitrator decides, you both agree to do that thing.

The arbitrator also must be impartial. Not an employee of other side, or even retained by one party or the other. In some instances, both parties hire their own arbitrator, then those two hire a third impartial arbitrator to be a deciding vote.

This case involves a humble Iowa Taco Bell franchise employee, named Robyn Morgan. The franchise owner is Sundance Incorporated.

Morgan argues that Sundance Inc. failed to pay her overtime as prescribed by the Fair Labor Standards Act (FLSA), which basically says if you are paid hourly, and work more than forty hours in a seven-day period, you must be paid at least 1.5 times your normal wage.

Sundance, when hiring new employees, has an arbitration clause in their application for employment. Pretty standard shit, really.

Well, Morgan, apparently being unaware or uninterested that this was the deal, opted to sue Sundance instead of going to arbitration, starting a class action suit claiming her and many other employees like her, were underpaid for the overtime they worked.

It’s not that these assholes aren’t allowed to go to court, but they had a fucking agreement. If they both waive that agreement, and decide court is the best path, they’re welcome to do so.

Morgan was not the only person alleging Sundance were some no-overtime-paying assholes. There was another case, Wood v. Sundance in Michigan, who also claimed the same. Sundance apparently owns like 150 Taco Bells all over the midwest.

Anyway, when Morgan filed suit, again, it was a class action. So Sundance was like, “Hey, man. There’s already another case out there (Wood v. Sundance), so this bitch is double-dipping. If she wants to sue on her own, fine. But this class action shit is wrong, man!”

The court however, thought the class-action was perfectly fine, and allowed her to proceed.

But, Morgan and Wood, seeing an opportunity to join forces, went into mediation as a united front against those no-overtime-paying mother fuckers. They got a shit ton of payroll data from Sundance, and eventually Wood settled, but Morgan was like, “No way, Jose. We want more.”

At some point, someone at Sundance finally went, “Hey, uhh guys? Don’t we have an arbitration clause? I seem to recall that shit somewhere. Why are we settling this through the courts?”

Another Sundance rep was like, “Fuck, you’re right my brother. How did we forget that? We must have been stoned or something. Let’s file a motion to compel arbitration and stop wasting time with this shit in court, then go get some tacos.”

They tried to argue that they were afraid they’d have to arbitrate with the whole fucking class, which seemed like a pretty big ask, but then when SCOTUS ruled on a similar case, saying such things weren’t required, which gave Sundance the feeling of safety to think they could just push Morgan to arbitrate. But we all know, they were fucking high, forgot, and got the munchies for some tacos, right?

Either way, Morgan was like, “The minute you decided to file motions and shit to prevent us from a class action, you fucking waived the arbitration agreement. We’ve spent money and time prepping for court, not arbitration. So you can fuck right the hell off.”

A district court heard Sundance’s argument, but was like, “Sorry you idiots. But you waited too fucking long to compel for arbitration. With all the time and money she spent, you harmed her by waiting around to ask for arbitration until after she spent all the scratch.” This harm indicates that she has been “prejudiced.”

But Sundance was unmoved, and filed an appeal with the 8th circuit, who didn’t feel Morgan was prejudiced by such a delay. Apparently believing any money she spent preparing for court, was also good preparation for arbitration.

Lower courts had used a three-part test to determine the case before it made it to SCOTUS:

Did Sundance fucking know they had an arbitration clause in place?
Did they behave in such a way that suggests they knew they had a fucking arbitration clause and intended to enforce it?
Was Morgan fucking harmed (prejudiced) in some way by them doing what they did prior to deciding to enforce their fucking arbitration agreement.

The debate in this case, is mostly about #3—whether the petitioner (Morgan) has a burden to prove that the respondents (Sundance) waived the arbitration, and such burden, is more of a pain in the ass (shows prejudice) than other burdens a petitioner might have to overcome in contract law. Most other contracts do not need to show prejudice to be ruled unenforceable.

Since SCOTUS previously ruled arbitration agreements shouldn’t be treated as more special than other contracts, Morgan’s team argues that having to show prejudice means she’s required to do more, and thus violates Concepcion’s rule.

As arguments began, Justice Roberts, with the politeness of a 50-year-old Boy Scout, asked counsel for petitioner Morgan, Karla Gilbride, “So what the fuck do we do if there’s a state that has some arbitration-specific rule? Tell the state to go fuck themselves, and shove that rule squarely up their ass?”

Counsel Gilbride was like, “Yeah, basically. Did you even fucking read the FAA? It’s part of my briefs. All contracts created equally.”

Justice Roberts was like, “Well how the fuck do we define waiver then? Isn’t it a case by case basis? No one has a million fucking rules defining what is and isn’t a fucking waiver.”

“Sure, bro. But what the lower court got wrong, was that they added a requirement of prejudice. They did analyze the first two tests, and agreed it had been waived. But then, they added that third part of the test, requiring prejudice. That’s what we take issue with.” Counsel Gilbride responded.

Justice Kagan chimed in and asked if Iowa law had a prejudice requirement in state law for all contracts, would it then be acceptable here?

Counsel Gilbride responded, “If we’re going to discuss things that aren’t true in this fucking case, then sure, since that would apply to all contracts equally, it would jive with the FAA and would be OK.”

Justice Barrett had some monkey wrenches she wanted to throw at counsel Gilbride, so she was like, “Based on the lower courts three part test, I know we’re assuming that they waived their right to arbitration by engaging with the courts instead of asserting arbitration right away. But instead of waivers, aren’t we really talking about estoppel by laches?”

What is estoppel and laches you ask? Great fucking question. I didn’t know either. It’s basically the idea that if you wait too long to assert a right, the court will prevent you from asserting it later. So the difference is that a waiver is something you do voluntarily, whereas estoppel is when the court basically waives it for you, and you don’t have a choice.

The reason this matters, is that estoppel by laches does require prejudice. Meaning, for the court to say, “Fuck you, you can no longer assert your right to arbitrate because you waited to long” they must show that the wait fucked up the other party. If so, this puts Morgan back on the hook for #3 of the three part test.

Counsel Gilbride responded, “You’re assuming we’re arguing we weren’t prejudiced, but we’re not and never have. We’re just arguing it shouldn’t be necessary to show prejudice to begin with.”

For the respondents (Sundance), comes SCOTUS regular, counsel Paul Clement.

He opened that nothing in any of these laws or contracts puts a fucking time limit on when arbitration must be asserted.

So while those other assholes claim that us waiting to assert it is akin to waiving that right, that’s a fucking lie. It’s waived, when we say it’s waived. If you assholes want to prevent us from asserting our right, then that’s estoppel, and you have to show prejudice. But we didn’t do shit to that girl that caused her harm. We were just chilling out, waiting to see what made more sense.”

Justice Gorsuch, seemingly unconvinced by this argument was like, “Are you really trying to say that the courts can never decide you waived your right if there’s no time limit on asserting it? Because that seems pretty fucking crazy, dog.”

Counsel Clement was like, “If it’s obvious we waived it, sure. But clearly we never made any effort to suggest we voluntarily waived it. They are just assuming that, and trying to get the court to impose it, which then becomes estoppel, and then requires prejudice. This isn’t rocket surgery, man.”

Justice Kavanaugh asked about the lower courts determination that there’s a “presumption of forfeiture” if you don’t demand arbitration in your first response. Once you agree to engage with the courts, you’re waiving arbitration.

Justice Kavanaugh also questioned the idea that Morgan wasn’t prejudiced. Any delays by Sundance due to motions and discovery are going to add costs to Morgan’s case, and that is certainly causing her harm.

Counsel Clement argued that other courts generally don’t require invoking arbitration at the first response, but instead, consider it waived if there’s a shit-ton of requests for evidence (known as discovery) and such that the defense requests for court.

Justices Kagan seemed to be having none of Clements arguments, though. While he continued to hammer the point that just filing a few motions in court doesn’t mean his side waived their right to arbitrate, Justice Kagan accused him of just making up rules of default for his own benefit.

But the real dagger was justice Sotomayor chiming in, who laid out all the ways Sundance delayed and stalled, filed motions, and entered into settlement talks, all the while knowing they had an arbitration agreement they weren’t demanding be honored.

By their own admission, they were gambling on another SCOTUS case to see how it was decided, which would then give them a better understanding if they should litigate against the class action, or force arbitration. That decision to gamble, in her mind, was a fucking waiver of their right to arbitrate.

In a unanimous decision where Morgan wins, SCOTUS ruled indeed that the Sundance waived the right to arbitration when it engaged in litigation versus compelling arbitration. Morgan does NOT have to show she was harmed by their actions (prejudiced) before trying to compel arbitration, because that would then be a unique requirement for arbitration agreements, putting them on some unique tier, above other contracts, and that’s some straight up bullshit.