Attorney General Ellison urges Supreme Court to protect employees and consumers from corporate gamesmanship in pending arbitration cases

Leads a bipartisan amicus brief asking the Court to ensure that companies cannot seek two bites at the apple by strategically defending cases in court for months, and then seeking to compel arbitration if their court strategy is unsuccessful

January 6, 2022 (SAINT PAUL) — Minnesota Attorney General Keith Ellison, along with Maryland Attorney General Brian Frosh, today led a bipartisan coalition of 19 attorneys general from across the country in urging the U.S. Supreme Court to protect employees and consumers from corporate gamesmanship. In an amicus brief filed today with the Court, the Attorney General Ellison and the bipartisan coalition ask the court to ensure that in cases when plaintiffs are employees or consumers bound by arbitration agreements, companies cannot seek two bites at the apple by strategically defending cases in court for months — sometimes dragging them out for years in an effort to drain plaintiffs’ resources — then seek arbitration if their court strategy is unsuccessful.  

“Shedding light on arbitration clauses is important, because they are hidden in hundreds of millions of employee and consumer contracts. Far too often, these clauses are attempts by corporations to avoid taking responsibility for wrongdoing and shield them from the consequences of it. Far too often, these clauses make it harder for people to afford their lives and live with dignity and respect,” Attorney General Ellison said.  

“As a result, it’s important that the rules for when and how arbitration is enforced be as fair as possible. Federal arbitration law, however, has developed in such a way that allows companies to enforce their arbitration agreements even after many months or years of court litigation. This bipartisan group of attorneys general is standing up for the people of their states in opposing that gamesmanship. We are asking the highest court in the land simply to recognize that arbitration agreements must operate in harmony with state law and make the playing field level for employees and consumers,” Attorney General Ellison concluded. 

The case in which Attorney General Ellison and the bipartisan coalition of attorneys general that he co-led intervened, Morgan v. Sundance, Inc., arises from the experience of Robyn Morgan, a former employee of a Taco Bell in Osceola, Iowa. Ms. Morgan alleged that her former employer, Sundance, Inc., the owner of 150 Taco Bell franchises in multiple states, failed to pay her for all the hours she worked, including both regular and overtime hours. She also alleged that this failure to pay her wages was part of her employer’s business model and that her employer knew or should have known that it was unlawful. Sundance denied Ms. Morgan’s claims. Ms. Morgan sued her former employer in federal district court, where her suit was litigated for eight months before Sundance disclosed the existence of an arbitration agreement in her employment contract and attempted to exercise it. It is unclear whether Ms. Morgan was previously aware of the existence of the arbitration agreement or of having consented to it.  

Ms. Morgan is far from alone. As Attorney General Ellison and the bipartisan coalition state in their brief, “One study found that, as recently as 2018, more than 800 million consumer arbitration agreements were in force nationally, and possibly as many as two-thirds of American households were subject to these largely ‘nonnegotiable, adhesionary contracts.’  Another study found that a majority of the Nation’s private-sector non-union employees work for employers that impose mandatory arbitration requirements. Given the pervasiveness of arbitration agreements involving state residents, Amici States have both a responsibility to ensure the correct and consistent application of arbitration law and a responsibility to protect state residents from the costs and unfairness inflicted by those who invoke arbitration clauses only after first choosing to litigate strategically in court.”  

In the brief, Attorney General Ellison and the coalition ask the Supreme Court to find that state contract law governs the issue of “waiver” under the Federal Arbitration Act. In most cases, general state contract law would require defendants in litigation to assert a right to arbitration in a timely manner, or else it is deemed waived. The coalition asks the Supreme Court to rule that federal courts may not impose an additional requirement that plaintiffs be prejudiced by the untimely assertion of arbitration before the right to arbitrate is deemed waived.   

Amici States seek to protect their residents from the otherwise unnecessary litigation expenses and delays that result when parties engage in such gamesmanship,” the multistate coalition writes. “Such abuses not only impose increased litigation costs on employees and consumers; they also waste judicial resources and frustrate a ‘prime objective’ of arbitration, which is to achieve streamlined proceedings and expeditious results.”   

Joining Attorney General Ellison in today’s brief are Maryland Attorney General Brian Frosh, who co-led the brief with Attorney General Ellison, and the attorneys general of Alaska, Colorado, Delaware, the District of Columbia, Idaho, Illinois, Iowa, Maine, Massachusetts, North Carolina, New Jersey, New York, Oregon, Rhode Island, Vermont, Virginia, and Washington.