Supreme Court Sends "Judge Alex" Back To Arbitration

TV’s “Judge Alex” is probably less a fan of arbitration that you’d think, according to CNN. He’s been handed a Supreme Court decision that forces him back into the waiting arms of the American Arbitration Association.

The 8-1 decision came in a lawsuit by Alex E. Ferrer, a former Florida Circuit Court judge who decides minor civil disputes as a form of TV entertainment.

Ferrer refused to pay a management fee to Arnold Preston after the two men had signed a contract that called for arbitration of any disputes.

Ferrer says Preston is not a licensed talent agent as California law requires.

Preston sought the money by starting a proceeding with the American Arbitration Association in Los Angeles. Ferrer filed a complaint with the California Labor Commissioner, seeking to invalidate the contract for the fees. Ferrer went to court when the labor commissioner said she lacked the power to block the arbitration.

At issue was the reach of the Federal Arbitration Act.

“When parties agree to arbitrate all questions arising under a contract, the FAA supersedes state laws,” wrote Justice Ruth Bader Ginsburg.

Oh, irony.

High court rules against TV’s ‘Judge Alex’
[CNN]
(Photo:AP)

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  1. Dead Wrestlers Society says:

    He’s a good looking guy and all, but I can’t believe they gave him a tv show. Al Gore thinks he is stiff.

  2. Jthmeffy says:

    im still confused on how ANYTHING can supersede the LAW

  3. IphtashuFitz says:

    @Jthmeffy: When the highest court there is says so, that’s when.

  4. Illusio26 says:

    I wonder what he is looking at in the photo…

  5. azntg says:

    @IphtashuFitz: Either that or private individuals come up with clever ideas that exploit loopholes and it remains unchecked.

    Enforcement is the key (or the lack of).

  6. scoosdad says:

    @Jthmeffy: FAA = Federal Arbitration Act, i.e, a federal law superceding a California state law.

  7. LorneReams says:

    “When parties agree to arbitrate all questions arising under a contract, the FAA supersedes state laws,” wrote Justice Ruth Bader Ginsburg.

    What? I thought contracts that break laws are usually held unenforceable. Is this judge saying contracts trump laws?

  8. Ausoleil says:

    Apparently parties freely agreed to a contract, and one decided that it was an inconvenient forum for him to get redress for his grievances. Unfortunately for him the contract is still in force.

    As distasteful as arbitration is, it was the right decision for the Supreme Court to make.

    The real problem lay in the arbitration system and that is what must be addressed. Litigation of this sort won’t do it, and it will probably take a change in the laws governing arbitration to do it.

  9. arch05 says:

    This place is now full of idiots. Someone already answered the question why this case is now proceeding the way it is. Quit saying ‘OMGZ CONTRAKZ RULE OVER LAWZ?!’ Can we get a damn banhammer already?

  10. KernelM says:

    @LorneReams: The judge is saying the contract falls under a federal law that preempts the state law.

  11. Bye says:

    @Dead Wrestlers Society: He is a good-looking guy, but I can’t help but picture him reacting to the outcome of this lawsuit by stomping his feet and saying, “DARN! DARN! DARN! DARN! DARN!” as ceiling plaster falls to the ground.

  12. Beerad says:

    Judge Alex is awesome. I’ve had a few days off work recently and watched way too much daytime tv. I think he and Judge Marilyn Milian (on the People’s Court) are my two faves.

    That being said, it’s a bit surprising that he’s contesting the arbitration clause in a contract, although it sounds like his position is that since the other guy isn’t a licensed agent under CA law the contract (and thus the arbitration clause) shouldn’t be binding at all. The Supremes view is that since the argument is over whether or not the other guy is entitled to the money under the contract, that’s a dispute over the contract that, per the contract, should be handled by arbitration.

    That’s my hasty, 60-second analysis of things, anyway.

  13. Bay State Darren says:

    Hopefully, the “star power,” even if F-list, will get some serious attention towards the bullshit that is mandatory abritration. Not that I got anything against the guy, but I’d like to see this be a drawn-out very public battle which he loses. Kind of like how the world turned against paparazzi after the Princess Di thing.

  14. Curiosity says:

    Generally the FAA overrides state laws which attempt to send disputes to an administrative agency before arbitration – this is more generally called preemption [en.wikipedia.org]).

    That is the case here and it is confusing for those who may not practice law. By the end of reading this post, there should be a clearer understanding of how this affects you.

    We are talking about two things 1. whom decides the case when the courts really (the arbitrator or the administrative hearing) and 2. who makes the determination about who decides.

    While I am sure that most people here know what role an arbitrator plays, refer to my previous post @curiosity if you need clarification.

    Perhaps though what most consumers do not get is the impact of administrative law which is basically a Congressional created executive entity (not a judicial ). Congress has the authority to write the laws but gives authority to promulgate rules and regulations to interpret and to administer those laws to the federal agencies. The government agencies issue rules and regulations that have the force of law and preempt state laws and rules. Technically, the administrative law is subordinate to legislation. Most federal agencies have a quasi-judicial power in determining cases and in ruling about questions arising from their regulations. Hearings are conducted by an administrative law judge who issues the initial decision. Decisions may be appealed to a higher authority in the agency, then through the federal courts.

    So essentially the question is not if the courts will decide the actual matter at hand but what non-court procedure will be used (per question 1)- this is what was determined by the Supreme Court (per question 2) under Buckeye Check Cashing, Inc. v. Cardegna, 546 U. S. 440 (2006) the Court gave the arbitrator the ability to answer questions about the validity of the overall contract between the parties, even when one of the parties contended that the parties’ agreement was void. Therefore, since the FAA is federal law, it preempts state law and arbitration is chosen as the procedural method.

    The lessons I am taking from this case (and telling applicable clients) are:

    1. Rights may be hidden. There are rights people have that are not just enforced in court but enforced by Administrative Hearings. Before you sign anything, realize what you are losing and if you have to lose it.

    2. Set your preferences for resolving disputes, and be picky on the details. As a little guy Administrative Hearings may be still better than Arbitration (though possibly worse than courts). What exactly do you want to apply?

    3. If you are giving others greater protection, they should pay you for it and it should be conditional, limited, or expressly stated. A contract is a bargain, so haggle for what you want realize what you bring to the table, and realize what they lose. A win-win situation is possible.

  15. Curiosity says:

    @Beerad:

    The actual argument is actually a bit flipped.

    Preston, the party against J. Alex actually contended that he was not a licensed talent agent, but rather a personal manager.

    His point was that the Administrative body in CA and the California Talent Agencies Act didn’t even cover this dispute since he is not a talent agent. Therefore, if you looked to the contract the arbitration agreement governed the dispute.

    If he was licensed his position would be worse.

  16. nequam says:

    @BayStateDarren: The problems with arbitration constantly discussed on Consumerist relates to CONSUMER arbitration. This story is about a non-consumer commercial relationship. Believe it or not, arbitration agreements are fairly standard, appropriate, and often specifically negotiated in non-consumer transactions.

    In fact, this story doesn’t really belong on Consumerist, but for what appears to be a knee-jerk at every mention of the word “arbitration” around here.

  17. enm4r says:

    @Curiosity: Thank you, I was misreading the same as Beerad, thinking “how can the stipulation to use arbitration in the contract be valid if the entire contract is voided by not being an licensed…”

    Not to shift blame, but the reporting on this has been quite confusing, because I don’t think even the reporters understand well enough to explain.

  18. SOhp101 says:

    @Curiosity: Great comment. Sounds like a response I would need to write on an exam in my business law course.

  19. solidstate42 says:

    @ Nequam – Thank you.

  20. Beerad says:

    @Curiosity: Yikes. Well, that’s what 60 seconds will get you. The CNN article could have been a little clearer about each party’s position.

  21. Curiosity says:

    @Beerad:

    No problem, I assumed as much since whenever the news comes on I am usually disappointed by the lack of journalism. I see posts on here as more of a community learning experience – mistakes and misunderstandings allowed and all that. You know like – [www.behance.com] / [lifehacker.com]

  22. Curiosity says:

    @SOhp101: No problem, it is a horrible side effect of law – researching problems for fun.

  23. Curiosity says:

    @nequam:

    As a note, it is hard not to be a consumer – I would suspect that the contract is actually between two consumers/producers, a totally subjective statement independent of the “commercial nature” since we all engage in commerce unless we are totally isolated (Robinson Crusoe).

    “Consumers, by definition, include all of us”. These are the opening words of a Special Message of President Kennedy to the United States Congress in 1962. There, President Kennedy coined four fundamental consumer rights – the right to safety, the right to be informed, the right to choose, and the right to be heard.

    Consumers (per the OED [dictionary.oed.com]):

    1. He who or that which consumes, wastes, squanders, or destroys.

    2.
    a. Pol. Econ. One who uses up an article produced, thereby exhausting its exchangeable value: opposed to producer.

    b. Economics. consumers’ credit, credit given to the consumer while he is in possession and use of an article for which he is paying by instalments; consumers’ goods, rent, surplus, wealth (see quots.).

    c. gen. One who purchases goods or pays for services; a customer, purchaser. Freq. attrib., as consumer goods, research, resistance; Consumer(s’) Council, an organization set up to safeguard the interest of consumers; consumer durable (orig. U.S. and usu. pl.), an article for domestic use which does not need to be rapidly replaced by the purchaser (see quot. 19581); also attrib.

  24. Greasy Thumb Guzik says:

    I preferred the Washington Post’s article on this.
    The Post stated that the court ruled 9-1 against Alex.
    I had no idea that a tenth person was added to the Supreme Court!

  25. marsneedsrabbits says:

    @darkjedi26:
    I wonder what he is looking at in the photo…

    He’s look at Justice. Sweet, sweet justice.

  26. nequam says:

    @Curiosity: Interesting philosophical points, for sure, but a tenet of consumer law is that the so-called consumer by nature operates from a disadvantaged bargaining position. Indeed, most consumer protection statutes distinguish consumers from those, e.g., “engaged in the conduct of trade or commerce.” While it is true from a practical standpoint that not all business are created equal, as you know, the law presumes symmetry and objectivity in commercial transactions. Consumer transactions are treated as something different.

    I consider Black’s, rather than the OED, to be the better guide as to the legal sense of the term “consumer.” I’ll paraphrase, but the definition distinguishes a consumer from other commercial players (e.g., manufacturers, wholesalers, retailers) based on the fact that a consumer transacts to purchase goods/services as the “end user,” without the expectation of making a profit (e.g., as a reseller) him- or herself.

  27. Curiosity says:

    @nequam:

    Consumer law is a protection against attempts of businesses to fine print their way out of situations, because of “consumer” inexperience in the qualified promises that comprises most contracts, not the lack of power or symmetry of consumers.

    I try to use commonly available sources that are sound simply because the average person should realize that they can gain power by self-education and that the basic concepts are not really that complex.

    Symmetry and objectivity is considered present in almost all contracts irrespective of if they are consumer or commercial. If they were not the contract would not be an agreement, but subject to unconscionability and other defenses. Moreover we would not live in a presumably market economy, but more one attuned to a multiple actor dictatorship (note the romans objections to businesses).

    The legal community in fact assumes that the consumer has equal power in bargaining and objectivity because they not only can walk away from the transaction, but they know their own finances. The key to power for consumers is saying know and making sure the business gives them what they want.

    I believe that the distinction that you are reaching for but not finding is that consumers are considered such because it is assumed they have less than an adequate grasp of the fine technicalities (fine print) because they do not use such language on a day to day basis. For these reasons there are things like the “yard sale” exception etc.

    Of course Blacks is the better dictionary in some respects if you have access to it and have a background in law, however the majority here do not have the experience in matters of law that I suspect that you do. The OED btw is more authoritative here. It has a better precise definition in this case compared to Blacks simply because it is not repetitive like Blacks definition, and has all the nuance Blacks does (if not more than), but is easily comprehensible.

    I think you miss the point that both the OED and Blacks puts forth, that in order to be a consumer, you have to consume something. Here each party (which may or may not be businesses) are each “consuming” each others services rather than reselling them (or doing other things with them).