Biglaw, Celebrities

Jay-Z Declares War... Against The Lack Of Diversity In The Arbitration World

Could Hova be the savior of diversity in the world of ADR?

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Jay-Z (by Joella Marano / Jorge Barrios, via Wikimedia / Creative Commons)

Mandatory arbitration goes well beyond Biglaw. It’s not only required of hapless summer associates and powerful partners, but it’s also a staple of commercial contracts — including ones involving boldface names. When it comes to being dragged into arbitration, celebrities are… just like us.

But celebrities are in a better position to fight back against unfairness in arbitration proceedings. This morning in New York Supreme Court, Shawn Carter aka Jay-Z filed a very interesting petition to stay arbitration in his ongoing business and intellectual-property disputes with Iconix, purchaser of the rights to his ROCAWEAR fashion line.

Here’s the core of his argument, from the memorandum of law in support of his petition (posted in full on the next page):

Through this proceeding, Petitioners seek a preliminary and permanent stay of an ongoing arbitration before the American Arbitration Association (the “AAA”) necessitated by AAA procedures that violate New York law and render the otherwise applicable arbitration clause void as against public policy….

When Mr. Carter began reviewing arbitrators on the AAA’s Search Platform… he was confronted with a stark reality: he could not identify a single African-American arbitrator on the “Large and Complex Cases” roster, composed of hundreds of arbitrators, that had the background and experience to preside over the Arbitration. After repeated requests to the AAA for diverse arbitrators with expertise in complex commercial law, the AAA was able to provide only three neutrals it identified as African-American: two men—one of whom was a partner at the law firm representing Iconix in this arbitration and thus had a glaringly obvious conflict of interest—and one woman.

The AAA’s lack of African-American arbitrators with the expertise necessary to arbitrate “Large and Complex Cases” came as a surprise to Petitioners, in part because of the AAA’s advertising touting its diversity. This blatant failure of the AAA to ensure a diverse slate of arbitrators for complex commercial cases is particularly shocking given the prevalence of mandatory arbitration provisions in commercial contracts across nearly all industries, which undoubtedly include minority owned and operated businesses. The AAA’s arbitration procedures, and specifically its roster of neutrals for large and complex cases in New York, deprive black litigants like Mr. Carter and his companies of the equal protection of the laws, equal access to public accommodations, and mislead consumers into believing that they will receive a fair and impartial adjudication.

Where, as here, a contract violates New York law, New York courts do not hesitate to invalidate that contract provision as void as against public policy, notwithstanding the fact that the parties willingly agreed to the provision. And when an arbitration provision violates public policy, New York courts routinely stay the arbitration.

And that’s the relief Jay-Z seeks in this petition, filed by his high-powered counsel, Quinn Emanuel partners Alex Spiro, Andrew Rossman, and Ellyde Thompson.

Even with top legal talent, it’s far from a foregone conclusion that Jay-Z will succeed, given the traditional reluctance of courts to tinker with the machinery of arbitration. But if he does prevail, it could lead to big changes in the arbitration world, forcing AAA, JAMS, and other leading ADR organizations to seek out more minority and women arbitrators — which might not be a bad thing.

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Jay-Z’s chances of success in this case are certainly subject to Reasonable Doubt. But whether or not he prevails on this particular petition, his arguments could constitute The Blueprint for bringing greater diversity and inclusion to the world of alternative dispute resolution.

UPDATE (11/29/2018, 10:31 a.m.): As reported by the New York Times, the court granted an injunction that will put the arbitration proceedings on hold until a hearing on December 11. As Alex Spiro told the Hollywood Reporter, the ruling by New York Supreme Court Justice Saliann Scarpulla “is historic” and “a victory for everyone.”

(Flip to the next page to read the memorandum of law filed by Quinn Emanuel on behalf of Shawn Carter aka Jay-Z.)

Earlier:

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DBL square headshotDavid Lat is editor at large and founding editor of Above the Law, as well as the author of Supreme Ambitions: A Novel. He previously worked as a federal prosecutor in Newark, New Jersey; a litigation associate at Wachtell, Lipton, Rosen & Katz; and a law clerk to Judge Diarmuid F. O’Scannlain of the U.S. Court of Appeals for the Ninth Circuit. You can connect with David on Twitter (@DavidLat), LinkedIn, and Facebook, and you can reach him by email at dlat@abovethelaw.com.

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