Case 3:17-cv-01953-PAD Document 102-1 Filed 12/02/20 Page 1 of 21

In The United States District Court

For The District Of Puerto Rico

______________________________
|
Austin Trout, |
|
Plaintiff, |
|
vs. | Case No. 3:17-1953-PAD
|
Organizacion Mundial de Boxeo, |
Inc. |
|
Defendant. |
______________________________|

AMICUS CURIAE BRIEF

OF LAW PROFESSOR IMRE STEPHEN SZALAI
IN SUPPORT OF PLAINTIFF AUSTIN TROUT
 Case 3:17-cv-01953-PAD Document 102-1 Filed 12/02/20 Page 2 of 21

TABLE OF CONTENTS

I. Introduction And Summary Of Argument

II. The WBO’s Arbitration Provisions Contain Several Highly Problematic Terms

A. The First Circuit Held That The WBO’s Arbitrator-Selection Provision Is

Unconscionable

B. The WBO’s Arbitration Provision Setting Forth A 14-Day Prescriptive

Period Violates The FAA’s Effective Vindication Doctrine

C. The WBO’s Arbitration Provision Requiring “Ex Aequo et Bono” Proceedings

Also Violates The FAA’s Effective Vindication Doctrine

III. As A Matter Of Federal Law, The Text Of The FAA Does Not Allow For Severance Of
Bad Faith Terms, And The Obligation To Arbitrate Here Must Be Invalidated In Its
Entirety

A. The Text Of The FAA’s Enforcement Provisions Does Not Allow For Severance

B. The Judicial Appointment Power From Section 5 of the FAA Does Not Apply To
Rescue or Rewrite A Bad Faith Arbitrator-Selection Provision

IV. The FAA’s History Supports The Rule That As A Matter of Federal Law, Courts Should
Invalidate Arbitration Agreements With Harsh Terms

V. The FAA’s Policy Supports The Rule That As A Matter of Federal Law, Courts Should
Invalidate Arbitration Agreements With Harsh Terms

VI. Conclusion
 Case 3:17-cv-01953-PAD Document 102-1 Filed 12/02/20 Page 3 of 21

I. Introduction And Summary Of Argument

The First Circuit vacated the Court’s decision and remanded the case so that the Court

would “determine in the first instance whether the arbitrator-selection provision at issue is

severable from the remainder of the arbitration agreement.” Opinion, pg. 23. The arbitrator-

selection provision is not severable for multiple reasons.

As explored by Trout in his briefing, the WBO’s Appeal Regulations could have included,

but did not include, a severance or savings provision. This failure to include a severance provision

suggests the parties intended for the arbitration provisions in the Appeal Regulations to be

enforced, or to be invalidated, in their entirety without any severance of particular terms. The

parties’ contract does not allow for severance, and neither does the Federal Arbitration Act (FAA).

This amicus curiae brief will explore the FAA’s text, history, and policy and demonstrate

that as a matter of federal law, the FAA does not allow a court to sever invalid, unconscionable,

or bad faith terms in an arbitration clause. Instead, the proper remedy when an arbitration clause

has invalid terms is complete invalidation of the entire obligation to arbitrate.

Furthermore, although the First Circuit found the WBO’s arbitrator-selection provision to

be unconscionable, there are at least three invalid provisions infecting the WBO’s arbitration

agreement, and any single one of these invalid provisions would justify the invalidation of the

entire obligation to arbitrate in this case. Consequently, the WBO must litigate Trout’s claims.

Going forward, if the WBO should desire, the WBO can re-draft its flawed arbitration agreement

to comply with the FAA for future bouts with other boxers.

II. The WBO’s Arbitration Provisions Contain Several Problematic Terms

A. The First Circuit Held That The WBO’s Arbitrator-Selection Provision Is

Unconscionable
 Case 3:17-cv-01953-PAD Document 102-1 Filed 12/02/20 Page 4 of 21

In discussing Puerto Rico’s unconscionability doctrine, the First Circuit cited case law

defining unconscionability as a contract with an “excessively onerous quality that reaches the point

of bad faith” (emphasis added and citations omitted). Opinion, pg. 17. Applying this high standard,

the First Circuit held that the WBO’s arbitrator-selection provision is unconscionable under Puerto

Rico law. Id. at 21. Consequently, the WBO’s arbitrator-selection provision should be viewed as

involving bad faith.

It cannot be overemphasized that the WBO’s arbitrator-selection provision is an egregious

violation of fairness, like a hit below-the-belt. The WBO purported to claim the sole, unilateral

ability to appoint arbitrators, without any input from the boxer involved in the dispute. It is well

established that the most important decision in connection with arbitration is the parties’ choice of

an arbitrator. 3 Ian R. Macneil et al., Federal Arbitration Law § 27.1 (1995) (selecting the arbitrator

is “the most important decision arbitrating parties can make,” and “[i]n arbitration, to a great

degree, the arbitrator is the process.”) (emphasis in original); 2 Martin Domke et al., Domke on

Commercial Arbitration § 24:1 (3d ed.) (“The arbitrator is the decisive element in any

arbitration.”).

Because of the fundamental significance of selecting an arbitrator, courts and leading

arbitration organizations have recognized that each party must generally have equal rights in the

selection of an arbitrator. The failure to provide such rights reflects unconscionability, bad faith,

and lack of fundamental fairness. Hooters of Am., Inc. v. Phillips, 173 F.3d 933, 940 (4th Cir.

1999) (arbitration agreement exhibits bad faith where one party unilaterally defines and controls

the pool of possible arbitrators); cf. National Academy of Arbitrators, Policy Statement on

Employment Arbitration (2009), https://naarb.org/employment-arbitration-policy-and-guidelines

(“Did both parties have a meaningful [arbitrator] selection opportunity? A negative answer to this
 Case 3:17-cv-01953-PAD Document 102-1 Filed 12/02/20 Page 5 of 21

question should cause you to decline the case . . . .”); Task Force on Alternative Dispute Resolution

in Employment, Due Process Protocol for Mediation and Arbitration of Statutory Disputes Arising

Out of the Employment Relationship (1995), https://naarb.org/due-process-protocol (recognizing

the right of both parties “to jointly select as . . . arbitrator one in whom both parties have requisite

trust . . . .”) (emphasis added).

Here, a boxer is completely shut out of the ring in selecting an arbitrator to hear his dispute.

However, the ability of both parties to participate in the selection of an arbitrator is critical because

meaningful participation is the “chief guarantor of arbitrators’ fairness and competence.” Hooters

of Am., Inc. v. Phillips, 39 F. Supp. 2d 582, 619 (D.S.C. 1998) (citation omitted). The WBO’s

unilateral right to control the selection of arbitrators is appalling by itself, but the WBO’s

arbitration agreement also contains other flawed provisions.

B. The WBO’s Arbitration Provision Setting Forth A 14-Day Prescriptive Period

Violates The FAA’s Effective Vindication Doctrine

In addition to WBO’s bad faith arbitrator-selection provision, WBO again pinned the boxer

on the ropes and tilted the playing field in its favor by drafting other heavy-handed terms in the

arbitration agreement. The WBO’s arbitration provisions set forth a severely-truncated prescriptive

period of only fourteen days to file a claim in arbitration. See Article III(e) of the WBO Appeal

Regulations (“Any Complaint must be filed as soon as reasonable after learning of a dispute and

in no event shall be filed later than 14 days after the occurrence of the event that gives rise to the

complaint.”). If an event giving rise to a complaint arises, it would be challenging for a reasonable

person to contact and interview potential attorneys, hire an attorney, have the attorney gather the

necessary facts and evidence to satisfy ethical duties, have the attorney conduct legal research in

compliance with ethical duties, and have the attorney draft and file an arbitration claim in
 Case 3:17-cv-01953-PAD Document 102-1 Filed 12/02/20 Page 6 of 21

compliance with ethical duties - all within fourteen days of the incident giving rise to the

complaint.

The federal statutory claim at issue in this case, the Muhammad Ali Boxing Reform Act,

18 U.S.C. § 6301, et seq. (“MABRA”), has a four-year statute of limitations. Pacquiao v. M&M

Sports, Inc., 2005 WL 1539281 (S.D.N.Y. June 27, 2005). The WBO’s unilateral attempt to

shorten the statute of limitations from four years to fourteen days frustrates the ability of a boxer

to effectively vindicate his or her rights under MABRA, and thus the WBO’s clause violates the

FAA’s effective vindication doctrine. The Supreme Court generally allows arbitration of statutory

claims, but not if the particular rules or provisions in an arbitration agreement would frustrate the

ability of a party to effectively vindicate its substantive, statutory rights. Mitsubishi Motors Corp.

v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 637 (1985) (antitrust claims are generally

arbitrable, but a party must be able to “effectively . . . vindicate its statutory cause of action in the

arbitral forum”); see also Taylor v. Am. Income Life Ins. Co., 2013 WL 2087359, (N.D. Ohio May

14, 2013) (arbitration clause’s 30 day statute of limitations violates the FAA’s effective vindication

doctrine); cf. Brown v. MHN Gov’t Servs., Inc., 306 P.3d 948 (Wash. 2013, en banc) (6 month

statute of limitations provision in an arbitration clause is unconscionable); Jones v. Deja Vu, Inc.,

419 F. Supp. 2d 1146 (N.D. Cal. 2005) (same). 1

C. The WBO’s Arbitration Provision Requiring “Ex Aequo et Bono” Proceedings

Also Violates The FAA’s Effective Vindication Doctrine

Article IV of the WBO’s Appeal Regulations requires that the Grievance Committee “shall

conduct all of its proceedings as Amiable Compositeur, Ex Aequo et Bono.” As explained by one

1
The First Circuit found that MABRA claims, as a general rule, could be subject to arbitration. Opinion, pg. 14. In
other words, there is nothing inherent in the text of MABRA that would generally prevent arbitration of MABRA
claims. However, the First Circuit’s ruling did not address the distinct, entirely different issue of whether a heavily-
truncated statute of limitations, or other harsh terms in an arbitration clause, would frustrate the ability of a party to
vindicate statutory rights in the arbitral forum.
 Case 3:17-cv-01953-PAD Document 102-1 Filed 12/02/20 Page 7 of 21

court, “an arbitrator acting as an ‘amiable compositeur or ex aequo et bono’ is free to resolve the

dispute by applying broader principles of fairness, largely without reference to the law of a

particular legal system.” LG Elecs., Inc. v. InterDigital Commc’ns, Inc., 98 A.3d 135, 143–44 (Del.

Ch. 2014), aff'd, 114 A.3d 1246 (Del. 2015). See also Jasper Contractors, Inc. v. E-Claim.com,

LLC, 94 So. 3d 123, 127 (La. App. 1 Cir. 2012) (“The contractual provisions that the arbitral

tribunal shall decide according to what is ‘amiable compositeur’ means ‘according to equity and

good conscience,’ and ‘ex aequo et bono’ means what is ‘just and good.’”) (citation omitted);

Willbros W. Africa, Inc. v. HFG Eng’g US, Inc., 2009 WL 411565, at *3 (S.D. Tex. Feb. 12, 2009)

(“A decision maker who is authorized to decide ex aequo et bono is not bound by legal rules and

may instead follow equitable principles.”) (citation omitted).

The WBO’s arbitration procedures are problematic as applied to this case because these

procedures explicitly authorize the arbitrators to decide cases based on equitable principles, and

these arbitrators are not obligated to follow the governing law. Although deciding a case based on

general principles of fairness may be entirely appropriate for a claim limited to the WBO’s

contractually-based, internal policies, such as whether a boxer used inappropriate hand bandages

during a fight, such decision-making is highly problematic for statutory claims, like the federal

statutory MABRA claim at issue in this case. Courts have refused to compel arbitration and

allowed the parties to proceed to litigation when an arbitration clause permits an arbitrator to ignore

controlling federal statutory laws. Such arbitration clauses violate the FAA’s effective vindication

doctrine mentioned above. See, e.g., Gibbs v. Sequoia Capital Operations, LLC, 966 F.3d 286 (4th

Cir. 2020) (arbitration clause not enforceable because the arbitrators were not obligated to follow

and apply federal statutory laws); Gingras v. Think Fin., Inc., 922 F.3d 112 (2d Cir. 2019) (same);

Ryan v. Delbert Servs. Corp., 2016 WL 4702352 (E.D. Pa. Sept. 8, 2016) (same).
 Case 3:17-cv-01953-PAD Document 102-1 Filed 12/02/20 Page 8 of 21

To summarize, the First Circuit discussed one highly problematic provision in the WBO’s

arbitration agreement, the bad faith arbitrator-selection provision, which is egregious by itself.

However, there are at least three invalid provisions infecting the arbitration agreement.

Furthermore, as explained below, the text, history, and policy of the FAA, like a three-punch

combo, support complete invalidation of the WBO’s arbitration agreement as applied to Trout’s

claims, and a complete invalidation of the entire obligation to arbitrate would be justified solely

on the grounds of the egregious, bad faith arbitrator-selection clause.

III. As A Matter Of Federal Law, The Text Of The FAA Does Not Allow For Severance
Of Bad Faith Terms, And The Obligation To Arbitrate Here Must Be Invalidated In
Its Entirety

A. The Text Of The FAA’s Enforcement Provisions Does Not Allow For
Severance

To assist with the efficient and rapid enforcement of genuine arbitration agreements, the

text of the FAA’s core enforcement provisions does not permit the severance of invalid or bad

faith terms. Instead, complete, swift invalidation of the entire obligation to arbitrate must occur if

an arbitration clause contains invalid terms. The FAA can be conceptualized as similar to an “on-

off” switch: as a matter of federal law, the terms of an arbitration agreement are either fully

enforceable, or not enforceable at all.

The heart of the FAA provides that agreements to arbitrate are “valid, irrevocable, and

enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.”

9 U.S.C. § 2. Under section 2, the FAA’s most important provision, there are only two options:

either the agreement to arbitrate is fully enforceable, or the agreement is not enforceable in its

entirety if there is a basis at law or in equity to challenge the contract. Cf. AT&T Mobility LLC v.

Concepcion, 563 U.S. 333, 355 (2011) (Thomas, J., concurring) (FAA permits general contract

defenses concerning the formation of an agreement to arbitrate). Section 2 does not provide for
 Case 3:17-cv-01953-PAD Document 102-1 Filed 12/02/20 Page 9 of 21

severance of problematic terms, such as the egregious, bad faith arbitrator-selection provision in

this case.

Similarly, section 3 of the FAA does not permit severance of unconscionable terms. Section

3, which builds on the foundation of section 2, provides for a stay of litigation “until such

arbitration has been had in accordance with the terms of the agreement.” 9 U.S.C. § 3 (emphasis

added). Pursuant to this provision, either a court grants a stay so that the arbitration takes place “in

accordance with the terms of the agreement,” or the court does not grant a stay at all. If the Court

were to stay the litigation in this case so that arbitration would take place, section 3 would govern

the stay, but severance of egregious, bad faith terms is simply not permitted under the text of

section 3.

Section 4 of the FAA, which also helps carry out the core directive of section 2, does not

permit severance of problematic terms in an arbitration agreement. If one party refuses to honor

an agreement to arbitrate, section 4 of the FAA states that “the court shall make an order directing

the parties to proceed to arbitration in accordance with the terms of the agreement.” 9 U.S.C. § 4

(emphasis added). Section 4 also does not provide a court with the power to reshape the parties’

agreement by ordering severance of bad faith, unconscionable terms. Instead, the only order

permitted under section 4 is an order to arbitrate “in accordance with the terms of the agreement,”

which is the foundation of all arbitration.

In sum, sections 2, 3, and 4 of the FAA are the sole provisions allowing for an order

compelling arbitration, and the text and structure of these core enforcement provisions all reflect

a binary view of the FAA. Simply put, as a matter of federal law, an agreement to arbitrate is fully

enforceable, or not enforceable at all. Furthermore, aside from the clear text of the FAA, the

judicial creation of an obligation to arbitrate could run afoul of the Seventh Amendment. Riggs v.
 Case 3:17-cv-01953-PAD Document 102-1 Filed 12/02/20 Page 10 of 21

Scrivner, Inc., 927 F.2d 1146, 1148 (10th Cir. 1991) (compulsory, court-created obligation to

engage in binding arbitration violates a plaintiff’s constitutional right to a jury trial).

Here, the First Circuit found that the arbitrator-selection provision in the WBO’s arbitration

agreement was an egregious, bad faith provision. Furthermore, two other terms, the abbreviated

prescriptive period and the ex aequo et bono provision, violate the FAA’s effective vindication

doctrine. As a result, the Court should invalidate the obligation to arbitrate in its entirety. As a

practical matter, the plaintiff would then proceed with his claims in court, and if the WBO desired,

the WBO could redraft its arbitration provisions to create a fair, valid process complying with the

FAA for future bouts with other boxers.

B. The Judicial Appointment Power From Section 5 Of The FAA Does Not
Apply To Rescue or Rewrite A Bad Faith Arbitrator-Selection Provision

As explained above, the FAA’s core enforcement procedures governing an order to

arbitrate do not allow for severance of bad faith, egregious terms. Although section 5 of the FAA

contains a procedure for judicial appointment of arbitrators, which is different from a broad order

compelling arbitration, section 5 applies in narrow circumstances involving a “lapse,” or a situation

where there has been a mechanical breakdown in the appointments process. Section 5 should not

be used to rescue or reward a party who drafted bad faith, egregious terms regarding the

appointment of an arbitrator.

Section 5 covers three possible situations where judicial appointment of an arbitrator is

appropriate: 1) where the agreement does not set forth a method for selecting an arbitrator; 2)

where a method is provided and a party “shall fail to avail himself of such method”; and 3) “if for

any other reason there shall be a lapse in the naming of an arbitrator.” 9 U.S.C. § 5 (emphasis

added). The first two situations do not apply here. The arbitration agreement at issue provides for

a method of selection, and thus category one is not applicable. Category two covers a situation
 Case 3:17-cv-01953-PAD Document 102-1 Filed 12/02/20 Page 11 of 21

where one party refuses to follow a proper arbitrator-selection method set forth in the contract,

which is also not the case here. The third and final category covers a “lapse” in the naming of the

arbitrator, and as explained below, courts have construed a “lapse” narrowly. Drafting an

egregious, bad faith arbitrator-selection provision does not count as a “lapse.”

Courts typically use section 5 of the FAA when a chosen arbitrator is no longer available,

a chosen arbitration institution is no longer available, or one party refuses to select an arbitrator

based upon a method set forth in the contract. WBO, in its brief in its discussion of the judicially-

created “integral” test, cites several cases where the arbitration provider specified in the agreement

no longer existed at the time a dispute arose, or where an arbitration provider declined to hear a

dispute:

● A-1 Premium Acceptance, Inc. v. Hunter, 557 S.W.3d 923 (Mo. 2018) (arbitration clause

required arbitration before the National Arbitration Forum, which was no longer available

to hear consumer claims);

● Ranzy v. Tijerina, 393 Fed. Appx. 174 (5th Cir. 2010) (same);

● GGNSC Louisville Mt. Holly, LLC v. Mohamed-Vall, 2016 WL 9024811 (W.D. Ky. Apr.

6, 2016) (same);

● In re Salomon Inc. S’holders’ Derivative Litig., 68 F.3d 554 (2d Cir.1995) (New York

Stock Exchange, which was the arbitration institution chosen in the contract, declined to

hear the dispute);

● Wilson v. Dell Financial Services, L.L.C., 2010 WL 503093 (S.D.W. Va. Feb. 8, 2010)

(American Arbitration Association declined to hear debt collection disputes, and the

National Arbitration Forum ceased to hear consumer cases); and

 Case 3:17-cv-01953-PAD Document 102-1 Filed 12/02/20 Page 12 of 21

● Cobarruviaz v. Maplebear, Inc., 143 F. Supp. 3d 930 (N.D. Cal. 2015) (arbitral forum

JAMS declined to hear the case).

In discussing section 5 of the FAA, these cases examine whether a defunct arbitration

forum set forth in an agreement, or a chosen arbitration forum which declined to hear a case, is

“integral” or central to the parties’ agreement. These cases are distinguishable from the present

case. First, these courts are examining an unusual situation where an entire arbitration institution

is no longer available or refuses to hear a case. These courts are not examining whether one invalid

procedure within a larger bundle of procedures in an arbitration agreement is integral to the

agreement. Second, these cases dealing with defunct arbitration providers certainly do not address

the situation here, when one party drafts egregious arbitration terms in bad faith. Third, these court

decisions involving defunct arbitration forums also do not address the textual, historical, and policy

arguments raised in this brief about the binary nature of the FAA’s mechanisms to enforce

arbitration agreements. As explained above, the text of the FAA does not permit severance as a

matter of federal law. As a result, a court should not examine whether particular terms, such as

the bad faith arbitrator-selection provision, the truncated prescriptive period, or the provision

allowing the arbitrators to ignore controlling statutory law, are central to an arbitration agreement

for purposes of possibly severing these terms.

The WBO in its opening brief largely avoids any analysis of the text of the FAA, and

instead, the WBO attempts to land some jabs by using the “integral” test as the governing standard

for arbitration clauses containing harsh terms. However, the Eleventh Circuit addressed this

situation of invalidation vs. severance without relying on the “integral” test pushed by the WBO,

and the Eleventh Circuit upheld the complete invalidation of an arbitration agreement on the

grounds that the agreement contained an invalid provision:

 Case 3:17-cv-01953-PAD Document 102-1 Filed 12/02/20 Page 13 of 21

To sever the [invalid provision from the arbitration clause] would reward the [the
drafting party] for its actions and fail to deter similar conduct by others. If [a
drafting party] could rely on the courts to sever an unlawful provision and compel
the [plaintiff] to arbitrate, the [drafting party] would have an incentive to include
unlawful provisions in its arbitration agreements. Such provisions could deter an
unknowledgeable [plaintiff] from initiating arbitration, even if they would
ultimately not be enforced. It would also add an expensive procedural step to
prosecuting a claim; the [plaintiff] would have to request a court to declare a
provision unlawful and sever it before initiating arbitration.

Perez v. Globe Airport Sec. Servs., Inc., 253 F.3d 1280, 1287 (11th Cir. 2001) (citations omitted),

subsequently vacated on procedural grounds, Perez v. Globe Airport Sec. Serv., Inc., 294 F.3d

1275 (11th Cir. 2002). The Eleventh Circuit’s reasoning, which is consistent with the FAA’s text,

history, and policy, is instructive here and would similarly compel a complete invalidation of the

obligation to arbitrate. The “integral” test proposed by the WBO should not be used when a party

drafts egregious terms in bad faith.

One case cited by WBO, McMullen v. Meijer, Inc. (II), 166 F. App’x. 164 (6th Cir. 2006),

does involve a flawed selection clause similar to the one here, where the drafting party controlled

the selection of arbitrators. However, the McMullen case does not support the WBO’s attempt to

rely on section 5 of the FAA to rewrite the contract because the court in McMullen did not rely on

section 5 to appoint a different arbitrator. Id. at 169. Instead of relying on section 5, the McMullen

court concluded that the contract’s chosen arbitration rules, from the American Arbitration

Association, already set forth an alternative, proper process for selecting arbitrators, and this

process would replace the deeply-flawed arbitration selection procedure in the contract. Id. Here,

the WBO’s remaining arbitration provisions do not provide for an alternative selection method for

an arbitrator.

As recognized by the Second Circuit in the Salomon case cited by WBO, “the ‘lapse’

referred to in section 5 means a lapse in time in the naming of the arbitrator or in the filling of a

vacancy on a panel of arbitrators, or some other mechanical breakdown in the arbitrator selection
 Case 3:17-cv-01953-PAD Document 102-1 Filed 12/02/20 Page 14 of 21

process.” 68 F.3d at 560 (citations and internal quotations omitted). As mentioned above, the

Salomon case involved the New York Stock Exchange, which declined to hear the case, and the

Second Circuit held a lapse did not occur in the case since there was no lapse in time in naming an

arbitrator or a “mechanical breakdown.” Id. As examples of a “mechanical breakdown” in the

process of appointment, the Second Circuit mentioned situations where there is deadlock in the

naming of an arbitrator; an arbitrator dies and leaves a vacancy on the panel; or an arbitrator chosen

by the parties has a conflict of interest. Id. Literally, a “lapse” (from the Latin term “lapsus” for

fall or slip) would involve a “slight error” or “mistake,” or a termination of a right through neglect

to exercise it. Oxford English Dictionary (2 ed. 1988). This literal meaning of lapse is consistent

with the Second Circuit’s interpretation of section 5 as involving a “mechanical breakdown” in the

procedure of appointing an arbitrator.

Courts should not use the “lapse” provision of section 5 of the FAA, or any provision of

the FAA, to rewrite a contract and reward a drafting party for including egregious, invalid terms,

such as a bad faith arbitrator-selection provision, the abbreviated prescriptive period, or the

provision allowing the arbitrators to ignore federal statutory law. A “lapse,” which is akin to

neglect, a slight error, or mistake, does not rise to the same high level as egregious, bad faith terms,

which is how the First Circuit described the standard for unconscionability under Puerto Rico

contract law. Opinion, pg. 17. As explained below, in addition to the FAA’s text, both the history

and policy behind the FAA dictate that the FAA should not be used by a court to sever harsh terms

and rewrite agreements drafted by a party in bad faith.

IV. The FAA’s History Supports The Rule That As A Matter of Federal Law, Courts
Should Invalidate Arbitration Agreements With Harsh Terms

By examining the FAA’s history and development, one can better understand this binary

view under the FAA regarding the judicial enforcement or non-enforcement of an arbitration
 Case 3:17-cv-01953-PAD Document 102-1 Filed 12/02/20 Page 15 of 21

agreement in its entirety. The FAA was originally understood to cover just contractual or

commercial disputes, not statutory claims, at first. 2 Also, around the time of the FAA’s enactment,

it appears that arbitration clauses were simpler and shorter than arbitration agreements one sees

today. Members of the arbitration committee of the New York Chamber of Commerce were the

principal drafters of the FAA and similar state arbitration statutes enacted during the 1920s. See

generally Imre S. Szalai, Outsourcing Justice: The Rise of Modern Arbitration Laws in America

(2013). Around the time of the FAA’s enactment, the New York Chamber of Commerce

recommended the use of the following standard, one-sentence arbitration clause for contractual

disputes, the original type of dispute intended to be covered by the FAA:

Any and all controversies arising under, out of, or in connection with or relating to
the agreement of which this is a part shall be submitted to arbitration, and judgment
upon any award rendered may be entered in the highest court of the forum, state or
federal, having jurisdiction in the premises.

American Arbitration Association, The Practice of Commercial Arbitration 231 (1928). With such

a simple, one-sentence agreement to arbitrate contractual disputes, there would be no pressing need

to sever harsh terms in a complex arbitration agreement. Instead, fitting with the simple agreements

of the time, the FAA’s streamlined judicial procedures provided a binary result of either judicial

enforcement or non-enforcement of these simple agreements in their entirety. If there was some

flaw that called for the revocation of such a simple agreement, such as a defense that attacked the

formation of the agreement to arbitrate, then the simple, one-sentence agreement to arbitrate would

not be enforceable in its entirety. Cf. AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 355 (2011)

2
See 9 U.S.C. § 2 (declaring the validity and enforceability of “[a] written provision in . . . a contract evidencing a
transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract. . . .”)
(emphasis added); see also Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 646 (1985)
(Stevens, J., dissenting, joined by Brennan, J.) (“The plain language of this statute . . . does not encompass a claim
arising under federal law. . . . Nothing in the text of the 1925 Act, nor its legislative history, suggests that Congress
intended to authorize the arbitration of any statutory claims.”).
 Case 3:17-cv-01953-PAD Document 102-1 Filed 12/02/20 Page 16 of 21

(Thomas, J., concurring) (FAA permits general contract defenses concerning the formation of an

agreement to arbitrate).

Over time, as the Supreme Court expanded the FAA’s coverage beyond contractual claims

to cover virtually all types of claims, and as arbitration agreements proliferated throughout

American society, arbitration agreements have become more complex, with some stronger parties

drafting one-sided, harsh terms in an attempt to slant the odds in their favor, such as by shortening

the statute of limitations, designating an inconvenient location for the hearings, limiting damages,

unilaterally controlling the pool of arbitrators, or by other unfair methods. The New York Chamber

of Commerce’s standard clause from the 1920s set forth above is only 52 words in length. But

today’s arbitration clauses can be much more complex. For example, the arbitration clauses studied

by the Consumer Financial Protection Bureau for its landmark report to Congress involved about

1,108 words on average, with some arbitration clauses going as high as 2,500 words, which is

about 50 times longer than the standard clause from the 1920s recommended by the primary

drafters of the FAA. Consumer Fin. Prot. Bureau, Arbitration Study, Report to Congress, Pursuant

to Dodd-Frank Wall Street Reform and Consumer Protection Act § 1028(a), at 27-28 (March

2015). The modern, lengthy arbitration clauses studied by the Consumer Financial Protection

Bureau were “almost always more complex and written at a higher grade level than the rest of the

contract.” Id. at 28.

Today, more than ever, with the increasing complexity and proliferation of arbitration

clauses, there needs to be a mechanism to ensure fundamental fairness in arbitration and to stop

the drafting of harsh, one-sided terms within a complex, lengthy arbitration clause. The text of the

FAA, with its binary result of either judicial enforcement or non-enforcement of an agreement in

its entirety, already embodies a clear, textual solution that can help ensure fairness in arbitration
 Case 3:17-cv-01953-PAD Document 102-1 Filed 12/02/20 Page 17 of 21

proceedings. To encourage the drafting of fair arbitral procedures, and to maintain streamlined

judicial procedures for enforcement of arbitration agreements, one-sided arbitration agreements

with harsh terms should be swiftly invalidated in their entirety, as a matter of federal law and

regardless of state law or severance clauses. Such agreements with egregious terms should not be

considered arbitration under the FAA or entitled to the FAA’s protection.

This binary outcome under the FAA, of either judicial enforcement or non-enforcement of

an arbitration agreement in its entirety, is consistent with the FAA’s streamlined framework to

promote arbitration as a meaningful alternative to litigation. It would be time consuming for parties

and the courts to go the distance and litigate in lengthy proceedings which particular provisions of

an arbitration agreement should be severed prior to enforcement. As discerningly recognized by

the Third Circuit, merely ordering severance would perversely make the WBO’s arbitration

provisions the “opening bid in a negotiation with the [individual boxer] or the court over the

agreement’s unconscionable terms.” Nino v. Jewelry Exch., Inc., 609 F.3d 191, 205 (3d Cir. 2010).

See also Perez v. Globe Airport Sec. Servs., Inc., 253 F.3d 1280, 1287 (11th Cir. 2001) (merely

severing egregious terms would “add an expensive procedural step to prosecuting a claim; the

[plaintiff] would have to request a court to declare a provision unlawful and sever it before

initiating arbitration”) (citations omitted). Prolonged litigation regarding severance undercuts the

FAA’s streamlined nature of judicial proceedings, undermines the value of arbitration as an

effective process to resolve disputes, and directly conflicts with the unambiguous text of the FAA,

which is binary in nature.

V. The FAA’s Policy Supports The Rule That As A Matter of Federal Law, Courts
Should Invalidate Arbitration Agreements With Harsh Terms

Although the FAA does not define the term “arbitration,” arbitration under the statute was

understood to reflect a good faith, mutual undertaking to use simple, even-handed, fair procedures
 Case 3:17-cv-01953-PAD Document 102-1 Filed 12/02/20 Page 18 of 21

to resolve commercial disputes. Bills to Make Valid and Enforceable Written Provisions or

Agreements for Arbitration of Disputes Arising out of Contracts, Maritime Transactions, or

Commerce Among the States or Territories or with Foreign Nations: Joint Hearings on S. 1003

and H.R. 646 Before the Subcomm. of the Comm. on the Judiciary, 68th Cong., 1st Sess. 7 (1924)

(commercial arbitration “saves time, saves trouble, saves money . . . . It preserves business

friendships . . . . [W]e do not permit any abuse by one side or the other. Friendliness is preserved

in business. It raises business standards. It maintains business honor . . . .”); id. at 24 (commercial

arbitration is “expeditious, economical, and equitable, conserving business friendships and

energy”); id. at 31 (commercial arbitration offers “an efficient, expeditious, and inexpensive

adjustment” of disputes arising in the “daily business transactions” of merchants so that they can

be “equitably disposed of”); see also A Bill Relating to Sales and Contracts to Sell in Interstate

and Foreign Commerce and a Bill to Make Valid and Enforceable Written Provisions or

Agreements for Arbitration of Disputes Arising out of Contracts, Maritime Transactions, or

Commerce Among the States or Territories or with Foreign Nations: Hearing on S. 4213 and 4214

Before the Subcomm. of the Senate Comm. on the Judiciary, 67th Cong., 4th Sess. 10 (1923) (in

response to questioning from a Senator who raised concerns about the application of the FAA to

“take it or leave it,” one-sided contracts drafted by a stronger party, the bill’s supporters replied

the FAA was not intended to apply in such a context, which suggests arbitration under the FAA is

a consensual, fair process undertaken in good faith). The FAA embodies a strong policy to promote

the integrity of arbitration as a good faith, fair process to resolve disputes.

Here, however, the First Circuit found that the WBO drafted a bad faith, egregious

arbitrator-selection provision, and the agreement is also infected with other terms that are invalid

under the FAA. Ordering severance of egregious terms adopted in bad faith would undermine the
 Case 3:17-cv-01953-PAD Document 102-1 Filed 12/02/20 Page 19 of 21

FAA by incentivizing future drafting parties to overreach and include harsh, oppressive terms.

Perez v. Globe Airport Sec. Servs., Inc., 253 F.3d 1280, 1287 (11th Cir. 2001) (refusing to sever

harsh terms from an arbitration clause because doing so would reward and incentivize parties to

continue drafting harsh terms). As explained below, if a party who drafted harsh terms could be

saved by the bell of severance, as opposed to invalidating the entire obligation to arbitrate, three

abusive situations would potentially occur, which would frustrate the FAA’s policy of promoting

the resolution of disputes in good faith.

First, mere severance can indirectly lead to suppression of claims, where arbitration does

not take place at all. A future plaintiff encountering an arbitration clause with harsh terms may

choose not to engage in time-consuming litigation over the enforcement of the arbitration clause

if the sole remedy is mere severance of such terms at the end of prolonged litigation. Stuck with

the harsh terms, such plaintiffs may throw in the towel and choose not to arbitrate at all because

the arbitration would occur pursuant to the harsh terms. Under this scenario where no claims are

filed in any forum, the harsh arbitration clause operates as a means of suppressing claims and

conferring de facto immunity for wrongdoing. The FAA was designed to promote the meaningful

resolution of disputes through arbitration in good faith, not to promote claim suppression through

the misuse of heavy-handed arbitration clauses as a scare tactic.

Second, mere severance can indirectly lead to arbitration with harsh, one-sided procedures.

If mere severance is the result after protracted litigation (by way of example, this current litigation

has lasted for several years already), some parties may decide to forego litigation and proceed

directly to spar with the other party in an arbitration proceeding governed by harsh, unfair terms.

Knowing that the only realistic penalty is the possibility of severance, some plaintiffs would forego

a long fight in court concerning severance and roll the dice by filing claims in an arbitration system
 Case 3:17-cv-01953-PAD Document 102-1 Filed 12/02/20 Page 20 of 21

where the odds were designed to favor the stronger party. Unfortunately, such an arbitration would

not be a fair fight and would occur before a tribunal governed by one-sided, bad faith procedures

designed to favor the drafting party. By merely ordering severance in this case and incentivizing

the future drafting of extremely harsh terms, the FAA would indirectly undermine the enforcement

of critical rights pursuant to oppressive arbitration terms adopted in bad faith. Some parties may

proceed to arbitration pursuant to harsh terms instead of fighting for years merely to sever a harsh

provision.

Third, some plaintiffs may choose to go the distance and litigate, perhaps for several years

and several rounds of appeals, the narrow issue of whether particular arbitration terms are

severable. But increased sparring and litigation about the arbitration process undermines the

potential value and efficiency of arbitration and should not be an objective of the FAA. Ordering

severance – after prolonged sparring in court – as the sole penalty for drafting oppressive terms

would undermine the FAA’s goal of supporting a quick, effective method of resolving disputes.

To summarize, allowing severance as a remedy for the drafting of harsh terms is highly

problematic. Not only does severance violate the clear text of the FAA, but also from a policy

perspective, severance would encourage three abusive situations: claim suppression, tribunals

administering arbitration pursuant to harsh terms, or protracted litigation over severance. Amicus

curiae respectfully submits that courts allowing severance of harsh terms in an arbitration

agreement are acting contrary to the FAA’s text, history, and policy. Instead, swiftly invalidating

a defective arbitration agreement in its entirety would advance the goals of the FAA and promote

arbitration as a legitimate process for resolving disputes. With a bona fide threat of judicial

invalidation, future parties would avoid drafting harsh, one-sided arbitration procedures and

instead be incentivized to develop and strive for fair systems of dispute resolution.
 Case 3:17-cv-01953-PAD Document 102-1 Filed 12/02/20 Page 21 of 21

The FAA was originally intended to promote arbitration as a good faith method of

resolving commercial disputes. Arbitration, where meaningful consent and fair procedures exist,

can be a useful, powerful tool serving the parties and the broader legal system. But with an order

of severance, the WBO would be saved by the bell for its egregious, bad faith, below-the-belt

drafting; ordering severance of the oppressive terms in this case would only undermine the FAA

and encourage further abuse of arbitration.

VI. Conclusion

Amicus curiae respectfully submits that based on the FAA’s unambiguous text, history,

and policy, the Court should rule that Austin Trout has won this round against the WBO, and there

is no obligation to arbitrate.

In San Juan, PR, this 1st day of December 2, 2020.

WE HEREBY CERTIFY that on December 2, 2020, I electronically filed the foregoing with the

Clerk of the Court using the CM/ECF system, which will send notification of such filing to all CM/ECF

participants in the case.

s/ Jorge L. Marchand Heredia

JORGE L. MARCHAND HEREDIA
LAW OFFICE
Attorney Bar Number: 223712
Attorney for Plaintiff
PO BOX 364273
SAN JUAN, PR 00936-4273
Tel. (787)428-3533
Fax. (787)524-1208
jorgeluismarchand@gmail.com