Jay-Z and his attorneys at Quinn Emanuel Urquhart & Sullivan are accusing the American Arbitration Association of lacking a slate of African-American arbitrators capable of handling “large and complex cases,” contradicting the organization’s claims about its diversity.
On Wednesday, the rap artist and entrepreneur persuaded a New York State judge in Manhattan to pause an arbitration with the current owner of his Rocawear apparel brand, pointing to the lack of African-American arbitrators qualified to preside over the matter.
“The lack of African-American arbitrator candidates stands in stark contrast to the proclamation on the AAA’s website that the AAA prioritizes engaging arbitrators from diverse backgrounds,” Quinn Emanuel attorney Alex Spiro said in the filing. “In reality, the AAA lacks any meaningful selection of minority arbitrators and, specifically, African-American arbitrators.”
Jay-Z, whose given name is Shawn Carter, sold Rocawear to Iconix, a major fashion brand company, in 2007. At the time, Iconix was expanding, and the $200 million purchase was the largest deal the company had ever done.
In 2016, Iconix said in a financial statement that it suffered a reduction in assets and income to its Rocawear-related assets of $169 million in 2015. In the following year’s filing, the company announced another $34.6 million in losses related to the Rocawear brand.
Jay-Z says that the company’s financial distress has prompted a stream of litigation against him, including a trademark lawsuit pending in the Southern District of New York, and an arbitration initiated Oct. 1. The U.S. Securities and Exchange Commission is also investigating the original 2007 sale of Rocawear.
After Iconix commenced the arbitration, Jay-Z and his attorneys began reviewing available arbitrators on the AAA’s search platform, in order to name four selections to a panel of 12 that would ultimately be narrowed by all the parties. But he discovered that he was unable to identify a single African-American arbitrator on the “large and complex cases” roster qualified to preside over the arbitration.
According to the filing, Jay-Z then confronted the AAA about the lacuna, prompting the organization to respond with three names: two men, one of whom was a partner at Blank Rome, which is representing Iconix, and one woman.
“Thus, the AAA provided petitioners with one choice for an arbitrator from Mr. Carter’s class—which, of course, is no choice at all,” the filing said. “The AAA’s failure to provide a venire of arbitrators that includes more than a token number of African-Americans renders the arbitration provision in the contract void as against public policy,” the lawyers wrote in an accompanying memorandum.
The organization then gave Jay-Z the choice of making his own four selections from its field of arbitrators, or letting it make selections for him. It ultimately did the latter.
In critiquing the AAA’s actions, Jay-Z noted the growing ubiquity of mandatory arbitration clauses in commercial contracts across all industries as an other justification for the court to step in.
“It would stand to reason that prospective litigants—which undoubtedly include minority owned and operated businesses—expect there to be the possibility that the person who stands in the shoes of both judge and jury reflects the diverse population,” he said.
The absence of qualified African-Americans on the AAA’s roster means that he and other black litigants are ultimately deprived of the equal protection of the laws and equal access to public accommodations, while misled into believing that they will receive a fair and impartial adjudication, according to the petition.
The filing came before a Nov. 30 deadline for the parties to strike up to four names on the list of 12. Instead, Jay-Z pushed to have the arbitration stayed until the parties could work with the AAA to assemble a list that includes a sufficient number of qualified African-American arbitrators.
Late Wednesday afternoon, the court agreed and granted a temporary restraining order, according to a representative for Spiro. The order did not immediately post a decision on its electronic docket.
Earlier in the day Spiro declined to comment on the substance of the filing Wednesday, as did the AAA, pointing to its policy of not commenting on arbitrations it administers. An attorney for Iconix did not respond to a request for comment.
The arbitration world has not been entirely indifferent to the question of diversity, with two important developments occurring in 2018. In May, JAMS introduced a model inclusion rider clause that urges users to consider diversity as one of the factors in neutral selection. In August, the American Bar Association (ABA) adopted Resolution 105, which encourages users to select and use diverse neutrals.