Alex Silverman

Second Circuit Finds International Arbitral Tribunal Formed Under a Bilateral Investment Treaty Constitutes a “Foreign Tribunal” Under 28 U.S.C. § 1782

July 29, 2021 by Alex Silverman

Third-party defendants AlixPartners LLP and Simon Freakley (collectively, “AlixPartners”) appealed from a July 2020 order of the U.S. District Court for the Southern District of New York, which granted an application for discovery assistance pursuant to 28 U.S.C. § 1782. Section 1782 allows federal district courts to compel witness testimony or document production from any person or entity “residing” or otherwise “found” in the judicial district for “use in a proceeding in a foreign or international tribunal.” The Fund for Protection of Investor Rights in Foreign States sought assistance from the district court in seeking discovery from AlixPartners for use in an arbitration proceeding the fund had commenced against the nation of Lithuania. The fund brought the proceeding before an arbitral panel established pursuant to a bilateral investment treaty between Lithuania and Russia. The issues on appeal were: (1) whether an arbitration between a foreign state and an investor, which takes place before an arbitral panel established pursuant to a bilateral investment treaty to which the foreign state is a party, constitutes a “proceeding in a foreign or international tribunal” under section 1782; (2) whether the fund is an “interested person” within the meaning of section 1782; and (3) whether the district court abused its discretion in finding certain factors established by the U.S. Supreme Court in Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004), weighed in favor of granting the fund’s application.

Reinforcing its decision in In re Application of Hanwei Guo, 965 F.3d 96 (2d Cir. 2020), the Second Circuit held that the arbitration panel here qualified as a “foreign or international tribunal” under section 1782, as it was established in accordance with a bilateral investment treaty between two nations and was governed by the UNCITRAL rules. The court found this conclusion to be consistent with both Guo and legislative intent to broaden the reach of section 1782 to allow for discovery assistance within the context of intergovernmental tribunals. Because the fund was a party to the arbitration for which it sought discovery assistance, the court ruled that the fund was an “interested person” under section 1782. Having also determined that the district court did not err in its weighing of the so-called Intel factors, the Second Circuit affirmed the district court’s ruling granting the fund’s application for discovery assistance.

In re Fund for Protection of Investor Rights in Foreign States v. AlixPartners, LLP, No. 20-2653 (2d Cir. July 15, 2021).

Wisconsin Federal Court Vacates Order Compelling Arbitration and Reopens District Court Case, Finding “Extraordinary Circumstances” Justified Relief Under FRCP 60(b)

July 8, 2021 by Alex Silverman

Marcia Laude filed suit alleging that her late husband was not adequately cared for while residing in a nursing home operated by the defendants. In 2019, a Wisconsin district court granted the defendants’ motion to compel arbitration and dismissed the case without prejudice. Two years later, the plaintiffs sought relief from the order compelling arbitration and requested, under Federal Rule of Civil Procedure 60(b), that they be permitted to pursue their case in federal court. Rule 60(b) allows the court to relieve a party from a final judgment or order for certain specified reasons, or for “any other reason that justifies relief.” Obtaining relief under the “catchall” provision requires proof of “extraordinary circumstances.” Here, the court accepted that extraordinary circumstances existed because the defendants moved to compel arbitration years ago, over the plaintiffs’ objection, and then refused to arbitrate or even communicate with the plaintiffs for 13 months, leaving them without a remedy. The plaintiffs also argued that the defendants impliedly waived their right to arbitrate given their conduct since the 2019 order. The court agreed, and thus granted the plaintiffs’ request to reopen the case in federal court, under Rule 60(b)(6).

Laude v. Azar, No. 2:19-cv-00783 (E.D. Wis. June 15, 2021).

Texas Federal Court Compels Arbitration of Civil Rights Claims but Stays Proceedings to Avoid Future Statute of Limitations Issues

July 6, 2021 by Alex Silverman

The plaintiff filed suit for alleged civil rights violations arising from his former employment with the defendant. The defendant moved to dismiss and compel arbitration, citing an arbitration clause in the plaintiff’s employment agreement. A provision in the arbitration agreement placed a limit on the number of allowable depositions and special interrogatory requests but authorized the arbitrator to allow additional discovery he or she deemed appropriate. The plaintiff conceded that he signed the arbitration agreement but claimed the discovery limitations rendered it unconscionable and thus unenforceable, including because they were more restrictive than the Federal Rules of Civil Procedure. The court disagreed, noting that the U.S. Supreme Court considered and rejected an almost identical argument in Gilmer v. Interstate/Johnson Lane Corp. The plaintiff also cited no authority in which an arbitration clause was deemed unconscionable on the ground that its discovery restrictions were more onerous than the Federal Rules of Civil Procedure. The court therefore granted the defendant’s motion to compel arbitration but did not dismiss the action, choosing instead to stay the proceedings to preserve the plaintiff’s claims in the event they are not resolved by arbitration.

Pirzada v. AAA Texas, LLC, No. 4:21-cv-00664 (S.D. Tex. June 15, 2021).

SDNY Declines to Adopt Collateral Attack Doctrine, Grants Motion to Compel Arbitration

June 17, 2021 by Alex Silverman

Petitioners Credit Suisse AG and Lara Warner sought to permanently stay an arbitration commenced by respondent Colleen Graham, who cross-moved to compel the arbitration. The petitioners claimed the proceeding was an impermissible “collateral attack” on a prior, related arbitration in which Graham’s claims against different parties were dismissed. As it relates to the second arbitration against the petitioners, there was no dispute as to whether Graham’s claims were subject to arbitration, nor that any threshold arbitrability questions were to be decided by an arbitrator. In deciding the petitioners’ motion, the court therefore started from the baseline that Graham’s motion to compel must be granted, absent a valid basis to stay.

The petitioners argued the issues raised in Graham’s arbitration against them were already resolved in the first arbitration, pointing to several cases in which courts found a second arbitration could not collaterally attack the final determination made in a first arbitration. According to the petitioners, the “collateral attack doctrine” is not a question or arbitrability, but rather a legal question to be decided by a court. But the court disagreed and declined to adopt the collateral attack doctrine. Under the FAA, the court explained, its role is to decide whether an arbitration falls within the terms of a valid arbitration agreement, not whether it is estopped by a prior arbitration. If, as here, an arbitration falls within a valid arbitration agreement, the court found it is well established that any threshold procedural questions about the arbitration “are presumptively not for the judge, but for an arbitrator, to decide.” The court found its role was even more limited here, as the parties specifically agreed to delegate any gateway issues to the arbitrator. Comparing the petitioners’ “collateral attack” argument to the res judicata argument raised and rejected in a 2015 Second Circuit decision, the court ruled that the preclusive effect of Graham’s first arbitration, if any, should be decided by the arbitrator in the second arbitration. Graham’s motion to compel arbitration was thus granted, and the petitioners’ motion to stay was denied.

Credit Suisse AG v. Graham, No. 1:21-cv-00951 (S.D.N.Y. Apr. 7, 2021)

Illinois District Court Denies Motion to Vacate Arbitration Award and Imposes Sanctions, Citing “Outright Hostility” to Such Challenges in the Seventh Circuit

June 15, 2021 by Alex Silverman

The U.S. District Court for the Northern District of Illinois denied a former employee’s motion to vacate an arbitration award in favor of defendant AT&T Mobility Services LLC. The plaintiff claimed the arbitrator exceeded his powers or imperfectly executed them and that the award manifestly disregarded the law, so as to warrant vacatur under section 10(a)(4) of the Federal Arbitration Act. The court disagreed, finding as an initial matter that the plaintiff failed to explain how exactly the arbitrator exceeded his powers until his reply brief. Because the court cannot consider arguments first raised on reply, the motion to vacate was denied on this basis alone. But even considering the motion on its merits, the court found no evidence requiring vacatur, noting the grounds for doing so are “extremely limited” and that the plaintiff failed to cite a single decision in which an arbitration award was vacated. The court took particular issue with the “incoherent and unsupported arguments” in the plaintiff’s moving papers and the plaintiff’s evident attempt to take “another bite at the apple.” Finding there is “an outright hostility in the Seventh Circuit to parties challenging arbitration awards,” the court granted AT&T’s motion for sanctions and directed the plaintiff to pay $1,500.

Skuja v. AT&T Mobility Services LLC, No. 1:18-cv-07945 (N.D. Ill. May 25, 2021).