Alex Silverman

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).

Connecticut Supreme Court Finds State Law Statutory Limitation Period to Vacate Arbitration Award Confers Jurisdiction on State Courts and Not Preempted by FAA

May 17, 2021 by Alex Silverman

Plaintiff A Better Way Wholesale Autos Inc. filed an application in Connecticut state court seeking to vacate an arbitration award issued in favor of the defendants, James Saint Paul and Julie J. Saint Paul. The defendants filed motions to confirm the award and for attorneys’ fees, and to dismiss the plaintiff’s application. The defendants argued that the application was untimely under Connecticut Statutes section 52-420 (b) and that the trial court therefore lacked subject matter jurisdiction. The trial court order granting the defendant’s motions and dismissing the plaintiff’s application was affirmed on appeal. The Supreme Court of Connecticut framed the issues as: (1) whether Connecticut’s 30-day statutory limitation for seeking to vacate an arbitration award is “jurisdictional” in that it implicates the subject matter jurisdiction of state courts; and (2) whether the Connecticut statute is preempted by the FAA, which has a three-month limitation period for seeking to vacate.

With regard to the jurisdictional issue, the plaintiff claimed that section 52-420 (b) did not confer jurisdiction because the arbitration clause between the parties explicitly provided that any arbitration “shall be governed by the [FAA] … and not by any state law concerning arbitration.” But the Supreme Court agreed with the courts below that parties cannot privately agree to have the FAA’s three-month limitation period apply to a vacatur action filed in Connecticut state court, so as to override the limitation period in section 52-420 (b). The Supreme Court also found it is “hornbook law” that parties cannot confer subject matter jurisdiction on a court by consent or agreement. The Supreme Court was similarly unpersuaded by the plaintiff’s preemption argument, finding the time limitation in section 52-420 (b) does not impede the federal policy of enforcing arbitration agreements.

A Better Way Wholesale Autos, Inc. v. Saint Paul, No. SC 20386 (Conn. Apr. 15, 2021).