Brendan Gooley

Fifth Circuit Reverses Decision Denying Motion to Compel International Arbitration

May 19, 2025 by Brendan Gooley

The Fifth Circuit Court of Appeals recently reversed a district court’s denial of a motion to compel arbitration, concluding that the contract between the parties evinced an intent to arbitrate even if the purported arbitral forum chosen by the parties no longer existed.

Baker Hughes Saudi Arabia Co. and Dynamic Industries Saudi Arabia Ltd. entered into a subcontract related to an oil and gas project in Saudi Arabia. The subcontract contained two arbitration clauses: Dynamic Industries could demand arbitration in Saudi Arabia and either party could initiate arbitration under the rules of the Dubai International Financial Centre’s joint partnership with the London Court of International Arbitration (DIFC-LCIA). The DIFC-LCIA was subsequently abolished, and a new institution was created in its place.

Baker Hughes then sued Dynamic Industries in court in the United States. Dynamic Industries moved to compel arbitration in the DIFC-LCIA. The court denied that motion because the parties’ designated forum, the DIFC-LCIA, no longer existed and the “forum-selection clause” was unenforceable.

The Fifth Circuit reversed. It noted that the arbitration clause related to the DIFC-LCIA provided that a “dispute shall be referred by either Party to and finally resolved by arbitration under the Arbitration Rules of the DIFC LCIA.” It concluded that that language was not a forum-selection clause because it “sets only the rules of arbitration and not the forum.” The Fifth Circuit also held that even if the clause was a forum-selection clause, the clause was not integral to the subcontract and the subcontract evinced a general intent to arbitrate regardless of the specific arbitral forum. Indeed, a separate arbitration provision allowed for arbitration in Saudi Arabia.

Baker Hughes Saudi Arabia Co. v. Dynamic Industries, Inc., 126 F.4th 1073 (5th Cir. Jan. 27, 2025).

Fourth Circuit Applies Supreme Court’s Coinbase Decision Outside Context of Arbitration

May 1, 2025 by Brendan Gooley

The Fourth Circuit Court of Appeals recently concluded that the U.S. Supreme Court’s decision in Coinbase Inc. v. Bielski is not limited to interlocutory appeals involving arbitration.

In Coinbase, which involved an interlocutory appeal from an order denying a motion to enforce an arbitration provision, the Supreme Court held that an interlocutory appeal of a motion denying arbitration “divests the district court of its control over those aspects of the case involved in the appeal.”

In City of Martinsville v. Express Scripts Inc., the city of Martinsville, Virginia, sued Express Scripts and OptumRx in state court related to their purported role in the opioid epidemic. The defendants removed the case to federal court, but the federal court remanded the case to state court. Immediately after the federal court remanded the case, but before the federal clerk mailed the remand order to the state court, Express Scripts filed an interlocutory appeal and sought to stay the case pursuant to Coinbase.

The district court denied the motion to stay, holding that Coinbase concerned appeals from motions regarding arbitration, not appeals regarding remand decisions. The Fourth Circuit reversed. It held that although Coinbase involved arbitration, that was a distinction without a difference and that Coinbase establishes that an automatic stay is in effect when appeals are filed regardless of whether the appeal concerns an order regarding arbitration, a remand order, etc. The court noted that while the stay may not preclude the court from taking any action whatsoever on the case, it precludes the court from taking action “over those aspects of the case involved in the appeal.” In the case of an appeal challenging a remand order, that includes mailing the remand order to the state court.

City of Martinsville v. Express Scripts Inc., No. 24-1912 (4th Cir. Feb. 10, 2025).

Second Circuit Vacates Decision Denying Arbitration

April 29, 2025 by Brendan Gooley

The Second Circuit Court of Appeals recently vacated a decision holding that a union could not compel arbitration of a grievance related to an expired collective bargaining agreement.

Xerox Corp. entered into a series of collective bargaining agreements with the Local 14A, Rochester Regional Joint Board, Xerographic Division Workers United. The final collective bargaining agreement expired in 2021 and the parties did not agree to a successor agreement. Xerox subsequently allegedly modified health benefits for certain retired workers. The union filed a grievance and demanded arbitration. Xerox refused to arbitrate and filed an action seeking declaratory relief and to stay and enjoin arbitration. It argued that none of the retiree benefits at issue had vested by the time the last collective bargaining agreement expired, and the union could therefore not enforce the provisions in the final agreement. The union argued that certain language in the final agreement promised benefits that survived the expiration of the agreement and were therefore enforceable.

The district court sided with Xerox, but the Second Circuit vacated that decision. It concluded that certain provisions in the final collective bargaining agreement could “be reasonably understood as guaranteeing benefits beyond the [final agreement’s] expiration or as constituting deferred compensation.” The Second Circuit also noted that to “discern the parties’ intent here, consulting extrinsic evidence of intent may be necessary,” which “would be a task for the arbitrator” “[i]f the Union’s grievance [was] indeed arbitrable.”

Xerox Corp. v. Local 14A Rochester Regional Joint Board, Xerographic Division Workers United, No. 23-634 (2d Cir. Feb. 5, 2025).

Fourth Circuit Upholds Confirmation of Hong Kong Arbitration Award

February 24, 2025 by Brendan Gooley

The Fourth Circuit Court of Appeals recently rejected challenges to a district court’s decision to confirm a Hong Kong arbitration award, including arguments that confirming the award violated public policy and international comity because it was inconsistent with Chinese currency control laws.

Stephany Yu entered into a business partnership Xu Hongbiao and Ke Zhengguang to develop real property in China. Ke subsequently passed away. Disputes arose and a Hong Kong arbitration panel ordered Yu to pay Xu and Ke’s estate around $1.63 million.

Ke’s estate commenced an action pursuant to the New York Convention in the District of Maryland, where Yu lived, to enforce the award. Yu argued: (1) Maryland was a forum non conveniens; (2) Ke’s estate failed to join indispensable parties; and (3) enforcing the award would violate public policy because it would violate Chinese currency control laws.

The district court rejected Yu’s arguments and confirmed the award, ordering Yu to pay Ke’s estate $3.6 million based on the original award plus costs, fees, and interest.

Yu appealed but the Fourth Circuit affirmed. First, the Fourth Circuit noted that it is unclear whether forum non conveniens is a defense under the New York Convention but held that it did not need to decide the issue because the District of Maryland was not an inconvenient forum for Yu even if such a defense is valid. Yu is a U.S. citizen who lives in Maryland and holds assets there. Second, the Fourth Circuit found Yu’s arguments about purportedly indispensable parties unpersuasive. While Ke’s estate had indeed not joined all the parties to the underlying real estate partnership, those parties were not indispensable because Ke’s estate only sought to confirm the award and obtain money from Yu. Thus, Yu and Ke’s estate were “the only parties necessary for complete relief.” Third, the Fourth Circuit rejected Yu’s argument about Chinese currency laws. The court noted that “China controls the outflow of [currency] from China as part of its currency management” but explained that the arbitration award, never mind the order confirming it, simply did not constitute a transaction in China that required the export of currency. “[N]othing about an award by a Hong Kong arbitration panel made in [Chinese currency, which is “a widely traded international currency”] violates U.S. public policy.” Finally, the Fourth Circuit also disagreed with Yu’s argument that the district court erred by issuing an award in U.S. dollars. The court noted that a judgment in foreign currency may be appropriate in certain circumstances but that the district court acted reasonably by issuing its award in U.S. dollars, as is customary for U.S. courts.

Estate of Ke Zhengguang v. Yu, 105 F.4th 648 (4th Cir. 2024).

Fourth Circuit Holds It Lacks Jurisdiction to Consider Petition to Vacate

February 3, 2025 by Brendan Gooley

The Fourth Circuit Court of Appeals recently held that it lacked jurisdiction over a petition to vacate an arbitration award.

Petitioners Stanley and Gail Friedler and several other individuals opened brokerage accounts with Stifel, Nicolaus & Co. The petitioners were unhappy with the management of their accounts and filed claims for arbitration alleging mismanagement with FINRA. The arbitration panel ruled for Stifel. The petitioners moved to vacate FINRA’s award. The district court denied the petitioners’ motion, and the petitioners appealed to the Fourth Circuit.

The Fourth Circuit questioned whether the federal courts had jurisdiction in light of the Supreme Court’s decision in Badgerow v. Walters, 596 U.S. 1 (2022), which held that “the face of [a] petition [to vacate arbitration awards] must contain an independent jurisdictional basis beyond the Federal Arbitration Act (‘FAA’) itself.” Both parties argued the courts had jurisdiction.

The Fourth Circuit disagreed. It rejected the parties’ argument “that because the ‘face of the petition’ asserts that the arbitration panel manifestly disregarded federal securities laws, the district court had federal-question jurisdiction over the dispute.” The Fourth Circuit explained that a “petition to vacate an arbitration award doesn’t raise the merits of the underlying claim, but rather the ‘enforceability of an arbitral award,’ which is ‘no more than a contractual resolution of the parties’ dispute.’” The court also disagreed with the argument “that a claim of manifest disregard is a creature of federal common law that itself gives rise to federal-question jurisdiction.”

The Fourth Circuit therefore vacated and remanded the district court’s decision with instructions to dismiss the petition to vacate the arbitration award.

Friedler v. Stifel, Nicolaus & Co., No. 22-1895 (4th Cir. July 18, 2024).