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Brendan Gooley

Court Confirms Arbitration Decision Concluding That Discrimination Claims Were Time-Barred

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A federal district court recently confirmed an arbitration decision concluding that a disgruntled former employee’s discrimination and retaliation claims under Title VII were time-barred because the former employee did not initiate arbitration in a timely fashion.

Clare Anagonye, a financial adviser, filed a charge with the EEOC claiming she was constructively discharged and discriminated and retaliated against on the basis of her race, color, and gender in violation of Title VII. The EEOC dismissed the charge on January 19, 2018, and advised Anagonye of the 90-day limitation period for filing a civil action at that time.

Anagonye filed a civil action within the 90-day time period, but her employment contract with her former employer contained an arbitration clause. The district court concluded that the clause was valid and enforceable and stayed Anagonye’s action pending arbitration. Anagonye subsequently filed a demand for arbitration on or about August 27, 2019.

Anagonye’s former employer argued that the arbitration clause in the employment contract required Anagonye to initiate arbitration, not a lawsuit, within 90 days of the EEOC’s dismissal.

An arbitrator panel of the American Arbitration Association (AAA) agreed and concluded that Anagonye’s demand for arbitration was time-barred and that it therefore lacked jurisdiction over her claim. Anagonye’s former employer moved to confirm the award and Anagonye, proceeding pro se, moved to vacate it.

The U.S. District Court for the Eastern District of Michigan confirmed the award. A magistrate judge concluded that Anagonye had “failed to establish any of the statutory grounds for setting aside the arbitration decision.” The judge noted that it had already rejected Anagonye’s primary claim that court, not arbitration, was the appropriate venue for her claims when it ordered a stay pending arbitration and that Anagonye had waived any challenge to that decision by failing to object to it. The judge also rejected Anagonye’s “conclusory statements and speculation” regarding alleged “corruption” by the AAA panel, noting that the record established that Anagonye had the opportunity to select arbiters despite her allegations to the contrary. Finally, the judge held that he was precluded from adjudicating the panel’s decision that Anagonye’s claim was time-barred because “the FAA does not provide for judicial review of an arbitrator’s legal conclusions.”

The district court adopted the magistrate judge’s recommendation.

Anagonye v. Mass Mutual Insurance Co., No. 2:18-cv-11170 (E.D. Mich. May 21, 2021).

First Circuit Concludes App User Is Bound by Arbitration Clause in App’s Terms and Conditions

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The First Circuit Court of Appeals recently concluded that an app user had sufficient notice of and was bound by an arbitration clause in the app’s terms and conditions. The court rejected the user’s arguments that, among other things, she was not bound by the clause because she had to scroll down to see it. The court concluded that the user was bound by the arbitration clause.

Handy Technologies Inc. operates an application that enables users to retain house cleaners and other home services. Maisha Emmanuel, a nanny and housekeeper, signed up to offer her services through Handy’s app. As part of that process, Emmanuel submitted an application that required her to click a checkbox next to the statement: “I agree to Handy’s Terms of Use.” The phrase “terms of use” was a hyperlink that, if clicked, would have taken the user to Handy’s terms, which include a mandatory arbitration clause. Emmanuel, however, clicked the checkbox, submitting her application, without accessing or reviewing the terms of use. After an interview, background check, and orientation session, Emmanuel gained access to the Handy app, which contained a screen stating: “I understand that the Handy Service Professional Agreement has changed and that I need to carefully read the updated agreement on the following screen before agreeing to the new terms.” When Emmanuel clicked through to the next screen, she saw the initial portion of Handy’s independent contractor agreement. The visible portion noted that Emmanuel was agreeing to be bound by the agreement but did not display language regarding arbitration. Had Emmanuel scrolled down, she would have seen the mandatory arbitration clause. Emmanuel, however, did not scroll through the screens or terms when using the app.

Emmanuel subsequently filed a putative class action alleging that Handy had misclassified her and other similarly situated users as independent contractors when it should have classified them as employees and that Handy had therefore violated, inter alia, the FLSA by failing to pay her and similarly situated users minimum wage. Handy moved to compel arbitration.

The district court granted Handy’s motion, and Emmanuel appealed.

The First Circuit affirmed. The court applied Massachusetts law on notice to app users regarding arbitration agreements, concluding that Emmanuel had “reasonable notice of the term in the Agreement concerning arbitration” and that a valid contract to arbitrate therefore existed. Handy’s app was clear that Emmanuel was agreeing to a contract. Although the arbitration clause was not visible without scrolling, the app was clear that the entirety of the agreement could be viewed by scrolling down. Emmanuel’s onboarding process, which included an interview, orientation, and background check, also supported the conclusion that Emmanuel knew she was entering into a significant contractual relationship by signing up for Handy’s app.

The First Circuit also declined to consider Emmanuel’s contention that Handy’s agreement was unconscionable. Emmanuel’s argument regarding unconscionability, that Handy allegedly had a unilateral right to modify the agreement, was not directed to the agreement’s arbitration clause and was therefore for the arbitrator to address, not the court.

Emmanuel v. Handy Technologies, Inc., No. 20-1378 (1st Cir. Mar. 22, 2021).

Second Circuit Affirms Confirmation of ICC Decision Based on UAE Law

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The Second Circuit Court of Appeals recently affirmed a decision confirming a decision by the International Chamber of Commerce (ICC) that applied the law of the United Arab Emirates (UAE).

Cessna Finance Corp. leased several private jets to startup Prestige Jet Rental. Ghaith Al Ghaith, Prestige’s chairman, who was also the deputy chairman of Al Ghaith Holding Co. PJSC (AGHC), guaranteed the lease agreements in his capacity as deputy chairman of AGHC. When Prestige defaulted, Cessna initiated arbitration in the ICC pursuant to the lease agreements against AGHC. AGHC argued that Al Ghaith’s guarantee was invalid because its articles of association required the signatures of “two out of three” of its chairman, deputy chairman, and managing director to bind the company, and only Al Ghaith had signed the guarantee. The ICC rejected that claim, finding that “AGHC was bound by ‘good faith’ under … the UAE Civil Code.” Cessna moved to confirm the ICC’s award and AGHC cross-moved to vacate the award.

The district court confirmed the award. The Second Circuit affirmed. The Second Circuit rejected AGHC’s argument that the ICC had “manifestly disregarded the law,” explaining that it had applied the law of the UAE in a way that “provided at least a barely colorable justification for its decision.” The court noted that a barely colorable justification was all that was needed for an award to be enforced against a challenge that an arbitrator manifestly disregarded the law.

Cesfin Ventures LLC v. Al Ghaith Holding Co. PJSC, No. 20-1106 (2d Cir. Apr. 22, 2021).

Sixth Circuit Concludes District Court Lacked Authority to Award Attorneys’ Fees Following Arbitration

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The Sixth Circuit recently reversed a district court’s decision to award attorneys’ fees after the Circuit concluded that the claim on which the fees were awarded was subject to mandatory arbitration, and noted that the arbitrator had not awarded any fees for that claim.

Members of the UAW union sued TRW Automotive U.S. LLC for breach of contract and violations of ERISA claiming that TRW violated a collective bargaining agreement (CBA) when it changed their health care coverage. The district court compelled arbitration pursuant to a clause in the CBA that provided in relevant part that arbitration “shall be the exclusive remedy for the enforcement by [the union] of any claim against the Company.” The arbitrator ruled in favor of the union workers.

The district court then granted in part a motion the union filed seeking statutory attorneys’ fees for their ERISA vesting claim, a claim that the district court found was not before the arbitrator and was instead before the court. Specifically, the court “declined to award any ERISA attorney’s fees and costs incurred through the date of the arbitration award because ‘the ERISA claim was not addressed prior to or at arbitration’” but “granted [the union workers’] request for attorney’s fees and costs related to their ERISA claim incurred after the arbitration award.”

The Sixth Circuit reversed. In short, the Court concluded that the district court “lacked the authority” to award fees or otherwise make rulings on the union workers’ ERISA vesting claim “because the ERISA vesting claim and ERISA attorney’s fee claim . . . were both subject to mandatory arbitration under the CBA, allowing only limited court review for issues of legality or enforcement.”  The Court explained:  “Once the arbitrator finds a merits violation, the parties are responsible for raising any remedy issues in their remedy demands during arbitration. . . .  The parties do not have to return to the district court once a merits violation is found just to seek permission to present ‘ripe’ remedy issues to the arbitrator. Plaintiffs’ position, presented without any supporting legal authority, would lead to an untenable result where the arbitrator performs fact-finding but the district court issues the remedy. Not only would this contradict the CBA’s declaration that arbitration is the exclusive remedy for any dispute, but it would also defeat the purpose of arbitration if the parties still have to litigate remedy issues in federal court.”

UAW International et al. v. TRW Automotive U.S. LLC, Nos. 19-2252/2262 (6th Cir. Mar. 11, 2021).

District Court Predicts that Alabama Supreme Court Would Refuse to Extend Bad Faith to Reinsurance Disputes

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The United States District Court for the Middle District of Alabama recently predicted that the Alabama Supreme Court would refuse to recognize bad faith claims in the context of reinsurance disputes if it was presented with the question. The district court therefore granted a reinsurer’s motion to dismiss several bad faith claims against it.

Alabama Municipal Insurance Corporation (“AMIC”) sued Munich Reinsurance America, Inc. for purportedly underpaying several reinsurance claims by approximately $1.9 million. AMIC asserted bad faith claims as part of its suit. Munich Re moved to dismiss those claims, arguing Alabama does not (or rather, would not) recognize bad faith in the context of reinsurance disputes.

The district court agreed. It therefore granted Munich Re’s motion to dismiss and denied a motion by AMIC to amend. In sum, the court noted that the Alabama Supreme Court has limited bad faith claims to insurance situations “that most resemble typical insurance contracts” (e.g., those in which the insured is a consumer or individual, etc.) The district court noted that the Alabama Supreme Court declined to extend the tort to a situation involving a dispute between a primary and excess insurer and that another United States district court had predicted “that the Alabama Supreme Court would not choose to extend the tort to suretyships.” The district court noted that the tort was designed to protect vulnerable insureds who have little negotiating power when signing insurance contracts and that the insurer-reinsurer dynamic is not such a situation.

The court therefore predicted that the Alabama Supreme Court would not recognize bad faith claims in the context of insurer-reinsurer disputes and dismissed those claims.

Alabama Municipal Ins. Corp. v. Munich Reinsurance Am., Inc., No. 2:20-cv-00300-MHT-JTA (Doc. No. March 16, 2021).