On June 23, 2023, the U.S. Supreme Court issued a 5-4 opinion resolving a circuit split in Coinbase Inc. v. Bielski, in which it held that a district court must stay its proceedings while an interlocutory appeal on the question of arbitrability is ongoing. Read our in-depth article on CarltonFields.com.
Mississippi Supreme Court Affirms Denial of Motion to Compel Arbitration of Wrongful Death Suit
Noting that the Federal Arbitration Act applies to nursing home admission agreements that include a mandatory arbitration provision, the Mississippi Supreme Court affirmed the trial court’s order denying Belhaven Senior Care LLC’s motion to compel arbitration of a wrongful death and negligence suit brought by the administrator and estate of a former patient. The court agreed with the trial court that the party who signed the admission agreement on behalf of the patient lacked the legal authority to bind the patient to the agreement.
When Mary Hayes was admitted to the Belhaven nursing home in November 2018, her daughter, Betty Smith (the administrator of her mother’s estate), executed an admission agreement on behalf of her mother that included a provision for binding arbitration of all claims related to Hayes’ residency at the nursing home. Hayes died in June 2020, and Smith filed a complaint against Belhaven in state court alleging claims for wrongful death, negligence, gross negligence, medical malpractice, and a statutory survival claim. Belhaven moved to compel arbitration, relying on the arbitration clause in the admission agreement. The trial court declined to compel arbitration because Smith did not have the legal authority to bind her mother to the admission agreement.
On appeal, Belhaven argued that under the Health-Care Decisions Act, Smith acted as a “statutory health care surrogate” for her mother when she signed the admission agreement and is estopped from denying the validity of the arbitration clause because she and Hayes benefited from the agreement, and Hayes was a third-party beneficiary. In rejecting Belhaven’s arguments, the court noted that it applies a two-prong inquiry in evaluating arbitration clauses, which includes first determining if there is a valid arbitration agreement, and if so, if the parties’ dispute is within the scope of the arbitration agreement. The court made clear that its focus in this case “rests wholly on the arbitration agreement’s validity.” The court concluded that the capacity to make health care decisions is presumed under the act, and a health care surrogate may only make health care decisions when the adult patient has been determined by the primary physician to lack capacity. Since Hayes was not evaluated by a physician when admitted, and was not found to lack capacity, Belhaven failed to prove the requirements of the act. The court then found that because Smith did not qualify as her mother’s health care surrogate, there was no valid contract. The court further found that Smith was not estopped from contesting the validity of the arbitration clause in the admission agreement. The court affirmed the trial court’s decision not to compel arbitration and remanded the matter.
Belhaven Senior Care, LLC v. Smith, No. 2022-CA-00050-SCT (Miss. Apr. 6, 2023).
Third Circuit Finds Publishing Company Waited Too Long to Challenge Arbitration Award Under Labor Management Relations Act
Under a collective bargaining agreement that ran from 2014 to 2017 between the Newspaper Guild of Pittsburgh and PG Publishing, the publisher of the Pittsburgh Post-Gazette, PG was required to cover a portion of increases to newsroom employees’ health care costs. PG stopped making the contributions after the agreement expired in 2017. After bringing their labor dispute before the NLRB, the parties pursued arbitration to decide whether the guild’s grievance was arbitrable, and if so, whether PG breached the agreement in declining to make the required contributions. In December 2019, the arbitrator found in favor of the guild and directed PG to cover the health care premium increases.
In February 2020, PG sought to vacate the award in federal court through a complaint under both the Labor Management Relations Act (LMRA) and the Federal Arbitration Act (FAA). The U.S. District Court for the Western District of Pennsylvania dismissed PG’s complaint as time-barred and entered an order to enforce the arbitration award. PG appealed.
Agreeing with the district court, the Third Circuit found that PG’s bid to vacate the arbitration award was untimely. The panel noted that even though PG filed its complaint within 90 days of the arbitrator’s award, which is the limitations period applicable to motions to vacate under the FAA, PG’s general references to the FAA in its complaint were not sufficient to invoke the FAA as a means of seeking vacatur distinct from the LMRA. The Third Circuit reasoned that under the LMRA, the limitations period was 30 days from the December 2019 award, and PG did not file its complaint more than 30 days after the issuance of the award. In addition, the Third Circuit rejected PG’s attempt to take advantage of the longer statute of limitations available under the FAA, as PG failed to challenge the award by motion practice, which is required under the FAA.
PG Publishing, Inc. v. Newspaper Guild of Pittsburgh, Communication Workers of America, AFL-CIO LOCAL 38061, No. 20-3475 (3d Cir. Nov. 30, 2021).
SDNY Recognizes Strong Deference Owed to Arbitrators, Confirms Arbitration Award
International Engineering and Construction (IEC) commenced arbitration against Baker Hughes (formerly GE Oil and Gas) over construction delays in the building of a liquefied natural gas power plant in Nigeria. The three-arbitrator panel issued an award finding that both GE and IEC breached the construction contracts. While the panel awarded IEC more than $7 million plus interest from GE, it also ordered IEC to pay GE $11 million plus interest, as well as 95% of the arbitration costs and GE’s costs. The net result was that IEC was ordered to pay more than $8 million plus interest.
GE moved to confirm the arbitration award and IEC cross-moved to vacate the award on the grounds that the arbitrators manifestly disregarded the law and the plain language of the parties’ contracts. Although the district court noted that IEC’s arguments “might have traction” if the court were writing on a blank slate, based upon the strong deference owed to arbitrators, the court found that IEC’s vacatur arguments “fell short,” and confirmed the award in favor of GE.
Baker Hughes Energy Services, LLC v. International Engineering & Construction S.A., No. 1:21-cv-01961 (S.D.N.Y. Nov. 16, 2021)
New York Federal Court Reduces Arbitration Award in Labor Dispute by 25% Where Arbitrator Exceeds Scope of Authority
This case arose out of a labor dispute between Charter Communications Inc., successor to Time Warner Cable, and International Brotherhood of Electrical Workers, AFL-CIO, Local Union No. 3, a labor organization that represents employees in the bargaining unit employed by Charter.
On March 28, 2017, Local 3 commenced a strike against Charter. Charter thereafter served Local 3 with an arbitration demand seeking to arbitrate whether Local 3 violated the no-strike clause contained in the collective bargaining agreement (which expired on March 31, 2017) when it commenced a strike on March 28.
The U.S. District Court for the Eastern District of New York addressed whether Local 3 members were bound by a provision in the collective bargaining agreement requiring arbitration of disputes when they were allegedly on strike.
The district court found the parties were bound by the no-strike, arbitration, and grievance provisions in the collective bargaining agreement, and ordered the parties to arbitrate. In its decision, which was confirmed by the circuit court, the district court noted that it was undisputed that on March 31, 2017, the no-strike obligation was not in force, “so the contested strike period up for arbitration on claimed damages by Charter is three days.”
The arbitrator found in favor of Charter and awarded it $968,195 for the violation of the no-strike clause. However, although the arbitrator confirmed the district court’s three-day strike period in its liability decision, she added a day — March 31 — to the strike period in her damage’s decision, stating that “the time frame for purposes of assessing damages in this proceeding is March 28, 29, 30, and 31, 2017.”
Charter moved to confirm the arbitration award in the district court, and Local 3 cross-moved to vacate or modify the award, arguing that the arbitrator exceeded the scope of her authority by extending the strike period from three days to four days. Local 3 also argued that the damages formula used by the arbitrator did not account for alleged savings to Charter during the strike, and resulted in a windfall to Charter, which warranted modification of the award.
On November 4, 2021, the district court agreed with Local 3 and reduced Charter’s arbitration award by 25%, to $726,146.25, finding that the arbitrator exceeded the scope of her authority when she altered the strike period by adding an extra day to the time frame for assessing damages. However, the district court rejected Local 3’s argument as to the damages formula, finding that it did not establish that the arbitrator had shown a manifest disregard for the law when declining to offset the award by Charter’s alleged savings.
International Brotherhood of Electrical Workers, AFL-CIO, Local Union No. 3 v. Charter Communications, Inc., No. 1:17-cv-05357 (E.D.N.Y. Nov. 4, 2021).