Carlton Fields

ORDER COMPELLING ARBITRATION REVERSED DUE TO FAILURE TO DETERMINE THE EXISTENCE AND SCOPE OF ARBITRATION AGREEMENT

September 27, 2016 by Carlton Fields

The Ninth Circuit recently reversed a trial court for compelling arbitration without issuing an order that (1) made “the necessary factual findings as to the parties’ communications,” (2) determined “the law applicable to contract formation,” and (3) ruled “as a matter of law what constituted the offer, acceptance, or terms of the contract.” The appellate court remanded for the trial court to “resolve factual issues and make legal conclusions regarding the scope of the parties’ agreement.” Due to the basic threshold error, the court determined that it did not need to consider the parties’ arguments regarding unconscionability, waiver, and due process. Cunico Corp. v. Custom Alloy Corp., Case No. 14-56544 (9th Cir. Sept. 6, 2016).

This post written by Michael Wolgin.

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SECOND CIRCUIT PANEL ADHERES TO CIRCUIT PRECEDENT AND AFFIRMS ENFORCEABILITY OF EMPLOYMENT CLASS ACTION WAIVERS

September 26, 2016 by Carlton Fields

The Second Circuit issued a summary order affirming a decision by the Southern District of New York compelling arbitration pursuant to class-action and collective-action waivers contained in an employment arbitration agreement. The agreement required employees to submit all employment and compensation-related claims to arbitration and mandated that such claims be decided on an individual basis. The sole issue on appeal was whether the arbitration provision’s “prohibition of class or collective adjudication of work-related claims illegally restrict[ed] employees’ substantive rights under the NLRA and the [Norris-La Guardia Act], and [was] unenforceable under the [Federal Arbitration Act].” The court described the landscape of the Circuit split on this issue, noting that the National Labor Relations Board (NLRB) and the Seventh and Ninth Circuits have rejected the class/collective action waivers, whereas the Fifth and Eighth Circuits have held that such waivers may be enforceable. The Second Circuit panel then followed its own precedent, citing its 2013 decision in Sutherland v. Ernst & Young LLP, which is aligned with position of the Fifth and Eighth Circuits. The court then affirmed the enforceability of the waivers here. Patterson v. Raymours Furniture Co., Inc., Case No. 15-2820-cv (2d Cir. Sept. 2, 2016).

This post written by Gail Jankowski, a law clerk at Carlton Fields in Washington, DC.

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ALABAMA AMENDS CAPTIVE INSURERS ACT

September 15, 2016 by Carlton Fields

On April 26, 2016, Alabama Governor Robert J. Bentley approved House Bill No. 270, which revised Alabama’s Captive Insurers Act. The revised Captive Insurers Act went into effect on July 1, 2016, and included amendments to several provisions of the act to make it easier to establish captives and provides tax-friendly measures for captives. In particular, we note that the amended act lowers capital requirements, allows captives to be formed as any form of business entity, provides for a 60-day provisional license in certain circumstances, and caps premium taxes. Under Alabama’s 2006 Captive Insurers Act, captives could only be formed as corporations. Norman Chandler, President of the Alabama Captive Association, has stated that “The newly revised Captive Act will significantly help the captive industry grow in Alabama.”

A copy of the revised Chapter 31B is available here, which shows in redline form the changes to the Act. 2016 Alabama Laws Act 2016-191 (H.B. 270).

This post written by Zach Ludens.

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SECOND CIRCUIT COURT OF APPEALS ALLOWS FEDERAL COURTS TO “LOOK THROUGH” § 10 FAA PETITION TO DETERMINE FEDERAL JURISDICTION

September 13, 2016 by Carlton Fields

The United States Court of Appeals for the Second Circuit has reversed its own precedent to allow federal courts examining petitions under § 10 of the FAA to “look through” the petition to examine if there is federal jurisdiction. In the case, which arose out of a dispute involving registered FINRA members and their former employees, the district court dismissed the case for want of jurisdiction, finding that it did not state a “substantial federal question on its face.” On appeal, the petitioner argued that the Second Circuit’s precedent in Greenberg v. Bear, Stearns & Co., 220 F.3d 22 (2d Cir. 2000), which led the district court to its determination, had been displaced by Vaden v. Discovery Bank, 556 U.S. 49 (2009). The Second Circuit panel held that Vaden “rendered Greenberg’s result fundamentally inconsistent with the Act’s statutory context and judicial interpretations.” Thus, the Second Circuit returned the case to the district court with instructions that it could “look through” the § 10 petition, “applying the ordinary principles of federal-question jurisdiction to the underlying dispute as defined by Vaden.” Doscher v. Sea Port Group Securities, LLC, No. 15-2814 (2d Cir. Aug. 11, 2016).

This post written by Zach Ludens.

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ARBITRATION CLAUSE CONTAINED ONLY IN “SIDE” AGREEMENTS TO INSURANCE POLICIES, ENFORCED IN DISPUTE OVER “RETROSPECTIVE PREMIUMS”

September 8, 2016 by Carlton Fields

A U.S. District Court for the Southern District of New York recently enjoined Advanced Micro Devices (AMD), from proceeding with litigation in California against National Union Fire Insurance Company (NUFIC), related to a dispute over premiums under workers compensation insurance policies. The New York court further required the parties to proceed in arbitration in New York, even though the relevant arbitration agreements were contained within side agreements (the “indemnity and payment agreements”), and not in the relevant insurance policies.

In opposing NUFIC’s request to require AMD to proceed with arbitration, AMD argued that the indemnity and payment agreements unenforceable because they were unauthenticated side agreements that had not been filed with California’s insurance regulators. The court rejected AMD’s argument that the indemnity agreements were not authentic. The court also found that the dispute over the legitimacy of the indemnity and payment agreements would be addressed in arbitration, rather than by the courts. The court further determined that since one iteration of the applicable arbitration clauses broadly applied to “disputes arising out of or relating to the Agreements,” the arbitration could include the premium dispute at issue here.

Finally, the court considered whether it should defer to the first-filed lawsuit in California (it was filed three days before the New York action to enforce arbitration). The court determined that even though the California action was first in time, the dispute at hand was clearly subject to arbitration, and the New York court was “uncertain” that the California court had the “power” to compel the arbitration. Therefore, the court ruled that the arbitration should proceed in New York, and further ruled that a preliminary injunction enjoining the California proceedings was warranted. National Union Fire Insurance Co. v. Advanced Micro Devices, Inc., Case No. 1:16-cv-05699 (USDC S.D.N.Y. Aug. 4, 2016).

This post written by Barry Weissman.

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