John Pitblado

Third Circuit Finds Agreement to Arbitrate Unenforceable Because Arbitration Was Directed to an Illusory Forum

April 9, 2018 by John Pitblado

Where a Loan Agreement’s arbitration provision stated disputes “will be resolved by Arbitration, which shall be conducted by the Cheyenne River Sioux Tribal Nation by an authorized representative in accordance with its consumer dispute rules and the terms of this Agreement,” the Third Circuit Court held, on review, that the Tribe was required to be involved in the arbitration. This, however, proved impossible, because the Court found no such tribal arbitral forum exists.

The Court found that “[t]he Choice of Arbitrator provision allows the parties to select the AAA, JAMS, or some other agreed upon organization ‘to administer the arbitration… [under] the chosen arbitration organization’s rules and procedures… to the extent that those rules and procedures do not contradict either the law of the [Tribe] or the express terms of [the Loan] Agreement.’” However, the Court declined to extend the Choice of Arbitrator provision to give parties the right to arbitrate before a non-Tribal representative, as it would be irreconcilable with the forum selection clause and the plain language of the provision.

The arbitration agreement was invalidated because the Tribal “arbitration provision was an integral, not ancillary, part of the parties’ agreement to arbitration, despite the inclusion of a severability clause in the contract.” References in the Loan Agreement “reflect that the primary purpose of the Loan Agreement was to arbitrate disputes subject to [the Tribe’s] oversight and its laws.”

Macdonald v. CashCall, Inc., et al., No. 17-261 (3d Cir. Feb. 27, 2018)

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D.C. CIRCUIT COURT RULES ON CURRENCY CONVERSION ISSUE IN ARBITRAL AWARD

March 22, 2018 by John Pitblado

Following a Greek arbitration, Petitioner sought to confirm an arbitration award and enter judgment in the U.S. District Court for the District of Columbia. The arbitral award was issued on July 2, 2013 for €39,818,298 in damages and $162,500 in costs. Apply Rule 59(e), the District Court converted the entire award (plus interest) into U.S. dollars using the exchange rate in effect on July 2, 2013 – the date of the arbitral award – making the total judgment $62,731,104.80. Since the euro had declined over the course of the litigation, the judgment increased its value by approximately $11.9 million.

On Appeal, the D.C. Circuit Court found the District Court had erred in two ways: (1) it incorrectly concluded that Rule 59(e) precedent did not apply to Petitioner because it was not a “losing party;” and (2) it incorrectly concluded that it was “manifestly unjust to award [Petitioner] judgment in euros even though [Petitioner] had expressly sought relief in euros at least three times and had not asked for dollars until its post-judgment motion.”

The Circuit Court held that “under Rule 59(e), a district court may not convert a judgment to dollars if the movant contracted in euros, received its arbitral award in euros, requested euros in its complaint and filed three proposed order seeking euros, before reversing course post-judgment.” The matter was remanded with instructions to reenter judgment in accordance with the arbitral award.

Leidos, Inc. v. Hellenic Republic, No. 17-7082 (D.C. Cir. Feb. 2, 2018)

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SEVENTH CIRCUIT REVERSES ORDER COMPELLING ARBITRATION OF DISPUTE BETWEEN TWO NON-SIGNATORIES TO ARBITRATION AGREEMENT

March 21, 2018 by John Pitblado

The U.S. Court of Appeals for the Seventh Circuit recently held that state law governs whether a contract’s arbitration clause is binding on non-signatories. The dispute arises from a consumer protection action filed by the plaintiff in response to a spam text message he received promoting a Subway sandwich. Subway sought to compel arbitration of the action based on the arbitration clause in two cellphone contracts between T-Mobile and plaintiff’s mother. Although plaintiff was an authorized user under his mother’s account, plaintiff never signed and was not otherwise a party to the T-Mobile agreements. Applying federal law, the district court dismissed plaintiff’s action and compelled arbitration based on principles of equitable estoppel. The Seventh Circuit reversed, however, finding that state law estoppel applied and that Subway could not prove that it detrimentally relied on plaintiff’s statements or conduct as it relates to the T-Mobile arbitration clauses.

Warciak v. Subway Restaurants, Inc., No. 17-CV-01956 (7th Cir. Jan. 25, 2018)

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COURT INTERPRETS CONTRACT CONTAINING MANDATORY DE NOVO REVIEW PROVISION OF ARBITRATION AWARD

March 20, 2018 by John Pitblado

The Tenth Circuit Court of Appeals determined that an ADR provision of an agreement which called for arbitration, but also indicated that either party may “notwithstanding any provision of law bring an action against the other in a federal district court for the de novo review of any arbitration award” was legally invalid, rendering the arbitration clause unenforceable.

Relying on the Supreme Court’s decision in Hall Street Associates, LLC v. Mattel, Inc., which “makes clear de novo review is entirely incompatible with the expedited process envisioned in the FAA,” the Tenth Circuit was “unwilling to treat the mere provision of a federal forum in [the Indian Gaming Regulatory Act] as some implicit rejection of the applicability of the FAA review standards to arbitrations involving gaming compacts.”

The Court recognized that the ADR provision “makes clear that the parties’ agreement to engage in binding arbitration was specifically conditioned on, and inextricably linked to, the availability of de novo review in federal court” and would not sever the de novo language from the parties’ agreement.

Citizen Potawatomi Nation v. State of Oklahoma, No. 16-6224 (10th Cir. Feb. 6, 2018)

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U.K. COURT FINDS ARBITRATION RESPONDENT DID NOT WAIVE OBJECTION TO JURISDICTION OF ARBITRATION TRIBUNAL

March 1, 2018 by John Pitblado

The Queen’s Bench Division of the U.K.’s High Court of Justice has reversed a partial award by a tribunal of the London Court of International Arbitration (“LCIA”), which held that an arbitration respondent lost its right to challenge the validity of a request for arbitration by failing to object until after serving its Response and shortly before its Statement of Defence was due. The court agreed with the tribunal that the request for arbitration violated LCIA Rules by seeking to join two disputes arising under separate contracts in a single proceeding. The court disagreed, however, with the conclusion that the respondent untimely challenged the tribunal’s jurisdiction based on the invalid request. Reading Section 31 of the 1996 Arbitration Act together with Article 23.3 of the LCIA Rules, the court found that objections to jurisdiction must be made no later than the time for the Statement of Defence.

A v. B, [2017] EWHC 3417 (Comm)

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