John Pitblado

NINTH CIRCUIT AFFIRMS CALIFORNIA DISTRICT COURT’S CONFIRMATION OF ARBITRATION AWARD

February 16, 2017 by John Pitblado

In this matter, a California district court confirmed an arbitration award in favor of D.A.R.E. America, and denied a motion to vacate the arbitration award by D.A.R.E. New Jersey, Inc. D.A.R.E. New Jersey, Inc. appealed to the Ninth Circuit.

In the arbitration, D.A.R.E. New Jersey attempted to amend its arbitration demand to include a new claim under the New Jersey Franchise Practices Act on the eve of the arbitration hearing. The Ninth Circuit found that the arbitrator did not manifestly disregard the law by refusing to allow D.A.R.E. New Jersey to arbitrate its New Jersey Franchise Practices Act claim, noting that “[t]o vacate an arbitration award on this ground, [i]t must be clear from the record that the arbitrator[] recognized the applicable law and then ignored it.” The Ninth Circuit also noted that “[t]he scope of the arbitrator’s jurisdiction extends to issues not only explicitly raised by the parties, but all issues implicit within” the arbitration demand, and that an arbitrator’s interpretation of the scope of her powers is given great deference. The Court noted that the arbitrator found that the determination that D.A.R.E. New Jersey materially breached the charter agreement was necessary to resolve the breach of contract claim. Finally, the Ninth Circuit noted that arbitration awards may be vacated on public policy grounds where an explicit, well defined, and dominant public policy exists and that the policy specifically militates against the relief ordered by the arbitration. It then found that D.A.R.E. New Jersey had not identified an explicit public policy that militates against the relief ordered by the arbitration. Thus, the Ninth Circuit affirmed the district court’s confirmation of the arbitration award. D.A.R.E. New Jersey, Inc. v. D.A.R.E. America, No. 2:12-cv-09805 (9th Cir. Jan. 17, 2017).

This post written by Jeanne Kohler.

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SIXTH CIRCUIT AFFIRMS DISTRICT COURT’S COLORADO RIVER ABSTENTION AND THAT STATE COURT APPROPRIATELY DETERMINED ARBITRATION AGREEMENT’S ENFORCEABILITY

February 15, 2017 by John Pitblado

An earlier-filed state court action determined the enforceability of an arbitration agreement, before a federal district court could rule on a motion to compel arbitration. The federal district court thereafter abstained from ruling on the motion to compel, finding that the state court decision controlled. The Sixth Circuit upheld the abstention, finding it satisfied five of the six factors for abstention under Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. (1983).

A Kentucky state court determined that the power of attorney did not give anyone sufficient authority to sign an arbitration agreement waiving the constitutional right to a jury trial under Ping v. Beverly Enterprises, Inc., 376 S.W.3d 581 (KY 2012), and Extendicare Homes, Inc. v. Belinda Whisman, 2013-SC-000426-I. Prior to that ruling, the defendant had separately filed a petition in federal court seeking to compel arbitration. Deferring to the state court’s ruling, the federal court thereafter abstained from acting on the petition to compel arbitration. The petitioner appealed.

The Sixth Circuit went through the Moses H. Cone factors. Notably, the fifth factor – the source of governing law – was found not clearly to favor or disfavor abstention. The Court noted that “when determining the enforceability of an arbitration agreement – the question primarily at issue here and in the state courts – this court is bound to apply the state law of contract formation… placing state law at least as much at issue as federal law.” Thus, it was not improper for the federal court to defer to the state court’s ruling in a prior-filed action. Preferred Care of Delaware, Inc., dba Preferred Care, Inc., et al. v. Simm VanArsdale, as Administrator of Estate of, Judith VanArsdale, No. 16-5209 (6th Cir. Jan. 13, 2017)

This post written by Nora A. Valenza-Frost.

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FIRST CIRCUIT AFFIRMS DISTRICT COURT’S CONFIRMATION OF ARBITRATION AWARD UNDER THE “LOOK-THROUGH” TEST

February 14, 2017 by John Pitblado

The background of this matter could be found here. In sum, Plaintiffs Dr. Luis Ortiz-Espinosa and his wife Maritza Soto-Garcia, the conjugal partnership they formed, Espinosa-Soto, and Luis Ortiz-Espinosa, as trustee of Centro Dermatologico San Pablo PSC Retirement Plan (“Plaintiffs”) had two sets of brokerage investment accounts with defendant BBVA Securities of Puerto Rico, Inc. Plaintiffs’ accounts were opened in 2006 with over $2.6 million, and by 2009, the accounts had suffered losses of over $2.049 million. Believing that BBVA and the securities broker employed by BBVA who managed their accounts were responsible for the losses, Plaintiffs commenced arbitration before the Federal Industry Regulatory Authority (“FINRA”) against BBVA and the securities broker, asserting several claims under both federal and Puerto Rico law.

A FINRA arbitration panel conducted seventeen hearing sessions in Puerto Rico, and then issued an award, denying Plaintiffs’ claims. Plaintiffs then filed a complaint in Puerto Rico court, requesting that the court vacate or modify the arbitration award under the Puerto Rico Arbitration Act. Defendants removed the case to Puerto Rico federal court, arguing that the district court had federal question jurisdiction and also had supplemental jurisdiction over the state law claims. Plaintiffs moved to remand the case to Puerto Rico court for lack of jurisdiction. The federal district court denied the motion to remand after applying the look-through approach, a test which the Supreme Court had previously determined applies under the FAA with respect to motions to compel arbitration. Under this approach, a court may “look through” the motion to compel to determine if it is predicated on an action that “arises under federal law.” Thus, the district court “looked through” the motions to confirm and vacate and determined that the underlying statement of claim in the arbitration alleged claims based on federal securities laws. The district court subsequently denied Plaintiffs’ petition to vacate or modify the arbitration award and granted the petition to confirm the award, noting that disturbing the arbitration award was “not warranted” under either under the Federal Arbitration Act (“FAA”) or Puerto Rico law. Plaintiffs appealed to the First Circuit.

The First Circuit first found that the FAA applied to this case.as it involves an arbitration agreement in a transaction involving commerce. It then held that the look-through approach is the correct test in arbitration award enforcement proceedings, noting that federal courts have an important role in enforcing arbitration agreements post awards, and thus, it would not make sense to exclude federal question jurisdiction over those cases. The First Circuit also noted that the look-through approach is the only possible approach that would provide such federal jurisdiction. The First Circuit also determined that federal jurisdiction existed as there was no question that Plaintiffs’ claims in the arbitration involved federal securities laws arising under federal laws. Finally, the First Circuit found that the district court did not err in refusing to vacate the award and in confirming it. Thus, the First Circuit affirmed the Puerto Rico federal district court’s confirmation of the arbitration award.

Ortiz-Espinosa v. BBVA Securities of Puerto Rico, Inc., No. 16-1122 (1st Cir. 2017).

This post written by Jeanne Kohler.

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PETITION TO VACATE ARBITRATION AWARD SERVED BY EMAIL DID NOT CONSTITUTE SERVICE UNDER FED. R. CIV. P. 5

February 13, 2017 by John Pitblado

The Second Circuit has affirmed a decision finding email insufficient for service, absent consent to such method. In the underlying district court, the Petitioner emailed a copy of his petition to one of Respondent, Deutsche Bank’s attorneys asking whether counsel would accept service on Deutsche Bank’s behalf. Counsel agreed to accept service if Petitioner would give Deutsche Bank 90 days to respond. Petitioner did not respond, and instead personally served Deutsche Bank after the three-month period to vacate the award had expired. The Second Circuit affirmed the SDNY’s decision dismissing the petition for failure to serve notice as required by 9 U.S.C. § 12 and Fed. R. Civ. P. 5. Martin v. Deutsche Bank Securities Inc., No. 16-456 (2d Cir. Jan. 19, 2017)

This post written by Nora A. Valenza-Frost.

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FIFTH CIRCUIT FOLLOWS PRECEDENT IN UPHOLDING EMPLOYMENT AGREEMENT CONTAINING CLASS ACTION WAIVERS

January 26, 2017 by John Pitblado

Relying on D.R. Horton Inc. v. NLRB and Murphy Oil, USA v. NRLB, the Fifth Circuit found the NLRB’s decision that Citibank violated the National Labor Relations Act by requiring employees to sign an arbitration agreement containing collective/class action waiver was erroneous and reversed the Board’s decision.

As noted earlier this week, the Supreme Court will hear oral argument on this issue.

Citigroup Tech. Inc., et al. v. NLRB, No. 15-60856 (USCA 5th Cir., Dec. 8, 2016)

This post written by Nora A. Valenza-Frost.

See our disclaimer.