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John Pitblado

Florida Federal Court Confirms Arbitration Award, Finding Defendants Did Not Meet “Heavy Burden” to Vacate the Award

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The background of this case can be found here. Floridians for Solar Choice, Inc. (“FSC”), is a Florida not-for-profit corporation formed for the purpose of qualifying for a solar energy amendment ballot initiative in Florida’s general election. FSC initially filed a complaint in Florida federal court in December 2015 against Defendants PCI Consultants, Inc. (“PCI”), a “national leader in obtaining signed petitions for ballot initiatives,” and PCI’s principal, Angelo Paparella (“Paparella”). The case stemmed from a failed ballot initiative to qualify a solar constitutional amendment for the 2016 election in Florida. In its complaint, FSC alleged causes of action for breach of contract, fraud in the inducement, conversion, and unjust enrichment against PCI, and fraud in the inducement and conversion against Paparella. FSC also filed a motion to compel arbitration, arguing that the claims asserted relate to contracts which contain arbitration clauses. The Florida district court granted the motion to compel in January 2016 and closed the case. In October 2017, Defendants filed a motion to reopen case, which was granted. In its motion, Defendants advised the court that the parties had participated in an arbitration administered by the American Arbitration Association (“AAA”) in April 2017, that the “sole arbitrator issued a non-final award on July 20, 2017 and on October 10, 2017, the arbitrator issued a ‘Final Award’ adopting the non-final award.” Defendants moved to vacate the award, and FSC moved to confirm the award.

In their motion to vacate, Defendants made five arguments: 1) the award must be vacated because FSC employed “fraud and/or undue means” to procure an arbitration award in its favor; 2) the arbitrator, acting alone, lacked jurisdiction under the AAA rules to enter an award exceeding one million dollars; 3) the arbitrator had “irrefutable bias” against Defendants; 4) the arbitrator failed to hear evidence related to FSC’s “surprise damages claim;” and 5) the AAA Rules barred entry of the October final award in favor of FSC because the July award was a “final award” that terminated the arbitrator’s jurisdiction. In response, FSC argued that the arbitrator’s award is supported by the record evidence and that Defendants failed to meet their burden on their claim of fraud or undue means and on their claim of arbitrator bias. FSC further argued that the Arbitrator had jurisdiction to issue an award above one million dollars and to enter the October final award. FSC also moved to confirm the July award, as amended by the October final award (and a later corrected November 1, 2017 award).

The court found that Defendants failed to meet their burden to demonstrate that FSC defrauded or used undue means to influence the arbitrator. The court also found that the arbitrator had the authority to enter the arbitration awards. The court also denied the motion to vacate on the ground that the arbitrator was biased. As to the arbitrator’ evidentiary rulings, the court noted that “[a]rbitrators enjoy wide latitude in conducting an arbitration hearing, and they are not constrained by formal rules of procedure or evidence,” and found that Defendants were not deprived of a fair hearing. Thus, the Florida federal court denied Defendants’ motion to vacate. As the Defendants did not meet the “heavy burden” to vacate the award, the Florida federal court also granted FSC’s motion to confirm the award.

Floridians for Solar Choice, Inc. v. PCI Consultants, Inc., No. 15-cv-62688 (USDC S.D. Fla. June 11, 2018).

This post written by Jeanne Kohler.

See our disclaimer.

Dismissal of Forced-Placed Insurance Cases Pursuant to Filed-Rate Doctrine Upheld by Eleventh Circuit

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Borrowers’ complaints alleging their mortgage servicers breached loan contracts and the implied covenant of good faith and fair dealing by charging “inflated amounts” for “force-placed” or “lender-placed” insurance and receiving “rebates” or “kickbacks” from the force-placed insurer, which savings were not passed on to the borrowers, were dismissed as the insurance rates were filed with and approved by the relevant state regulators.

“The filed-rate doctrine forbids a regulated entity from charging rates for its services other than those properly filed with the appropriate regulatory authority. As a result, where the legislature has conferred power upon an administrative agency to determine the reasonableness of a rate, the rate-payer can claim no rate as a legal right that is other than the filed rate.” Thus, the filed-rate doctrine precludes suits: (1) directly challenging a filed-rate; and (2) facially-neutral challenges – “i.e., any cause of action that is not worded as a challenge to the rate itself” but where the damages awarded “would, effectively, change the rate paid by the customer… to one below the filed rate by other customers or would, in effect, result in a judicial determination of the reasonableness of that rate.”

Despite the borrowers’ assertions that they are not challenging the reasonableness of the insurance rates, they repeatedly stated they were challenging the premiums charged. As the Court noted, “since these premiums are based upon rates filed with the state regulators, [the borrowers] are directly attacking those rates as being unreasonable as well… Their complaints therefore contain textbook examples of the sort of claims that we have previously held are barred by the non-justiciabilty principle.”

Carlton Fields Jorden Burt, P.A. represented American Security Insurance Company in this matter.

Patel v. Specialized Loan Servicing, LLC, 16-12100, 16-6585 (USCA 11th Cir. Sept. 24, 2018)

This post written by Nora A. Valenza-Frost.

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English Court Holds that Discovery Given by U.S. Citizen Pursuant to a 28 U.S.C. § 1782 Order can be Used in London Arbitrations

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This English court case involved arguments by Dreymoor Fertilisers Overseas Pte. Ltd. (“Dreymoor”), a Singapore trading company, to prevent EuroChem Trading GmbH, a Swiss company, and JSC MCC EuroChem, Russia’s largest fertilizer company (collectively, EuroChem”), from using information obtained through a U.S. court order under 28 U.S.C. §1782 (the “1782 Order”), which allows a federal court to order a person residing in its district to provide testimony or documents “for use in a proceeding in a foreign or international tribunal.”

EuroChem had obtained the 1782 Order in Tennessee federal court in order to obtain information to be used in litigation against Dreymoor proceeding in the British Virgin Islands and in Cyprus. EuroChem also intended to use the information obtained pursuant to the 1782 Order in two arbitrations proceeding in London. In all of the cases, EuroChem alleges that Dreymoor paid bribes to secure various fertilizer supply and sales contracts. Dreymoor sought an injunction in an English court, restraining EuroChem from enforcing the 1782 Order with respect to the London arbitrations, which was originally granted.

However, recently, on an application to continue the injunction, an English court found that EuroChem has a legitimate interest in obtaining the evidence in question for use in the London arbitrations. Thus, the court held “[w]hether enforcement of the 1782 Order would constitute unconscionable conduct requires an overall evaluation,” and “[i]n my judgment, looking at the circumstances of this case as a whole and with particular regard to the factors which I have identified, many of which point strongly against the grant of an injunction, it would not.” Thus, the English court refused to continue the injunction.

Dreymoor Fertilisers Overseas PTE Ltd. v. EuroChem Trading GMBH, [2018] EWHC 2267 (Comm. Aug. 24, 2018).

This post written by Jeanne Kohler.

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Ninth Circuit Finds Foreign Bank Did Not Waive Personal Jurisdiction by Litigating Other Defenses and Counterclaims in a Related Matter

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The Ninth Circuit recently reversed a California District Court’s finding of personal jurisdiction against a foreign bank, and found it did not waive appeal on that issue by asserting defenses. The Ninth Circuit stated that “[o]ur cases are clear that once the issue of personal jurisdiction has been adjudicated on the merits against a party, that party may fully participate and defend the litigation up to and including filing its own counterclaim.” It distinguished cases relied upon by the Central District of California as inapposite, as they involved circumstances where: (1) the defense was listed in the answer but never affirmatively litigated; and (2) where the defendant did not avail himself of the opportunity to conduct discovery on the jurisdictional issue and renew its motion to dismiss if the evidence supported a lack of personal jurisdiction. Here, the Bank timely asserted personal jurisdiction as a defense and litigated the issue to a decision from the district court: “[n]othing more was required to preserve the issue, and subsequent litigation of defenses and counterclaims did not waive the Bank’s properly preserved defense of personal jurisdiction.”

The Court further found that the Bank did not have sufficient contacts with the United States to establish personal jurisdiction over the contract claims asserted by Plaintiffs. The Bank “entered into a contract with a Cayman Islands corporation to provide pre-paid cards in the UAE. There is no indication that the Bank conducted any unilateral activities in California… [and] certainly no evidence that any minimal contacts with California, through email and phone calls to California or through an investigation conducted in California by one of the Bank’s agents, form the basis for [Plaintiff’s] contract-focused claims, which raise from the Bank’s and [Plaintiff’s] conduct in the UAE.”

The Court also reversed the judgment compelling arbitration the contract claims and remanded for dismissal due to the lack of personal jurisdiction over the Bank.

InfoSpan, Inc. v. Emirates NBD Bank PJSC, 16-55090 (USCA 9th Cir. Sept. 7, 2018)

This post written by Nora A. Valenza-Frost.

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Ninth Circuit Holds Putative Class Action ERISA Claims Fall Outside Scope of Individual Arbitration Agreements

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Plaintiffs, current and former employees of the University of Southern California (“USC”), were participants in two USC-sponsored ERISA contribution plans. In order to participate in the plans, individual employees were required to sign arbitration agreements covering all claims between the parties. The arbitration agreements expressly covered claimed violations of federal law, including ERISA. Plaintiffs filed a putative class action against USC alleging breach of fiduciary duty pursuant to ERISA § 502(a)(2). The action sought various forms of equitable relief for the benefit of the plans only, rather than for employees in their individual capacity. USC moved to compel arbitration, arguing that the arbitration agreements prohibited employees from litigating claims on behalf of the ERISA plans. The district court denied USC’s request, and the Ninth Circuit affirmed.

The Ninth Circuit agreed that the arbitration agreements did not encompass breach of fiduciary duty claims filed under ERISA § 502(a)(2). The court compared Plaintiff’s claims to a 2017 decision in which the Ninth Circuit held that an individual arbitration agreement did not extend to a qui tam action filed against an employer by its employee because the claim was filed on behalf of the government under the False Claims Act, not in the employee’s individual capacity. Likewise, the court observed that breach of fiduciary duty claims under § 502(a)(2) are filed for the benefit of the ERISA plan, not any individual participant. Thus, as in the qui tam context, the Ninth Circuit concluded that Plaintiffs’ putative class claims against USC fell outside the scope of the arbitration agreements, as the parties consented only to arbitrate claims filed in an employee’s individual capacity. The court specifically declined to rule, however, that individual agreements to arbitrate ERISA claims are per se unenforceable, leaving that issue for another day.

Munro v. Univ. of Southern California, No. 17-55550 (9th Cir. July 24, 2018)

This post written by Alex Silverman.

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