John Pitblado

On August 26, the Second Circuit Court of Appeals considered whether a trial court had appointment authority under the Federal Arbitration Act (“FAA”). Overturning a prior order that denied Odyssey Reinsurance Company’s (Odyssey) motion to appoint, the Second Circuit found that the trial court not only had the authority to appoint an arbitration umpire but “the obligation to appoint an umpire to correct a breakdown in the umpire selection process.”

The trial court found that it did not need to intervene in a dispute over worker’s compensation billings. The Second Circuit Court disagreed, finding the parties deadlocked as to the interpretation of various terms in the arbitration agreement concerning umpire qualifications. This “lapse” therefore necessitated the trial court to appoint an arbitration umpire.

Odyssey Reinsurance Co. v. Certain Underwriters at Lloyd’s London Syndicate 53, No. 14-2840-cv (2nd Cir. Aug. 26, 2015)

This post written by Matthew Burrows, a law clerk at Carlton Fields in Washington, DC.

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The Tenth Circuit recently held that Cox Communications, Inc., (Cox) had waived its right to arbitration while defending a class action lawsuit brought on behalf of its cable subscribers. These subscribers sued the communications company in 2009 in several jurisdictions, alleging that the company illegally tied provision of its cable service to rental of a set-top box. These lawsuits were consolidated and transferred to the United States District Court for the Western District of Oklahoma. In response, Cox moved to dismiss and while the motion was pending, began inserting mandatory arbitration clauses into its various customer contracts, including those of class members. Cox did not notify the district court it was doing so, however. Efforts to certify a nationwide class failed, so plaintiffs sought to certify various geographic classes. These class actions were once again consolidated and transferred to the Western District of Oklahoma.

Before the district court, Cox moved unsuccessfully to dismiss before the parties engaged in substantial discovery and named plaintiff Healy moved to certify the class. The district court granted class certification and Cox appealed to the Tenth Circuit, but its petition was denied. Throughout these proceedings, Cox never mentioned the arbitration clauses until it filed motions for summary judgment and to compel arbitration. The district court denied the motion to compel on the basis that Cox’s prior conduct in the litigation constituted waiver. Cox appealed, and the Tenth Circuit affirmed, noting that both plaintiffs and the two courts would be prejudiced if arbitration were allowed. Healy v. Cox Commc’ns., Inc., No. 14-6158 (10th Cir. June 24, 2015).

This post written by Whitney Fore, a law clerk at Carlton Fields in Washington, DC.

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In a dispute over the purchase of a car, the purchaser filed a class action in California against the car dealer, and the dealer moved to compel arbitration. The dealer invoked the arbitration agreement contained in the automobile sales contract. The agreement contained a class action waiver provision and further provided that if the class waiver is deemed unenforceable, the entire arbitration agreement is unenforceable. The trial court denied the dealer’s motion to compel arbitration, finding the class waiver, and, thus, the entire arbitration agreement to be unenforceable. As we previously reported, the Court of Appeal declined to address the class waiver issue, holding instead that the arbitration appeal provision and the agreement as a whole were unconscionably one-sided. Relying on the U.S. Supreme Court’s decision in AT&T Mobility, LLC v. Concepcion, 131 S. Ct. 1740 (2011), the dealer appealed.

After the trial court decision but before the appellate court ruled, the Supreme Court in Concepcion held that the Federal Arbitration Act (“FAA”) requires enforcement of class waivers in consumer arbitration agreements. The appellate court’s decision focused on whether the arbitration agreement was unconscionable, concluding that several of its provisions “have the effect of placing an unduly oppressive burden on the buyer.” The California Supreme Court noted that after Concepcion, unconscionability remains a valid defense to a motion to compel arbitration, but that state unconscionability laws must not disfavor arbitration by imposing procedures that interfere with the fundamental attributes of arbitration. The court then analyzed the arbitration agreement at issue under California’s unconscionability framework and concluded that while elements of the agreement were burdensome, the provisions the plaintiff claimed were substantively unconscionable — limits on appeals, allocation of costs, retention of the remedy of self-help — did not render the agreement unconscionable. The court likewise rejected the plaintiff’s class waiver arguments. Sanchez v. Valencia Holding Co., No. S199119 (Cal. Aug. 3, 2015)

This post written by John A. Camp.

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