Kenneth Cesta

District of Illinois Directs Insurer to Supplement Record to Support Privilege Based on “Common Interest Doctrine”

December 8, 2023 by Kenneth Cesta

In Ansur America Insurance Co. v. Borland, the U.S. District Court for the Southern District of Illinois addressed a discovery dispute involving claims brought by Ansur America Insurance Co. against the law firm Ansur retained to defend an insured in an underlying product liability action. Ansur alleged that the defendants failed to defend the case in a reasonable manner, which resulted in Ansur having to settle the case at a substantially increased amount. The defendants sought the production of several categories of documents from Ansur regarding its handling of the underlying claim. Ansur withheld or redacted numerous documents asserting the attorney-client and work product privileges. The defendants filed a motion to compel production disputing Ansur’s privilege assertions.

The court first addressed whether certain claims department and corporate officers listed on Ansur’s privilege log were control group members, which would support the application of the privileges to their communications. The court found Ansur established that some of the individuals were in fact members of the control group and that their communications were privileged. With regard to the other individuals who were not within the control group, the court directed Ansur to produce their communications.

The court then addressed the defendants’ arguments that Ansur should be required to produce documents Ansur shared with its reinsurers regarding the underlying product liability claim. Ansur opposed production, contending the common interest doctrine provides a basis for withholding the production of the reinsurance-related documents at issue. The common interest doctrine “extends a preexisting privilege to communications made in the presence of third parties for the purpose of coordinating a defense strategy or pooling information for common legal purpose.” Ansur argued the doctrine applied because it “shared an identical interest with its reinsurers and therefore, the privilege was not lost by their sharing of documents.” The court concluded that, based on the motion papers, it was unable to determine whether the common interest doctrine was applicable. The court noted it must first examine the communications at issue to determine whether the underlying privileges exist. Recognizing Ansur and its reinsurers do share a common legal interest, and that the common interest doctrine could apply to certain communications and documents, the court directed Ansur to review the documents and determine if they were “made in connection with the provision of legal services and was not just discussing the availability of reinsurance,” after which the court would conduct an in camera review of the documents.

Ansur America Insurance Co. v. Borland, No. 3:21-cv-00059 (S.D. Ill. Oct. 23, 2023).

Ninth Circuit Affirms District Court Order Granting Motion to Compel Arbitration of Discrimination Claims

December 6, 2023 by Kenneth Cesta

In Jackson v. Applied Materials Corp., the Ninth Circuit Court of Appeals affirmed a district court order granting a motion to compel arbitration of the plaintiff’s discrimination and retaliation claims, finding the arbitration agreement entered into by the parties was valid and encompassed the disputes before the court.

The court did not address the underlying facts of the case in its memorandum opinion, other than to note the matter involved claims of discrimination and retaliation brought by Jackson against his former employer. In affirming the district court’s order granting the defendant’s motion to compel arbitration, the court noted it had jurisdiction to conduct a de novo review of the matter under 28 U.S.C. § 1291. Relying on Ninth Circuit authority confirming that the Federal Arbitration Act “requires that district courts refer cases to arbitration where a valid arbitration agreement covers the dispute at issue,” the court found that the district court properly granted the defendant’s motion to compel arbitration “because the parties entered into a valid arbitration agreement encompassing the dispute at issue.” Relying on additional Ninth Circuit precedent, the court also based its decision on a finding that Jackson did not establish any of the grounds for vacating, modifying, or correcting the underlying arbitration awards in favor of the defendant under 9 U.S.C. §§ 9–11. Finally, the court refused to consider arguments and allegations raised for the first time on appeal, and affirmed the district court’s order granting the defendant’s motion to compel arbitration.

Jackson v. Applied Materials Corp., No. 22-16673 (9th Cir. Oct. 18, 2023).

SDNY Confirms Arbitration Award Under New York Convention

November 10, 2023 by Kenneth Cesta

In Exclusive Trim Inc. v. Kastamonu Romania, S.A., the U.S. District Court for the Southern District of New York granted a petition to confirm and enforce a foreign arbitration award issued in an arbitration held before the International Centre for Dispute Resolution.

The parties entered into a supply agreement, which, among other terms, set forth the minimum amount of product to be purchased by the petitioner from the respondent in the first year. The agreement also included an arbitration provision requiring all controversies and claims be resolved through arbitration administered by the American Arbitration Association (AAA), and “judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.” A dispute arose between the parties and the petitioner filed an arbitration proceeding with the AAA alleging breach of contract and unjust enrichment. The matter was assigned to the AAA’s international division, the International Centre for Dispute Resolution. After an evidentiary hearing held in New York, the arbitrator issued an award for the petitioner on its claims and rejected the respondent’s counterclaim. The award required the respondent to make payment within 30 days.

After the respondent failed to satisfy the award, the petitioner filed a petition under the New York Convention and the Federal Arbitration Act to confirm and enforce the award. The respondent did not oppose the petition. In reviewing the petition, the district court concluded it had jurisdiction over the matter, noting that the four requirements for determining whether an arbitration agreement falls within the scope of the New York Convention had been met: “(1) there must be a written agreement; (2) it must provide for arbitration in the territory of a signatory of the convention; (3) the subject matter must be commercial; and (4) it cannot be entirely domestic in scope.” The court then analyzed the applicable standard of review for the matter, noting that it must enforce the arbitration award unless one of the seven defenses under the New York Convention was established. The court noted that the respondent had not appeared in the action or opposed the petition, and “if a petition to enforce an arbitration award is unopposed, a court need not inquire on its own into whether an exception to enforcement applies” and, in any event, there was no suggestion in the record that any of the defenses under the New York Convention were applicable. The court held that the petitioner established it was entitled to judgment in its favor in accordance with the award and granted the petition.

Exclusive Trim, Inc. v. Kastamonu Romania, S.A., No. 1:23-cv-03410 (S.D.N.Y. Oct. 12, 2023).

SDNY Grants Motion to Compel Arbitration of Employee’s Discrimination and Retaliation Claims

November 8, 2023 by Kenneth Cesta

In Marino v. CVS Health, the U.S. District Court for the Southern District of New York found defendant CVS Health’s “arbitration of workplace legal disputes policy” and related arbitration agreement compelled arbitration of the plaintiff’s discrimination and retaliation claims based on her pregnancy.

Sarah Marino was employed as a pharmacist at CVS beginning in 2012 and became a pharmacy manager after her first child was born in 2017. After her second child was born in April 2020, Marino took leave under the Family and Medical Leave Act (FMLA) but alleged that she was forced to work without pay during her leave, and was ultimately forced to terminate her employment in January 2023 in retaliation for her complaints about poor treatment and working conditions.

Marino brought claims in the Southern District of New York alleging violations of the FMLA, the New York State Human Rights Law, the Fair Labor Standards Act, and New York labor laws. CVS moved to compel arbitration and stay Marino’s action. In support of its motion, CVS relied on its arbitration of workplace legal disputes policy and arbitration agreement, which included a provision that all disputes covered by the policy would be decided by a single arbitrator and governed by the Federal Arbitration Act (FAA), including claims of harassment, discrimination, and retaliation. Marino participated in online training addressing the policy in 2014 and did not exercise the option to opt out of the arbitration agreement included in the policy within 30 days. She opposed the motion to compel, contending she had no choice but to sign the training acknowledgment, and the terms of the arbitration agreement were “buried” or “submerged” in the training presentation. Marino also argued she was a “worker engaged in interstate commerce” and thus exempt from the FAA.

The court rejected both arguments, concluding that the 30-day opt-out provision “negates any suggestion” that she was forced to enter into the arbitration agreement. The court also held that “only a worker in a transportation industry can be classified as a transportation worker” under the FAA and, since CVS does not operate in the transportation industry, Marino did not satisfy the statutory exclusion under the FAA for transportation workers. The court granted the motion to compel arbitration and to stay the case.

Marino v. CVS Health, No. 7:23-cv-00784 (S.D.N.Y. Oct. 16, 2023).

Eleventh Circuit Affirms Order Compelling Arbitration of Discrimination Claims, Rejects Argument That Arbitration Agreement Was Unconscionable

October 18, 2023 by Kenneth Cesta

In Payne v. Savannah College of Art and Design Inc., the Eleventh Circuit Court of Appeals affirmed a district court order denying a motion to compel arbitration of plaintiff Isaac Payne’s discrimination-based claims. The court found the mandatory arbitration agreement in Payne’s underlying employment agreement was fair, and not unconscionable, and defendant Savannah College of Art and Design (SCAD) did not waive its right to arbitrate with Payne.

Payne was hired by SCAD in August 2015 as the school’s head fishing coach. Among the documents that Payne signed as part of the new hire process was a “staff handbook acknowledgment,” which provided that Payne agreed to “comply with the policies contained in the handbook, including the Alternative Dispute Resolution Policy and Agreement.” The staff handbook also stated the school’s alternative dispute resolution policy and agreement was binding on the parties. The agreement included a dispute resolution process including arbitration in the event either party brought a claim. Payne did not dispute he signed the staff handbook acknowledgment.

After he was terminated from his position, Payne brought discrimination and retaliation claims against SCAD in federal court, alleging he was fired for reporting “race-based abuse and threats by white student-athletes to SCAD leadership.” SCAD filed a motion to dismiss the complaint and to compel arbitration. Payne opposed the motion, arguing the arbitration agreement was unconscionable for several reasons, including the cost-shifting provision that negatively impacted his rights, the process for selecting arbitrators limited the potential arbitrators to two white men, and the agreement included a confidentiality provision. Payne also argued SCAD waived its right to compel arbitration when it allegedly sought to settle claims with a student who raised similar complaints to SCAD leadership and had withdrawn from the team, and sought limited discovery related to that issue. The magistrate judge issued a report and recommendation that SCAD’s motion to dismiss and compel arbitration should be granted, which was adopted by the district court.

The Eleventh Circuit affirmed the district court’s order finding the fee-shifting provisions included in the arbitration agreement did not make it unconscionable. The court addressed precedent in the circuit confirming that to establish the arbitration’s fee-shifting provision was unconscionable, Payne would have to provide evidence of “(1) the amount of fees he is likely to incur and (2) his inability to pay those fees.” The court concluded Payne could not establish these facts and further rejected Payne’s arguments that the terms that controlled the arbitrator selection process were contradictory. The court also rejected Payne’s contention that SCAD waived its right to arbitrate, concluding: “We have never held that a party waives its right to arbitrate based on its actions taken in a previous legal action — especially when that party did not bring the lawsuit at bar and has repeatedly insisted that arbitration is the proper dispute resolution channel.” The court affirmed the order of the district court dismissing the action and compelling arbitration.

Payne v. Savannah College of Art & Design, Inc., No. 22-11556 (11th Cir. Aug. 31, 2023).