Michael Wolgin

Eleventh Circuit Affirms Denial of Imax Corp.’s Petition to Vacate Arbitration Tribunal Rulings That Included Awards of Nearly $1 Million in Arbitration Costs and Attorney’s Fees

June 24, 2020 by Michael Wolgin

The arbitration awards involved several agreements for the sale, lease, and maintenance of Imax theater systems in South and Central America and the Caribbean. The arbitral tribunal issued a partial final award, and then several months later the tribunal issued its final award that resolved requests for relief on which it had deferred ruling. The tribunal ordered Imax to pay the opposing party $971,525.38 in arbitration costs, representing $800,000 in attorneys’ fees, and 70% of the administrative fees and expenses of the International Dispute Resolution Procedures of the American Arbitration Association, as well as 70% of the compensation and expenses of the arbitrators, which totaled $171,525.38. Imax challenged the awards, but the district court denied vacatur. The Eleventh Circuit then affirmed the denial, finding that the district court properly denied vacatur because Imax “failed to carry its burden to establish” (1) a defense under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards or (2) that the arbitral tribunal exceeded its powers under the Federal Arbitration Act.

IMAX Corp. v. Giencourt Investments, S.A., No. 20-10491 (11th Cir. May 28, 2020).

Third Circuit Affirms Denial of Motion to Compel Car Rental Class Action to Arbitration Based on Insufficiently Incorporated Arbitration Provisions

June 3, 2020 by Michael Wolgin

Seven plaintiffs filed a putative class action against a car rental company and its subsidiary for allegedly unauthorized charges incurred when the plaintiffs rented cars from the company. The car rental companies moved to compel the plaintiffs to arbitrate their claims under the Federal Arbitration Act based on an arbitration clause that, for six out of the seven plaintiffs (the “U.S. plaintiffs”), was located on the paper jacket into which rental associates folded the car rental agreement, and for the seventh plaintiff (the “Costa Rica plaintiff”), was located on the back of the agreement.

Each U.S. plaintiff signed below the final paragraph on the agreement, which provided: “I agree the charges listed above are estimates and that I have reviewed & agreed to all notices & terms here and in the rental jacket.” The rental associates, however, were not trained to alert customers to the additional terms in the rental jacket, and the rental associates did not say anything about the rental jacket when the U.S. plaintiffs reviewed their agreements. Additionally, five U.S. plaintiffs used websites to reserve their car rentals, each of which had terms of use that included an arbitration provision. Regarding the agreement signed by the Costa Rica plaintiff, the front and back sides of the document both had signature lines, but the Costa Rica plaintiff signed only the front.

The district court denied the car rental companies’ motion to compel arbitration. The court found: (1) the U.S. plaintiffs did not assent to the arbitration provision in the rental jacket; (2) the record was not sufficiently developed with respect to the arbitration clause on the websites; and (3) a disputed factual issue existed as to whether the Costa Rica plaintiff was on reasonable notice of the arbitration provision.

On appeal, the Third Circuit found that it possessed jurisdiction over all three of the above issues under the FAA. The Third Circuit then determined that the rental car companies failed to demonstrate that the rental jacket containing the arbitration provision was incorporated into the U.S. agreements based on applicable state contract law. The agreement did not define or clearly describe the rental jacket, and there was no evidence that the plaintiffs were aware of the arbitration provision before they executed the agreement.

The court also rejected the defendants’ arguments that the plaintiffs who booked online agreed to each website’s terms of use and arbitration provision or that the district court erred in excluding unauthenticated evidence concerning the websites. Finally, the court affirmed the district court’s ruling that genuine issues of material fact existed as to whether the Costa Rica plaintiff had reasonable notice of the arbitration provision on the back of the car rental agreement. The court noted that the front side of the agreement did not direct the customer to the back of the agreement (containing the arbitration provision) or inform the customer of the terms. The Third Circuit therefore affirmed the district court’s refusal to compel arbitration.

Bacon v. Avis Budget Group, Inc., No. 18-3780 (3d Cir. May 18, 2020).

Court Compels FMLA Employment Dispute to Arbitration, Finding That Arbitration Agreement Delegated Arbitrability to Arbitrator and Agreement Appeared Not to Be Void or Unconscionable

May 12, 2020 by Michael Wolgin

A former executive and in-house lawyer for the Miami Heat basketball franchise sued the team for allegedly violating her rights under the Family and Medical Leave Act when she was terminated from her employment. The Heat filed a motion to compel arbitration, which the plaintiff opposed. First, the plaintiff contended that the arbitrability of the dispute was for the court, not the arbitrator. The court disagreed, holding that, while the agreement did not contain an express delegation clause, the agreement’s incorporation of the American Arbitration Association rules served to delegate the issues regarding the validity of the arbitration agreement to the arbitrator.

The plaintiff also argued that the agreement was void as against public policy, contending that the agreement’s provisions for the arbitrator to award reasonable fees to the prevailing party and for each party to be responsible for one-half of any administrative costs imposed by the AAA precluded her from vindicating her complete rights under the FMLA. Although the court did not need to decide this issue – having already found that arbitrability was delegated to the arbitrator – the court found that even if the fees and costs provision was unenforceable due to a failure to provide the plaintiff with remedies fully consistent with the FMLA, the provision was not the essence of the parties’ agreement and was therefore severable.

The plaintiff also contended that the agreement was unconscionable because the Heat allegedly did not permit her time to review the agreement, seek legal counsel, or negotiate the terms. The court rejected this argument finding that the plaintiff failed to provide any evidence to “explain any specific reason she felt rushed to sign the agreement, had no ability to negotiate it, or lacked employment alternatives.” The court further rejected the plaintiff’s argument that the agreement was substantively unconscionable because it required her to arbitrate all her claims, “while only requiring the Defendant to arbitrate counterclaims that it ‘is or should be aware [of] at the time a demand for arbitration is made.'” The court explained that the plaintiff overlooked the provision in the agreement that required “that any claims ‘arising in the workplace environment’ be subject to arbitration.” “Certainly,” the court concluded, the agreement was not “outrageously unfair” and did not “otherwise shock the judicial conscience.” The court compelled arbitration and dismissed the case.

Yakovee v. Miami Heat L.P., No. 1:20-cv-20540 (S.D. Fla. Apr. 30, 2020).

Alabama Supreme Court Reverses Order Compelling Arbitration Based on Failure to Authenticate Arbitration Agreement

April 21, 2020 by Michael Wolgin

A construction company, Parkerson Construction LLC, sued homeowner Jeanne Lacy Oaks claiming that Oaks owed it more than $50,000 for construction work on her home. Oaks filed a counterclaim alleging that Parkerson misrepresented itself and performed deficient work. Parkerson moved to compel arbitration on Oaks’ counterclaim based on an arbitration provision in a September unauthenticated work authorization agreement that was attached to the motion. The trial court granted Parkerson’s motion and compelled arbitration.

On appeal, the Alabama Supreme Court reversed the trial court’s order, concluding that Parkerson failed to meet its evidentiary burden, akin to the evidentiary burden on a motion for summary judgment, to demonstrate that an arbitration agreement existed between it and Oaks. The Alabama high court rejected Parkerson’s reliance on federal case law that, Parkerson argued, permitted trial courts to consider, “for summary-judgment purposes, evidence that is not submitted in admissible form.” The Alabama court noted that the federal case law, which was not binding on it, also held that a challenge to the admissibility of evidence created a burden “on the proponent to show that the material is admissible as presented or to explain the admissible form that is anticipated” at trial. In this case, the court held, Oaks attacked the authenticity of the September 2015 agreement, but Parkerson did not demonstrate that the agreement was or could be admissible. Parkerson had “more than four months between Oaks’s initial assertion that the September 2015 agreement was not authenticated and the hearing on its motion to compel arbitration, during which it could have placed into evidence an authenticated copy of the September 2015 agreement. Parkerson failed to do so. Therefore, the September 2015 agreement was never properly before the trial court, leaving the court without any basis for granting Parkerson’s motion to compel arbitration.”

Oaks v. Parkerson Construction, LLC, No. 1171193 (Ala. Feb. 28, 2020).

Third Circuit Addresses Interplay Between LMRA and FAA and Affirms Arbitration Award in Favor of Union Under Collective Bargaining Agreement

March 31, 2020 by Michael Wolgin

The case relates to the disposition of accrued vacation time of unionized nurses after a new employer (Prospect) assumed a collective bargaining agreement. Prospect construed the collective bargaining agreement differently than the prior employer and refused to allow more than 200% of the annual vacation time limit. An arbitrator ultimately decided in favor of the nurses’ ability to maintain the full amounts of their previously accrued vacation time, determining that the collective bargaining agreement did not curtail the nurses’ right to the full amount of their accumulated leave. The arbitrator further found that Prospect assumed the collective bargaining agreement and that Prospect, therefore, was obligated to honor the excess accumulated leave. After the district court upheld the arbitration award, Prospect appealed to the Third Circuit.

As an initial matter, the Third Circuit found that Prospect’s attempt to vacate the award was timely, rejecting the union’s argument that the state 30-day statute of limitations period authorized by the Labor Management Relations Act applied. Because Prospect was entitled to sue under the Federal Arbitration Act, which applies to collective bargaining agreements, it could rely on the lengthier three-month limitations period of the FAA.

Next, the Third Circuit rejected Prospect’s three arguments attempting to show that the award should be vacated under the FAA. First, the court rejected Prospect’s argument that the award was in excess of the arbitrator’s powers because the arbitrator failed to arguably interpret the collective bargaining agreement. The court found that the arbitrator’s ruling could be supported by a canon of contract construction and that “[w]hether or not that is the best reading of the CBA, it is certainly sufficient to uphold the arbitrator’s award.” Second, the court rejected Prospect’s argument that the arbitrator manifestly disregarded federal labor law pertaining to successor employers. Because the arbitrator “did not foreclose the possibility that Prospect, as a successor employer, could have, as an initial condition of employment, capped the nurses’ carry-over of vacation time” but, instead, found only that there was “no evidence that Prospect did so in time” it was not a manifest disregard of the principles of successor employment. And third, the court rejected Prospect’s argument that the arbitrator was guilty of misconduct in “refusing to hear evidence pertinent and material to the controversy” about a similar National Labor Relations Board decision in a different case. The Third Circuit ruled that the evidentiary ruling was “not patently incorrect,” and it was “certainly not an error that deprived Prospect of a fair hearing.” The Third Circuit, therefore, affirmed the order confirming the award.

Prospect CCMC LLC v. Crozer-Chester Nurses Association, Nos. 19-1439 & 19-1440 (3d Cir. Feb. 26, 2020).