Michael Wolgin

Third Circuit Affirms Dismissal of Petition to Confirm “Sham” Arbitration Award

August 13, 2021 by Michael Wolgin

A pro se plaintiff had sought to confirm a $116,313 award by “Sitcomm Arbitration Association,” which had allegedly ruled that TD Auto Finance LLC was liable for breach of contract. TD Auto Finance contested the petition by moving to dismiss, contending that the award was a “sham” related to the repossession of the plaintiff’s car and that it had never agreed to participate in an arbitration. The district court agreed with TD Auto Finance and dismissed the petition, finding that the plaintiff failed to submit a valid agreement to arbitrate and noting that the purported award was incomprehensible, lacked factual findings and legal conclusions, and did not support the existence of an agreement between the parties.

On appeal, the Third Circuit Court of Appeals rejected the plaintiff’s argument that TD Auto Finance was barred from challenging the award because it had not moved to vacate it within the three-month statutory time period. The court ruled that it was unnecessary to consider this issue, where, as here, the district court properly denied a petition to confirm that lacked “evidence of a genuine arbitration award and an agreement between the parties.”

Pena v. TD Auto Finance LLC, No. 21-1670 (3d Cir. July 15, 2021).

Second Circuit Affirms Denial of Vacatur of Employment Arbitration Award Due to Failure to Provide Evidence of Alleged Perjury in Arbitration Proceedings

June 11, 2021 by Michael Wolgin

The district court had denied a motion filed by a former employee of a department store for vacatur of an arbitration award that rejected a grievance filed by the employee’s union against the store. On appeal, the employee argued that the district court erred when it denied vacatur because the award was obtained by fraud, namely, false testimony. The Second Circuit affirmed, holding that, because the employee provided no record evidence of the arbitration testimony, and only repeated “unsupported allegations,” the appellant failed to show (1) the existence of fraudulent activity; (2) that, even with the exercise of due diligence, he could not have discovered the fraud prior to the award issuing; and (3) that the fraud materially related to an issue in the arbitration. The court concluded: “Without providing at least the challenged testimony, [the appellant] has failed to show that any perjury occurred or even that the testimony he wishes to challenge was materially related to the arbitrator’s decision.” The court affirmed, ruling that the employee failed to demonstrate any error with the denial of the motion for vacatur.

Bright-Asante v. Saks & Co., No. 20-1280 (2d Cir. May 14, 2021).

Eleventh Circuit Revives Labor Union’s Complaint to Compel Arbitration That District Court Had Found to Be Time-Barred

May 14, 2021 by Michael Wolgin

The Eleventh Circuit Court of Appeals reversed an order granting summary judgment to an employer in a case brought by a union to compel arbitration pursuant to a collective bargaining agreement. The district court had concluded that the complaint was untimely because it was filed beyond the six-month limitations period for complaints brought under Georgia law to compel arbitration under section 301 of the Labor Management Relations Act. According to the district court, the employer, BellSouth, “unequivocally refused to arbitrate” more than six months before the union’s lawsuit. The Eleventh Circuit disagreed, agreeing with the union that the record demonstrated that discussions had continued between the parties regarding arbitrability and that BellSouth never unequivocally refused to arbitrate. The court found: “Debating the arbitrability of the grievance and keeping the scheduled arbitration are not unequivocal refusals to arbitrate.” The court vacated the summary judgment and remanded to the district court to consider the arbitrability issues raised in the summary judgment briefing.

Communications Workers of America v. BellSouth Telecommunications, LLC, No. 20-14244 (11th Cir. Apr. 20, 2021).

Eleventh Circuit Holds That “Notice of a Motion to Vacate” Under FAA Cannot Be Accomplished by Email Absent Express Written Consent

April 23, 2021 by Michael Wolgin

After an arbitration resulted in an award that included more than $650,000 in attorneys’ fees, the liable party filed a motion to vacate that portion of the award in a federal district court. The attorney for that party, however, only emailed opposing counsel a “courtesy copy” of the 20-page memorandum in support of the motion to vacate and did not formally serve the motion itself until a few weeks later — beyond the FAA’s three-month deadline to seek vacatur of an award. The district court denied the motion to vacate and confirmed the arbitration award, reasoning that the defending party had not consented to service by email, and as a result, there was no timely service of the motion to vacate the award.

On appeal, the Eleventh Circuit affirmed the district court’s ruling, explaining that the FAA imposes strict procedural requirements, including those relating to service of a notice of motion to vacate an award. Federal Rule of Civil Procedure 5 allows service “by other electronic means,” including email, but only to the extent “that the person consented to in writing.” The Eleventh Circuit determined that the adverse party here had not consented in writing, notwithstanding that the underlying arbitration agreement referenced the AAA construction rules, which permit service by email under certain circumstances. Service by email is permitted only for service of “notices required by” the AAA construction rules, and those rules do not include the motion at issue here, requesting that a court vacate an arbitration award. Accordingly, because the adverse party never provided express written consent for email service, the court affirmed the district court’s decision that there was no valid service of the motion to vacate, and also affirmed the confirmation of the award.

O’Neal Constructors, LLC v. DRT America, LLC, No. 20-11045 (11th Cir. Apr. 1, 2021).

Sixth Circuit Reverses District Court for Exceeding Its Authority by Ruling on Arbitrability in the Presence of an Unchallenged Delegation Clause

April 2, 2021 by Michael Wolgin

The plaintiff alleged that she was a victim of an illegal predatory loan orchestrated by the defendant’s company. The loan allegedly charged excessive interest but was shielded from U.S. law by tribal sovereign immunity.

The plaintiff filed suit, alleging that the loan was illegal and that the defendant had committed RICO and other consumer protection violations. The loan contract, however, included an arbitration provision, providing that “any dispute … related to this agreement will be resolved through binding arbitration” under tribal law, subject to review in tribal court. The defendant moved to compel arbitration, contending that the plaintiff agreed to a delegation clause to arbitrate issues “concerning the validity, enforceability, or scope” of the arbitration agreement, but the district court denied the defendant’s motion. The court found that the enforceability of the arbitration agreement “has already been litigated, and decided against [the defendant], in a similar case commenced in Vermont.”

The Sixth Circuit reversed, finding that the district court exceeded its authority by resolving the issue of arbitrability and finding that the arbitration agreement was enforceable. The provision delegating the question of arbitrability to an arbitrator was invoked by the defendant but was never specifically challenged by the plaintiff or addressed by the district court. “Only a specific challenge to a delegation clause brings arbitrability issues back within the court’s province.” Accordingly, the “district court should have enforced [the delegation clause] and referred the case to arbitration.”

The Sixth Circuit was not persuaded by the plaintiff’s argument that the issue of arbitrability related to the defendant’s standing, and therefore could be adjudicated in court. In response, the Sixth Circuit noted that a “logical conundrum” exists because courts still must determine the existence of the contract even when a delegation clause exists in the underlying arbitration agreement. The court, however, relied on its prior decision in another case that “signaled” that a “nonsignatory’s ability to enforce an arbitration agreement concerned a question of arbitrability.” The court determined that it would “follow suit and find that whether [the defendant] can enforce the arbitration agreement against [the plaintiff] presents a question of arbitrability that [the] arbitration agreement delegated to an arbitrator.”

Swiger v. Rosette, No. 19-2470 (6th Cir. Mar. 4, 2021).