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Nora Valenza-Frost

Massachusetts District Court Appoints Arbitrator in Light of Parties Inability to Do So

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When two parties in an arbitration were unable to select a “mutually agreeable” arbitrator, the Massachusetts district court stepped in to handle the selection. The parties’ arbitration agreement provided that the parties would select a “mutually agreeable single arbitration with experience in commodity futures contracts for coffee, to preside over the arbitration.” While both parties proposed candidates, they were unable to agree on the arbitrator.

The Massachusetts Appeals Court has stated that, while Massachusetts General Laws chapter 251, section 3 permits the courts to enforce arbitrator selection clauses, it “only requires the court to appoint an arbitrator if the arbitration agreement at issues fails to specify a method for doing so.” The arbitration agreement at issue had a mechanism for arbitrator selection — it was the parties who could not find a “mutually agreeable” arbitrator. The court found that section 3 permits a court to appoint an arbitrator in such circumstances when “the arbitrator selection method set forth [in the] contract has ‘failed.'” Additional support for the court’s interpretation of Massachusetts law is found in section 5 of the Federal Arbitration Act and cases interpreting the statute.

Green Valley Trading Co. v. Olam Americas, Inc., No. 1:19-cv-11524 (D. Mass. Jan. 7, 2020).

Maryland District Court Finds Damages Award, Not Liability Award Was “Final” Decision Triggering Time to Challenge Award Under FAA

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The plaintiff moved to vacate an arbitration award and the defendant moved to dismiss and confirm. The defendant’s dismissal motion challenged confirmation of an arbitration award, arguing that the matter was filed in violation of the arbitration agreement’s confidentiality clause, was prohibited by the defense of arbitration and award, failed to comply with the Federal Arbitration Act, was untimely, and failed to include any legal authority.

The court dispensed with the defendant’s first argument, as the arbitration agreement expressly preserved the parties’ statutory right to judicial review of arbitration proceedings. As to the second argument – that confirmation is prohibited by the defense of arbitration and award – the court noted that the plaintiff was not attempting to re-litigate the claims that were resolved by the arbitration but rather “exercise its statutory right to request that a district court vacate the arbitration award.”

As to the third argument, timeliness, the FAA requires that a party challenging an arbitration award serve notice on the adverse part “within three months after the award is filed or delivered,” which period begins to run once the arbitrator issues its final award. Here, the liability award was issued on July 9, 2018, and the damages award on January 3, 2019. Thus, the plaintiff’s complaint, filed on January 25, 2019, was within the three-month period. Additionally, “[a]lthough the FAA provides that the sole method for challenging an arbitration award is by serving a motion to vacate within three months of the final award and does not expressly permit a party to initiate a challenge to an arbitration award by filing a complaint, a court may construe a complaint challenging an arbitration decision as a motion to vacate when doing so would not prejudice the opposing party.” Finding no prejudice, the court rejected the defendant’s third argument.

As to the fourth argument – that the plaintiff failed to include any legal authority to support vacating the arbitration award – the court noted that, in considering a Rule 12(b)(6) motion, its “role is not to determine whether a party has proven its case” but rather “to determine whether a party has stated a claim for which relief can be granted.” Finding that the complaint met this requirement, the court rejected the defendant’s argument.

The parties cross-moved for summary judgment. The court rejected the plaintiff’s argument that the arbitrator exceeded her legal authority and manifestly disregarded the law, and confirmed the award.

Benchmark Elecs., Inc. v. Myers, No. 8:19-cv-00242 (D. Md. Dec. 3, 2019).

Without Jurisdiction or Authority to Review, California Appellate Court Dismisses Appeal of Trial Court’s Statement of Decision

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Finding that a California trial court’s statement of decision was not a judgment or appealable order, the California Court of Appeal dismissed the appeal, having no jurisdiction or authority to review it.

The appellant argued that the statement of decision was a final judgment within the meaning of California Code of Civil Procedure section 904.1(a)(1). The court disagreed, as a judgment is final “when it terminates the litigation between the parties on the merits of the case and leaves nothing to be done but to enforce by execution what has been determined.” Thus, a statement of decision will be appealable only when it is “signed and filed and does, in fact, constitute the court’s final decision on the merits.” The court found that the statement of decision was a limited ruling on a discrete issue that did “not finally resolve the dispute alleged in the operative pleadings.”

The appellant argued, in the alternative, that its opening brief should be treated as a petition for a writ of mandate. The court noted, “Although we have the power to treat the purported appeal as a petition for writ of mandate, we should not exercise that power expect under unusual circumstances.” Seeing no justification for such relief, the court held that “[u]nder the circumstances presented here, treating the instant appeal as a writ application would … encourage parties to knowingly appeal from nonappealable orders, safe in the knowledge that their appeal will be saved by the appellate courts. We cannot condone or encourage such practice.”

Warwick Cal. Corp. v. Applied Underwriters, Inc., No. A155523 (Cal. Ct. Ap. Jan. 7, 2020).

Second Circuit Finds Arbitrator Within Authority to Bind Absent Class Members to Arbitration

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In reversing a New York federal court, the Second Circuit found the arbitration was within the arbitrator’s authority in binding absent class members to class proceedings because, by signing the operative arbitration agreement, the absent class members — employees of the defendant — bargained for the arbitrator’s construction of their agreement with respect to class arbitrability. The issue whether the arbitrator exceeded her authority in certifying an opt-out, as opposed to a mandatory, class was not before the Second Circuit, and thus the matter was remanded to the district court.

The court found that the arbitrator’s decision was supported, in part, by the American Arbitration Association’s Supplementary Rules for Class Arbitrations, which provide that “the arbitrator shall determine as a threshold matter … whether the applicable arbitration clause permits the arbitration to proceed on behalf of … a class.” Furthermore, the arbitration agreement provided that questions of arbitrability and procedural questions were to be decided by the arbitrator.

The Second Circuit noted that it was not for the court to “decide whether the arbitrator’s class certification decision was correct on the merits of issues such as commonality and typicality. We merely decide that the arbitrator had the authority to reach such issues even with respect to the absent class members.”

Jock v. Sterling Jewelers Inc., No. 18-153 (2d Cir. Nov. 18, 2019).

Ninth Circuit Affirms Summary Judgment in Favor of Boeing and District Court’s Application of Swedish and U.K. Law

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The parties entered into a joint venture to launch commercial satellites into space from an ocean platform, which venture ultimately failed. As a result of certain guarantees, Boeing paid $449 million to cover loans made to the venture, which the defendants refused to reimburse as required by the parties’ contracts. Boeing successful moved for summary judgment, to which the district court applied both Swedish and U.K. law.

The circuit court affirmed the district court’s order granting summary judgment, and also affirmed the lower court’s decision denying the defendants’ motion for a stay in favor of Swedish arbitration. Only some of the claims at issue were referable to Swedish arbitration (and not those involving the guaranty). Moreover, the defendants had previously taken the position that the Swedish arbitrator lacked jurisdiction over Boeing’s claims, which was inconsistent with its right to arbitration and constituted a waiver of that right.

Boeing Co. v. KB Yuzhnoye, No. 18-55283 (9th Cir. Nov. 12, 2019).