Arbitration Process Issues

On July 2, 2013, we reported on Feeney v. Dell Inc., which was issued eight days before the U.S. Supreme Court’s decision in American Express Co. v. Italian Colors Restaurant, and appeared to reach a result at odds with that decision. Specifically, while Amex held that individual arbitration could be compelled under the FAA based on a class waiver contract provision, notwithstanding that the cost of arbitration exceeded the potential recovery, Feeney had held that U.S. Supreme Court precedent precluded a class waiver under those circumstances. On August 1, 2013, the Feeney court granted a petition for rehearing, changing the result in its prior opinion, and reversing the lower court’s denial of a motion to confirm the underlying arbitration award, holding that “following Amex, our analysis in Feeney II no longer comports with the Supreme Court’s interpretation of the FAA.” Feeney v. Dell Inc., Case No. SJC-11133 (Mass. August 1, 2013).

This post written by Michael Wolgin.

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In a consolidated appeal of two cases involving Credit Acceptance Corporation (“CAC”), the West Virginia Supreme Court reversed two trial court decisions denying motions to compel arbitration, and ordered both cases to proceed to arbitration. The trial court had found that the arbitral forums named in the agreements were unavailable, and that the agreements were unconscionable inasmuch as they contained a waiver of the right to a jury trial. It denied CAC’s motions to compel arbitration on those bases in both cases. The West Virginia Supreme Court reversed, finding that (1) while one of the arbitral forums mentioned in the agreement – the National Arbitration Forum – was no longer available for consumer arbitrations, the other entity mentioned – the American Arbitration Association – remained available; and (2) the fact that an arbitration agreement requires an explicit waiver of the right to a jury trial does not render it unconscionable or unenforceable. The Court remanded with directions to the trial court to compel arbitration. Credit Acceptance Corp. v. Front, No. 12-0545 (W.V. June 19, 2013).

This post written by John Pitblado.

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National Casualty, Wausau and Swiss Re reinsured OneBeacon under a multiple line excess cover program. When disputes arose OneBeacon arbitrated with Swiss Re, and lost. OneBeacon then demanded arbitration with National Casualty and Wausau with respect to the same reinsurance program, but that proceeding broke down over disputes concerning the selection of an umpire to complete a three arbitrator panel. National Casualty and Wausau then filed a lawsuit against OneBeacon, seeking a declaration that the prior arbitration award and the doctrine of collateral estoppel barred OneBeacon’s second arbitration, and seeking the court’s assistance in the appointment of the umpire. The court granted OneBeacon’s motion to dismiss the preclusion claim on the basis that the preclusive effect of a prior arbitration in a subsequent arbitration should be decided by the arbitrator and not by the court.

The reinsurers had put forth a senior official of Swiss Re as their umpire candidate, to which OneBeacon objected, on the basis that the candidate was not impartial and was not qualified to serve. The court found OneBeacon’s challenge to the as yet unselected umpire candidate premature under the terms of the Federal Arbitration Act, which provides that challenges to arbitrators should be entertained by courts only after the issuance of an arbitration award. National Cas. Co. v. OneBeacon American Ins. Co., Case No. 12-11874 (USDC D. Mass. July 1, 2013).

This post written by Brian Perryman.

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