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Arbitration Process Issues

ONLINE ARBITRATION AGREEMENT ROUNDUP

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There are three recent opinions on motions to compel arbitration which illustrate the impact of the Internet in this area of the law.

Guidotti v. Legal Helpers Debt Resolution, L.L.C., No. 12-1170 (3d Cir. May 28, 2013) (reversing lower court’s partial refusal to compel arbitration in putative class action; lower court must permit discovery and make findings whether absence of electronic header associated with third-party document hosting website supported plaintiff’s claim that plaintiff never reviewed arbitration provision nor agreed to arbitrate).

Chatman v. Pizza Hut, Inc., Case No. 1:12-cv-10209 (USDC N.D. Ill. May 23, 2013) (granting motion to compel individual arbitration in case brought as putative employment class action; finding that arbitration provision in online agreement was supported by three forms of consideration: (1) Pizza Hut’s promise to consider the plaintiff for employment; (2) Pizza Hut’s obligation to submit to binding arbitration; and (3) Pizza Hut’s continued employment of the plaintiff).

Dixon v. NBCUniversal Media, LLC, Case No. 2:12-cv-07646 (USDC S.D.N.Y. May 28, 2013) (granting motion to compel individual arbitration in case brought as putative employment class action, notwithstanding employee’s failure to review arbitration agreement in ADR manual; employee completed online PowerPoint training, which disclosed that binding nature of the ADR program, that it applied to employee’s claims, that no collective procedure would be permitted, and that continued employment constituted an agreement).

This post written by Michael Wolgin.

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RES JUDICATA BARRED CLAIMS RESOLVED IN ARBITRATION DESPITE ARBITRATOR’S COMMENTS REGARDING LIMITATIONS ON AUTHORITY

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In a longstanding dispute arising out of an oil development venture, an intermediary seeking additional profits appealed to the Fifth Circuit after the lower court dismissed the intermediary’s RICO claims that had been previously resolved in arbitration. The arbitration award had rejected the intermediary’s claims based on alleged bribes that associated oil companies allegedly paid to foreign officials. Finding that res judicata barred the intermediary’s claims, the Fifth Circuit rejected the intermediary’s argument that the arbitrator had failed to exercise jurisdiction when he stated in the course of dismissing the claims that he lacked authority to determine criminality under RICO. The Fifth Circuit held that the arbitrator’s statement was not indicative of a refusal to consider the intermediary’s claims, that the arbitrator did in fact exercise jurisdiction, and that as a result, the lower court correctly found that res judicata barred the intermediary’s lawsuit. Grynberg v. BP, P.L.C., Case No. 12-20291 (5th Cir. June 7, 2013).

This post written by Michael Wolgin.

See our disclaimer.

PRIOR TO AMERICAN EXPRESS, MASSACHUSETTS SUPREME COURT FINDS CLASS WAIVER UNENFORCEABLE UNDER THE FAA ON COST-PROHIBITIVE GROUNDS

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Eight days before the U.S. Supreme Court issued its American Express decision, the Massachusetts Supreme Court appeared to reach a contrary conclusion when it found that U.S. Supreme Court precedent interpreting the FAA precluded a class waiver when a party would be precluded from pursuing individual statutory relief due to the complexity and cost of the case. The Massachusetts court made this determination in an opinion that reversed its own previous holding made prior to Concepcion in the same putative class action, regarding a class waiver provision in a consumer contract that the court had invalidated because it was “contrary to the fundamental public policy of the Commonwealth favoring consumer class actions” under state statute. It seems likely that the defendant will either seek further review of renew its motion to compel arbitration in light of the American Express decision. Feeney v. Dell Inc., Case No. SJC-11133 (Mass. June 12, 2013).

This post written by Michael Wolgin.

See our disclaimer.

U.S. SUPREME COURT UPHOLDS CLASS WAIVER PROVISIONS UNDER THE FAA, NOTWITHSTANDING COST-PROHIBITIVENESS OF INDIVIDUAL RELIEF

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On June 20th, the U.S. Supreme Court reversed a decision from the Second Circuit that refused to enforce a class waiver arbitration provision in a putative antitrust class action. The Supreme Court 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. The Supreme Court based its decision on its prior ruling in Concepcion, and the fact that nothing in the antitrust laws or the class action procedural rules guarantee an affordable path to litigating claims. Additionally, the Court held that the class waiver did not run afoul of prior case law stating that a class waiver might be prohibited if it precluded “effective vindication” of statutory rights. The Court explained that that exception is intended to prevent only a “prospective waiver” of a right to pursue statutory remedies, which does not exist simply because it is not cost-effective to prove one’s case. American Express Co. v. Italian Colors Restaurant, Case No. 12-133 (S. Ct. June 20, 2013).

This post written by Michael Wolgin.

See our disclaimer.

COURT DEALS ANOTHER BLOW TO ASSIGNEE OF LIQUIDATED CAPTIVE IN CONTINUING REINSURANCE DISPUTE

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A federal court dismissed claims brought by the putative assignee of rights from a previously liquidated captive insurer, against the defendant reinsurer, for alleged payment dispute under reinsurance treaties issued by the defendant to the captive between 1977 and 1986. The plaintiff petitioned to compel arbitration in 2012, and this blog has reported on the court’s denial of plaintiff’s request that the defendant post pre-judgment security, and the plaintiff’s appeal of that decision, as well as the court’s subsequent decision dismissing the case for lack of standing, as the court found the assignee plaintiff had not been assigned the right to arbitrate.

The plaintiff thereafter filed an amended complaint, ostensibly to cure the jurisdictional defect regarding assignment of the right to arbitrate. However, the court again sided with the defendant reinsurer, finding that the amendment did not cure the defect, that the plaintiff has no right to compel arbitration, and that the plaintiff’s claims should be dismissed for failure to state a claim. Pine Top Receivables of Illinois, LLC v. Banco De Seguros Del Estado, No 12 C 6357 (USDC N.D. Ill. June 11, 2013).

This post written by John Pitblado.

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