Arbitration Process Issues

TWO COURTS FIND LACK OF APPELLATE JURISDICTION TO HEAR ARBITRATION-RELATED APPEALS

January 18, 2013 by Carlton Fields

Two recent opinions illustrate the need to assess jurisdiction when proceeding in arbitration-related matters. The Seventh Circuit Court of Appeals recently held that it did not have appellate jurisdiction over an arbitration dispute involving a collective bargaining agreement for interstate truckers. Since appellate jurisdiction was predicted on a jurisdictional grant in the Federal Arbitration Act, 9 U.S.C. §16(a)(1), and 9 U.S.C. §1 exempts from the FAA’s scope employment agreements involving interstate commerce, the court found, after a remand for fact finding, that it did not have jurisdiction under 9 U.S.C. §16 because the dispute involved truckers working in interstate commerce, and dismissed the appeal for lack of jurisdiction. International Brotherhood of Teamsters Local Union No. 50 v. Kienstra Precast LLC, No. 11-2097 (7th Cir. Dec. 13, 2012).

Of perhaps more interest to reinsurance practitioners, one party in a reinsurance arbitration filed an action in United States district court in Wisconsin seeking a declaration that the law firm representing the opposing party could not represent the opposing party in an arbitration pending in New York due to a conflict of interest. Jurisdiction was predicated on diversity of citizenship and amount in controversy. The court raised a question of subject matter jurisdiction on its own, and determined that the amount in controversy was not measured by the amount in dispute in the arbitration, but rather by the cost of replacing counsel, and that there was no good faith basis for believing that the cost of replacing counsel would satisfy the jurisdictional requirement of $75,000. The court therefore remanded the case to state court on its own motion. National Casualty Co. v. Utica Mutual Insurance Company, Case No. 12-657 (USDC WD Wis. Dec. 12, 2012).

This post written by Rollie Goss.

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FOURTH CIRCUIT REVERSES ORDER DENYING MOTION TO COMPEL ARBITRATION BASED ON WAIVER, APPLYING FAA RATHER THAN STATE LAW

January 15, 2013 by Carlton Fields

In a recent opinion, the Fourth Circuit reversed a district court order denying a motion to compel non-class arbitration. The district court applied Maryland arbitration law and concluded that the party moving to compel arbitration waived its right to enforce arbitration because the moving party (1) waited six months from the date the complaint was filed to file a motion to compel arbitration, (2) participated in some discovery, and (3) made a strategic decision to delay seeking arbitration until the law regarding whether it would be forced into class arbitration was more certain (that certainty was provided by the Supreme Court in Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. __, 130 S. Ct. 1758 (2010)). The Fourth Circuit determined that the FAA, rather than Maryland law, applied and provides for more limited circumstances that give rise to a waiver of the right to compel arbitration. The only relevant factors under the FAA are the amount of delay and the extent of the moving party’s trial oriented activity, not the moving party’s reason for delay. Applying these factors, the Fourth Circuit found that the non-moving party was not prejudiced by the six month delay or the moving party’s minimal participation in litigation, focusing on the fact that the moving party did not file any dispositive motions. Rota-McLarty v. Santander Consumer USA, Inc., No. 11-1597 (4th Cir. Nov. 28, 2012).

This post written by Abigail Kortz.

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EIGHTH CIRCUIT APPLIES BROAD INTERPRETATION OF CONCEPCION TO UPHOLD CLASS-WAIVER ARBITRATION CLAUSE IN EMPLOYMENT DISPUTE

January 14, 2013 by Carlton Fields

The Eighth Circuit recently reversed a district court’s refusal to compel arbitration in an employment dispute under the Fair Labor Standards Act, enforcing a class-waiver arbitration clause. The district court interpreted the FLSA as providing a right to a class action, and had found that the class waiver in this case was therefore invalid. The district court had also held that Concepcion was not controlling in the employment context, relying on a recent National Labor Relations Board decision. The Eighth Circuit reversed, holding that nothing in the text or legislative history of the FLSA indicates a congressional intent to bar employees from agreeing to arbitrate FLSA claims individually, and that there is no conflict between the FLSA and the FAA. The Eighth Circuit further held that the NLRB decision relied on by the district court was not entitled to deference. In any event, the court explained, the NLRB decision limited its holding to arbitration agreements barring all concerted actions, unlike the agreement in this case, which did not preclude reporting to administrative agencies, which themselves could file representative class suits. The court also rejected the notion that Concepcion and other U.S. Supreme Court precedent upholding the enforceability of class waivers is limited to the consumer context. Owen v. Bristol Care, Inc., No. 12-1719 (8th Cir. Jan. 7, 2013).

This post written by Michael Wolgin.

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ARBITRATION PROCEDURE ROUNDUP

January 10, 2013 by Carlton Fields

Confirming/Vacating Arbitral Award

Fisher v. Wells Fargo Advisors, LLC, Case No. 12-1413-CM (USDC D. Kan. Dec. 18, 2012) (granting motion to confirm arbitration award; holding that allegedly erroneous discovery rulings did not deprive plaintiff of a fundamentally fair hearing nor constitute arbitrator misconduct)

Laughlin v. VMWare, Inc., Case No. 11-cv-00530-EJD (USDC N.D. Cal. Dec. 20, 2012) (denying motion to vacate arbitration award; holding that the arbitrator did not manifestly disregard the law by denying respondent’s motion to strike class allegations)

State Farm Insurance Cos. v. Padilla, No. 27-CV-11-23900 (Minn. Ct. App. Dec. 24 2012) (reversing order vacating no fault arbitration award; holding that the arbitrator did not exceed his powers by finding that insurer’s request for an examination under oath was unreasonable)

Stone & Youngberg, LLC v. Kay Family Revocable Trust, No. 11-16684 (9th Cir. Dec. 12, 2012) (holding that the arbitrator did not manifestly disregard negligence law and, further, that a court has no authority under the FAA to modify an arbitration award to prevent double recovery)

Compelling Arbitration

Baltazar v. Forever 21, Inc., No. B237173 (Cal. Ct. App. Dec. 20, 2012) (reversing order denying motion to compel arbitration; holding, among other things, that a provision in an arbitration agreement allowing either party to seek provisional remedies in court, such as injunctive relief, did not render the arbitration agreement unconscionable)

Taylor v. Community Bankers Securities, LLC, Case No. H-12-2088 (USDC S.D. Tex. Dec. 19, 2012) (denying motion to compel arbitration of action brought by receiver appointed to represent investors in Ponzi scheme due to absence of evidence that investors entered into arbitration agreements)

Botorff v. Amerco, Case No. 2:12-cv-01286-MCE-EFB (USDC E.D. Cal. Dec. 19, 2012) (dismissing UCL claim against truck rental company; holding that arbitration agreement referred to but not included in rental agreement was enforceable and, further, that small claims court exception to compulsory arbitration did not apply because plaintiff’s lawsuit was brought as a class action that could not be adjudicated in small claims court)

Stone v. Vail Resorts Development Co., Case No. 1:09-cv-02081 (USDC D. Colo. Dec. 20, 2012) (denying plaintiff’s motion to reopen case and reconsider order compelling arbitration)

Interim Arbitral Relief

United States f/b/o Clifford & Galvin Contracting, LLC v. Endicott Constructors Corp., Case No. 12-10152-MLW (USDC D. Mass. Dec. 13, 2012) (denying motion to dismiss Miller Act claims against surety and staying case pending arbitration between contractor and assured party)

Bergman v. Spruce Peak Realty, LLC, Case Nos. 2:11-cv-127, 2:11-cv-128 (USDC D. Vt. Dec. 13, 2012) (granting motion to consolidate two related class action cases and granting motion to stay consolidated action pending arbitrator’s decision on scope of arbitrable claims in one case)

Jurisdictional Issues

First Investment Corp. of the Marshall Islands v. Fujian Mawei Shipbuilding, Ltd., No. 12-30377 (5th Cir. Dec. 21, 2012) (affirming that district court properly dismissed for lack of personal jurisdiction a petition to confirm a foreign arbitration award under the U.N. Convention on the Recognition and Enforcement of Foreign Arbitral Awards; affirming that defendant People’s Republic of China was properly dismissed for lack of subject matter jurisdiction)

This post written by Ben Seessel.

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REINSURERS’ ACTION SEEKING TO VOID REINSURANCE AGREEMENT TRANSFERRED TO PLACE OF RELATED ARBITRATION

January 7, 2013 by Carlton Fields

Plaintiffs, five Lloyd’s of London underwriters, filed suit in Ohio federal court seeking a declaration that an alleged reinsurance agreement between them and defendant Stonebridge Casualty Insurance Company’s predecessor in interest was invalid because plaintiffs had no knowledge of it. Plaintiffs’ Ohio action was filed after Stonebridge had successfully moved in Florida federal court to compel arbitration of disputes arising under the agreement. Stonebridge moved to have the Ohio action transferred to Florida or dismissed. In response, plaintiffs argued that the Florida court lacked jurisdiction due to the presence of an Ohio forum selection clause in the reinsurance agreement. The court found that this clause did not strip the Florida court of its diversity jurisdiction. The court chastised plaintiffs for attempting to rely on a forum selection clause in a contract that they had not even acknowledge existed. The Ohio court similarly rejected plaintiffs’ argument that venue was improper in Florida, given that many of the relevant negotiations occurred in Florida, and key witnesses and documents were located in Florida. Certain Underwriters at Lloyd’s, London v. Stonebridge Casualty Insurance Co., Case No. 2:12-cv-160 (USDC S.D. Ohio Dec. 12, 2012).

This post written by Ben Seessel.

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