Arbitration Process Issues

FEDERAL COURT HOLDS THAT JOINT VENTURE AGREEMENT TO PURCHASE, RENOVATE, AND SELL REAL PROPERTY IS SUBJECT TO THE FAA

January 2, 2013 by Carlton Fields

Bilbo, a Mississippi resident, and McNally, a Floridian, entered into a joint venture agreement to purchase, renovate, and resell residential property located in Jackson, Mississippi. The agreement contained an arbitration clause. After a dispute arose, Bilbo moved to compel arbitration in federal district court. McNally moved to dismiss on the grounds that the FAA did not apply because the parties’ agreement did not concern “matters of interstate commerce.” The court held that the FAA applied, given that Congress’ power to regulate commerce is broadly construed and that McNally, a Florida resident, agreed to purchase and renovate property in Mississippi, a different state. Bilbo v. McNally, Case No. 12-cv-00502 (USDC S.D. Miss. Nov. 15, 2012).

This post written by Ben Seessel.

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UNITED STATES SUPREME COURT GRANTS CERTIORARI IN TWO CASES INVOLVING PUTATIVE CLASS ACTIONS AND ARBITRATION

December 31, 2012 by Carlton Fields

The Supreme Court has accepted certiorari review of two cases involving putative class actions and arbitration. In the first case, American Express Company v. Italian Colors Restaurant, the Court agreed to review the question whether the FAA permits courts to invalidate arbitration agreements on the ground that the agreement precludes class arbitration of federal statutory claims. The court of appeals had invalidated an arbitration provision because it found that the provision effectively precluded plaintiffs from pursuing protections provided by federal antitrust laws. In the Second matter, Oxford Health Plans LLC v. Sutter, the Court agreed to review whether, under Stolt-Nielsen, an arbitrator acts within his powers pursuant to the FAA by determining that parties affirmatively agreed to authorize class arbitration based solely on the use of broad contractual language precluding litigation and requiring arbitration of any dispute arising under a contract.

American Express Co. v. Italian Colors Rest., No. 12-133 (U.S., cert. granted, Nov. 9, 2012); Oxford Health Plans LLC v. Sutter, No. 12-135 (U.S., cert. granted Dec. 7, 2012)

This post written by Ben Seessel.

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CALIFORNIA APPELLATE DECISION TAKES A BROAD VIEW OF CONCEPCION, HIGHLIGHTING THE CURRENT DIVIDE WITHIN CALIFORNIA

December 24, 2012 by Carlton Fields

Last week we reported on a decision by one California appellate court holding that U.S. Supreme Court precedent did not overrule the California Supreme Court’s Gentry decision to the extent the latter voids class arbitration waivers that are determined by the court to prevent an employee from vindicating certain statutory rights. Another decision of a different panel of the same California appellate district highlights the broader approach currently taken by California courts on this issue. In an appeal of an order refusing to enforce a class arbitration waiver based on California statutory law, the appellate court reversed, finding that Concepcion made clear that the FAA preempts state law prohibiting a consumer from waiving class action rights. The court noted the current divide with California courts regarding the viability of Gentry, but concluded that it “need not comment on the continuing viability of Gentry because the instant case does not deal with employment issues.” The court did conclude, however, that Concepcion rejects the argument that class action waivers in consumer contracts can be invalidated in order to vindicate statutory rights even if the statutory right is desirable for other reasons” — a position that is apparently not unanimously held in California. Sherf v. Rusnak/Westlake, Case No. B237275 (Cal. Ct. App. October 16, 2012).

This post written by Michael Wolgin.

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CALIFORNIA APPELLATE COURT HOLDS THAT GENTRY SURVIVES, REJECTING APPLICABILITY OF U.S. SUPREME COURT DECISIONS

December 18, 2012 by Carlton Fields

A recent opinion of the Second Appellate District of the California Court of Appeals has reinforced the split among California courts as to the impact in California courts of the U.S. Supreme Court’s recent decisions concerning arbitration procedure. The plaintiff brought a putative class action against his employer, alleging various Labor Code violations, in California State Court. Citing the parties’ arbitration agreement and class arbitration waiver, the defendant moved to compel individual arbitration, which the trial court granted. A California appellate court reversed, relying on the California Supreme Court’s opinion in Gentry, which held that class action waivers should not be enforced if class arbitration is a more effective way to vindicate the class members’ claims than individual arbitration.

Following the reversal, the employer filed a second motion to compel arbitration, contending that the U.S. Supreme Court’s intervening decisions in Stolt-Nielsen and Concepcion effectively overruled Gentry and required individual arbitration. On appeal following the trial court’s denial of the second motion to compel, the California appellate court affirmed, concluding that Gentry remains good law. The court reasoned that Concepcion prohibits only categorical rules against class action waivers, that Concepcion did not preclude a case-specific determination such as that in Gentry, and that a class waiver which prevents an employee from vindicating certain statutory rights was unenforceable. The court also held that Stolt-Nielsen did not overrule Gentry so long as the claims would ultimately proceed in court, rather than in a class arbitration. There may be further guidance on these issues soon, since the U.S. Supreme Court has accepted review of an opinion of the Second Circuit which espoused the waiver of statutory rights theory. Franco v. Arakelian Enterprises, Inc., Case No. B232583 (Cal. Ct. App. December 4, 2012).

This post written by Michael Wolgin.

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THIRD CIRCUIT REVERSES ORDER COMPELLING ARBITRATION, FINDING WAIVER AFTER TEN MONTHS OF LITIGATION

December 13, 2012 by Carlton Fields

In an antitrust suit by certain pharmacies against CaremarksPCS, the plaintiffs appealed a trial court order granting defendant Caremark’s motion to compel arbitration based on the parties’ arbitration agreement. The plaintiffs argued that (1) Caremark waived its right to arbitrate by actively litigating the case in federal court for over ten months before demanding arbitration; and (2) that the arbitration clause is unenforceable because it limited the remedies available under the Sherman Act. The Third Circuit agreed with the plaintiffs, finding that Caremark waived the right to arbitrate based on the fact that it actively litigated the matter for so long prior to demanding arbitration. The court did not reach the second argument, as it was rendered moot by the holding on waiver. In re Pharmacy Benefit Managers Antitrust Litigation, No. 12-1430 (3d Cir. Nov. 15, 2012).

This post written by John Pitblado.

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