Arbitration Process Issues

COURT COMPELS ARBITRATION, CALLING UNCONSCIONABILITY AN ISSUE FOR THE ARBITRATOR

August 30, 2012 by Carlton Fields

Applying California law and the Federal Arbitration Act, a federal district court ruled that Senior Services of Palm Beach must arbitrate its claims against ABCSP, Inc., a franchising company, pursuant to the arbitration clause of the parties’ franchise agreement. Although Senior Services claimed the arbitration clause was unconscionable, the court held that, by incorporating the rules of the American Arbitration Association into their arbitration provision, the parties had agreed to allow the arbitrator to determine gateway issues such as arbitrability, which included unconscionability. The court went on to say that, however, that if the matter were properly before it, it would hold that the arbitration clause was not unconscionable. The provision did not meet the test for either procedural or substantive unconscionability, as there was no inequality in bargaining power or evidence of surprise, nor was the provision, including its requirement to arbitrate in California, harsh or one-sided. Thus, the court granted the prevailing party’s motion to dismiss the case and compel arbitration. Senior Services of Palm Beach LLC v. ABCSP Inc., Case No. 9:12-cv-80226-JIC (USDC S.D. Fla. June 7, 2012).

This post written by Brian Perryman.

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PARTIES AGREE TO DISMISSAL OF ACTION AFTER LIBERTY MUTUAL PETITIONS COURT TO APPOINT ARBITRATOR

August 28, 2012 by Carlton Fields

A lawsuit involving a reinsurance dispute has been voluntarily dismissed so that it may proceed in arbitration. On July 14, 2011, Liberty Mutual petitioned a court to appoint an umpire and compel arbitration pursuant to its reinsurance agreement with Continental Insurance under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards and the Federal Arbitration Act. The dispute between the two parties arose after Liberty Mutual sought reimbursement from its reinsurer, Continental for amounts paid to a policyholder. Although the parties agreed that their contracts required them to arbitrate, and each had successfully chosen one arbitrator, they were unable to choose an umpire. Because their contracts did not specify a selection process for the umpire and the parties were unable to come to an agreement themselves, Liberty Mutual sought judicial intervention, asking for an order appointing one of five disinterested industry umpires or, alternatively, a retired Massachusetts judge. Although both parties submitted memoranda on the issue and the court held a hearing on the motion, the parties thereafter stipulated to a dismissal of the action and, pursuant to this, the court dismissed the action with prejudice. Liberty Mutual Insurance Co. v. Continental Insurance Co., Case No. 11-cv-11245-MBB (USDC D.Mass. May 7, 2012).

This post written by Brian Perryman.

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ENGLISH LAW APPLIES TO ARBITRATION AGREEMENT IN POLICIES OSTENSIBLY GOVERNED BY BRAZILIAN LAW WHERE LONDON IS ARBITRAL FORUM

August 23, 2012 by Carlton Fields

Insurance policies insuring various risks regarding the construction of a hydroelectric plant in Brazil provided that, if the parties could not resolve disputes through mediation, arbitration was to take place in London. Brazilian law, however, governed the policies and, furthermore, the policies gave Brazilian courts exclusive jurisdiction over policy disputes. The policies, and arbitration clauses within them, however, were silent regarding what law governed interpretation of the policies’ arbitration agreements.

The insurers (Sulamérica and others) gave notice of arbitration regarding a dispute, to which the insureds responded by obtaining an order from a Brazilian court enjoining arbitration. The insurers applied to the U.K. Commercial Court for an injunction to restrain the Brazilian court proceedings. In opposition, the insureds argued that, under Brazilian law, arbitration could not be commenced without their consent. The Commercial Court sided with the insurers, determining that the arbitration agreement was governed by English law. The appeals court dismissed the appeal and agreed with the Commercial Court that, given the choice of London as arbitral forum, the arbitration agreement had its “closest and most real connection” with English law. Sulamérica CIA Nacional de Seguros S.A. v. Enesa Engenharia S.A., Case No. A3/2012/0249, [2012] EWCA Civ. 638 (Q.B. May 16, 2012).

This post written by Ben Seessel.

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CALIFORNIA APPELLATE COURT REFUSES TO ENFORCE “UNCONSCIONABLE” ARBITRATION CLAUSE WHICH WAS NEVER AGREED TO

August 20, 2012 by Carlton Fields

Perry Sparks sued his former employer for wrongful termination in California state court. The defendant employer moved to compel arbitration, relying on an arbitration clause in its 2006 employee handbook. The trial court held, and the appellate court affirmed, that the motion to compel should be denied for several reasons: (1) the arbitration clause was included within a lengthy employee handbook and there was no specific acknowledgement or agreement by plaintiff to be bound by the clause; (2) the handbook did not constitute a contract, and any “agreement” found therein was rendered illusory by the defendant’s unilateral authority to alter the terms; (3) the specific rules referred to in the arbitration clause were not provided to plaintiff; and (4) the arbitration clause was unconscionable. The court side-stepped the Supreme Court’s decision in AT&T Mobility LLC v. Concepcion by basing its holding alternatively on the non-existence of an agreement, which it held remains a gatekeeper inquiry properly addressed by the Court. Sparks v. Vista Del Mar Child and Family Services, B234988 (Cal. App. Ct. July 30, 2012).

This post written by John Pitblado.

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AWARD UPHELD AGAINST FOOTBALL PLAYER’S WORKERS’ COMPENSATION CLAIM FOR FAILURE TO SUPPORT APPLICATION OF STATE LAW

August 16, 2012 by Carlton Fields

A former professional football player, whose National Football League employment contract waived application of California workers’ compensation law, sought to vacate an arbitration award that denied the player’s pursuit of California workers’ compensation benefits for injuries that allegedly occurred over the course of the player’s football career. The court rejected the player’s arguments that the award constituted a violation of California and federal labor policy, and that the award reflected a manifest disregard of California law. The player’s injuries, the court explained, could not be sufficiently tied to events occurring in California. Without a “clear” indication that a California court would apply that state’s law, the award could not be deemed to violate California and federal labor policy, which in turn precluded the player’s contention that the award violated the Constitution’s Full Faith and Credit Clause. Matthews v. National Football League Management Council, Case No. 11-5186 (9th Cir. Aug. 6, 2012).

This post written by Michael Wolgin.

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