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Arbitration Process Issues

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

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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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CALIFORNIA FEDERAL COURT FINDS ARBITRATION AGREEMENT NOT UNCONSCIONABLE

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Plaintiff Abreu filed a putative class action lawsuit against Slide, Inc., the developer of SuperPoke!, an online game in which users adopt, care for, and interact with virtual pets. Google acquired Slide in 2010 and, shortly thereafter, discontinued the game. Plaintiff asserted a number of common law and statutory causes of action against Slide and Google pertaining to the termination of the game, including alleged violations of California’s Unfair Competition Law (UCL). Google and Slide successfully moved to compel arbitration.

The federal district court held that the requirement of a $125 filing fee was not substantively unconscionable, particularly where the arbitration agreement provided that respondent would pay arbitration costs if the arbitrator determined costs to be excessive. It further rejected plaintiff’s argument that the arbitration provision was substantively unconscionable because the clause failed to provide that plaintiff could recover attorney’s fees if she was successful on her claims. The court held in abeyance the issue of whether the arbitration provision was unconscionable because it permitted only defendants to file an action for injunctive relief in court, finding that the one-way injunctive relief clause was severable so as to permit arbitration of all other issues. Abreu v. Slide, Inc., Case No. 12-00412 (USDC N.D. Cal. July 12, 2012)

This post written by Ben Seessel.

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CALIFORNIA APPELLATE COURT REJECTS UNCONSCIONABILITY ARGUMENT IN EMPLOYMENT CASE

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Lorena Nelsen brought a putative class action in California state court against her former employer, Legacy Partners Residential, Inc. (“LPR”), alleging violations of the California Labor Code. LPR moved to compel individual arbitration based on the parties’ arbitration agreement. The trial court rejected Nelsen’s contention that the arbitration clause was unconscionable and unenforceable. The Appellate Court affirmed, distancing itself from its previous holdings that have been called into question by the U.S. Supreme Court’s ruling in AT&T Mobility v. Concepcion, upon which the decision heavily relies. Nelsen v. Legacy Partners Residential, Inc., No. A132927 (Cal. App. July 18, 2012).

This post written by John Pitblado.

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DISTRICT COURT CONFIRMS REINSURANCE ARBITRATION AWARD AGAINST TWO BRAZILIAN COMPANIES

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Several developments have occurred in the ongoing reinsurance dispute between Aurum Asset Managers and several Brazilian companies. In April, Aurum filed a petition in federal district court to confirm an amended arbitration award, entering judgment in Aurum’s favor, and granting Aurum equitable relief. On June 11th, the district court denied the award as against respondent Banco do Estado do Rio Grande do Sul. The court, however, confirmed the award as against two respondents (Bradesco Companhia de Seguros and Bradesco Auto/Re Companhia de Seguros) unless and until the court received arguments from any party opposing the confirmation prior to June 22nd. On June 26th, having not heard any arguments opposed, the court confirmed the final arbitration award and entered judgment against the two Bradesco entities. Aurum Asset Managers, LLC v. Banco do Estado do Rio Grande do Sol, No. 08-mc-102 (USDC E.D. Pa. June 12, 2012 & June 26, 2012).

This post written by John Black.

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CLASS WAIVERS AND FEE SHIFTING PROVISIONS NOT UNCONSCIONABLE

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The 11th Circuit ruled that SunTrust Bank account holders must arbitrate claims against it for excessive overdraft fees pursuant to an arbitration clause in its depositor agreement. Plaintiffs alleged that SunTrust breached its contract, converted funds, acted unconscionably, and was unjustly enriched by deceptively processing transactions to maximize overdraft fees. Although the district court initially denied SunTrust’s Motion to Compel individual arbitration, finding the clause substantively unconscionable under Georgia state law because it contained a class action waiver, the 11th Circuit remanded SunTrust’s appeal in light of the Supreme Court’s decision in AT&T Mobility LLC v. Concepcion, which held that the Federal Arbitration Act (“FAA”) preempted a California state rule relating to the unconscionability of class arbitration waivers.

Upon SunTrust’s renewed motion, the district court again found the clause substantively unconscionable because its fee-shifting provisions disproportionately allocated the risks of loss in the dispute to the Plaintiffs. Reversing that decision, the 11th Circuit ruled that the bank was entitled under the FAA to arbitration “in the manner provided for in [its deposit] agreement” and held that the clause was “neither procedurally nor substantively unconscionable.” The court noted that arbitration agreements, even when entered by parties with unequal bargaining power, are not per se unconscionable under Georgia law, particularly when given equal prominence to other adhesion contract provisions. Additionally, 11th Circuit precedent and a Georgia statute affirm the legality and conscionability of SunTrust’s multi-party account setoff rights to collect fees. In re Checking Account Overdraft Litigation, No. 11-14316 (11th Cir. Mar. 1, 2012).

This post written by Rollie Goss.

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