Arbitration Process Issues

MISSOURI SUPREME COURT ENFORCES CONCEPCION ON UNCONSCIONABILITY

June 13, 2012 by Carlton Fields

Plaintiff Lavern Robinson brought a putative class action against Title Lenders, Inc. in Missouri state court. Title Lenders moved to stay and compel arbitration of the claims under the parties’ contract, which contained an agreement to arbitrate, as well as a class arbitration waiver. The trial court found the class arbitration waiver to be unconscionable, and therefore unenforceable under Missouri common law contract principles. The Missouri Supreme Court reversed, enforcing AT&T Mobility, LLC v. Concepcion, 131 S. Ct. 1740 (2011), because the trial court’s decision was based specifically on the unconscionability of the class arbitration waiver, thereby distinguishing its companion ruling in Brewer v. Mo. Title Loans, Inc., — S.W.3d —- (Mo. March 6, 2012), which allowed for unconscionability review of other aspects of an agreement, even in light of Concepcion, so long as the agreement was not invalidated for containing a class arbitration waiver. Robinson v. Title Lenders, Inc., No. SC91728 (Mo. March 6, 2012).

This post written by John Pitblado.

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CITING CONCEPCION, FIFTH CIRCUIT AFFIRMS NO CLASS ARBITRATION RULING

June 11, 2012 by Carlton Fields

Jeffrey Reed brought a putative class action case against his alma mater, “on-line” school, Florida Metropolitan University, Inc. (“FMU”), in Texas state court, alleging that FMU solicited students in violation of certain provisions of the Texas Education Code. FMU removed to federal court, and moved to compel arbitration under the parties’ agreement. The court granted the motion to compel, and also refused to address the issue of whether class arbitration was allowable, which Reed had raised, finding it should be decided by the arbitrator. At arbitration, Reed moved for a “Clause Construction Award” allowing the arbitration to proceed on a class basis. Over FMU’s objection, the arbitrator ruled in Reed’s favor. Reed moved to confirm and FMU moved to vacate the ruling. The district court vacated the award, finding it exceeded the scope of the arbitrator’s power under the Federal Arbitration Act. Reed appealed. The Fifth Circuit Court of Appeals affirmed, based on the U.S. Supreme Court’s holdings in Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct 1758 (2010) and AT&T Mobility, LLC v. Concepcion, 131 S. Ct. 1740 (2011), emphasizing that the arbitrator forced the parties into class arbitration without a contractual basis for doing so. Reed v. Florida Metropolitan Univ., Inc., No. 11-50509 (5th Cir. May 18, 2012).

This post written by John Pitblado.

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NO RES JUDICATA EFFECT FOR UNCONFIRMED ARBITRATION AWARD

May 31, 2012 by Carlton Fields

The Greers entered into a contract with Town Construction for construction of their home. After a dispute arose regarding costs, workmanship, and other issues, Town Construction filed an arbitration demand with AAA for unpaid balances. The Greers counterclaimed for damages for repairs and diminution in home value due to construction defects, specifically alleging that their home had cracks in the walls due to Town Construction’s faulty workmanship. The arbitrator awarded damages on Town Construction’s claims and the Greers’ counterclaims. There was no evidence in the record, however, that the award had been confirmed by a court.

Three years later, the Greers discovered more cracks in the walls and filed a lawsuit in state court for damages. The trial court dismissed the claims as barred by res judicata because the Greers’ claims had already been litigated in the AAA arbitration proceeding. The Court of Appeal reversed. The court held that, under Louisiana Supreme Court precedent, an unconfirmed arbitration award is not a “valid final judgment” because it was not “rendered by [a] court” and thus has no res judicata effect. Greer v. Town Constr. Co., No. 2011 CA 1360 (La. Ct. App. Mar. 23, 2012).

This post written by Ben Seessel.

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LLOYDS’ DISQUALIFICATION ACTION AGAINST OPPOSING COUNSEL DISMISSED

May 29, 2012 by Carlton Fields

Certain Underwriters at Lloyds, London (“Underwriters”) brought an action in Massachusetts Superior Court against Liberty Mutual and its counsel, Sidley Austin LLP, seeking to disqualify Sidley from representing Liberty Mutual in a coverage action involving a Lloyds reinsurance treaty, where Liberty Mutual was adverse to Lloyds. Sidley had also been retained by Resolute Management, Inc.. (f/k/a Equitas), which is Lloyds’ long-tail asbestos reinsurance claims management arm, to represent it in connection with a federal appeal. Sidley claimed that there was no conflict in its representation in the two actions, but that if there was a conflict, it was nevertheless disclosed to Lloyds, and implicitly waived thereby. The Court agreed with Sidley, finding the two representations did not involve substantially similar issues, and that Lloyds had been appropriately apprised of Sidley’s representation of Liberty Mutual when it retained Sidley in the federal appeal. The Court denied the motion for disqualification, and dismissed Lloyds’ action seeking declaratory and injunctive relief. Apparently, Lloyds was not upset enough about Sidley’s dual role to fire it from representing Equitas in the appeal. Certain Underwriters at Lloyds, London v. Sidley Austin LLP, No. SUCV2010-04663 (Mass. Super. Ct. March 5, 2012).

This post written by John Pitblado.

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NINTH CIRCUIT: NO IMMEDIATE APPEAL OF INTERIM STAY AND ORDER COMPELLING SUBMISSION OF DISPUTE TO REFEREE

May 24, 2012 by Carlton Fields

The Ninth Circuit recently issued an opinion on an issue of first impression — whether an order compelling enforcement of a contractual agreement to submit a dispute to a referee, and staying proceedings in the interim, is immediately appealable. The dispute at issue arose between Bagdasarian Productions and Twentieth Century Fox over the film “Alvin and the Chipmunks, The Squeakquel.” The Ninth Circuit dismissed the appeal on the basis that it lacked jurisdiction at this stage of the proceedings. Specifically, the court held that the stay was not a “final decision” or “judgment” because it did not put the plaintiffs “out of court.” No decision by the referee could possibly moot the action or be res judicata (as with a parallel proceeding). Indeed, after the referee’s decision, the losing party would have the option of moving for a new trial or any other post-judgment motions. Similarly, the court found that the order staying the proceedings was not immediately appealable under the collateral order doctrine because plaintiffs could ultimately seek relief on appeal to this court after the action before the referee and district court concludes. The Court noted that its ruling was consistent with treatment of orders denying or compelling arbitration under the Federal Arbitration Act. Bagdasarian Productions, LLC v. Twentieth Century Fox Film Corp., No. 10-56430 (9th Cir. Mar. 26, 2012).

This post written by John Black.

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