Arbitration Process Issues

COURT COMPELS INDIVIDUAL ARBITRATION UNDER CONCEPCION

March 14, 2012 by Carlton Fields

Anna Tractenberg filed a class action suit against Citigroup, Inc. Citigroup moved to compel individual arbitration. The court awaited decision from the U.S. Supreme Court in AT&T Mobility LLC v. Concepcion, 563 U.S. —- (2011), and then, based on its holding, granted Citigroup’s motion to compel individual arbitration. On Tractenberg’s motion for reconsideration, the Court rejected her arguments that the language in her contract with Citigroup differed materially from the language at issue in Concepcion. Anna Tractenberg v. Citigroup, Inc., No. 10-3092 (USDC E.D. Pa. Sept. 1, 2011) (see Dec. 22, 2011 Order denying motion for reconsideration of Orders dated September 1, 2011 and denying request for 1292(b) appeal certification and earlier Order denying motion to opposing arbitration and seeking discovery).

This post written by John Pitblado.

See our disclaimer.

SECOND CIRCUIT STICKS TO ITS DECISION THAT A CLASS ACTION WAIVER EFFECTIVELY PRECLUDING VINDICATION OF FEDERAL STATUTORY RIGHTS IS UNENFORCEABLE

March 13, 2012 by Carlton Fields

The Second Circuit Court of Appeals held that a class action waiver clause is not enforceable where plaintiffs can demonstrate that the practical effect of enforcing the clause would be to preclude plaintiffs from vindicating their federal statutory rights. The court further held that the Supreme Court’s decisions in Stolt-Nielsen and Concepcion do not alter this determination. Plaintiffs alleged that provisions in Amex’s contracts requiring businesses to “honor all cards” issued by Amex and its affiliates constitute an illegal tying arrangement in violation of the Sherman Antitrust Act. Plaintiffs submitted an economist’s report that, in the court’s view, demonstrated that it was not financially feasible for plaintiffs to assert their claims individually. Accordingly, the court held that the class action waiver could not be enforced because it effectively prohibited plaintiffs from pursuing protections provided by federal antitrust law. The parties had not agreed to class arbitration. Thus, in accordance with Stolt-Nielsen, the court held that the case could “proceed in a judicial class action or not at all.” The court remanded the matter to the district court with instruction to deny Amex’s motion to compel arbitration. In re Am. Express Merchants’ Litig., No. 06-1871 (2nd Cir. Feb. 1, 2012).

This post written by Ben Seessel.

See our disclaimer.

U.S. SUPREME COURT SENDS STERN MESSAGE ON ENFORCING CONCEPCION

March 12, 2012 by Carlton Fields

In a curt per curiam opinion, the U.S. Supreme Court sent a clear message to the Supreme Court of Appeals of West Virginia, vacating that Court’s decision that found state public policy superseded the Federal Arbitration Act, where personal injury claims against a nursing home were at issue. Pointing at the outset to the Supremacy Clause of the U.S. Constitution, the U.S. Supreme Court emphasized its holding in AT&T Mobility LLC v. Concepcion, 563 U.S. —- (2011) (slip op. at 6-7), that “[w]hen state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: The conflicting rule is displaced by the FAA.” It vacated and remanded. Marmet Health Care Center, Inc. v. Brown, Nos. 11-391 and 11-394, 565 U.S. —- (Feb. 21, 2012).

This post written by John Pitblado.

See our disclaimer.

THIRD CIRCUIT HOLDS THAT DISTRICT COURT ERRED IN REFUSING TO APPOINT SUBSTITUTE ARBITRATOR UNDER FAA SECTION 5

February 27, 2012 by Carlton Fields

Plaintiff Khan filed a putative class action lawsuit against Dell alleging, among other claims, violations of a state consumer protection statute and common law fraud. The arbitration clause at issue provided that disputes: “SHALL BE RESOLVED EXCLUSIVELY AND FINALLY BY BINDING ARBITRATION ADMINISTERED BY THE NATIONAL ARBITRATION FORUM (NAF). . . .” At the time Dell filed its motion to compel arbitration, however, NAF had been barred from conducting consumer arbitrations pursuant to the terms of a consent decree with the Minnesota Attorney General that NAF had entered into after being investigated for allegedly engaging in deceptive practices disadvantaging consumers.

The district court held that NAF’s designation was “integral” to the arbitration provision such that it could not be enforced without using NAF and denied Dell’s motion to compel arbitration. The Third Circuit reversed. It determined that the arbitration clause was ambiguous because “EXCLUSIVELY” could refer either to “BINDING ARBITRATION,” to “NAF,” or to both and that the provision thus did not indicate the parties’ “unambiguous intent not to arbitrate their disputes if NAF is unavailable.” The Third Circuit held that the district court, accordingly, should have appointed a substitute arbitrator under FAA Section 5 and remanded the case for further proceedings consistent with its opinion. Khan v. Dell Inc., No. 10-3655 (3rd Cir. Jan. 20, 2012).

This post written by Ben Seessel.

See our disclaimer.

COURT COMPELS ARBITRATION OF MULTIPLE PLAINTIFFS NOTWITHSTANDING “NARROW” ARBITRATION AGREEMENT

February 22, 2012 by Carlton Fields

A court compelled arbitration of a dispute between an insurer and an affiliated group of multinational companies, despite the fact that the agreement to arbitrate was “narrow,” signed by only one of the plaintiff companies, and subject to a statute of limitations defense that state law permitted to be addressed in court. The contract governed certain obligations under separate insurance agreements, including premium obligations and reimbursement of specified expenses incurred in settling claims. The contract contained an arbitration agreement, which provided for arbitration of “[a]ll disputes or differences arising out of [the contract’s] interpretation.” When a dispute arose regarding the insureds’ failure to reimburse the insurer for certain expenses, the insurer demanded arbitration and the insureds sued for a declaration that the claims were not arbitrable, and were barred by state statute of limitations.

Plaintiffs argued that the arbitration agreement was “narrow” and did not apply to the parties’ dispute, which they alleged related to matters collateral to the contract’s terms. While the court agreed that the agreement was narrow and that some record evidence supported their description of the dispute, the court found that there was sufficient evidence to find that the dispute “might” involve interpretation of the contract’s reimbursement calculation terms. The court also rejected plaintiffs’ argument that the non-signatories were not bound, holding that the non-signatories were estopped from excluding themselves because they effectively conceded receiving a “direct benefit” from the contract. Regarding the plaintiffs’ statute of limitations argument, the court held that despite the fact that the parties agreed to a choice of state law that provides for a limitations defense to arbitration to be made in court, the limitations issue was for the arbitration panel. Alfa Luval U.S. Treasury Inc. v. National Union Fire Insurance Co. of Pittsburgh, PA, Case No. 1:11-cv-01872 (USDC S.D.N.Y. Jan. 26, 2012).

This post written by Michael Wolgin.

See our disclaimer.