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You are here: Home / Archives for Arbitration / Court Decisions / Arbitration Process Issues

Arbitration Process Issues

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.

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Filed Under: Arbitration Process Issues

NLRB FINDS THAT PROHIBITING CLASS ACTIONS IN EMPLOYMENT CONTRACTS VIOLATES FEDERAL LABOR LAW

February 16, 2012 by Carlton Fields

The National Labor Relations Board (“NLRB”) affirmed an administrative law judge’s decision that an employer violated the National Labor Relations Act (“NLRA”) by requiring covered employees, as a condition of employment, to sign an agreement precluding them from filing class actions addressing their wages, hours or other working conditions in any forum, arbitral and judicial. The NLRB found that such a prohibition unlawfully restricts employees’ NLRA Section 7 rights to engage in concerted action for mutual aid or protection. The NLRB stated that its holding does not conflict with the FAA or undermine the policy underlying the FAA and distinguished the Supreme Court’s recent Stolt-Nielson and Concepcion decisions. D.R. Horton, Inc., Case No.12-CA-25764 (N.L.R.B. Jan. 2, 2012).

This post written by Ben Seessel.

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Filed Under: Arbitration Process Issues

COURT DECLINES TO COMPEL ARBITRATION UNDER “NARROW” ARBITRATION PROVISION

February 15, 2012 by Carlton Fields

Union Insurance Company and other insurers entered into an “Agency-Company Agreement,” with broker Hull & Company, providing Hull with binding authority. Hull bound risk from the Thirsty Parrot Bar and Grill, including umbrella coverage from Union. The Thirsty Parrot ultimately settled a covered assault claim against one its former employees, to which Union contributed $800,000. Union sought recompense from Hull, alleging that Hull breached underwriting guidelines which were incorporated by reference into the Agency-Company Agreement. Union sought to compel arbitration of its claim, but Hull resisted. The Court refused to compel arbitration under a provision allowing arbitration of disputes pertaining to “misunderstanding as to the interpretation or application of any provision of this Agreement.” The Court found that the dispute over underwriting guidelines was not related or collateral to interpretation of the Agency-Company Agreement, because it found that Union failed to establish that the underwriting guidelines were incorporated by reference into the Agreement, and thus the dispute did not come within the Agreement’s arbitration provision. Union Ins. Co. v. Hull &Company, Inc., Case No. 4-00337 (USDC S.D. Iowa Dec. 19, 2011).

This post written by John Pitblado.

See our disclaimer.

Filed Under: Arbitration Process Issues

SUPREME COURT ENFORCES ARBITRATION OF CREDIT REPAIR ORGANIZATIONS ACT CLAIMS

February 13, 2012 by Carlton Fields

The United States Supreme Court reversed a Ninth Circuit Court of Appeals decision that affirmed a “right to sue” under the Credit Repair Organizations Act (CROA). A putative class of cardholders brought CROA violation claims against CompuCredit, which issues Visa cards to individuals with poor credit scores seeking to repair their credit. The cardholder agreement contained an arbitration provision. When the cardholders brought suit in California federal court, CompuCredit moved to compel arbitration. The trial court denied the motion to compel, citing language in CROA requiring companies to provide a disclosure to consumers that includes the sentence, “You have a right to sue a credit repair organization that violates the [Act].” The Ninth Circuit affirmed. In an 8-1 decision authored by Justice Scalia (Justices Sotomayor and Kagan in a separate concurrence, Justice Ginsburg dissenting), the Supreme Court reversed, holding that the cited language did not unambiguously provide a right that supersedes the strong public policy embodied in the FAA of enforcing arbitration agreements. CompuCredit Corp. v. Greenwood, No. 10-948, 565 U.S. —-, 132 S.Ct. 665 (Jan. 10, 2012).

This post written by John Pitblado.

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Filed Under: Arbitration Process Issues, Week's Best Posts

COURT CONSOLIDATES REINSURANCE CASES BEFORE EXISTING ARBITRATION PANEL

February 8, 2012 by Carlton Fields

A federal district court consolidated several reinsurance cases to be heard before an arbitration panel already formed to hear a dispute between the parties, as well as a corporation which the parties agreed to keep confidential. The court determined that, to avoid duplicative litigation and conserve litigation, all three actions could be consolidated and resolved through arbitration. Further, because all three actions arose from the same set of operative facts the arbitration panel already in existence could determine the correct reading of the arbitration agreements contained in each reinsurance agreement. The panel would first determine if each dispute should be heard by an independent panel. The court stayed the actions pending resolution by the existing arbitration panel. Arrowood Indemnity Co. v. Harper Insurance Co., No. 12-2 (USDC W.D.N.C. Jan. 19, 2012).

This post written by John Black.

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Filed Under: Arbitration Process Issues

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