Arbitration Process Issues

PARTY’S PREVIOUSLY WAIVED RIGHT TO ARBITRATE “REVIVED” AFTER AMENDED COMPLAINT

November 29, 2011 by Carlton Fields

Sara Krinsk filed a putative class action lawsuit against SunTrust Bank, alleging that it improperly revoked a line of credit on her home, based on an alleged company wide policy to dispatch with certain credit risks after issues with collateralized mortgage debt came to light in 2008 and 2009. After participating in the litigation for nine months, and after plaintiff amended her complaint greatly enlarging the putative class, SunTrust moved to compel arbitration based on the arbitration provision in the parties’ contract, which also precluded class arbitration. The district court denied the motion, finding SunTrust had waived its right to arbitrate due to its participation in the litigation to that point. SunTrust appealed, arguing that the Plaintiff’s amendment of her complaint shortly before SunTrust moved to compel arbitration revived its right to arbitrate anew. The Eleventh Circuit agreed, finding the case presented “one of those limited circumstances” warranting revival of arbitration rights because the amended complaint significantly altered the scope of the case. Krinsk v. Suntrust Banks, Inc., No. 10-11912 (11th Cir. Sept. 7, 2011)

This post written by John Pitblado.

APPEALS COURT REVERSES TRIAL COURT’S ORDER VACATING ARBITRATION AWARD AS INSUFFICIENTLY “REASONED”

November 28, 2011 by Carlton Fields

A federal circuit court of appeals reversed a lower court order vacating an arbitration award because the arbitrators had “exceeded their powers” by purportedly failing to provide a “reasoned award” as agreed upon by the parties. Cat Charter, LLC and its principals initiated an arbitration against Multihull Technologies, Inc. and its owner to resolve a dispute involving the construction of a yacht. The parties requested a “reasoned award” from the panel. According to the district court, the arbitrators failed to deliver an award that was sufficiently “reasoned,” exceeding their powers under Federal Arbitration Act section 10(4)(a). The court of appeals analyzed what it termed the “spectrum of increasingly reasoned awards” that runs from a “standard award,” which merely announces a decision, to “findings of fact and conclusions of law,” which requires “relatively exacting” detail. The appellate court found that a “reasoned award” was somewhere in the middle of the spectrum and that the panel’s award, though “it could have provided more,” gave a sufficiently detailed explanation to be considered “reasoned.” The appeals court reinstated the award, noting that if the parties had desired more detail, they could have requested that the arbitrators provide “findings of fact and conclusions of law.” Cat Charter 11th Cir 7.13.11, No. 10-11674 (11th Cir. July 13, 2011).

This post written by Ben Seessel.

COURT DISTINGUISHES CONCEPCION WHERE ARBITRATION OF INDIVIDUAL CLAIMS WAS “INFEASIBLE”

November 22, 2011 by Carlton Fields

A state court recently distinguished the U.S. Supreme Court’s Concepcion decision in upholding a prior order that found that arbitration agreements that precluded class arbitration were void as against public policy. A putative consumer class action was brought against Dell Inc. by plaintiffs who had agreed to arbitrate disputes only on an individual basis – and not as a class action. Dell initially prevailed in arbitration, but the appellate court subsequently reversed the award, holding that the agreement barring class arbitration violated state public policy and was unenforceable. After the appellate court issued its ruling, the U.S. Supreme Court decided the Concepcion case, which held the FAA preempts state laws that preclude class action waivers. Arguing that Concepcion rejected the appellate court’s decision in this case, Dell renewed its underlying motion to confirm the arbitration award. The court denied Dell’s motion, distinguishing Concepcion on its facts. Whereas the plaintiffs in Concepcion had sizable individual claims and a favorable procedure in place to arbitrate individual claims, the plaintiffs in this case had small individual claims and no favorable individual claim resolution procedure. State policy against a class waiver prevailed in this case because arbitration of individual claims was “infeasible as a matter of fact” leaving no “federal interest with which the state law might conflict.” Since this rationale arguably is similar to those underlying state law provisions vulnerable under Conception, it will be interesting to see whether this position prevails. Feeney v. Dell, Inc., Case No. MICV 2003-01158 (Mass. Super. Ct. Sept. 30, 2011).

This post written by Michael Wolgin.

SUPREME COURT REQUIRES APPLICATION OF FAA IN STATE COURTS

November 21, 2011 by Carlton Fields

The U.S. Supreme Court has issued a per curiam decision holding that the Federal Arbitration Act must be enforced in both state and federal courts. In this case, a Florida state court of appeal upheld a trial court’s refusal to compel arbitration after determining that two of the four claims in a complaint were nonarbitrable. The Supreme Court cited prior precedent requiring that courts send arbitrable claims to arbitration even if it will lead to piecemeal litigation. See Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 217 (1985). The Court vacated the judgment and remanded the case so that the lower court could determine if any of the claims were arbitrable. KPMG, LLP v. Cocchi, No. 10-1521, 565 U.S. – (U.S. Nov. 7, 2011).

This post written by John Black.

CONFIRMATION OF ARBITRATION AWARD OF ATTORNEYS FEES AND COSTS AFFIRMED ON APPEAL

November 17, 2011 by Carlton Fields

White Springs Agricultural Chemicals, Inc. and Glawson Investments Corp. had a history of property dispute litigation arising from their respective uses of neighboring properties in Florida. They stipulated to a settlement, agreeing that future disputes would be arbitrated. A dispute again arose, and Glawson demanded arbitration in accordance with the agreement. The parties arbitrated, and the panel found in Glawson’s favor, awarding attorneys fees and costs. White Springs sought to vacate the award in federal court, arguing the fee award was improper and beyond the scope of the submission. The court disagreed, confirming the award. White Springs appealed. The Eleventh Circuit affirmed, citing the agreement for the panel’s authority to award attorneys fees, and noting that, while Glawson had not initially sought fees, it was apparent the parties had submitted that issue to the arbitration panel, inasmuch as both parties briefed the issue, and the panel heard argument on the issue before issuing the award. White Springs Agricultural Chemicals, Inc. v. Glawson Investments Corp., No. 10-14532 (11th Cir. Oct. 17, 2011).

This post written by John Pitblado.