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Arbitration Process Issues

ARBITRATION ROUND-UP

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Manifest Disregard:

Protherapy Associates, LLC v. AFS of Bastian, Inc., Case No. 6:10cv00017 (USDC W.D. Va. July 27, 2011) (granting motion to confirm award; denying motion to modify award; no manifest disregard of law; arbitration decision that found joint and several liability did not conflict with related judicial opinion that elected not to pierce corporate veil);

International Brotherhood of Teamsters Local Union 177 v. United Parcel Service, Inc., Case No. 2:11cv00180 (USDC D.N.J. Aug. 11, 2011) (denying motion to vacate award; arbitrator relied on evidence and did not exceed powers; no “manifest disregard” of underlying collective bargaining agreement where arbitrator’s interpretation was not “totally unsupported” by general contract principles);

Johnson v. Wells Fargo Home Mortgage, Inc., Case No. 3:05cv00321 (USDC D. Nev. Aug. 17, 2011) (granting in part motion to vacate award on remand from Ninth Circuit; damages award under the Fair Credit Reporting Act was “manifest disregard” to the extent it conflicted with court’s prior holding that certain foreclosure fees were paid for a business purpose and not a consumer purpose);

Priority One Services, Inc. v. W&T Travel Services, LLC, Case No. 1:10cv01873 (USDC D.D.C. Aug. 23, 2011) (granting in part motion to vacate award; panel’s award of prejudgment interest was an “evident material miscalculation” requiring modification; court need not resolve whether “manifest disregard” is valid basis for vacatur because no showing panel otherwise acted improperly in applying state law and calculating damages);

Amaprop Ltd. v. Indiabulls Financial Services Ltd., Case No. 1:11cv02001 (USDC S.D.N.Y. Sept. 9, 2011) (granting petition to confirm arbitration award; no “manifest disregard” where arbitrator’s analysis justified award and party failed to oppose petition);

Sussex v. Turnberry/MGM Grand Towers, LLC, Case No. 2:08cv00773 (USDC D. Nev. Sept. 15, 2011) (denying motion to vacate award and motion for reconsideration; no “manifest disregard” for arbitrator’s determination that plaintiffs could not proceed as a class; reconsideration denied where new case law did not change the law);

Jurisdiction:

Powerweb Energy, Inc. v. GE Lighting Systems, Inc., Case No. 2:10cv02652 (USDC E.D. Pa. Sept. 2, 2011) (granting motion for remand to state court of petition to vacate award; jurisdiction cannot be based on federal issues absent from complaint that would arise only upon vacatur of award or based on counts of counterclaim);

Northland Truss System, Inc. v. Henning Construction Co., Case No. 4:11cv00216 (USDC S.D. Iowa Sept. 7, 2011) (dismissing petition to vacate arbitrator’s order joining seller of construction materials to arbitration between barn owner and builder; no jurisdiction where allegation of manifest disregard of federal law was “patently meritless”; noting that Eight Circuit has not determined whether claim for manifest disregard of federal law confers jurisdiction; plaintiff failed to state claim because FAA does not authorize vacatur of arbitration orders).

Procedure:

Pearl Seas Cruises, LLC v. Irving Shipbuilding, Inc., Case No. 3:11cv00201 (USDC D. Conn. Aug. 9, 2011) (granting motion to dismiss petition to vacate interim award; prior to final award, party’s claim of undue delay was for panel, not for court);

Atlantic City Electric Co. v. Estate of Jerry Riccardo, Case No. 2:09cv03573 (USDC E.D. Pa. Aug. 11, 2011) (granting summary judgment in action to set aside award due to misrepresentations related to health of accident victim; fraud claims were time-barred; under Pennsylvania law, “regardless of whether the arbitration at issue is a statutory or common law arbitration, the thirty (30) day time limit within which to challenge the award applies”);

International Brotherhood of Teamsters, Local No. 264 & 375 v. Nason’s Delivery, Inc., Case No. 1:11cv00186 (USDC W.D.N.Y. Aug. 31, 2011) (denying unions’ motion for preliminary injunction and temporary restraining order to enforce relief awarded in arbitration against employer liquidating its assets; unions failed to show irreparable harm of employer’s liquidation and likelihood of success of petition to confirm award under N.Y. General Associations Law).

Evident Partiality:

Plastic Recovery Technologies, Co. v. Samson, Case No. 1:11cv02643 (USDC N.D. Ill. July 28, 2011) (denying motion to vacate award; no evident partiality despite arbitrator’s knowledge of party’s refusal to pay fees).

FINRA:

McCafferty v. A.G. Edwards & Sons, Inc., Case No. 2:11cv00517 (USDC D.N.J. Aug. 11, 2011) (granting motion to dismiss and cross-motion to confirm award; alleged violation of N.J. whistleblower statute was not a “statutory employment discrimination claim” under FINRA; arbitration panel did not lack jurisdiction or exceed powers by including a “non-public” arbitrator on the panel).

Due Process:

First American Title Insurance Co. v. Ordin, Case No. B226671 (Cal. Ct. App. Sept. 14, 2011) (affirming confirmation of awards; plaintiff failed to show it was “substantially prejudiced” by arbitrator’s alleged refusal to hear relevant evidence and to permit supplemental briefing).

This post written by Michael Wolgin.

ARBITRATION DENIED WHERE PROPONENT LACKED “SUFFICIENTLY CLOSE” RELATIONSHIP TO ARBITRATION AGREEMENT

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Arbitration was denied in a putative class action lawsuit for alleged violations of the Fair Debt Collection Practices Act brought by two cell phone users against Collecto Inc., a collection agency contracted by Verizon and AT&T. Collecto was not a party to the underlying cell phone service contracts between the plaintiffs and cell phone carriers, but sought to enforce the contracts’ respective arbitration provisions based on the doctrines of agency and estoppel. The court applied the two-prong test in the Supreme Court’s Stolt Nielsen decision, which requires a non-signatory seeking to compel arbitration to show (1) that there are “intertwined factual issues” between the claims asserted and the agreement, and (2) that there is a relationship among the parties that justifies estoppel. While the court found that the first pong was met, it found that the second prong failed because the relationship between Collecto and the cell phone carriers was not “sufficiently close” to warrant estoppel. The court made this determination because no corporate relationship existed between Collecto and the carriers, the underlying contracts between Collecto and the carriers expressly disclaimed any agency relationship, and plaintiffs contended that Collecto had acted without valid authorization from the carriers. The court concluded that although “the FAA strongly favors arbitration, the applicable rule recognized in this case – that a party cannot be forced to arbitrate without agreeing to do so – must succeed.” Butto v. Collecto, Inc., Case No. 10-cv-2906 (USDC E.D.N.Y. Aug. 15, 2011).

This post written by Michael Wolgin.

NINTH CIRCUIT: ENGLISH ARBITRATION LAW DOES NOT APPLY, AND DISPUTE NOT ARBITRABLE UNDER FEDERAL LAW

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Titan Maritime appealed a district court’s decision denying its motion to compel arbitration in an action filed by Cape Flattery Limited for gross negligence in the salvage of a vessel owned by Cape Flattery. Titan argued that the district court erred in refusing to apply English arbitrability law and that, even under federal arbitrability law, the dispute should go to arbitration. The Ninth Circuit Court of Appeal affirmed the district court’s denial of the motion to compel arbitration, noting specifically that under the Supreme Court’s reasoning in First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995), non-federal arbitrability law should apply only if there is clear and unmistakable evidence that the parties intended to apply such non-federal law. Accordingly, the Ninth Circuit held that federal arbitrability law did apply and that under federal law, the dispute was not arbitrable. Cape Flattery Limited v. Titan Maritime, LLC, No. 09-15682 (9th Cir. July 26, 2011).

This post written by John Black.

NONSIGNATORY AGENTS OF A PARTY TO AN ARBITRATION AGREEMENT ARE NOT COMPELLED TO ARBITRATE

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The Fifth Circuit held that two agents and officers of Beacon Maritime, Inc. were not bound to arbitrate claims against Aban Offshore Limited because, although one officer had signed a contract containing an arbitration clause in his capacity as an officer of the company, neither had signed the agreement in his individual capacity. The court reversed a trial court decision compelling the individual officers to arbitrate. Among other authorities, the Fifth Circuit relied on the Restatement (Third) of Agency, which provides that when an agent contracts with another on behalf of a disclosed principal, the agent and the third party become parties to the contract, but the agent does not become a party to the agreement unless the agent and third party agree otherwise. The court also cited state and federal case law holding that nonparties resisting arbitration demands are not be bound by arbitration agreements. Guy Covington v. Aban Offshore Ltd., No. 10-40449 (5th Cir. Aug. 10, 2011).

This post written by Ben Seessel.

THIRD CIRCUIT CONFIRMS THAT FEDERAL ARBITRATION ACT PREEMPTS STATE LAW DEEMING CLASS ARBITRATION WAIVERS UNCONSCIONABLE

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The Third Circuit reversed a prior decision and held that, under the Supreme Court’s ruling in AT&T Mobility v. Concepcion, a New Jersey law providing that class arbitration waivers in consumer adhesion contracts are unconscionable is preempted by the Federal Arbitration Act. As we reported earlier on June 1, 2010, the Third Circuit had previously vacated a trial court order compelling individual arbitration holding that, under governing New Jersey law, provisions in adhesion contracts precluding class arbitrations are unconscionable and thus unenforceable. The defendant, Cellco Partnership, d/b/a Verizon Wireless, successfully petitioned for a writ of certiorari to the Supreme Court, which vacated the Third Circuit’s decision after deciding in Concepcion that a similar California law was preempted by the FAA. On remand, the Third Circuit reversed its prior decision and affirmed the trial court’s order compelling individual arbitration of the plaintiffs’ claims. Litman v. Cellco Partnership, No. 08-4103 (3d Cir. June 6, 2011).

This post written by Ben Seessel.