Arbitration Process Issues

COURT DENIES MOTION TO RECONSIDER CONFIRMATION OF ARBITRATION AWARD

October 7, 2010 by Carlton Fields

Following a denial of its motion to vacate an adverse arbitration award, plaintiffs ABS Financial Services submitted a Motion for Reconsideration requesting that the US District Court for the District of New Jersey reverse its prior ruling and judgment. In its earlier decision, the Court had confirmed the arbitration award even though it contained errors of law because it determined that the the award was supported “by at least some of the evidence in the record and was an arguably reasonable construction of the parties’ contracts.” Noting the extremely difficult standard of review for motions for reconsideration, the Court denied the instant Motion, holding that it had not committed a clear error or manifestly disregarded the law in its prior ruling and judgment. ABS Brokerage Servs., LLC v. Penson Fin. Servs., Inc., Case No. 09-04590 (D. N.J. Aug. 16, 2010).

This post written by John Black.

ELEVENTH CIRCUIT FINDS INSUFFICIENT EVIDENCE TO SUPPORT WAIVER OF ARBITRATION DESPITE ONE-MONTH DELAY PRIOR TO ARBITRATION DEMAND

September 29, 2010 by Carlton Fields

In a suit between a law firm and Citibank, the Eleventh Circuit reversed the district court’s denial of Citibank’s petition to compel arbitration despite its one-month delay in demanding arbitration. The Eleventh Circuit held that even assuming that Citibank “acted inconsistently with the arbitration right” by filing an answer that was silent on arbitration, the law firm did not provide adequate evidence that its research and filings prior to Citibank’s arbitration demand constituted sufficient prejudice to preclude arbitration. Although the law firm may have suffered some prejudice “when it expended time and resources preparing and filing an offer of judgment, reply, and notice of readiness for trial,” waiver was inappropriate because of the “brevity” of the one-month delay and because the law firm “could not point to any portion of the record that reveals either the amount of money it spent or the number of hours it dedicated to conducting litigation-specific discovery and preparing litigation-specific documents.” Citibank, N.A., v. Stok & Assocs., P.A., No. 09-13556 (11th Cir. July 20, 2010).

This post written by Michael Wolgin.

SEVENTH CIRCUIT: COURTS MUST DETERMINE WHETHER A CONTRACT EXISTS BEFORE ENTERING STAY

September 9, 2010 by Carlton Fields

Recently, the Seventh Circuit issued an opinion in Janiga v. Questar Capital Corp. on the issue of whether the court or an arbitrator is responsible for deciding whether a particular document signed by the parties constitutes a contract and, if so, whether that contract includes an arbitration clause. The Court of Appeals – noting that arbitration itself is a matter of contract – determined that the District Court must decide whether a contract exists before it decides whether to stay an action and order arbitration. The question of enforceability, however, falls squarely on the arbitrator. Applying governing state law on the formation of contracts, the Seventh Circuit then ruled that Janiga had signed a valid contract and thus assented to arbitration. The case was remanded for further proceedings consistent with the opinion. Janiga v. Questar Capital Corp., Case No. 09-2982 (7th Cir. Aug. 2, 2010).

This post written by John Black.

COURT PUNTS TO ARBITRATOR ON EFFECT OF VOLUNTARY DISMISSAL ON CLAIM AGAINST REINSURER

September 7, 2010 by Carlton Fields

A third-party complaint disputing the nature and extent of an obligation to reinsure an insurance company with respect to losses arising from assumed reinsurance risks has been dismissed without prejudice, to allow an arbitrator to decide the scope of a settlement agreement. Through a settlement agreement, the insurance company resolved its dispute with the defendant named in the original complaint. The original complaint was dismissed with prejudice. Thereafter, the insurance company contended that its claims against the third-party defendant reinsurer should be voluntarily dismissed without prejudice to allow arbitration of those parties’ claims. The reinsurer argued the voluntary dismissal should be with prejudice, as the insurance company’s claims in the third-party complaint were derivative of the claims in the original complaint. The court declined to dismiss with prejudice, finding that the question of whether the claims were, in fact, derivative was a question better left for the arbitrator. Eagle Star Insurance Co. v. Highland Insurance Co., Case No. 02-2165 (USDC S.D. Cal. July 22, 2010).

This post written by Brian Perryman.

LET IT SNOW: ARBITRATION COMPELLED IN VAIL RESORT PARKING KERFUFFLE

September 1, 2010 by Carlton Fields

A Colorado district court granted a Vail resort condominium developer’s motion to compel arbitration under a condominium purchase agreement. Residents brought suit alleging that they were denied promised parking rights at the resort-side condominium they purchased, and were instead secretly substituted with valet parking rights instead, which rights were of lesser value. The residents sued the developer. The developer demanded arbitration under the purchase agreement, which the residents resisted. The developer brought a separate action to compel arbitration. The court found for the developer, rejecting the residents’ arguments that (1) they were not bound by the arbitration provision because they were not parties to the original purchase agreement, but instead were assignees; (2) the claims do not arise out of interpretation of the agreement; (3) the developer waived its right to arbitrate by failing to assert that right as an affirmative defense to the lawsuit brought by the residents, and (4) the residents’ claims under the Colorado Consumer Protection Act were not arbitrable. Stone v. Vail Resorts Development Co., No. 1:09-CV-02081 (USDC D. Col. July 1, 2010)

This post written by John Pitblado.