Arbitration Process Issues

COURT GRANTS LIMITED PRE-ARBITRATION DISCOVERY OF NON-PARTY

July 20, 2009 by Carlton Fields

A New York State Court allowed the issuance of judicial subpoenas to non-parties at the request of Petitioner corporations in a pre-arbitration discovery action. The Petitioners and Respondents had agreed to arbitrate under FINRA rules, but the arbitration had not yet commenced, as Petitioners sought discovery to determine if other parties should be joined in the arbitration.

The Court noted that FINRA provides a comprehensive discovery scheme, and allows for the issuance of arbitral subpoenas, but is ambiguous as to pre-arbitral discovery. The Court also noted a general judicial reluctance to order discovery where the parties have agreed to arbitrate, but ruled that it was nonetheless appropriate for the limited purpose of determining whether any other parties exist that should be brought into the arbitration. VP Trader Pro, LLC v. Joseph Azevedo Pires, No 102334-09 (N.Y. Sup. Ct. April 21, 2009).

This post written by John Pitblado.

FORMER EMPLOYEES COMPEL BEAR STEARNS TO ARBITRATION

July 15, 2009 by Carlton Fields

Bear Stearns filed suit in New York state court against two former employees to recover funds it alleges was due and owing on promissory notes executed by the former employees. The defendants removed the action to the Southern District of New York and subsequently moved to compel arbitration pursuant to their employee agreements. Noting the presumption in favor of arbitration, the district court explained that even though the forum clause included in the promissory notes was not exclusive and made no mention of arbitration, such disputes fell within the scope of the employment agreements’ arbitration clause. The court stayed all proceedings pending the conclusion of arbitration. Bear Stearns & Co. v. Gordon, 08 Civ. 8596 (S.D. N.Y. Jul. 1, 2009); Bear Stearns & Co v. Cohen, 08 Civ. 8597 (S.D. N.Y. Jul. 1, 2009).

This post written by John Black.

PRE-ARBITRATION SUBPOENAS ISSUED TO HELP IDENTIFY PROPER PARTIES TO CONTEMPLATED ARBITRATION

July 8, 2009 by Carlton Fields

A court granted a petition for pre-arbitration issuance of judicial subpoenas to enable the petitioners to learn the names of potential parties against whom they may have a claim in their contemplated arbitration. Although the contemplated arbitration was to be governed by the Financial Industry Regulatory Authority’s Code of Arbitration Procedure, those rules were silent as to pre-arbitration discovery. However, a New York civil procedure statute specifically permitted pre-action discovery “to aid in arbitration.” That statute had been invoked where application was made to discover the identity of potential parties against whom an action may exist, so the petition was held proper. Petition of VTrader Pro LLC, Index No. 102334/09 (N.Y. Sup. Ct. Apr. 21, 2009).

This post written by Brian Perryman.

PETITION TO VACATE ARBITRATION AWARD FILED IN WRONG COURT

July 7, 2009 by Carlton Fields

Following an unfavorable decision by an arbitrator, the Pacific Northwest Regional Council of Carpenters (“PNRCC”) filed suit in the Western District of Washington to vacate the arbitrator’s award to the Laborers’ International Union of North America (“LIUNA”). LIUNA filed a motion to transfer PNRCC’s action to D.C. federal court, arguing that PNRCC was bound to consent to D.C. jurisdiction by the collective bargaining agreement. Finding that the action could clearly have been brought in D.C., the district court focused on the “convenience of the parties” and “interests of justice” requirements for a §1404(a) transfer. The court noted that both LIUNA and PRNCC’s parent union were headquartered in Washington, D.C. and that all relevant records were in D.C. where all of the operative facts of the case occurred. For these reasons, the court held that D.C. was the more convenient forum.

The court also held that the interests of justice supported the transfer. LIUNA had filed a suit seeking enforcement of the arbitration award in D.C. and the court noted that it would be inefficient and duplicative to examine the same issues in separate cases. Ultimately, the court granted the motion to transfer, explaining that whether the agreement properly bound PNRCC was irrelevant in the §1404(a) analysis. LIUNA had met their burden by showing that D.C. was the most appropriate forum to decide all issues based on the traditional §1404(a) considerations. Pacific Northwest Reg'l Council of Carpenters v. Laborers Int'l Union of N. Am., Case No. C09-420 (W.D. Wash. June 5, 2009).

This post written by John Black.

ORDER ALLOWING DISCOVERY OF ARBITRATION AWARD’S VALIDITY LACKED FINALITY TO CONFER APPELLATE JURISDICTION

July 6, 2009 by Carlton Fields

In an unpublished opinion, the Third Circuit Court of Appeals declined to exercise jurisdiction over an appeal of an order allowing discovery in connection with a motion to vacate an arbitration award. The Federal Arbitration Act provides for appeals from orders “modifying, correcting, or vacating an [arbitration] award.” The trial court’s decision to permit discovery into whether the award should be vacated might be a prelude to a final order vacating or modifying the award, but it is not a final order for purposes of the Act. Guyden v. Prudential Life Ins. Co. of Am., No. 08-3108 (3d Cir. June 5, 2009).

This post written by Brian Perryman.