This case addresses the important and divisive issue of whether the Federal Arbitration Act and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards deprive a United States District Court court of jurisdiction to order injunctions and grant provisional remedies while an international arbitration is pending in London. Relying on precedent from the Second Circuit, a Connecticut District Court denied a motion to dismiss, holding that it has jurisdiction to entertain a motion for a prejudgment remedy by a party to an arbitration currently pending in London. However, it denied a motion requiring the immediate disclosure of assets. Bahrain Telecommunications v. DiscoveryTel, Inc., Case No. 3:05cv1957 (D. Ct. March 9, 2007)
Arbitration Process Issues
COURT UPHOLDS ARBITRATOR’S DECISION REGARDING CLASS CERTIFICATION
Sutter, a New Jersey pediatrician, filed a class action complaint against Oxford and several other health insurers for failure to pay medical claims timely and correctly under New Jersey law. Shortly after the case was filed, a New Jersey court granted Oxford’s motion to compel arbitration. Arbitration proceeded under the rules of the American Arbitration Association, which included a specific rule governing class actions. In 2005, the sole arbitrator issued a partial final class determination award, where he defined the class of claimants and certified the class. Oxford promptly filed a motion in district court to vacate the award. The District Court upheld the award, rejecting defendant’s argument that the arbitrator exceeded his authority and manifestly disregarded the law. The Third Circuit recently affirmed the judgment, finding that the arbitrator had not acted in manifest disregard of law, because he had considered all of the requirements set forth in the AAA's class action rule. Sutter v. Oxford Health Plans, Case No. 05-5223 (3rd Cir. February 28, 2007)
McCarran-Ferguson Forces Court To Deny Motion To Compel Arbitration
An Oklahoma District Court was forced to deny the defendant’s motion to compel arbitration, despite the parties’ reinsurance contracts that contained clear and unambiguous arbitration clauses. Pursuant to the McCarran-Fergusson Act, the court was required to apply a state statute prohibiting the enforcement of arbitration clauses in any contract “which reference[s] insurance.” The court also concluded that Oklahoma common law could not save the arbitration agreements. Citing to an Oklahoma Supreme Court case, the court stated that “arbitration provisions falling outside of the UAA [Uniform Arbitration Act] are governed by common law and, generally, ‘agreements to submit future controversies to arbitration are contrary to public policy.’” Cannon v. Lane, 867 P.2d 1235 (Okla. 1994). Although the court acknowledged several subsequent cases stating that the public policy of Oklahoma favors arbitration, the court distinguished those cases because they all fell within the purview of the UAA. Since Cannon has not been overruled, the District Court was bound by it and forced to deny the motion to compel arbitration. The court also rejected defendant’s argument that the Oklahoma statute violates the Contracts Clause of the Federal Constitution. Mid-Continent Casualty Co. v. General Reinsurance Corporation, Case No. 06-CV-0475 (N.D.Okla. Feb. 15, 2007).
Tenth Circuit adopts arbitral immunity doctrine
In an appeal from an award in an NASD-sponsored arbitration, the Tenth Circuit has joined virtually all other Circuits in recognizing that arbitrators, arbitral forums and arbitral sponsors are immune from liability for actions taken in connection with administering arbitration. Pfannenstiel v. Merrill Lynch, Pierce, Fenner & Smith, Case No. 04-1274 (10th Cir. Feb. 20, 2007).
Court splits requested class arbitration into separate arbitrations
Cintas Corp. was sued by a group of its service sales representatives for back pay under the Fair Labor Standards Act, which provides for opt-in classes. The District Court entered an Order compelling 56 of the 65 named Plaintiffs to arbitrate, and a request for class-wide arbitration was filed with the American Arbitration Association. The Court held that the arbitrator should determine whether class-wide arbitration was appropriate. After approximately 2,400 Plaintiffs opted into the back pay lawsuit, Cintas filed 70 separate actions against such Plaintiffs, seeking to compel them to arbitrate the dispute in the Districts in which they were employed by Cintas. The Judicial Panel on Multidistrict Litigation created an MDL proceeding, transferring the 70 separate actions to the original forum court, for a determination of: (1) whether the parties named in the 70 separate actions were refusing to arbitrate within the meaning of section 4 of the Federal Arbitration Act; and (2) whether the parties were complying with that obligation by seeking class-wide arbitration. The Court held that the parties were refusing to arbitrate within the meaning of section 4 of the FAA, found that all common proceedings had been completed, and suggested that the cases be remanded to the transferor courts for further, individual, proceedings. In re: Cintas Corp. Overtime Pay Arbitration Lit., Case No. 06-1781 (USDC N.D. Cal. Jan. 12, 2007).