Arbitration Process Issues

This case addressed whether a court was required to recognize the right of a non-signatory to compel arbitration. The Defendant, Boris Bannai, executed an agreement for the sale of ore on behalf of Northgate. The agreement included an arbitration clause, requiring the arbitration of all claims relating to the agreement in London. When the plaintiff sued Bannai for fraud and unjust enrichment based on the agreement, Bannai moved to compel arbitration. Applying English law as required by the choice of law provision in the arbitration agreement, the court denied the motion, concluding that as a nonsignatory, Bannai lacked standing to compel arbitration. There are three expecptions to the general principle of English law that a non-party to an agreement may not compel arbitration, but none of the exceptions were asserted. Felman Productions Inc. v. Boris Bannai, Case No. 3:06-0644 (USDC S.D. W.Va. March 5, 2007)

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)

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).