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).
Arbitration Process Issues
Court remands case to new arbitration panel for further proceedings
After partially vacating an arbitration award as being in manifest disregard of law, a District Court has remanded the case to a new arbitration panel for further proceedings. The Court found it inappropriate to remand the case to the same arbitration panel for further proceedings relating to the issue as to which it had found that the panel had manifestly disregarded Pennsylvania law. Koken v. Cologne Reinsurance (Barbados) Ltd., Case No. 98-0678 (USDC MD Pa Dec. 5, 2006).
Court compels arbitration under international arbitration convention
A US District Court has held that arbitration should be compelled under the Convnetion on the Recognition and Enforcement of Foreign Arbitral Awards of a dispute between a Georga-based insured and a British insurer. The insurance hedged the insured's participation as an investor in a secondary market for life insurance policies. The Court found that although Georgia law invalidated arbitration agreements in insurance policies, and Georgia law applied to the interpretation of the arbitration agreement, the international convention superceded the McCarran-Ferguson Act, requiring arbitration despite Georgia law's hostility to such arbitration agreements. Goshawk Dedicated Limited v. Portsmouth Settlement Co., Case No. 06-274 (USDC ND Ga. Dec. 18, 2006).
Court declines to intervene in umpire appointment process
A District Court has declined to intereven in the appointment of an umpire, finding that there was no impass, and that the parties should continue the process, following the process set forth in various facultative and excess of loss reinsurance agreements. Global Reinsurance Corp. v. Certain Underwriters at Lloyd's, London, Case No. 06-7689 (USDC S.D.N.Y. Dec. 16, 2006). The agreements provided that each party would appoint an arbitrator, and that the party appointed arbitrators would have 30 days to agree upon an umpire. Failing agreement, each arbitrator was to designate one umpire, with the selection being made between the two proposed persons by drawing lots. Global contended that there was an impass due to its objections to the impartiality of the umpire suggested by Lloyd's arbitrator. The Court disagreed, finding that objections to partiality were proper only after an award was entered, and that the process should continue as agreed. This opinion illustrates the importance of including, as part of the qualifications for arbitrators and umpires in an arbitration provision, requirements that prospective arbitrators and umpires not have relationships with parties and their counsel. All qualifications must be clearly stated in the agreement.
UPDATE: Argonaut Insurance arbitrator appointment dispute
In an August 24 post, we reported on a District Court decision allowing Lloyds to appoint both arbitrators in a dispute with Argonaut Insurance due to Argonaut not appointing an arbitrator in a timely manner. Argonaut filed a Notice of Appeal of that decision, but the District Court recently entered an Order denying Argonaut's motion for a stay of the enforcement of the decision pending the appeal. This likely means that the arbitration will proceed with the two arbitrators appointed by Lloyds while the appeal proceeds.