Arbitration Process Issues

This case involved a personal injury negligence action brought by plaintiffs Cameron David and Shelby Gladd against defendants Satnam Singh and his employer Landmark Logistics, Inc. (“Landmark”) in Oklahoma federal court. Landmark was insured by CastlePoint National Insurance Company(“CastlePoint”), which is currently the subject of a California conservatorship proceeding. Defendant Singh made a motion to stay, asking the Oklahoma federal court to exercise its inherent discretion to stay the case pending the resolution of the California conservatorship proceeding. Singh’s motion was based on Burford abstention, a federal abstention doctrine to prevent interference with state insurance receivership matters. Landmark did not move for a stay or join the motion.

The Oklahoma district court denied defendant Singh’s motion for a stay, finding that the appropriate circumstances warranting Burford abstention were not present in the case. Notably, the court noted that Burford abstention requires the remand or dismissal of the action, and not merely a stay. In its analysis, the Oklahoma district court found that there was no basis to determine whether defendants’ insurance claims against CastlePoint are likely to be satisfied in the California conservatorship or any ancillary proceeding. The court noted that defendant Singh did not assert or attempt to show any irreparable harm that he would suffer if plaintiffs’ negligence case was allowed to proceed, and that his reasons for staying the case related solely to who was responsible for paying the cost to defend the case and, if plaintiffs were to prevail, for satisfying an award of damages. The court also noted that because CastlePoint had already retained counsel to represent the defendants in the action, Singh had not shown any specific injury to his defense of the case. On the other hand, the court noted that a stay would cause substantial harm to plaintiffs, whose personal injury claims against defendants would be delayed while CastlePoint’s conservator receives and processes insured claims. Thus, the court held that it would be fundamentally unfair to prevent plaintiffs’ timely pursuit of their claims, for reasons having nothing to do with the merit of the claims. Thus, the court held that defendant Singh had failed to justify a stay of the case at this juncture.

Gladd v. Landmark Logistics, Inc., No. 16-894 (D) (USDC W.D. OK. Oct. 28, 2016).

This post written by Jeanne Kohler.

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In order to be arbitrable, a dispute must fall within the scope of the parties’ operative arbitration agreement. Here, a non-signatory to the relevant agreement was seeking to “invoke an arbitration provision that was not expressly incorporated into a contract to which the non-signatory is a party”. Finding that authority for this proposition was absent from the movant’s papers, a federal court denied a party’s motion to compel.

The co-surety non-signatories were defendants in the action by way of their nonpayment of a payment bond, the amount of which was undisputed. The service agreement which addressed the work to be performed, for which the co-sureties issued a payment bond, contained an arbitration provision to which they were not parties. Ultimately, the Court determined the “arbitration provision cannot be read to encompass a dispute of this nature” and that there was no evidence at the time the service agreement was executed that the parties “intended for the arbitration provision to cover an unnamed surety’s failure to perform under a yet-to-be-secured payment bond” for an undisputed sum. Thus, the co-sureties’ motion to dismiss or in the alternative stay litigation and compel arbitration was denied.

Aztech Engineering Group, Inc. et al. v. Liberty Mut. Ins. Co., et al., 1:16-cv-01657 (USDC S.D. Ind. Oct. 1, 2016)

This post written by Nora A. Valenza-Frost.

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Two purported class representatives appealed an order compelling arbitration in their putative class action lawsuit against Amazon Services, LLC. The court affirmed, holding that the named plaintiffs agreed to Amazon’s “Business Solutions Agreement,” which contained an arbitration clause agreeing to arbitrate “any dispute” relating to the BSA or use of Amazon’s services. The court was not persuaded by the plaintiffs’ argument that a second “Marketplace Participation Agreement” agreement that they signed, which contained a litigation forum selection clause, took precedence over the arbitration clause in the BSA. The court rejected the argument that the MPA was a separately defined “Program Policy” that was superior to the BSA, finding that the MPA was an inferior “Seller Agreement” within the meaning of the BSA. The court further found that the fact that one of the parties signed the MPA before signing the BSA was immaterial; the BSA and its arbitration provisions represented the parties “entire agreement,” which superseded all prior agreements. Peters v. Amazon Services, LLC, Case No. 14-35294 (9th Cir. Oct. 13, 2016).

This post written by Michael Wolgin.

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