In a Special Focus article, Rob DiUbaldo and Jeanne Kohler address the question of whether a reinsurer’s statute of limitations defense is an issue for arbitrators to resolve, or one that must be decided by a court of competent jurisdiction.
Arbitration Process Issues
UBER’S ATTEMPT TO COMPEL CLASS ARBITRATION REJECTED DUE TO UNCONSCIONABILITY OF ARBITRATION AGREEMENT
The court held that a number of the provisions in the subject arbitration agreements were unconscionable, including a delegation clause providing that disputes involving the arbitration agreement be decided in arbitration. The court found this clause to be, not only ambiguous in light of a conflicting class action court jurisdiction clause, but unconscionable as a contract of adhesion that, when combined with a fee splitting provision, unfairly required “the payment of hefty fees simply to arbitrate arbitrability.” The court further found unconscionable the clauses requiring the drivers to waive class claims under the Private Attorney General Act (PAGA), under Ninth Circuit precedent and California state case law. Because the court found that the arbitration agreement was “permeated with unconscionability,” it determined that it would not sever particular clauses, but would reject the arbitration agreement entirely. As a result, the court did not consider plaintiffs’ alternative argument that the arbitration agreement was unenforceable because it violated the drivers’ rights under the National Labor Relations Act to file a class claim (as held by the NLRB in D.R. Horton). The court did appear to suggest, however, that such an argument would likely fail under the policies of the FAA as set forth by the U.S. Supreme Court in Concepcion. O’Connor v. Uber Technologies, Inc., Case No. 13-cv-03826-EMC (USDC N.D. Cal. Dec. 10, 2015).
This post written by Joshua S. Wirth, a law clerk at Carlton Fields Jorden Burt in Washington, DC.
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FILING OF FOUR LAWSUITS OVER TEN YEARS DID NOT WAIVE RIGHT TO ARBITRATE WHERE “LITIGATION MACHINERY” HAD NOT BEEN INVOKED
Grigsby & Associates appealed an order confirming an arbitration award of compensatory damages and attorney fees to M Securities, in a dispute relating to underwriting fees owed in a municipal bond transaction. Grigsby claimed that the award should be vacated because the defendants waived their right to arbitration after filing four lawsuits concerning the bond transaction over ten years. The Eleventh Circuit held, however, that despite the prior lawsuits, M Securities still had not “substantial[ly] invoke[d] the litigation machinery prior to demanding arbitration.” M Securities did not effectuate service against Grigsby in three of the lawsuits, and the fourth litigation did not progress beyond the filing stage. And while delay in seeking arbitration generally weighs in favor of finding waiver, it must be coupled with other substantial conduct “inconsistent with an intent to arbitrate,” which M Securities did not display here. Nor did Grigsby demonstrate prejudice given “the extremely limited nature” of the prior lawsuits. Grigsby & Associates, Inc. v. M Securities Investment, Case No. 13-15208 (11th Cir. Dec. 28, 2015).
This post written by Joshua S. Wirth, a law clerk at Carlton Fields Jorden Burt in Washington, DC.
See our disclaimer.
COURT DENIES RECONSIDERATION OF ORDER STAYING ACTION TO COMPEL ARBITRATION
A federal district court refused to reconsider its order staying Allstate’s action to compel arbitration against its insured, A.O. Smith. The case involved a Settlement/Coverage-in Place Agreement between A.O. Smith and Allstate regarding coverage for asbestos liability. Continental Casualty Company, another insurer for A.O. Smith, filed an action in Wisconsin state court against both A.O. Smith and Allstate arguing that the Agreement impermissibly limited its subrogation and contribution rights against Allstate. When Allstate and A.O. Smith asserted their defenses in the Wisconsin action, a dispute emerged between them as to the nature of the Agreement. Allstate attempted to compel arbitration against A.O. Smith in federal court and to stay the Wisconsin litigation pending the outcome of the arbitration. The federal court, however, refused to compel arbitration and instead stayed its own proceedings, in deference to the Wisconsin court’s determination of a pending motion for summary judgment that could impact arbitrability. In denying reconsideration of that ruling, the court explained that its stay was warranted because the Wisconsin litigation was further along, the Wisconsin court was “currently in a more informed position from which to address the issue of arbitrability, and a stay [was therefore] warranted on that basis.” Allstate Insurance Co. v. A.O. Smith Corp., Case No. 1:15-cv-06574 (USDC N.D. Ill. Dec. 11, 2015).
This post written by Barry Weissman.
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NINTH CIRCUIT ALLOWS RACKETEERING CLAIM TO PROCEED FOLLOWING ARBITRATION
Earlier this month, the U.S. Court of Appeals for the Ninth Circuit reversed summary judgment in favor of defendants who faced a RICO suit following resolution of arbitration with the plaintiffs. The case involved a dispute over whether the defendants tried to overtake a foreign subsidiary of the plaintiffs. A relevant agreement between the parties required the plaintiffs to submit to arbitration under Singapore law. The plaintiff brought suit in the Northern District of California, but that case was dismissed on forum non conveniens grounds. As part of that suit, the plaintiff included a RICO claim and sought treble damages. The Singapore arbitration took about two decades to reach completion, following which time the defendants paid the arbitral award to the plaintiff. Then, the defendants found that the plaintiff had re-initiated suit in California, continuing to seek treble damages under RICO.
The court balanced the treble damages provision of RICO with the “one satisfaction rule,” the principle that a plaintiff should not recover more than their actual losses. The “full measure” of the plaintiff’s claims were not satisfied by the arbitration’s award of actual losses, and, thereby, the RICO trebling claim was not extinguished. The court remanded the case for further proceedings, albeit with a limitation that the previous arbitral award would be offset against any liability on the RICO claim. Uthe Technology Corp. v. Aetrium, Inc., No. 3:L95-cv-02377 (9th Cir. Dec. 11, 2015).
This post written by Zach Ludens.
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