Arbitration Process Issues

CALIFORNIA APPELLATE COURT DENIES MANDAMUS PETITION: ARBITRATOR WILL DECIDE WHETHER ARBITRATION AGREEMENT PERMITS CLASS ACTION CLAIMS

October 21, 2015 by John Pitblado

An appellate court in California denied Universal Protection Service, LP (“Universal”) and their affiliate’s mandamus petition, seeking to overturn a lower court ruling compelling arbitration. The court found that whether an arbitration agreement permitted class-wide arbitration is a question for an arbitrator, and not the court.

Plaintiffs, a group of security officers formerly in the employ of Universal, sought arbitration following their employment termination—allegedly—after filing an administrative complaint. The issue before the court centered on whether an arbitration agreement within plaintiff’s employment contract gave an arbitrator the power to determine whether an arbitration agreement allowed for class action arbitration. The court looked to whether there was “clear and unmistakable evidence” that Universal and the plaintiffs planned for an arbitrator to handle such disputes.

Universal argued that because the arbitration agreement did not reference class actions specifically, this was concrete evidence that the parties did not intend the question of class action arbitration to be within the purview of an arbitrator. The court disagreed, finding that mere silence within an arbitration agreement is not sufficient. Instead, the court noted that the parties incorporated the American Arbitration Association’s (“AAA”) rules pertaining to employment disputes including the AAA’s Supplementary Rules for Class Arbitrations. Despite noting that some federal cases have rejected similar conclusions, the court held that because the parties intentionally made the AAA apart of their employment contract, this inclusion authorizes an arbitrator to decide whether the arbitration agreement permits class actions.

Universal Prot. Serv., LP v. Superior Ct. of Yolo Cnty., No. C078557 (Cal. Ct. App. Aug. 18, 2015)

This post written by Matthew Burrows, a law clerk at Carlton Fields in Washington, DC.

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REINSURANCE DISPUTE VOLUNTARILY DISMISSED AFTER CEDENT FAILED TO ESTABLISH GOOD CAUSE TO SEAL

October 20, 2015 by John Pitblado

A reinsurance dispute we have covered previously was voluntarily dismissed shortly after the Western District of Michigan ordered that cedent’s amended motion for partial stay and accompanying memorandum, affidavits, and exhibits be unsealed. Plaintiff/counter-defendant Michigan Millers Mutual Insurance Company (MMMIC), the cedent, had filed its amended motion for partial stay and accompanying documents under seal. When the district court discovered this fact, the court directed MMMIC to “either file with the Court a notice informing the Court of the order authorizing the sealing of it’s [sic] motion and accompanying materials, or file a motion consistent with the provisions of Rule 10.6(b) establishing ‘good cause’ for sealing them.”

In response, MMMIC filed a motion to maintain under seal certain redacted passages in its motion for partial stay and accompanying exhibits. The court denied that motion and ordered the motion for partial stay and accompanying documents to be unsealed because MMMIC failed to establish either a need or good cause to seal these documents. Soon thereafter, the parties voluntarily dismissed the suit.

Michigan Millers Mut’l Ins. Co. v. Westport Ins. Corp., No. 1:14-cv-00151-PLM (USDC W.D. Mich.) (Aug. 21, 2015, denying motion to seal); (Sept. 18, 2015, stipulation of dismissal).

This post written by Whitney Fore, a law clerk at Carlton Fields in Washington, DC.

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SIXTH CIRCUIT HOLDS PIZZA HUT FRANCHISEE WAIVED ARBITRATION RIGHT

October 19, 2015 by John Pitblado

The world’s largest Pizza Hut franchisee, NPC International, Inc. (“NPC”), which operates more than 1200 Pizza Hut restaurants in the United States, was sued in federal district court by employees in five separate collective action lawsuits for alleged unpaid “off the clock” work, meeting, and training time. The district court found that the defendant employer’s litigation actions waived its contractual right to insist on arbitration of employees’ claims for unpaid compensation by failing to assert timely the right. The district court accordingly denied NPC’s motion to compel arbitration in all five cases. NPC appealed.

The Sixth Circuit Court of Appeals affirmed, concluding that NPC had “slept on its rights” by waiting almost fifteen months before raising the arbitration issue in any of the five cases. Further, it was only after NPC obtained unfavorable rulings on its initial dispositive motions that it moved to dismiss or compel arbitration. Finally, NPC’s belated assertion of its right to arbitration caused plaintiffs actual prejudice in the form of unnecessary delay and expense.

Gunn v. NPC Int’l, Inc., Nos. 14-6036/6040/6041/6042/6044 (6th Cir. Aug. 28, 2015).

This post written by Whitney Fore, a law clerk at Carlton Fields in Washington, DC.

See our disclaimer.

FEDERAL COURT ALLOWS SEALING OF A PETITION SEEKING CONFIRMATION OF ARBITRAL AWARD

October 14, 2015 by Carlton Fields

On August 14, 2015, a federal district court in New York entered an order allowing a petition to confirm an arbitration award to be filed in redacted form with the arbitration award to be filed under seal. The case is pending between the Century Indemnity Company and the Global Reinsurance Corporation, U.S. Branch. The underlying arbitral award deals with a reinsurance dispute relating to underlying policies issued by Century to Caterpillar Tractor Company during the late 1960s and early 1970s and claims under the policies for asbestos products personal injury lawsuits. According to Century’s Petition, Century and Global had an agreement that certain arbitration information be kept confidential. The most recent arbitration award confirmation is part of ongoing claims between Century and Global on reinsurance policies to underlying policies to manufacturers such as Caterpillar for ongoing underlying claims, such as the asbestos claims here. We most recently reported on these cases on July 21, 2015. Century Indemnity Co. v. Global Reinsurance Corp. of America, Case No. 15-cv-6426 (USDC S.D.N.Y. Aug. 14, 2015).

This post written by Zach Ludens.

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NINTH CIRCUIT HOLDS THAT STATE DECISION BARRING WAIVER OF REPRESENTATIVE CLAIMS DOES NOT CONFLICT WITH FEDERAL ARBITRATION ACT

October 12, 2015 by Carlton Fields

On June 25, 2012 and July 7, 2014, we reported on the issue of waiver of representative claims under California’s Private Attorneys General Act of 2004 (“PAGA”). In Iskanian v. CLS Transportation of Los Angeles, LLC, the California Supreme Court held that a representative claim under PAGA was not waivable. Following a district court’s dismissal of a claim under PAGA following a motion to compel arbitration, the United States Court of Appeals for the Ninth Circuit was asked to decide whether the California rule from Iskanian was preempted by the Federal Arbitration Act (“FAA”). The Ninth Circuit held that it was not.

The case involved a dispute regarding overtime wages between a former employee and Luxottica Retail North America, Inc. Prior to the California Supreme Court’s holding in Iskanian, Luxottica moved to compel arbitration under a dispute resolution agreement, and the district court agreed, dismissing the case to arbitration. However, in so doing, the district court reached a holding that ultimately was in conflict with Iskanian, which was decided during the pendency of the appeal. Finding that, among other purposes, the purpose of PAGA was to “permit aggrieved employees to act as private attorneys general to collect civil penalties for violations of the Labor Code,” the Ninth Circuit held that the FAA did not preempt the Iskanian rule because its saving clause permits invalidation by “generally applicable contract defenses, such as fraud, duress, or unconscionability,” and that the Iskanian rule was one of those generally applicable contract defenses that may be persevered by the savings clause. The court then found that the Iskanian rule expresses no preference regarding whether such representative claims must be litigated or arbitrated, and, therefore, it did not conflict with the FAA because it did not “conflict with arbitration.” Sakkab v. Luxottica Retail North America, Inc., No. 13-55184 (9th Cir. Sep. 28, 2015).

This post written by Zach Ludens.

See our disclaimer.