Arbitration Process Issues

ELEVENTH CIRCUIT ENFORCES CLASS ARBITRATION WAIVER

July 2, 2014 by Carlton Fields

The Eleventh Circuit affirmed a ruling compelling arbitration of an employment dispute. Plaintiff employees brought a putative collective action suit against the defendant, a windshield repair company, pursuant to the Fair Labor Standards Act (“FLSA”), alleging wage violations. The employer moved to compel individual arbitration pursuant to the terms of the parties’ individual arbitration agreements. The district court granted the motion and plaintiffs appealed, arguing that the FLSA’s statutory right to bring a collective action is substantive and cannot be abrogated by agreement or superseded by the Federal Arbitration Act (“FAA”). The Eleventh Circuit disagreed, finding that, absent explicit congressional intent otherwise in the terms of the FLSA, the FAA requires enforcement of arbitration provisions, and allows for parties to waive their right to class or collective action. Walthour v. Chipio Windshield Repair, LLC, No. 13-11309 (11th Cir. March 21, 2014).

This post written by John Pitblado.

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ARBITRATION PROCEDURE UNCONSCIONABILITY ROUNDUP

June 30, 2014 by Carlton Fields

Basulto v. Hialeah Automotive, Case No. SC09-2358 (Fla. March 20, 2014) (reversing intermediate appellate court’s ruling compelling arbitration on monetary relief claims; intermediate court failed to limit its review to whether a valid arbitration agreement existed; no valid agreement due to substantive and procedural unconscionability);

Crawford Professional Drugs, Inc. v. CVS Caremark Corp., Case No. 12-60922 (5th Cir. April 4, 2014) (affirming order compelling arbitration, notwithstanding argument by non-signatories that they were not subject to the arbitration clause; state law may allow an arbitration contract to be enforced by or against nonparties to the contract through state-contract-law theories, including equitable estoppel);

Sanchez v. Carmax Auto Superstores California, LLC, Case No. B244772 (Cal. Ct. App. Feb. 6, 2014) (reversing order denying motion to compel arbitration; arbitration agreement was not illusory, nor unenforceable for procedural unconscionability merely because it was an adhesion contract; arbitration agreement was not substantively unconscionable in that it had bi-lateral application, it did not overly limit discovery, and arbitration rules and procedures were not unfair);

Caplin Enterprises, Inc. v. Arrington, Case No. 2011-CT-01332-SCT (Miss. May 8, 2014) (reversing intermediate appellate court’s ruling that certain arbitration agreements were enforceable; all agreements were contracts of adhesion and so one-sided in their terms as to meet the standard for substantive unconscionability);

Tiri v. Lucky Chances, Inc., Case No. A136675 (Cal. Ct. App. May 15, 2014) (reversing denial of petition to compel arbitration based on trial court’s finding of unconscionability; trial court lacked authority to rule on enforceability of the arbitration agreement where the parties delegated such authority to the arbitrator).

This post written by Michael Wolgin.

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SIGNATORIES AND NON-SIGNATORIES DENIED MOTIONS TO COMPEL ARBITRATION

June 26, 2014 by Carlton Fields

The Tenth Circuit Court of Appeals and a federal district court in Michigan have each issued opinions on motions to compel arbitration. In the Michigan opinion, the court granted a motion for summary judgment, in favor of the defendant, Consolidated Insurance Company, and denied the plaintiff’s motion to compel arbitration. The plaintiff, the representative of the decedent’s estate, sought to recover uninsured motorist benefits under a commercial vehicle policy issued to decedent’s employer. Prior negotiations between the parties resulted in a written agreement to arbitrate the matter. Before arbitration commenced, the defendants canceled the process, arguing that the issue was not arbitral. The defendant’s cancellation was deemed valid based on intervening caselaw holding that coverage did not extend to individuals injured while outside a vehicle. Since the decedent was outside of his truck at the time he was killed, the issue of coverage could not be arbitrated. Johnston v. Indiana Insurance Co., Case No. 13-10797 (USDC E.D. Mich. Feb 11, 2014).

The Tenth Circuit Court of Appeals affirmed a district court’s denial to compel arbitration, finding that since none of the defendant board members signed an agreement with an arbitration clause, they could not be compelled to arbitrate. The court further held that the plaintiff’s alternative legal theories to compel arbitration were forfeited or waived. Genberg v. Porter, No. 13-1140 (10th Cir. May 12, 2014).

This post written by Rollie Goss.

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APPELLATE COURTS ADDRESS JURISDICTION TO HEAR DISPUTES CONCERNING ARBITRATION

June 18, 2014 by Carlton Fields

Establishing that a federal court has jurisdiction to hear an arbitration dispute is not always easy. The Fourth Circuit recently affirmed the dismissal of an action seeking to vacate an arbitration award based upon lack of subject matter jurisdiction. Plaintiff attempted to show that the nexus between her claims and “commerce” fell within the realm of the FAA, and therefore there was a federal question under §1331. However, she failed to raise that argument below, so it was not properly before the court of appeal, and the Court found it to be unavailing in any event. Ball v. Stylecraft Homes, LLC, No. 13-1946 (4th Cir. Mar. 26, 2014)

The Eleventh Circuit affirmed the denial of a motion to remand for lack of jurisdiction. The issue was whether diversity jurisdiction was defeated because the action was a direct action against an insurer, defeating diversity jurisdiction under 28 U.S.C. §1332(c). The Court held that it was not a direct action, and affirmed the district court’s order compelling arbitration. Kong v. Allied Professional Insurance Company, No. 13-12305 (11th Cir. May 9, 2014)

This post written by Rollie Goss.

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ARBITRATION ROUND-UP – EXISTENCE OR VALIDITY OF AGREEMENT TO ARBITRATE

June 12, 2014 by Carlton Fields

The following recent cases analyzed whether the parties entered into a valid agreement to arbitrate and under what circumstances a court may consider that issue.

Dasher v. RBC Bank (U.S.A.), No. 13-10257 (11th Cir. Feb. 10, 2014) (affirming denial of motion to compel arbitration, finding absence of arbitration provision in agreement which superseded prior agreement, which included an arbitration provision, provided no evidence of the parties’ intent to arbitrate)

JP Morgan Chase Bank N.A. v. Bluegrass Powerboats, No. 2011-SC-000668-DG (Ky. Mar. 20, 2014) (affirming trial court’s order setting aside order compelling arbitration after the arbitrator had rendered a dispositive order, finding that because the arbitrator’s decision was not final, and because the evidence did not support the existence of an agreement to arbitrate, the trial court had the power to correct its prior erroneous ruling)

The Flowserve Corp. v. United States Fire Insurance Co., Case No. 2:14-cv-00676 (USDC D. N.J. May 7, 2014) (granting defendant’s motion to compel arbitration, finding that parties’ side agreement, which did not include an arbitration clause and which modified certain terms of the underlying settlement agreement which did include an arbitration clause, evidenced the parties’ agreement to arbitrate where side agreement provided that, except to the extent it modified the terms of the settlement agreement, all terms of the settlement agreement remained binding upon the parties)

Lakah v. UBS A.G., Case No. 1:07-cv-02799-MGC (USDC S.D.N.Y. March 20, 2014) (denying “what amounts to a summary judgment motion” that plaintiffs should be compelled to arbitrate on the basis of veil piercing and estoppels theories because there were issues of fact as to the making of the agreement for arbitration)

Bank of the Ozarks, Inc. v. Walker, 201 Ark. 223 (2014) (vacating appellate court’s reversal of trial court’s order denying motion to compel arbitration, and remanding matter to trial court, finding that trial court, which ruled that arbitration clause was unconscionable, must first determine whether a valid arbitration agreement existed and, if so, whether the dispute fell within the scope of the agreement)

This post written by Leonor Lagomasino.

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