Confirmation / Vacation of Arbitration Awards

SECOND CIRCUIT REVERSES DISTRICT COURT ON APPLICATION OF STOLT-NIELSEN

July 11, 2011 by Carlton Fields

Recently, a group of retail sales employees appealed to the Second Circuit an order vacating an arbitration award on the ground that the arbitrator had exceeded her authority in light of the Supreme Court’s decision in Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758 (2010). The Second Circuit reversed the judgment of the district court, concluding that the district court simply substituted its own interpretation of the parties’ arbitration agreement rather than examining whether the arbitrator had exceeded her authority under Supreme Court precedent. The Second Circuit explained that the district court failed to undertake the appropriate inquiry – whether the arbitrator had the authority to reach the issue at all, not whether the arbitrator decided the issue correctly. The Court noted that the district court had concluded that under Stolt-Nielsen, the arbitrator had improperly ruled that the parties’ arbitration agreement did not prohibit class arbitration. Because this analysis failed to consider the pertinent issue (as noted above), the Second Circuit reversed the judgment of the district court vacating the award and remanded the case with instruction to confirm the award. Jock v. Sterling Jewelers, Inc., No. 10-3247 (2d Cir. July 1, 2011).

This post written by John Black.

COURT CONFIRMS ARBITRATION AWARD, DESPITE AFFORDING LENIENCY TO PRO SE PARTY

July 7, 2011 by Carlton Fields

A somewhat exasperated-sounding opinion from a federal court in Maryland addressed a litany of allegations and procedural issues raised by a pro se defendant’s motion to dismiss the action seeking confirmation of an arbitration award, as well as a motion to continue the case, based on the defendant’s medical condition. While according the pro se defendant “leniency” in addressing a number of procedural defects, the court nevertheless found that the defendant failed in his various pleadings to meet the high standards for vacating an arbitration award under the FAA. The court also found that no continuance based on the defendant’s medical condition was necessary because the court had sufficient information to rule on the various motions. The court denied the defendant’s motion to dismiss, denied his motion to continue, and granted the petitioner’s motion for entry of a confirmation order. Colonna v. Hanners, Case No. 10-1899 (USDC S.D. Md. June 1, 2011).

This post written by John Pitblado.

“MANIFEST DISREGARD OF THE LAW” ALIVE AND WELL IN THE NINTH CIRCUIT

June 30, 2011 by Carlton Fields

A court in the Ninth Circuit recently considered whether an arbitration award in an employment dispute was a “manifest disregard of the law” under the Federal Arbitration Act. The case stemmed from the employer’s termination of its CEO under an employment agreement that deemed a termination “for cause” if the officer committed a “willful” illegal act. After the CEO was indicted for securities fraud and pleaded guilty to “willfully” making false and misleading statements in connection with the same conduct that led to his termination, the employer argued that the CEO made a “judicial admission” that precluded him from disputing that his conduct was “willful.” The arbitrator, however, disagreed and found that “willful” meant “something different in the context of a securities fraud violation as opposed to under the Agreement.” The court found no “manifest disregard” in the arbitrator’s determination, finding that the decision was “a reasonable construction” of the law and was “not clearly irrational.” Electro Scientific Industries, Inc. v. Dooley, Case No. 10-CV-1564 (USDC D. Or. May 17, 2011).

This post written by Michael Wolgin.

EIGHTH CIRCUIT AFFIRMS ARBITRATION DECISION AGAINST ILLINOIS FARMERS INSURANCE

June 29, 2011 by Carlton Fields

Recently, the Eighth Circuit Court of Appeals filed its opinion ruling on an appeal from the District Court’s orders dismissing Farmers’s counterclaim that Alpine Glass violated Minnesota’s anti-incentive statute, granting summary judgment in favor of Alpine on a breach of contract issue, and denying Farmers’s motion to vacate an arbitration award. The Eighth Circuit affirmed, finding that Alpine Glass did not violate the anti-incentive statute by charging a contingent price, and that the breach of contract issue was improperly framed by Farmers as a breach of a unilateral contract. Finally, the Court affirmed the District Court’s denial of Farmers’s motion to vacate the arbitration award concluding that the arbitrator applied the correct standard to the issue under the pertinent Minnesota statute. The Court upheld the arbitrator’s conclusion that Farmers failed to pay the competitive price. Alpine Glass, Inc. v. Illinois Famers Ins. Co., No. 10-1689 (8th Cir. June 17, 2011).

This post written by John Black.

PLAINTIFF SUES ARBITRATOR, AAA FOR DUE PROCESS VIOLATIONS

June 28, 2011 by Carlton Fields

The present action before the US District Court in Nevada arose from a dispute between Dr. Ronald Slaughter and Laboratory Medicine Consultants regarding a stockholder agreement. A state district judge ordered the parties to arbitrate claims. A state court compelled the parties to arbitrate their disputes. Slaughter subsequently submitted an arbitration demand against LMC in September, 2007, after which he then tried to disqualify arbitrator Howard Roitman (which was denied). While arbitration was proceeding, Slaughter filed a suit in the Nevada federal court seeking to litigate issues encompassed by the arbitration. Slaughter then sought a stay of the arbitrtation pending litigation, but the Court denied the stay and dismissed the federal case in its entirety. Undeterred, Slaughter then filed another suit in federal court, this time against the AAA, Arbitrator Roitman, and two employees of the AAA alleging that his due process rights were violated during the underlying arbitration proceedings. Meanwhile, the arbitration continued, with rulings adverse to Slaughter. Defendants moved to dismiss the action, stating that they had immunity pursuant to N.R.S. § 38.229 for their conduct in administering arbitration proceedings and that the federal case was an impermissible collateral attack on the underlying arbitration. The Court agreed and dismissed the motion, specifically finding that Nevada’s Uniform Arbitration Act (cited above) protected the defendants against the suit. Further, the Court found that Slaughter’s action was an attack on the arbitration award and that his only relief would be to pursue vacatur of the award under the Federal and Nevada Arbitration Acts. Accordingly, the federal action was dismissed in its entirety. Slaughter v. American Arb. Assoc., Case No. 10-01437 (USDC D. Nev. June 2, 2011).

This post written by John Black.