Contract Interpretation

Linda Anderson sued Sarah Boyle alleging that Boyle breached her duties as trustee of an irrevocable trust to which Anderson and Boyle were beneficiaries. Boyle moved to compel arbitration, citing an arbitration clause in the trust. The lower court denied the motion and Boyle appealed.

The Virginia Supreme Court granted the appeal solely to decide whether the Virginia Uniform Arbitration Act (VUAA) or the Federal Arbitration Act (FAA), each of which requires arbitration for “contracts,” compels enforcement of an arbitration provision in a trust. The court explained that a trust is, in general, a “donative instrument,” not an “agreement between two or more persons which creates an obligation to do or not to do a particular thing.” As such, the court held that a trust is not a “contract,” as required to fall within the ambit of both the VUAA and the FAA. While the VUAA also compels arbitration for certain “written agreements,” the court disagreed with Boyle that a trust qualifies as an “agreement.” Further, even if it did, the court noted that an arbitration clause would not be enforceable under the VUAA as it relates to claims between a trustee and a beneficiary, the latter of whom is not a party to any “written agreement to submit any existing controversy to arbitration.” The court therefore affirmed the lower court order denying Boyle’s motion, agreeing that neither the VUAA nor the FAA compels arbitration.

Boyle v. Anderson, No. 210382 (Va. Apr. 14, 2022).

On March 23, 2022, a New York federal court confirmed an award in an arbitration before a tribunal of the International Chamber of Commerce (ICC) between Olin Holdings Ltd. and the state of Libya under a bilateral investment treaty. In the underlying ICC arbitration, Olin claimed that the Libyan government obstructed the operation of, and ultimately expropriated, Olin’s dairy factory in Libya’s capital city Tripoli in violation of the bilateral investment treaty between Libya and Cyprus, where Olin was formed. Olin sought $147,882,000 as compensation for the damages it allegedly incurred as a result.

In June 2016, the ICC tribunal issued a jurisdictional award, concluding that the bilateral investment treaty included an agreement to arbitrate the dispute and that Olin’s prior lawsuits against Libya in Libyan court did not preclude Olin from invoking the arbitration clause. The tribunal held an evidentiary hearing on the merits and issued a final award awarding Olin €18,225,000 in damages; $773,000 for the costs of arbitration; and €1,069,687.70 for general legal costs and expenses, plus simple interest at a rate of 5% per annum from the date of the final award.

Olin petitioned to confirm the final award in New York state court, and Libya removed the petition to federal court. Noting that courts are required to review arbitrators’ decisions “with considerable deference” if the record supplies “clear and unmistakable evidence” that the parties agreed to submit a given issue to arbitration, the court concluded that the terms of reference agreement entered into by the parties at the outset of the ICC arbitration constituted such clear and unmistakable evidence of the parties’ intent to arbitrate with respect to both arbitrability and the substantive issues in the dispute, indicating that deferential review was warranted.

The court noted that under this deferential standard, if the arbitrators “explain their conclusions in terms that offer even a barely colorable justification for the outcome reached, confirmation of the award cannot be prevented by litigants who merely argue, however persuasively, for a different result.” The court further noted that under the New York Convention, the court was required to confirm the final award unless it finds one of the seven grounds for refusal or deferral of recognition or enforcement of the award specified in the Convention. In finding that the ICC tribunal presented more than a “barely colorable justification” for the final award, the court noted that the final award was 143 pages long, and thoughtfully and thoroughly considered and rejected each of Libya’s defenses to Olin’s claims. The court further considered each of the seven enumerated grounds for refusing to confirm an award under the Convention and found that none of those grounds had been met. As a result, the court granted Olin’s motion to confirm the final award. The court separately denied Libya’s motion to dismiss the petition on forum non conveniens grounds, finding that Libya failed to meet its burden to establish any of the factors that would support dismissal of the action in favor of a foreign jurisdiction.

Olin Holdings Ltd. v. State of Libya, No. 1:21-cv-04150 (S.D.N.Y. Mar. 23, 2022).

The Tenth Circuit Court of Appeals recently concluded that whether an arbitration agreement could be enforced against a non-signatory who was allegedly a third-party beneficiary of the arbitration agreement was for the arbitrator, not the court, to determine where the arbitration provisions contained delegation language that the alleged beneficiary did not specifically challenge.

Ladonna Kay Rainwater was a patient at Casa Arena Blanca Nursing Center. Rainwater’s daughter Melanie Burris signed an admission agreement and a dispute resolution agreement that contained an arbitration clause as part of Rainwater’s admission to Casa Arena. The agreement provided that it was “between Kay Rainwater (‘Resident’) and/or Melanie Burris (‘Representative’), and Casa Arena Blanca (‘Facility’)” and further provided that Rainwater was a “third-party beneficiary of the agreement.” The agreement also included a “delegation clause” and incorporated JAMS rules, including JAMS rules regarding delegation.

After Rainwater passed away, her estate filed a wrongful death lawsuit alleging that Casa Arena failed to care for Rainwater properly. Casa Arena moved to compel arbitration. The district court denied Casa Arena’s motion and Casa Arena appealed.

The Tenth Circuit reversed and remanded. The court explained that there was no dispute that a contract had been formed, that the contract contained an arbitration clause, or that the arbitration clause included a delegation clause. The dispute was whether the arbitration clause should be enforced against Rainwater’s estate as a third-party beneficiary of the agreement.

That issue, the Tenth Circuit explained, was for the arbitrator in light of the delegation clause and the fact that Rainwater’s estate had not specifically challenged the delegation clause (and instead had generally asserted its arguments regarding enforceability as to the estate).

Casa Arena Blanca LLC v. Rainwater, No. 21-2037 (10th Cir. Mar. 22, 2022).

Defendants appealed a California federal district court order denying their motion to compel arbitration of the plaintiff’s claims for trade secret misappropriation, common law misappropriation, and unfair competition. The issue was whether the plaintiff could be equitably compelled to arbitrate, despite there being no contract in which it agreed to do so. The Ninth Circuit held there was no basis for compelling arbitration. The court noted that under California law, a non-signatory to an arbitration agreement may be compelled to arbitrate under two circumstances: (i) if its claims are “dependent, on or inextricably intertwined” with the underlying contractual obligations of the agreement containing the arbitration clause; or (ii) if it receives a “direct benefit” from the contract containing the arbitration clause. Agreeing that neither circumstance was present here, the court affirmed the district court order denying the defendants’ motion to compel.

Thrasio, LLC v. Boosted Commerce, Inc., No. 21-55621 (9th Cir. Mar. 18, 2022).