Jurisdiction Issues

APPLYING KENTUCKY LAW, SIXTH CIRCUIT FINDS CONTINUED EMPLOYMENT CONSTITUTES ASSENT TO ARBITRATION AGREEMENT

November 28, 2016 by Michael Wolgin

During the time Plaintiffs Aldrich and Nolan worked as recruiters for the University of Phoenix, they allegedly signed an electronic form acknowledging their understanding of updated terms to the employee handbook. The acknowledgment form included an arbitration clause, and the updated employee handbook contained a class action waiver. Thereafter, both Aldrich and Nolan continued to work for the University of Phoenix for almost two years and were eventually let go. They later brought claims for wrongful termination on account of their refusal to engage in allegedly unfair, deceptive, and fraudulent practices related to recruiting veterans and service members. The trial court granted the University of Phoenix’s motion to dismiss and compel arbitration. Although Aldrich and Nolan asserted that they never received or signed the acknowledgement form, the court reasoned that under Kentucky law, continued employment constituted assent to the terms of the agreement. Moreover, the court held that there was no dispute of material fact entitling plaintiffs to a jury trial on the issue of whether they in fact signed, and because the arbitration agreement was valid, the waiver provision was valid as well.

On appeal, Sixth Circuit affirmed, reiterating Kentucky law holding that “an employee can be bound by an arbitration agreement, even without a signature, when he or she demonstrates acceptance of the agreement by continuing to work for the employer.” Aldrich v. University of Phoenix, Inc., Case No. 16-5276 (6th Cir. Oct. 24, 2016).

This post written by Gail Jankowski, a law clerk at Carlton Fields in Washington, DC.

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SUIT AGAINST REINSURER IN CALIFORNIA DISMISSED FOR LACK OF PERSONAL JURISDICTION

November 15, 2016 by Rob DiUbaldo

A federal district court in California recently dismissed a lawsuit brought by a cedent against its reinsurer for lack of a personal jurisdiction, where the reinsurer’s only contacts with the state derived from the fact that the operative reinsurance certificates were entered into with a California company and that it attempted resolve the claims at issue by engaging in certain activities in the state.

The lawsuit centered on certain reinsurance certificates between the American Insurance Company (“TAIC”) and R&Q Re, a Pennsylvania corporation, regarding coverage for underlying asbestos claims implicating certain excess policies reinsured by the certificates. When R&Q declined to pay amounts billed under the certificates based upon insufficient notice, TAIC commenced suit, and R&Q moved to dismiss for lack of jurisdiction.

In dismissing the action, the court found that it lacked both general and specific personal jurisdiction over the dispute. With regard to the former, the court held that it lacked general jurisdiction because R&Q Re is a Pennsylvania corporation, even though it is licensed to do business in California and maintains a registered agent in the state for purposes of service of process. As for the latter, the court found that the fact that the reinsurance certificates were entered into with TAIC, a California company, was insufficient to warrant specific personal jurisdiction. Similarly, R&Q’s contacts with TAIC purely related to its resolution of the subject claims were insufficient, even including a visit to California to conduct an audit where the visit occurred because TAIC refused to send files out-of-state. American Ins. Co. v. R&Q Reinsurance Co., Case No. 16-03044 (USDC N.D. Cal. Oct. 12, 2016).

This post written by Thaddeus Ewald, a law clerk at Carlton Fields in Washington, DC .

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FIFTH CIRCUIT REMANDS TO DETERMINE WHETHER JURISDICTION EXISTED FOR APPEAL OF DENIAL OF MOTION TO COMPEL ARBITRATION

November 8, 2016 by Michael Wolgin

The underlying dispute involved allegations of breach of warranty and deceptive trade practices based on a sale of an allegedly defective car. The Fifth Circuit explained that the FAA, which governed the alleged arbitration agreement in the purchase contact, does not supply jurisdiction in the federal courts, that there was no federal question jurisdiction here, and that there was insufficient information in the record to show that diversity jurisdiction existed. The court ruled: “This Court is not satisfied, based on the record before it, that AutoNation does not share citizenship with the [plaintiffs]. For that reason, we VACATE the district court’s order and REMAND for a determination of subject matter jurisdiction. If diversity is not established, the district court must dismiss the parties’ suit.” Roman v. AutoNation Ford Gulf Freeway, Case No. 16-20047 (5th Cir. Oct. 13, 2016).

This post written by Michael Wolgin.

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NINTH CIRCUIT AFFIRMS DENIAL OF MOTION TO COMPEL ARBITRATION FOR LACK OF FEDERAL JURISDICTION

October 27, 2016 by Rob DiUbaldo

The Ninth Circuit affirmed a district court’s dismissal of a plaintiff’s RICO claim, and thus found the district court lacked independent federal jurisdiction to compel arbitration of the dispute under the Federal Arbitration Act (“FAA”). Specifically, the Ninth Circuit agreed with the district court that the plaintiff failed to properly allege any predicate acts for a cognizable RICO claim against the defendant. As that claim was the plaintiff’s only basis for federal jurisdiction, the court found it lacked jurisdiction to compel arbitration under the FAA, which requires a party so moving to demonstrate that the court has an independent basis for federal jurisdiction.

Estate of Clark v. Horwich, No. 12-17064 (9th Cir. Sept. 23, 2016).

This post written by Thaddeus Ewald, a law clerk at Carlton Fields in Washington, DC .

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THIRD CIRCUIT REJECTS CONTRACTOR’S CHALLENGE TO ARBITRAL JURISDICTION BASED ON FAILURE TO COMPLY WITH AGREEMENT’S PROCEDURAL REQUIREMENTS

October 24, 2016 by Rob DiUbaldo

The Third Circuit affirmed a lower court’s ruling against a contractor challenging an arbitrator’s authority in ordering payment of delinquent contributions to employee benefit funds. Plaintiff (“Nolt”) signed a Project Labor Agreement (“PLA”) for a construction project that required it to hire union employees, but permitted it to hire non-union employees in certain circumstances. The PLA also required Nolt to contribute to employee benefit funds “on behalf of all employees covered by” it. The PLA contained a provision with an exclusive grievance and arbitration procedure for disputes between the parties, which included certain pre-arbitration “meet and confer” requirements and time limits, the failure to comply with which rendered any grievances null and void.

In a dispute over whether Nolt was required to contribute to union employee benefit funds on behalf of its non-union employees, who would not benefit from the funds, an arbitrator interpreted the plain language of the PLA to require contributions for “all employees covered” by the PLA and ordered payment of $492,000 in delinquent contributions. Nolt moved to vacate the arbitration award on the grounds that the arbitrator lacked jurisdiction and that the award violated public policy and other relevant wage laws.

The Third Circuit, noting the limited role of courts in reviewing arbitration awards, affirmed the award based on a finding of arbitral jurisdiction and lack of sufficient conflict with a cognizable public policy. The court found that Nolt’s argument claiming the union failed to comply with the PLA’s procedural requirements was a question of “procedural arbitrability” that was appropriately left to the arbitrator, rather than one of “substantive arbitrability” that would be appropriate for judicial resolution. The court also rejected Nolt’s claim that the award conflicted with public policy by forcing it to essentially pay twice, first to the union employee benefit fund and second via its obligations under applicable wage laws. Nolt failed to identify any “explicit conflict with other ‘laws and legal precedents’,” and, instead, relied on a non-cognizable “general interest in fairness and equal treatment” between union and non-union employers. The court deferred to the arbitrator’s interpretation of the PLA as contract interpretation within his authority and affirmed despite recognizing Nolt’s persuasive arguments that the award forced Nolt to pay an unfair price for its non-union employees.

D.A. Nolt, Inc. v. Local Union No. 30 United Union of Roofers, Waterproofers & Allied Workers, No. 15-3697 (3d Cir. Sept. 23, 2016).

This post written by Thaddeus Ewald, a law clerk at Carlton Fields in Washington, DC .

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