Jurisdiction Issues

FEDERAL COURT REMANDS ACTION TO CONFIRM ARBITRATION AWARD: NO SUBJECT MATTER JURISDICTION

October 9, 2014 by Carlton Fields

A federal court in California recently rejected efforts to remove a state court arbitration confirmation proceeding to federal court. The underlying royalties dispute had been addressed in an arbitration, and ultimately the dispute arrived in California state court in a proceeding to confirm the arbitration award. The defendant opposed the petition for confirmation and filed a separate petition to vacate or modify the award. That pleading included a count for “Declaratory Judgment for No Liability under Federal Patent Laws.” Based on the assertion of federal relief in its own petition, the defendant filed a notice of removal. The federal court rejected the defendant’s assertion of jurisdiction and remanded the case back to state court. The court concluded that there was no subject matter jurisdiction — despite the patent-related request for relief — due to the limited nature of the proceedings before the state court. The court determined that the declaratory judgment count did not belong in the state court action in the first place, and it ruled that issues of patent law need not be decided to resolve the limited issues presented in the case. In sum, the court refused to allow the defendant “to create jurisdiction where none can possibly exist in order to bring a properly-situated case before a new forum.”

Amkor Tech., Inc. v. Tessera, Inc., 5:14-CV-03604 EJD, 2014 WL 4467715 (USDC N.D. Cal. Sept. 9, 2014).

This post written by Catherine Acree.

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TENTH CIRCUIT REVERSES TRIAL COURT DENIAL OF MOTION TO COMPEL ARBITRATION OF WAGE DISPUTE

September 24, 2014 by Carlton Fields

The Tenth Circuit Court of Appeals reversed a trial court order denying an employer’s motion to compel arbitration of a wage dispute under the arbitration clause contained in the plaintiffs’ Confidentiality/Non-Compete Agreement. The plaintiff employees brought suit against their employer, an oil-rig servicer, under the Fair Labor Standards Act and Oklahoma Protection of Labor Act. The employer moved to compel arbitration under a provision in the parties’ non-compete agreements. The plaintiffs argued – successfully to the trial court – that the wage disputes did not come within the purview of the arbitration provision, which, although in an agreement that related mostly to non-compete and confidentiality issues, nevertheless contained a broad clause mandating arbitration of “any dispute.” The Tenth Circuit noted that, while the scope of the parties’ contract was narrow, the scope of the arbitration provision was broad, and that, under the Supreme Court’s decision in AT&T Mobility LLC v. Concepcion, and the broad federal policy favoring arbitration embodied in the FAA, it was constrained to enforce the agreement. It remanded with instructions to compel arbitration. Sanchez v. Nitro-Lift Technologies, LLC, Nos. 12-7046 and 12-7057 (10th Cir. Aug. 8, 2014).

This post written by John Pitblado.

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FIFTH CIRCUIT HOLDS ORDER REMANDING CASE BACK TO ARBITRATORS FOR CLARIFICATION IS NON-FINAL AND NON-APPEALABLE

August 18, 2014 by Carlton Fields

The appeal arose from a lawsuit to clarify an arbitration award concerning an alleged breach of a corporate merger agreement containing a binding arbitration clause. The federal district court found the arbitration panel had exceeded its authority under that arbitration clause by failing to provide sufficient findings of fact and conclusions of law regarding a damages claim. The district court therefore remanded the case back to the panel for consideration of that issue and clarification of the award. On appeal, the Fifth Circuit held that because the district court neither confirmed nor vacated the award, the order was not final, a point on which the dissent strongly disagreed, and it therefore did not have appellate jurisdiction over the order. The court further reasoned that it was necessary to decline jurisdiction to avoid generating piecemeal appeals and in light of the court’s deferential standard of review of arbitration awards. Murchison Capital Partners, L.P., et al. v. Nuance Communications, Inc., No. 13-10852 (5th Cir. July 25, 2014).

This post written by Renee Schimkat.

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FEDERAL DISTRICT COURT UPHOLDS FOREIGN REINSURER’S RIGHT TO REMOVE ACTION TO FEDERAL COURT

July 28, 2014 by Carlton Fields

The Court for the Middle District of Louisiana upheld a magistrate’s ruling denying a motion to remand filed by the Louisiana Commerce and Trade Association of Self Insurer’s Fund (“LCTA”), holding that the defendant foreign reinsurers (“Reinsurers”) properly removed the state court action under the Convention of the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”) which Congress implemented under the Convention Act, 9 U.S.C. §§201-208. In so holding, the Court first found it had subject matter jurisdiction under the Convention Act and rejected LTCA’s argument that, because the issue of arbitrability was not raised below, the state court action did not “relate to” an arbitration as required by the New York Convention. Noting the extraordinary breadth of the New York Convention, the Court found that because LTCA’s claim against the Reinsurers arose under the Reinsurance Contract which included an arbitration clause, the state court action thus related to the arbitration clause. The Court also noted that a party is not required to first move to compel arbitration before it is permitted to remove the action and, in any case, the Reinsurers in this case had advised the state court that they intended to remove the action.

The Court then turned to LTCA’s contractual argument that the Reinsurers waived their right to remove under the Service-of-Suit Clause in the Reinsurance Contract. In this case, the Service-of-Suit clause provided that the Reinsurers agreed to submit to the jurisdiction of a court of competent jurisdiction within the United States in the event they failed to pay any amount claimed under the Reinsurance Contract. The Service-of-Suit Clause, however, further provided that nothing contained in that provision constituted a waiver of the Reinsurer’s right to remove the action to a United States District Court. The Court found that this provision was not an explicit, clear, and unequivocal waiver of the right to remove, as required under applicable law, and further found it expressly and sufficiently reserved the Reinsurer’s right to removal. Louisiana Commerce and Trade Association Self-Insurers Fund v. Certain Underwriters at Lloyd’s London Subscribing to Contract Number A1430B600/A2430B600, No 13-700-JJB-RLB (M.D. La. July 15, 2014), affirming and adopting Magistrate Judge’s Report and Recommendations dated May 6, 2014.

This post written by Leonor Lagomasino.

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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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