Jurisdiction Issues

Supreme Court of Idaho Finds That District Court Had Jurisdiction to Determine Enforceablity of Non-Compete Provision in Employment Agreement, Which Included a Mandatory Arbitration Provision

December 14, 2022 by Kenneth Cesta

In Blaskiewicz v. Spine Institute of Idaho, P.A., after being terminated with less than one year of employment, Donald Blaskiewicz, “a highly-trained neurosurgeon” filed a complaint for declaratory judgment in the state district court of Idaho to determine the enforceability of a Professional Services Agreement with his former employer, the Spine Institute of Idaho. The PSA contained a noncompete clause that “contractually proscribed Blaskiewicz from practicing medicine within fifty miles of the Spine Institute’s office (with an explicit exception for Caldwell) for a period of eighteen months, should his employment with the Spine Institute be terminated for any reason.” The PSA also included an arbitration clause, which required that “‘any dispute arising out of or related to [the PSA] be settled by arbitration in Ada County, Idaho.’”

The Spine Institute moved to dismiss, or in the alternative, to stay the proceedings, arguing that “the sole way … to challenge the noncompete provision was through arbitration and, as such, the district court was without jurisdiction to consider Blaskiewicz’s complaint.” Significantly, the Spine Institute “did not seek an order compelling arbitration, apparently because Blaskiewicz had not breached the PSA.” The district court denied the Spine Institute’s motion, concluding that it had jurisdiction over the matter. Thereafter, the district court granted Blaskiewicz’s motion for summary judgment, finding that the noncompete provision in the PSA was void as against public policy, and awarded attorney’s fees in favor of Blaskiewicz.

The Supreme Court of Idaho vacated the district court’s grant of summary judgment and remanded the case for further proceedings. First, the court addressed whether the appeal was moot, since the 18-month noncompete period had expired and Blaskiewicz did not accept employment during that time. The court concluded that the appeal was not moot since the district court had awarded attorney’s fees to Blaskiewicz, and “if we were to conclude the district court erred in granting summary judgment (as we do below) … this case presents a real and substantial controversy.” Second, the court held that “the district court had jurisdiction to determine whether the noncompete provision was enforceable,” and that while the Spine Institute moved to dismiss the case or stay the proceedings, they did not file a demand for arbitration and “cannot now complain that this controversy should have been arbitrated.” Third, the court found that the district court erred in granting summary judgment in favor of Blaskiewicz, concluding that “there are genuine issues of material fact such that summary judgment was inappropriate as to whether the noncompete provision was void as a matter of public policy or otherwise enforceable.” Finally, the court vacated the district court’s award of attorney’s fees since Blaskiewicz was no longer the prevailing party, and remanded the case for further proceedings.

Blaskiewicz v. Spine Institute of Idaho, P.A., Docket No. 48785 (Supreme Court of Idaho, Oct. 31, 2022)

Second Circuit Holds That Summons Is Not Required When Seeking Confirmation of Foreign Arbitral Award Against Foreign Instrumentalities

November 4, 2022 by Brendan Gooley

The Second Circuit Court of Appeals recently held that a summons is not required to initiate proceedings to compel a foreign arbitration award against a foreign instrumentality. The court also confirmed the arbitration award at issue but vacated the district court’s award of additional fees because the losing party’s arguments did not amount to bad faith or vexatious arguments.

CVG Ferrominera Orinoco, C.A. is a Venezuelan company that produces and exports iron ore. Commodities & Minerals Enterprise Ltd. (CME) is a British Virgin Islands company that trades commodities and minerals, including iron ore. CME and Ferrominera executed a contract for a ship named the General Piar to transport Ferrominera-owned iron ore to an offshore transfer station where CME would then ship it onward. The contract specified U.S. law as the choice of law and contained a broad arbitration clause.

CME commenced arbitration for unpaid invoices, lost profits, and attorneys’ fees. The arbitration panel rejected jurisdictional, fraud/corruption, and other defenses from Ferrominera and entered an award in favor of CME. CME moved to confirm that award. The U.S. District Court for the Southern District of New York confirmed the award and awarded costs and fees.

The Second Circuit affirmed, except with respect to the district court’s fee award.

First, the Second Circuit rejected Ferrominera’s argument that the district court lacked personal jurisdiction because CME had not served a summons when it initiated its action to confirm. The Second Circuit held that “a summons is not required to properly effect service when seeking confirmation of a foreign arbitral award against a foreign instrumentality” because the Federal Arbitration Act does not require a summons and the FAA’s references to the Foreign Sovereign Immunities Act, which Ferrominera relied on, were only to fill gaps in the FAA regarding the manner of serving documents.

Second, the Second Circuit disagreed with Ferrominera’s arguments that the agreement was invalid under Venezuelan law because the proper Venezuelan officials had not signed off on it, that, even if valid, the arbitrators had exceeded their authority by refusing to allow Ferrominera to allocate payments between various agreements with CME as it wished, and that the award violated U.S. public policy. The agreement contained a U.S. choice-of-law provision, which rendered Ferrominera’s reliance on Venezuelan law regarding who must approve agreements meritless. The allocation argument was merely a damages argument, and damages were for the arbitrators to determine. Ferrominera’s public policy argument meanwhile relied on a claim that the agreement was obtained through “corruption,” but that did not challenge the award, and the FAA’s narrow public policy exception concerned whether the award offended public policy.

Third, the Second Circuit agreed with Ferrominera that the district court erred by awarding further fees. Although the district court had inherent authority to award fees for bad faith, vexatious, etc., arguments, Ferrominera’s arguments did not meet that standard. The summons issue, for example, was an issue of first impression for the Second Circuit that Ferrominera had prevailed on in other courts. The Second Circuit vacated the additional fees.

Commodities & Minerals Enterprise Ltd. v. CVG Ferrominera Orinoco, C.A., No. 20-4248 (2d Cir. Oct. 3, 2022).

Fourth Circuit Dismisses Petition Brought by NLRB to Enforce Settlement and Order

October 5, 2022 by Kenneth Cesta

Concluding that the action before it “lacks adverseness” and did not present a case or controversy fit for judicial resolution, the Fourth Circuit Court of Appeals held that it did not have jurisdiction over the National Labor Relations Board’s petition to enforce a settlement and order to which the employer had consented, and dismissed the petition.

Respondent Constellium Rolled Products employs members of a local United Steelworkers union. After a labor dispute, the union filed four charges with the NLRB alleging that Constellium committed unfair labor practices. The union requested information from Constellium that it believed would be relevant to collective bargaining. The union alleged that Constellium refused to provide the requested information, and “[b]elieving the allegations had merit,” the NLRB issued an agency complaint against Constellium. Rather than proceed through agency adjudication, the union and Constellium entered into a formal settlement stipulation, which provided that the stipulation was not effective until the NLRB had approved it and that upon entry of an NLRB order, Constellium would immediately comply with the terms of the order. Constellium also agreed in the stipulation that when the NLRB sought a judgment in federal court to enforce the order, “Constellium would waive all defenses and consent to the entry of that judgment.”

The NLRB approved the stipulation, issued an order reflecting the terms, and then petitioned the court under 29 U.S.C. §160(e) to enter a consent judgment against Constellium reflecting the terms of the order. The Fourth Circuit dismissed the petition holding that “[b]ecause this suit lacks adverseness, we lack jurisdiction.” In considering the jurisdictional issue, the Fourth Circuit noted the Supreme Court’s decision in United States v. Windsor, 570 U.S. 744 (2013), which reaffirmed that Article III requires “sufficient adverseness” to confer an adequate basis for jurisdiction. The court further noted that “[a]dverse interests — that minimum adverseness threshold required by Windsor — exist only when judicial action would have ‘real-world consequences’ and ‘real meaning’ for the parties.” The court noted that the NLRB “agrees that Constellium has complied with the order and continues to do so” and found that while there was adverseness between the NLRB and Constellium at some point when the matter was before the board, “that adverseness was extinguished before the case got to federal court” and dismissed the petition.

National Labor Relations Board v. Constellium Rolled Products Ravenswood, LLC, No. 20-2140 (4th Cir. Aug. 5, 2022).

Second Circuit Concludes That Nigerian Ruling on Enforcement of Arbitration Award Is Entitled to Comity

August 10, 2022 by Brendan Gooley

The Second Circuit Court of Appeals recently partially refused to enforce a foreign arbitration award on the ground that it was required to give comity to a foreign court decision concerning that award.

Esso Exploration and Production Nigeria Ltd. entered into a contractual agreement with the Nigerian government to develop Nigerian oil fields. The agreement provided that the Nigerian National Petroleum Corp. (NNPC) was entitled to obtain (“lift”) portions of the extracted oil. The agreement also included an arbitration clause requiring arbitration in Nigeria.

A dispute arose regarding whether NNPC was “lifting” more than it was allowed. Esso and NNPC arbitrated that issue in Nigeria and the arbitration panel awarded Esso approximately $1.8 billion plus interest. NNPC challenged that award in Nigerian courts. A Nigerian court set aside part of the award. Esso meanwhile petitioned the U.S. District Court for the Southern District of New York to confirm its arbitration award in full. The district court denied Esso’s petition in full, concluding that it was required to give comity to the Nigerian court decision.

The Second Circuit affirmed in part. It agreed that the district court was required to give comity to the Nigerian court’s decision but noted that the Nigerian court had only set aside the arbitration award in part. There was therefore nothing preventing U.S. courts from enforcing the aspect of the award that Nigerian courts had not vacated.

Esso Exploration & Production Nigeria Ltd. v. Nigerian National Petroleum Corp., No. 19-3159 (2d Cir. July 8, 2022)

Fifth Circuit Dismisses Appeal of Order Denying Motion to Reopen Case, Sever Cost-Splitting Provision, and Impose Costs of Arbitration on Appellee

March 3, 2022 by Michael Wolgin

The underlying dispute related to a property manager’s limitation of the appellant, Jane Doe, to one pet in her apartment. Doe sued the manager for declaratory relief, injunctive relief, monetary damages, and punitive damages under the Fair Housing Act and the Louisiana Equal Housing Opportunity Act. Doe moved for a preliminary injunction, and the property manager moved to compel arbitration and stay the case pursuant to the lease’s arbitration clause. Doe responded, in relevant part, by arguing that the court should sever the arbitration clause’s cost-splitting provision and require the property manager to pay Doe’s share of the arbitration costs.

The district court granted the motion to compel arbitration, holding that Doe was bound by the arbitration clause. It also declined to rule on Doe’s motion for a preliminary injunction and denied Doe’s request to sever the cost-splitting provision of the arbitration clause and her request that the property manager pay her share of the arbitration costs. The court stayed the case and retained jurisdiction to reopen the case on appropriate written motion. The parties subsequently could not agree on the costs of arbitration, and Doe filed a motion to reopen the case and, again, to sever the cost-splitting provision of the arbitration clause. The district court denied Doe’s motion, holding that, pursuant to the agreement’s delegation clause, disputes regarding the parties’ respective responsibilities for arbitration costs should be addressed by the arbitrator.

On appeal to the Fifth Circuit, the court agreed with the property manager’s arguments that the court lacked jurisdiction. The court held that the district court’s order compelling arbitration and staying and administratively closing the case pending arbitration was interlocutory and unappealable within the meaning of section 16 of the FAA. The court held that Doe’s motion to reopen the case and sever was, in effect, nothing more than a motion to reconsider the merits of part of the district court’s order compelling arbitration. A denial of a motion to reconsider an order compelling arbitration does not possess any more finality than the order compelling arbitration itself. The Fifth Circuit also ruled that the collateral order doctrine did not apply given section 16 of the FAA’s “specific framework for determining whether and when an appeal is proper” and that exercising mandamus jurisdiction, a drastic remedy reserved only for truly extraordinary situations, would be inappropriate.

Doe v. Tonti Management Co., No. 21-30295 (5th Cir. Feb. 1, 2022).