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Jurisdiction Issues

Second Circuit Dismisses Appeal of Order Compelling Arbitration in Labor Dispute, Extends Prior Holding in Cheeks v. Freeport Pancake House Inc.

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The Second Circuit Court of Appeals recently dismissed a plaintiff’s appeal of the trial court’s order compelling arbitration on the grounds that the order was a non-appealable interlocutory order under 9 U.S.C. § 16(b). In dismissing the appeal, the court also extended the reach of its earlier decision in Cheeks v. Freeport Pancake House Inc., 796 F.3d 199 (2d Cir. 2015), with respect to voluntary dismissals in disputes governed by the Fair Labor Standards Act (FLSA).

The relevant facts of Samake v. Thunder Lube Inc. are procedural in nature. In Samake, plaintiff Sekouba Samake filed suit in federal court against his former employer alleging violations of the FLSA and other laws. The employer moved to compel arbitration, and Samake promptly filed a notice of unilateral voluntary dismissal without prejudice pursuant to Federal Rule of Civil Procedure 41(a)(1)(A)(i). The district court entered an order retaining jurisdiction over the case pursuant to Cheeks, in which the Second Circuit held that any FLSA settlement must be reviewed by the district court before the parties may dismiss a case by joint stipulation pursuant to Rule 41(a)(1)(A)(ii). Samake then filed a letter with the trial court indicating that the parties had not settled, and sought to withdraw his notice of voluntary dismissal. The court entered an order effecting Samake’s withdrawal of his notice of voluntary dismissal. Thereafter, the parties briefed the employer’s motion to compel arbitration, and the court ultimately granted the motion. Samake timely filed an appeal of the order compelling arbitration.

On appeal, Samake argued primarily that the trial court did not have jurisdiction to continue the proceedings — and enter an order compelling arbitration — because its jurisdiction was automatically revoked as a result of Samake’s notice of voluntary dismissal pursuant to Rule 41(a)(1)(A)(i). By implication, Samake took the position that the Second Circuit’s holding in Cheeks should be restricted to its facts, such that a trial court retains jurisdiction to review FLSA settlements after the parties filed a joint stipulation of dismissal pursuant to Rule 41(a)(1)(A)(ii) (as the Cheeks court held), but loses jurisdiction if the plaintiff files a unilateral notice of dismissal under Rule 41(a)(1)(A)(i).

In rejecting Samake’s argument, the Second Circuit held that Rule 41(a)(1)(A)(i) and (ii) both provide that voluntary dismissal is automatic “subject to any applicable federal statute,” including the FLSA:

We hold that the same result is warranted when the dismissal is effected unilaterally under Rule 41(a)(1)(A)(i) as when dismissal is effected by stipulation of all parties under (A)(ii). As a matter of grammar and structure, the exception to automatic dismissal for “any applicable federal statute” in subsection (A) applies equally to both subsections (A)(i) and (A)(ii); and Cheeks held that the FLSA is such an “applicable federal statute.” The plain text (set out in the margin) thus extends Cheeks to all dismissals under Rule 41(a)(1)(A).

Thus, the court concluded that the trial court below properly retained jurisdiction over the action under Cheeks, notwithstanding Samake’s prior voluntary dismissal. Based on this, the court further concluded that the trial court had jurisdiction to both effectuate Samake’s withdrawal of his voluntary dismissal and to consider the employer’s motion to compel arbitration. As the resulting order compelling arbitration was itself non-appealable under 9 U.S.C. § 16(b), the court dismissed Samake’s appeal of that order for lack of appellate jurisdiction.

Samake v. Thunder Lube, Inc., No. 21-102 (2d Cir. Jan. 27, 2022).

Ninth Circuit Swipes Right on Arbitration of Former Tinder Employee’s Sexual Harassment and Retaliation Claims

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The Ninth Circuit Court of Appeals recently held that a former Tinder employee who asserted claims of sexual harassment by her superiors must arbitrate her claims pursuant to an enforceable arbitration agreement she signed during her employment.

The plaintiff filed suit against Tinder in California state court, alleging that she was wrongfully terminated as a result of reporting instances of sexual harassment by her superiors.

Tinder, through its successor Match Group LLC, timely removed the matter to federal court based on diversity jurisdiction. The plaintiff moved to remand the case to California state court, claiming that both she and Tinder, a dissolved Delaware corporation with its principal place of business in California, were citizens of California, thus defeating diversity jurisdiction. Match Group moved to compel arbitration pursuant to the arbitration agreement the plaintiff signed during her employment.

The California district court denied the plaintiff’s motion to remand, finding that Tinder was not a “dissolved corporation” but rather it merged with Match Group, making Match Group the proper party to the suit, and whose Texas citizenship was to be considered for purposes of diversity jurisdiction. The district court also granted Match Group’s motion to compel arbitration based on the enforceable arbitration agreement.

The plaintiff appealed the district court’s decision, arguing that the district court failed to consider Tinder’s citizenship when it determined that diversity jurisdiction existed. The Ninth Circuit held that the district court was correct in considering only Match Group’s citizenship because, following the merger with Match Group, Tinder ceased to exist as a separate entity and continued solely as an unincorporated division of Match Group.

The plaintiff also challenged the district court’s ruling that her claims must be submitted to arbitration, arguing that the arbitration agreement was unconscionable, did not apply retroactively to encompass preexisting claims, and that California law bars retroactive application of the arbitration agreement.

Rejecting each of the plaintiff’s arguments, the Ninth Circuit affirmed the ruling that the arbitration agreement was enforceable. The court reasoned that the arbitration agreement only gave rise to a low degree of procedural unconscionability, not any substantive unconscionability that infected the arbitration agreement as a whole. The court also found that, although the plaintiff signed the arbitration agreement during her employment as a condition of her continued employment, the plaintiff’s preexisting claims fell within the scope of the broad language of the arbitration agreement that reflected an intent to cover claims that had accrued before the effective date of the arbitration agreement. The Ninth Circuit also rejected the plaintiff’s claim that California law bars retroactive application of the arbitration agreement where there was no suggestion that Match Group sought to modify the agreement unilaterally.

Sanfilippo v. Match Group LLC, No. 20-55819 (9th Cir. Sept. 28, 2021).

Fifth Circuit Affirms Order Confirming International Arbitration Award, Ending Decades-Old Maritime Injury Litigation

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Vinod Kumar Dahiya was injured in late 1999 while on a ship en route to Louisiana. At the time, he was employed by Neptune Shipmanagement Services and assigned to a vessel with interests held by the remaining plaintiffs. An arbitration clause in Dahiya’s employment contract required arbitrating any dispute arising out of the contract in Singapore or India. Following a rollercoaster of litigation in Louisiana state and federal courts over the course of two decades, including a state court trial and judgment for Dahiya that was later reversed, the dispute was ultimately arbitrated in India. In 2020, Dahiya obtained an arbitration award against Neptune for roughly $130,000. Neptune and the other plaintiffs later filed this action in Louisiana district court to confirm the award and enjoin Dahiya from pursuing further litigation against the non-Neptune plaintiffs. The district court granted summary judgment to the plaintiffs.

On appeal, Dahiya challenged the Indian award on the following grounds: (1) the district court lacked subject matter jurisdiction; (2) the arbitration clause was unenforceable because Neptune never signed the employment contract; and (3) the district court erred in finding the award prevented him from pursuing litigation against non-Neptune plaintiffs that were not parties in the arbitration. The Fifth Circuit disagreed in all respects. On the jurisdictional point, the court rejected the notion that the district court lost jurisdiction when it remanded the pre-arbitration litigation to state court in 2002, finding that a remand order in an earlier case had no preclusive effect with respect to a new case, with new issues, and thus a new basis for conferring federal jurisdiction. Conversely, the court found that earlier state court rulings did have preclusive effects as to Dahiya’s second and third arguments. Unlike the jurisdictional issue, the court explained that Louisiana state courts had already addressed and rejected the exact arguments Dahiya was now raising. The court therefore affirmed the district court order in its entirety.

Neptune Shipmanagement Services PTE, Ltd. v. Dahiya, No. 20-30776 (5th Cir. Oct. 1, 2021).

Federal Circuit Declines to Hear Challenge to Patent Board’s Decision Even Though Decision Allegedly Involved Adjudicating Issues Subject to Arbitration

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The Federal Circuit Court of Appeals recently declined to hear an appeal or grant a writ of mandamus seeking review of a decision by the Patent Trial and Appeal Board to institute inter partes review proceedings even though those proceedings were allegedly subject to arbitration.

MaxPower Semiconductor Inc. sought to appeal the Patent Trial and Appeal Board’s decision to institute inter partes review proceedings involving four of MaxPower’s patents. In the alternative, MaxPower sought a writ of mandamus to review the board’s decision. In relevant part, MaxPower argued that “the collateral order doctrine warrant[ed] immediate review because its challenge implicates questions of whether the Board can institute proceedings that are subject to arbitration.”

The Federal Circuit rejected MaxPower’s arguments for review, including its argument that it was entitled to immediate review because the question whether the board could institute proceedings subject to arbitration was implicated. The court explained that “[i]f MaxPower [was] truly not raising matters that are absolutely barred from appellate review … then MaxPower can meaningfully raise its arbitration-related challenges after the Board’s final written decisions. We therefore cannot say that MaxPower has established jurisdiction to review these decisions under the collateral order doctrine.”

In re MaxPower Semiconductor, Inc., No. 2021-146 (Fed. Cir. Sept. 8, 2021).

Eleventh Circuit Rules FAA Does Not Create Subject Matter Jurisdiction

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Brett-Andrew Nelson filed a petition to confirm an arbitration award issued by the Sitcomm Arbitration Association. The award purported to award Nelson $500,000 from each of the four defendants based on their breach of an unspecified “contractual agreement.” Nelson claimed the district court had subject matter jurisdiction to confirm the award based solely on 9 U.S.C. § 9. The district court dismissed the petition with prejudice, finding no evidence of a valid contract between the parties. On appeal, the Eleventh Circuit Court of Appeals held sua sponte that the district court lacked subject matter jurisdiction over Nelson’s petition. While the petition claimed jurisdiction based on section 9 of the FAA, the Eleventh Circuit found the FAA does not create jurisdiction on its own; there must instead be an independent jurisdictional foundation. Because Nelson failed to establish subject matter jurisdiction, the court found the district court should have dismissed the petition without prejudice, rather than with prejudice. The matter was thus vacated and remanded for the limited purpose of allowing the district court to dismiss the case without prejudice.

Nelson v. Jackson, No. 21-10440 (11th Cir. Aug. 2, 2021).