Arbitration / Court Decisions

LMRA ARBITRATION AWARD UPHELD BY THE THIRD CIRCUIT

August 5, 2015 by Carlton Fields

The Third Circuit affirmed an arbitration award under the Labor Management Relations Act (“LMRA”) as the decision reached by the arbitrator comported with the collective bargaining agreement (“CBA”) between the parties. Washington Hospital (“WH”) employed Deborah Holden, an LPN, before terminating her employment pursuant to the CBA’s absenteeism policy. Holden’s union filed a grievance protesting Holden’s discharge. An arbitrator decided that the termination was improper and reinstated Holden, because WH failed to follow contractually agreed upon discipline procedures. The arbitrator made this decision despite noting that Holden’s ten absences in a 12-month time period would be sufficient grounds on which to terminate an employee. WH sought to vacate the award, but the district court upheld the award.

On appeal, WH argued that the court abused its discretion by denying WH’s request for discovery based on remarks by Holden that put her honesty at issue. However, the court found that Holden’s testimony was not fraudulent, and further, that Holden’s testimony was “immaterial” to the arbitration decision. Instead, the court upheld the district court’s decision because WH did not follow the CBA’s procedures, specifically—WH failed to give two warning notices before terminating Holden. Washington Hosp. v. SEIU Health Care Inc. Penn., Case No. 14-3951 (3d Cir. June 12, 2015).

This post written by Matthew Burrows, a law clerk at Carlton Fields in Washington, DC.

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DRAFT AGREEMENT TO ARBITRATE WAS NOT ENFORCEABLE, NOTWITHSTANDING PAYMENT OF CONTRACTUAL DEPOSIT

August 4, 2015 by Carlton Fields

The Eighth Circuit affirmed a district court’s finding that LoRoad, LLC (“LoRoad”) failed to accept an agreement with Global Expedition Vehicles, L.L.C. (“Global”) that would allow LoRoad to enforce the arbitration contained within.

LoRoad negotiated with Global to build a custom expedition vehicle. The terms of the “Assembly Agreement” called for a nonrefundable $120,000 deposit. During the exchange of agreement drafts, LoRoad sent Global $120,000 along with a modified—allegedly signed—agreement shortly thereafter. As the relationship soured, Global stopped work on the expedition vehicle. LoRoad alleged that it did not have a final set of documents, as prior draft exchanges were simply contract negotiations. LoRoad sought to compel arbitration to handle the dispute per the agreement, asserting that the arbitration provision was enforceable because the parties exhibited the requisite intent to form a binding contract. In addition, LoRoad alleged that the arbitration provision was enforceable because that particular provision remained the same throughout multiple agreement draft iterations. The court focused on LoRoad’s intent. LoRoad’s only conduct to indicate an agreement was its payment of $120,000. However, it also argued that this sum was only a “good faith deposit” and not a payment per the agreement. Further, LoRoad sent emails to Global indicating that the agreement was “not yet executed.” Without an executed agreement or a free-standing agreement to arbitrate, arbitration could not be compelled. LoRoad, LLC v. Expedition Vehicles, LLC, Case No. 14-2636 (8th Cir. June 1, 2015)

This post written by Matthew Burrows, a law clerk at Carlton Fields in Washington, DC.

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CALIFORNIA COURT DISMISSES TOLLING SUBCLASS CLAIMS WITH PREJUDICE, FINDING ISSUES BARRED BY LAW OF THE CASE DOCTRINE

July 30, 2015 by Carlton Fields

We have previously reported on a case styled Munoz v. PHH Corp., one of similar suits alleging putative class actions under the Real Estate Settlement Procedures Act arising from purported “sham” reinsurance transfers covering private mortgage insurance. In this ruling, the court granted defendant’s partial motion to dismiss the plaintiff-intervenor’s amended complaint with prejudice and to strike certain allegations from the remaining pleading.

Previously, the court granted the plaintiff-intervenor leave to file an amended complaint to cure deficiencies identified in the court’s order for partial judgment on the pleadings against the plaintiff-intervenor for failure to plead sufficient facts. In that August 2014 order, the court found that PHH’s loan disclosure documents had adequately placed the tolling subclass on notice of their claims, and that no extraordinary circumstances justified the late filing. The court also found that the plaintiff-intervenor failed to sufficiently plead a claim of fraudulent concealment apart from the underlying RESPA claim.

The court found that the allegations in the amended complaint would involve the re-litigation of these previously resolved issues. It reasoned that the amended complaint’s equitable estoppel and tolling claims “merely cloak[ed] the same facts or irrelevant facts in new legal theory, one amenable to the same defenses that have already prevailed” and were therefore barred under the law of the case doctrine. The court dismissed with prejudice because its previous order granted the intervenor one opportunity to amend, and the intervenor failed to cure the complaint’s deficiencies. Because the court had dismissed the claims with prejudice, it struck certain pleadings filed after the date of the order permitting the filing of an amended complaint as immaterial. Munoz v. PHH Corp., Case No. 08-00759 (USDC E.D. Cal. May 21, 2015).

This post written by Brian Perryman.

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FOURTH CIRCUIT REJECTS CHARACTERIZATION OF MOTIONS “FOR RECONSIDERATION,” REMANDS TO DETERMINE WHETHER DISPUTE IS ARBITRABLE

July 29, 2015 by Carlton Fields

The Court of Appeals for the Fourth Circuit recently remanded a case to the district court for full consideration of a request to compel arbitration, finding the lower court’s order “inconsistent with the emphatic federal policy in favor of” arbitration. The plaintiff, Dillon, sued several banks which were allegedly “complicit” in effectuating illegal payday loans by processing transfers on behalf of the lenders (tribal and out-of-state). The district court denied the banks’ initial motion to enforce arbitration clauses contained in the original loan agreements because the banks failed to provide authenticating evidence. When the banks renewed their motions to cure that deficiency by providing such evidence, the district court construed the motions as reconsideration motions, and denied them.

On appeal, the court analyzed the lower court’s perfunctory reasoning in construing the renewed motions as seeking reconsideration. The court rejected the idea that the banks only had one opportunity to invoke the Federal Arbitration Act’s enforcement mechanisms. Only when the party “is in default in proceeding with” arbitration does the Act foreclose the chance of obtaining a stay under its mechanisms. The court also distinguished the underlying issues presented by the initial and renewed motions to reject the notion that the law of the case doctrine justified denial. The district court’s ruling on the initial motions spoke to whether the pleadings established arbitrability did not, as law of the case, determine the renewed motions’ issue of whether Dillon consented to arbitration in the first place. The district court was instructed to, on remand, determine whether the claims are within the scope of the original loan agreement’s arbitration clause, and whether the banks forfeited those rights because they are “in default in proceeding” with arbitration. Dillon v. BMO Harris Bank, N.A., No. 14-1728 (4th Cir. May 29, 2015).

This post written by Brian Perryman.

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COURT DENIES AS MOOT INSURER’S MOTION TO REVIEW DISCOVERY

July 28, 2015 by Carlton Fields

A district court in Kansas denied as moot defendant Liberty Mutual Fire Insurance Company’s motion to review a magistrate’s order granting plaintiff Great Plains Ventures, Inc.’s motion to compel reinsurance, reserves, and claims-related materials. The magistrate judge ruled in January that Liberty Mutual failed to establish why documents Great Plains had requested in a coverage dispute were irrelevant or privileged. Thus, the magistrate judge granted Great Plains’ motion to compel. Soon thereafter, Liberty Mutual requested that the magistrate judge stay his order in anticipation of its objection to the discovery order and its motion to review the order to compel. While the motion to review was pending, the magistrate judge denied the motion to stay and ordered Liberty Mutual to produce the documents. Liberty Mutual complied, and because it did so, the court ruled that its request for review was moot. Great Plains Ventures, Inc. v. Liberty Mutual Fire Insurance Co., No. 6:14-cv-01136 (USDC D. Kan. May 1, 2015).

This post written by Whitney Fore, a law clerk at Carlton Fields in Washington, DC.

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