Arbitration / Court Decisions

CHINESE ARBITRATION AWARD AFFIRMED IN MINERAL COMPANY DISPUTE

June 24, 2015 by Carlton Fields

The court ruled that ACC Resources is bound by an arbitral award issued by the China International Economic & Trade Arbitration Commission (“CIETAC”). The award required the mineral company to pay its supplier, Calbex Mineral Limited the unpaid balance for minerals supplied. ACC argued that the award was made without its knowledge and without offering the company the opportunity to defend itself. ACC also argued that the arbitration award was void because the CIETAC subcommission that initially rendered the award in favor of Calbex had broken away from CIETAC.

The district court held that ACC failed to meet the standards of the New York Convention—which governs the enforceability of international arbitration—by not providing sufficient proof to show that they had not been given notice of the proceedings. Further, the court noted that ACC failed to offer evidence that it knew about the subcommission’s split from CIETAC during the relevant time. ACC also disputed the panel’s failure to forward evidence received in the course of its investigation, but the district court held that ACC did not show prejudice from this violation. Because ACC had not been prejudiced, the arbitral award must stand. Calbex Mineral Ltd. v. ACC Resources Co., L.P., No. 13-276 (USDC W.D. Pa. Mar. 13, 2015).

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

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COURT REMANDS ARBITRATION AWARD FOR FURTHER CLARIFICATION WHERE RATIONALE WAS NOT GIVEN

June 23, 2015 by Carlton Fields

In a case involving a dispute over steel production to replace a portion of the Whitestone Bridge spanning New York City’s East River, a federal district court remanded an arbitration award back to the arbitrator. Under the parties’ arbitration agreement, the arbitrator was to issue a reasoned award. However, the arbitrator’s award was a two-page award with the “arbitrator merely list[ing] various categories of monetary damages without explanation as to how he calculated those figures or determined liability.” Under the Southern District of New York standard, a reasoned award is one where the arbitrator presents “something short of findings of fact and conclusions of law but more than a simple result. Where the award offered no more than the damages, the court found that this low standard was not met.

The court chose not to vacate the award, however. Noting that some courts have completely vacated the award where arbiters have ignored the arbitration agreement and exceeded their powers, the court found that the doctrine of functus officio (once the award is made, the duty is done) was inapplicable. Because the arbitrator never completed his duty, the court found that remand to do so was proper. Tully Const. Co. v. Canam Steel Corp., No. 1:13-cv-03037-PGG (USDC S.D.N.Y. Mar. 2, 2015).

This post written by Zach Ludens.

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COURT DISMISSES CHALLENGE OF FINRA ARBITRATION AWARD FOR LACK OF JURISDICTION

June 22, 2015 by Carlton Fields

In a case involving a FINRA arbitration between investors and their financial advisor, Judge Anita S. Brody of the United States District Court for the Eastern District of Pennsylvania found that she did not have the jurisdiction to hear a challenge of the arbitration award. Though FINRA rules may be subject to heavy federal regulation and approval by the SEC, the court found that this was not enough to create a federal question to give the court jurisdiction over the challenge. Instead, the court found that under § 10 of the Federal Arbitration Act, review of an arbitration award with underlying federal questions does not in itself implicate a federal question sufficient for jurisdictional purposes. This is because where there is no merits review, “the substance of the underlying arbitration is generally irrelevant to a district court’s consideration of a motion to vacate.” Instead, the motion to vacate must raise a federal question on its face. The court further held that an argument of manifest disregard of federal law in such an instance was still heard as a claim under § 10 of the Federal Arbitration Act, which is “something of an anomaly in that it does not create any independent federal-question jurisdiction under 28 U.S.C. § 1331 or otherwise.” Accordingly, the court dismissed the case for lack of subject-matter jurisdiction. Goldman v. Citigroup Global Markets Inc., No. 2:12-cv-04469-AB (USDC E.D. Pa. May 19, 2015).

This post written by Zach Ludens.

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ADMINISTRATIVE CLOSING OF EMPLOYMENT DISCRIMINATION CASE SUBJECT TO ARBITRATION AGREEMENT BARS APPELLATE REVIEW

June 18, 2015 by John Pitblado

In Walker v. TA Operating, LLC et. al., Case No. 14-41046 (5th Cir. May 22, 2015), the Fifth Circuit Court of Appeals dismissed an appeal of an employment discrimination case subject to an arbitration agreement due to lack of jurisdiction. In the underlying case, the district court granted the defendant’s motion to compel arbitration and administratively closed the case because the district court determined that the parties were subject to a valid and applicable arbitration agreement. The district court’s decision was dictated by the Federal Arbitration Act (the “FAA”), which grants district courts two powers: 1) the authority to issue an order directing that arbitration proceed in the manner provided for in such agreement; and 2) the authority to stay an arbitrable proceeding pending the outcome of the contractually-required arbitration. On appeal, the Fifth Circuit dismissed the cased due to lack of jurisdiction because an order by the district court administratively closing a case is tantamount to a stay, and bars appellate review. The Fifth Circuit explained that a district court has jurisdiction over final decisions of the district court and that Congress explicitly provided that appellate courts lack jurisdiction over a district court order granting a stay of any action under section 3 of the FAA or directing arbitration to proceed under section 4 of the FAA.

This post written by Kelly A. Cruz-Brown.

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TENTH CIRCUIT AFFIRMS LIFT OF ARBITRATION STAY FOR FAILURE TO PAY REQUISITE FEES

June 17, 2015 by John Pitblado

In late May, the Tenth Circuit Court of Appeals affirmed a district court decision to lift an arbitration stay for Plaintiff Pre-Paid Legal Services, Inc. (“Pre-Paid”) as Defendant Todd Cahill (“Cahill”) failed to pay his respective share of the arbitration fees.

Pre-Paid sells legal service contracts whereby members deal with a network of attorneys. Cahill was a sales associate for Pre-Paid. His employment contract contained an arbitration provision as well as several non-compete provisions. Pre-Paid sued Cahill alleging that Cahill used information from his prior employment to recruit new associates after he left the company. Cahill removed the state filed action to federal court whereby the action was stayed pending arbitration. Cahill failed to pay his respective share of the arbitration fees, however, and the arbitration was cancelled. On appeal, Pre-Paid argued that the appellate court did not have jurisdiction to hear the appeal. Cahill argued that arbitration must be heard on the merits before any stay could be lifted.

Federal arbitration laws requires a court to stay an action pending arbitration provided that “the applicant for the stay is not in default in proceeding with the arbitration.” The court reasoned that Cahill’s failure to pay the required arbitration fees made him in default and therefore the federal stay guarantee should not apply. The court also found that they had jurisdiction to review the district court’s lift to stay the proceedings, citing to circuit court and supreme court authorities.

Pre-Paid Legal Serv., Inc. v. Cahill, No. 14-7032, (10th Cir. May 26, 2015)

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

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