Arbitration / Court Decisions

Bilbo, a Mississippi resident, and McNally, a Floridian, entered into a joint venture agreement to purchase, renovate, and resell residential property located in Jackson, Mississippi. The agreement contained an arbitration clause. After a dispute arose, Bilbo moved to compel arbitration in federal district court. McNally moved to dismiss on the grounds that the FAA did not apply because the parties’ agreement did not concern “matters of interstate commerce.” The court held that the FAA applied, given that Congress’ power to regulate commerce is broadly construed and that McNally, a Florida resident, agreed to purchase and renovate property in Mississippi, a different state. Bilbo v. McNally, Case No. 12-cv-00502 (USDC S.D. Miss. Nov. 15, 2012).

This post written by Ben Seessel.

See our disclaimer.

The Supreme Court has accepted certiorari review of two cases involving putative class actions and arbitration. In the first case, American Express Company v. Italian Colors Restaurant, the Court agreed to review the question whether the FAA permits courts to invalidate arbitration agreements on the ground that the agreement precludes class arbitration of federal statutory claims. The court of appeals had invalidated an arbitration provision because it found that the provision effectively precluded plaintiffs from pursuing protections provided by federal antitrust laws. In the Second matter, Oxford Health Plans LLC v. Sutter, the Court agreed to review whether, under Stolt-Nielsen, an arbitrator acts within his powers pursuant to the FAA by determining that parties affirmatively agreed to authorize class arbitration based solely on the use of broad contractual language precluding litigation and requiring arbitration of any dispute arising under a contract.

American Express Co. v. Italian Colors Rest., No. 12-133 (U.S., cert. granted, Nov. 9, 2012); Oxford Health Plans LLC v. Sutter, No. 12-135 (U.S., cert. granted Dec. 7, 2012)

This post written by Ben Seessel.

See our disclaimer.

Last week we reported on a decision by one California appellate court holding that U.S. Supreme Court precedent did not overrule the California Supreme Court’s Gentry decision to the extent the latter voids class arbitration waivers that are determined by the court to prevent an employee from vindicating certain statutory rights. Another decision of a different panel of the same California appellate district highlights the broader approach currently taken by California courts on this issue. In an appeal of an order refusing to enforce a class arbitration waiver based on California statutory law, the appellate court reversed, finding that Concepcion made clear that the FAA preempts state law prohibiting a consumer from waiving class action rights. The court noted the current divide with California courts regarding the viability of Gentry, but concluded that it “need not comment on the continuing viability of Gentry because the instant case does not deal with employment issues.” The court did conclude, however, that Concepcion rejects the argument that class action waivers in consumer contracts can be invalidated in order to vindicate statutory rights even if the statutory right is desirable for other reasons” — a position that is apparently not unanimously held in California. Sherf v. Rusnak/Westlake, Case No. B237275 (Cal. Ct. App. October 16, 2012).

This post written by Michael Wolgin.

See our disclaimer.