Arbitration / Court Decisions

IMPLEADED REINSURER DISMISSED UNDER CONVENTION ON THE RECOGNITION AND ENFORCEMENT OF FOREIGN ARBITRAL AWARDS

July 5, 2011 by Carlton Fields

The plaintiff in a personal injury suit arising from an automobile accident amended his petition to add Lloyd’s of London to a state court suit initially brought against the alleged tortfeasor and the tortfeasor’s primary insurer (Lloyd’s cedent). Lloyd’s removed the suit to federal court under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, and sought dismissal based on the arbitration provisions of its contract with the insurer. The plaintiff did not oppose the dismissal, so long as it was without prejudice, and moved to remand the case back to state court. The court granted Lloyd’s motion to dismiss without prejudice and granted plaintiff’s motion to remand. Rossignol v. Tillman, Case No. 10-3044 (USDC E.D. La. June 17, 2011).

This post written by John Pitblado.

“MANIFEST DISREGARD OF THE LAW” ALIVE AND WELL IN THE NINTH CIRCUIT

June 30, 2011 by Carlton Fields

A court in the Ninth Circuit recently considered whether an arbitration award in an employment dispute was a “manifest disregard of the law” under the Federal Arbitration Act. The case stemmed from the employer’s termination of its CEO under an employment agreement that deemed a termination “for cause” if the officer committed a “willful” illegal act. After the CEO was indicted for securities fraud and pleaded guilty to “willfully” making false and misleading statements in connection with the same conduct that led to his termination, the employer argued that the CEO made a “judicial admission” that precluded him from disputing that his conduct was “willful.” The arbitrator, however, disagreed and found that “willful” meant “something different in the context of a securities fraud violation as opposed to under the Agreement.” The court found no “manifest disregard” in the arbitrator’s determination, finding that the decision was “a reasonable construction” of the law and was “not clearly irrational.” Electro Scientific Industries, Inc. v. Dooley, Case No. 10-CV-1564 (USDC D. Or. May 17, 2011).

This post written by Michael Wolgin.

EIGHTH CIRCUIT AFFIRMS ARBITRATION DECISION AGAINST ILLINOIS FARMERS INSURANCE

June 29, 2011 by Carlton Fields

Recently, the Eighth Circuit Court of Appeals filed its opinion ruling on an appeal from the District Court’s orders dismissing Farmers’s counterclaim that Alpine Glass violated Minnesota’s anti-incentive statute, granting summary judgment in favor of Alpine on a breach of contract issue, and denying Farmers’s motion to vacate an arbitration award. The Eighth Circuit affirmed, finding that Alpine Glass did not violate the anti-incentive statute by charging a contingent price, and that the breach of contract issue was improperly framed by Farmers as a breach of a unilateral contract. Finally, the Court affirmed the District Court’s denial of Farmers’s motion to vacate the arbitration award concluding that the arbitrator applied the correct standard to the issue under the pertinent Minnesota statute. The Court upheld the arbitrator’s conclusion that Farmers failed to pay the competitive price. Alpine Glass, Inc. v. Illinois Famers Ins. Co., No. 10-1689 (8th Cir. June 17, 2011).

This post written by John Black.

PLAINTIFF SUES ARBITRATOR, AAA FOR DUE PROCESS VIOLATIONS

June 28, 2011 by Carlton Fields

The present action before the US District Court in Nevada arose from a dispute between Dr. Ronald Slaughter and Laboratory Medicine Consultants regarding a stockholder agreement. A state district judge ordered the parties to arbitrate claims. A state court compelled the parties to arbitrate their disputes. Slaughter subsequently submitted an arbitration demand against LMC in September, 2007, after which he then tried to disqualify arbitrator Howard Roitman (which was denied). While arbitration was proceeding, Slaughter filed a suit in the Nevada federal court seeking to litigate issues encompassed by the arbitration. Slaughter then sought a stay of the arbitrtation pending litigation, but the Court denied the stay and dismissed the federal case in its entirety. Undeterred, Slaughter then filed another suit in federal court, this time against the AAA, Arbitrator Roitman, and two employees of the AAA alleging that his due process rights were violated during the underlying arbitration proceedings. Meanwhile, the arbitration continued, with rulings adverse to Slaughter. Defendants moved to dismiss the action, stating that they had immunity pursuant to N.R.S. § 38.229 for their conduct in administering arbitration proceedings and that the federal case was an impermissible collateral attack on the underlying arbitration. The Court agreed and dismissed the motion, specifically finding that Nevada’s Uniform Arbitration Act (cited above) protected the defendants against the suit. Further, the Court found that Slaughter’s action was an attack on the arbitration award and that his only relief would be to pursue vacatur of the award under the Federal and Nevada Arbitration Acts. Accordingly, the federal action was dismissed in its entirety. Slaughter v. American Arb. Assoc., Case No. 10-01437 (USDC D. Nev. June 2, 2011).

This post written by John Black.

ARBITRATION WITH SOME PLAINTIFFS BUT NOT OTHERS DENIED DUE TO RISK OF CONFLICTING RULINGS

June 27, 2011 by Carlton Fields

In an action brought by twenty-three investors against a brokerage related to investment fraud by the broker, a California appellate court rejected the brokerage’s attempt to arbitrate with the twelve investors with whom the brokerage had signed client agreements and stay the court action as to the remaining investors. While the client agreements at issue contained express agreements to arbitrate “any and all controversies or claims,” California law provides that a court should not order arbitration where: (1) a party to the arbitration agreement is contemporaneously a party to a pending court action arising out of the same transaction; and (2) where “there is a possibility of conflicting rulings on a common issue of law or fact.” The court was not persuaded by the brokerage’s argument that no risk of conflicting rulings existed, where the twelve investors, who had signed client agreements, had a “different legal standing” than the eleven investors who were non-clients. The court explained that the brokerage failed to show how the client/non-client distinction was relevant and that, on the contrary, “a legal duty may exist outside of a written agreement.” Cianci v. Centaurus Financial, Inc., Case No. B222474 (Cal. Ct. App. May 5, 2011).

This post written by Michael Wolgin.