Arbitration / Court Decisions

RULE 60(B) MOTION NOT AVAILABLE TO CIRCUMVENT OR EXPAND THE FAA’S GROUNDS FOR VACATUR OF AN ARBITRATION AWARD

May 7, 2009 by Carlton Fields

On October 6, 2008, we reported on a Texas district court entering orders, over a period of several months, confirming two arbitration awards, granting partial final judgment under Rule 54(b), denying a stay without bond, and denying a Rule 59 motion to set aside the partial final judgment.

Halliburton Energy Services, Inc. (“Halliburton”) has since moved for relief under Rule 60(b), for discovery relating to its Rule 60(b) motion, and for a protective order on discovery into its assets. Halliburton claimed that documents recently discovered in its own files conclusively establish a key issue determined in the arbitration and sought discovery into the opposing party’s knowledge of these documents. The court, after declining to rule on the issue of the motion’s timeliness, denied the motion for relief under Rule 60(b), holding that Rule 60(b) was not available to vacate the award and, on the merits, finding that Halliburton presented no evidence of fraud or misconduct, could not show that these documents would have changed the proceedings, could not show that the judgment was inequitable, had the opportunity to fully and fairly present its case, and could not show due diligence in its search for documents. Finally, the court denied the motion for discovery related to the Rule 60(b) motion and granted the motion for a protective order, finding that discovery into Halliburton’s assets was not supported by the record. Halliburton Energy Servs., Inc. v. NL Indus., Case No. 05-4160 (USDC S.D. Tex. Mar. 31, 2009).

This post written by Dan Crisp.

RECENT RULINGS UPHOLD ARBITRATION AWARDS ON VARIOUS GROUNDS

May 6, 2009 by Carlton Fields

Manifest disregard of law: Dealer Computer Services, Inc. v. Dayton Ford, Inc., Case No. 08-3508 (USDC D.N.J. April 9, 2009) (granting motion to confirm, finding no manifest disregard of law).

Evident Partiality: Martik Brothers, Inc. v. Kiebler Slippery Rock, LLC, Case No. 08-1756 (USDC W.D. Pa. April 20, 2009) (granting petition to confirm, no evident partiality where arbitrator and plaintiff’s counsel engaged in casual conversation about golf and travel).

Sufficiency of evidence: Campbell v. American Family Life Assurance Co. of Columbus, Inc., Case No. 08-5806 (USDC D. Minn. April 14, 2009) (denying motion to vacate award, finding insufficient evidence submitted to overcome arbitrator’s grant of summary judgment award to defendant, based on unambiguous terms of parties’ insurance contract)

Exceeding authority: Reliastar Life Ins. Co. of New York v. EMC Nat’l Life Co., No. 07-0828 (2d Cir. April 9, 2009) (reversing trial court’s vacatur of portion of arbitrators’ award for attorneys fees against defendant for failing to arbitrate in good faith, finding such an award does not exceed submission, even though agreement required parties to pay own fees and costs); Dupont v. Tobin, Carberry, O’Malley, Riley & Selinger, PC, No. 08-1414 (2d. Cir. April 16, 2009) (affirming district court’s confirmation of award, arbitrators did not exceed authority in finding facts and interpreting agreement); Thule AB v. Advanced Accessory Holding Corp., Case No. 09-91 (USDC S.D.N.Y. April 2, 2009) (denying motion to vacate, reviewing accountant did not exceed authority by applying different methodology than requested by plaintiff).

Miscellaneous confirmations: Schmidt v. Citibank (South Dakota), N.A., Case No. 08-165 (USDC E.D. Va. April 10, 2009) (granting defendant’s motion to confirm, denying several motions by pro se plaintiff on numerous grounds); Mutual Marine Office, Inc. v. Transfercom Ltd., Case No. 08-10367 (USDC S.D.N.Y. April 15, 2009) (granting petition to confirm as defendant failed to raise arguments in arbitration and thus waived them); Jones v. PPG Industries, Inc., Case No. 07-1537 (USDC W.D. Pa. April 27, 2009) (granting motion to confirm arbitrator’s award in favor of employer on discrimination claims on various grounds).

This post written by John Pitblado.

RECENT DECISIONS FEATURE JURISDICTIONAL ISSUES OVER NON-SIGNATORIES TO ARBITRATION AGREEMENTS

May 5, 2009 by Carlton Fields

UBS AG named Ramy and Michel Lakah (the “Lakahs”) as respondents in an arbitration proceeding, despite Michel never signing the arbitration agreement and Ramy only signing on behalf of Lakah Funding Ltd. and the guarantors, not in his personal capacity. The Lakahs petitioned the state court to stay the arbitration, and UBS removed the petition to federal court seeking to pierce the corporate veil. While the action was pending, the arbitration panel chairman informed all parties that the panel would address the question of jurisdiction over the Lakahs, and the Lakahs subsequently moved for a preliminary injunction. The court granted the petitioners’ motion for injunctive relief, stating that, unless the agreement clearly provides otherwise, courts decide the question of whether the parties agreed to arbitrate, and, without addressing the merits, the court found that petitioners would be irreparably harmed if the panel addressed the issue due to the cost of and time spent litigating before a body lacking the authority to decide this issue. Lakah v. UBS AG, Case No. 07-2799 (USDC S.D.N.Y. Mar. 6, 2009).

Symetra National Life Insurance Co. and Symetra Life Insurance Co., (collectively “Symetra”), obligors on structured settlement payments and nonparties to the transfer agreement that contained the arbitration clause, appealed from a trial court’s confirmation of an arbitration award that directed Symetra to pay Rapid Settlements, Ltd., instead of the original payee. In reversing the trial court’s judgment and vacating the arbitration award, the court held that the arbitration award violated public policy as set forth in the Texas Structured Settlement Protection Act (“TSSPA”) because no court had preapproved the transfer agreement. The court also held that Symetra had standing to contest the arbitration award because, first, the TSSPA gave Symetra an interest sufficient to contest any attempt to force the company to make payments, in the absence of court approval, to anyone other than the payee and, second, Symetra could be subject to double liability if payments were ever made to the wrong party. Symetra Nat’l Life Ins. Co. & Symetra Life Ins. Co. v. Rapid Settlements, Ltd., Case No. 14-07-00880 (Tex. App. Apr. 21, 2009).

This post written by Dan Crisp.

MIDWEST EMPLOYERS CAS. CO. VS. LEGION INS. CO. – THE SAGA CONTINUES TOWARDS TRIAL

May 4, 2009 by Carlton Fields

As reported in our previous posts on November 19, 2007 and July 8, 2008, Midwest Employers Casualty Company (“Midwest”) sued Legion Insurance Company (“Legion”), in connection with 43 separate reinsurance certificates issued by Midwest to Legion between 1994 and 2001. The crux of Midwest’s position is that the certificates each establish that the coverage was provided on a “loss occurring basis” rather than a “risk attaching basis,” and also that the agreements contain no agreement to arbitrate. Midwest moved for summary judgment on those bases. However, the federal court agreed with Legion that the nature of the agreements could not be ascertained from the face of the documents submitted, and that the parties’ various oral agreements and understanding as to how the agreements operated potentially conflicted with the certificates, leaving fact questions to be reserved for trial. The court denied the motion and instructed the parties to prepare for trial. Midwest Employers Cas. Co. v. Legion Ins. Co., Case No. 07-870 (USDC W.D. Mo. Mar. 24, 2009).

This post written by John Pitblado.

NINTH CIRCUIT APPLIES OREGON LAW TO FIND CLASS ACTION WAIVER UNENFORCEABLE

May 1, 2009 by Carlton Fields

The Ninth Circuit recently concluded that a district court improperly dismissed a consumer class action pursuant to an arbitration agreement between a wireless provider and its customers, holding that the agreement’s class action waiver was unconscionable and therefore unenforceable under Oregon law. The court found that the waiver was substantively unconscionable for two reasons. First, the waiver was unilateral in effect: “It can hardly be imagined that T-Mobile or its suppliers would ever want or need to bring a class action against T-Mobile’s customers.” Second, the class action waiver created a disincentive to litigate since the actual damges alleged were below $700 a year. Given the small size of the individual claims covered by the agreement, the waiver made it impracticable for customers to vindicate their rights in court. The court also found that under the arbitration agreement the class action waiver was not severable since the agreement itself included a provision prohibiting severance of the waiver. Chalk v. T-Mobile USA, Inc., No. 06-35909 (9th Cir. Mar. 27, 2009).

This post written by Brian Perryman.