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Arbitration / Court Decisions

ENGLISH HIGH COURT GRANTS ANTI-SUIT INJUNCTION

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The English High Court considered an application by Noble and Shell for an anti-suit injunction to restrain Gerling from continuing proceedings in the Vermont courts against both Noble and Shell where there had been a final arbitration award rendered in a London arbitration.

In November 2006 the Vermont court held that it had no jurisdiction to vacate the arbitration award since the seat of the award was London, but accepted subject matter jurisdiction over the claims to rescind the contracts for misrepresentation. In granting the ex parte injunction, the Court held that the misrepresentation claim fell within the scope of the arbitration agreement. The Court also held that the claims raised in the Vermont proceedings could have been raised in the London arbitration and that Gerling was estopped from raising those claims in the Vermont proceedings.

On the inter partes hearing for a final injunction, the Court held that Gerling’s conduct in attempting to nullify the effect of the arbitration award by court proceedings in Vermont against both Noble and its parent Shell, based on assertions contrary to the findings in the award, was vexatious, oppressive, an abuse of process and unconscionable. This decision confirms the jurisdiction of the English court to grant an anti-suit injunction to protect an arbitration award after the arbitration proceedings have concluded, and not only exiting arbitration proceeding prior to the delivery of an award. Noble Assurance Company and Shell Petroleum Inc. v. Gerling-Konzern General Insurance Company, 2006 EWHC 253 (February 22, 2007).

SECOND CIRCUIT FINDS JURISDICTION UNDER FAA TO HEAR INTERLOCUTORY APPEAL

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This ruling addresses the narrow issue of whether or not an appellate court has jurisdiction under the FAA to hear an interlocutory appeal of a decision denying a motion to compel arbitration. In 2004 appellees filed a class action against several American Express companies (collectively, “Amex”) alleging conspiracy to fix fees for transactions in foreign currencies and conspiracy to impose compulsory arbitration clauses on their cardholders in order to suppress competition and deprive their cardholders of a meaningful choice concerning the arbitration of disputes.

Amex moved to compel arbitration pursuant to the arbitration clauses contained in the cardholder agreements. The District Court denied the motion, reasoning that, because the plaintiffs/appellees had raised an antitrust claim concerning the validity of the arbitration clauses, a jury trial was necessary to determine the validity of the arbitration clauses prior to enforcement.

Amex appealed, invoking Section 16 of the FAA, which grants jurisdiction to courts of appeals over interlocutory appeals from refusals to stay an action under 9 U.S.C. § 3 and from denials of petitions to compel arbitration under 9 U.S.C. § 4. Appellees filed a motion to dismiss on the ground that Section 16 of the FAA does not apply in cases where arbitration is required by principles of equitable estoppel.

The Second Circuit denied appellee’s motion to dismiss the appeal, holding that “when a District Court finds that a signatory to a written arbitration agreement is equitably estopped from avoiding arbitration with a non-signatory, the writing requirement of Section 16 of the FAA is met.” Ross v. American Express Company, Case No. 06-4598 (2d Cir. February 13, 2007).

NON-SIGNATORY LACKED STANDING TO COMPEL ARBITRATION

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This case addressed whether a court was required to recognize the right of a non-signatory to compel arbitration. The Defendant, Boris Bannai, executed an agreement for the sale of ore on behalf of Northgate. The agreement included an arbitration clause, requiring the arbitration of all claims relating to the agreement in London. When the plaintiff sued Bannai for fraud and unjust enrichment based on the agreement, Bannai moved to compel arbitration. Applying English law as required by the choice of law provision in the arbitration agreement, the court denied the motion, concluding that as a nonsignatory, Bannai lacked standing to compel arbitration. There are three expecptions to the general principle of English law that a non-party to an agreement may not compel arbitration, but none of the exceptions were asserted. Felman Productions Inc. v. Boris Bannai, Case No. 3:06-0644 (USDC S.D. W.Va. March 5, 2007)

U.S. COURT holds that it has jurisdiction to grant a prejudgment remedy relating to a foreign arbitration

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This case addresses the important and divisive issue of whether the Federal Arbitration Act and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards deprive a United States District Court court of jurisdiction to order injunctions and grant provisional remedies while an international arbitration is pending in London. Relying on precedent from the Second Circuit, a Connecticut District Court denied a motion to dismiss, holding that it has jurisdiction to entertain a motion for a prejudgment remedy by a party to an arbitration currently pending in London. However, it denied a motion requiring the immediate disclosure of assets. Bahrain Telecommunications v. DiscoveryTel, Inc., Case No. 3:05cv1957 (D. Ct. March 9, 2007)

COURT UPHOLDS ARBITRATOR’S DECISION REGARDING CLASS CERTIFICATION

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Sutter, a New Jersey pediatrician, filed a class action complaint against Oxford and several other health insurers for failure to pay medical claims timely and correctly under New Jersey law. Shortly after the case was filed, a New Jersey court granted Oxford’s motion to compel arbitration. Arbitration proceeded under the rules of the American Arbitration Association, which included a specific rule governing class actions. In 2005, the sole arbitrator issued a partial final class determination award, where he defined the class of claimants and certified the class. Oxford promptly filed a motion in district court to vacate the award. The District Court upheld the award, rejecting defendant’s argument that the arbitrator exceeded his authority and manifestly disregarded the law. The Third Circuit recently affirmed the judgment, finding that the arbitrator had not acted in manifest disregard of law, because he had considered all of the requirements set forth in the AAA's class action rule. Sutter v. Oxford Health Plans, Case No. 05-5223 (3rd Cir. February 28, 2007)