Arbitration / Court Decisions

In a dispute over Uber’s alleged failure to provide a wheelchair-accessible ride-sharing option in New Orleans, the District Court held that, under California law, plaintiffs were not equitably estopped from avoiding arbitration because their ADA claims did not rely on Uber’s Terms and Conditions.

California law permits a party to compel a nonsignatory to arbitrate when a nonsignatory should be equitably estopped from arguing that he cannot be bound by an arbitration clause. Uber argued that Plaintiffs’ standing theory – that they may sue without downloading the Uber App and assenting to its Terms and Conditions because downloading the Uber App would be futile -is inextricably intertwined with the Terms and Conditions. However, equitable estoppel is inapplicable where a plaintiff’s allegations reveal no claim of any violation of any duty, obligation, term or condition imposed by the contract. Here, the plaintiffs do not rely on Uber’s Terms and Conditions – the case arises entirely under the ADA – and plaintiffs’ ADA claims are fully viable without any reference to Uber’s Terms and Conditions, so equitable estoppel does not apply. The decision denying Uber’s motion to compel arbitration was upheld by the Ninth Circuit.

Namisnak, et al. v. Uber Techs., Inc., et al., No. 18-15860 (9th Cir. August 24, 2020)

In opposing a motion to compel arbitration, Nueces County made two procedural arguments: first, that the carrier waived its right to arbitrate by virtue of the policy’s service-of-suit clause. The District Court for the Southern District of Texas rejected the County’s argument, as the policy contained no such express override of the arbitration agreement, and both the “service-of-suit and arbitration clauses can be construed harmoniously such that the service-of-suit clause allows the courts, including the federal courts, to enforce the policy’s arbitration rights.”

Second, the County argued that the McCarran-Ferguson Act eliminated the court’s jurisdiction under the Convention Act. The court rejected this argument, as the Fifth Circuit has held that McCarran-Ferguson did not reverse-preempt an insurance company’s invocation of arbitration under the Convention Act.

The court also rejected the County’s substantive arguments against arbitration. The County claimed there was no written agreement for arbitration because the County did not sign the arbitral clause – the insurance policy. The court rejected this argument, as the Fifth Circuit has already held that a signature is not required to enforce an arbitration agreement in an insurance policy. The County argued that an insurance policy does not represent a commercial relationship as required by 9 U.S.C. § 2, 202. The court rejected this argument as well, as the insurance policy containing the arbitration agreement arises out of a commercial relationship between the County and its carrier. The parties were directed to arbitration, and any questions as to arbitrability were referred to the arbitrator.

Nueces County, Texas v. Certain Underwriters at Lloyd’s of London, et al., 2:20-cv-00065 (U.S.D. Tex. August 31, 2020)

The Southern District of New York declared that plaintiff Monjasa A/S was not bound by an arbitration agreement to which neither it nor the defendant was a party. The case stems from a fuel delivery contract between two non-parties, Monjasa Lda and Angola de Navegacao Lda (ANNA). The contract called for Monjasa Lda to supply fuel to a ship known as the BBC Scotland. Monjasa Lda and the plaintiff are wholly separate subsidiaries of Monjasa Group. The defendant underwrote an insurance policy covering the BBC Scotland and its owner. The dispute arose after the BBC Scotland collided with and damaged the Golden Oak, a fuel tanker that Monjasa Lda arranged under the fuel contract, forcing Monjasa Lda to send a different tanker – the Duzgit Venture – to complete the delivery.

Subsequently, various parties – excluding the plaintiff – engaged in settlement discussions regarding the damage to the Golden Oak. The defendant, as insurer for the BBC Scotland parties, ultimately funded the settlement, after which it sent an arbitration demand to the plaintiff seeking reimbursement. According to the defendant, the plaintiff was liable for the settlement and subject to arbitration based on the general Monjasa Group terms and conditions incorporated by reference in the Monjasa Lda/ANNA contract. As support, the defendant cited a reference on the fuel delivery receipt issued by the Duzgit Venture stating that the sale was “governed by terms and conditions between Vessel and Monjasa A/S, acting as principal.” The plaintiff responded by filing this action.

Because there was no dispute that the plaintiff and the defendant were not parties to the contract between Monjasa Lda and ANNA, the district court found that the plaintiff could only be bound by its terms under agency principles. In that regard, the court ruled that the defendant failed to prove that Monjasa Lda was acting with actual or apparent authority to bind the plaintiff when it contracted with ANNA. The court also found that it was the defendant’s burden to prove that it was entitled to enforce a contract to which it was not a party. Although acting as subrogee of the BBC Scotland’s owner, the court found no connection between the owner of the BBC Scotland and the fuel delivery contract. Further, the court held that no reasonable fact-finder could conclude that the owner of the BBC Scotland was a third-party beneficiary of the contract. Accordingly, the court granted the plaintiff’s motion for summary judgment and denied the defendant’s cross-motion to compel arbitration, finding that the defendant had no basis to invoke the arbitration clause in the first instance.

Monjasa A/S v. Mund & Fester GmbH & Co. KG, No. 1:19-cv-06143 (S.D.N.Y. Aug. 6, 2020).

Betty Frison invented a product related to hair weaving and subsequently entered into an agreement with Davison Design to promote her product. The agreement required that the parties arbitrate any dispute. After believing Davison Design misrepresented the financial gain that she would realize from the product, Frison initiated arbitration against Davison Design, pursuing a claim under the American Inventors Protection Act.

Frison received an award of more than $13,000 in damages and $10,000 in attorneys’ fees. Davison Design then filed an application in federal court under sections 10 and 11 of the Federal Arbitration Act to vacate or modify the award. The U.S. District Court for the Western District of Pennsylvania denied Davison Design’s application, and Frison sought additional attorneys’ fees for successfully upholding the arbitration award. The district court rejected Frison’s request, and Frison appealed.

On appeal, Frison argued that the attorneys’ fees provision of the American Inventors Protection Act entitled her to fees for upholding the arbitration award. Relying on the “American Rule,” which provides that each party bear its own attorneys’ fees unless a statute or contract provides otherwise, the Third Circuit found that Frison did not have a basis in statute or contract to recover fees for successfully defending the arbitration award. Although the fee-shifting provision of the American Inventors Protection Act allows the recovery of attorneys’ fees “in a civil action against the invention promoter,” the Third Circuit held that this action was brought by the invention promoter not under the American Inventors Protection Act for damages, but under the Federal Arbitration Act to vacate or modify an arbitration award.

Accordingly, the Third Circuit found that the district court did not err in denying Frison’s request for additional attorney’s fees.

Davison Design & Development Inc. v. Frison, No. 19-2045 (3d Cir. Aug. 11, 2020).