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The court applied a two-part “intertwined-ness test” to determine whether an arbitration agreement allowed a non-signatory to invoke equitable estoppel to compel arbitration. The first prong of the test examines whether the claims advanced by the signatory to the arbitration agreement arise under the same subject matter of the agreement. The second prong asks whether the non-signatory has a “close relationship” to a signatory of the agreement.

The first prong is heavily fact dependent. Here, the court held it was met because the “bulk of Plaintiffs’ claims … [arose] from the formation, execution, and existence of the Reinsurance Agreements,” which contained the arbitration agreement. The court was also influenced by the fact that the plaintiffs simultaneously filed a complaint in court and a demand for arbitration, both of which provided nearly identical factual allegations, alleged injuries, and theories of the case.

The second prong “is centered on the role of the non-signatory defendants when the misconduct occurred.” The court noted that an agency relationship between the non-signatory and a signatory may be sufficient to permit the non-signatory to compel arbitration. The fact that the plaintiffs also connected the non-signatory defendants to a signatory through conspiracy allegations clinched the matter for the court. The defendants had the requisite “close relationship” with a signatory to allow them to compel arbitration. Bankers Conseco Life Insurance Company v. Feuer, Case No. 16-Civ-7646 (USDC S.D.N.Y. Mar. 15, 2018).

This post written by Benjamin E. Stearns.

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Where a Loan Agreement’s arbitration provision stated disputes “will be resolved by Arbitration, which shall be conducted by the Cheyenne River Sioux Tribal Nation by an authorized representative in accordance with its consumer dispute rules and the terms of this Agreement,” the Third Circuit Court held, on review, that the Tribe was required to be involved in the arbitration. This, however, proved impossible, because the Court found no such tribal arbitral forum exists.

The Court found that “[t]he Choice of Arbitrator provision allows the parties to select the AAA, JAMS, or some other agreed upon organization ‘to administer the arbitration… [under] the chosen arbitration organization’s rules and procedures… to the extent that those rules and procedures do not contradict either the law of the [Tribe] or the express terms of [the Loan] Agreement.’” However, the Court declined to extend the Choice of Arbitrator provision to give parties the right to arbitrate before a non-Tribal representative, as it would be irreconcilable with the forum selection clause and the plain language of the provision.

The arbitration agreement was invalidated because the Tribal “arbitration provision was an integral, not ancillary, part of the parties’ agreement to arbitration, despite the inclusion of a severability clause in the contract.” References in the Loan Agreement “reflect that the primary purpose of the Loan Agreement was to arbitrate disputes subject to [the Tribe’s] oversight and its laws.”

Macdonald v. CashCall, Inc., et al., No. 17-261 (3d Cir. Feb. 27, 2018)

This post written by Nora A. Valenza-Frost.

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The Sixth Circuit Court of Appeals has found that Kentucky’s Insurers Rehabilitation and Liquidation Law (IRLL) did not reverse-preempt the Federal Arbitration Act so as to prohibit the arbitration of a dispute when that dispute had already been removed to a federal district court.

The case arose out of the insolvency of the Kentucky Health Co-op, a non-profit health insurance company. The Kentucky Department of Insurance instituted a delinquency proceeding in Franklin County Circuit court and, as liquidator, brought a collateral proceeding against CGI Technologies and Solutions, Inc. CGI had provided claims processing services to the Kentucky Health Co-op under an agreement providing that all disputes would be resolved by arbitration and that Kentucky law would apply. CGI removed the case to federal court based on diversity jurisdiction and moved to compel arbitration, and the liquidator moved to remand the matter to state court. The district court refused to remand the case but denied the motion to compel arbitration, and CGI appealed the denial of the motion to compel arbitration, but did not appeal the denial of the motion to remand.

On appeal, the liquidator argued that federal law favoring arbitration was reverse-preempted by Kentucky law providing that the Franklin Circuit Court has exclusive jurisdiction over all matters relating to an insolvent insurer’s liquidation. Such reverse preemption, which is authorized by the McCarran-Ferguson Act, applies when 1) the state statute was enacted for the purpose of regulating the business of insurance; 2) the federal statute involved does not specifically relate to the business of insurance; and 3) the application of the federal statute would invalidate, impair, or supersede the state statute regulating insurance. The Sixth Circuit easily found that the first two of the requirement for preemption were satisfied, but found that the third was not. The alleged impairment of the state statute was the fact that it would deny the Franklin Circuit Court of exclusive jurisdiction over the matter as provided for by the IRLL. But since the Liquidator had not appealed the denial of the motion to remand, no matter what the court decided the action would remain in federal court, and not be returned to state court. Finding that enforcing the arbitration clause would thus not invalidate, impair, or supersede a state statute regulating insurance, the Sixth Circuit vacated the order denying CGI’s motion to compel arbitration.

Atkins v. CGI Technologies and Solutions, Inc., Case No. 17-5506 (6th Cir. Feb. 9. 2018)

This post written by Jason Brost.

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The Eleventh Circuit recently upheld a district court’s denial of RBC Bank’s latest attempt to compel arbitration of a dispute with banking customers over allegedly fraudulent overdraft practices. The bank had previously lost its bid to enforce the arbitration provision in a 2008 customer account agreement (“CAA”). PNC Bank, which had acquired RBC, issued a new CAA in 2012 that lacked an arbitration provision and purported to be binding on account holders who did not opt out. The lower court then denied RBC’s renewed motion to compel arbitration based on the 2008 CAA, finding the 2012 CAA superseded the 2008 CAA. Shortly thereafter, PNC distributed a 2013 amended CAA including an arbitration provision that purported to apply retroactively to existing claims and to be binding on account holders who did not opt out. The present opinion came in review of the district court’s subsequent denial of another motion to compel arbitration, this one based upon the 2013 CAA, finding that PNC waived the right to pursue arbitration under the 2013 CAA where it did not issue the amendment until three years after this litigation began, failed to argue the 2013 CAA for almost two years after its purported effective date, and previously pursued arbitration under the 2008 CAA instead. The court also alternatively held the 2013 CAA amendment was not effective because both parties did not “expressly” agree to the arbitration provision addition.

Upon review, the Eleventh Circuit affirmed the denial of arbitration but for different reasons than the trial court articulated. The appellate court did not address waiver because it instead found PNC failed to demonstrate the necessary meeting of the minds regarding arbitration via the 2013 CAA. The court’s analysis centered on two primary considerations: (1) that PNC communicated with the plaintiff regarding the purported retroactive effect of the arbitration provision (which would effectively end the litigation) directly rather than through counsel, and (2) plaintiff repeatedly evinced his resistance to arbitration notwithstanding his failure to opt out of the 2013 CAA. Specifically, the court found PNC’s failure to communicate through plaintiff’s counsel to be material to its interpretation of the 2013 CAA’s retroactive effect. The contrast between plaintiff’s “uncounseled,” non-response to the opt out offer and the “counseled” response of repeated and ongoing opposition to arbitration demonstrated plaintiff could not have agreed to retroactive application of the arbitration agreement.

The court rejected PNC’s argument that refusing to enforce the 2013 CAA would be asymmetric considering the court previously enforced the 2012 CAA, because then plaintiff was not demonstrating inconsistent behavior, was seeking to enforce an agreement against PNC that PNC drafted, and did not exhibit ethically questionable behavior. Additionally, the court rejected PNC’s argument that plaintiff’s filing of an amended complaint revived its arbitration rights because the court’s conclusion that plaintiff did not agree to the 2013 CAA necessarily meant there were no arbitration rights to revive, and that the amended complaint’s changes would not warrant revival.

Dasher v. RBC Bank (USA), No. 15-13871 (11th Cir. Feb. 13, 2018).

This post written by Thaddeus Ewald .

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