Despite a pending motion to compel arbitration in state court, a party (MetLife) petitioned a Tennessee district court under the Federal Arbitration Act for the same relief. As that Act itself does not create federal-question jurisdiction, the court sua sponte looked to the citizenship of the parties and the amount in controversy. Finding both requirements met, and declining to invoke the doctrine of abstention as the respondent requested, the court determined the merits of the parties’ claims. Applying federal law, the court looked at the contract created by the parties’ exchange of emails while the issue of arbitrability was pending before the state court. The pertinent email from MetLife stated that it was agreeable to mediating within 90 days of the state court’s ruling on the arbitration issue. In the Sixth Circuit, a party waives a contractual right to arbitrate by “(1) taking actions that are completely inconsistent with any reliance on the arbitration agreement; and (2) delaying its assertion to such an extent that the opposing party incurs actual prejudice.” MetLife merely expressed its openness to mediation. The respondent also challenged the validity of the arbitration provisions themselves, characterizing them as unenforceable contracts of adhesion, which the court could determine under the Federal Arbitration Act. As the parties agreed that New York law governed the arbitration provisions, the court looked at the elements of adhesion and determined the account application the respondent signed contained enforceable and valid arbitration provisions. As to the account applications respondent directed her MetLife representative to sign, the court reserved a ruling on the issue of agency. Metlife Securities, Inc. v. Holt, Case No. 2:16-cv-32 (USDC E.D. Tenn. July 21, 2016).
This post written by Nora A. Valenza-Frost.
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