In a Special Focus article, Rob DiUbaldo and Jeanne Kohler address the question of whether a reinsurer’s statute of limitations defense is an issue for arbitrators to resolve, or one that must be decided by a court of competent jurisdiction.
SECOND CIRCUIT REFUSES TO VACATE FINRA AWARD AS A MANIFEST DISREGARD OF THE LAW
Raymond James had initiated a FINRA arbitration because Singh, a financial advisor who was a registered representative of Raymond James, had refused to indemnify Raymond James pursuant to the terms of their agreement. Following an arbitration award in favor Raymond James, Singh unsuccessfully attempted to vacate the arbitration award against him by arguing the award was a manifest disregard of the law. On appeal, the higher court also rejected Singh’s arguments, noting that unless it had “serious reservations about the soundness of the arbitrator’s reading of the contract” it could not vacate the award. The court further pointed out that it was prohibited from second guessing the arbitrators construing of the contract. Singh’s argument that the amount of the award was not justified by the evidence did not fare any better; arbitrators are not required to disclose their rationale for an award, the record showed that there was evidence presented to the panel, and the amount awarded was less than the amount sought by Raymond James. Singh v. Raymond James Financial Services, Inc., Case No. 14-3970 (2d Cir. Dec. 9, 2015).
This post written by Barry Weissman.
See our disclaimer.
UBER’S ATTEMPT TO COMPEL CLASS ARBITRATION REJECTED DUE TO UNCONSCIONABILITY OF ARBITRATION AGREEMENT
The court held that a number of the provisions in the subject arbitration agreements were unconscionable, including a delegation clause providing that disputes involving the arbitration agreement be decided in arbitration. The court found this clause to be, not only ambiguous in light of a conflicting class action court jurisdiction clause, but unconscionable as a contract of adhesion that, when combined with a fee splitting provision, unfairly required “the payment of hefty fees simply to arbitrate arbitrability.” The court further found unconscionable the clauses requiring the drivers to waive class claims under the Private Attorney General Act (PAGA), under Ninth Circuit precedent and California state case law. Because the court found that the arbitration agreement was “permeated with unconscionability,” it determined that it would not sever particular clauses, but would reject the arbitration agreement entirely. As a result, the court did not consider plaintiffs’ alternative argument that the arbitration agreement was unenforceable because it violated the drivers’ rights under the National Labor Relations Act to file a class claim (as held by the NLRB in D.R. Horton). The court did appear to suggest, however, that such an argument would likely fail under the policies of the FAA as set forth by the U.S. Supreme Court in Concepcion. O’Connor v. Uber Technologies, Inc., Case No. 13-cv-03826-EMC (USDC N.D. Cal. Dec. 10, 2015).
This post written by Joshua S. Wirth, a law clerk at Carlton Fields Jorden Burt in Washington, DC.
See our disclaimer.
FILING OF FOUR LAWSUITS OVER TEN YEARS DID NOT WAIVE RIGHT TO ARBITRATE WHERE “LITIGATION MACHINERY” HAD NOT BEEN INVOKED
Grigsby & Associates appealed an order confirming an arbitration award of compensatory damages and attorney fees to M Securities, in a dispute relating to underwriting fees owed in a municipal bond transaction. Grigsby claimed that the award should be vacated because the defendants waived their right to arbitration after filing four lawsuits concerning the bond transaction over ten years. The Eleventh Circuit held, however, that despite the prior lawsuits, M Securities still had not “substantial[ly] invoke[d] the litigation machinery prior to demanding arbitration.” M Securities did not effectuate service against Grigsby in three of the lawsuits, and the fourth litigation did not progress beyond the filing stage. And while delay in seeking arbitration generally weighs in favor of finding waiver, it must be coupled with other substantial conduct “inconsistent with an intent to arbitrate,” which M Securities did not display here. Nor did Grigsby demonstrate prejudice given “the extremely limited nature” of the prior lawsuits. Grigsby & Associates, Inc. v. M Securities Investment, Case No. 13-15208 (11th Cir. Dec. 28, 2015).
This post written by Joshua S. Wirth, a law clerk at Carlton Fields Jorden Burt in Washington, DC.
See our disclaimer.
ARBITRATION AWARD OVERTURNED UNDER THE FAA BECAUSE THE PANEL WAS NOT IMPARTIAL
The New York Supreme Court vacated the award entered in an arbitration of television rights between Mid-Atlantic Sports Network (“MASN”), the Baltimore Orioles, the Commissioner of Baseball (“MLB”) and the Washington Nationals. The arbitration was held by the Revenue Sharing Definitions Committee of Major League Baseball (“RSDC”). MASN and the Orioles filed a petition to vacate the award, and MLB and the Nationals moved to confirm it.
In vacating the award, the court discussed various grounds for vacatur under the FAA: corruption, fraud, misconduct of the arbitrator, use of undue means to procure the award, evident partiality, and corruption. The court found evident partiality existed here, because the law firm and lawyers opposing MASN and the Orioles served as counsel in other matters for every other entity in the arbitration, including the individual arbitrators. The court speculated that, to the extent that “there is no authority for a finding of ‘evident partiality’ in such a relationship,” it is because “arbitrators in similar situations have disqualified themselves rather than risk a charge of partiality.” While the “appearance of bias” is not a basis for vacatur under the FAA and therefore not applicable, the court noted that such an appearance existed here. The court further found that the panel completely ignored the prejudice established by MASN and the Orioles, which reflected “an utter lack of concern for fairness of the proceeding that is ‘so inconsistent with basic principles of justice’ that the award must be vacated.” TCR Broadcasting Holding, LLP v. WN Partner, LLC, Case No. 652044/2014 (N.Y. Sup. Ct. Nov. 4, 2015).
This post written by Barry Weissman.
See our disclaimer.