Federal Cases
Pre-Agreement Disputes Not Covered by Broad Arbitration Agreement
Watson Wyatt Corp. v. SBC Holdings, Inc., No. CIV.05-71473, 2006 WL 2023549 (E.D. Mich. Jun 30, 2006)
6/30/2006
A Michigan federal court has compelled arbitration in a dispute over the Stroh’s Brewing Company pension plan. But the court split the baby, compelling arbitration for the claims arising after the parties signed a 2002 arbitration agreement and sending the pre-agreement disputes to court.
At issue in Watson Wyatt Corp. v. SBC Holdings, Inc., No. CIV.05-71473, 2006 WL 2023549 (E.D. Mich. Jun 30, 2006), is an accounting error made in 2001 by Watson Wyatt, which provided actuarial services to the former Stroh’s Brewing Company pension plan. The error affected several decisions made by SBC Holdings, the plan’s administrator, between 2001 and 2003. During this period, the parties entered into a broad agreement to arbitrate “any dispute or claim.” When SBC sued Watson Wyatt upon learning of the error, Watson Wyatt moved to compel arbitration... Full Story
Federal Court Says Arbitration Offers Employee a Broad Palate of Remedies
Palmer v. Prevost Car, Inc., No. 3:05-1040, 2006 WL 2035710 (M.D. Tenn. July 17, 2006)
7/17/2006
In upholding an employee’s arbitration agreement, a federal district court in Tennessee observed that the rules of arbitration “do not foreclose statutory remedies, but rather give the arbitrators a broader a palate from which to fashion a remedy.”
In Palmer v. Prevost Car, Inc., No. 3:05-1040, 2006 WL 2035710 (M.D. Tenn. July 17, 2006), Palmer and Prevost entered into employment agreement that provided for arbitration. Palmer later sued Prevost, claiming discrimination and retaliatory termination in violation of the Civil Rights Act... Full Story
Eighth Circuit Interprets Narrow Arbitration Clause - Narrowly
Lipton-U. City, LLC v. Shurgard Storage Centers, Inc., No. 06-1282, 2006 WL 2100763 (8th Cir. July 31, 2006)
7/31/2006
According to the Eighth Circuit Court of Appeals, a narrow arbitration clause covering additional terms and conditions does not extend to the essential term of purchase price.
In Lipton-U. City, LLC v. Shurgard Storage Centers, Inc., No. 06-1282, 2006 WL 2100763 (8th Cir. July 31, 2006), Lipton brought suit to compel Shurgard to arbitrate the purchase price of a storage facility it operated under a lease. The parties entered into a lease agreement with a purchase option, but the district court rescinded the purchase option price formula due to a mistake regarding the property’s value... Full Story
Appraisal is Subject to More Judicial Scrutiny Than an Arbitration Award
Salt Lake Tribune Publishing Co., LLC v. Management Planning, Inc., No. 05-4316, 2006 WL 2006016 (10th Cir. July 19, 2006)
7/19/2006
The Tenth Circuit Court of Appeals held that under New Jersey law, a court may review an appraisal for a mistake of law.
In Salt Lake Tribune Publishing Co., LLC v. Management Planning, Inc., No. 05-4316, 2006 WL 2006016 (10th Cir. July 19, 2006), Tribune Publishing had an option agreement whereby it could reacquire a newspaper by paying fair market value. The option agreement provided that fair market value would be determined by a detailed appraisal procedure.
Following a disputed appraisal, Tribune Publishing brought suit challenging the appraisal on the ground that it used a definition of “fair market value” different from the one specified in the option agreement. The district court treated the appraisal as an arbitration award and rejected the challenge upon a limited review... Full Story
Contract Incorporating Arbitration Rules Means Rules in Effect at Time of Dispute – Not Time of Contract Formation
Southern Farms Ltd. v. American Farmland Investors Corp., No. 6:06-cv-309-Orl-22DAB, 2006 WL 2038532 (M.D. Fla. July 19, 2006)
7/19/2006
When parties incorporate arbitration rules into their agreement, the rules in effect at the time of the dispute apply, not the rules in effect at the time the agreement was formed, a Florida federal court held.
In Southern Farms Ltd. v. American Farmland Investors Corp., No. 6:06-cv-309-Orl-22DAB, 2006 WL 2038532 (M.D. Fla. July 19, 2006), Southern attempted to exercise an option agreement to purchase property leased from American. The agreement provided for appraisers to determine the fair market value of the property in the event that Southern exercised the option... Full Story
Mitigation of Arbitration Costs a Necessary Step Before Judicial Relief
U.S. ex rel. Grober v. Summit Medical Group, Inc., No. 02-177-C, 2006 WL 2037391 (W.D. Ky. July 18, 2006)
7/18/2006
According to a Kentucky federal court, judicial relief for high arbitration costs is only available after the complaining party has taken reasonable steps to reduce the cost of arbitration.
In U.S. ex rel. Grober v. Summit Medical Group, Inc., No. 02-177-C, 2006 WL 2037391 (W.D. Ky. July 18, 2006), Grober received a $42,175 bill from the American Arbitration Association (AAA) after arbitrating his claim of retaliation against his employer, Summit. He petitioned the court to rescind its earlier order compelling arbitration because of the excessive bill... Full Story
Arbitrator Should Decide Whether to Stay Arbitration Pending Outcome of State Administrative Proceeding
Coffee Beanery Ltd. v. WW L.L.C., No. 06-10408, 2006 WL 2033929 (E.D. Mich. July 18, 2006)
7/18/2006
A federal district court in Michigan held that the arbitrator should decide whether to stay arbitration pending the outcome an administrative proceeding because the underlying challenge was to the entire agreement, not just the arbitration clause.
In Coffee Beanery Ltd. v. WW L.L.C., No. 06-10408, 2006 WL 2033929 (E.D. Mich. July 18, 2006), WW and Coffee Beanery entered into a franchise agreement containing an arbitration clause... Full Story
Court Allows Limited Discovery in Motion to Compel Arbitration
Cunningham v. Van Ru Credit Corporation, No. 06-10452, 2006 WL 2056576 (E.D. Mich. July 21, 2006)
7/21/2006
A party responding to a motion to compel arbitration may engage in limited discovery relating to the enforceability of an arbitration agreement, a federal court in Michigan held.
In Cunningham v. Van Ru Credit Corporation, No. 06-10452, 2006 WL 2056576 (E.D. Mich. July 21, 2006), Cunningham brought a claim alleging that Van Ru violated the Fair Debt Collection Practices Act. Van Ru petitioned the court to compel arbitration based on an alleged arbitration agreement in Cunningham’s credit agreement... Full Story
Employment Arbitration Agreement That Can Be Unilaterally Altered Fails for Lack of Mutuality
Pellow v. Daimler Chrysler Services North America, LLC, No. 05-73815, 2006 WL 2042509 (E.D. Mich. July 20, 2006)
7/20/2006
A federal district court in Michigan denied an employer’s motion to compel arbitration because the employer’s right to unilateral modification rendered the arbitration agreement unenforceable for lack of mutuality.
In Pellow v. Daimler Chrysler Services North America, LLC, No. 05-73815, 2006 WL 2042509 (E.D. Mich. July 20, 2006), Pellow sued his former employer, Daimler Chrysler, for wrongful termination. Daimler moved to compel arbitration pursuant to a dispute resolution agreement in which “Daimler Chrysler reserve[d] the right to amend, modify, suspend, or terminate all or part of this [procedure] at any time at its sole discretion"... Full Story
Soliciting Arbitrator’s Firm After an Arbitration is not Grounds to Vacate the Award
Canadian Aviation Simulator Services, Inc. v. Thales Training and Simulation, Ltd., No. 06 Civ.1911(SAS), 2006 WL 1975932 (S.D.N.Y. July 13, 2006)
7/13/2006
A member of an arbitration panel is not evidently partial when one of the parties to the arbitration contacts the arbitrator’s law firm about serving as its counsel after the panel has completed deliberations and issued its award, the United States District Court for the Southern District of New York held.
In Canadian Aviation Simulator Services, Inc. v. Thales Training and Simulation, Ltd., No. 06 Civ.1911(SAS), 2006 WL 1975932 (S.D.N.Y. July 13, 2006), Canadian petitioned the court to vacate an arbitration award issued in Thales’ favor on grounds of arbitrator impartiality... Full Story
Continuing Arbitration After Participant Walks Out is not Misconduct
Kober v. Kelly, No. 06 Civ. 3341(MGC), 2006 WL 1993248 (S.D.N.Y. July 18, 2006)
7/18/2006
According to the United States District Court for the Southern District of New York, an arbitration panel’s decision to render an award absent a full hearing and ex parte communication after a party walked out of the arbitration did not deny that party a fair hearing, and the ex parte communication did not influence the award.
In Kober v. Kelly, No. 06 Civ. 3341(MGC), 2006 WL 1993248 (S.D.N.Y. July 18, 2006), Kober moved to vacate an arbitration award rendered against him. During the arbitration proceedings, Kober’s counsel left the hearing before presenting evidence. The arbitrators requested him to return and complete the hearing, but he would not... Full Story
Age Discrimination Claims Can Still be Arbitrated
O’Kelly v. Vanguard Integrity Professionals, Inc., No. 2:06-CV-00170-RCJ-LRL, 2006 WL 2057225 (D. Nev. July 21, 2006)
7/21/2006
A federal district court in Nevada found that age discrimination claims can be arbitrated despite the requirement of a “knowing and voluntary” waiver. However, the Court also found that the discrimination claim did not fall within the arbitration agreement at issue.
In O’Kelly v. Vanguard Integrity Professionals, Inc., No. 2:06-CV-00170-RCJ-LRL, 2006 WL 2057225 (D. Nev. July 21, 2006), O’Kelly sued his former employer, Vanguard, for age discrimination. Vanguard moved to compel arbitration pursuant to the following arbitration clause: “In the event of any dispute arising under this Employment Agreement, including any dispute regarding the nature, scope or quality of services provided by either Party hereto, it is hereby agreed that such dispute shall be resolved by binding arbitration”... Full Story
Arbitrator Decides Arbitrability, Statute of Limitations and Condition Precedent Issues
Hausmann v. Thomas, No. 05-CV-1735-BR, 2006 WL 2054642 (D. Or. July 21, 2006)
7/21/2006
An arbitrator, not the court, should decide the issues of whether a condition precedent to an arbitration agreement exists, whether the statute of limitations has run, and whether a claim is covered by the arbitration agreement, a federal court in Oregon held.
In Hausmann v. Thomas, No. 05-CV-1735-BR, 2006 WL 2054642 (D. Or. July 21, 2006), Hausmann contracted with Thomas to build a home, and the parties’ contract contained an arbitration agreement. After the home was completed, Hausmann discovered that the construction was defective and brought claims against Thomas alleging negligence and breach of contract... Full Story
Florida Court Says “Suit” Implies Litigation Instead of Arbitration
Kel Homes, LLC v. Burris, No. 2D05-3547, 2006 WL 2033904 (Fla. Dist. Ct. App. July 21, 2006)
7/21/2006
The Florida District Court of Appeals held that a claim for specific performance did not fall within the scope of an arbitration clause because a separate provision of the contract specifically permitted a “suit for specific performance.”
In Kel Homes, LLC v. Burris, No. 2D05-3547, 2006 WL 2033904 (Fla. Dist. Ct. App. July 21, 2006), Kel Homes agreed to build a house for the Burrises pursuant to a contract containing an arbitration clause. When hurricanes hit the area, Kel attempted to terminate the contract based on an “acts of God” provision. In response, the Burrises sued Kel, seeking specific performance and claiming monetary damages for fraud in the inducement. Kel moved for dismissal pursuant to the arbitration clause, but the trial court denied the motion... Full Story
Arbitration Agreement May Encompass Statutory Employment Claims Without Explicit Reference
Kiesel v. Lehigh Valley Eye Center, P.C., No. 05-4796, 2006 WL 1985788 (E.D. Pa. July 12, 2006)
7/12/2006
A federal district court in Pennsylvania stayed further proceedings pending arbitration upon finding that the parties’ arbitration agreement was enforceable and encompassed statutory claims of discrimination.
In Kiesel v. Lehigh Valley Eye Center, P.C., No. 05-4796, 2006 WL 1985788 (E.D. Pa. July 12, 2006), Kiesel, a 72-year-old ophthalmologist, worked for Lehigh under an employment agreement that provided for arbitration of “[a]ny controversy or disagreement between the parties"... Full Story
Sex Discrimination Allegations in Wisconsin Move Forward to Arbitration
Scaffidi v. Fiserv, Inc., No. 05-C-1046, 2006 WL 2038348 (E.D. Wis. July 20, 2006)
7/20/2006
According to a Wisconsin federal court, sex discrimination allegations are arbitrable so long as the arbitration agreement is a valid contract.
Mia Scaffidi sued her former employer, Fiserv, for sex discrimination and retaliation in Scaffidi v. Fiserv, Inc., No. 05-C-1046, 2006 WL 2038348 (E.D. Wis. July 20, 2006). Fiserv moved the court to compel arbitration according to an employment arbitration agreement Scaffidi executed... Full Story
Court Decision Points to Looming Question: Is “Manifest Disregard of the Law” a Statutory or Common Law Basis for Vacating an Arbitration Award?
U.S. ex rel. Watkins v. AIT Worldwide Logistics, Inc., No. 2:04CV115, 2006 WL 2193120 (E.D. Va. Aug. 1, 2006)
8/1/2006
Circuit courts have long applied varying standards for “manifest disregard of the law,” which is widely regarded as a common law, nonstatutory basis for vacating an arbitration award. Now, on the heels of a petition for certiorari arguing that there are no common law bases for vacatur, a federal district court in Virginia has deepened the divide by treating manifest disregard as a statutory creature.
In U.S. ex rel. Watkins v. AIT Worldwide Logistics, Inc., No. 2:04CV115, 2006 WL 2193120 (E.D. Va. Aug. 1, 2006), Air Cargo agreed to sell freight transportation services for AIT. Under the agreement, Air Cargo was supposed to enter information for each sale into AIT’s computer system. The agreement, which contained an arbitration clause, also required Air Cargo to indemnify AIT for “any and all claims, liabilities, costs and expenses . . . arising out of or in connection with” Air Cargo’s services... Full Story
Be Warned “Poor Losers”: 11th Circuit Threatens Sanctions Against Those Who Bring Baseless Arbitration Appeals
B.L. Harbert International, LLC v. Hercules Steel Co., 441 F.3d 905 (11th Cir. 2006)
2/28/2006
Wanting to ensure that parties in arbitration get the benefits of a faster and less expensive procedure than litigation, the Eleventh Circuit issued a stern warning that it is “ready, willing, and able to consider imposing sanctions” on those considering appealing arbitration decisions without a strong justification under the manifest disregard of law standard.
The parties in B.L. Harbert International, LLC v. Hercules Steel Co., 441 F.3d 905 (11th Cir. 2006), became involved in litigation over the length of time it took Hercules, a construction subcontractor, to finish its work for Harbert. The parties arbitrated the dispute, and the arbitrator determined that Hercules performed its work in a timely manner and awarded Hercules monetary relief... Full Story
Court Sanctions Party for Frivolous Arbitration Appeal
Rueter v. Merrill Lynch, Pierce, Fenner & Smith, Inc., No. 2:06-CV-868-VEH, 2006 WL 2085240 (N.D. Ala. Jul 18 2006
7/18/2006
An Alabama federal court has sanctioned a litigant for bringing a frivolous motion to vacate an arbitration award, following the Eleventh Circuit’s recommendation that courts discourage frivolous appeals by sanctioning arbitration’s “poor losers.” See B.L. Harbert Int’l, LLC v. Hercules Steel Co., 441 F.3d 905 (11th Cir. 2006).
In Rueter v. Merrill Lynch, Pierce, Fenner & Smith, Inc., No. 2:06-CV-868-VEH, 2006 WL 2085240 (N.D. Ala. Jul 18 2006), the Rueters sued Merrill Lynch for allegedly mismanaging the couple’s investment portfolio. When the Rueters lost at arbitration, they filed a motion to vacate the arbitration award, arguing that the arbitration panel had manifestly disregarded the law, that the decision was arbitrary and capricious, and that the arbitrators committed misconduct by refusing to consider the expert testimony the Rueters proffered... Full Story
State Cases
Participation in Arbitration Does Not Relieve Insurance Company of Potential Liability for Bad Faith Conduct
Boykin v. State Farm General Insurance Co., No. F047264, 2006 WL 1047031 (Cal. App. April 21, 2006)
4/21/2006
An insurance company that participates in arbitration and pays the arbitration award may still be subject to bad faith claims brought in a judicial forum, a California state court held.
In Boykin v. State Farm General Insurance Co., No. F047264, 2006 WL 1047031 (Cal. App. April 21, 2006), Boykin and State Farm disputed over payment of an insurance policy after Boykin’s home was damaged by fire. The parties engaged in “appraisal,” a form of arbitration provided for in the insurance policy... Full Story
Arbitration Agreement Must be Included or Incorporated Into Preliminary Report in Title Insurance Policies
Kleveland v. Chicago Title Insurance Co., 2d Civil No. B187427, 2006 WL 2045845 (Cal. Ct. App. July 24, 2006)
7/24/2006
According to a California state court, an arbitration clause in a title insurance policy is only enforceable if the clause is included or incorporated into the terms of the preliminary title report.
In Kleveland v. Chicago Title Insurance Co., 2d Civil No. B187427, 2006 WL 2045845 (Cal. Ct. App. July 24, 2006), Kleveland brought an action for breach of contract against Chicago Title after he discovered that the insured property included an easement that was not mentioned in the preliminary title report. Chicago Title appealed the decision denying its motion to compel arbitration... Full Story
Stay of Court Proceedings Eliminates Risk of Conflicting Rulings
Yin v. Zhong, No. B185869, 2006 WL 2076347 (Cal. Ct. App. July 27, 2006)
7/27/2006
The California Court of Appeal found that a cross-complaint not subject to arbitration could not give rise to conflicting rulings because the trial court stayed further proceedings pending the outcome of arbitration.
In Yin v. Zhong, No. B185869, 2006 WL 2076347 (Cal. Ct. App. July 27, 2006), Zhong agreed to sell real property to Yin under a purchase agreement providing for arbitration. When Zhong refused to sell, Yin petitioned the court for an order compelling arbitration. Three weeks later, Zhong filed a cross-complaint against his real estate broker alleging that he committed fraud in brokering the sale... Full Story
Under Florida Law, Party Waived Right to Arbitrate by Filing a Lawsuit Without Simultaneously Requesting Arbitration
Frontage Road Partners, LLC v. McMullen, No. 2D06-1439, 2006 WL 2061350 (Fla. Dist. Ct. App. July 26, 2006)
7/26/2006
The Florida District Court of Appeals held that a party waived its right to arbitration by filing a complaint and notice of lis pendens without simultaneously requesting a stay and order compelling arbitration.
In Frontage Road Partners, LLC v. McMullen, No. 2D06-1439, 2006 WL 2061350 (Fla. Dist. Ct. App. July 26, 2006), Frontage Road filed a notice of lis pendens along with a complaint for specific performance of a purchase agreement containing an arbitration clause... Full Story
Challenges to a Contract as a Whole are Arbitrable
Holman Dealerships, Inc. v. Davis, 2006 WL 2052724 (Miss. Ct. App. July 25, 2006)
7/25/2006
According to the Mississippi Court of Appeals, challenges to a contract as a whole are still subject to the terms of the arbitration agreement.
In Holman Dealerships, Inc. v. Davis, 2006 WL 2052724 (Miss. Ct. App. July 25, 2006), Vera Davis, along with her son and daughter-in-law, Paul and Catherine Davis, sued Holman Dealerships. Their complaint alleged fraud and misrepresentation related to the sale of a Volkswagon vehicle. Vera had purchased the vehicle for Paul and Catherine... Full Story
Missing Recording of Damaging Admission Not a Basis for Vacating Arbitration Award
Groves v. Merrill Lynch, Pierce, Fenner & Smith, Inc., No. A-6418-04T2, 2006 WL 2059514 (N.J. Super. Ct. App. Div. July 26, 2006)
7/26/2006
The New Jersey Superior Court held that a missing audio recording of a damaging admission was not a basis for vacating an arbitration award because the missing recording could not have affected the outcome of the arbitration.
In Groves v. Merrill Lynch, Pierce, Fenner & Smith, Inc., No. A-6418-04T2, 2006 WL 2059514 (N.J. Super. Ct. App. Div. July 26, 2006), Groves initiated arbitration claiming that Merrill Lynch mishandled his financial planning. Following a four-day hearing, the arbitration panel denied Groves any relief... Full Story
In Texas, Arbitrator’s Refusal to Postpone Hearing Not Grounds for Vacatur When Party Seeking Postponement Does Not Show Sufficient Cause
Gold Rush, Inc. v. Wayne, No. 13-05-497-CV, 2006 WL 2076725 (Tex. App. July 27, 2006)
7/27/2006
An arbitrator’s refusal to postpone a hearing, despite a party’s inability to attend due to health reasons, is not grounds for vacating the arbitration award unless the party who could not attend the hearing shows sufficient cause by presenting an affidavit from medical personnel, a Texas state court held.
In Gold Rush, Inc. v. Wayne, No. 13-05-497-CV, 2006 WL 2076725 (Tex. App. July 27, 2006), Gold Rush sought an order vacating an arbitration award. Wayne, a landlord, had accelerated Gold Rush’s rent due under a lease after Gold Rush defaulted in payment of a month’s rent... Full Story
ADR Legislation & Regulation
No legislative/regulatory updates this week.
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