ADR LAW & POLICY UPDATE

Federal Cases

Use of the Word “May” Does Not Mean Arbitration Is Optional
The Detroit Edison Co. v. The Burlington Northern and Santa Fe Railway Co., No. 05-74873, 2006 WL 2246172 (E.D. Mich. Aug. 7, 2006)
8/7/2006

Citing the federal policy favoring arbitration, a federal district court in Michigan concluded that arbitration was mandatory even though the arbitration clause used the word “may” instead of “shall.”

In The Detroit Edison Co. v. The Burlington Northern and Santa Fe Railway Co., No. 05-74873, 2006 WL 2246172 (E.D. Mich. Aug. 7, 2006), BNSF agreed to transport coal for Detroit Edison. Their agreement included an arbitration clause providing that in the event of a dispute, “either party may seek resolution of the question or controversy pursuant to binding arbitration"... Full Story

Another Frivolous Arbitration Appeal Draws Sanction in Wake of Hercules Steel
SII Investments, Inc. v. Jenks, No. 8:05 CV 2148 T 23MAP, 2006 WL 2092639 (M.D. Fla. July 27, 2006)
7/27/2006

Just days after an Alabama federal court sanctioned a party for filing a frivolous motion to vacate an arbitration award, a federal district court in Florida has followed suit. Both decisions relied on B.L. Harbert International, LLC v. Hercules Steel Co., 441 F.3d 905 (11th Cir. 2006), in which the Eleventh Circuit warned losing parties in arbitration that they would be sanctioned for frivolous challenges to awards.

SII Investments, Inc. v. Jenks, No. 8:05 CV 2148 T 23MAP, 2006 WL 2092639 (M.D. Fla. July 27, 2006), involved a pair of jilted investors, as did the case decided days earlier in Alabama. See Rueter v. Merrill Lynch, Pierce, Fenner & Smith, Inc., No. 2:06-CV-868-VEH, 2006 WL 2085240 (N.D. Ala. Jul 18 2006)... Full Story

Colorado Court Allows Non-Signatory to Join Arbitration
RMES Communications, Inc. v. Qwest Bus. Gov't Servs., Inc., No. 05-cv-02185-LTB-MJW, 2006 WL 2128692 (D. Colo. July 27, 2006)
7/27/2006

A Colorado federal court held that a party who was not a signatory to an arbitration agreement may join the arbitration because the claims against the party and the signatory were intertwined and arose from the same factual allegations.

In RMES Communications, Inc. v. Qwest Business Government Services, Inc., No. 05-cv-02185-LTB-MJW, 2006 WL 2128692 (D. Colo. July 27, 2006), Johnson, an individual defendant, wanted to join the arbitration of a dispute between RMES and Qwest, in which Johnson was named as a defendant... Full Story

Arbitration Award Upheld in Face of Public Policy Challenge
Mikkelsen v. ConAgra Foods, Inc., No. 1:05-cv-43, 2006 WL 2221438 (D. N.D. July 27, 2006)
7/27/2006

Citing narrow review of arbitration awards and a lack of a well-defined public policy consideration, a federal court in North Dakota refused to vacate an arbitration award.

In Mikkelsen v. ConAgra Foods, Inc., No. 1:05-cv-43, 2006 WL 2221438 (D. N.D. July 27, 2006), ConAgra contracted to purchase grain from Mikkelsen. The parties disputed whether the contract was a cash sale contract or a deferred-pricing contract that takes into account market fluctuations... Full Story

Courts Retain Jurisdiction to Protect and Enforce Arbitration
Keystone Fruit Mktg., Inc. v. Brownfield, No.CV-05-5087-RHW, 2006 WL 2096071 (E.D. Wash. July 26, 2006)
7/26/2006

According to a Washington federal court, courts retain jurisdiction over arbitration proceedings to enforce and protect the sanctity of the arbitral process.

The Court compelled arbitration in Keystone Fruit Marketing, Inc. v. Brownfield, No.CV-05-5087-RHW, 2006 WL 2096071 (E.D. Wash. July 26, 2006) in a dispute over the sale of sweet onions. After Keystone, a sweet onion seller, accused Brownfield, a competitor, of resisting arbitration with the arbitrator the parties had previously selected... Full Story

Taking a Minority Position, Federal Court in Michigan Strikes Class Action Waiver and Denies Arbitration to Parties
Wong v. T-Mobile USA, Inc., No. 05-73922, 2006 WL 2042512 (E.D. Mich. July 20, 2006)
7/20/2006

A federal district court in Michigan determined that a class action waiver in an arbitration agreement was unenforceable, finding that a class litigation was necessary for the plaintiff to vindicate his statutory rights. This decision runs counter to the significant majority of courts which have held that class action waivers are enforceable.

In Wong v. T-Mobile USA, Inc., No. 05-73922, 2006 WL 2042512 (E.D. Mich. July 20, 2006), T-Mobile provided cellular phone service to Wong under a contract containing an arbitration agreement and class action waiver... Full Story

Arbitrators Empowered to Decide Consolidation Dispute
Markel International Insurance Co. v. Westchester Fire Insurance Co., No. 05-5522 (WHW), 2006 WL 2310788 (D.N.J. Aug. 10, 2006)
8/10/2006

A federal district court in New Jersey held that an arbitrator must decide whether to consolidate claims brought against separate parties under separate agreements. The Court followed the holdings of other courts which interpreted Green Tree Financial Corp. v. Bazzle, 539 U.S. 444 (2003) to apply to consolidation issues.

In Markel International Insurance Co. v. Westchester Fire Insurance Co., No. 05-5522 (WHW), 2006 WL 2310788 (D.N.J. Aug. 10, 2006), Westchester filed a single arbitration claim against Markel and Lloyd’s seeking reimbursement pursuant to two separate reinsurance contracts. Markel and Lloyd’s moved to compel separate arbitrations, while Westchester moved to have its claims heard in a consolidated arbitration. The arbitration agreements at issue were silent on the issue of consolidation... Full Story

Ninth Circuit Upholds Arbitration Agreement Invoking NASD Rules, Even Though NASD Declined to Administer Arbitration
Reddam v. KPMG LLP, Nos. 05-56664, 05-56671, 2006 WL 2291299 (9th Cir. Aug. 10, 2006)
8/10/2006

The Ninth Circuit Court of Appeals has upheld an arbitration agreement requiring the use of NASD arbitration rules, even though the NASD refused to administer the case because neither party was an NASD member. Holding that there was no evidence that the naming of the NASD was central to the arbitration agreement, the Court overruled a lower court and allowed the arbitration to proceed.

In Reddam v. KPMG LLP, Nos. 05-56664, 05-56671, 2006 WL 2291299 (9th Cir. Aug. 10, 2006), Reddam sued KPMG, Deutsche Bank, and two other entities, alleging that they recommended a tax reduction strategy which resulted in substantial tax liability... Full Story

State Cases

Appellate Court Requires Arbitration Awards to be Confirmed Absent Valid Challenge
NCO Portfolio Management, Inc. v. McGill, No. 21229, 2006 WL 2041476 (Ohio Ct. App. Jul 21, 2006)
7/21/2006

An Ohio appellate court has reversed a lower court’s decision to vacate a pair of arbitration awards sua sponte. A court does not have discretion to vacate an award on its own, and a signature on an arbitration agreement is not required for confirmation, the Court held.

In NCO Portfolio Management, Inc. v. McGill, No. 21229, 2006 WL 2041476 (Ohio Ct. App. Jul 21, 2006), and MBNA America Bank, N.A. v. O'Brien, No. 21216, 2006 WL 2041478 (Ohio Ct. App. Jul 21, 2006), the consumers, McGill and O’Brien, opened up credit card accounts with MBNA. Pursuant to the terms of the cardholder agreements, the two agreed to arbitrate all disputes. When both consumers defaulted on the accounts, MBNA and NCO, MBNA’s assignee, submitted successful claims to arbitration... Full Story

Arbitrator Cannot Manifestly Disregard Unsettled Law, Connecticut Supreme Court Holds
Economos v. Liljedahl Brothers, Inc., No. 17394, 2006 WL 2109488 (Conn. Aug. 8, 2006)
8/8/2006

An arbitrator does not manifestly disregard the law when applying a statute that is susceptible to varying interpretations and has not been interpreted by the higher courts of the state, the Supreme Court of Connecticut held.

In Economos v. Liljedahl Brothers, Inc., No. 17394, 2006 WL 2109488 (Conn. Aug. 8, 2006), Economos contracted with Liljedahl to make improvements on the Economos’ home. While remodeling was in progress, Liljedahl submitted change orders for additional work completed on the project, and Economos never signed these orders... 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

Orders Compelling Arbitration are Non-Appealable in Missouri
Burris v. American Heritage Homes, LLC, No. ED 88003, 2006 WL 2129303 (Mo. Ct. App. August 1, 2006)
8/1/2006

According to a Missouri state court, parties cannot appeal an order compelling arbitration.

In Burris v. American Heritage Homes, LLC, No. ED 88003, 2006 WL 2129303 (Mo. Ct. App. August 1, 2006), Kerrie Burris, as the representative of a putative class, sued Heritage for defects in homes it had constructed. Heritage filed a motion to compel arbitration according to the terms of the sale contract. The trial court granted the motion and Burris appealed... Full Story

Repossessing Automobile Does Not Waive Right to Arbitration, Ohio Court Holds
Muhammad v. Serpentini Chevrolet, Inc., 2006 WL 2192096 (Ohio App. Aug. 3, 2006)
8/3/2006

A car dealership that repossesses a vehicle does not waive its right to submit disputes to binding arbitration as provided under the parties’ sales contract, an Ohio state court held.

In Muhammad v. Serpentini Chevrolet, Inc., 2006 WL 2192096 (Ohio App. Aug. 3, 2006), Muhammad purchased an automobile from Serpentine under a Retail Installment Sales Contract. The agreement contained an arbitration clause, requiring that all disputes between the parties be submitted to binding arbitration... Full Story

Arbitration Agreement Upheld Despite Administrator’s Refusal to Accept the Matter
Deeds v. Regence Blueshield of Idaho, No. 31180, 2006 WL 2089247 (Idaho July 28, 2006)
7/28/2006

The Idaho Supreme Court held that arbitration should proceed even though the designated administrator refused to accept the matter for lack of a post-dispute agreement to arbitrate.

In Deeds v. Regence Blueshield of Idaho, No. 31180, 2006 WL 2089247 (Idaho July 28, 2006), Deeds sued Regence seeking reimbursement under a health insurance policy that provided for “arbitration in accordance with the applicable rules of the American Arbitration Association [“the AAA”]"... Full Story

Appellate Court Requires Arbitration Awards to be Confirmed Absent Valid Challenge
MBNA America Bank, N.A. v. O'Brien, No. 21216, 2006 WL 2041478 (Ohio Ct. App. Jul 21, 2006)
7/21/2006

ADR Legislation & Regulation

FEDERAL LEGISLATION

No new legislation

STATE LEGISLATION

Massachusetts HB 1515 (Introduced 01/26/2005) Signed by Governor 08/09/2006
Subjects: Dispute Resolution, Interstate Insurance Compact

This bill enters Massachusetts into the Interstate Insurance Product Regulation compact, an interstate insurance compact between several states to create and establish a joint public agency known as the ‘Interstate Insurance Product Regulation Commission’ (Commission). Pursuant to article IV of this compact, the Commission will have the power to develop uniform standards for product lines, receive and provide prompt review of filed products, and give approval to those product filings satisfying applicable uniform standards; provided, it is not intended for the Commission to be the exclusive entity for receipt and review of insurance product filings. The Commission also has the power to provide for dispute resolution among compacting states. Massachusetts has become the 28th state to join the Interstate Insurance Product Regulation Commission. Information about the compact can be found on the National Association of Insurance Commissioners (NAIC) website at http://www.naic.org/topics/topic_compact.htm.

REGULATIONS

No new regulations