Federal Cases
Policy Favoring Arbitration Does Not Trump Reconsideration Rule
Marks 3 Zet-Ernst Marks GmBh & Co. KG v. Presstek, Inc., No. 05-2794, 2006 WL 1892255 (1st Cir. July 11, 2006)
7/11/2006
According to the First Circuit Court of Appeals, the policy favoring arbitration does not permit a party to disregard the rules of procedure by raising a new argument on a motion for reconsideration.
In Marks 3 Zet-Ernst Marks GmBh & Co. KG v. Presstek, Inc., No. 05-2794, 2006 WL 1892255 (1st Cir. July 11, 2006), Marks, a German company, contracted with Presstek, a Delaware corporation, to market Presstek’s products in Europe. When Presstek terminated the contract, Marks alleged breach of contract and requested arbitration pursuant to a clause in the contract providing that any dispute “shall be referred to and determined by arbitration in The Hague under the International Arbitration rules.” As the Court observed, this clause “was poorly drafted” because it did not specify... Full Story
Nonsignatory Can Effectively Invoke Agreement to Arbitrate in a Class Action Case
American Bankers Insurance Group, Inc. v. Long, No. 05-1747, 2006 WL 1949429 (4th Cir. July 14, 2006)
7/14/2006
The Fourth Circuit Court of Appeals held that a nonsignatory who was a defendant in a class action case could invoke an arbitration agreement under the doctrine of equitable estoppel where the claims of the case were related to the underlying agreement.
In American Bankers Insurance Group, Inc. v. Long, No. 05-1747, 2006 WL 1949429 (4th Cir. July 14, 2006), the Longs bought a $75,000 promissory note from Thaxton Life Partners (“TLP”). TLP later filed for bankruptcy and informed the Longs that it would not make any payments on the note. The Longs commenced a class action suit against American Bankers Insurance Group (“ABIG”), alleging that ABIG participated in a scheme to defraud investors through the sale of TLP’s promissory notes.
ABIG moved to compel arbitration... Full Story
Federal Court in California Disallows Arbitration Where Discovery and Mutuality Are Lacking
McDaniels v. Hospice of Napa Valley, No. C 06-2558 CW, 2006 WL 20382760 (N.D. Cal. July 19, 2006)
7/19/2006
A federal district court in California held that an arbitration agreement in an employee handbook was unconscionable because it disallowed discovery and lacked mutuality.
In McDaniels v. Hospice of Napa Valley, No. C 06-2558 CW, 2006 WL 20382760 (N.D. Cal. July 19, 2006), McDaniels sued Hospice, her former employer, alleging discrimination, retaliation, and several other claims... Full Story
Court Rejects “Manifest Disregard” Challenge Where There Is No Controlling Law
Morrill v. G.A. Wright Marketing, Inc., No. 04-cv-01744-MSK-BNB, 2006 WL 2038419 (D. Colo. July 18, 2006)
7/18/2006
A federal district court in Colorado found that an arbitrator did not act in manifest disregard of the law by refusing to follow a single, cursory decision in an otherwise uncharted area of the law.
In Morrill v. G.A. Wright Marketing, Inc., No. 04-cv-01744-MSK-BNB, 2006 WL 2038419 (D. Colo. July 18, 2006), an arbitrator awarded $34,300 to Morrill for discrimination on the basis of his association with a victim of age discrimination... Full Story
Only NASD Members Can Arbitrate Claims in that Arbitral Forum
Fitzgerald v. HRB Management Inc., No. 05-CV-74768-DT, 2006 WL 1984173 (E.D. Mich. July 13, 2006)
7/13/2006
NASD rules do not allow a party to arbitrate claims against a non-member or non-associated person who is not a signatory to an applicable arbitration agreement, a federal court in Michigan held.
In Fitzgerald v. HRB Management Inc., No. 05-CV-74768-DT, 2006 WL 1984173 (E.D. Mich. July 13, 2006), Fitzgerald, a former employee of H & R Block Financial Advisors (“H & R Block”), initiated an array of claims against H & R Block following his termination... Full Story
Non-Signatory Seeking Benefit Under Contract Must Abide by Arbitration Agreement
M.A. Mortenson Co. v. Gem Mechanical Servs., Inc., No. 06-2182 (JNE/SRN), 2006 WL 1997367 (D. Minn. July 14, 2006)
7/14/2006
A non-signatory to a contract who brings an action for breach is seeking a benefit under the contract and must fulfill its obligations under the contract, including arbitration of disputes, a Minnesota federal court held.
In M.A. Mortenson Co. v. Gem Mechanical Servs., Inc., No. 06-2182 (JNE/SRN), 2006 WL 1997367 (D. Minn. July 14, 2006), Mortenson had subcontracted with North East to perform work for a government contract. When North East began to default, Gem took over performance of the subcontract between Mortenson and North East... Full Story
Arbitration Provision Covers Trade Secrets Claim Because Underlying Agreement Required Confidentiality
FCI USA, Inc. v. Tyco Electronics Corp., No. 2:06-CV-128 (TJW), 2006 WL 1984440 (E.D. Tex. July 14, 2006)
7/14/2006
A federal district court in Texas found that a trade secrets claim was subject to arbitration as a dispute “involving a term” of the underlying agreement because the agreement also included a confidentiality provision.
In FCI USA, Inc. v. Tyco Electronics Corp., No. 2:06-CV-128 (TJW), 2006 WL 1984440 (E.D. Tex. July 14, 2006), FCI and Tyco entered into a “Strategic Alliance Agreement” that provided for arbitration of any dispute “involving a term of th[e] Agreement"... Full Story
Courts May Sanction Parties for Violating Mediation Order
Monroe v. Corpus Christi Independent School District, No. CIV. A.C 05 412, 2006 WL 1991738 (S.D. Tex. July 17, 2006)
7/17/2006
A federal district court in Texas acknowledged its authority to sanction parties for violating a mediation order, but the Court found that a party’s failure to send a representative with full settlement authority did not warrant sanctions.
In Monroe v. Corpus Christi Independent School District, No. CIV. A.C 05 412, 2006 WL 1991738 (S.D. Tex. July 17, 2006), the Court ordered the parties to mediate Monroe’s discrimination claim against the School District. The order required the parties to mediate in good faith... Full Story
D.C. Federal Court Upholds Investor’s Arbitration Award
Kurke v. Oscar Gruss and Son, Inc., No. 05-7017, 2006 WL 1982851 (D.C. Cir. July 18, 2006)
7/18/2006
The United States Court of Appeals for the District of Columbia rejected a stockbroker’s argument that an arbitration panel manifestly disregarded the law by awarding an investor $706,000 in damages for unlawful churning. As the Court observed, the manifest disregard standard is “manifestly difficult to satisfy” and the award was based on admissible evidence.
In Kurke v. Oscar Gruss and Son, Inc., No. 05-7017, 2006 WL 1982851 (D.C. Cir. July 18, 2006), investor David Kurke filed an arbitration demand alleging that his brokerage, Oscar Gruss, churned his account, depleting the balance from $1,007,000 to $39,000. Churning occurs when an account is excessively traded to generate commissions... Full Story
State Cases
Mandatory Interest Arbitration Is Constitutional, Says California Appellate Court
Hess Collection Winery v. California Agricultural Labor Relations Board, 2006 Daily Journal D.A.R. 8786, 2006 WL 1828535 (Cal. Ct. App. July 5, 2006)
7/5/2006
In an unusual opinion, the California Court of Appeal has upheld a law allowing an arbitrator to craft a collective bargaining agreement when an agricultural employer and its employees fail to negotiate an agreement. The Court found that the statute authorized the arbitrators to act as legislators, fashioning new contractual obligations. Finding that the law has a rational relationship to the protection of unskilled agricultural workers, the Court deemed it constitutional.
In Hess Collection Winery v. California Agricultural Labor Relations Board, 2006 Daily Journal D.A.R. 8786, 2006 WL 1828535 (Cal. Ct. App. July 5, 2006), a private arbitrator (who is called a “mediator” in the statute) determined the terms of the parties’ contract after Hess Winery and the United Food and Commercial Worker’s Union failed to agree... Full Story
Trial Court Errs in Compelling Arbitration of Claims Not Covered by Parties’ Arbitration Agreement
Carroll v. Pacific Specialty Insurance Co., No. GIC801808, 2006 WL 2024389 (Cal. App. July 20, 2006)
7/20/2006
A court cannot compel arbitration of claims that the parties clearly did not agree to arbitrate, a California appellate court held.
In Carroll v. Pacific Specialty Insurance Co., No. GIC801808, 2006 WL 2024389 (Cal. App. July 20, 2006), Carroll brought uninsured motorist and bad faith claims against Pacific after a hit and run motorcycle accident.
Pursuant to California statute, the parties’ agreement included a clause requiring arbitration of all uninsured motorist claims. The clause also stated that all other disputes were to be decided in a judicial forum... Full Story
FAA Applies To Parties Who Conduct Some Business Affecting Interstate Commerce – Even if Disputed Transaction Does not Involve Interstate Commerce
McKay Building Co., Inc. v. Juliano, No. 1071720, 2006 WL 2037161 (Ala. July 21, 2006)
7/21/2006
Evidence that a party to a transaction does some business affecting interstate commerce – even if the transaction at issue does not affect interstate commerce – is sufficient proof that the transaction sufficiently “affects” interstate commerce for the FAA to apply, the Alabama Supreme Court held.
In McKay Building Co., Inc. v. Juliano, No. 1071720, 2006 WL 2037161 (Ala. July 21, 2006), Juliano contracted with McKay to make improvements on Juliano’s home. The parties’ contract included an arbitration clause; however, when a dispute arose, Juliano argued that the Federal Arbitration Act (“FAA”) was inapplicable because the parties’ transaction did not involve interstate commerce... Full Story
California Appeals Court Upholds Arbitral Award and Rejects Allegations of Discrimination
Fabbri v. TD Waterhouse Investor Services, Inc.
7/19/2006
According to a California appellate court, an arbitration award will only be vacated because of arbitrator discrimination when the record supports the allegations with substantial evidence.
An arbitration award was rendered in favor of TD Waterhouse in Fabbri v. TD Waterhouse Investor Services, Inc., No. B187168, 2006 WL 2005798 (Cal. Ct. App. July 19, 2006). Fabbri alleged that the arbitrator discriminated against him because of his age and foreign accent and moved the court to vacate the award.
Fabbri relied on inferences to support... Full Story
Negligence Claims Can Be Arbitrated
Walters Automobiles, Inc. v. Howard, No. 2005-CA-001031-MR, 2006 WL 2033977 (Ky. Ct. App. July 21, 2006)
7/21/2006
The Kentucky Court of Appeals held that a negligence claim fell within the scope of an arbitration agreement that covered “any dispute” arising between the parties.
In Walters Automobiles, Inc. v. Howard, No. 2005-CA-001031-MR, 2006 WL 2033977 (Ky. Ct. App. July 21, 2006), Howard bought a motor vehicle from Walters under a sales contract providing for arbitration of “any dispute arising between/among the parties of any nature whatsoever"... Full Story
New Jersey Court Confirms No-Fault Arbitration Award
Allcare Medical and Rehabilitation v. State Farm Insurance Co., 2006 WL 1971957 (N.J. Super. Ct. Law Div. July 13, 2006)
7/13/2006
The New Jersey Superior Court confirmed an award issued in a no fault arbitration because the arbitrator had already addressed the issue being raised by the aggrieved party.
In Allcare Medical and Rehabilitation v. State Farm Insurance Co., 2006 WL 1971957 (N.J. Super. Ct. Law Div. July 13, 2006), Allcare submitted medical bills to State Farm seeking reimbursement under the New Jersey No Fault Act.
When State Farm refused to pay, Allcare filed a demand for arbitration with the National Arbitration Forum. The arbitrator awarded Allcare $4,901.47. When State Farm still refused to pay, Allcare brought a motion to confirm the award... Full Story
New Jersey Supreme Court Says Parents Can Agree to Arbitration on Behalf of Minors
Hojnowski v. Vans Skate Park, No. A-17/45-05, 2006 WL 1976379 (N.J. July 17, 2006)
7/17/2006
Citing state and federal policy favoring arbitration, the New Jersey Supreme Court held that a parent may agree to arbitration on a minor child’s behalf.
In Hojnowski v. Vans Skate Park, No. A-17/45-05, 2006 WL 1976379 (N.J. July 17, 2006), twelve-year old Andrew Hojnowksi and his mother visited Vans Skate Park. Andrew could not enter the skate park until his mother signed a release that provided for arbitration and precluded Vans’ liability for certain injuries. Andrew’s mother signed the release on Andrew’s behalf... Full Story
For Arbitration Agreement To Be Retroactive, It Needs Retroactive Language
In re Brookshire Brothers, Ltd., No. 06-06-00059-CV, 2006 WL 1985445 (Tex. App. July 18, 2006)
7/18/2006
An arbitration agreement does not apply to disputes and claims arising before the effective date of the arbitration agreement when the language of the agreement does not indicate that it applied retroactively, a Texas state court held.
In In re Brookshire Brothers, Ltd., No. 06-06-00059-CV, 2006 WL 1985445 (Tex. App. July 18, 2006), Brookshire sought to compel arbitration of a tort claim brought by its employee, Mayfield, who suffered injuries after a slip and fall accident on the job.
Mayfield’s injuries occurred in July 2004, and Brookshire enacted a policy calling for arbitration of all disputes or claims brought by employees in August 2005. Mayfield did not receive a copy of the policy until January 2006... Full Story
Court Upholds Arbitrator’s Refusal to Hear Non-Material Evidence
Kosty v. South Shore Harbour Community Association, Inc., No. 01-04-00698-CV, 2006 WL 2042385 (Tex. App. July 20, 2006)
7/20/2006
An arbitrator’s decision to exclude evidence about a party’s defense to a claim underlying a settlement agreement is not grounds for vacating the arbitration when award when the issue before the arbitrator is whether the settlement agreement was breached, a Texas state court held.
In Kosty v. South Shore Harbour Community Association, Inc., No. 01-04-00698-CV, 2006 WL 2042385 (Tex. App. July 20, 2006), Kosty and South Shore entered into arbitration to resolve a dispute regarding whether Kosty breached a settlement agreement between the parties... Full Story
Court Sanctions Attorney for Not Abiding by Arbitration Agreement with Former Client
Smith v. Duncan Land & Exploration, Inc., No. 2-05-334-CV, 2006 WL 2034031 (Tex. Ct. App. July 20, 2006)
7/20/2006
The Texas Court of Appeals upheld sanctions imposed on an attorney who intervened in a lawsuit against her former client instead of seeking arbitration as required by the engagement letter that the attorney had drafted.
In Smith v. Duncan Land & Exploration, Inc., No. 2-05-334-CV, 2006 WL 2034031 (Tex. Ct. App. July 20, 2006), Duncan retained Smith to act as Duncan’s legal counsel in a suit against Blay. Smith drafted an engagement letter that provided for arbitration.
After Duncan discharged Smith and refused to pay her fees... Full Story
ADR Legislation & Regulation
FEDERAL LEGISLATION
United States SB 3555 (Introduced 06/21/2006)
Subjects: Arbitration, Veterans Affairs
This bill would establish the Office of Veterans Identity Protection Claims to reimburse injured veterans for injuries suffered as a result of the unauthorized use, disclosure, or dissemination of identifying information stolen from the Department of Veterans Affairs, and for other purposes. The bill requires mandatory arbitration of claims of injury by veterans.
United States SB 3560/ HR 5676 (Introduced 06/22/2006)
Subjects: Dispute Resolution, Campaign Finance
This bill would amend the Federal Election Campaign Act of 1971 to replace the Federal Election Commission with the Federal Election Administration, and for other purposes. The Administration would have the authority to create procedures for alternative dispute resolution of violations.
United States SB 3589 (Introduced 05/25/2006)
Subjects: Mediation, Flood Insurance
In the case of the occurrence of a major disaster, as defined in section 102 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5122) that may have resulted in flood damage under the flood insurance program established under Chapter I of the National Flood Insurance Act of 1968 and other personal lines residential property insurance coverage offered by a State regulated insurer, this bill would require representatives of the flood insurance program to participate in mediation of claims over flood insurance if requested by the commissioner of insurance for a state.
United States HR 5637 (Introduced 06/19/2006)
Subjects: Arbitration, Insurance
This bill streamlines the regulation of nonadmitted insurance and reinsurance. Preemption of State Law- Except as provided in subsection (a) of the bill with respect to the State of domicile of a ceding insurer, all laws, regulations, provisions, or other actions of a State would be preempted to the extent that they restrict or eliminate the rights of a ceding insurer or reinsurer to resolve disputes pursuant to contractual arbitration to the extent such contractual provision is not inconsistent with the provisions of title 9, United States Code.
United States HR 5802 (Introduced 07/13/2006)
Subjects: Arbitration Concessions Contracts
To amend the National Park Service Concessions Management Improvement Act of 1998, to extend to additional small businesses the preferential right to renew a concessions contract entered into under such Act, to facilitate the renewal of a commercial use authorization granted under such Act, and for other purposes. As it relates to arbitration, the bill would amend the Act to include: “In the event of a dispute between the concessioner and the Secretary regarding leasehold surrender interest valuations, leasehold surrender interest allocations, or the amount of physical depreciation, the matter shall be resolved through binding arbitration.”
STATE LEGISLATION
Delaware HB 430 (Introduced 05/11/2006) Signed by Governor 07/17/2006
Subjects: Arbitration, Debt Management Services
Enacts the “Delaware Uniform Debt-Management Services Act.” States that an agreement between a consumer and debt manager may not: (1) provide for application of the law of any jurisdiction other than the United States and Delaware; (2) except as permitted by Section 2 of the Federal Arbitration Act, 9 U.S.C. Section 2, as amended, or the Delaware Uniform Arbitration Act, Chapter 57 of Title 10 of the Delaware Code. A provision in an agreement which violates this chapter is void.
Michigan HB 6168 (Introduced 07/26/2006)
Subjects: Dispute Resolution, Interstate Insurance Compact
This bill would add Michigan to the Interstate Insurance Product Regulation Compact, an interstate insurance compact between several states (currently 27) to create and establish a joint public agency known as the ‘interstate insurance product regulation commission.’ The Commission has the power to provide for dispute resolution among compacting states.
New York SB 4744 (Introduced 02/22/2006) Signed by Governor 07/26/2006
Subjects: Arbitration, Home Equity Purchasing
Enacts the “Home Equity Theft Prevention Act.” Provides homeowners with information necessary to make an informed decision regarding the sale of their home to an equity purchaser (one who acquires title to a residence in foreclosure, subject to several exceptions); requires the sales agreement to be expressed in writing; provides safeguards to equity sellers against deceit and financial hardship; restricts unfair contract terms. Restricts arbitration provisions in equity purchasing contracts as follows: any provision in a covered contract which attempts or purports to require arbitration of any dispute arising under this section shall be void at the option of the equity seller.
North Carolina SB 277 (Introduced 03/01/2005) Signed by Governor 07/19/2006
Subjects: Mediation, Disasters
Provides for a voluntary mediation program for residential property insurance claims caused by disasters, requires sellers of property insurance to disclose major perils that are not covered, provides for the tolling of time periods in property insurance policies in disaster situations, provides for the tolling of time periods if the operations of the department of insurance are interrupted by force majeure, and authorizes motor vehicle self-insurance for certain religious organizations.
North Carolina HB 1908 (Introduced 05/11/2006) Signed by Governor 07/10/2006
Subjects: Special Education, Mediation
This act rewrites the laws governing the education of children with special needs. Voluntary mediation is encouraged to resolve disputes regarding the child’s education. Parties who choose not to mediate may be required to meet with a disinterested party, who will explain the benefits of mediation. The State will bear the cost of mediation under this act. Any agreement resulting from mediation may be legally binding if agreed to by the parties.
California SB 1636 (Introduced 02/24/2006) Signed by Governor 7/7/06
Subjects: Trade Secrets, Attorney’s Fees, Arbitration
An Act to amend Section 3426.4 of the Civil Code, relating to trade secrets. The amended language allows attorney’s fees to be recovered for both litigation and arbitration of willful and malicious misappropriation of trade secrets.
District of Columbia LB 0827 (Introduced 07/06/2006)
Subjects: Insurance, Dispute Resolution
An act entitled the ‘Interstate Insurance Product Regulation Compact Act of 2006.’ This bill establishes a joint public agency known as the 'Interstate Insurance Product Regulation Commission.' The Interstate Insurance Product Regulation Commission will create and administer a dispute resolution program for insurance liabilities between compacting states.
New Jersey AB 3174 or SB 1726 (Introduced 06/01/2006)
Subjects: Construction Contracts, Dispute Resolution
An act created to facilitate the prompt payment of construction contracts. The terms of the bill require construction contracts to include an option to resolve payment disputes through an alternative dispute resolution method.
New Jersey AB 3165 or SB 2119 (Introduced 07/07/2006)
Subjects: County College Teachers, Arbitration
An act requiring binding arbitration for certain matters relating to dismissals or reductions in salary of tenured persons employed in a teaching capacity at a county college. The bill authorizes the New Jersey Public Employment Relations Commission to establish an arbitration panel and conduct arbitrations in a manner consistent with the terms of the bill.
New Jersey AB 3356 (Introduced 06/19/2006) Signed by Governor 07/11/2006
Subjects: Child Welfare, Mediation
An act establishing the Department of Children and Families as a principal department in the Executive Branch to replace the Division of Youth and Family Services in the Department of Human Services. Several changes were made to former mediation policies in order to protect the confidentiality of statements made during mediation, while still acknowledging certain privileges to reveal information related to the child’s safety and the safety of others.
New York AB 11968 (Introduced 06/19/2006)
Subjects: Great Lakes basin waters, Dispute Resolution
This bill would enact the Great Lakes-St. Lawrence River Basin Water Resources Compact to promote improved management of the waters of the Great Lakes-St. Lawrence River Basin. Article Seven of the compact would require disputes between compact states to be settled by alternative dispute resolution. This section also sets out the dispute resolution procedures to be administered by the Great Lakes-St. Lawrence river basin water resources council.
New York AB 12060 (Introduced 06/23/2006)
Subjects: Video providers, Mediation
This act was designed to authorize a statewide video service provider franchise in order to compete with cable operators. Video providers established by the state franchise are required to implement an informal process for handling municipality or customer inquiries, billing issues, service issues and other complaints. In the event an issue is not resolved through this informal process, a municipality may request a confidential, non-binding mediation with the video service provider.
REGULATIONS
Florida Reg 30801 (FAC 69J-2.003) (proposed 03/31/2006) Rule Adopted 07/06/2006
Subjects: Mediation, Residential insurance
Establishes a mediation program for the resolution of disputed commercial residential insurance claims resulting from the 2004 and 2005 hurricanes and tropical storms that affected the state. EFFECTIVE DATE: 07/26/2006.
Florida Reg 30993 (FAC 69J-2.001) (proposed 06/02/2006) Rule Adopted 07/06/2006
Subjects: Mediation, Residential insurance
Repeals the rule that pertains to alternative procedures for resolution of disputed personal lines insurance claims arising from hurricane and tropical storm damage. EFFECTIVE DATE: 07/26/2006.
Mississippi Reg 10419 (2005-02) (Proposed 05/25/2006) 06/16/06 Rule Adoption
Subjects: Mediation, Hurricanes Katrina and Rita
Establishes temporary rules for the Temporary Special Mediation Program for Personal Lines Residential Insurance Claims resulting from Hurricane Katrina. EFFECTIVE DATE: 06/16/2006.
Missouri REG 16242 (7 CSR 10-26.010) (Proposed 01/12/2006) 07/17/2006 Rule Adoption
Subjects: Arbitration, Highway/Road contracts
Proposes rules to eliminate the need to file an amendment each year to update the rule regarding the cap on contract claims eligible for mandatory binding arbitration. EFFECTIVE DATE: 08/30/2006.
Missouri REG 16243 (7 CSR 10-26.020) (Proposed 01/12/2006) 07/17/2006 Rule Adoption
Subjects: Mediation, Highway/Road contracts
Proposes rules to eliminate the need to file an amendment each year to update the rule regarding the cap on contract claims eligible for mediation. EFFECTIVE DATE: 08/30/2006.
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