Federal Cases
Court Finds No Agreement to Arbitrate Where Only One of Two Contracts Governing the Transaction Contained an Arbitration Clause
Lau v. Antonio Silva, P.C., No. Civ. S-04-2351 WBS PAN (GGH) PS, 2006 WL 2382266 (E.D. Cal. Aug. 17, 2006)
8/17/2006
A federal district court in California denied an attorney’s motion to compel arbitration of a legal malpractice dispute because only one of the two signed retainer agreements contained an arbitration clause.
In Lau v. Antonio Silva, P.C., No. Civ. S-04-2351 WBS PAN (GGH) PS, 2006 WL 2382266 (E.D. Cal. Aug. 17, 2006), Lau sued Silva, his former attorney, for legal malpractice. Silva moved to compel arbitration pursuant to a clause in one of the two retainer agreements signed by Lau. In opposing the motion, Lau argued that the arbitration clause was unenforceable because of procedural unconscionability... Full Story
Court Defers to Arbitrator’s Interpretation of Parties’ Intent and Confirms Award
Value St. Louis Associates, L.P. v. STL 300 N. 4th, LLC, No. 4:05CV01207ERW, 2006 WL 2349623 (E.D. Mo. Aug. 11, 2006)
8/11/2006
An arbitrator does not manifestly disregard the law when the party challenging the award does not present evidence that the arbitrator ignored testimony and the award reasonably reflects the contracting parties’ intent, a federal court in Missouri held.
In Value St. Louis Associates, L.P. v. STL 300 N. 4th, LLC, No. 4:05CV01207ERW, 2006 WL 2349623 (E.D. Mo. Aug. 11, 2006), Value, the tenant, made improvements on property leased from STL. The parties’ agreement provided that a demolition fund would be established in the fortieth year of the lease, and Value would deposit 1/36th of the cost of demolition into the fund each year... Full Story
Federal Policy in Favor of Arbitration Creates a Stricter Standard for Waiver
Cathay Bank v. Inchon, LLC, No. 06-1971 (DRD), 2006 WL 2355407 (D.N.J. Aug. 15, 2006)
8/15/2006
According to a New Jersey federal court, the right to arbitrate is not necessarily waived when a party fails to raise arbitration as a affirmative defense in its answer, particularly if it is raised before the other party would face significant prejudice.
In Cathay Bank v. Inchon, LLC, No. 06-1971 (DRD), 2006 WL 2355407 (D.N.J. Aug. 15, 2006), Cathay sued Inchon for defaulting on two loan agreements. Both contracts included arbitration agreements, but Inchon did not raise arbitration as an affirmative defense in its answer to the complaint... Full Story
Identical Name and Address Gives Party Standing to Challenge Arbitration Award
Durga v. MBNA American Bank, NA [sic], Civil No. 06-2444 (AET), 2006 WL 2375457 (D.N.J., Aug. 14, 2006)
8/14/2006
The federal district court in New Jersey found that a party had standing to challenge an arbitration award because his name and address were identical to those specified in the award. Nevertheless, the Court found that the party failed to establish any grounds for vacating the award.
In Durga v. MBNA American Bank, NA [sic], Civil No. 06-2444 (AET), 2006 WL 2375457 (D.N.J., Aug. 14, 2006), after MBNA obtained an arbitration award against a Raymond Durga, Plaintiff Raymond Durga, Sr., moved to vacate the award... Full Story
Carve-Out for Injunctive Relief Precludes Determination that Agreement Delegated Questions of Arbitrability to the Arbitrator
Eaton Vance Management v. ForstmannLeff Associates, LLC, 2006 WL 2331009 (S.D.N.Y. Aug. 11, 2006)
8/11/2006
A New York federal district court ruled that an exemption for claims for specific performance precluded a determination that the arbitration clause “clearly and unmistakably” delegated questions of arbitrability to the arbitrator.
In Eaton Vance Management v. ForstmannLeff Associates, LLC, 2006 WL 2331009 (S.D.N.Y. Aug. 11, 2006), Tooke worked for ForstmannLeff as an investment portfolio manager. Tooke’s employment agreement prohibited her from soliciting any ForstmannLeff clients within a year of ending her employment... Full Story
Regardless of Potential Piecemeal Litigation, Arbitrability is Based on the Scope of the Arbitration Agreement
Verizon Advanced Data, Inc. v. Frognet, Inc., No. 2:05-CV-955, 2006 WL 2373265 (S.D. Ohio Aug. 14, 2006)
8/14/2006
According to an Ohio federal court, only disputes falling within the scope of an arbitration agreement are arbitrable, and the court cannot compel arbitration of disputes beyond the agreement’s scope in order to avoid piecemeal litigation.
In Verizon Advanced Data, Inc. v. Frognet, Inc., No. 2:05-CV-955, 2006 WL 2373265 (S.D. Ohio Aug. 14, 2006), Verizon sued Frognet to recover money owed under two separate contracts (“Contract 1” and “Contract 2”). Frognet moved to stay the proceedings and compel arbitration because Contract 2 contained an arbitration provision... Full Story
Court Compels Arbitration Following Unsuccessful Mediation Session
Michael Angelo’s Gourmet Foods, Inc. v. National Union Fire Insurance Company of Pittsburgh, PA, No. A-05-CA-912-SS, 2006 WL 2241225 (W.D. Tex. Aug. 4, 2006)
8/4/2006
Courts will generally enforce “condition precedent” arbitration clauses, where either party has the option of commencing arbitration proceedings following the occurrence of some future event, such as an unsuccessful mediation session.
In Michael Angelo’s Gourmet Foods, Inc. v. National Union Fire Insurance Company of Pittsburgh, PA, No. A-05-CA-912-SS, 2006 WL 2241225 (W.D. Tex. Aug. 4, 2006), the a United States district court in the Western District Texas compelled arbitration of a dispute between Michael Angelo’s Gourmet Foods, Inc. (Michael Angelo’s) and its insurer, National Union Fire Insurance Company of Pittsburgh, Pa. (National Union). The dispute resolution clause contained in the insurance agreement afforded each party the option of seeking mediation or arbitration. However, in the event of an unsuccessful mediation, either party had the right within 120 days of termination of the mediation to commence an arbitration proceeding...” Full Story
State Cases
Arbitration Provides Consumers a Full Range of Legal Remedies
Reeves v. Ace Cash Express, Inc., No. 2D05-5752, 2006 WL 2347789 (Fla. Dist. Ct. App. Aug. 11, 2006)
8/11/2006
The Florida District Court of Appeal held that a consumer protection claim was arbitrable, finding that the arbitrator could award the consumer a full range of remedies.
In Reeves v. Ace Cash Express, Inc., No. 2D05-5752, 2006 WL 2347789 (Fla. Dist. Ct. App. Aug. 11, 2006), Reeves sued Ace Cash Express (“ACE”), alleging a violation of the Florida Consumer Collection Practices Act (“FCCPA”). The trial court ordered the parties to arbitrate the dispute.
On appeal, Reeves argued that the arbitration agreement violated public policy because it “di[d] not provide her the panoply of rights available under the FCCPA.” Specifically, Reeves complained that the agreement did not give the arbitrator authority to award injunctive relief, would not allow an award of punitive damages, and prohibited class actions... Full Story
Florida Courts Split on Whether Courts or Arbitrators Decide the Enforceability of Remedial Limitations
SA-PG-Ocala, LLC v. Stokes, Nos. 5D05-3776, 5D05-3777, 2006 WL 2347369 (Fla. Dist. Ct. App. Aug 11, 2006)
8/11/2006
There is a split of authority among Florida courts on the issue of whether the court or arbitrator should decide the enforceability of remedial limitations in an arbitration agreement. Most recently, a Florida District Court of Appeal decided the enforceability question in holding that a nursing home’s arbitration agreement was void as contrary to public policy because it substantially limited the patient’s remedies under the Nursing Home Residents’ Act.
In SA-PG-Ocala, LLC v. Stokes, Nos. 5D05-3776, 5D05-3777, 2006 WL 2347369 (Fla. Dist. Ct. App. Aug 11, 2006), Stokes signed an arbitration agreement in connection with her admission to a nursing home. Under the designated rules of arbitration, an arbitrator could not award “consequential, exemplary, incidental, punitive or special damages” unless the claimant demonstrated “by clear and convincing evidence” intentional or reckless misconduct... Full Story
Alabama Supreme Court Says Arbitration Rules Must Provide For Award of Punitive Damages
Sloan v. McQueen, Nos. 1041893, 1041906, 1050068, 2006 WL 2383256 (Ala. Aug. 18, 2006)
8/18/2006
The Alabama Supreme Court held that a provision of an arbitration agreement that disallowed awarding punitive damages was unfair. However, the Court severed the offensive portion of the agreement and allowed the parties to proceed to arbitration.
In Sloan v. McQueen, Nos. 1041893, 1041906, 1050068, 2006 WL 2383256 (Ala. Aug. 18, 2006), McQueen contracted with Sloan to build a home. The construction contract required all disputes to be submitted to arbitration under the rules of the Better Business Bureau (“BBB”), but if the services of the BBB were “unavailable,” the rules of the American Arbitration Association (“AAA”) would apply... Full Story
Ohio Court Finds Class Waiver Provision Substantively Unconscionable
Schwartz v. Alltel Corp., No. 86810, 2006 WL 2243649 (Ohio App. 8 Dist., June 29, 2006)
6/29/2006
While the majority of courts still rule to the contrary, the Ohio Court of Appeals has held that a class action waiver in a cellular phone contract runs afoul of the state’s public policy regarding consumer protection and is thus substantively unconscionable.
In Schwartz v. Alltel Corporation, No. 86810, 2006 WL 2243649 (Ohio App. 8 Dist., June 29, 2006), Schwartz, a cellular phone consumer, purchased a service contract with Alltel. The agreement included an arbitration clause in small, gray font on the back of the page... Full Story
Where Court Orders Parties to Arbitrate, the Action Should be Stayed, Not Dismissed
Thompson v. Terminix Int'l Co., L.P., No. M2005-02708-COA-R3-CV, 2006 WL 2380598 (Tenn. Ct. App. Aug. 16, 2006)
8/16/2006
According to the Tennessee Court of Appeals, when a court grants a motion to compel arbitration, the underlying action should be stayed, not dismissed, because dismissal paves the way for an immediate appeal.
In Thompson v. Terminix International Company, L.P., No. M2005-02708-COA-R3-CV, 2006 WL 2380598 (Tenn. Ct. App. Aug. 16, 2006), Thompson sued Terminix to recover damages caused by termite infestation. Terminix moved to compel arbitration pursuant to the parties’ contract... Full Story
Provision for Alternative Forums Saves Arbitration Agreement After Revocation of Party’s NASD Membership
In re Sands Brothers & Co., No. 05-05-01667-CV, 2006 WL 2348951 (Tex. App. Aug. 15, 2006)
8/15/2006
The Texas Court of Appeals held that revocation of a party’s NASD membership did not render an arbitration agreement unenforceable because the agreement provided for alternative forums.
In In re Sands Brothers & Co., No. 05-05-01667-CV, 2006 WL 2348951 (Tex. App. Aug. 15, 2006), Patten and several other investors sued Sands for securities fraud. Sands moved to compel arbitration and stay further proceedings... Full Story
Doctrine of Equitable Estoppel Does Not Allow Nonsignatory to Compel Arbitration of Quantum Meruit Claim Because the Claim Arises Independent of Any Contract
Skyleasing, LLC v. Tejas Avco Inc., No. 14-05-00212-CV, 2006 WL 2290852 (Tex. App. Aug. 10, 2006)
8/10/2006
The Texas Court of Appeals affirmed an order denying a nonsignatory’s motion to compel arbitration because the circumstances necessary to apply the doctrine of equitable estoppel were not present.
In Skyleasing, LLC v. Tejas Avco Inc., No. 14-05-00212-CV, 2006 WL 2290852 (Tex. App. Aug. 10, 2006), Tejas leased airport space to ADS who subleased space to Skyleasing. When ADS failed to make lease payments, Tejas sued ADS and Skyleasing... Full Story
Party Sanctioned For Failing to Attend Inappropriately-Ordered Mediation Session
Areizaga v. Board of County Commissioners of Hillsborough County, No. 2K05-471, 2006 WL 2355985 (Fla. App. 2 Dist., Aug. 16, 2006)
8/16/2006
Where state law requires that court orders to mediate disputes be reduced to writing, a party failing to comply with an oral order to attend mediation might still be subject to sanction if the proper objection is not raised in a timely manner.
The District Court of Appeal of Florida held that the circuit court departed from the “essential requirements of the law by proceeding to order mediation, even though the court’s oral mediation order had not been reduced to writing as required by Florida Rule of Civil Procedure 1.710(b). Areizaga v. Board of County Commissioners of Hillsborough County, No. 2K05-471, 2006 WL 2355985 (Fla. App. 2 Dist., Aug. 16, 2006). Nonetheless, the Court found that sanctions against Areizaga, the party failing to attend, were appropriate because Areizaga failed to bring this technical error to the court’s attention, nor did he offer good cause for failing to attend the mediation session... Full Story
Deadline in Arbitration Act Does Not Apply to Issues Not Submitted to Arbitration
Shultz v. Atlantic Mutual Insurance Co., No. 1-05-0749, 2006 WL 2052222 (Ill. App. Ct. July 24, 2006)
7/24/2006
The Illinois Appellate Court held that the 90-day time limit for challenging an arbitration award did not apply to an insurer’s coverage defenses because only the issue of damages was submitted to arbitration.
In Shultz v. Atlantic Mutual Insurance Co., No. 1-05-0749, 2006 WL 2052222 (Ill. App. Ct. July 24, 2006), Atlantic Mutual (Atlantic) insured Shultz under a policy providing $500,000 of underinsured motorist (UIM) coverage and $2,000,000 of umbrella coverage. The UIM portion of the policy contained an arbitration clause... Full Story
ADR Legislation & Regulation
FEDERAL LEGISLATION
No new legislation
STATE LEGISLATION
California SB 1213 (Introduced 01/30/2006) Enrolled 08/22/2006
Subjects: Arbitration, Port Owner-Operator Drivers
This bill would allow an organization representing port owner-operator drivers and a port motor carrier to, upon mutual agreement, submit any dispute to final and binding arbitration, including, but not limited to, the settlement of any outstanding economic issues.
California AB 2871 (Introduced 02/24/2006)
Subjects: Student Records, Mediation
A bill authorizing parents requesting school records for their children to file a complaint if they do not receive the records within five days of the request. Complaint procedures specify that the complaining party may request mediation of the dispute at any time during the hearing process.
REGULATIONS
Massachusetts Reg 211 CMR 23.00(#8757) (Proposed 05/05/2006) Rule Adopted 8/11/2006
Subjects: Arbitration/Mediation, “Audit of Insurers by Independent Public Accountants”
Mandates that the Commissioner of Insurance shall not recognize a person or firm as a qualified independent certified public accountant if that person or firm has directly or indirectly entered into an agreement of indemnity or release from liability with the insurer it is auditing. Allows disputes between certified public accountants and insurers to be resolved by mediation or arbitration.
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