Federal Cases
Ninth Circuit Splinters on Proper Application of Buckeye
Nagrampa v. MailCoups, Inc., No. 03-15955, 2006 WL 3478345 (9th Cir. Dec. 4, 2006)
12/4/2006
Proceeding en banc, the Ninth Circuit Court of Appeals splintered on the question of whether a court confronted with an unconscionability challenge to an arbitration clause may consider the circumstances surrounding the formation of the underlying contract. According to an 8-3 majority, the surrounding circumstances (e.g., inequality of bargaining power) are a proper consideration but only if necessary to support a challenge directed exclusively at the arbitration clause.
In Nagrampa v. MailCoups, Inc., No. 03-15955, 2006 WL 3478345 (9th Cir. Dec. 4, 2006), Nagrampa and MailCoups entered into a franchise agreement whereby Nagrampa would operate a MailCoups franchise and disseminate coupons via direct mail. The franchise agreement contained an arbitration clause naming Boston as the venue but permitting MailCoups “to obtain any provisional remedy, including, without limitations, injunctive relief from any court of competent jurisdiction"... Full Story
Fifth Circuit Reaffirms Pro-Arbitration Federal Policy and Upholds "Expansive" Arbitration Agreement
Ford Motor Co. v. Ables, No. 05-60391, 2006 WL 3431602 (5th Cir. Nov. 29, 2006)
11/29/2006
The Fifth Circuit Court of Appeals held that an arbitration clause “capable of expansive reach” applied to claims arising from the sale of an automobile because the claims “touch[ed] matters” covered by the underlying contract.
In Ford Motor Co. v. Ables, No. 05-60391, 2006 WL 3431602 (5th Cir. Nov. 29, 2006), Ables and several others sued Ford, alleging that a Ford dealership sold them pre-owned vehicles that were not properly certified.
Ford filed a motion to compel arbitration based on an arbitration clause in the underlying retail installment contracts. The district court denied the motion on the ground that the claims against Ford “seemingly” fell outside the scope of the arbitration agreement... Full Story
State Cases
Inclusion of Person’s Name on Contract Did Not Alone Prove Assent to Arbitration Agreement
Ellsworth v. American Arbitration Ass'n, No. 20050371, 2006 WL 3488912 (Utah Dec. 05, 2006)
12/5/2006
The Utah Supreme Court held that a man whose name was added to a contract for repairs on his wife’s house was not required to participate in arbitration proceedings initiated by the contractor because the inclusion of his name, standing alone, was not sufficient to prove that he agreed to arbitrate.
In Ellsworth v. American Arbitration Ass'n, No. 20050371, 2006 WL 3488912 (Utah Dec. 05, 2006), Carol Naylor contracted with Lowell Construction (Lowell) to repair damage to her home. The contract’s cover page listed Naylor and her husband, Stanford Ellsworth, as owners of the home. However, the signature page contained only one signature labeled “Owner,” and only Naylor signed the contract. Moreover, Naylor owned the home prior to marriage, and she remained the sole owner during the marriage... Full Story
Arbitration Moves Forward Even Though Claimant Invoked Right Against Self-Incrimination
Vargas v. National Continental/Progressive Ins. Co., Case No. BER-L-7245-06, 2006 WL 3512277 (N.J. Super. Ct. Law Div. Nov. 21, 2006)
11/21/2006
A New Jersey court ruled that an arbitration claimant under indictment for fraud could exercise her Fifth Amendment right against self incrimination during examination under oath. However, the Court denied the claimant’s request to stay the arbitration pending the outcome of her criminal case.
In Vargas v. National Continental/Progressive Ins. Co., Case No. BER-L-7245-06, 2006 WL 3512277 (N.J. Super. Ct. Law Div. Nov. 21, 2006), Theresa Vargas filed a demand for arbitration with the National Arbitration Forum (the FORUM) seeking Personal Injury Protection (PIP) benefits from her insurance company for medical treatment allegedly received in connection with a motor vehicle accident... Full Story
Georgia Supreme Court Holds That Prior Arbitration Award Has Res Judicata Effect
Bryan County v. Yates Paving & Grading Co., No. S06G0119, 2006 WL 3438073 (Ga. Nov. 30, 2006)
11/30/2006
By a 4-3 majority, the Georgia Supreme Court held that a trial court properly decided the res judicata effect of a prior arbitration award in granting summary judgment and disposing of an otherwise arbitrable claim. The dissent viewed the res judicata effect of the prior arbitration award as “an issue of procedural arbitrability for the arbitrator to decide.”
In Bryan County v. Yates Paving & Grading Co., No. S06G0119, 2006 WL 3438073 (Ga. Nov. 30, 2006), Bryan County (the County) and Yates Paving & Grading (Yates) entered into a public works contract containing an arbitration clause. After being replaced on the project, Yates initiated arbitration and obtained an award for monetary damages that was confirmed by the trial court... Full Story
Court Upholds Validity of Auto Purchase Arbitration Agreement
Murphy v. Courtesy Ford, L.L.C., No. 3D05-1896, 2006 WL 3498583 (Fla. Dist. Ct. App. Dec. 6, 2006)
12/6/2006
Rejecting an argument of unconscionability, the District Court of Appeal of Florida upheld an order compelling arbitration between a car buyer and used car dealership, pursuant to provisions of a sale and purchase agreement.
In Murphy v. Courtesy Ford, L.L.C., No. 3D05-1896, 2006 WL 3498583 (Fla. Dist. Ct. App. Dec. 6, 2006), Murphy purchased a used vehicle from Courtesy Ford and agreed to sign all of the affiliated purchase agreements. One of these documents directed Murphy to read material on the reverse side, which included a binding arbitration clause typed in clear, regular-sized font. When Murphy attempted to sue Courtesy Ford for damages under the Florida Deceptive and Unfair Trade Practices Act, Fla. Stat. §501.201 to .213, Courtesy Ford moved to compel arbitration... Full Story
Court Finds No Manifest Disregard of Law by Arbitrator Absent Proof That Arbitrator Ignored the Law
Johnson Real Estate Investments, LLC v. Aqua Industrials, Inc., No. A06A1067, 2006 WL 3437888 (Ga. App. Nov. 30, 2006)
11/30/2006
A Georgia Appellate Court upheld an arbitration award despite manifest disregard objections because there was no proof that the arbitrator was aware of the applicable law and it was deliberately ignored.
In Johnson Real Estate Investments, LLC v. Aqua Industrials, Inc., No. A06A1067, 2006 WL 3437888 (Ga. App. Nov. 30, 2006), Aqua Industrials, a subcontractor, pursued claims in arbitration against Johnson Real Estate Investments, LLC and Excellatron Solid State (referred to collectively as “Excellatron”) regarding the non-payment of select invoices for a contracting project. An award was issued in favor of Aqua Industrials. Excellatron moved to vacate the award on grounds of manifest disregard of law by the arbitrator. At the same time, Aqua Industrials moved to confirm the award... Full Story
Minnesota Court Compels Arbitration of Business-to-Business Dispute
Skytech, Inc. v. Scientific Learning Corp., No. A06-269, 2006 WL 3490908 (Minn. Ct. App. Dec. 5, 2006)
12/5/2006
The Court of Appeals of Minnesota upheld a lower court’s decision to compel arbitration of a sales dispute between two business entities, despite confusion over the proper filing of the arbitration claim.
In Skytech, Inc. v. Scientific Learning Corp., No. A06-269, 2006 WL 3490908 (Minn. Ct. App. Dec. 5, 2006), Skytech entered into an agreement with Scientific Learning Corporation (SLC) to sell SLC’s computer software to churches and community organizations. The business arrangement fell through, and SLC terminated the agreement... Full Story
New Jersey Court Holds That Forum Selection Clause Is Not Enforceable Against an Employee Who Is Not Subject to the Specific Agreement
Stern v. Challenge Financial Investors Corp., No. A-2817-05T2, 2006 WL 3433562 (N.J. Super. A.D. Nov. 29, 2006)
11/29/2006
A New Jersey appellate court held that a bank employee did not have to arbitrate in Florida because he was not subject to the forum clause contained within agreements which he signed, but were not applicable to him.
In Stern v. Challenge Financial Investors Corp., No. A-2817-05T2, 2006 WL 3433562 (N.J. Super. A.D. Nov. 29, 2006), Michael Stern pursued various claims against his former employer, Challenge Financial, in court. Challenge Financial moved to dismiss and to compel arbitration in accordance with an arbitration agreement contained within its dispute resolution policy. Stern had signed the Employee Dispute Resolution policy. There were two other agreements associated with his employment. Each contained forum selection clauses. The Branch Management Company agreement required arbitration in Florida, and the Branch Manager agreement vested jurisdiction in the Florida courts... Full Story
Oil Development Dispute Deemed Outside Scope of Arbitration Agreement
In re Great Western Drilling, Ltd., No. 11-06-00244-CV, 2006 WL 3461801 (Tex. App. Nov. 30, 2006)
11/30/2006
A Texas appellate court issued a conditional writ of mandamus ordering a lower court to reverse its order compelling arbitration of series of claims between an oil drilling company and a group of working interest owners.
In re Great Western Drilling, Ltd., No. 11-06-00244-CV, 2006 WL 3461801 (Tex. App. Nov. 30, 2006) involved an arbitration claim filed by working interest owners against Great Western Drilling, Ltd. (Great Western). A “working interest owner” is a party who obtains the rights to explore, develop, and operate a mineral property, usually subject to a royalty. The working interest owner bears the costs of such operations, but is entitled to a share of the mineral production proceeds in return... Full Story
Court Rejects "Frivolous Appeal" Of Arbitral Decision and Awards Double Appellate Costs to the Prevailing Party
Borges v. Arbella Mutual Ins. Company, No. 06-P-257, 2006 WL 3499414 (Mass. App. Ct. Dec. 5, 2006)
12/5/2006
The Appeals Court of Massachusetts rejected a challenge to an arbitration award based upon a plaintiff’s contention that the arbitrator refused to consider material evidence.
In Borges v. Arbella Mutual Ins. Company, No. 06-P-257, 2006 WL 3499414 (Mass. App. Ct. Dec. 5, 2006), Borges sought to vacate an arbitration award issued in favor of Arbella Mutual Insurance Company (Arbella). The award denied Borges’ claim for underinsured motorist benefits, finding that several of his injuries stemming from an automobile accident were actually preexisting conditions... Full Story
ADR Legislation & Regulation
FEDERAL LEGISLATION
FEDERAL SB1608 (Introduced 07/29/2005) Enrolled 12/9/2006
Subjects: SPAM, Dispute Resolution Providers
Creates the Undertaking Spam, Spyware, and Fraud Enforcement with Enforcers Beyond Borders Act of 2005; enhances the Federal Trade Commission enforcement against illegal spam, spyware, and cross-border fraud and deception and other consumer protection law violations. Would make alternative dispute resolution providers subject to the portion of the Act exempting certain providers from liability for disclosing materials in connection with an investigation into possible unfair deceptive acts or practices, assets subject to recovery by the Commission, including assets located in foreign jurisdictions. An identical bill, SB4110, was also introduced on December 8, and carries the same provisions as they relate to alternative dispute resolution providers. Text of the bill.
STATE LEGISLATION
Indiana SB27 (Pre-filed 12/18/2006)
Subjects: Homeowners Associations, Mediation
Homeowner’s association election disputes. This bill would require the parties to a dispute involving the election of a director or an officer of a homeowners association or condominium association to attempt to resolve the dispute through the use of mediation before bringing an action in a court.
Michigan HB 6359 (Introduced 08/23/2006) To Governor 12/13/2006
Subjects: Insurance, Health, Medical Services, Arbitration
This act amends the state insurance code to require a Medicare select insurer to use procedures for hearing complaints and resolving written grievances from subscribers. The procedures must be aimed at mutual agreement for settlement and may include arbitration procedures. The grievance procedure must be described in the policy and certificate and in the outline of coverage. Text of the bill.
Michigan HB6456 (Introduced 09/12/2006) To Governor 12/14/2006
Subjects: Dispute Resolution, Cable
Cable television regulation bill, which, among other things, establishes the following dispute resolution requirements: “(1) Each video service provider shall establish a dispute resolution process for its customers. Each provider shall maintain a local or toll-free telephone number for customer service contact. (2) The commission shall establish a process to review disputes which are not resolved under subsection (1), disputes between a provider and a franchising entity, and disputes between providers. (3) Each provider shall notify its customers of the dispute resolution process created under this section.” Text of the bill.
Michigan SB632 (Introduced 6/22/2005) Enrolled 12/15/2006
Subject: Builder Licensing Fee Disputes
This bill would allow a licensee to contractually provide for an alternative dispute resolution procedure to resolve complaints filed with the Department of Labor and Economic Growth over licensing of residential builders. The procedure shall be conducted by a neutral third party for determining the rights and responsibilities of the parties and shall be initiated by the licensee, who shall provide notice of the initiation of the procedure to the parties. Text of the bill.
Ohio SB699 (Introduced 12/05/2006)
Subjects: Mediation, Capital Appropriations
Makes capital appropriations and provides authorization and conditions for the operation of state programs. If the approval of a plan remains in dispute thirty days prior to the conclusion of the fiscal year in which the board's current plan is scheduled to expire, the board or the director may request that the dispute be submitted to a mutually agreed upon third-party mediator with the cost to be shared by the board and the department. The director shall adopt rules establishing the procedures of this dispute resolution process.
South Carolina HB3023 (Prefiled 12/13/2006)
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 Commission will administer a dispute resolution program for insurance liabilities between compacting states.
Utah HB44 (Prefiled 12/18/2006)
Subjects: Arbitration, Motor Vehicle Accidents
Modifies the Insurance Code by amending provisions relating to arbitration for third party motor vehicle accident claims. Text of the bill.
REGULATIONS
California Title 22 CCR Sec(s) 69100 thru 69109 (Proposed 10/26/2006) Adopted 11/27/2006
Subjects: Insurance Mediation Program
This regulation would interpret, clarify and make specific the Department’s program relating to the mediation of earthquake, homeowners and automobile collision and physical damage claims. This had previously only been a pilot program, and only applied to earthquake claims. Disputes including, but not limited to, scope of damage, scope or method of repairs, cause of damage, asbestos or other contaminations, additional living expenses, aftershock damage and disputes over preexisting damage are eligible for referral to mediation. Immediately upon referral of a dispute to mediation, the Department shall transfer all information it deems necessary concerning the disputed claim to a mediator of its choosing. The Department shall select the mediator primarily on a rotation basis.
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