Federal Cases
Federal Court Honors Choice-of-Law Provision and Upholds Class Action Waiver Under Texas Law
Carideo v. Dell, Inc., No. C-06-1772, 2007 WL 1753511 (W.D. Wash. June 18, 2007)
6/18/2007
In honoring a choice-of-law provision and upholding a class action waiver under Texas law, a federal court in Washington ruled that the application of Texas law would not violate a fundamental public policy of Washington because the party opposing arbitration failed to cite any authority for the proposition that Washington has a fundamental policy against class action waivers.
In Carideo v. Dell, Inc., No. C-06-1772, 2007 WL 1753511 (W.D. Wash. June 18, 2007), Carideo bought a laptop computer from Dell. The "Terms and Conditions of Sale" included a Texas choice-of-law provision and an arbitration agreement that barred class-wide proceedings... Full Story
Proper Mailing of Arbitration Agreement Creates Presumption of Receipt
Azur v. MBNA Corp., No. 06-1047, 2007 WL 1656255 (W.D. Pa. June 7, 2007)
6/7/2007
In ordering arbitration of a truth-in-lending claim against a credit card issuer, a federal court in Pennsylvania applied the rule that proper mailing of a legal document, such as an arbitration agreement, gives rise to a rebuttable presumption of receipt.
In Azur v. MBNA Corp., No. 06-1047, 2007 WL 1656255 (W.D. Pa. June 7, 2007), Azur sued MBNA for alleged violations of the Truth in Lending Act. Specifically, Azur claimed that his executive assistant, Vanek, made fraudulent charges to his MBNA credit card... Full Story
Fifth Circuit Holds That Mediation Fees Are Not Taxable Under Federal Statute
Cook Children's Medical Center v. The New England PPO Plan Of General Consolidated Management Inc., No. 06-10511, 2007 WL 1842117 (5th Cir. June 28, 2007)
6/28/2007
In construing a federal statute that identifies the costs recoverable by a prevailing party, the Fifth Circuit Court of Appeals held that mediation fees may not be taxed against the losing party because mediators are not "court appointed experts" within the meaning of the statute.
In Cook Children's Medical Center v. The New England PPO Plan Of General Consolidated Management Inc., No. 06-10511, 2007 WL 1842117 (5th Cir. June 28, 2007), Cook Children's Medical Center (Cook) sued The New England PPO Plan (the Plan), seeking payment from the insurer for medical services. After a failed attempt to resolve the dispute through mediation, the district court granted summary judgment in favor of the Plan. In granting summary judgment, the district court awarded costs, including a $1,000 mediation fee, to the Plan... Full Story
Rooker-Feldman Doctrine Precludes Federal Litigation Where State Court Has Confirmed Arbitration Award Pertaining to Dispute
Kelly v. MBNA America Bank, No. Civ.A.06.228 JJF, 2007 WL 1830892 (D. Del. June 25, 2007)
6/25/2007
A federal court in Delaware held that the Rooker-Feldman doctrine precluded federal litigation of a credit card holder's overcharge claims where a state court had already confirmed an arbitration award pertaining to the underlying account.
In Kelly v. MBNA America Bank, No. Civ.A.06.228 JJF, 2007 WL 1830892 (D. Del. June 25, 2007), Kelly held several MBNA credit cards. MBNA filed arbitration claims to collect the unpaid balance on six of the cards. After three of the resulting arbitration awards were confirmed by a Michigan court, Kelly sued MBNA for alleged overcharges... Full Story
Court Prevents Disclosure of Confidential Documents Created in Anticipation of Mediation
Duarte v. City of Nampa, No. CV 06-480-S-MHW, 2007 WL 1792325, (D. Idaho Jun. 20, 2007)
6/20/2007
Denying a motion to compel disclosure of privileged documents made in anticipation of mediation, an Idaho federal court found that compelling disclosure of privileged documents would discourage parties from pursuing mediation by undermining its confidentiality.
In Duarte v. City of Nampa, No. CV 06-480-S-MHW, 2007 WL 1792325, (D. Idaho Jun. 20, 2007), Duarte, a police officer, suffered an injury at work. After unsuccessfully trying to resume his duties as a police officer, the City terminated him. Duarte filed a discrimination claim with the Idaho Human Rights Commission (IHRC). IHRC determined there was probable cause for finding discrimination and organized mediation between Duarte and the City... Full Story
Organization's Criticism of the Use of Arbitration in Certain Circumstances Does Not Result in a Loss of Its Right to Compel Arbitration
Rex v. CSA-Credit Solutions of America, Inc., No. 106-CV-633, 2007 WL 1875858 (W.D. Mich. June 27, 2007)
6/27/2007
The arbitration of claims brought under the Credit Repair Organization Act (CROA) and other state consumer protection laws was not fraudulently induced, unconscionable, waived, or otherwise forbidden due to the organization's criticism of the use of arbitration in other circumstances, according to a Michigan federal court.
In Rex v. CSA-Credit Solutions of America, Inc., No. 106-CV-633, 2007 WL 1875858 (W.D. Mich. June 27, 2007), credit repair service CSA sought to compel arbitration of Rex's various claims under federal and state consumer protection laws, alleging that all were arbitrable under the parties' "Client Service Agreement," which contained an arbitration clause. Rex opposed the motion to compel, alleging that the agreement to arbitrate was fraudulently induced, unconscionable, waived, and not contemplated under the Credit Repair Organization Act (CROA)... Full Story
Equitable Estoppel Does Not Subject "Intertwined" Claims to Arbitration
National Union Fire Ins. Co. of Pittsburgh, Pa. v. Vector Group, Ltd., No. 06 Civ. 7135(JSR), 2007 WL 1893730 (S.D.N.Y. June 29, 2007)
6/29/2007
Refusing to compel an insurance company to arbitrate a settlement payment dispute, a New York federal court held that equitable estoppel does not subject non-arbitrable claims to arbitration where a non-signatory corporate entity is intertwined with claims an affiliated entity is bound to arbitrate.
In National Union Fire Ins. Co. of Pittsburgh, Pa. v. Vector Group, Ltd., No. 06 Civ. 7135(JSR), 2007 WL 1893730 (S.D.N.Y. June 29, 2007), Vector controlled two distinct corporations, Brooke and New Valley. Brooke owned a stake in New Valley. Both corporations held insurance policies with National Union. New Valley's policy contained an arbitration provision while Brooke's did not... Full Story
Incorporating AAA Rules Demonstrates Intent for Arbitrators to Decide Arbitrability
Way Services, Inc. v. Adecco North America, LLC, 2007 WL 1775393, (E.D. Pa. Jun. 18, 2007)
6/18/2007
A federal court in Pennsylvania, applying California law, held that the parties had demonstrated intent for an arbitrator to decide arbitrability of disputes by incorporating the American Arbitration Association (AAA) rules into their agreement.
In Way Services, Inc. v. Adecco North America, LLC, 2007 WL 1775393, (E.D. Pa. Jun. 18, 2007), Way Services and Adecco were parties to a franchise agreement that invoked California law. Adecco notified Way Services of its intention to terminate the agreement due to Way Services' alleged breach of the agreement... Full Story
Court Rejects Unconscionability Challenge to Unilateral Arbitration Agreement
JTH Tax, Inc. v. Lee, No. 2:06cv486, 2007 WL 1795751 (E.D. Va. June 19, 2007)
6/19/2007
In ordering arbitration of a franchisee's counterclaims, a federal court in Virginia rejected the franchisee's argument that the unilateral nature of the arbitration agreements rendered them unconscionable.
In JTH Tax, Inc. v. Lee, No. 2:06cv486, 2007 WL 1795751 (E.D. Va. June 19, 2007), JTH Tax (JTH) and Lee entered into five separate franchise agreements, each containing an arbitration clause that applied only to Lee's claims. When JTH sued for trademark infringement and breach of contract, Lee filed several counterclaims. In response, JTH filed a motion to compel arbitration of the counterclaims... Full Story
An Employee's Subjective View of an Intervening Termination, Lack of Meaningful Choice, or Harshness in Imposition of Costs Not Sufficient Grounds to Set Aside Arbitration Agreement
Signavong v. Volt Management Corp., No. C07-515JLR, 2007 WL 1813845 (W.D. Wash. June 21, 2007)
6/21/2007
Employment disputes that fall within the scope of an arbitration clause will not be set aside due to an employee's subjective view that an intervening termination rendered the agreement invalid, nor will they be set aside on unconscionability grounds without a procedural showing of a lack of meaningful choice or a substantive showing of harshness or one-sidedness, according to a Washington federal court.
In Signavong v. Volt Management Corp., No. C07-515JLR, 2007 WL 1813845 (W.D. Wash. June 21, 2007), Volt sought to compel arbitration of Signavong's employment discrimination claim, consistent with an agreement between the parties to arbitrate such disputes. Signavong opposed the motion, claiming that the agreement was only effective during her first term of employment and not during her second term, or, in the alternative, the agreement was unconscionable and therefore unenforceable... Full Story
Amount in Controversy Requirement Must Be Satisfied Looking Only at the Petition to Find Federal Jurisdiction over Motions to Compel Arbitration
Woehrer v. Bernard, No. 06C1194, 2007 WL 1795592 (E.D. Wis. June 20, 2007)
6/20/2007
In considering a motion to compel arbitration, federal subject-matter jurisdiction based on diversity of citizenship can only be found if "it appears to a legal certainty," looking only at the petition, that the parties could recover an amount equal or greater to the jurisdictional threshold, according to a Wisconsin federal court.
In Woehrer v. Bernard, No. 06C1194, 2007 WL 1795592 (E.D. Wis. June 20, 2007), Woehrer brought a motion to compel arbitration with Bernard over disputed legal fees. Bernard opposed the motion, claiming the federal court lacked the subject-matter and personal jurisdiction necessary to hear the controversy and order arbitration... Full Story
State Cases
Parties Must Challenge Scope of Arbitrator's Powers During Arbitration or Else Forfeit Such Arguments
J.C. Gury Co. v. Nippon Carbide Industries (USA) Inc., No. B194926, 2007 WL 1874245 (Cal. Ct. App. June 29, 2007)
6/29/2007
Finding that an arbitrator did not exceed his powers by finding a contract provision unconscionable and awarding consequential damages, a California appellate court held that failing to challenge the scope of an arbitrator's authority during the arbitration amounts to a waiver.
In J.C. Gury Co. v. Nippon Carbide Industries (USA) Inc., No. B194926, 2007 WL 1874245 (Cal. Ct. App. June 29, 2007) Nippon sold reflective sheeting material to Gury, a manufacturer of reflective signs. For years, Gury used Nippon's reflective sheeting without experiencing any problems. However, after Nippon relocated its reflective sheeting factory to China, Gury began to experience defects in signs sold to its customers... Full Story
Alleged Arbitrator Failure to "Follow the Law" Not an Instance of the Arbitrator Exceeding His Powers
Storm Water Inspection and Maintenance Services, Inc. v. Smith, No A114779, 2007 WL 1849097 (Cal. Ct. App. June 28, 2007)
6/28/2007
Refusing to vacate an arbitration award on the alleged grounds that an arbitrator exceeded his powers, a California appellate court found than an arbitrator's failure to follow California law when rendering an arbitration ruling is not grounds for vacatur.
In Storm Water Inspection and Maintenance Services, Inc. v. Smith, No A114779, 2007 WL 1849097 (Cal. Ct. App. June 28, 2007), Smith and several family members formed Storm Water Inspection and Maintenance Services, Inc. (SWIMS). Smith owned 25% of SWIMS, worked part time as a secretary, and served as the board's secretary/treasurer. Smith was subject to an employment agreement containing an arbitration clause. SWIMS fired Smith and exercised its option to repurchase Smith's shares in the company... Full Story
Cardegna's Holding Applies to Florida Even When FAA Is Not Governing Law
Charles Boyd Const. Inc. v. Vacation Beach, Inc., No. 5D06-2168, 2007 WL 1789297 (Fla. Dist. Ct. App. June 22, 2007)
6/22/2007
Reversing its earlier ruling that a trial court should decide a challenge to a contract's validity, a Florida appellate court followed the Supreme Court's ruling in Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006) concluding that an arbitrator must first decide a challenge to a contract's validity, even when the FAA is not the governing law as it was in Caredegna.
In Charles Boyd Const. Inc. v. Vacation Beach, Inc., No. 5D06-2168, 2007 WL 1789297 (Fla. Dist. Ct. App. June 22, 2007), Vacation Beach contracted with Charles Boyd Construction to build a condominium project. Vacation Beach discovered Charles Boyd Homes, a dissolved corporation, had obtained the structure's building permit rather than Charles Boyd Construction... Full Story
Tennessee Choice of Law Provision Overrides FAA and Precludes Arbitration of Fraudulent Inducement Claim
Morgan Keegan & Co., Inc. v. Force, No. 2006-CA-000311-ME, 2007 WL 1954025 (Ky. Ct. App. July 6, 2007)
7/6/2007
Fraudulent inducement as to an entire contract, an arbitrable issue under federal law, may be made non-arbitrable through the parties' designation of contrary state law, according to the Kentucky Court of Appeals.
In Morgan Keegan & Co., Inc. v. Force, No. 2006-CA-000311-ME, 2007 WL 1954025 (Ky. Ct. App. July 6, 2007), Force had an investment account with Morgan Keegan. The client agreement contained an arbitration clause and the following choice of law provision: "This agreement and its enforcement shall be governed by the laws of the State of Tennessee and federal law as applicable including the Federal Arbitration Act"... Full Story
Right of Appeal Beyond Trial Court Can Be Waived
Van Duren v. Rzasa-Ormes, 2007 WL 1853988 (N.J. Super. Ct. App. Div. June 29, 2007)
6/26/2007
Refusing to vacate an arbitrator's award in an automobile dealership partnership's dissolution, a New Jersey appellate court held that an unambiguous non-appealability clause between two sophisticated businesspeople of relatively equal bargaining power was enforceable and did not violate public policy.
In Van Duren v. Rzasa-Ormes, 2007 WL 1853988 (N.J. Super. Ct. App. Div. June 29, 2007), a dispute arose between Van Duren and Rzasa-Ormes, partners in twelve automobile dealerships. To avoid litigation, the parties entered into a binding arbitration agreement that was "not subject to an appeal to any authority in any form." They appointed an arbitrator and submitted to him questions of valuation and division of their respective interests... Full Story
Court Denies Confirmation of Award Where Party Failed to Prove Compliance with Arbitration Administrator's Notice Requirements
MBNA America Bank, N.A. v. Turull, No. 2006-1088KC, 2007 WL 1835408 (N.Y. App. Term June 21, 2007)
6/21/2007
A New York appellate court affirmed an order denying confirmation of an arbitration award where the party seeking confirmation failed to prove that it served notice of the arbitration on the other party as required by the applicable arbitration rules.
In MBNA America Bank, N.A. v. Turull, No. 2006-1088KC, 2007 WL 1835408 (N.Y. App. Term June 21, 2007), MBNA filed an arbitration claim against Turull. Turull did not participate in the arbitration, and the arbitrator entered an award in MBNA's favor. The trial court denied confirmation of the award... Full Story
Hearing Required When Party Challenges Arbitration Agreement's Validity
Castron v. Higginbotham, No. 88559, 2007 WL 1849086 (Ohio. Ct. App. June 28, 2007)
6/28/2007
Finding a trial court erred by failing to conduct a hearing to determine whether an arbitration agreement was valid, an Ohio appellate court held that when a party challenges an arbitration agreement's validity, a trial court must conduct a hearing to determine the validity and existence of a valid arbitration agreement.
In Castron v. Higginbotham, No. 88559, 2007 WL 1849086 (Ohio. Ct. App. June 28, 2007), Castro purchased a motor vehicle from Higginbotham. The purchase agreement contained an arbitration agreement. Castro filed a complaint against Higginbotham alleging violations of the Ohio Consumer Sales Practices Act and Motor Vehicles Sales Rule, breach of contract, and fraud and deceit. Higginbotham moved to stay proceedings claiming Castro had signed an arbitration agreement. Castro responded by arguing the arbitration agreement was unconscionable, that she was fraudulently induced to enter the agreement, and that her claims were outside the arbitration clause's scope... Full Story
Oklahoma Supreme Court: Applying Class Action Waiver to Preexisting Lawsuit Would Be Unconscionable
Bilbrey v. Cingular Wireless, L.L.C., No. 102973, 2007 WL 1828283 (Okla. June 26, 2007)
6/26/2007
The Oklahoma Supreme Court held that retroactively applying a class action waiver to a preexisting class action lawsuit would be unconscionable because it "defie[d] reason to conclude that [the claimant] intended to halt a class action suit . . . in exchange for a free cell phone."
In Bilbrey v. Cingular Wireless, L.L.C., No. 102973, 2007 WL 1828283 (Okla. June 26, 2007), Bilbrey entered into a cellular phone contract with Southwestern Bell Mobile Systems to which Cingular became successor in interest. Bilbrey initiated a class action suit against Cingular, alleging that Cingular overcharged its customers by calculating the duration of answered calls from when the phone started ringing rather than when the other party answered the call... Full Story
FAA Applies to Employee's Arbitration Agreement Where Employer Engaged in Interstate Commerce
In re Border Steel, Inc., No. 08-06-00308-CV, 2007 WL 1855690 (Tex. App. June 28, 2007)
6/28/2007
In reversing a lower court order denying an employer's motion to compel arbitration, the Texas Court of Appeals held that the Federal Arbitration Act (FAA) governed the arbitration agreement because the agreement specifically stated that the employer engaged in interstate commerce by purchasing out-of-state goods and advertising outside the state.
In In re Border Steel, Inc., No. 08-06-00308-CV, 2007 WL 1855690 (Tex. App. June 28, 2007), Juarez suffered an injury during the course of his employment with Border Steel. Pursuant to an employee benefit plan, Border Steel paid Juarez short-term disability benefits and medical expenses. Juarez later sued Border Steel alleging that it negligently caused its injuries... Full Story
Health Care Providers in Washington May Not Require Binding Arbitration
Jolley v. BlueShield, No. 57477-9-I, 2007 WL 1733215 (Wash. Ct. App. June 18, 2007)
6/18/2007
Reversing a trial court's confirmation of an arbitration award, a Washington appellate court held that the FAA does not preempt Washington's McCarran-Ferguson Act and that health care providers may not require arbitration that excludes judicial remedies.
In Jolley v. BlueShield, No. 57477-9-I, 2007 WL 1733215 (Wash. Ct. App. June 18, 2007), BlueShield, a health care provider, terminated a practitioner agreement it had with Dr. Jolley. Dr. Jolley unsuccessfully challenged the termination through BlueShield's internal appeals process. He then submitted arbitration claims against BlueShield asserting wrongful termination, violation of the Consumer Protection Act, and damages... Full Story
Unliquidated Claims Do Not Become Liquidated Damages Subject to Prejudgment Interest Upon Their Entry in an Arbitration Award
State Dept. of Corrections v. Fluor Daniel, Inc., No. 78290-3, 2007 WL 1953597, (Wash. July 6, 2007)
7/6/2007
"[A]n arbitration award does not transform an unliquidated claim into a fully liquidated sum entitling the prevailing party to prejudgment interest," according to the Washington Supreme Court.
In State Dept. of Corrections v. Fluor Daniel, Inc., No. 78290-3, 2007 WL 1953597, (Wash. July 6, 2007), Fluor Daniel appealed the intermediate court's denial of prejudgment interest previously granted by a trial court confirming an arbitration award. The trial court held that the award became "liquidated damages" upon its entry by the arbitrator, and that the prevailing party was therefore entitled to prejudgment interest on the amount of the award from the time of entry to the time of confirmation. The intermediate court had reversed the trial court's addition of interest to the confirmation of the award... Full Story
ADR Legislation & Regulation
LEGISLATION
CA A 1164
AUTHOR: De Leon [D]
TITLE: Child Care: Provider Organization: Representation
INTRODUCED: 02/23/2007
LAST AMEND: 07/05/2007
DISPOSITION: Pending
LOCATION: Senate Second Reading File
Commentary:
This bill formerly related to competition in the video/broadband industry and providing for binding arbitration of grievances was gutted and amended to relate instead to child care. The current bill also provides that, “An agreement pursuant to this section may provide for binding arbitration of grievances.”
CT H 7182
INTRODUCER: Joint Energy and Technology
TITLE: Certified Competitive Video Service
INTRODUCED: 02/14/2007
ENACTED: 07/11/2007
DISPOSITION: Enacted
Commentary:
Bill provides "In the event an issue is not resolved through this informal process, a customer may request from the [Department of Public Utilities] a confidential, nonbinding mediation with the company, and a designated member of the department staff shall serve as the mediator."
KS S 333
AUTHOR: Commerce Cmt
TITLE: Fairness in Public Building Construction Act
INTRODUCED: 02/07/2007
ENACTED: 04/20/2007
DISPOSITION: Enacted
Commentary:
Creates the Fairness in Public Building Construction Act, amending and repealing previous act. Court or arbitrator should award costs and reasonable attorney fees to prevailing party; sets venue in the county where real property is located, hearing location where real property is located, and requires application of Kansas law.
OR S 248
AUTHOR: Courtney [D]
TITLE: Employment Agreements
INTRODUCED: 01/12/2007
LAST AMEND: 06/27/2007
DISPOSITION: To Governor
Commentary:
"A written arbitration agreement entered into between an employer and employee and otherwise valid ... is void and may not be enforced by the court unless: (a) The employer informs the employee at the time the offer of employment is first communicated to the employee that an arbitration agreement is required as a condition of employment; or (b) The arbitration agreement is entered into upon a subsequent bona fide advancement of the employee by the employer."
US H 3010
SPONSOR: Johnson [D]
TITLE: Arbitration
INTRODUCED: 07/12/2007
DISPOSITION: Pending
LOCATION: House Judiciary Committee
Commentary:
Arbitration Fairness Act of 2007. This bill seeks to amend the Federal Arbitration Act to ban the use of predispute consumer and employment arbitration agreements. Additionally, the statement of intent in the bill contains a number of statements hostile towards arbitration, including, "Mandatory arbitration is a poor system for protecting civil rights and consumer rights because it is not transparent," "Mandatory arbitration undermines the development of public law for civil rights and consumer rights, because there is no meaningful judicial review of arbitrators' decisions. With knowledge that their rulings will not be seriously examined by a court applying current law, arbitrators enjoy near complete freedom to ignore the law and even their own rules," and, "Private arbitration companies are sometimes under great pressure to devise systems that favor the corporate repeat players who decide whether those companies will receive their lucrative business." A similar bill has been introduced in previous sessions.
US S 1782
SPONSOR: Feingold [D]
TITLE: Arbitration
INTRODUCED: 07/12/2007
DISPOSITION: Pending
LOCATION: Senate Judiciary Committee
Commentary:
Arbitration Fairness Act of 2007. This bill seeks to amend the Federal Arbitration Act to ban the use of predispute consumer and employment arbitration agreements. Additionally, the statement of intent in the bill contains a number of statements hostile towards arbitration, including, "Mandatory arbitration is a poor system for protecting civil rights and consumer rights because it is not transparent," "Mandatory arbitration undermines the development of public law for civil rights and consumer rights, because there is no meaningful judicial review of arbitrators' decisions. With knowledge that their rulings will not be seriously examined by a court applying current law, arbitrators enjoy near complete freedom to ignore the law and even their own rules," and, "Private arbitration companies are sometimes under great pressure to devise systems that favor the corporate repeat players who decide whether those companies will receive their lucrative business." A similar bill has been introduced in previous sessions.
REGULATION
No new regulations.
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