Federal Cases
Second Circuit Finds “Evident Partiality” Where Arbitrator Attempted to Preserve Neutrality by Not Investigating a Potential Conflict
Applied Industrial Materials Corp. v. Ovalar Makine Ticaret Ve Sanayi, A.S., No. 06-3297-CV, 2007 WL 1964955 (2d Cir. July 9, 2007)
7/9/2007
In affirming an order vacating an arbitration award for “evident partiality,” the Second Circuit Court of Appeals held that an arbitrator had a duty to investigate a potential conflict or at least to inform the parties that he was foregoing any investigation in order to preserve his neutrality.
In Applied Industrial Materials Corp. v. Ovalar Makine Ticaret Ve Sanayi, A.S., No. 06-3297-CV, 2007 WL 1964955 (2d Cir. July 9, 2007), Applied Industrial Materials (AIM) and Ovalar entered into a joint venture whereby AIM delivered petroleum coke to Ovalar for distribution in Turkey... Full Story
Employee Could Not Challenge Arbitration Agreement on Basis of Duress Where Employer Had Right to Withhold Funds
Lester v. Advanced Environmental Recycling Technologies, Inc., No. 06-51519, 2007 WL 1982195 (5th Cir. July 5, 2007)
7/5/2007
An employee could not argue duress as a basis for invalidating an arbitration agreement within an employer-provided worker's compensation plan where the employer had a legal right to withhold compensation from the employee due to the employee's refusal to consent to the plan, according to the Fifth Circuit Court of Appeals.
In Lester v. Advanced Environmental Recycling Technologies, Inc., No. 06-51519, 2007 WL 1982195 (5th Cir. July 5, 2007), Lester sued Advanced, his employer, seeking damages for an injures sustained on the job. Advanced moved to compel arbitration pursuant to an employer-provided occupational injury benefits plan that contained a clause requiring arbitration of claims arising out of accidents at work. The district court granted the motion... Full Story
Contractual Provision for Heightened Review Did Not Apply to Arbitrators' Venue Determination
The Ridge at Red Hawk, L.L.C. v. Schneider, No. 06-4162, 2007 WL 1969681 (10th Cir. July 9, 2007)
7/9/2007
The Tenth Circuit Court of Appeals held that a contractual provision for heightened review did not apply to the arbitrators' venue determination because the party seeking vacatur could not demonstrate that the venue determination was based "on an incorrect or erroneous ruling of law."
In The Ridge at Red Hawk, L.L.C. v. Schneider, No. 06-4162, 2007 WL 1969681 (10th Cir. July 9, 2007), The Ridge filed a petition seeking vacatur of an arbitration award and invoking a provision in the arbitration agreement for vacatur "of any award that is based in whole or in part on an incorrect or erroneous ruling of law." In seeking vacatur, The Ridge claimed that the arbitration panel erred in determining that the proper venue for arbitration was Texas instead of Utah. Specifically, The Ridge argued that Utah, its principal place of business, was the proper venue because the agreement required the arbitration "be conducted in the principal place of business of the party against whom arbitration proceedings are brought." The district court dismissed the petition on the ground that the arbitrators' venue determination presented an issue of fact... Full Story
Arbitration Clause Applies to Defamation Claims Arising Out of, or Related to, Performance of Underlying Contract
Metzler Contracting Co. v. Stephens, Civ. No. 07-00261 HG-LEK, 2007 WL 1977732 (D. Haw. July 3, 2007)
7/3/2007
Defamation claims can be arbitrated under a contract containing a broadly-worded arbitration clause, if the alleged defamation arises out of or is related to the performance of the contract, according to a federal district court in Hawaii.
In Metzler Contracting Co. v. Stephens, Civ. No. 07-00261 HG-LEK, 2007 WL 1977732 (D. Haw. July 3, 2007), Metzler Contracting and Stephens entered into a residential construction contract with a broad arbitration clause requiring that any claim arising out of the contract, with a few narrow exceptions, be submitted to binding arbitration... Full Story
Arbitral Immunity Exists Despite Alleged Lack of Authority to Hear Dispute
Park v. Columbia Credit Services, Inc., No. 06-0828-CV-W-ODS, 2007 WL 1847142 (W.D. Mo. June 25, 2007)
6/25/2007
Arbitral immunity protects a person so long as he or she is acting as an arbitrator, irrespective of whether he or she in fact had the authority to hear the dispute, according to a federal district court in Missouri.
In Park v. Columbia Credit Services, Inc., No. 06-0828-CV-W-ODS, 2007 WL 1847142 (W.D. Mo. June 25, 2007), Park brought a complaint seeking review of an arbitration award entered in favor of debt collector Columbia for an outstanding consumer credit card debt. Park alleged that the arbitration award and Columbia's subsequent attempt to confirm it were "unlawfully sought," because she had never assented to an agreement to arbitrate the debt dispute... Full Story
Arbitration Clause Applies to Tort Claims That Cannot Be Maintained Without Reference to the Underlying Contract
Sharifi v. AAMCO Transmissions, Inc., No. 3:07-CV-0718-D, 2007 WL 1944371, (N.D. Tex. June 28, 2007)
6/28/2007
Tort claims are subject to a broadly worded arbitration clause if they cannot be maintained without reference to the underlying contract, according to a Texas federal court.
In Sharifi v. AAMCO Transmissions, Inc., No. 3:07-CV-0718-D, 2007 WL 1944371, (N.D. Tex. June 28, 2007), franchisee Sharifi sued franchisor AAMCO for a number of alleged torts, including fraud and emotional distress. AAMCO moved to compel arbitration pursuant to a broadly worded arbitration clause in the parties' franchise agreement. In opposing the motion, Sharifi argued that the claims were torts that did not arise out of or relate to the agreement... Full Story
State Cases
Washington Supreme Court Rejects Class Action Waiver As Exculpatory in Effect
Scott v. Cingular Wireless, No. 77406-4, 2007 WL 2003404 (Wash. July 12, 2007)
7/12/2007
By a 6-3 majority, the Washington Supreme Court held that a class action waiver was substantively unconscionable – thus rendering the arbitration agreement unenforceable – because the waiver allegedly functioned as an exculpatory clause by impeding the pursuit of minor claims. In reaching this holding, the Court was unswayed by the remedial impact of an attorney fees provision in the agreement because the attorney fees provision was expressly limited to consumers who prevailed in full. Accordingly, as the Court noted, a consumer "could recover 99 percent of a claim and still not be awarded any attorney fees."
In Scott v. Cingular Wireless, No. 77406-4, 2007 WL 2003404 (Wash. July 12, 2007), Scott brought a class action against Cingular, his wireless service provider, alleging that Cingular violated Washington's Consumer Protection Act (CPA) by overcharging its customers between $1 and $40 per month... Full Story
California Appeals Court Says Court May Decide Class Action Issues After Arbitrator Finds Those Issues Beyond Scope of NASD Arbitration Agreement
Clark v. First Union Securities, Inc., No. B189589, 2007 WL 1346188 (Cal. Ct. App. May 9, 2007)
5/9/2007
Rejecting the argument that in not explicitly referring two class action claims back to the trial court, an arbitrator had implicitly decided the causes could not be litigated, the California Court of Appeal held that the two causes of action could be heard in state court.
In Clark v. First Union Securities, Inc., No. B189589, 2007 WL 1346188 (Cal. Ct. App. May 9, 2007), Clark, an investment consultant, sued First Union Securities, Inc. (FSI) and Wachovia, his former employer, both as an individual and as the representative of a putative class... Full Story
Court Rejects Unconscionability Challenge to Arbitration Agreement with Opt-Out Provision
Columbia Credit Services, Inc v. Billingslea, No. B190776, 2007 WL 1982721 (Cal. Ct. App. July 10, 2007)
7/10/2007
The California Court of Appeal rejected a credit card holder's unconscionability challenge to an arbitration agreement because the agreement contained an opt-out provision and its terms were conspicuously displayed.
In Columbia Credit Services, Inc v. Billingslea, No. B190776, 2007 WL 1982721 (Cal. Ct. App. July 10, 2007), Billingslea obtained an MBNA credit card in 1997. In 1999, MBNA mailed notices to its cardholders, stating that it was adding a binding arbitration provision to its cardholder agreement. Billingslea did not opt out of the arbitration provision. He continued to use the card for several years, amassing a $17,821.39 balance... Full Story
Improper to Vacate Arbitral Award Despite Proper Vacatur of Order Compelling Arbitration
Rossco Holdings Inc. v. Bank of America, No. B189963, 2007 WL 1152977 (Cal. Ct. App. Apr. 19, 2007)
4/19/2007
An appellate court in California determined that the effect of a trial court judge's failure to recuse himself from hearing a motion to compel arbitration after having employment discussions with the arbitration administrator was to vacate the order to compel arbitration, but leave intact the resulting arbitration award for a new judge to determine whether it should be upheld.
In Rossco Holdings Inc. v. Bank of America, No. B189963, 2007 WL 1152977 (Cal. Ct. App. Apr. 19, 2007), the judge issued an order compelling arbitration but later recused himself because he had engaged in employment discussions with the arbitration administrator. The arbitration proceeded and an award issued. Rossco moved to vacate the order compelling arbitration in light of the judge's recusal. The trial court granted the motion and also vacated the award, as it had arisen from a vacated order to compel. The Bank appealed... Full Story
Arbitrability of Issues Is Determined by Plain Language in Contract Provisions, Not by the Character of the Remedy Sought
Birnbaum v. Calabro, 2007 WL 1790589 (N.J. Super. Ct. App. Div. June 22, 2007)
6/22/2007
The plain language of contracts and arbitration provisions, not the character of the remedy sought, govern questions of arbitrability, according to a New Jersey appellate court.
In Birnbaum v. Calabro, 2007 WL 1790589 (N.J. Super. Ct. App. Div. June 22, 2007), Birnbaum appealed an order to compel arbitration of several claims arising out of employment and shareholder agreements with Calabro. The lower court issued an order compelling arbitration of all claims, deciding that the monetary character of the damages sought by Birnbaum was "generally for compensation from employment, cognizable under the Employment Agreement subject to arbitration"... Full Story
FAA Does Not Preempt RUAA's Provisional Remedies
Scottish Re Life Corp v. Transamerica Occidental Life Insurance Co., No. COA06-1278, 2007 WL 1891168 (N.C. Ct. App. July 3, 2007)
7/3/2007
Affirming a trial court's provisional remedies award in a complex insurance dispute, a North Carolina appellate court held that the Federal Arbitration Act (FAA) does not preempt North Carolina's Revised Uniform Arbitration Act's (RUAA) provisional remedies provision.
In Scottish Re Life Corp v. Transamerica Occidental Life Insurance Co., No. COA06-1278, 2007 WL 1891168 (N.C. Ct. App. July 3, 2007), Scottish Re Life entered into reinsurance contracts with Annuity and Life Reassurance (ALR). Transamerica later assumed ALR's obligations. Scottish Re Life demanded some form of security that would allow it to receive credit after it discovered that New York had not licensed Transamerica. Transamerica asserted it had not agreed to assume certain liabilities and that Scottish Re Life had made false representations, thus entitling Transamerica to rescind the agreement... Full Story
Ohio Law Requires Hearing at Request of Party Opposing Motion to Compel Arbitration
Brunke v. Ohio State Home Services, Inc., No. 06CA008947, 2007 WL 1805026 (Ohio Ct. App. June 25, 2007)
6/25/2007
According to the Ohio Court of Appeals, under Ohio statutory law, parties opposing a motion to compel arbitration must be granted a court hearing on the issue upon request.
In Brunke v. Ohio State Home Services, Inc., No. 06CA008947, 2007 WL 1805026 (Ohio Ct. App. June 25, 2007), Brunke appealed an order compelling arbitration of certain claims, alleging that the trial court erred in not holding a hearing before compelling arbitration as required under the Ohio Code... Full Story
Texas Court of Appeals: Abating Arbitration "Flies in the Face" of Speedy Dispute Resolution
In re Sonic-Carrolton V, L.P., No. 05-07-00574-CV, 2007 WL 1990396 (Tex. App. July 11, 2007)
7/11/2007
Reversing a trial court order abating arbitration, the Texas Court of Appeals held that the Federal Arbitration Act (FAA) preempts state law vesting the Texas Motor Vehicle Board (TMVB) with primary jurisdiction over dealership disputes.
In In re Sonic-Carrolton V, L.P., No. 05-07-00574-CV, 2007 WL 1990396 (Tex. App. July 11, 2007), Millennium sued Sonic and Volvo over a dispute arising out of the purchase and sale of an automobile dealership. Sonic and Volvo moved to compel arbitration. Although all the parties asserted the arbitration agreement covered their disputes, Millennium moved to abate arbitration to allow the TMVB to hear the dispute. Millennium argued that the TMWB had primary jurisdiction under the Texas Occupation Code. The trial court abated arbitration until the TMVB heard the dispute. Sonic and Volvo appealed... 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: 07/17/2007
DISPOSITION: Pending
LOCATION: Senate Appropriations Committee
Commentary:
This bill, which formerly related to competition in the video/broadband industry, was gutted and amended to relate instead to child care. The current bill also provides that "[a]n agreement pursuant to this section may provide for binding arbitration of grievances."
CA A 1264
AUTHOR: Eng [D]
TITLE: Courts: Delay Reduction: Unnamed Defendants
INTRODUCED: 02/23/2007
LAST AMEND: 06/20/2007
DISPOSITION: To Governor
Commentary:
Amending an existing act regarding the reduction in delay of court proceedings. Amendments include: "Existing law also prohibits delay reduction rules from requiring a period for referral of a case to arbitration that is less than 210 days after the filing of the complaint", and "[t]he bill also would prohibit the court from conducting a postmediation status conference if the parties have participated in mediation and the mediator files a notice of agreement or nonagreement at least 5 days before the hearing."
CA S 574
AUTHOR: Negrete McLeod [D]
TITLE: Alcoholic Beverages
INTRODUCED: 02/22/2007
LAST AMEND: 07/05/2007
DISPOSITION: Pending
LOCATION: Assembly Second Reading File
Commentary:
An act amending the Business and Professions Code in relation to alcoholic beverages. (Alcohol Beverage Control Act). Amendments include: "(1) An arbitration held under this subdivision shall be held in California through a private arbitration services provider with at least three offices in California and a statewide roster of at least 70 neutral arbitrators, of which at least 30 have prior experience as a sole arbitrator in franchise, distribution, or related business litigation." Additional amendments outline the arbitration process.
ME H 1301
LD: 1869
AUTHOR: Cummings [D]
TITLE: Predatory Lending and Homeowners
INTRODUCED: 04/24/2007
ENACTED: 06/11/2007
DISPOSITION: Enacted
Commentary:
Relating to predatory home loans. "Notwithstanding any other provision of law, a residential mortgage loan agreement may not include any provision that waives any borrower's remedies available at law or equity, whether acting individually or on behalf of others similarly situated, or the borrower's rights to civil discovery or appeal. Any such provision is unenforceable and void as a matter of law. Without regard to whether a borrower is acting individually or on behalf of others similarly situated, any provision of a residential mortgage loan agreement that allows a person to require a borrower to assert any claim or defense in a forum that is less convenient, more costly or more dilatory for the resolution of a dispute than a judicial forum established in this State where the borrower may otherwise properly bring a claim or defense or that limits in any way any claim or defense the borrower may have is unconscionable and void as a matter of law."
MO S 22
SPONSOR: Griesheimer [R]
TITLE: Political Subdivisions
INTRODUCED: 01/03/2007
ENACTED: 07/13/2007
DISPOSITION: Enacted
Commentary:
Withholds county funds unless a county agrees to engage in mandatory mediation if a jailer in the county determines that a prisoner needs medicine, dental care, or medical attention after being located to the jail from another county.
NC H 730
SAME AS: NC S 735
AUTHOR: Goforth [D]
TITLE: Mediation of Property Insurance Claims
INTRODUCED: 03/15/2007
DISPOSITION: To Governor
Commentary:
Makes minor changes to law concerning mediation of property insurance claims.
NC H 1671
AUTHOR: England [D]
TITLE: Negligent Health Care Actions
INTRODUCED: 04/19/2007
LAST AMEND: 07/17/2007
DISPOSITION: To Governor
Commentary:
Amending an act to provide for arbitration of wrongful death and personal injury claims. The amendments would make any preexisting agreement to arbitrate void, and only allow for post dispute agreements to arbitrate. The bill also attempts to make the Revised Uniform Arbitration Act inapplicable to this article.
NH S 170
AUTHOR: Gottesman [D]
TITLE: Mediation and Arbitration
INTRODUCED: 01/04/2007
ENACTED: 07/16/2007
DISPOSITION: Enacted
Commentary:
Establishes an office of mediation and arbitration within the judicial branch. The bill combines the probate court mediation fund and the court mediation fund into a mediation and arbitration fund.
OR H 2112
AUTHOR: Minnis [R]
TITLE: Construction Contractor Insurance
INTRODUCED: 01/08/2007
DISPOSITION: To Governor
Commentary:
Bill had previously required construction contractor to include in its standard contracts, "an explanation of the property owner's rights under the contract, including, but not limited to, the ability to file a claim with the board and the existence of any mediation or arbitration provision in the contract, set forth in a conspicuous manner as defined by the board by rule..." A 6/4/07 amendment to the bill removed all references to ADR, and instead prohibits person licensed or required to be licensed by Construction Contractors Board from installing barrier type insulation and finish systems on a new residential dwelling.
OR H 2117
AUTHOR: Minnis [R]
TITLE: Terminology of Landscaping Services
INTRODUCED: 01/08/2007
ENACTED: 06/22/2007
DISPOSITION: Enacted
Commentary:
Amending an act relating to landscaping. No substantive changes to arbitration mention; but slight change removing requirements regarding format of award.
OR H 2127
AUTHOR: Minnis [R]
TITLE: Victims of Juvenile Crime
INTRODUCED: 01/08/2007
ENACTED: 06/26/2007
DISPOSITION: Enacted
Commentary:
An act revising juvenile code regarding rights of victims of juvenile crime. Amendments include: (4) A county juvenile department may include mediation between a child and a victim as one of the terms of an informal disposition a formal accountability agreement under ORS 419C.230 or an authorized diversion program under ORS 419C.225."
OR H 2331
AUTHOR: Minnis [R]
TITLE: Jury Trials in County Courts
INTRODUCED: 01/10/2007
LAST AMEND: 06/23/2007
DISPOSITION: To Governor
LOCATION: Eligible for Governor
Commentary:
A 6/23/07 amendment to this bill regarding court fees includes several provisions regarding vacating arbitral awards, specifically providing for vacatur where: "(a) The party making application furnishes proof that:
(A) A party to the arbitration agreement referred to in ORS 36.466 was under some incapacity or that the agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the laws of the State of Oregon or the United States;
(B) The party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present the party's case;
(C) The award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration or contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters not submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside; or
(D) The composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of ORS 36.450 to 36.558 from which the parties cannot derogate, or, failing such agreement, was not in accordance with ORS 36.450 to 36.558; or
(b) The circuit court finds that:
(A) The subject matter of the dispute is not capable of settlement by arbitration under the laws of the State of Oregon or of the United States; or
(B) The award is in conflict with the public policy of the State of Oregon or of the United States."
OR H 2654
AUTHOR: Consumer Protection Cmt
TITLE: Construction Contractors Whom Maintain Insurance
INTRODUCED: 02/13/2007
ENACTED: 06/26/2007
DISPOSITION: Enacted
LOCATION: Chaptered
Commentary:
Requires construction contractor to maintain insurance that provides contractor with liability coverage for completed work. Provides for "conspicuous" and clear explanation of arb/med clauses; clarifies that court confirmation makes an arbitration award "final."
OR H 3242
AUTHOR: Schaufler [D]
TITLE: Construction Contractors
INTRODUCED: 03/12/2007
DISPOSITION: To Governor
Commentary:
Creates categories and levels of construction contractor licensing; modifies claim and recovery provisions. Outlines arbitration procedures for disputes involving the "Construction Contractor's Board," must be properly licensed to initiate claim, can avoid arbitration if requested within 30 days of notice.
OR S 94
AUTHOR: Courtney [D]
TITLE: Construction Contractors
INTRODUCED: 01/08/2007
ENACTED: 07/17/2007
DISPOSITION: Enacted
Commentary:
Revises terminology pertaining to Construction Contractors Board dispute resolution. Changes terminology without any substantive change to ADR process.
OR S 337
AUTHOR: Courtney [D]
TITLE: Health Professional Regulatory Boards
INTRODUCED: 01/12/2007
ENACTED: 07/17/2007
DISPOSITION: Enacted
Commentary:
Relating to reports to health professional regulatory boards; creating new provisions; amending ORS 30.265, 677.205, 677.415 and 742.400; and declaring an emergency. Amendments include: (c) 'Disposition of a claim' means: (A) A judgment or award against the covered practitioner by a court, a jury or an arbitrator; and 5(c) For purposes of this subsection, 'judicial finding' means a finding of liability by a court, a jury or an arbitrator.
REGULATION
Florida FAC 61B-82.001, .002, .004, through .007
AGENCY: Department of Business and Professional Regulation/Division of Florida Land Sales, Condominiums and Mobile Homes
TITLE: Mediation Programs
PROPOSED: 07/20/2007
Commentary: Would repeal the rules to replace the Homeowners Association mediation program operated by the Division of Land Sales, Condominiums and Mobile Homes with private mediation.
Florida FAC 61B-83.001 through .004
AGENCY: Department of Business and Professional Regulation/Division of Florida Land Sales, Condominiums and Mobile Homes
TITLE: Arbitrators and Mediators
PROPOSED: 07/20/2007
Commentary: Would repeal the rules relating to the Division of Florida Land Sales, Condominiums and Mobile Homes' certification and training program for arbitrators and mediators for the Division.
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