Federal Cases
Employers Need Not Demonstrate Bilateral Effect of Mutual Arbitration Agreements
Miyasaki v. Real Mex Restaurants, Inc., No. C 05-5331 VRW, 2006 WL 2385229 (N.D. Cal. Aug. 17, 2006)
8/17/2006
In ordering parties to arbitrate an employment dispute, a federal district court in California ruled that an employer need not demonstrate that an arbitration agreement is bilateral in effect unless the agreement is explicitly or implicitly non-mutual. The Court held that the inclusion of a mutual obligation to arbitrate is sufficient to enforce the agreement.
In Miyasaki v. Real Mex Restaurants, Inc., No. C 05-5331 VRW, 2006 WL 2385229 (N.D. Cal. Aug. 17, 2006), Miyasaki sued Real Mex, her former employer, alleging discrimination on the basis of sex and race. Real Mex moved to compel arbitration pursuant to a dispute resolution agreement (DRA) that Miyasaki signed when starting her employment. In opposing the motion, Miyasaki argued that a supposed lack of mutuality rendered the DRA unconscionable and therefore unenforceable... Full Story
Rule 55 Default Judgment Proceedings Are Inappropriate to Confirm or Vacate an Arbitration Award
D.H. Blair & Co., Inc. v. Gottdiener, No. 04-3260, 2006 WL 2551218 (2d Cir. Sep. 5, 2006)
9/5/2006
The Second Circuit Court of Appeals held that default judgments under Rule 55 of the Federal Rules of Civil Procedure are “generally inappropriate” in proceedings to confirm or vacate an arbitration award. The significance of the holding is limited primarily to challenges to arbitration awards since the Federal Arbitration Act (FAA) requires courts to grant an unopposed motion for confirmation.
In D.H. Blair & Co., Inc. v. Gottdiener, No. 04-3260, 2006 WL 2551218 (2nd Cir. Sep. 5, 2006), D.H. Blair and Gottdiener submitted an investment dispute to arbitration. The arbitrators awarded Gottdiener $255,000 in compensatory damages and $450,000 in punitive damages. The award also included prejudgment interest on all damages... Full Story
Manifest Disregard of the Law Requires More Than Disagreement With the Outcome
Terminix Intern. Co., L.P. v. Ferrario, No. 4:06CV879 HEA, 2006 WL 2546814 (E.D. Mo. Aug. 31, 2006)
8/31/2006
A federal district court in Missouri rejected an employer’s argument that an arbitrator manifestly disregarded the law in deciding an employment case, instead holding that the employer’s appeal showed nothing more than disagreement with the outcome of the arbitration.
In Terminix Intern. Co., L.P. v. Ferrario, No. 4:06CV879 HEA, 2006 WL 2546814 (E.D. Mo. Aug. 31, 2006), Terminix, a pest control company, filed an arbitration claim against Ferrario and Williams, two former employees, when they attempted to buy their own pest control business. Terminix alleged that the employee’s attempt to buy the business violated their noncompete agreement and fiduciary duties... Full Story
Fifth Circuit Holds That Arbitration Clause in Insurance Policy Applies Only to Disputes Involving the Insurer, and Not Between Insureds
Tittle v. Enron Corp., No. 05-20380, 2006 WL 2522444 (5th Cir. Sep. 1, 2006)
9/1/2006
The Fifth Circuit Court of Appeals construed an arbitration clause in an insurance policy as applying only to disputes involving the insurer and not to disputes between the insureds over allocation of insurance proceeds.
In Tittle v. Enron Corp., No. 05-20380, 2006 WL 2522444 (5th Cir. Sep. 1, 2006), former Enron employees brought a class action against Enron and its board of directors, alleging breach of fiduciary duties in violation of ERISA... Full Story
Arbitration Agreement in Subcontract Requires Arbitration of Party’s Dispute Involving Master Contract
FMC Technologies, Inc. v. Sequoia Energy, L.L.C., No. CIVA 6:05-376 DCR, 2006 WL 2540377 (E.D. Ky. Aug. 31, 2006)
8/31/2006
A subcontractor brought into a lawsuit as a third party defendant is still entitled to invoke the arbitration clause in its subcontract, even when the main lawsuit involves a master contract that lacks an arbitration provision, according to a federal district court in Kentucky.
In FMC Technologies, Inc. v. Sequoia Energy, L.L.C., No. CIVA 6:05-376 DCR, 2006 WL 2540377 (E.D. Ky. Aug. 31, 2006), FMC, a contractor, sued Sequoia for breach of a construction contract. Sequoia counterclaimed, alleging negligence and breach of implied warranty... Full Story
New Jersey Federal Court Says That Arbitration Agreement May Expand Judicial Review
FDS International v. Seko Worldwide, Inc., No. CIVA06CV1023 PGS, 2006 WL 2528579 (D.N.J. Aug. 31, 2006)
8/31/2006
A federal district court in New Jersey refused to vacate an arbitrator’s award where the party challenging the award alleged only that the arbitrator failed to apply the terms of the parties’ agreement.
In FDS International v. Seko Worldwide, Inc., No. CIVA06CV1023 PGS, 2006 WL 2528579 (D.N.J. Aug. 31, 2006), FDS petitioned the court to vacate an arbitration award in Seko’s favor... Full Story
Party Waived any Objection to Arbitrability by Voluntarily Participating in Arbitration
Garner v. MBNA America Bank, N.A., No. 3:05-cv-1029-R, 2006 WL 2354939 (N.D. Tex. Aug. 14, 2006)
8/14/2006
In confirming an arbitration award, a federal district court in Texas held that a party waived any objection to arbitrability by voluntarily participating in arbitration.
In Garner v. MBNA America Bank, N.A., No. 3:05-cv-1029-R, 2006 WL 2354939 (N.D. Tex. Aug. 14, 2006), MBNA initiated arbitration to resolve a billing dispute with Garner. The arbitrator awarded MBNA $23,777.69 plus interest. Garner moved to vacate the award... Full Story
State Cases
Marital Dissolution Issues May Be Submitted to Binding Arbitration
In re Marriage of Woods, 2006 WL 2498195 (Or. Ct. App. Aug. 30, 2006)
8/30/2006
The Oregon Court of Appeals held that a husband was entitled to a trial de novo following court-annexed arbitration of issues arising from the dissolution of his marriage. However, the Court indicated that binding arbitration is an option for parties in a marital dissolution seeking an alternative to litigation.
In In re Marriage of Woods, 2006 WL 2498195 (Or. Ct. App. Aug. 30, 2006), Mack and Cynthia Woods, husband and wife, petitioned for dissolution of their marriage. The trial court referred the matter to court-annexed arbitration pursuant to Or. Rev. Stat. § 36.405... Full Story
Company’s Failure to Comply With Provisions of Carmack Amendment Relating to Arbitration Opens the Door for Award of Attorney Fees
All in the Family Moving & Storage v. Latka, No. 1D05-3073, 2006 WL 2190522 (Fla. App. Aug. 4, 2006)
8/4/2006
A shipping company who fails to comply with the arbitration notice requirements of the Carmack Amendment may not then rely on the shipper’s failure to use arbitration as an argument against awarding the shipper attorney fees, a federal court in Florida held.
In All in the Family Moving & Storage v. Latka, No. 1D05-3073, 2006 WL 2190522 (Fla. App. Aug. 4, 2006), a court awarded the Latkas damages and attorney fees in an action against All in the Family... Full Story
Florida Appellate Court Says Arbitration Covers Homebuyer’s Fraudulent Inducement Claim
Beazer Homes Corp. v. Bailey, No. 5D05-2229, 2006 WL 2570564 (Fla. Dist. Ct. App. Sep. 8, 2006)
9/8/2006
The Florida District Court of Appeal ruled that a homebuyer’s fraudulent inducement claim fell within the scope of an arbitration clause in the sales contract.
In Beazer Homes Corp. v. Bailey, No. 5D05-2229, 2006 WL 2570564 (Fla. Dist. Ct. App. Sep. 8, 2006), Beazer built and sold a home abutting a golf course to Bailey. The sales contract provided for arbitration of all disputes “aris[ing] out of” the contract... Full Story
Sham Arbitration Award Does Not Impede Confirmation of Legitimate Award
MBNA America, NA v. Silva, No. 9949, 2006 WL 2223802 (Mass. App. Ct. July 27, 2006)
7/27/2006
The Massachusetts Appeals Court confirmed an arbitration award against a credit card holder who earlier obtained a sham award against the card issuer.
In MBNA America, NA v. Silva, No. 9949, 2006 WL 2223802 (Mass. App. Ct. July 27, 2006), MBNA sent Silva an amended cardholder agreement providing that any disputes between the parties would be resolved through arbitration administered by the National Arbitration Forum... Full Story
Arbitrator Exceeded Authority by Awarding More Than Amount Requested
Carroll v. Ferro, No. COA05-1420, 2006 WL 2528735 (N.C. Ct. App. Sep. 5, 2006)
9/5/2006
The North Carolina Court of Appeals held that a trial court erred in modifying an arbitration award on the basis that the arbitrator exceeded his powers by awarding $2,629,224 to a claimant who paid the filing fee for a claim not exceeding $1,000,000. As the Court noted, where an arbitrator exceed his powers, there is a basis for vacating, not modifying, the award.
In Carroll v. Ferro, No. COA05-1420, 2006 WL 2528735 (N.C. Ct. App. Sep. 5, 2006), Caroll filed an arbitration claim against Ferro in connection with a dispute over several manufactured home communities. Carroll filed his complaint with the American Arbitration Association, which requires parties to pay filing fees based on the amount of the alleged damages. Carroll paid his filing fee based on estimated damages of $1,000,000... Full Story
Inadequate Description of Procedure Renders Arbitration Clause Unenforceable
Felix v. Ganley Chevrolet, Inc., No. 86990, 86991, 2006 WL 2507469 (Ohio Ct. App. Aug. 31, 2006)
8/31/2006
The Ohio Court of Appeals held that an arbitration clause containing few details about the process was unconscionable because the signing party was “substantially less informed” than the drafters about the arbitration process.
In Felix v. Ganley Chevrolet, Inc., No. 86990, 86991, 2006 WL 2507469 (Ohio Ct. App. Aug. 31, 2006), the Felixes purchased a car from Ganley Chevrolet. The purchase agreement contained a six-sentence arbitration clause referring all disputes to “binding arbitration"... Full Story
Without Retroactive Language, Arbitration Agreement Does Not Apply Retroactively
Gregory v. Sprint Spectrum L.P., Super.Ct.No. GIC806155, 2006 WL 2497781 (Cal. App. 4 Dist. August 30, 2006)
8/30/2006
An arbitration agreement can apply retroactively to disputes, the California Court of Appeal held, but because a company’s 2004 arbitration agreement contained no retroactive language, it did not encompass a lawsuit filed against the company in 2003.
In Gregory v. Sprint Spectrum L.P., Super.Ct.No. GIC806155, 2006 WL 2497781 (Cal. App. 4 Dist. August 30, 2006), Gregory filed a putative class action against Sprint in 2003 for deceptive trade practices. Sprint filed a motion to compel arbitration... Full Story
Doctrine of Equitable Estoppel Allows Non-Signatory to Compel Arbitration
Wilcox & Fetzer, Ltd. v. Corbett & Wilcox, No. Civ.A.2037-N, 2006 WL 2473665 (Del. Ch. Aug. 22, 2006)
8/22/2006
The Delaware Court of Chancery ruled that the doctrine of equitable estoppel allowed a non-signatory to compel arbitration because the claims against the nonsignatory were intertwined with the contract and also alleged concerted misconduct between a signatory and the non-signatory.
In Wilcox & Fetzer, Ltd. v. Corbett & Wilcox, No. Civ.A.2037-N, 2006 WL 2473665 (Del. Ch. Aug. 22, 2006), Robert Wilcox and Kurt Fetzer were joint shareholders in Wilcox & Fetzer (W&F). Wilcox left the firm and sold his interest to Fetzer... Full Story
Delaware Court Decides Arbitrability of Issues Falling With Carve-Out Provision in Arbitration Clause
Nutzz.com v. Vertrue Inc., No. Civ.A. 1231-N, Civ.A. 1719-N, 2006 WL 2220971 (Del. Ch. July 25, 2006)
7/25/2006
The court can decide the issue of the arbitrability of claims that may fall within a carve-out provision of an arbitration agreement, a Delaware state court held.
In Nutzz.com v. Vertrue Inc., No. Civ.A. 1231-N, Civ.A. 1719-N, 2006 WL 2220971 (Del. Ch. July 25, 2006), Nutzz and Vertrue disputed over the alleged breach of a Confidentiality provision in their agreement... Full Story
ADR Legislation & Regulation
FEDERAL LEGISLATION
No new legislation
STATE LEGISLATION
California SB 697 (Introduced 02/22/2005) Enrolled 09/13/2006
Subjects: Child Care, Education
An Act amending the Education Code to authorize representation of family child care providers. The purpose of the bill is to improve access to, and the stability of, quality child care by providing collective activities and other representation rights to family child care providers. The bill provides that a provider organization will represent the individual providing child care in negotiations with public and private entities. This bill authorizes any written agreement between the provider organization, the child care provider and the agency in negotiations to include a provision requiring binding arbitration of grievances.
California AB 770 (Introduced 02/18/2005) Enrolled 09/19/2006
Subjects: Common Interest Developments, Dispute Resolution
An act to amend the Business and Professions Code related to common interest developments, requiring the association that manages a development to provide a fair, reasonable, and expeditious procedure for resolving disputes between the association and members of the association involving their rights, duties, or liabilities under the act. The act also requires an association or an owner of a separate interest or a member of an association to endeavor to submit their dispute to alternative dispute resolution before they file certain enforcement actions in court. Under the bill, the Office of the Common Interest Development Ombudsperson provides free assistance in resolving disputes.
California SB 1476 (Introduced 02/23/2006) Enrolled 09/12/2006
Subjects: Guide Dogs for the Blind, Arbitration
This bill regulates various professions and vocations by various boards within the Department of Consumer Affairs. A pilot project would establish an arbitration program for disputes between guide dog users and guide dog schools relating to the continued physical custody and use of the guide dog. The procedures would provide for a three-panel arbitration system, and if the parties voluntary agree to the arbitration, the award would be binding and non-appealable.
California AB 2482 (Introduced 02/23/2006) Enrolled 09/12/2006
Subjects: Arbitration, Out of State Representation
Existing law, effective until January 1, 2007, permits persons admitted to the bar of any other state to represent a party in an arbitration proceeding in this state, or to render legal services in this state in connection with an arbitration proceeding in another state. Existing law requires out-of-state attorneys representing a party in a California arbitration proceeding to serve upon the arbitrator, the State Bar of California, the parties, and counsel, a certificate containing specified information prior to the first scheduled hearing in the arbitration. Existing law also permits any party to an arbitration arising under certain collective bargaining agreements to be represented by any person. This bill would remove the January 1, 2007, repeal date, thereby extending those provisions indefinitely, and make a related, conforming change.
California AB 2624 (Introduced 02/24/2006) Enrolled 09/12/2006
Subjects: Common Interest Developments, Arbitration
A bill relating to common interest developments: This bill would require that prior to initiating a foreclosure for delinquent assessments, “an association shall offer the owner and, if so requested by the owner, shall participate in dispute resolution pursuant to the association's 'meet and confer' program required in Article 5 (commencing with Section 1363.810) of Chapter 4 or alternative dispute resolution with a neutral third party pursuant to Article 2 (commencing with Section 1369.510) of Chapter 7. The decision to pursue dispute resolution or a particular type of alternative dispute resolution shall be the choice of the owner, except that binding arbitration shall not be available if the association intends to initiate a judicial foreclosure."
Michigan HB 6456 (Introduced 09/12/2006)
Subjects: Video Service Providers, Dispute Resolution
This bill would create a state video service authorization system, replacing the current system of local franchising, to promote competition in providing video services. Video service providers would have to establish a dispute resolution process for its customers and maintain a local or toll-free telephone number for customer service. The Michigan Public Service Commission would have to establish a process to review disputes not resolved under the provider's own process, and each provider would be required to notify its customers of the resolution dispute process.
REGULATIONS
New York Reg 18576 (Proposed and Adopted 08/31/2006)
Subjects: Arbitration, Personal Injury Protection Benefits
Establishes emergency rules applicable when multiple insurers may be responsible to the claimant for the processing of first party benefits. It also enhances the current arbitration procedures to provide an expedited eligibility hearing option, when required, to designate an insurer responsible for processing the first party benefits. Provides definitions of terms. CITATION: Title 11 NYCRR Part 65 Section 3. EFFECTIVE DATE: 09/08/2006. EXPIRATION DATE: 12/06/2006. Complete text of the regulation
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