Federal Cases
Arbitration Agreement Covering Claims Against Escrow Fund for Corporate Merger Does Not Encompass Claims Against Personal Assets of Corporate Officers
Duthie v. Matria Healthcare, Inc., No. 08-1699, 2008 WL 3931571 (7th Cir. Aug. 28, 2008)
8/28/2008 12:00:00 AM
The Seventh Circuit Court of Appeals held that where a corporate merger contract contains an arbitration agreement encompassing disputes between corporate parties seeking recovery from an escrow fund, claims against individual corporate officers do not fall within the scope of the arbitration agreement.
In Duthie v. Matria Healthcare, Inc., No. 08-1699, 2008 WL 3931571 (7th Cir. Aug. 28, 2008), Duthie was the CEO for CorSolutions, which had agreed to merge with Matria. Duthie signed a merger contract with Matria in his capacity as CEO. An escrow fund had been created for the merger, and the contract contained an arbitration agreement that provided for the arbitration of claims seeking recovery from the escrow fund... Full Story
Party Cannot Seek Stay of Arbitration Under New York Convention
Ghassabian v. Hematian, No. 08 Civ. 4400, 2008 WL 3982885 (S.D.N.Y. Aug. 27, 2008)
8/27/2008 12:00:00 AM
A federal district court in New York denied an Israeli inventor’s motion to stay a pending arbitration because, as the Court explained, the New York Convention and its implementing statutes do not provide for a stay of arbitration.
In Ghassabian v. Hematian, No. 08 Civ. 4400, 2008 WL 3982885 (S.D.N.Y. Aug. 27, 2008), Ghassabian, an Israeli citizen, invented a wrist-mounted telephone device. To market his invention Ghassabian joined with Hematian and two other Americans (collectively, Hematian) to form Classicom LLC in the United States... Full Story
Medical Providers Must Arbitrate Underpayment Claims Individually in State No-Fault Arbitration Program
Innovative Physical Therapy, Inc. v. Metlife Auto & Home, No. 07-5446 (JAP), 2008 WL 4067316 (D.N.J. Aug. 26, 2008)
8/26/2008 12:00:00 AM
A federal district court in New Jersey held that where a medical provider alleges that an insurance company underpaid a personal injury protection (PIP) claim and that the insurance company systematically underpays such claims, the medical provider is not entitled to class certification and must arbitrate each claim individually.
In Innovative Physical Therapy, Inc. v. Metlife Auto & Home, No. 07-5446 (JAP), 2008 WL 4067316 (D.N.J. Aug. 26, 2008), three medical service providers (Providers) sued Metlife Insurance, alleging that Metlife improperly used “computer-generated bill review reports” to arbitrarily discount PIP claims for first-party medical benefits below the amounts billed by the insured’s medical providers. For example, a Provider billed a Metlife-insured patient $63.44, but Metlife only paid $59.35 because its computer-generated bill review report determined that $59.35 was the “reasonable” cost of the treatment... Full Story
“College of Arbiters” is a Generic Term That Describes Any Arbitral Panel
Magi XXI, Inc. v. Stato Della Citta Del Vaticano, No. 07-CV-02898, 2008 WL 3895915 (E.D.N.Y. Aug. 22, 2008)
8/22/2008 12:00:00 AM
A federal district court in New York held that where an arbitration agreement provides that a dispute shall be referred to a “College of Arbiters,” the phrase is referring to a generic arbitral panel, not to a specific arbitral panel bearing that name.
In Magi XXI, Inc. v. Stato Della Citta Del Vaticano, No. 07-CV-02898, 2008 WL 3895915 (E.D.N.Y. Aug. 22, 2008), Magi entered into a sub-license contract with Second Renaissance, LLC (SR), which granted Magi rights to market and sell products inspired by items in the Vatican Library collection... Full Story
Sixth Circuit: Court Has Authority to Decide Whether Party Waived Right to Arbitrate Through Pre-Litigation Conduct
JPD, Inc. v. Chronimed Holdings, Inc., No. 07-4427, 2008 WL 3876343 (6th Cir. Aug. 22, 2008)
8/22/2008 12:00:00 AM
The Sixth Circuit Court of Appeals determined that a court, rather than an arbitrator, has authority to decide whether a party waived its right to arbitrate through pre-litigation conduct allegedly inconsistent with an intent to arbitrate.
In JPD, Inc. v. Chronimed Holdings, Inc., No. 07-4427, 2008 WL 3876343 (6th Cir. Aug. 22, 2008), DiCello owned Northland Pharmacy (Northland), a specialty drugstore which sold drugs for complex illnesses. Chronimed agreed to purchase Northland for $12 million, plus additional cash if the earnings target for the next year was exceeded. Chronimed also agreed to maintain aspects of DiCello’s prior business practices throughout the year to give DiCello a fair chance at earning the extra money... Full Story
Texas Federal District Court Interprets FAA’s One-Year Limitation Period for Confirmation as “Mandatory”
FIA Card Services, N.A. v. Gachiengu, Civ. A. No. H-07-2382, 2008 WL 3826110 (S.D. Tex. Aug. 14, 2008)
8/14/2008 12:00:00 AM
A Texas federal district court has held that the Federal Arbitration Act’s (FAA) one-year limitation on award confirmation is a “mandatory” time limit, thus barring motions to confirm awards after one year has passed.
In FIA Card Services, N.A. v. Gachiengu, Civ. A. No. H-07-2382, 2008 WL 3826110 (S.D. Tex. Aug. 14, 2008), Gachiengu opened a credit card account with FIA. The account was issued subject to a broadly-worded arbitration agreement and a Delaware choice-of-law provision. A dispute arose, and an award was issued in favor of FIA in June of 2005. In November of 2005, FIA moved to confirm the award. Unable to find Gachiengu, FIA obtained an order permitting substituted service in July of 2006... Full Story
Tenth Circuit Rejects Excess of Powers Challenge Where Arbitrator May Have Relied on Previous Experience in Resolving the Dispute
Youngs v. American Nutrition, Inc., No. 06-4203, 2008 WL 3126145 (10th Cir. Aug. 7, 2008)
8/7/2008 12:00:00 AM
The Tenth Circuit Court of Appeals held that the “extremely broad discretion” granted an arbitrator doomed post-award attempts to vacate the resulting award for exceeding his powers where the arbitrator potentially relied on personal background experience with the matters in dispute to resolve the claims.
In Youngs v. American Nutrition, Inc., No. 06-4203, 2008 WL 3126145 (10th Cir. Aug. 7, 2008), Youngs and other minority shareholders of ANI filed suit against ANI after a failed attempt to mediate a dispute regarding transfers of ANI to separate entities wholly owned by the majority shareholders. The dispute was submitted to arbitration in accordance with the parties’ agreement... Full Story
Court Rejects Argument That Limited Review of Arbitration Award Constitutes a “Due Process Violation”
Halliburton Energy Services, Inc. v. NL Industries, Civ. A. Nos. H-05-4160, H-06-3504, 2008 WL 3165687, (S.D. Tex. Aug. 4, 2008)
8/4/2008 12:00:00 AM
Reviewing a motion to vacate an arbitration award under a highly deferential standard that does not recognize “manifest disregard of the law” as a valid extra-statutory ground does not constitute a due process violation, according to a federal district court in Texas.
In Halliburton Energy Services, Inc. v. NL Industries, Civ. A. Nos. H-05-4160, H-06-3504, 2008 WL 3165687, (S.D. Tex. Aug. 4, 2008), two arbitration awards were issued in favor of NL Industries (NLI) and against Halliburton. The awards were reduced to a final judgment. Halliburton then moved to set aside the judgment under Fed. R. Civ. P. 59(e), arguing that the Court’s refusal to review the awards for manifest disregard of the law amounted to a violation of Halliburton’s due process rights and “call[ed] into question the correctness of the judgment.”... Full Story
Party Did Not Waive Right to Arbitrate by Obtaining Injunctive Relief in Court
Maronian v. American Communications Network, Inc., No. 07-CV-6314 (CJS), 2008 WL 2917183, (W.D.N.Y. July 24, 2008)
7/24/2008 12:00:00 AM
A New York federal district court has rejected an attempt by a group of multi-level marketing representatives to avoid arbitration on waiver grounds. Specifically, the Court found that the other party did not waive its right to arbitrate by seeking and obtaining injunctive relief in court.
In Maronian v. American Communications Network, Inc., No. 07-CV-6314 (CJS), 2008 WL 2917183, (W.D.N.Y. July 24, 2008), Maronian and others (the representatives) were independent contractors representing American through a multi-level marketing plan. American generally had its representatives sign a pre-printed contract. All of the representatives except one also signed an arbitration agreement as part of the contract with American, although two representatives signed as a representative of corporations where each was the sole shareholder... Full Story
Yacht Salvage Company’s Motion to Compel Arbitration Runs Aground After Owner Challenges Contract on Agency Grounds
Peterson v. Allen, No. C07-1866MJP, 2008 WL 2891078 (W.D. Wash. July 23, 2008)
7/23/2008 12:00:00 AM
A challenge to the formation of a contract on agency grounds is not an arbitrable matter, according to a federal district court in Washington.
In Peterson v. Allen, No. C07-1866MJP, 2008 WL 2891078 (W.D. Wash. July 23, 2008), Peterson’s yacht was grounded on rocks. Before attempting a rescue of the yacht’s occupants, Allen presented one of the occupants with a salvage contract containing an arbitration agreement. After some initial objections, an occupant signed the agreement. Peterson – who was not on board at the time of the grounding – later objected to Allen’s motion to compel arbitration and challenged the formation of any contract between the parties... Full Story
Texas Federal Court Cites Hall Street in Rejecting Excess of Arbitral Powers As a Means of Obtaining Heightened Review
Wood v. Penntex Resources LP, No. H-06-2198, 2008 WL 2609319 (S.D. Tex. June 27, 2008)
6/27/2008 12:00:00 AM
A federal district court in Texas ruled that parties cannot circumvent the rule against arbitration agreements calling for expanded judicial review – as set forth in the United States Supreme Court’s recent Hall Street decision – by characterizing erroneous fact finding as an excess of arbitral powers.
In Wood v. Penntex Resources LP, No. H-06-2198, 2008 WL 2609319 (S.D. Tex. June 27, 2008), ERG and its president, Wood, were engaged in litigation over oil-producing properties with Tsar. Later, ERG was acquired by Penntex through a stock purchase contract. The contract addressed potential liability stemming from the Tsar litigation and contained an arbitration agreement encompassing any claims arising from the purchase...
Full Story
State Cases
Party Did Not Waive Right to Arbitration by Bringing Motion for Summary Judgment
In re H & R Block Financial Advisors, Inc., No. 14-08-00450-CV, 2008 WL 4007504 (Tex. App. Aug. 28, 2008)
8/28/2008 12:00:00 AM
An appellate court in Texas held that where a party answers a lawsuit and asserts arbitration as an affirmative defense and later moves for summary judgment, the party has not waived its right to arbitration by substantially invoking the litigation process.
In In re H & R Block Financial Advisors, Inc., No. 14-08-00450-CV, 2008 WL 4007504 (Tex. App. Aug. 28, 2008), Krynik’s father opened two Uniform Gift to Minor Act accounts with H & R Block. Krynik eventually sued H & R Block and his ex-stepmother, Vieshe, alleging that H &R Block wrongfully released his account proceeds to Vieshe, who then absconded with the funds... Full Story
Tennessee Appellate Court Finds Daughters Did Not Act Has Health Care Surrogates and Thus Lacked Authority to Agree to Arbitration
McKey v. National Healthcare Corp., No. M2007-02341-COA-R3-CV, 2008 WL 3833714 (Tenn. Ct. App. Aug. 15, 2008)
8/15/2008 12:00:00 AM
According to a Tennessee appellate court, a health care surrogate may only act under Tennessee law if the patient is found to lack capacity, and if the supervising health care provider has designated the surrogate in its records.
In McKey v. National Healthcare Corp., No. M2007-02341-COA-R3-CV, 2008 WL 3833714 (Tenn. Ct. App. Aug. 15, 2008), Brewer was admitted to a National Healthcare Corporation (NHC) nursing home. At the time of admission, Brewer's daughters, McKey and Fletcher, signed the admission paperwork. These documents contained an arbitration agreement...
Full Story
After Statutory Vacatur Period Expires, Party Cannot Challenge Award by Alleging “No Agreement”
MBNA America Bank, N.A. v. Bowling, No. 2007-CA-000956-MR, 2008 WL 3547649 (Ky. Ct. App. Aug. 15, 2008)
8/15/2008 12:00:00 AM
A Kentucky state appellate court has held that a party challenging an arbitration award cannot dispute arbitral jurisdiction for the first time at confirmation proceedings, if the statutory period for vacating the award has already passed.
In MBNA America Bank, N.A. v. Bowling, No. 2007-CA-000956-MR, 2008 WL 3547649 (Ky. Ct. App. Aug. 15, 2008), Bowling opened a credit card account with MBNA. The parties’ contract contained an arbitration agreement. After Bowling failed to make payments on the account, MBNA initiated arbitration proceedings. Bowling did not respond. The arbitrator entered an award in favor of MBNA... Full Story
Proof of Authenticity of Arbitration Agreement Signature Not Required in Determination of Agreement's Existence
La Sala v. Bally Total Fitness Corp., No. A118461, 2008 WL 3274426 (Cal. Ct. App. Aug. 11, 2008)
8/11/2008 12:00:00 AM
In evaluating disputes over the existence of an arbitration agreement, a trial court only needs to make an evidentiary finding of the agreement's existence, not a determination of the proffered evidence's authenticity, according to a California Court of Appeal.
In La Sala v. Bally Total Fitness Corp., No. A118461, 2008 WL 3274426 (Cal. Ct. App. Aug. 11, 2008), La Sala was employed by Crunch Fitness. After Bally purchased Crunch, Bally presented La Sala with an employee handbook. The handbook referred to a separate document that contained an arbitration agreement. La Sala signed an acknowledgment of receipt of the employee handbook, recognizing, among other things, the existence of the separate document containing the arbitration agreement... Full Story
Nursing Home Loses Right to Arbitrate Based on ADR Provider’s Policy Requiring a Post-Dispute Arbitration Agreement
Magnolia Healthcare, Inc. v. Barnes ex rel. Grigsby, No. 2006-CA-00427-SCT, 2008 WL 3101737 (Miss. Aug. 7, 2008)
8/7/2008 12:00:00 AM
The Mississippi Supreme Court has affirmed the denial of a nursing home’s motion to compel arbitration where the parties’ pre-dispute arbitration agreement invoked rules requiring a post-dispute arbitration agreement.
In Magnolia Healthcare, Inc. v. Barnes ex rel. Grigsby, No. 2006-CA-00427-SCT, 2008 WL 3101737 (Miss. Aug. 7, 2008), Barnes was admitted to Magnolia's health care facility by Grigsby. Grigsby completed the admission paperwork on behalf of the incompetent Barnes. The paperwork included an arbitration agreement... Full Story
Under Alabama Law, Existence of Arbitration Agreement Not a Precondition to Entry of Judgment on Arbitration Award
Credigy Receivable, Inc. v. Day, No. 2070091, 2008 WL 2942089 (Ala. Civ. App. Aug. 1, 2008)
8/1/2008 12:00:00 AM
According to a recent decision by the Alabama Court of Civil Appeals, the existence of an arbitration agreement is not a precondition to the entry of judgment on an arbitration award. Instead, the entry of judgment is mandatory but conditional, and the aggrieved party may challenge the conditional judgment by arguing that they never agreed to arbitrate.
In Credigy Receivable, Inc. v. Day, No. 2070091, 2008 WL 2942089 (Ala. Civ. App. Aug. 1, 2008), Credigy filed an arbitration claim against Day to collect the unpaid balance on an MBNA credit card. The arbitrator issued an award in favor of Credigy... Full Story
Courts Do Not Have Authority to Vacate an Arbitration Award on Their Own Initiative
NCO Portfolio Management, Inc. v. Gubanyar, No. 90480, 2008 WL 2932143 (Ohio Ct. App. July 31, 2008)
7/31/2008 12:00:00 AM
Where a credit card company filed a motion to confirm an arbitration award along with the requisite documentation, and the credit card holder did not file a motion to vacate the award, the law required the court to confirm the award because courts do not have authority to vacate an award on their own initiative, according to the Ohio Court of Appeals.
In NCO Portfolio Management, Inc. v. Gubanyar, No. 90480, 2008 WL 2932143 (Ohio Ct. App. July 31, 2008), NCO filed an arbitration claim against Gubanyar for unpaid credit card debt. The arbitrator issued an award in favor of NCO, and NCO subsequently filed an application to confirm the award... Full Story
Failure to Attach Arbitration Agreement to Confirmation Application Fatal in Ohio Court
Midland Funding NCC-2 Corp. v. Johnson, No. 07 CA 29, 2008 WL 2954286 (Ohio Ct. App. July 31, 2008)
7/31/2008 12:00:00 AM
An Ohio appellate court has held that it would not confirm an otherwise valid arbitration award when the moving party failed to attach a copy of the arbitration agreement to its application for confirmation.
In Midland Funding NCC-2 Corp. v. Johnson, No. 07 CA 29, 2008 WL 2954286 (Ohio Ct. App. July 31, 2008), Johnson opened a credit card account with Midland. The cardholder’s contract contained an arbitration agreement. Later, Midland filed a claim against Johnson with the National Arbitration Forum. The appointed arbitrator issued an award in favor of Midland... Full Story
Statutory Deadline Bars Credit Card Holder’s Challenge to Arbitration Award
FIA Card Services N.A. v. Helmer, No. 07-1631, 2008 WL 2902183 (Iowa Ct. App. July 30, 2008)
7/30/2008 12:00:00 AM
An Iowa state appellate court has reversed a trial court’s order denying confirmation of an arbitration award, holding that vacatur of the award was time-barred under the Iowa Code.
In FIA Card Services N.A. v. Helmer, No. 07-1631, 2008 WL 2902183 (Iowa Ct. App. July 30, 2008), FIA obtained an arbitration award against Helmer for unpaid credit card debt. A copy of the award was delivered to Helmer on September 19, 2006. FIA subsequently applied for confirmation of the award. In March 2007, Helmer filed an application to deny the motion to confirm, arguing that he did not have notice of the arbitration proceeding and that the award was procured by “corruption, fraud, or other illegal means.”... Full Story
Statutory Mediation Privilege Applies to Documents Exchanged in Mediation Prior to Statute’s Enactment
Dyer v. Blackhawk Leather LLC, No. 2007AP1400, 2008 WL 2906965 (Wis. Ct. App. July 30, 2008)
7/30/2008 12:00:00 AM
The Wisconsin Court of Appeals held that documents exchanged in mediation are privileged, and thus not discoverable, even if those documents were exchanged prior to the enactment of the statute creating the mediation privilege.
In Dyer v. Blackhawk Leather LLC, No. 2007AP1400, 2008 WL 2906965 (Wis. Ct. App. July 30, 2008), Dyer sued Waste Management for contamination of his groundwater, and Dyer also sued a group of businesses (the Generators) for contributing to the contamination...
Full Story
NASD Award Upheld Despite Allegations of Manifest Disregard of the Law Against Panel
TD Ameritrade, Inc. v. McLaughlin, Piven, Vogel Securities Inc., No. 3603-CC, 2008 WL 2855116 (Del. Ch. July 24, 2008)
7/24/2008 12:00:00 AM
The Delaware Chancery Court rejected a security dealer’s claim that an NASD award was issued in manifest disregard of the law, but modified the award to correct a mathematical error.
In TD Ameritrade, Inc. v. McLaughlin, Piven, Vogel Securities Inc., No. 3603-CC, 2008 WL 2855116 (Del. Ch. July 24, 2008), William Pickert was a longtime client of McLaughlin, Piven, Vogel Securities (MPV). An MPV associate transferred money from Pickert’s account to fraudulent accounts set up at Ameritrade and stole over $400,000... Full Story
Under California Law, Arbitrators May Order Non-Parties to Provide Discovery, But Non-Parties May Obtain Full Judicial Review of Any Discovery Orders
Berglund v. Arthroscopic & Laser Surgery Center of San Diego, L.P., No. S144813, 2008 WL 2757560 (Cal. July 17, 2008)
7/17/2008 12:00:00 AM
The California Supreme Court has held that the same statutory language granting an arbitrator the authority to order discovery against non-parties and to sanction non-compliance does not limit the scope of judicial review of those orders when review is sought by non-parties.
In Berglund v. Arthroscopic & Laser Surgery Center of San Diego, L.P., No. S144813, 2008 WL 2757560 (Cal. July 17, 2008), Berglund brought suit against various medical care providers for battery and breach of fiduciary duty by a doctor allegedly abusing narcotics. Berglund had agreed to arbitrate his disputes with all defendants but ALSC, so a court compelled arbitration of all claims except those against ALSC... Full Story
ADR Legislation & Regulation
LEGISLATION
IA H 2653
AUTHOR: Commerce, Regulation and Labor Cmt
TITLE: Foreclosure Consultants
DISPOSITION: Enacted
LOCATION: Chaptered
Commentary: Relates to foreclosure consultants and foreclosure reconveyances. The bill provides that any provision of a foreclosure consultant contract that attempts or purports to require arbitration of a dispute that arises under the bill is void at the option of the homeowner.
MI H 5722
SPONSOR: Smith V [D]
TITLE: Auditing Procedures
DISPOSITION: Pending
LOCATION: Senate Banking and Financial Institutions Committee
Commentary: Provides for general amendments to insurance auditing procedures. Amendments include: (3) AN INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT MAY ENTER INTO AN AGREEMENT WITH AN INSURER TO HAVE DISPUTES RELATING TO AN AUDIT RESOLVED BY MEDIATION OR ARBITRATION. HOWEVER, IF A DELINQUENCY PROCEEDING IS COMMENCED AGAINST THE INSURER UNDER CHAPTER 81, THE MEDIATION OR ARBITRATION PROVISION SHALL OPERATE AT THE OPTION OF THE STATUTORY SUCCESSOR.
REGULATIONS
None.
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