Federal Cases
Arkansas Federal Court Finds That FAA Preempts Mutuality Requirement
Enderlin v. XM Satellite Radio Holdings, Inc., No. 4:06-CV-0032-GTE, 2008 WL 830262 (E.D. Ark. Mar. 25, 2008)
3/25/2008
In an unprecedented ruling, a federal district court in Arkansas has found that the Federal Arbitration Act (FAA) preempts an Arkansas common law rule requiring arbitration agreements to evince a mutual obligation to arbitrate. The Court reasoned that the FAA preempts the mutuality requirement because it applies only to arbitration agreements and not to other contractual obligations.
In Enderlin v. XM Satellite Radio Holdings, Inc., No. 4:06-CV-0032-GTE, 2008 WL 830262 (E.D. Ark. Mar. 25, 2008), Enderlin periodically subscribed to XM Satellite Radio (XM Radio). He later filed a class action lawsuit against XM Radio for alleged violations of the Arkansas Deceptive Trade Practices Act. In response to the lawsuit, XM Radio filed a motion to compel arbitration in accordance with the customer service agreement... Full Story
Sixth Circuit Holds That Non-Signatories Have No Right to Interlocutory Appeal of Order Denying Arbitration
Carlisle v. Curtis, Mallet-Prevost, Colt & Mosle, LLP, No. 06-5290, 2008 WL 942035 (6th Cir. Apr. 9, 2008)
4/9/2008
Non-signatories may not seek an interlocutory appeal of an order denying a motion to stay proceedings because non-signatories are not parties to a "written agreement," according to the Sixth Circuit Court of Appeals.
In Carlisle v. Curtis, Mallet-Prevost, Colt & Mosle, LLP, No. 06-5290, 2008 WL 942035 (6th Cir. Apr. 9, 2008), Carlisle sought advice from accounting firm Arthur Andersen, financial advisor Bricolage, and law firm Curtis regarding investments designed to minimize tax liability. Allegedly upon their advice, Carlisle invested in a type of tax shelter. In connection with the investment, Carlisle entered into a management contract with Bricolage; the contract contained an arbitration agreement. Arthur Andersen and Curtis were not parties to the management contract... Full Story
Third Circuit Rejects Various Allegations of Arbitrator "Misconduct" and Affirms Award Confirmation
Transtech Industries, Inc. v. A&Z Septic Clean, No. 05-5246, 2008 WL 762100 (3d Cir. Mar. 24, 2008)
3/24/2008
The Third Circuit Court of Appeals affirmed the confirmation of an arbitration award, rejecting the contention that the arbitrator had failed to fully consider one party's submissions during the proceedings.
In Transtech Industries, Inc. v. A&Z Septic Clean, No. 05-5246, 2008 WL 762100 (3d Cir. Mar. 24, 2008), Transtech and SCA Services (SCA) operated a joint partnership to transport waste to a certain landfill. After the landfill was closed by the government, Transtech sued and received damages for loss of the use of the landfill... Full Story
Non-Signatory to Narrow Arbitration Agreement Not Bound to Arbitrate Shipping Dispute
The Rice Company (Suisse), S.A. v. Precious Flowers Ltd., No. 07-20063, 2008 WL 861096 (5th Cir. Apr. 02, 2008)
4/2/2008
The Fifth Circuit Court of Appeals has concluded that the owner of a vessel, which had contracted ownership of the vessel to a shipping company, was a non-signatory to the narrowly-drawn arbitration agreement between the shipping company and the charterer. As such, the ship owner was not required to arbitrate a shipping dispute regarding damaged cargo in New York.
In The Rice Company (Suisse), S.A. v. Precious Flowers Ltd., No. 07-20063, 2008 WL 861096 (5th Cir. Apr. 02, 2008), The Rice Company had purchased rice to be sent to Togo on a vessel owned by Precious Flowers, and chartered by IBN. After an alleged problem with the vessel caused damage to the rice, The Rice Company sued in Texas district court and also moved to compel arbitration in New York... Full Story
Party Challenging Arbitration Agreement Must Submit Enough Evidence to Make Challenge "Colorable"
Magnolia Capital Advisors, Inc. v. Bear Stearns & Co., Nos. 07-10320 and 07-11222, 2008 WL 879973 (11th Cir. Apr. 3, 2008)
4/3/2008
In reversing a federal district court order compelling arbitration, the Court of Appeals for the Eleventh Circuit held that enough evidence had been presented to make an investment firm's denial of the agreement to arbitrate "colorable," and remanded the case to trial to determine whether the firm was a signatory to the arbitration agreement.
In Magnolia Capital Advisors, Inc. v. Bear Stearns & Co., Nos. 07-10320 and 07-11222, 2008 WL 879973 (11th Cir. Apr. 3, 2008), Reinhard was the principal for Magnolia, an investment firm, and also a "registered representative" of Paragon Financial Group, an introducing broker dealer. Magnolia contracted with Bear Stearns, a clearing agent, and later sued Bear Stearns for breach of contract. In response, Bear Stearns moved to compel arbitration based on an arbitration clause in an "Options Form" contract that contained Magnolia's name and address, the President of Paragon's signature, and Reinhard's signature... Full Story
Allegations of Procedural Unconscionability Related to Contract As a Whole and Thus Presented a Question for the Arbitrator
Guy v. Quality Health Services, Inc., No. CIV.A.2:08CV28KSRHW, 2008 WL 919702 (S.D. Miss. Apr. 3, 2008)
4/3/2008
In ordering arbitration of an insurance dispute, a federal district court in Mississippi refused to entertain the policy holder's claim of procedural unconscionability because the procedural irregularities pertained to the insurance policy as a whole and not solely to the arbitration agreement.
In Guy v. Quality Health Services, Inc., No. CIV.A.2:08CV28KSRHW, 2008 WL 919702 (S.D. Miss. Apr. 3, 2008), Guy bought a short-term disability insurance policy from AFLAC. Following an illness and hospitalization, Guy sued AFLAC and others, alleging that AFLAC was liable for a bad faith refusal to make payments under the policy... Full Story
Rooker-Feldman Doctrine Bars Federal Court Fair Debt Action While State Court Proceedings Regarding Related Arbitration Are Pending
Lavander v. Wolpoff & Abramson, L.L.P., No. 07-0015-CV-W-FJG, 2008 WL 695399 (W.D. Mo. Mar. 12, 2008)
3/12/2008
Under the Rooker-Feldman doctrine, a party may not challenge an arbitrator's authority to hear debt disputes through an FDCPA action in federal court while related state proceedings are pending, according to a federal district court in Missouri.
In Lavander v. Wolpoff & Abramson, L.L.P., No. 07-0015-CV-W-FJG, 2008 WL 695399 (W.D. Mo. Mar. 12, 2008), Lavander and other plaintiffs (collectively "Lavander") entered into credit agreements with MBNA. Law firm Wolpoff sought to recover Lavander's MBNA account debts through arbitration proceedings pursuant to the Lavander's credit agreement... Full Story
Liability Issues Must be Arbitrated Against a Subsidiary Before Litigation to Seek Piercing the Veil of the Corporate Parent
Sarl v. A.M. Todd Co., Civ. Act. No. 07-2727, 2008 WL 724607 (E.D. Pa. Mar. 18, 2008)
3/18/2008
A federal court in Pennsylvania held that liability issues must be arbitrated against a subsidiary before piercing the veil claims can be litigated against the corporate parent when an arbitration award against the subsidiary could have been enforced on the same theory.
In Sarl v. A.M. Todd Co., Civ. Act. No. 07-2727, 2008 WL 724607 (E.D. Pa. Mar. 18, 2008), A.G.K. Sarl and A.M. Todd agreed that Sarl would ship several shipments of vanilla beans to A.M. Todd or one of its subsidiaries, including Zink and Triest Company (ZTI). After problems arose with the shipments, Sarl filed for arbitration against ZTI under the parties' contract... Full Story
Nonsignatory Deriving No Direct Benefits from Contract Containing Arbitration Clause Cannot Be Compelled to Arbitrate
Med-IM Development, Inc. v. General Electric Capital Corp., No. H-07-1618, 2008 WL 901489 (S.D. Tex. Mar. 31, 2008)
3/31/2008
In denying a motion to compel arbitration, a Texas federal district court held that a third-party financer was not a signatory to a vendor-purchaser arbitration agreement, and direct-benefits estoppel did not compel the financer's participation in the arbitration because the agreement did not directly benefit the nonsignatory. But the Court also held that the facts underlying the two disputes significantly overlapped and the likely impact of litigation on the arbitration supported a discretionary stay of litigation pending the arbitration.
In Med-IM Development, Inc. v. General Electric Capital Corp., No. H-07-1618, 2008 WL 901489 (S.D. Tex. Mar. 31, 2008), Med-IM purchased equipment from General Electric Medical Systems Information Technologies ("GEMSIT") through a sales agreement that had an arbitration clause, and obtained financing for the equipment through General Electric Capital Corporation (GECC) in an agreement that did not have an arbitration clause... Full Story
State Court Must Approve Proposed Transfers Under State Structured Settlement Protection Act
Symetra Life Insurance Co. v. Rapid Settlements, Ltd., No. H-05-3167, 2008 WL 901584 (S.D. Tex. Mar. 31, 2008)
3/31/2008
In granting an application for a permanent injunction, a Texas federal district court held that a party could not use arbitration to circumvent a state structured settlement protection act that requires state court approval of a proposed transfer of an annuitant's rights to future structured settlement payments.
In Symetra Life Insurance Co. v. Rapid Settlements, Ltd., No. H-05-3167, 2008 WL 901584 (S.D. Tex. Mar. 31, 2008), Symetra sought a permanent injunction to prevent Rapid Settlements (Rapid), a factoring company, from using arbitration to effect a transfer of an annuitant's rights to future structured settlement payments where a state court had not approved the transfer... Full Story
West Virginia Federal Court Orders Non-Signatory Guarantor and Alter Ego to Arbitrate Dealership Dispute
James C. Justice Companies, Inc. v. Deere & Co., Civ. A. No. 5:06-cv-00287, 2008 WL 828923 (S.D. W.Va. Mar. 27, 2008)
3/27/2008
A federal district court in West Virginia has ordered a non-signatory company to arbitrate a dealership's territorial dispute, finding the non-signatory a guarantor and alter ego of the signatory dealership.
In James C. Justice Companies, Inc. v. Deere & Co., Civ. A. No. 5:06-cv-00287, 2008 WL 828923 (S.D. W.Va. Mar. 27, 2008), Deere sought to compel arbitration of a dealership dispute with James C. Justice Companies (JCJC), alleging that JCJC was the guarantor of dealership Bluefield and therefore subject to the arbitration agreement between Deere and Bluefield... Full Story
State Cases
Law Firm Waived Right to Arbitrate Malpractice Dispute Through Active Participation in Discovery
Woods v. Patterson Law Firm, P.C., No. 1-08-0066, 2008 WL 901169 (Ill. App. Ct. Mar. 31, 2008)
3/31/2008
The Illinois Court of Appeals held that a law firm waived its right to arbitrate a malpractice dispute not by filing an earlier collection lawsuit but through its active use of discovery procedures in a malpractice lawsuit brought by its former clients.
In Woods v. Patterson Law Firm, P.C., No. 1-08-0066, 2008 WL 901169 (Ill. App. Ct. Mar. 31, 2008), the Patterson Law Firm (Law Firm) represented Jeffrey Woods and several others (collectively, Clients) on various matters. The representation agreement contained an arbitration clause... Full Story
Under Louisiana Law, Statutory Grounds for Modification or Vacatur of an Arbitration Award are Exclusive
JK Developments, LLC v. Amtek of Louisiana, Inc., No. 2007 CA 1825, 2008 WL 793600 (La. Ct. App. Mar. 26, 2008)
3/26/2008
A Louisiana appellate court determined that the narrow authority and exclusive nature of the Louisiana statute governing the modification of arbitration awards did not allow it to modify a contractor's arbitration award.
In JK Developments, LLC v. Amtek of Louisiana, Inc., No. 2007 CA 1825, 2008 WL 793600 (La. Ct. App. Mar. 26, 2008), Amtek, a contractor, and JK, a development company, arbitrated a contract dispute. The arbitration award ordered Amtek to pay JK damages for work not completed properly, attorney fees, and interest for a loan taken out by JK to fund Amtek's work... Full Story
Decision Standard Incorporated into Arbitration Agreement Trumps State Law Standard in Resolving Real Estate Agent Commission Dispute
Island Realty v. Van Dyk Group, Inc., No. L-3289-05, 2008 WL 918432 (N.J. Super. Ct. App. Div. Apr. 7, 2008)
4/7/2008
A New Jersey appellate court determined that when a private arbitration agreement conflicts with New Jersey state law, the duty to arbitrate and the scope of the arbitration are dependent solely upon the parties' agreement.
In Island Realty v. Van Dyk Group, Inc., No. L-3289-05, 2008 WL 918432 (N.J. Super. Ct. App. Div. Apr. 7, 2008), realtor Van Dyk showed Gaske a home listed for $629,999. Gaske and Van Dyk attempted to negotiate a lower price with the seller. However, negotiations ended when the seller refused to reduce the price below $615,000, and Gaske refused to offer more than $585,000... Full Story
Unconscionability Determination That Considers the "Fairness" of Terms Outside the Arbitration Agreement is Improper
Taylor Building Corp. of America v. Benfield, NO. 2006-1890, 2006-2043, 2008 WL 696334 (Ohio Mar. 12, 2008)
3/12/2008
An Ohio appellate court properly identified de novo review as the standard of review of a trial court's order staying proceedings pending arbitration, but the appellate court erred in finding the arbitration agreement unconscionable due to "unfairness" in contract terms unrelated to the arbitration agreement, according to the Ohio Supreme Court.
In Taylor Building Corp. of America v. Benfield, NO. 2006-1890, 2006-2043, 2008 WL 696334 (Ohio Mar. 12, 2008), Benfield contracted with Taylor for the construction of a residence. The contract contained an arbitration agreement. Unsatisfied with Taylor's work during the project, Benfield refused to pay Taylor for the balance of the contract and demanded a refund of the funds already paid. Taylor filed suit against Benfield for breach, and moved to stay the case pending arbitration... Full Story
Arbitration Award Must Be Properly Admitted as Evidence to Allow Confirmation
Gruber v. CACV of Colorado, LLC, No. 05-07-00379-CV, 2008 WL 867459 (Tex. Ct. App.-Dallas, Apr. 02, 2008)
4/2/2008
A Texas appellate court reversed the confirmation of an arbitration award, holding that an arbitration award must be properly admitted as evidence in order to support confirmation of the award.
In Gruber v. CACV of Colorado, LLC, No. 05-07-00379-CV, 2008 WL 867459 (Tex. Ct. App.-Dallas, Apr. 02, 2008), Frank Gruber had an arbitration award admitted against him, which was confirmed by the trial court. Gruber appealed the trial court's confirmation of the award, claiming that suitable evidence of the award had not been presented... Full Story
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