Federal Cases
Ninth Circuit Finds Class Waiver Unenforceable Under Washington Law
Lowden v. T-Mobile USA, Inc., No. 06-35395, 2008 WL 170279 (9th Cir. Jan. 22, 2008)
1/22/2008
In affirming a district court order denying a mobile phone company's motion to compel arbitration, the Ninth Circuit Court of Appeals relied a on a recent decision by the Washington Supreme Court in holding that a class waiver rendered the arbitration agreement substantively unconscionable and therefore unenforceable under Washington law. The Court's decision in this case serves as a reminder that the principal consideration in these cases is attorney incentive, and as such, the enforceability of a class waiver may turn on whether the arbitration agreement satisfies attorney incentive within the parameters of one-on-one arbitration.
In Lowden v. T-Mobile USA, Inc., No. 06-35395, 2008 WL 170279 (9th Cir. Jan. 22, 2008), Lowden and another T-Mobile customer filed a lawsuit alleging that T-Mobile, their wireless service provider, had billed them for improper charges. In response, T-Mobile filed a motion to compel arbitration pursuant to an arbitration agreement in the customers' service contracts. The arbitration agreement contained a class waiver barring class-wide proceedings. In opposing the motion, the T-Mobile customers argued that the class waiver rendered the arbitration agreement unconscionable and therefore unenforceable. The district court denied the motion... Full Story
D.C. Court of Appeals Finds Arbitration Agreement Limited to Construction Plan Disputes
2200 M Street LLC v. Mackell, No. 04-CV-550, 2007 WL 4563643 (D.C. Dec. 31, 2007)
12/31/2007
Affirming a trial court's denial of a motion to compel arbitration of a construction dispute, the D.C. Court of Appeals held that the parties' arbitration agreement only covered disputes about construction plans, rather than the present dispute about alleged poor quality construction.
In 2200 M Street LLC v. Mackell, No. 04-CV-550, 2007 WL 4563643 (D.C. Dec. 31, 2007), various individuals bought condominiums from condominium seller 2200 M Street LLC in 2000 and 2001. Later, the building's water and sewer systems broke, causing flooding and toxic mold growth throughout the building... Full Story
Delaware Federal Court Refuses to Add New Defendant and Claims to Complaint of Party Resisting Arbitration
Kelly v. MBNA America Bank, Civ. A. No. 06-228-JJF, 2008 WL 54305 (D. Del. Jan. 3, 2008)
1/3/2008
A federal district court in Delaware refused to allow a party resisting arbitration to amend his complaint, by adding claims and a new defendant, after the complaint had already been dismissed.
In Kelly v. MBNA America Bank, Civ. A. No. 06-228-JJF, 2008 WL 54305 (D. Del. Jan. 3, 2008), Kelly brought claims against MBNA regarding a credit card account. After all of Kelly's claims were dismissed by the Court, including claims originally brought against the arbitration administrator named in the parties' agreement, Kelly moved to amend his complaint, adding new claims and adding Bank of America as a new defendant... Full Story
Exclusion of Evidence on Rational Basis Not Grounds for Vacatur
Deitchman v. Bear Stearns Securities Corp., No. 07-60465-CIV, 2007 WL 4592238 (S.D. Fla. Dec. 28, 2007)
12/28/2007
A federal district court in Florida determined that the party challenging an arbitration award for wrongful refusal to hear evidence failed to meet her burden of demonstrating that the exclusion of evidence lacked a rational basis. Accordingly, the Court upheld the award.
In Deitchman v. Bear Stearns Securities Corp., No. 07-60465-CIV, 2007 WL 4592238 (S.D. Fla. Dec. 28, 2007), Deitchman filed an arbitration claim against Bear Stearns, which had a clearing agreement with Deitchman's broker Eastlake Capital (Eastlake). The arbitration panel dismissed the claim against Bear Stearns but found each party liable for their own attorney fees... Full Story
Court Cites Availability of Telephonic Hearings in Rejecting Argument that Venue Provision Made Arbitration Cost-Prohibitive
Deaton v. Overstock.com, Inc., No. 07-cv-643-JPG, 2007 WL 4569874 (S.D. Ill. Dec. 27, 2007)
12/27/2007
In upholding an arbitration agreement entered into during an online transaction, a federal district court in Illinois cited the availability of telephonic hearings in rejecting the claimant's argument that travel to the designated venue would be cost-prohibitive. The Court also rejected the claimant's argument that the agreement's class waiver rendered it unenforceable.
In Deaton v. Overstock.com, Inc., No. 07-cv-643-JPG, 2007 WL 4569874 (S.D. Ill. Dec. 27, 2007), Deaton made a purchase from Overstock.com (Overstock), an online retailer of brand name merchandise. During the transaction, Overstock verified Deaton's credit card information using the last four digits of the card number and the expiration date... Full Story
Disappointed Party May Not Sue for Arbitration Expenses Under Fair Debt Collection Statutes and Must Instead Seek to Vacate or Modify the Underlying Award
Myles v. Wolpoff & Abramson, LLP, No. 07-CV-12247, 2008 WL 126620 (E.D. Mich. Jan. 14, 2008)
1/14/2008
A party incurring expenses during an arbitration proceeding cannot recover damages for those expenses by asserting federal statutory claims, but must move to vacate or modify the underlying arbitration award, according to a federal district court in Michigan.
In Myles v. Wolpoff & Abramson, LLP, No. 07-CV-12247, 2008 WL 126620 (E.D. Mich. Jan. 14, 2008), Myles alleged that Wolpoff & Abramson (W&A) refused to produce evidence of a signed, written arbitration agreement between the parties as requested during arbitration proceedings. Myles maintained that W&A's conduct resulted in Myles incurring unwarranted attorney's fees during arbitration. Myles sought recovery under the federal Fair Debt Collection Practices Act (FDCPA) and various state statutes. W&A moved for summary judgment of the claims... Full Story
Court Upholds Franchise Contract Calling for Arbitration Unless Jury Trial and Punitive Damages Rights in Litigation are Waived
Dunkin' Donuts Franchised Restaurants LLC v. Manassas Donut Inc., No. 1:07cv446 (JCC), 2008 WL 110474 (E.D. Va. Jan. 8, 2008)
1/8/2008
A franchise contract which requires arbitration of claims unless a party waives its rights to both a jury trial and punitive damages is not unconscionable if those waivers are knowingly, voluntarily, and mutually made, according to a federal district court in Virginia.
In Dunkin' Donuts Franchised Restaurants LLC v. Manassas Donut Inc., No. 1:07cv446 (JCC), 2008 WL 110474 (E.D. Va. Jan. 8, 2008), Dunkin' Donuts entered into several franchisee contracts with Manassas Donut. After an independent inspection of one of Manassas Donut's stores, Dunkin' Donuts filed a complaint against the franchisee for breach of contract and trademark infringement... Full Story
State Cases
Pennsylvania Supreme Court Finds No Federal Preemption of State's Thirty Day Limit on Challenging Arbitration Awards
Moscatiello v. Hilliard, No. 6 WAP 2007, 2007 WL 4553342 (Pa. Dec. 27, 2007)
12/27/2007
According to the Pennsylvania Supreme Court, the state's common law and statutory arbitration rules, which impose a thirty day time limit on challenging an award, are not preempted in state court by the Federal Arbitration Act's three month challenge period, because enforcing a shorter time limit does not undermine the federal policy favoring arbitration.
In Moscatiello v. Hilliard, No. 6 WAP 2007, 2007 WL 4553342 (Pa. Dec. 27, 2007), Moscatiello and Hilliard submitted an investment dispute to arbitration. The arbitration panel issued an award in Hilliard's favor, and two and a half months later, Moscatiello filed a petition to vacate the award... Full Story
Kentucky Court Finds Arbitration Agreement Hidden In Customer Service Questionnaire Unenforceable
Paul Miller Ford, Inc. v. Rutherford, No. 2007-CA-000293-MR, 2007 WL 4553662 (Ky. Ct. App. Dec. 28, 2007)
12/28/2007
Affirming a trial court's denial of a motion to compel arbitration of a dispute between a consumer and car dealership, a Kentucky appellate court held that an arbitration agreement hidden in a customer service questionnaire was unenforceable because there was no meeting of the minds.
In Paul Miller Ford, Inc. v. Rutherford, No. 2007-CA-000293-MR, 2007 WL 4553662 (Ky. Ct. App. Dec. 28, 2007), Rutherford bought a car from Paul Miller Ford. She signed several documents in connection with the purchase including what appeared to be a customer service questionnaire regarding the transaction. The questionnaire also contained an arbitration agreement... Full Story
Minnesota Court Upholds Settlement Agreement Over Claim of Intoxication
Soderbeck v. Center for Diagnostic Imaging, Inc., No. A06-2369, 2007 WL 4564109 (Minn. Ct. App. Dec. 31, 2007)
12/31/2007
Affirming a district court's motion to enforce a mediated settlement of a medical malpractice dispute, a Minnesota appellate court held that the party seeking to vacate the settlement agreement failed to prove that he was intoxicated or incompetent when he entered into the agreement.
In Soderbeck v. Center for Diagnostic Imaging, Inc., No. A06-2369, 2007 WL 4564109 (Minn. Ct. App. Dec. 31, 2007), a piece of steel became lodged in Soderbeck's right eye after an accident in 1980. In March 2001, Soderbeck went to the Center Diagnostic Imaging (CDI) for an MRI after suffering a separate shoulder injury. Soderbeck allegedly told CDI that he had a metal fragment in his eye. During the MRI scan, Soderbeck felt pain in his eye and became very nauseous. In May 2001, doctors surgically removed Soderbeck's right eye, but he continued to suffer severe symptoms... Full Story
Mississippi Signatory Binds Non-Signatory to Arbitrate Under Admissions Contract When Contract's Sole Purpose Is to Provide Services to Non-Signatory
Trinity Mission Health & Rehabilitation of Clinton v. Estate of Scott ex rel. Johnson, No. 2006-CA-01053-COA, 2008 WL 73682 (Miss. Ct. App. Jan. 8, 2008)
1/8/2008
A signatory can bind a non-signatory as a third-party beneficiary to an arbitration agreement in a health care admissions contract, if the sole purpose of the contract is to provide services to the non-signatory, according to the Mississippi Court of Appeals.
In Trinity Mission Health & Rehabilitation of Clinton v. Estate of Scott ex rel. Johnson, No. 2006-CA-01053-COA, 2008 WL 73682 (Miss. Ct. App. Jan. 8, 2008), Johnson admitted her mother, Scott, to Trinity's nursing home facility. Later, Johnson executed Trinity's amended admissions contract, which included an arbitration agreement, on her mother's behalf... Full Story
Statement of Clarification Not Part of Award, Order Requesting Clarification Not Vacatur
Austin v. Apollo Hair Systems of Seattle, Inc., No. 59558-0-I, 2008 WL 130848 (Wash. Ct. App. Jan. 14, 2008)
1/14/2008
An arbitrator's post-award statement of clarification is not part of the award for vacatur or modification purposes, and a court's order requesting a clarification statement from the arbitrator does not constitute vacatur of the original award, according to a Washington state appellate court.
In Austin v. Apollo Hair Systems of Seattle, Inc., No. 59558-0-I, 2008 WL 130848 (Wash. Ct. App. Jan. 14, 2008), Austin and Apollo arbitrated a stock purchase dispute. An award was entered in favor of Austin who then petitioned the trial court to confirm the award. The trial court remanded the case to the arbitrator "for clarification of his decision." The arbitrator issued a clarification, and the trial court subsequently confirmed the award... Full Story
ADR Legislation & Regulation
LEGISLATION
AZ H 2148
AUTHOR: Ableser [D]
TITLE: Payday Loan Regulation
DISPOSITION: Pending
LOCATION: House Financial Institutions and Insurance Committee
Commentary: A bill to restrict payday lending. As it relates to arbitration, the bill states, "an arbitration clause in a payday loan contract is not enforceable if the contract is unconscionable. In determining whether the contract is unconscionable, the court shall consider the circumstances of the transaction as a whole," in addition to a number of other factors relating to the arbitration such as venue and cost. The statute would also provide for criminal liability against the contract drafter and ADR administrator for any violation.
CA A 69
AUTHOR: Lieu [D]
TITLE: Mortgage Lending: Reporting
DISPOSITION: Pending
LOCATION: Assembly Third Reading File
Commentary: Enacts the Uniform Debt Settlement Services Act, the Debt Management Act, and the Credit Counselors Law to provide for the licensure and regulation of providers of debt settlement and debt management services. Relating to arbitration, the bill states: "Except as permitted by the California Arbitration Act (Title 9 (commencing with Section 1280) of Part 3 of the Code of Civil Procedure), [the agreement shall not] contain a provision that modifies or limits otherwise available forums or procedural rights, including the right to trial by jury, that are generally available to the individual under law other than as provided in this division." The bill would also forbid agreements from containing a choice of law provision other than California or applicable federal law.
CO H 1135
SPONSOR: Carroll M [D]
TITLE: Common Interest Communities
DISPOSITION: Pending
LOCATION: SENATE
Commentary: Amends an act concerning common interest communities which provides for alternative dispute resolution. The amendments include adding a requirement that the parties agree to go to mediation and adds other means of alternative dispute resolution besides arbitration for specific inclusion in the bylaws regarding specific disputes.
FL S 1380
AUTHOR: Jones [R]
TITLE: Electronic Gaming Machines
DISPOSITION: Pending
LOCATION: Senate Regulated Industries Committee
Commentary: Relates to electronic gaming machines; authorizes electronic gaming machines in certain pari mutuel facilities; prohibits persons under 21 years of age from operating electronic gaming machines; provides for days and hours of operation of eligible facilities; provides for regulatory preemption to the state. As it relates to arbitration, the bill provides for the arbitration of disputes regarding licensure, including procedure for selection of arbitrators and the application of AAA commercial arbitration rules.
GA H 979
AUTHOR: Richardson [R]
TITLE: GREAT Plan
DISPOSITION: Pending
LOCATION: House Ways and Means Committee
Commentary: Relates, respectively, to revenue and taxation and local government. The bill provides the right to appeal taxation decisions in arbitration and provides for the manner in which such arbitration must be conducted.
HI H 2795
AUTHOR: Green [D]
TITLE: Federally Qualified Health Centers
DISPOSITION: Pending
Commentary: Amends a bill establishing a timeline by which the department of health shall reconcile managed care supplemental payments and for other reasons. Amendments include: "Any person aggrieved by a final decision and order shall be entitled to judicial review in accordance with chapter 91 or may submit the matter to binding arbitration pursuant to chapter 658A."
HI S 2401
AUTHOR: Hanabusa [D]
TITLE: Condominium Revision Bill
DISPOSITION: Pending
LOCATION: Senate Commerce, Consumer Protection and Affordable Housing Committee
Commentary: Amends various provisions of the Hawaii Revised Statutes relating to condominiums for the purpose of correcting errors and references. Amendments include: "At the request of any party, any dispute concerning or involving one or more shareholders and a corporation, its board of directors, managing agent, resident manager, or one or more other shareholders relating to the interpretation, application, or enforcement of this chapter or the corporation's articles of incorporation, bylaws, or rules adopted in accordance with its bylaws shall be submitted first to mediation. When all reasonable efforts for mediation have been made and the dispute is not settled either in conference between the parties or through mediation, the dispute shall be submitted to arbitration in the same manner and subject to the same requirements, to the extent practicable, which now apply to condominium property regimes under part VII of chapter 514A or section 514B 162."
IL S 1400
SPONSOR: Jacobs M [D]
TITLE: Redevelopment and Annexation
DISPOSITION: Failed
LOCATION: Amendatorily Vetoed by Governor
Commentary: Bill levying an assessment on wind energy turbines; portion allowing for binding arbitration of disputes over deconstruction of abandoned turbines was vetoed by the Governor.
IN H 1214
AUTHOR: GiaQuinta [D]
TITLE: Vehicle Protection Products
DISPOSITION: Pending
LOCATION: HOUSE
Commentary: A bill making amendments to the laws concerning financial institutions. Amendments include: "Sec. 410. A lender making small loans, or an assignee of a small loan, shall not commit nor cause to be committed any of the following acts: ...(iii) A mandatory arbitration clause, unless the terms and conditions of the arbitration have been approved by the director of the department."
IN S 159
AUTHOR: Gard [R]
TITLE: Third Party Health Service Agreements
DISPOSITION: Pending
LOCATION: SENATE
Commentary: Specifies terms under which a third party may obtain a contractor's rights and responsibilities concerning a provider's delivery of health care services. As it relates to arbitration, a health care contract may provide for arbitration of disputes arising under the bill.
IN S 200
AUTHOR: Gard [R]
TITLE: Department of Environmental Management Matters
DISPOSITION: Pending
LOCATION: SENATE
Commentary: Amends requirements to become a mediator pursuant to Indiana environmental laws. Instead of fulfilling separate requirements, potential mediators are instead only required to be qualified as a mediator under Rule 2.5 of the Indiana Supreme Court Rules for Alternative Dispute Resolution.
KY H 13 BR: 24
SPONSOR: Rollins [D]
TITLE: Family Trust Program
DISPOSITION: Pending
LOCATION: House Appropriations & Revenue Committee
Commentary: Establishes a Kentucky Family Trust Program to establish and operate a trust program to manage funds placed in the trust for the benefit of persons with special health care needs. Provides for arbitration of disputes relating to the administration of the trust.
MO S 1005
SPONSOR: Bray [D]
TITLE: Uniform Planned Community Act
DISPOSITION: Pending
LOCATION: Senate Economic Development, Tourism and Local Government Committee
Commentary: Would enact the "Uniform Planned Community Act". As it relates to ADR, the bill allows Parties to a dispute arising under sections 445.151 to 445.420 of a bill, the declaration or the bylaws to agree to resolve the dispute by any form of binding or nonbinding alternative dispute resolution, provided that an agreement to submit to binding arbitration must be made in writing signed by the parties.
NE L 1110
AUTHOR: Erdman [NP]
TITLE: Property Tax Review Court Act
DISPOSITION: Pending
LOCATION: Legislature
Commentary: This bill would adopt the Property Tax Review Court Act and repeal the Tax Equalization and Review Commission Act. Provides for arbitration of disputes arising under the Act as ordered by the court.
NY A 2491
SPONSOR: Morelle [D]
TITLE: The Arts and Artifacts Domestic Indemnity Act
DISPOSITION: Pending
LOCATION: Assembly Tourism, Arts, and Sports Development Committee
Commentary: Amending the arts and cultural affairs law, including Section 62.07 which provides for arbitration of issues relating to damages for less than total destruction.
US H 5129
SPONSOR: Lewis Jo [D]
TITLE: Civil Rights Statutes
DISPOSITION: Pending
LOCATION: Multiple Committees
Commentary: Introduces a broad Civil Rights Act of 2008. Among its provisions is the "Preservation of Civil Rights Protections Act of 2008." It seeks to amend the FAA to state, "any clause of any agreement between an employer and an employee that requires arbitration of a dispute arising under the Constitution or laws of the United States shall not be enforceable." It would also eliminate the provision that "exempts seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce."
WA H 1590
AUTHOR: Goodman [D]
TITLE: Courts of Limited Jurisdiction
DISPOSITION: Pending
LOCATION: HOUSE
Commentary: Permits judicial services "contracting" between cities and counties in Washington. The bill provides for mandatory arbitration of disputes arising under these contracts.
WA H 2016
AUTHOR: Springer [D]
TITLE: Property Owner Option for Repurchase
DISPOSITION: Pending
LOCATION: HOUSE
Commentary: Provides for arbitration process where a real property owner is given a "repurchase" option on condemned land.
WA S 6744
AUTHOR: Fraser [D]
TITLE: Homeowners Association
DISPOSITION: Pending
Commentary: An enacting related to homeowner associations, provides that the Department of Community Trade and Economic Development shall conduct a study to determine the efficacy of creating a state agency run Homeowners' Association ombudsman office, which would provide dispute resolution services and information to homeowners about their rights and duties.
WI S 298
AUTHOR: Sullivan [D]
TITLE: Foreclosure Reconveyances
DISPOSITION: Pending
LOCATION: ASSEMBLY
Commentary: A bill to regulate foreclosure reconveyances. A foreclosure reconveyance is defined as a transaction under which the mortgagor transfers title to residential real property in foreclosure to a third party, called a foreclosure purchaser in the bill. As it relates to arbitration, the bill provides that any provision in a contract requiring arbitration of any dispute arising under the provisions is void at the option of the foreclosed homeowner. A violation of the statute may be considered criminal fraud.
WV H 4286
SPONSOR: Burdiss [D]
TITLE: Oil and Gas Surface
DISPOSITION: Pending
LOCATION: House Industry and Labor/Economic Development and Small Business
Commentary: Amends a bill concerning oil and gas surface owner's Bill of Rights. Amendments include: "A surface owner may not proceed in circuit court after receiving an arbitration award pursuant to this article."
REGULATIONS
Utah 30861
AGENCY: Department of Insurance/Division of Administration
TITLE: Individual and Group Health Insurance
Commentary: A bill requiring the state to write rules to recognize arbitration as an acceptable method of alternative dispute resolution with regards to health benefit plans. The rule will define the many forms of arbitration.
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