ADR LAW & POLICY UPDATE

Federal Cases

Second Circuit Finds Federal Jurisdiction to Uphold Consumer’s Right to Arbitration, Prohibits State Court from Enjoining Arbitral Proceedings
Emilio v. Sprint Spectrum, L.P., No. 08-5558-CV, 2009 WL 648623 (2nd Cir. Mar. 12, 2009)
3/12/2009

The Second Circuit Court of Appeals has affirmed a federal court order granting a consumer’s motion to compel arbitration, noting that it had jurisdiction to enjoin a merchant’s state court efforts to thwart arbitration without offending the Rooker-Feldman doctrine.

In Emilio v. Sprint Spectrum, L.P., No. 08-5558-CV, 2009 WL 648623 (2nd Cir. Mar. 12, 2009), Emilio and Sprint were parties to a wireless contract which contained a broadly-worded arbitration agreement. Emilio accused Sprint of “deceptive” tax charges, and attempted to demand arbitration with Sprint on his own behalf and on behalf of a putative class of similarly situated customers... Full Story

Arbitration Agreement in CBA Expressly Encompassing Statutory Employment Discrimination Claims Binds Individuals to Arbitrate
In 14 Penn Plaza, LLC v. Pyett, No. 07-581, 556 U.S. _______, 2009 WL 838159 (2009)
4/1/2009

The United States Supreme Court has held that a union may enter into a collective bargaining agreement (“CBA”) that requires arbitration of any represented individual’s statutory employment discrimination claims, without that agreement constituting a “waiver” of the employee’s statutory rights.

In 14 Penn Plaza, LLC v. Pyett, No. 07-581, 556 U.S. _______, 2009 WL 838159 (2009), several unionized employees, subject to a collective bargaining agreement (“CBA”), alleged that they were demoted and reassigned based on their age. Their union filed a grievance against their employer, Plaza, alleging in part that their demotion amounted to employment discrimination prohibited by their CBA... Full Story

“Excessive” Arbitration Costs Known at Time of Contracting Cannot Support Later Finding of Substantive Unconscionability
Kam-Ko Bio-Pharm Trading Co. Ltd-Australasia v. Mayne Pharma (USA) Inc., No. 07-35449, 2009 WL 606162 (9th Cir. Mar. 11, 2009)
3/11/2009

According to the Ninth Circuit Court of Appeals, commercial parties to an arbitration agreement cannot claim that the agreement is unenforceable based on substantively unconscionable excessive costs when those costs were fully contemplated by the parties at the time the agreement was entered.

In Kam-Ko Bio-Pharm Trading Co. Ltd-Australasia v. Mayne Pharma (USA) Inc., No. 07-35449, 2009 WL 606162 (9th Cir. Mar. 11, 2009), Kam-Ko entered into a contract with Mayne to secure certain drug distribution deals with NaPro on Mayne’s behalf. The contract contained an arbitration agreement, specifying that any dispute would be resolved by the International Chamber of Commerce (“ICC”) in Vancouver, Canada... Full Story

State Cases

Arizona Court of Appeals Requires Costs and Fees Assessment to Discourage “Marginal” De Novo Arbitral Appeals
Poulson v. Ofack, No. 1 CA-CV 07-0499, 2009 WL 691152 (Ariz. Ct. App. Mar. 17, 2009)
3/17/2009

An Arizona appellate court has declared that a trial court’s failure to assess costs and fees to the losing party at a de novo appeal of an arbitration award was reversible error, noting that the mandatory costs and fees recovery in such situations was intended to discourage “marginal appeals of arbitration awards.”

In Poulson v. Ofack, No. 1 CA-CV 07-0499, 2009 WL 691152 (Ariz. Ct. App. Mar. 17, 2009), Poulson sued Ofack for injuries stemming from a car accident. Under Arizona court rules, the matter was referred to compulsory arbitration. The arbitrator found for Poulson, awarding $39,000, plus $505.20 in costs... Full Story

California Appellate Court Determines Overlapping Issues in Lawsuit Mandate Stay Pending Arbitration
Sony BMG Music Entm’t v. Super. Ct., No. B212888, 2009 WL 543735 (Cal.App. 2 Dist. Mar 5, 2009)
3/5/2009

The California Court of Appeals has determined that when an ongoing arbitration and lawsuit necessarily require the resolution of a common issue, judicial proceedings must be stayed pending arbitration. The Court found stays mandated despite an opposing litigating party’s status as a non-party to the arbitration agreement.

In Sony BMG Music Entm’t v. Super. Ct., No. B212888, 2009 WL 543735 (Cal.App. 2 Dist. Mar 5, 2009), employment was terminated for personal managers Stephen Stewart-Short and Michael Rosenblatt, of the musical group Augustana. In response, Stewart-Short and Rosenblatt initiated two proceedings: arbitration against Augustana pursuant to an arbitration agreement and a lawsuit against Sony and Peter Giberga, a Sony executive, who were both non-parties to the arbitration agreement. The arbitration claim was based on breach of contract theories, while the lawsuit asserted intentional and negligent interference in the managers’ services. The trial was set to begin six weeks before the arbitration... Full Story

Plain Language in Third-Party Beneficiary Cause Precludes Arbitration of Third-Party Claims
Sitarik v. JFK Medical Center Ltd. Partnerships (JFK), No. 4D08-152, 2009 WL 529546 (Fla. Ct. App. Mar. 4, 2009)
3/4/2009

A Florida appellate court has held that plain language contemplating litigation in a third-party beneficiary clause exempts all non-parties from an obligation to arbitrate elsewhere in the contract.

In Sitarik v. JFK Medical Center Ltd. Partnerships (JFK), No. 4D08-152, 2009 WL 529546 (Fla. Ct. App. Mar. 4, 2009), Sitarik was an anesthesiologist during a surgical procedure at JFK’s facility. During surgery, an object was left inside the patient, and Sitarik reported the incident. Sitarik was terminated after his report. Sitarik then sued JFK for tortious interference with a business relationship, breach of contract, and violations of whistleblower statutes. JFK moved to arbitrate Sitarik’s claims, citing an arbitration agreement between JFK and Sitarik’s contractor, Sheridan. The trial court granted the motion, holding that Sitarik was bound as a third-party beneficiary... Full Story

Nebraska Supreme Court Adopts Public Policy Exception Allowing Vacatur of Arbitration Awards
State v. Henderson, No. S-07-010, 2009 WL 484959 (Neb. Feb. 27, 2009)
2/27/2009

Calling racial and ethnic equality under the law “the most fundamental public policy of the State,” the Nebraska Supreme Court has held that an arbitrator’s reinstatement of a State Trooper after his termination for membership in a KKK-affiliated group falls within the public policy exception for vacatur of arbitration awards.

In State v. Henderson, No. S-07-010, 2009 WL 484959 (Neb. Feb. 27, 2009), a Nebraska State Trooper, Henderson, was terminated after State investigators discovered his participation on a membership message board for members of the Knights Party, a political arm of the Ku Klux Klan (KKK). Henderson and his union filed a grievance and then demanded arbitration under his collective bargaining agreement (CBA), appealing the termination decision... Full Story

Party Does Not Waive Right to Arbitrate by Merely Filing Complaint in Court
North Carolina Farm Bureau Mutual Insurance Co. v. Sematoski, No. COA08-553, 2009 WL 232022 (N.C. Ct. App. Feb. 3, 2009)
2/3/2009

In reversing a trial court’s decision to grant summary judgment and deny a motion to compel arbitration, the North Carolina Court of Appeals held that a party does not waive its right to arbitration by merely filing a complaint in court.

In North Carolina Farm Bureau Mutual Insurance Co. v. Sematoski, No. COA08-553, 2009 WL 232022 (N.C. Ct. App. Feb. 3, 2009), Sematoski was in a car accident with Ferguson. Sematoski was a named beneficiary on two insurance policies issued by North Carolina Farm Bureau Mutual Insurance Company (NCFB), which provided underinsured motorist coverage up to $50,000 per person and $100,000 per person... Full Story

Ohio Appellate Court Finds No Evidence of Arbitrator Bias
Miller v. Mgt. Recruiters Internatl., Inc., No. 91114, 2009 WL 147653 (Ohio Ct. App. Jan. 22, 2009)
1/22/2009

Affirming a trial court ruling denying a motion to vacate the award for alleged arbitrator bias, an Ohio appellate court held that the party seeking to vacate the arbitration award failed to produce any direct evidence of arbitrator bias where the arbitrator failed to disclose that he had represented a client in an unrelated case in which the opposing counsel was an attorney from the law firm involved in the instant arbitration.

In Miller v. Mgt. Recruiters Internatl., Inc., No. 91114, 2009 WL 147653 (Ohio Ct. App. Jan. 22, 2009), MRI entered into a franchise agreement with Miller in which he would operate a personnel placement service franchise. The contract contained an arbitration agreement requiring the parties to arbitrate all disputes. A dispute arose between the parties and Miller submitted an arbitration demand. After conducting a hearing, the arbitrator ruled in MRI’s favor... Full Story

Tennessee Appellate Court Finds Nursing Home Arbitration Agreement Not Contract of Adhesion
Estate of Mooring v. Kindred Nursing Centers, No. W2007-02875-COA-R3-CV, 2009 WL 130184 (Ten. Ct. App. Jan. 20, 2009)
1/20/2009

Reversing a trial court ruling denying a motion to compel arbitration in a nursing home dispute, a Tennessee appellate court held that an arbitration agreement presented separately from the nursing home admissions contract was not a contract of adhesion.

In Estate of Mooring v. Kindred Nursing Centers, No. W2007-02875-COA-R3-CV, 2009 WL 130184 (Ten. Ct. App. Jan. 20, 2009), Mrs. Mooring became a resident at a nursing home. Her husband, Mr. Mooring, signed an admissions contract. He also signed a separate optional arbitration agreement requiring the parties to arbitrate any disputes that might arise... Full Story

Texas Court of Appeals Holds Reference to Specific State Arbitration Law Excludes Application of Federal Arbitration Act
In re Olshan Foundation Repair Co., L.L.C., NO. 05-08-01143-CV, 2009 WL 264667 (Tex.App. Feb 5, 2009)
2/5/2009

The Texas Court of Appeals has held that where parties to an arbitration agreement specifically select a given law, such as the Texas General Arbitration Act (TAA), to govern the arbitration between them, this sufficiently excludes the application of the Federal Arbitration Act (FAA).

In In re Olshan Foundation Repair Co., L.L.C., NO. 05-08-01143-CV, 2009 WL 264667 (Tex.App. Feb 5, 2009), Olshan made foundation repairs to the residence of the Waggoners. The contract provided that any dispute between the parties would be resolved by arbitration pursuant to the TAA... Full Story

Arbitration Agreement in Employee Benefits Plan Lacks Consideration Where Employee Is Not Eligible to Receive Benefits.
In re Rio Grande Regional Hosp., No. 13-06-00353-CV, 2009 WL 481886 (Tex. App. Feb 25, 2009)
2/25/2009

The Court of Appeals of Texas held that an employee does not receive adequate consideration when signing an arbitration agreement contained with an employee benefits plan, if that employee is not actually eligible for benefits under the plan.

In In re Rio Grande Regional Hosp., No. 13-06-00353-CV, 2009 WL 481886 (Tex. App. Feb 25, 2009), real party in interest Gonzalez worked for Rio Grande as a housekeeper. She was injured in the course and scope of her employment and sued for negligence, gross negligence, and premises liability. Rio Grande moved to compel arbitration based on an arbitration agreement contained within an employee benefits plan signed by Gonzalez. The trial court denied the motion and Rio Grande filed a petition with this Court seeking to compel the trial court to grant its motion to arbitrate... Full Story

ADR Legislation & Regulation

LEGISLATION

AL H 478
AUTHOR: Black M [D]
TITLE: Telephone Services Regulation
DISPOSITION: Pending
LOCATION: HOUSE
Commentary: The bill provides for the regulation of telephone service providers. As it relates to arbitration, the bill authorizes the Public Services Commission to arbitrate disputes involving the Truth in Billing Act.

CA S 661
AUTHOR: Wolk [D]
TITLE: Residential Care Facilities for the Elderly
DISPOSITION: Pending
LOCATION: Senate Judiciary Committee
Commentary: This bill would require that if an admission agreement includes an arbitration agreement, that arbitration agreement comply with prescribed requirements. The bill would provide that the arbitration agreement requirements shall not invalidate an arbitration agreement that does not meet the requirements if the arbitration agreement was entered prior to January 1, 2010. If the admission agreement includes an arbitration agreement, the arbitration agreement shall comply with all of the following: Clearly indicate that the agreement to arbitrate is voluntary and not a precondition for admission; clearly indicate to the parties that, by signing the arbitration agreement, both parties are voluntarily and knowingly waiving their right to a trial by jury or court trial and, instead, accepting the use of arbitration; provide a 10-day rescission period.

CO H 1028
SPONSOR: Frangas [D]
TITLE: CO Indigent Care Accountability Board
DISPOSITION: Pending
LOCATION: Postponed Indefinitely
Commentary: The bill creates an accountability board to review grievances concerning administration of the Colorado indigent care program. The bill requires a medical services provider and a medically indigent person to mediate disputes.

CO H 1273
SPONSOR: Kefalas [D]
TITLE: Health Care for Colorado
DISPOSITION: Pending
LOCATION: HOUSE
Commentary: The bill would create the Colorado health care authority as a body corporate and political subdivision of the state. It would require the authority to create a system to recommend to the general assembly that provides comprehensive medical benefits to Coloradans. Among the items the authority would consider is whether to implement a system for filing and arbitrating all disputes regarding delay, denial or modification of health care services.

DE H 49
PRIMARY SPONSOR: Marshall M [D]
TITLE: Court of Chancery
DISPOSITION: Enacted
LOCATION: Chaptered
Commentary: The bill regulates the Court of Chancery. As it relates to arbitration, the bill makes a few changes to the Delaware UAA to conform it to practice throughout the United States. The bill also authorizes the parties to have a member of the Court of Chancery arbitrate their dispute while guaranteeing the parties confidentiality.

IA S 364
COMPANION: IA H 695
AUTHOR: Judiciary Cmt
TITLE: Civil Actions
DISPOSITION: Enacted
LOCATION: Signed by Governor
Commentary: Imposes restrictions on civil actions and judgments relating to foreclosures. Section 6 mandates that the creditor give notice of the availability of mediation to the homeowner prior to commencing an action.

MA H 856
DOCKET: 1373
AUTHOR: Ayers [D]
TITLE: Automobile Insurance Property Damage
DISPOSITION: Pending
LOCATION: Joint Committee on Financial Services
Commentary: Mandates that parties involved in an insurance claim for auto damage submit to binding arbitration upon receipt of written demand by the other party if they have failed to agree on the amount of loss. Establishes procedures and timelines for filing claims and the appointment of "disinterested" arbitrator/appraisers to serve on a tripartite panel.

MA H 899
DOCKET: 2956
AUTHOR: Fennell [D]
TITLE: Automobile Insurance Property Damage Arbitration
DISPOSITION: Pending
LOCATION: Joint Committee on Financial Services
Commentary: Mandates that parties involved in an insurance claim for auto damage submit to binding arbitration upon receipt of written demand by the other party if they have failed to agree on the amount of loss. Establishes procedures and timelines for filing claims and the appointment of "disinterested" arbitrator/appraisers to serve on a tripartite panel.

MA H 1649
DOCKET: 3931
AUTHOR: Pedone [D]
TITLE: The Massachusetts Foreclosure Mediation Program
DISPOSITION: Pending
LOCATION: Joint Committee on The Judiciary
Commentary: Amends G.L.c. 244, Section 35A. mandates that the mortgager be "offered the opportunity to participate in a court supervised Foreclosure Mediation Program." Provides that the mediation program address all the issues relating to the foreclosure including reinstatement of the mortgage and the restructuring of the mortgage debt.

MA S 697
DOCKET: 1702
AUTHOR: McGee [D]
TITLE: Mediation
DISPOSITION: Pending
LOCATION: Joint Committee on Labor & Workforce Development
Commentary: A bill adopting the Uniform Mediation Act; establishes relevant terminology and procedures therein.

MD H 121
CROSSFILED WITH: MD S 133
AUTHOR: Kullen [D]
TITLE: Task Force
DISPOSITION: Failed
LOCATION: Withdrawn from further consideration
Commentary: This bill would create a "Task Force to Study Changes to the Automotive Warranty Enforcement Act." One of the Task Force’s jobs under the bill is to "study and make recommendations" concerning whether a State run arbitration program should be created to resolve disputes under the Automotive Warranty Enforcement Act.

ME H 968
LD: 1378
AUTHOR: Wagner R [D]
TITLE: Uniform Mediation Act
DISPOSITION: Pending
LOCATION: Joint Committee on Judiciary
Commentary: Maine House Bill 968, titled "Uniform Mediation Act," would adopt those portions of the Uniform Mediation Act that:
1. Establish privileges for mediation communication regarding disclosure, admissibility and discovery;
2. Authorize exceptions and waivers to the established privileges;
3. Specifically prohibit and permit various communications by a mediator; and
4. Establish the confidentiality of mediation communications.

ME H 994
LD: 1418
AUTHOR: Treat [D]
TITLE: Foreclosure Prevention
DISPOSITION: Pending
LOCATION: Joint Committee on Insurance and Financial Services
Commentary: A bill amending laws related to foreclosures. Establishes a mandatory foreclosure mediation program, and provides for all relevant procedures therein.

MI H 4782
SPONSOR: Sheltrown [D]
TITLE: Recreational Vehicle
DISPOSITION: Pending
LOCATION: House Tourism, Outdoor Recreation and Natural Resources Committee
Commentary: The bill regulates the relationships between Recreational Vehicle Dealers, Warrantors, Wholesalers, and Manufacturors. As it relates to dispute resolution, the bill provides that "A manufacturer may not coerce or attempt to coerce a dealer to enter into an agreement with the manufacturer or any other person that requires the dealer to submit its disputes to binding arbitration." Furthermore, the bill provides that "Before bringing a civil action under this section, the party bringing suit for an alleged violation of this act shall serve a written demand for mediation . . ."

NH H 281
AUTHOR: Chandler [R]
TITLE: Small Claims Actions
DISPOSITION: Pending
LOCATION: SENATE
Commentary: The bill increases the maximum amount of debt or damages for small claims actions from $5,000 to $7,500 and requires mediation of small claims actions exceeding $5,000.

NY A 7558
SPONSOR: Weinstein [D]
TITLE: Consumer Credit Fairness Act
DISPOSITION: Pending
LOCATION: Assembly Judiciary Committee
Commentary: New York Assembly Bill 7558, titled the "Consumer Credit Fairness Act," has been introduced. It establishes certain procedures that a creditor must follow when bringing a claim for default against a debtor. The bill establishes rules regarding the "notice of lawsuit" that the creditor must file and serve on the consumer defendant, and rules regarding the complaint in such an action.

As it relates to arbitration, the bill establishes certain requirements that the creditor must meet in order to get an arbitration award confirmed in court. For example, the creditor must attach to its motion to confirm: the actual agreement to arbitrate between the parties; the demand for arbitration, with proof of service; and the arbitration award, with proof of service. Furthermore, if the award does not contain a statement of the claims submitted for arbitration, the claims ruled upon by the arbitrator, and of the calculation of figures used by the arbitrator in arriving at the award, then the motion to confirm shall contain such statements. Otherwise, the Court cannot confirm the award.

NY S 4189
SPONSOR: Flanagan [R]
TITLE: Wireless Telephone Service Consumer Protection Act
DISPOSITION: Pending
LOCATION: Senate Energy and Telecommunications Committee
Commentary: Enacts the Wireless Telephone Service Consumer Protection Act, setting various standards to be enforced by the State Consumer Protection Board; authorizes the Board to promulgate rules and regulations and impose penalties for noncompliance; requires numerous disclosures regarding fees, taxes, and services; and regulates terminations. The bill would require the Consumer Protection Board to establish procedures for the administration and adjudication of all residential wireless complaints.

OK S 533
AUTHOR: Aldridge [R]
TITLE: Motor Vehicle Insurance
DISPOSITION: Enacted
LOCATION: Signed by Governor
Commentary: A bill pertaining to uninsured motor vehicle insurance. The uninsured motorist coverage shall be upon a form approved by the Insurance Commissioner as otherwise provided in the Insurance Code and may provide that the parties to the contract shall, upon demand of either, submit their differences to arbitration; provided, that if agreement by arbitration is not reached within three (3) months from date of demand, the insured may sue the tort-feasor.

TN H 1278
SAME AS: TN S 812
AUTHOR: Stewart M [D]
TITLE: Consumer Protection
DISPOSITION: Pending
LOCATION: House Consumer and Employee Affairs Committee
Commentary: The bill is a consumer protection bill that provides "Except as permitted by title 29, chapter 5, part 3, or by Section 2 of the Federal Arbitration Act, 9 U.S.C. Section 2, as amended, 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 this part."

TX S 1650
AUTHOR: Duncan [R]
TITLE: Federal Arbitration Case Appeals
DISPOSITION: Pending
LOCATION: HOUSE
Commentary: Would add a section to the Texas Arbitration act stating, "In a matter subject to the Federal Arbitration Act (9 U.S.C. Section 1 et seq.), a person may take an appeal or writ of error to the court of appeals from the judgment or interlocutory order of a district court, county court at law, or county court under the same circumstances that an appeal from a federal district court’s order or decision would be permitted by 9 U.S.C. Section 16."

VA H 2261
AUTHOR: Kilgore [R]
TITLE: Foreclosure Rescue
DISPOSITION: Enacted
LOCATION: Chaptered
Commentary: Virginia House Bill 2261, titled "Foreclosure Rescue," is now chaptered. The bill was amended to clarify that the ban on binding arbitration provisions includes only those transactions that deal with foreclosure rescue services. The bill’s language previously could have been interpreted to ban arbitration provisions in a much broader context.

VT H 444
AUTHOR: Health Care Cmt
TITLE: Health Information Technology
DISPOSITION: Pending
LOCATION: HOUSE
Commentary: A bill relating to health care reform, with a focus on health information technology. As it relates to ADR, the bill provides that either party may submit any dispute over payment of a medical bill to arbitration to be governed under the rules of the AAA.

REGULATION

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