Federal Cases
Federal Circuit Holds that Courts Must Stay Litigation When Parties Properly Agree That Arbitrator Decides Arbitrability
Qualcomm Inc. v. Nokia Corp., No. 2006-1317, 2006 WL 2988322 (Fed. Cir. Oct. 20, 2006)
10/20/2006
Under the Federal Arbitration Act (FAA), a court must stay litigation once it is “satisfied” that the underlying dispute is subject to arbitration. But what happens when the parties have agreed to let the arbitrator, not the court, decide the arbitrability of a dispute? The answer, according to the Federal Circuit Court of Appeals, is to issue a stay unless the assertion of arbitrability is “wholly groundless.”
In Qualcomm Inc. v. Nokia Corp., No. 2006-1317, 2006 WL 2988322 (Fed. Cir. Oct. 20, 2006), Qualcomm sued Nokia for patent infringement. Nokia filed a motion to stay further proceedings based on the parties’ arbitration agreement. The district court denied the motion, finding the arbitration agreement inapplicable to the underlying dispute... Full Story
Eighth Circuit Enforces Parties' Agreement to Have Arbitrator Decide Questions of Arbitrability
Sadler v. Green Tree Servicing, LLC, No. 05-3850, 2006 WL 2946726 (8th Cir. Oct 17, 2006)
10/17/2006
The Eighth Circuit Court of Appeals has held that when parties agree to have an arbitrator decide questions of arbitrability, the arbitrator should in fact decide this threshold question, even when one party later objects to the bargain they struck.
In Sadler v. Green Tree Servicing, LLC, No. 05-3850, 2006 WL 2946726 (8th Cir. Oct 17, 2006), the Sadlers bought a mobile home on a Retail Installment Contract and Security Agreement (the Agreement), which contained an arbitration clause. A few years later, in accordance with the Agreement, Green Tree exercised a foreclosure remedy without first going to arbitration... Full Story
California Federal Court Upholds Arbitration Agreement Containing Class Action Waiver
Galbraith v. Resurgent Capital Services, No. CIV S 05-2133 KJM, 2006 WL 2990163 (E.D. Cal. Oct. 19, 2006)
10/19/2006
In the spirit of a recent California Court of Appeal decision disclaiming an “across-the-board rule” against class action waivers, a federal district court in California has upheld an arbitration agreement containing a class action waiver.
In Galbraith v. Resurgent Capital Services, No. CIV S 05-2133 KJM, 2006 WL 2990163 (E.D. Cal. Oct. 19, 2006), Galbraith obtained a Best Buy credit card. After Galbraith fell behind on payments, Resurgent attempted to collect an unpaid balance of $2,691.35. Galbraith subsequently brought a putative class action against Resurgent, alleging unfair debt collection practices... Full Story
Court Upholds Arbitration Agreement Formed by “Clicking” Acceptance
Bar-Ayal v. Time Warner Cable Inc., No. 03 CV 9905(KMW), 2006 WL 2990032 (S.D.N.Y. Oct. 16, 2006)
10/16/2006
In ordering parties to arbitrate a dispute over internet surcharges, a federal district court in New York held that the internet user agreed to arbitrate by clicking an “Accept” button and signaling his acceptance of an agreement containing an arbitration clause. The Court concluded that the consumer agreed to a fair and enforceable arbitration agreement and can pursue all his legal rights and remedies in arbitration.
In Bar-Ayal v. Time Warner Cable Inc., No. 03 CV 9905(KMW), 2006 WL 2990032 (S.D.N.Y. Oct. 16, 2006), Bar-Ayal brought a putative class action against Time Warner, seeking a refund of surcharges imposed for use of Time Warner’s Road Runner internet service... Full Story
Federal Arbitration Act Does Not Require Confirmation Proceedings to Occur in District Where Award was Made
DTV Network Systems, Inc. v. Skywalker Communications, No. 4:06MC87SNL, 2006 WL 2987040 (E.D. Mo, Oct. 17, 2006)
10/17/2006
In confirming an arbitration award, a federal district court in Missouri held that the Federal Arbitration Act (FAA) does not require confirmation proceedings to occur in the district where the award was made.
In DTV Network Systems, Inc. v. Skywalker Communications, No. 4:06MC87SNL, 2006 WL 2987040 (E.D. Mo, Oct. 17, 2006), DTV Network Systems, Inc. (DTV) filed a motion to confirm an arbitration award. In opposition, Skywalker Communications (Skywalker) argued that venue was improper and, alternatively, that the award should be vacated as “completely irrational” or as “manifestly disregarding the law”... Full Story
Foreign Tribunal Does Not Disturb Domestic Agreement to Arbitrate
Comverse, Inc. v. American Telecommunications, Inc., No. 06 Civ. 6825(PKL), 2006 WL 3016315 (S.D.N.Y. Oct. 23, 2006)
10/23/2006
The United States District Court for the Southern District of New York has refused to enjoin litigation proceedings in Chile involving an American telecommunications company and an international reseller, since the Chilean proceedings do not disturb the parties’ written agreement to arbitrate.
In Comverse, Inc. v. American Telecommunications, Inc., No. 06 Civ. 6825(PKL), 2006 WL 3016315 (S.D.N.Y. Oct. 23, 2006), Comverse, an American provider of software and telecommunications systems, moved to compel arbitration of a dispute with American Telecommunications, Inc. (ATI), a Chilean distributor. ATI, however, had previously filed a claim with the Chilean Competition Tribunal, a specialized court in Chile that investigates claims and refers certain cases for prosecution by the Chilean National Economic Prosecutor... Full Story
Arbitration Agreement Invoking NASD Rules Unenforceable when Party’s NASD Membership Terminates
Dover Limited v. A.B. Watley, Inc., No. 04 Civ. 7366(FM), 2006 WL 2987054 (S.D.N.Y. Oct. 18, 2006)
10/18/2006
A federal district court in New York refused to compel arbitration of a dispute where the arbitration agreement invoked NASD arbitration rules, and the NASD would not arbitrate without mutual consent because the party’s NASD membership had terminated.
In Dover Limited v. A.B. Watley, Inc., No. 04 Civ. 7366(FM), 2006 WL 2987054 (S.D.N.Y. Oct. 18, 2006), Dover invested $10 million through A.B. Watley (ABW), based on repeated assurances from ABW’s representative that the investment would not deplete or depreciate. After losing over $3 million, Dover sued ABW, alleging violations of the Securities Exchange Act and various common law claims... Full Story
Individual Investor Recoups Losses at Arbitration
MetLife Securities, Inc. v. Bedford, No. 02 Civ. 3018(JES), 2006 WL 2871978 (S.D.N.Y. Oct. 4, 2006)
10/4/2006
A federal district court in New York confirmed an arbitration award over objection that the award exhibited manifest disregard of the law because no one apprised the arbitrators of the governing legal principle.
In MetLife Securities, Inc. v. Bedford, No. 02 Civ. 3018(JES), 2006 WL 2871978 (S.D.N.Y. Oct. 4, 2006), Bedford made failed investments on the advice of an employee of Metropolitan Life Insurance Company (MetLife Insurance)... Full Story
Court Strays from Traditional Cost-Sharing Analysis and Severs Provision
Haro v. NCR Corp., No. 3-:04-CV-328, 2006 WL 2990386 (S.D. Ohio Oct. 18, 2006)
10/18/2006
Instead of viewing the fairness of arbitration costs at the time the arbitration agreement was made, as is normally the case, a United States District Court in Ohio focused on Plaintiff’s economic hardship during the actual arbitration proceeding, and upheld the severance of a cost-sharing provision in Haro v. NCR Corp., No. 3-:04-CV-328, 2006 WL 2990386 (S.D. Ohio Oct. 18, 2006).
Traditionally, courts reviewing arbitration agreements for unconscionability due to burdensome costs will look at the parties’ financial positions at the time the parties entered the agreement. See Overstreet v. Contigroup Companies, Inc., No. 05-60953, 2006 WL 2424828 (5th Cir. Aug. 23, 2006); Results Oriented, Inc. v. Crawford, 538 S.E.2d 73,79 (Ga. App. 2000), aff’d 548 S.E.2d 342 (Ga. 2001). One of the reasons courts often cite for so doing is that the parties could not have predicted their future economic situation while signing the agreement. Therefore, arbitration agreements should only be deemed unconscionable when the prohibitive effects of a cost-sharing provision were apparent—an analysis that can only accurately take place at the time the agreement was signed... Full Story
Arbitrator Properly Refused to Allow Noncompliant Party to Call Witnesses
Biobased Systems, L.L.C. v. Biobased of South Texas, L.L.C., No. H-06-2149, 2006 WL 3044464 (S.D. Tex. Oct. 20, 2006)
10/20/2006
A federal district court in Texas held that an arbitrator did not engage in misconduct for refusing to allow a party to call witnesses where the party did not submit a witness list on time and repeatedly failed to attend arbitration hearings.
In Biobased Systems, L.L.C. v. Biobased of South Texas, L.L.C., No. H-06-2149, 2006 WL 3044464 (S.D. Tex. Oct. 20, 2006), Biobased Systems (Biobased) and Biobased of South Texas (BST) entered into an agreement whereby BST would act as a distributor for Biobased. Following arbitration of a payment dispute, the arbitrator awarded Biobased $162,947.57... Full Story
State Cases
After the Fact Arbitration Agreement Fails for Lack of Consent
Masteller v. Champion Home Builders, Co., No. 23936, 2006 WL 2987819 (S.D. Oct. 18, 2006)
10/18/2006
The South Dakota Supreme Court held that an arbitration agreement did not require arbitration of a homebuyer’s warranty claims where the warranty was provided five months before the arbitration agreement was ever presented or mentioned. A mutual pre-dispute arbitration agreement entered into by the parties at the outset of their contract would have covered this warranty dispute.
In Masteller v. Champion Home Builders, Co., No. 23936, 2006 WL 2987819 (S.D. Oct. 18, 2006), the Mastellers and Iseman entered into a purchase agreement whereby the Mastellers agreed to buy a home manufactured by Champion. The purchase agreement stated that the home “would be warranted assuming reasonable wear and tear for a period of one year from the date of delivery against defects in workmanship and materials.” The purchase agreement made no reference to arbitration... Full Story
Colorado Supreme Court Enforces Arbitration Agreement in Membership Application for Realtor Association
Lane v. Urgitus, No. 06SA49, 2006 WL 3000111 (Colo. Oct. 23, 2006)
10/23/2006
According to the Supreme Court of Colorado, membership in a professional organization conditioned on agreeing to arbitrate disputes between members is binding on all subsequent business disputes between members, even if the dispute relates to a separate contract.
In Lane v. Urgitus, No. 06SA49, 2006 WL 3000111 (Colo. Oct. 23, 2006), Lane petitioned the court to compel arbitration of a dispute over real estate transaction referral fees between himself and Urgitus, another member of the Denver Metropolitan Commercial Association of Realtors (the Association). The trial court compelled arbitration, and Urgitus appealed... Full Story
Florida Supreme Court Affirms Arbitrator’s Authority to Decide Timeliness Defenses
O’Keefe Architects, Inc. v. CED Construction Partners, Ltd., No. SC05-1417, 2006 WL 2971783 (Fla. Oct. 19, 2006)
10/19/2006
In construing an arbitration agreement that expressly precluded arbitration demands for time-barred claims, the Florida Supreme Court held that under the Florida Arbitration Code, the statute of limitations is a procedural question for the arbitrator and not a question of arbitrability for the court.
In O’Keefe Architects, Inc. v. CED Construction Partners, Ltd., No. SC05-1417, 2006 WL 2971783 (Fla. Oct. 19, 2006), CED was the general contractor on two housing projects designed by O’Keefe. Both contracts contained an identical arbitration clause requiring arbitration of “[c]laims, disputes or other matters . . . arising out of or relating to” the contract. The arbitration clause further provided: “In no event shall the demand for arbitration be made after the date when institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable statutes of limitations”... Full Story
Arbitrator Exceeded Powers by Acting in Contravention of the Law
DaimlerChrysler Corp. v. Porter, No. 270112, 2006 WL 3019682 (Mich. Ct. App. Oct. 24, 2006)
10/24/2006
The Michigan Court of Appeals held that an arbitration award was properly vacated because the arbitrator acted “in contravention of controlling principles of law,” which in Michigan has been interpreted to mean that the arbitrator exceeded his powers.
In DaimlerChrysler Corp. v. Porter, No. 270112, 2006 WL 3019682 (Mich. Ct. App. Oct. 24, 2006), Porter and DaimlerChrysler submitted an employment dispute to arbitration pursuant to an employee dispute resolution process (EDRP). The arbitrator found that DaimlerChrysler terminated Porter without just cause and subjected him to disparate treatment... Full Story
ADR Legislation & Regulation
FEDERAL LEGISLATION
No new federal legislation.
STATE LEGISLATION
Illinois HB 5833 (Introduced 11/01/2006)
Subjects: Arbitration, Consumer Installment Loans
This bill would regulate loans carrying an interest rate above 36%. Among other things, the bill would forbid a waiver of the right to a jury trial unless the waiver is included in an allowed arbitration clause. The bill would also prohibit a mandatory arbitration clause that is “oppressive, unfair, unconscionable, or substantially in derogation of the rights of consumers.” The bill also has separate restrictions on loans to members of the military. The Department of Financial and Professional Regulation would have oversight over these regulations. Copy of the text of the introduced bill.
Indiana AB 3330 (Introduced 10/26/2006)
Subjects: Probate Code, Arbitration, Mediation
This bill authorizes a personal representative who administers an estate under this chapter to participate in arbitration or mediation to resolve any dispute concerning a claim or demand made in favor of or against the estate, for the protection of the estate and of the personal representative in the performance of the personal representative's duties, without a court order.
REGULATIONS
Wisconsin WI ADC Ins 17 (Proposed 11/01/2006)
Subjects: Mediation Fees, Health Care
The proposed rule would establish the annual fees which participating health care providers must pay to the Injured Patients and Families Compensation Fund for the fiscal year beginning July 1, 2007. The proposed rule would also establish mediation panel fees for fiscal year 2008 commencing July 1, 2007. Text of the proposed rule change.
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