ADR LAW & POLICY UPDATE

Federal Cases

FAA Preempts Nebraska Law Requiring Conspicuous Notice of Arbitration Clause
Affiliated Foods Midwest Coop., Inc. v. Integrated Distribution Solutions, LLC, No. 8:06CV532, 2006 WL 3060028 (D. Neb. Oct. 23, 2006)
10/23/2006

An arbitration agreement that does not contain a capitalized notice of arbitration as required by state law is still enforceable because state laws that seek to place arbitration agreements apart from other contracts are preempted by the Federal Arbitration Act (FAA), a Nebraska federal court held.

In Affiliated Foods Midwest Coop., Inc. v. Integrated Distribution Solutions, LLC, No. 8:06CV532, 2006 WL 3060028 (D. Neb. Oct. 23, 2006), Affiliated Foods, a wholesale grocery cooperative, sued Integrated Distribution Solutions (IDS), a software company, alleging several causes of action in connection with the sale and support of IDS’ food distribution software... Full Story

Nonsignatory Must Arbitrate if Receiving Direct Benefits From the Underlying Contract
Wood v. PennTex Resources, L.P., No. H-06-2198, 2006 WL 3030680 (S.D. Tex. Oct. 23, 2006)
10/23/2006

Applying the doctrine of direct-benefits estoppel, a federal district court in Texas held that a corporate officer must arbitrate regardless of whether he was a party to the arbitration agreement because he received direct and substantial benefits from the underlying contract.

In Wood v. PennTex Resources, L.P., No. H-06-2198, 2006 WL 3030680 (S.D. Tex. Oct. 23, 2006), PennTex acquired ERG through a stock purchase agreement containing an arbitration clause. Wood signed the agreement as a corporate officer of ERG... Full Story

Arbitration Clause Applies To Claim That Party Tortiously Interfered With A Separate Contract
Frindar Megasoft International v. Telcordia Technologies, Inc., No. A-06-CA-600 LY, 2006 WL 3063434 (W.D. Tex. Oct. 26, 2006)
10/26/2006

A federal district court in Texas ordered arbitration of a tortious interference with contract claim pursuant to an arbitration clause in a separate contract, holding that the claim was subject to arbitration because the contract containing the arbitration clause would likely be raised as a justification in defending against the tortious interference claim.

In Frindar Megasoft International v. Telcordia Technologies, Inc., No. A-06-CA-600 LY, 2006 WL 3063434 (W.D. Tex. Oct. 26, 2006), Frindar sued Telcordia, claiming that Telcordia tortiously interfered with a contract between Frindar and Sasktel by telling Sasktel that Frindar failed to pay invoices under the Frindar/Telcordia contract... Full Story

Arbitration Clause in Option Contract Requires Arbitration of Disputes, Even if Transaction Was Not Completed
Silva v. TT of Colorado Springs, Inc., No. 06-cv-00992-MEH-BNB, 2006 WL 3054308 (D. Colo. Oct. 26, 2006)
10/26/2006

An arbitration agreement in an option contract to purchase a car is binding on the parties, despite the fact that the buyer did not purchase the car because he was not approved for financing, a federal court in Colorado held.

In Silva v. TT of Colorado Springs, Inc., No. 06-cv-00992-MEH-BNB, 2006 WL 3054308 (D. Colo. Oct. 26, 2006), Silva and TT signed a “Car Buyer’s Offer and Purchase Option Contract” (Option Agreement) relating to the sale of a Dodge Intrepid. The Option Agreement contained an arbitration clause and a provision stating that Silva would return the car if he failed to be approved for financing... Full Story

Law Firm Collecting Debt for Payday Lender May Invoke Lender’s Arbitration Agreement
Nichelson v. Soeder, 2006 WL 3079109 (E. D. Mo. Oct. 27, 2006)
10/27/2006

A federal district court in Missouri held that a law firm collecting debt on behalf of a payday lender could invoke the lender’s arbitration agreement even though the law firm was not a party to the agreement.

In Nichelson v. Soeder, 2006 WL 3079109 (E. D. Mo. Oct. 27, 2006), Soeder, an attorney, obtained a judgment for unpaid debt on behalf of his client, a payday lender. Nichelson, the borrower, subsequently sued Soeder, alleging a violation of the Fair Debt Collection Practices Act (FDCPA)... Full Story

Court Holds That Employee’s Arbitration Agreement Does Not Apply to Intentional Tort Claims
Steigerwalt v. Terminix Int’l Co., No. 06 CV 1855(JEI), 2006 WL 3000362 (D. N.J., Oct. 19, 2006)
10/19/2006

A federal district court in New Jersey held that an arbitration agreement did not apply to a former employee’s intentional tort claims based on its ruling that the agreement covered only statutory claims and claims arising from termination.

In Steigerwalt v. Terminix Int’l Co., No. 06 CV 1855(JEI), 2006 WL 3000362 (D. N.J., Oct. 19, 2006), Steigerwalt sued Terminix, his former employer, after he suffered severe neurological injuries during a fumigation job involving toxic methyl bromide. Terminix moved to compel arbitration of any claims not covered by New Jersey’s Workers’ Compensation Act (the Act)... Full Story

Patent Infringement Claim Barred from Court Due To Earlier Arbitration Proceeding
Innovative Engineering Solutions, Inc. v. Misonix, Inc., Civ. No. 05-1592-PK, 2006 WL 2987710 (D. Or. Oct. 17 2006)
10/17/2006

A United States District Court in Oregon has held that a patent infringement claim could not be raised in court after the party withdrew patent infringement claims from an earlier arbitration proceeding.

In Innovative Engineering Solutions, Inc. v. Misonix, Inc., Civ. No. 05-1592-PK, 2006 WL 2987710 (D. Or. Oct. 17 2006), Innovative Engineering Solutions, Inc. (IES) owned the intellectual property rights to a gas abatement device used in the production of silicon chips. Defendant Misonix, Inc. initially received a license to produce the device, but later operated under an implied license. In 2002, Misonix refused to pay royalties to IES, since they believed that they had “designed around” the licensed technology. IES sought damages and royalties by filing an arbitration demand pursuant to the preexisting agreement between the parties, but later dropped the patent infringement portion of the claim, which it viewed as “too complex” for arbitration... Full Story

State Cases

Arbitrator Exceeded Powers By Failing To Apply Contract’s Notice And Cure Provision
Gueyffier v. Ann Summers, Ltd., No. B186996, 2006 WL 3028272 (Cal. Ct. App. Oct. 26, 2006)
10/26/2006

The California Court of Appeals held that an arbitrator exceeded his powers by finding a party liable for breach of contract even though the contract’s notice and cure requirement was not satisfied.

In Gueyffier v. Ann Summers, Ltd., No. B186996, 2006 WL 3028272 (Cal. Ct. App. Oct. 26, 2006), Gueyffier and Ann Summers, a British company, entered into a franchise agreement allowing Gueyffier to open an Ann Summers store in Los Angeles.

The franchise agreement, which contained an arbitration clause, provided that Ann Summers could not “be held in breach” without written notice of the breach and an opportunity to cure. The agreement further provided that the notice and cure requirement was a “material term” that could “not be modified or changed by any arbitrator"... Full Story

Indiana Court Refuses to Follow FTC’s “Unreasonable” Position on Arbitration of Warranty Claims
Walker v. DaimlerChrysler Corp., No. 27A02-0507-CV-596, 2006 WL 3093977 (Ind. Ct. App. Nov. 2, 2006)
11/2/2006

The Indiana Court of Appeals has refused to follow a Federal Trade Commission (FTC) regulation stating that Magnusson-Moss Warranty Act (the Act) claims cannot be subject to binding arbitration. Of the nine courts to consider the issue, the Indiana Court of Appeals is the eighth one to find the FTC regulation “unreasonable.”

In Walker v. DaimlerChrysler Corp., No. 27A02-0507-CV-596, 2006 WL 3093977 (Ind. Ct. App. Nov. 2, 2006), William Walker appealed from an order compelling arbitration of Magnusson-Moss claims that he brought against DaimlerChrysler. On appeal, Walker relied on an FTC regulation stating that Congress did not intend to allow binding arbitration under the Act... Full Story

California Court Upholds Forum Selection Clause
Baber v. Quizno’s, B186235, 2006 WL 3072394 (Cal. App. Oct. 31, 2006)
10/31/2006

The California Court of Appeal upheld a forum selection clause naming Denver, Colorado as the site of an arbitration hearing for disputes arising from a franchise agreement.

In Baber v. Quizno’s, B186235, 2006 WL 3072394 (Cal. App. Oct. 31, 2006), Baber filed suit following termination of his franchise agreement with Quizno’s. Quizno’s responded by filing a petition to compel arbitration pursuant to the arbitration clause in the parties’ agreement. Thereafter, Baber argued that the franchise agreement was permeated by fraud, that the forum selection clause was unconscionable, and that a Colorado venue for arbitration was unfair. The trial court granted the petition to compel arbitration, but required that it be conducted in Los Angeles County, rather than the parties’ selected forum... Full Story

New Jersey Court Rejects Ambiguity Challenge to Arbitration Agreement
Fernandes v. Ramsey Nissan, No. DC-013539-04, 2006 WL 3102615 (N.J. Super. Ct. App. Div. Nov. 2, 2006)
11/2/2006

The Appellate Division of the New Jersey Superior Court upheld an arbitration agreement being challenged as ambiguous and difficult to read, finding the agreement clearly explained that the parties were giving up the right to a jury trial.

In Fernandes v. Ramsey Nissan, No. DC-013539-04, 2006 WL 3102615 (N.J. Super. Ct. App. Div. Nov. 2, 2006), Fernandes leased a motor vehicle from Ramsey Nissan (Ramsey). The lease agreement contained an arbitration clause... Full Story

Employer’s Limited Right To Modify Arbitration Agreement Does Not Render Promise to Arbitrate Illusory
In re Champion Technologies, Inc., No. 11-06-00181-CV, 2006 WL 3093839 (Tex. Ct. App. Nov. 2, 2006)
11/2/2006

The Texas Court of Appeals held that an employer’s limited right to modify or terminate an arbitration agreement did not render the promise to arbitrate illusory because the limitations on exercising that right would preclude the employer from avoiding its promise to arbitrate.

In In re Champion Technologies, Inc., No. 11-06-00181-CV, 2006 WL 3093839 (Tex. Ct. App. Nov. 2, 2006), plaintiffs brought a wrongful termination action against Champion, their former employer... Full Story

California Court Errs by Holding Hearing After, Not Before, Motion to Compel Arbitration
Hotels Nevada v. L.A. Pacific Center, Inc., No. B185814, 2006 WL 3199735 (Cal. Ct. App. Nov. 7, 2006)
11/7/2006

The California Court of Appeal held that a trial court erred by holding an evidentiary hearing after, not before, denying a motion to compel arbitration. This sequence of proceedings improperly relieved the opposing party of its burden of showing that the arbitration agreement was unenforceable.

In Hotels Nevada v. L.A. Pacific Center, Inc., No. B185814, 2006 WL 3199735 (Cal. Ct. App. Nov. 7, 2006), Hotels Nevada and L.A. Pacific were negotiating the sale of two Las Vegas properties. After the parties signed a purchase agreement, a dispute arose over the repayment period contemplated by a $5 million “holdback” provision. When Hotels Nevada sued for fraud, L.A. Pacific moved to compel arbitration pursuant to the purchase agreement... Full Story

ADR Legislation & Regulation

FEDERAL LEGISLATION

No new federal legislation.

STATE LEGISLATION

No new state legislation.

REGULATIONS

No new regulations.