ADR LAW & POLICY UPDATE

Federal Cases

Provencher v. Dell, Inc.
Provencher v. Dell, Inc., 409 F. Supp.2d 1196
(C.D. Cal 2006)

According to a California federal court, class wide claims can be arbitrated on an individual basis when the arbitration process is inexpensive and fair.

In Provencher v. Dell, Inc., 409 F. Supp.2d 1196 (C.D. Cal 2006), Provencher purchased a Dell personal computer, which contained two written copies of a standard “approve-or-return” contract. Provencher had 30 days to return to the computer to Dell, or he could accept the terms of the agreement by keeping the computer. Unhappy with the computer, Provencher filed a class action lawsuit against Dell. Dell then sought to compel arbitration against Provencher pursuant to the arbitration language in the sales contract.... Full Story

ACandS, Inc. v. Travelers Casualty & Surety
ACandS, Inc. v. Travelers Casualty & Surety Co., 435 F.3d 252
(3rd Cir. 2006)

Supreme Court Justice Samuel Alito recently wrote an opinion of the Third Circuit Court of Appeals ruling that an arbitration panel should halt its proceedings if an award might negatively impact the estate of a debtor protected by the bankruptcy code.

In ACandS, Inc. v. Travelers Casualty & Surety Co., 435 F.3d 252 (3rd Cir. 2006), a dispute arose between ACandS, an installer of asbestos insulation, and its insurer, Travelers Casualty and Surety Co. (“Travelers”). ACandS was facing billions of dollars worth of asbestos-related claims, and the parties disagreed about what percentage of those claims Travelers was obligated to cover.... Full Story

Arrowhead Global Solutions, Inc. v. Datapath, Inc.
Arrowhead Global Solutions, Inc. v. Datapath, Inc., 166 Fed. Appx. 39
(4th Cir. 2006)

Consistent with other Circuits that have considered the issue, the Fourth Circuit has determined that courts can confirm time-sensitive arbitration awards, such as temporary injunctions, before the arbitration is complete.

In Arrowhead Global Solutions, Inc. v. Datapath, Inc., 166 Fed. Appx. 39 (4th Cir. 2006), Datapath was a subcontractor of Arrowhead Global Solutions (“AGS”), a satellite receiver supplier. Datapath sued AGS for breach of contract when AGS gave some satellite work to another company.... Full Story

Sarofim v. Trust Company of the West
Sarofim v. Trust Company of the West, 440 F.3d 213
(5th Cir. 2006)

When an arbitrator awards punitive damages, the reasoning behind the award is irrelevant and the award will be confirmed, so long as the arbitrator did not manifestly disregard the applicable law or contravene public policy.

In Sarofim v. Trust Company of the West, 440 F.3d 213 (5th Cir. 2006), Trust Company of the West (“TCM”) handled over $12 million of investments from Sarofim. Within three years, the Sarofim portfolio had lost over $6 million due to lack of diversification and other poor investment strategies. Sarofim requested arbitration, and a three-member panel, applying the laws of California, awarded her $6.3 million in actual damages, and $2.9 million in punitive damages.... Full Story

Rollins, Inc. v. Black
Rollins, Inc. v. Black, 167 Fed. Appx. 798
(11th Cir. 2006)

The 11th Circuit has upheld an arbitration panel’s award of punitive damages, finding that the panel’s decision was in no way a “manifest disregard of the law.”

In Rollins, Inc. v. Black, 167 Fed. Appx. 798 (11th Cir. 2006), Black sued Orkin Exterminating Company over its failure to properly eradicate termites from Black’s home. Pursuant to the parties’ agreement, the case went to arbitration, and Black was awarded compensatory and punitive damages.... Full Story

Buckeye Check Cashing, Inc. v. Cardegna (Part 1)
Buckeye Check Cashing, Inc. v. Cardegna, 126 S. Ct. 1204
(2006)

Whether brought in federal or state court, a challenge mounted against the validity of a contract as a whole, rather than just the arbitration clause, must be heard by the arbitrator, the Supreme Court has held.

In Buckeye Check Cashing, Inc. v. Cardegna, 126 S. Ct. 1204 (2006), Cardegna brought a putative class action against Buckeye Check Cashing, alleging that Buckeye charged usurious interest rates in connection with check cashing loans, and that Buckeye's loan agreements violated several Florida lending and consumer protection laws.... Full Story

Buckeye Check Cashing, Inc. v. Cardegna (Part 2)
Buckeye Check Cashing, Inc. v. Cardegna, 126 S. Ct. 1204
(2006)

The Supreme Court’s recent decision upholding the use of arbitration to resolve consumer/business disputes will leave a very favorable mark on the dispute resolution landscape for decades to come.

The issue before the High Court was: who decides whether a contract that contains an arbitration agreement is void - the arbitrator or a judge?

In Buckeye Check Cashing, Inc. v. Cardegna, 126 S. Ct. 1204 (2006), Cardegna brought a putative class action against Buckeye Check Cashing, alleging that Buckeye’s loan agreements contained usurious interest rates and violated Florida lending and consumer protection laws.... Full Story

Kristian v. Comcast Corp.
Kristian v. Comcast Corp., 446 F.3d 25
(1st Cir. 2006)

In a sharp turn toward a minority position, the First Circuit has held that class action waivers of antitrust claims are unenforceable. The Court cited the inherent expense of prosecuting antitrust claims and two cases interpreting California state law with respect to class action waivers to explain its departure from four other circuits that allow class action waivers in arbitration agreements.

In Kristian v. Comcast Corp., 446 F.3d 25 (1st Cir. 2006), Kristian and other cable customers filed suit against Comcast alleging that service prices were inflated due to anticompetitive conduct. Comcast sought to compel arbitration based upon the arbitration clause contained in its customer agreements. The clause contained both a class action waiver and a prohibition on the recovery of all but simple, compensatory damages.... Full Story

Stolt-Nielsen SA v. Animalfeeds Intern. Corp.
Stolt-Nielsen SA v. Animalfeeds International Corp., No. 06 Civ. 420(JSR), 2006 WL 1750093
(S.D.N.Y. June 26, 2006)

An arbitration panel showed “manifest disregard of the law” by concluding that an arbitration agreement silent on the question of class arbitration permitted the procedure, according to the Southern District of New York. The court held that class arbitration is permissible only if the parties contracted for or mutually agreed to it.

In Stolt-Nielsen SA v. Animalfeeds International Corp., No. 06 Civ. 420(JSR), 2006 WL 1750093 (S.D.N.Y. June 26, 2006), Animalfeeds International (“AI”) sued Stolt-Nielsen (“Stolt”), alleging that antitrust violations had forced AI to overpay Stolt for shipping. The matter was referred to arbitration pursuant to the shipping agreement. AI demanded class arbitration on behalf of others who had purchased comparable services from Stolt, but Stolt argued that it never agreed to class arbitration. The arbitrators determined that the arbitration clause, though silent on the issue, permitted class arbitration.... Full Story

Qualcomm Inc. v. Nokia Corp.
Qualcomm Inc. v. Nokia Corp., No. 2006-1317, 2006 WL 2988322
(Fed. Cir. Oct. 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

Nagrampa v. Mailcoups, Inc.
Nagrampa v. MailCoups, Inc., No. 03-15955, 2006 WL 3478345
(9th Cir. Dec. 4, 2006)

Proceeding en banc, the Ninth Circuit Court of Appeals splintered on the question of whether a court confronted with an unconscionability challenge to an arbitration clause may consider the circumstances surrounding the formation of the underlying contract. According to an 8-3 majority, the surrounding circumstances (e.g., inequality of bargaining power) are a proper consideration but only if necessary to support a challenge directed exclusively at the arbitration clause.

In Nagrampa v. MailCoups, Inc., No. 03-15955, 2006 WL 3478345 (9th Cir. Dec. 4, 2006), Nagrampa and MailCoups entered into a franchise agreement whereby Nagrampa would operate a MailCoups franchise and disseminate coupons via direct mail. The franchise agreement contained an arbitration clause naming Boston as the venue but permitting MailCoups “to obtain any provisional remedy, including, without limitations, injunctive relief from any court of competent jurisdiction.”.... Full Story

State Cases

Jones v. Citigroup
Jones v. Citigroup, Inc., 38 Cal. Rptr.3d 461
(Cal. Ct. App. 2006)

The California Court of Appeal has enforced a class action waiver that was added to a credit card agreement through a notice included with the consumer's bill. The consumer argued that the waiver was procedurally unconscionable, but the Court rejected this challenge because the consumer was afforded an opportunity to opt out. The Court so held after it analyzed recent California precedent regarding the enforceability of class action waivers.

In Jones v. Citigroup, Inc., 38 Cal. Rptr.3d 461 (Cal. Ct. App. 2006), Jones filed a purported class action, individually and as a private attorney general, alleging that Citigroup failed to make required disclosures regarding certain finance charges and interest rates.... Full Story

LaSalla v. Doctor's Associates, Inc.
LaSalla v. Doctor’s Associates, Inc., No. 17483, 898 A.2d 803
(Conn. June 13, 2006)

The Connecticut Supreme Court refused to vacate an award involving the interpretation of a contract provision that had been interpreted differently in an earlier arbitration, holding that an arbitrator is free to apply or reject the doctrine of claim preclusion unless the parties agree otherwise.

In LaSalla v. Doctor’s Associates, Inc., No. 17483, 898 A.2d 803 (Conn. June 13, 2006), Doctor’s Associates (“DA”), a franchiser of Subway sandwich shops, and LaSalla entered into an agreement whereby LaSalla would act as DA’s development agent for northwest Florida. Under the agreement, LaSalla’s share of the royalties would be determined using a formula that accounted for preexisting Subway shops in the area. The agreement provided for mandatory arbitration.... Full Story

Tillman v. Commercial Credit Loans, Inc.
Tillman v. Commercial Credit Loans, Inc., No. COA05-924, 2006 WL 1526826
(N.C. Ct. App. Jun 06, 2006)

In Tillman v. Commercial Credit Loans, Inc., No. COA05-924, 2006 WL 1526826 (N.C. App. Jun 06, 2006), Tillman and several other consumers attempted to file a class action lawsuit against Commercial Credit, alleging several consumer protection violations. When Commercial Credit filed a motion to compel arbitration based on its agreement with the consumers, the consumers argued that the arbitration clause was unconscionable because (1) the costs of arbitration were prohibitively high; (2) the arbitration clause contained a class action prohibition; and (3) the agreement lacked mutuality.

The trial court found the arbitration clause to be unconscionable, but that decision was reversed by the Court of Appeals, which soundly rejected each of Tillman’s arguments..... Full Story

Hojnowski v. Vans Skate Park
Hojnowski v. Vans Skate Park, No. A-17/45-05, 2006 WL 1976379
(N.J. July 17, 2006)

Citing state and federal policy favoring arbitration, the New Jersey Supreme Court held that a parent may agree to arbitration on a minor child’s behalf.

In Hojnowski v. Vans Skate Park, No. A-17/45-05, 2006 WL 1976379 (N.J. July 17, 2006), twelve-year old Andrew Hojnowksi and his mother visited Vans Skate Park. Andrew could not enter the skate park until his mother signed a release that provided for arbitration and precluded Vans’ liability for certain injuries. Andrew’s mother signed the release on Andrew’s behalf.... Full Story

Deeds v. Regence Blueshield of Idaho
Deeds v. Regence Blueshield of Idaho, No. 31180, 2006 WL 2089247
(Idaho July 28, 2006)

The Idaho Supreme Court held that arbitration should proceed even though the designated administrator refused to accept the matter for lack of a post-dispute agreement to arbitrate.

In Deeds v. Regence Blueshield of Idaho, No. 31180, 2006 WL 2089247 (Idaho July 28, 2006), Deeds sued Regence seeking reimbursement under a health insurance policy that provided for “arbitration in accordance with the applicable rules of the American Arbitration Association [“the AAA”]”.... Full Story

Alterra Healthcare Corp. v. Bryant
Alterra Healthcare Corp. v. Bryant, No. 4D05-4409, 2006 WL 2612769
(Fla. Dist. Ct. App. Sep. 13, 2006)

There remains a split of authority among Florida courts on the issue of whether the court or arbitrator should decide the enforceability of remedial limitations in an arbitration agreement. On the heels of SA-PG-Ocala, LLC v. Stokes, Nos. 5D05-3776, 5D05-3777, 2006 WL 2347369 (Fla. Dist. Ct. App. Aug 11, 2006), another Florida District Court of Appeal decided the enforceability question by ruling that remedial limitations in an assisted living facility’s arbitration agreement were void as contrary to public policy.

In Alterra Healthcare Corp. v. Bryant, No. 4D05-4409, 2006 WL 2612769 (Fla. Dist. Ct. App. Sep. 13, 2006), Bryant, a resident in one of Alterra’s assisted living facilities, sued Alterra, claiming negligence and violations of the Assisted Living Facilities Act (ALFA).... Full Story

Cable Connection, Inc. v. DIRECTV, Inc.
Cable Connection, Inc. v. DIRECTV, Inc., No. B188278, 2006 WL 2709407
(Cal. Ct. App. Sep. 22, 2006)

Less than a month after one California Court of Appeal found that parties to an arbitration agreement may contract for heightened judicial review, another California Court of Appeal has refused to honor an arbitration agreement’s express provision for heightened judicial review.

In Cable Connection, Inc. v. DIRECTV, Inc., No. B188278, 2006 WL 2709407 (Cal. Ct. App. Sep. 22, 2006), Cable Connection sold and installed DIRECTV’s goods and services pursuant to a sales agency agreement. The sales agency agreement provided for arbitration in accordance with the rules of the American Arbitration Association (AAA).... Full Story

Kinkel v. Cingular Wireless LLC
Kinkel v. Cingular Wireless LLC, No. 100925, 2006 WL 2828664
(Ill. Oct. 5, 2006)

The Illinois Supreme Court held that a general bar on class-wide proceedings was unconscionable and therefore unenforceable. The Court carefully limited the reach of its holding and said that it would uphold a bar on class-wide proceedings if the party drafting the agreement gave the other party a “meaningful opportunity” to opt out or if the plaintiff had a cost-effective arbitration remedy available.

In Kinkel v. Cingular Wireless LLC, No. 100925, 2006 WL 2828664 (Ill. Oct. 5, 2006), Kinkel brought a class action alleging that Cingular wrongfully imposed a $150 fee for early termination of a two-year agreement for wireless phone service.... Full Story

O'Keefe Architects, Inc. v. CED Const. Partners, Ltd.
O’Keefe Architects, Inc. v. CED Construction Partners, Ltd., No. SC05-1417, 2006 WL 2971783
(Fla. Oct. 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