ADR LAW & POLICY UPDATE

Federal Cases

Legair v. Circuit City Stores, Inc.
Legair v. Circuit City Stores, Inc., 213 F. App’x 436 (6th Cir. 2007)

The Sixth Circuit Court of Appeals affirmed a district court order imposing sanctions on an attorney who disregarded an order to arbitrate. This decision continues the recent trend of cases reminding litigants that frivolous arbitration challenges are subject to sanctions.

In Legair v. Circuit City Stores, Inc., 213 F. App’x 436 (6th Cir. 2007), Legair sued Circuit City, his former employer, for alleged race discrimination.... Full Story

Pfannenstiel v. Merrill Lynch, Pierce, Fenner & Smith
Pfannenstiel v. Merrill Lynch, Pierce, Fenner & Smith, 477 F.3d 1155 (10th Cir. 2007)

The Tenth Circuit Court of Appeals became the tenth circuit court to formally recognize the doctrine of arbitral immunity. Accordingly, the Court held that the NASD was immune from liability for allegedly mishandling evidence presented at an arbitration hearing.

In Pfannenstiel v. Merrill Lynch, Pierce, Fenner & Smith, 477 F.3d 1155 (10th Cir. 2007), Pfannenstiel submitted a claim against Merrill Lynch to a panel of NASD arbitrators. Specifically, Pfannenstiel claimed that Merrill Lynch owed him $217,785.00 for deficiencies in his account.... Full Story

Ehleiter v. Grapetree Shores, Inc.
Ehleiter v. Grapetree Shores, Inc., 482 F.3d 207 (3rd Cir. 2007)

In affirming a lower court order denying a motion to compel arbitration, the Third Circuit Court of Appeals held that whether a party has waived its right to arbitrate by actively participating in litigation is a question for the court, rather than the arbitrator, unless there is clear and unmistakable evidence of the parties' intent to have an arbitrator decide the question.

In Ehleiter v. Grapetree Shores, Inc., 482 F.3d 207 (3rd Cir. 2007), Treasure Bay operated a casino on property leased from Grapetree. When Ehleiter, one of the casino dealers, slipped and fell on the premises, he sued Grapetree as the owner of the property.... Full Story

Sanford v. MemberWorks, Inc.
Sanford v. MemberWorks, Inc., 483 F.3d 956 (9th Cir. 2007)

In vacating both an order compelling arbitration and a subsequent order confirming the award, the Ninth Circuit Court of Appeals held that the trial court erred in ordering arbitration because the party opposing arbitration was challenging the "existence" rather than the "validity" of the underlying contract.

In Sanford v. MemberWorks, Inc., 483 F.3d 956 (9th Cir. 2007), Sanford bought a set of fitness tapes over the telephone. During the phone call, the call center representative allegedly read a script offering Sanford a trial membership in a MemberWorks program and advising her that a membership kit would be sent by mail.... Full Story

Douglas v. United States District Court
Douglas v. United States District Court, 495 F.3d 1062 (9th Cir. 2007)

In a case where a business entity attempted to add an arbitration agreement to an ongoing relationship by posting the agreement on its website, the Ninth Circuit Court of Appeals held that the district court erred in compelling arbitration because the party opposing arbitration had no notice, actual or constructive, of the arbitration agreement.

In Douglas v. United States District Court, 495 F.3d 1062 (9th Cir. 2007), Douglas contracted with America Online (AOL) for long distance phone service. Talk America later acquired this business from AOL and added four provisions to the service contract: (1) additional service charges; (2) a class action waiver; (3) an arbitration agreement; and (4) a choice of law provision calling for the application of New York law.... Full Story

Winfrey v. Simmons Food, Inc.
Winfrey v. Simmons Food, Inc., 495 F.3d 549 (8th Cir. 2007)

In upholding a unanimous arbitration award in favor of a group of poultry growers, the Eighth Circuit Court of Appeals explained that party-appointed arbitrators need not be neutral. However, as the Court noted, “evident partiality” may be a basis for vacating an arbitration award if the alleged bias of a party-appointed arbitrator had a prejudicial impact on the award.

In Winfrey v. Simmons Food, Inc., 495 F.3d 549 (8th Cir. 2007), a group of poultry growers (the Growers) sued Simmons Food (Simmons) for damages under the Packers and Stockyards Act. The district court ordered the parties to submit the dispute to arbitration in accordance with an arbitration clause in their contract.... Full Story

Lozano v. AT&T Wireless Services, Inc.
Lozano v. AT&T Wireless Services, Inc., 504 F.3d 718 (9th Cir. 2007)

The Ninth Circuit Court of Appeals has affirmed an order denying certification of a national class because the need for a state-by-state inquiry into the enforceability of the arbitration agreement and class waiver meant that individual questions would predominate over class-wide questions.

In Lozano v. AT&T Wireless Services, Inc., 504 F.3d 718 (9th Cir. 2007), Lozano filed a class action lawsuit against AT&T, his wireless service provider, alleging that AT&T engaged in “out-of-cycle billing” in violation of the Federal Communications Act (FCA), the California Consumer Legal Remedies Act (CCLRA), and the California Unfair Competition Law (UCL).... Full Story

State Cases

Bank of America, N.A. (USA) v. Dahlquist
Bank of America, N.A. (USA) v. Dahlquist, 152 P.3d 718 (Mont. 2007)

In affirming a lower court order denying confirmation of an arbitration award, the Montana Supreme Court held that the deadline for challenging an award under the Federal Arbitration Act (FAA) does not apply unless the arbitrator was selected in accordance with the arbitration agreement. This interpretation of the FAA offers additional protection against sham arbitration awards.

In Bank of America, N.A. (USA) v. Dahlquist, 152 P.3d 718 (Mont. 2007), Bank of America (BOA) sued Dahlquist, seeking the recovery of unpaid credit card debt.

In response, Dahlquist filed a motion to dismiss, arguing that the suit was subject to an arbitration award issued by the National Arbitration Counsel (NAC). Dahlquist also filed a motion to confirm the award. The trial court denied Dahlquist's motions on the ground that the arbitration was not conducted in accordance with the parties' arbitration agreement.... Full Story

Reigelsperger v. Siller
Reigelsperger v. Siller, 150 P.3d 764 (Cal. 2007)

In construing a California statute that imposes notice requirements on health care arbitration agreements, the California Supreme Court held that once the notice requirements are satisfied, parties are "free to adopt" arbitration agreements with expansive reach. Accordingly, the Court found that an arbitration agreement entered into during an initial visit was applicable to a malpractice claim that arose from treatment received two years later for a different condition.

In Reigelsperger v. Siller, 150 P.3d 764 (Cal. 2007), Siller, a chiropractor, treated Reigelsperger for lower back pain in August 2000. During his visit to Siller's office, Reigelsperger signed an arbitration agreement. Article 1 of the agreement required arbitration of "any dispute as to medical malpractice," while article 2 provided that "[t]his agreement is intended to bind the patient and the health care provider...who now or in the future treat[s] the patient.".... Full Story

Covenant Health Rehab of Picayune, L.P. v. Brown
Covenant Health Rehab of Picayune, L.P. v. Brown, 949 So.2d 732 (Miss. 2007)

In construing a Mississippi statute that allows a surrogate to make health care decisions on behalf of an incapacitated patient, the Mississippi Supreme Court held that a daughter admitting her mother to a nursing home had statutory authority to agree to arbitration on her mother's behalf.

In Covenant Health Rehab of Picayune, L.P. v. Brown, 949 So.2d 732 (Miss. 2007), Brown and her two sisters filed a wrongful death action against Covenant Health after their mother died during her residency in a Covenant Health nursing home.... Full Story

Hogan v. Country Villa Health Services
Hogan v. Country Villa Health Services, 55 Cal. Rptr. 3d 450 (Cal. Ct. App. 2007)

The California Court of Appeals held that a daughter admitting her mother to a nursing home had authority to enter an arbitration agreement on her mother's behalf pursuant to a power of attorney authorizing the daughter to make health care decisions for her mother.

In Hogan v. Country Villa Health Services, 55 Cal. Rptr. 3d 450 (Cal. Ct. App. 2007), Sarah Hogan (Sarah) executed a power of attorney authorizing her daughter Barbara to make health care decisions for her. The power of attorney was created using the standard form from section 4701 of the California Probate Code.... Full Story

Koons Ford of Baltimore, Inc. v. Lobach
Koons Ford of Baltimore, Inc. v. Lobach, 919 A.2d 722 (Md. 2007)

In construing the interplay between the Federal Arbitration Act (FAA) and the Magnuson-Moss Warranty Act (MMWA), the Maryland Court of Appeals held that the FAA does not require courts to enforce an arbitration agreement for claims brought under the MMWA. As the two dissenting justices explained, in reaching this holding, the Court rejected the reasoning of "the vast majority" of courts and instead "pin[ned] its decision on the reasoning adopted previously by only three federal district courts, a handful of law journal articles, and a dissent."

In Koons Ford of Baltimore, Inc. v. Lobach, 919 A.2d 722 (Md. 2007), Lobach bought a used car from Koons Ford (Koons). When he discovered that the car was allegedly defective and damaged, Lobach sued Koons, alleging violations of the MMWA and several other causes of action. Koons responded by filing a motion to compel arbitration in accordance with the parties' arbitration agreement. The trial court denied the motion with respect to the alleged violation of the MMWA but granted the motion in all other respects.... Full Story

Duke v. Graham
Duke v. Graham, 158 P.3d 540 (Utah 2007)

In construing a statute governing limited liability companies (LLC's), the Utah Supreme Court held that an arbitrator has authority to remove members and managers of an LLC if the company's operating agreement contains an arbitration clause that covers the dispute.

In Duke v. Graham, 158 P.3d 540 (Utah 2007), Ted Duke, Maria Cardenas, Randal Graham, and David Graham were members of an LLC called Way Cool Dirt Cheap (WCDC). Duke was also a manager of WCDC.... Full Story

Wagner Construction Co. v. Pacific Mechanical Corp.
Wagner Construction Co. v. Pacific Mechanical Corp., 157 P.3d 1029 (Cal. 2007)

The California Supreme Court held that the statute of limitations is not a proper basis for denying a motion to compel arbitration because the arbitrator, not the court, must decide whether the statute of limitations bars any claims that the parties have agreed to arbitrate.

In Wagner Construction Co. v. Pacific Mechanical Corp., 157 P.3d 1029 (Cal. 2007), Pacific subcontracted work to Wagner under a contract containing an arbitration clause.... Full Story

Salley v. Option One Mortgage Corp.
Salley v. Option One Mortgage Corp., 925 A.2d 115 (Pa. 2007)

In answering a question certified by the Third Circuit, the Pennsylvania Supreme Court held that an exception for foreclosure proceedings in an arbitration agreement between a mortgage lender and homeowner did not create a presumption of unconscionability. Since the Court’s reasoning was based on the unique nature of foreclosure proceedings, this decision should not be misconstrued as an endorsement of any other carve-outs or exceptions.

In Salley v. Option One Mortgage Corp., 925 A.2d 115 (Pa. 2007), Salley, a low-income homeowner, obtained a residential mortgage loan from Option One, a sub-prime lender. As part of the loan transaction, Salley and Option One entered into an arbitration agreement that required arbitration of all disputes except for foreclosure proceedings and the exercise of self-help remedies.... Full Story

Scott v. Cingular Wireless
Scott v. Cingular Wireless, 161 P.3d 1000 (Wash. 2007)

By a 6-3 majority, the Washington Supreme Court held that a class action waiver was substantively unconscionable – thus rendering the arbitration agreement unenforceable – because the waiver allegedly functioned as an exculpatory clause by impeding the pursuit of minor claims. In reaching this holding, the Court was unswayed by the remedial impact of an attorney fees provision in the agreement because the attorney fees provision was expressly limited to consumers who prevailed in full. Accordingly, as the Court noted, a consumer "could recover 99 percent of a claim and still not be awarded any attorney fees."

In Scott v. Cingular Wireless, 161 P.3d 1000 (Wash. 2007), Scott brought a class action against Cingular, his wireless service provider, alleging that Cingular violated Washington's Consumer Protection Act (CPA) by overcharging its customers between $1 and $40 per month.... Full Story

Gentry v. Superior Court
Gentry v. Superior Court, 165 P.3d 556 (Cal. 2007)

By a 4-3 majority, the California Supreme Court reversed an order compelling arbitration and remanded the case to the trial court with instructions to use a multi-factor test in determining the enforceability of a class action waiver. The ultimate question for the trial court is whether class-wide proceedings would be “a significantly more effective practical means of vindicating the [statutory] rights” of the employees who belong to the putative class. Parties who prefer the simplicity of one-on-one arbitration should not be overly concerned by the majority holding because this decision has no application outside of the employment context.

In Gentry v. Superior Court, 165 P.3d 556 (Cal. 2007), Gentry filed a class action against Circuit City, his former employer, alleging that Circuit City improperly classified him as an exempt employee and thus deprived him of his statutory right to overtime pay.... Full Story

Owens v. National Health Corp.
Owens v. National Health Corp., No. M2005-01272-SC-R11-CV, 2007 WL 3284669 (Tenn. Nov. 8, 2007)

The Tennessee Supreme Court held that a power of attorney for health care decisions authorized the attorney-in-fact to enter an arbitration agreement on the principal’s behalf because the decision to sign the arbitration agreement was necessary to implement the underlying health care decision – namely, the decision to admit the principal into a nursing home.

In Owens v. National Health Corp., No. M2005-01272-SC-R11-CV, 2007 WL 3284669 (Tenn. Nov. 8, 2007), Mary King executed a Durable Power of Attorney for Health Care Decisions authorizing Gwyn Daniel, as her attorney-in-fact, to make health care decisions on her behalf. The power of attorney also authorized Daniel to execute “any waiver, release or other document which may be necessary in order to implement the health care decisions.”.... Full Story