As with other matters where a company may seek to enforce contractual rights, arbitration agreements require a party to be able to prove the existence of the agreement.
In CSAA Affinity Insurance Co. v. AmeriGas Propane LP, the U.S. District Court in Arizona was asked to compel arbitration of an insurance claim for water loss and damage. The insurer was unable to produce a fully executed agreement containing the arbitration provision its regional director testified was included in the agreement. Instead, the director testified that the company’s files contained only the signature page of the agreement. The court rejected this evidence as insufficient, holding that “Defendants have not met their burden of establishing that the Insureds entered into an agreement containing an arbitration clause. Although Defendants assert that the terms of service sent to the Insureds, and which [the movant’s predecessor company] accepted, contained an arbitration clause per their usual practice, they have not established that the specific agreement accepted by the Insureds contained an arbitration clause.”
In Soliman v. Subway Franchisee Advertising Fund Trust, Ltd., the Second Circuit recently reviewed in detail the circumstances in which an arbitration provision indirectly referenced in a company’s promotional materials will be enforced. Soliman involves a putative class action alleging a violation of the Telephone Consumer Protection Act predicated on allegations that the defendant failed to comply with a consumer’s request to unsubscribe from a promotion.
The defendant moved to compel arbitration based upon terms and conditions found in a website to which the consumer was ostensibly referred by a hard copy, in store announcement of the promotion. The Second Circuit affirmed the lower court’s denial of the motion to compel for the reason that the arbitration provision was not “reasonably conspicuous” as required by applicable precedent. The decision, reviewing and distinguishing various precedents, provides an informative tutorial for companies seeking to provide for arbitration in their promotional programs and attorneys representing clients regarding the enforceability of arbitration provisions.
Dave Reif’s ADR Highlights discusses the Western District of Washington’s decision in BioOrigyn, LLC. v. Fairhaven Health, Inc., 2021 U.S. Dist. LEXIS 104803 (W.D. Wash. June 3, 2021), in which the court rejected a party’s attempt “to avoid arbitration by ‘dropping’ certain … contract claims.” As the article explains, the court held that it would “not ignore the express language of the complaint simply because Plaintiffs request to drop the claim here. Whether Plaintiffs continue to pursue this claim or not, the claim is subject to the 2015 Likeness Agreement’s arbitration provision and must be sent to arbitration.’”
Taft Stettinius & Hollister has published this article in Mondaq, discussing the Ohio Supreme Court’s recent decision in BST Ohio Corp. v. Wolgang, in which the court held that an Ohio statute facially providing three months to seek vacatur of an award does not necessarily provide that much time. Instead, as the article explains, “if a party moves to confirm an arbitration award, the opposing party must move to vacate the award before the court’s hearing to confirm the award – even if the hearing is less than three months after the arbitration award was issued.”
This article by Laurence Doering and Eileen Lobig, available on JD Supra, discusses international arbitration cases addressing arbitrators’ ability to conduct their own factual investigations outside the hearing. In particular, the article notes a German court’s recent decision affirming an award over claims that the arbitrators improperly conducted online research.
This decision will surprise United States practitioners and arbitrators, where history and culture emphasize the importance of receiving evidence only within the confines of a hearing where all parties have the opportunity to participate and respond.
Benjamin Stearns of Carlton Fields has this article in JD Supra, discussing the Ninth Circuit’s decision in Walsh v. Arizona Logistics, Inc. As the article explains, “[t]he Department of Labor brought an enforcement action against Arizona Logistics Inc. for alleged violations of the FLSA’s minimum wage, overtime, record-keeping, and anti-retaliation requirements resulting from the alleged misclassification of delivery drivers as independent contractors rather than employees. Arizona Logistics moved to compel arbitration under its agreements with the drivers…” The Ninth Circuit refused to compel arbitration, holding that the Department of Labor was “master of [his] own case,” and not subject to the arbitration requirement.
Lexology has published this article by Alexandria Murphy, Brian Rostocki and Benjamin Chapple of Reed Smith, discussing the decision in Diamond Materials, LLC v. Tutor Perini Corp., C.A. No. N20C-05-162-MAA, mem. op. (Del. Super. Ct. Apr. 30, 2021), in which the court enforced a contract provision that entitled “one party to the contract unilateral authority to determine whether certain claims fall within the purview of an arbitration clause,” thereby “preclud[ing] the court from determining the issue.” As the court explained, “[w]hile [plaintiff] might not like what the arbitration provision in the [Subcontracting Agreements] affords to [defendant], it cannot ignore it. ‘Delaware is a freedom of contract state, with a policy of enforcing the voluntary agreements of sophisticated parties in commerce.'”
Yvonne Arvanitis Fossati, Hazel, Poei and Scott Jang of Jackson Lewis have this article in The National Law Review, discussing the Ninth Circuit’s recent decision in Franklin v. Community Regional Medical Center, in which the court held that a staffing agency’s employee’s claims against the hospital to which she was assigned to work were subject to arbitration, even though she had no arbitration agreement with the hospital. As the article explains, the court held that the arbitration agreement between the employee and the staffing agency was sufficient to require arbitration with the hospital, and “that the doctrine of equitable estoppel prevents a party from ‘playing fast and loose with its commitment to arbitrate.'”
A California federal court has weighed in on the question of whether discovery should be permitted while determination of a motion to compel arbitration is pending. In Nguyen v. BMW of North America, LLC, the court, noting that “the Federal Rules of Civil Procedure do not automatically stay discovery when a potentially dispositive motion is pending,” held that, under the facts and circumstances before it, the stay was warranted. A “preliminary peek” at the motion to compel revealed to the court “that they are potentially dispositive of the entire case,” and “any stay is likely to be brief,” given that the motion to compel was fully briefed and under submission.
Conversely, according to the court, “requiring Defendant to engage in discovery that may not be permitted or accepted later if the matter is sent to arbitration would be prejudicial to Defendant. A stay also will allow the Court to avoid any potentially unnecessary judicial expenditures such as discovery disputes that may or may not be relevant if the matter is remanded or sent to arbitration.”
When I read the Fifth Circuit’s recent decision in International Energy Ventures Management, L.L.C. v. United Energy Group, Limited, I thought about a news item years ago when an unlicensed individual was discovered working as a litigator in a law firm. Despite the absence of credentials, and the wrongfulness of his actions, he was considered to have been an effective advocate.
As noted by the Ninth Circuit, International Energy paints a story of a dispute that, over seven years, “has bounced back and forth between three courts and two arbitrations.” In the course of this tortured journey, two separate arbitrators determined that, by virtue of its litigation conduct, the plaintiff had waived its right to arbitrate. The Ninth Circuit, however, ruled that the arbitrators had no business determining the waiver question, as that question was one for the courts to address. Thus, the arbitrators were deemed to have exceeded their powers in violation of the Federal Arbitration Act.
However, in reviewing the substantive merits of the waiver issue, the Ninth Circuit agreed that the arbitrators got it right. Even moreso, in a decision serving to endorse the arbitrators’ analysis, the Ninth Circuit offered an extensive disagreement with the lower court which held that no waiver had occurred.