John Lewis of Baker Hostetler has written this article, available at Lexology, discussing the Fourth Circuit’s recent decision in Beckley Oncology Associates, Inc. v. Abumasmah. The Fourth Circuit dismissed the lower court’s dismissal of a complaint to vacate an arbitration award, because “[t]he employment agreement between BOA and Abumasmah purported to waiveb oth judicial and appellate review of the arbitrator’s decision. Because the waiver of appellate review is enforceable, we dismiss BOA’s appeal.”
Those interested in a quick overview of the AAA’s recently released Discovery Best Practices for Construction Arbitration may find useful this summary by R. Thomas Dunn and David Fitzpatrick at Pierce Atwood, available at JD Supra.
The unmistakable takeaway from the Ohio Court of Appeals Decision in AJZ’s Hauling, L.L.C v. TruNorth Warranty Programs of North America is that the ends justified the means. A small, family-owned business, shortly after purchasing a used truck, “experienced significant engine- and transmission-related issues.” They filed suit against the issuer of a warranty. The warrantor successfully moved to compel arbitration in the absence of a court hearing, and the truck owner filed a notice of dismissal.
The truck owner sued again, and again the warrantor moved to compel arbitration. This time the court, in contravention of its initial ruling and ignoring the warrantor’s request for a hearing to which Ohio law entitled it, denied the motion to compel, making factual findings that:
a voluntary meeting of minds did not occur as the arbitration agreement and forum selection clause were never explained to [AJZ] and [AJZ] did not understand any information regarding arbitration proceedings or the surrendering of certain appellate rights. The language compelling arbitration was inconspicuous and the warranty was provided by a third-party and not signed by [TruNorth]. Further, [AJZ] was not provided a copy of the agreement until four days after taking possession of the vehicle at issue.
The warrantor argued on appeal that the lower court’s initial order finding the arbitration provision enforceable was res judicata, and could not be undercut by the second order contravening the first. The Court of Appeals disagreed, holding that “it would be unreasonable and unjust to rigidly apply the doctrine of res judicata to prohibit the trial court from reconsidering its prior ruling in the first case.”
Similarly, as to the warrantor’s claim that it was denied a rightful hearing, the court “acknowledge[d] that [the applicable statute] requires a court to hold a hearing on a motion to compel arbitration when the arbitration agreement’s enforceability is raised.” Nevertheless, the court found no reversible error. According to the court, a notation of “Hearing Requested” was deemed insufficient since it “did not specifically request and evidentiary or oral hearing on its motions to stay and compel arbitration.” Second, the Court of Appeals determined that “the trial court did, in fact “hear” the parties,” because the parties submitted written briefs, which included evidentiary support.
While process purists can find much to challenge about the appellate decision, the justification for the Court of Appeals willingness to overlook procedural shortcuts lies in its conclusions about the warranty provision. According to the Court of Appeals, the warranty was delivered to the purchaser only four days after the purchase, and the purchaser neither had an opportunity or was briefed on its provisions at the time of purchase. As for the provision itself…. it required the purchaser, a family-owned Pennsylvania limited liability company, to arbitrate before a three person arbitration panel in North Carolina regarding a $25,000 claim.
Buckley LLP has published this article on Lexology, discussing the Eleventh Circuit’s recent decision in Hearn v. Comcast Cable Communications, LLC. As the article describes, the court held that an arbitration provision’s language encompassed a claim where “[t]he plaintiff terminated the defendant’s services in August 2017, but later called the defendant in 2019 to inquire about pricing and services.”
Contracting parties who wish to provide both for arbitration and for the recovery of attorneys’ fees by the prevailing party should be careful before adopting template contract language. In Nelson v. Ryks, recently decided by the Minnesota Appellate Court, purchasers of real property who prevailed in arbitration against the sellers, were unable to convince the Appellate Court that they should retain the attorneys’ fees awarded by the arbitrator.
Even though the award had been confirmed by the lower court, the Appellate Court reversed on this issue, based upon the language contained in the parties’ agreement: “the prevailing Party of any action at law or in equity brought to enforce or interpret this Agreement will be entitled to reasonable attorney fees and costs.”
According to the Appellate Court, “[t]he use of these terms indicates that the parties intended to authorize attorney fees for court proceedings but not for arbitration.” Similarly, the Court noted that the arbitration section of the parties’ agreement “specifically addresses the costs of arbitration—'[b]oth Parties will share the costs of arbitration equally.’ But it is silent about attorney fees.” For the Court, “[t]he omission of any reference to attorney fees in the arbitration section of the purchase agreement further indicates that attorney fees are not authorized for arbitration.” Thus, “[t]he arbitrator exceeded his authority by awarding buyers attorney fees for the arbitration and the district court erred in upholding this portion of the arbitrator’s award.”
Transactional lawyers involved in negotiating merger and acquisition agreements may find helpful the insights provided by Mark Foley of von Briesen & Roper, S.C., in this article, found in The National Law Review. Attorney Foley suggests the particular analysis and questions that drafters should undertake before committing to a particular arbitration provision.
I have known Judge Robert Holzberg for many years, having appeared before him when he sat on the Connecticut Superior Court, and for the past number of years witnessing the substantial impact he has had on the Connecticut mediation community. He shares in this article, available at JD Supra, insightful observations based on his extensive experience.
In O’Neal Constructors, LLC v. DT America, LLC, the Eleventh Circuit was confronted with a losing party’s attempt to vacate a $650,000 attorney’s fee award. The party contended it satisfied the statutory deadline for service by virtue of email delivery.
As it argued, Federal Rule of Civil Procedure allows service “by other electronic means that the person consented to in writing.” Consent, according to the movant, was found in American Arbitration Association Construction Rule 44, entititled “Service of Notice,” which provided as follows:
(a) Any papers, notices, or process necessary or proper for the initiation or continuation of an arbitration under these rules; for any court action in connection therewith; or for the entry of judgment on any award made under these rules may be served on a party by mail addressed to the party or its representative at the last known address or by personal service, in or outside the state where the arbitration is to be held, provided that reasonable opportunity to be heard with regard thereto has been granted to the party.
(b) The AAA, the arbitrator and the parties may also use overnight delivery, electronic fax transmission (fax), or electronic mail (email) to give the notices required by these rules. Where all parties and the arbitrator agree, notices may be transmitted by other methods of communication.
Affirming the lower court, the Eleventh Circuit, however, held this language did not authorize the email service of the motion to vacate. As the Court explained, “[s]ubsection (a) of the Rule provides for service by mail or personal service for the paper, notices, or process it covers. It does not provide for service by email. Subsection (b) does provide for service by email, but only for service of ‘the notices required by these rules,’ meaning the AAA Construction Rules. Notice of a motion requesting a court to vacate an arbitration award is nowhere required or provided for in the AAA Construction Rules.”
Thus, as the Eleventh Circuit concluded, “Rule 5(b)(2)(E) of the Federal Rules of Civil Procedure does provide for service by email, but only with express written consent, of which there is none in this case. The district court was correct to hold that DRT did not serve in a proper and timely way notice of its motion to vacate and, as a result, that motion was due to be denied and the arbitration award confirmed.”
This article by Frank Silvestri of Verrill adds to the interest surrounding the U.S. Supreme Court’s grant of certiorari in Servotronics, Inc. v. Rolls-Royce PLC, by positing that Justice Alito’s failure to participate in the cert decision may signal his future recusal on the merits, giving rise to the prospect that the Court will split 4-4 and leave undecided “the question of whether a foreign private arbitration panel is a ‘foreign or international tribunal’ for purposes of 28 U.S.C. § 1782.”