The Southeast Texas Record has this discussion of an interesting decision by the Texas Court of Appeals in Lupe Holdings LP v. Sanchez. The lower court had denied a motion to compel arbitration, finding that the claimant initiated the proceeding after the expiration of a statute of limitations ostensibly incorporated into the parties’ agreement. With a detailed analysis of applicable law and the contract provision, the appellate court concluded that the timeliness argument was not sufficiently clear that the court should deprive the claimant of presenting the issue to the arbitrator. Accordingly, the court reversed the lower court’s decision.
“It might come as no surprise that many settlors and advisors seek to include [an arbitration] clause in their trusts…. Despite [the] potential benefits, the question remains whether such a clause can be enforced against a beneficiary or a trustee, when such beneficiary or trustee wants to proceed in court.” So begins this JD Supra article by Michael Barker, Hunter Glenn, Jodie Herrmann Lawson and Stephen Murphy of McGuire Woods, discussing the Virginia Supreme Court’s recent decision in Boyle v. Anderson, in which the court, interpreting the Federal Arbitration Act and its Virginia statutory counterpart, held that insofar as a trust is not a contract, the settlor of the trust cannot require that trustees and beneficiaries submit disputes to arbitration and the inclusion of an arbitration provision.
Robert Fountain of Carrington Coleman has this interesting article, available at JD Supra, discussing the Texas appellate opinion in Bluestone Resources, Inc. v. First National Capital, LLC.
As the article notes, the decision raises interesting issues about whether and when a court may impose statutory interest on an award when the arbitrators fail to provide for interest.
Attorney Robert Herskovits has authored this interesting article, available at JD Supra, discussing the intervention of the Alabama Securities Commission (“ASC”) in a Florida action brought by a registered financial advisor to confirm an arbitration award that expunged certain customer complaints from his record. According to the article, the ASC has stated its intention to vacate the award on grounds that the arbitrator acted with corruption, fraud, partiality, refused to hear evidence and exceeded his powers.
The article suggests that the ASC’s concerns go beyond the specific case and encompass a wholesale attack on the expungement process.
Franklin McRoberts authored this article, available at JD Supra, discussing in a business divorce context an unsuccessful attempt by one of the owners to bring nonparties into a contractually compelled arbitration. As the article explains, the New York court in Fritch v. Bron held that, insofar as the company held itself out as operating under a corporate structure, the plaintiff shareholder could not argue that there were “silent partners” who should be subject to arbitration under the corporate documents.
Two articles discussing two cases from California.
In Berman v. Freedom Financial Network LLC, discussed in this Lexology article by Om Alladi at Proskauer Rose, the Ninth Circuit held that an arbitration provision contained in websites was not sufficiently conspicuous to make it enforceable against consumers who ostensibly agreed to it by clicking on a “Continue” button.
On the other hand, Buckley has posted this article, also in Lexology, discussing a California state appellate decision in B.D. v. Blizzard Entertainment, Inc. holding that the “terms of an arbitration agreement contained in a defendant video game company’s online license agreement” were sufficiently conspicuous to make them enforceable.
The takeaway–or the unifying thread, such as it is–is that these cases are fact specific, and perhaps subject to a court’s view as to whether the glass is half full or half empty. Those seeking to provide for enforceable arbitration provisions should err in taking necessary steps to overcome any claims that a reasonable site visitor would not understand they were agreeing to arbitrate disputes.
In Park Plus, Inc. v. Palisades of Towson, LLC, the Maryland Court of Appeals held that the three year statutory period for suing for breach of contract did not bar the assertion of the contract claim in an arbitration proceeding contemplated by the parties’ agreement. As the court explained,
“Statutes of limitations have historically been considered procedural, not substantive defenses, and are generally understood to extinguish the remedy for enforcing a right, not the right itself… So, if Park Plus and Palisades had not included the arbitration provision in the contract, then Palisades could have filed a complaint seeking monetary damages in the circuit court instead of a petition to compel arbitration. In that scenario, the statute of limitations could have extinguished the remedy of a circuit court action, resulting in its dismissal.
“But because the parties did include an arbitration provision and given the limited nature of our role, the only substantive right we are concerned with here is the contractual right to arbitrate, not Palisades’ contractual right to a functioning parking system. Based on our traditional understanding of statutes of limitations, the expiration of the statute of limitations did not extinguish Palisades’ right to arbitrate.“
The court further held that compelling arbitration was consistent with the parties agreement:
When Park Plus and Palisades executed the contract with a binding arbitration clause, they agreed to the limitations imposed by Maryland law on the nature and scope of the court’s involvement over arbitrable disputes. As discussed above, when faced with a petition to compel arbitration, the court’s only function is to decide whether an agreement to arbitrate the dispute exists, and, if so, to enforce it with an order compelling arbitration. Also, [the statute of limitations] applies only to civil actions at law, therefore it does not apply to petitions to compel arbitration. Thus, our holding honors the parties’ agreement and applies Maryland law precisely as the General Assembly intended.
Brian Koosed, Whitney Smith, Kodey Haddox and Ashley Song of K&L Kates have this article in The National Law Review, in which they discuss a “lingering problem” of courts that “will not enforce a contract between cannabis companies” based on their view that awarding relief under the agreements would endorse violating the federal Controlled Substances Act. The authors explain that a way out of the conundrum is for the parties to contractually provide for arbitration of their disputes, providing a checklist of terms that “a carefully-crafted arbitration agreement and thoughtful selection of which laws govern the contract” will maximize the likelihood of enforceability.
Joseph A. Apatov , Stephanie Hand-Cannane , James W. Sandy , Chase Stoecker and Alyssa Weiss of McGlinchey Stafford have this article, available at Mondaq, discussing the Ohio Court of Appeals recent decision in Franklin Dissolution L.P. v. Athenian Fund Management, Inc. As the article explains, the court held that “a party does not waive enforcement of an agreement’s arbitration provisions simply because that agreement has been terminated.” Accordingly, an investment advisor seeking payment for fees was required to take its claim to arbitration, even though the underlying agreement had been terminated by the investment fund.
The New Jersey appellate division recently invalidated an company’s attempt to compel arbitration of claims brought by a former employee. In Guc v. Raymours Furniture Company, Inc., the court was presented with a contractual provision that required the employee to commence an arbitration of her employment related claims within 180 days. Because the contractual time limit was shorter than that provided by New Jersey law, the court, relying on judicial precedent, found it to be unenforceable.
Moreover, the court rejected the company’s argument that the arbitration should nonetheless proceed, with the time limitation being severed from the contract. Reviewing the agreement in its entirety, the court held that the company “chose to link and intertwine the time-limitation concept with the agreement to arbitrate. To sever the time-limitation provisions would require a rewriting of the contract…” Accordingly, the court refused to compel arbitration, leaving the company to judicially defend the employee’s claims.