Latiqua Liles of Genova Burns has this article in JD Supra, discussing the New Jersey Appellate Division’s decision in Hampton v. ADT, LLC , which overruled a trial court order compelling a former employee to arbitrate claims against his former employer’s predecessor. As the article explains, the Appellate Division held that the lower court erred in sending the case to arbitration without determining “unresolved controlling facts,” including those needed to ascertain whether the successor employee was the assignee of an enforceable arbitration agreement signed by the employee but not his employer.

Michael Holecek of Gibson Dunn has authored this Client Alert, discussing various techniques that companies are incorporating into their ADR provisions in response to the mass arbitration strategies that have evolved in response to class-action waivers found in arbitration agreements.

A California appeals court has affirmed the denial of a petition to compel arbitration in a dispute between an elderly individual and the residential care facility where she lived. The agreement between the parties provided for the arbitration of claims to be “administered by the National Arbitration Forum under the Code of Procedure then in effect.”

The lower court found “the arbitration provision was unenforceable because the National Arbitration Forum (NAF) was no longer in the business of providing arbitration services and the parties’ selection of NAF was integral to the parties’ agreement.” The appellate court agreed.

As the court explained in Miller v. MBK Senior Living, LLC, under California law “an agreement to arbitrate before a particular forum is as integral a term of a contract as any other, which courts must enforce…if an arbitration agreement designates an exclusive arbitral forum…and arbitration in that forum is not possible, courts may not compel arbitration in an alternate forum by appointing substitute arbitrators.”

According to the court, “the NAF arbitral forum and procedure terms selected by defendants were integral to the arbitration provision of the assisted living residence and services agreement. That NAF is no longer available to serve as arbitral forum renders the arbitration provision unenforceable.”

The takeaway for contract drafters: if there is any doubt as to the ongoing viability of a designated arbitration tribunal, include language enabling the parties or the court to select an alternative provider if the need arises.

In Off-Spec Solutions, LLC v. Transportation Investors, LLC, the Idaho Supreme Court determined that commercial parties contractual agreement to arbitrate disputes in California was unenforceable in light of an Idaho statute rendering void contract provisions that attempt to prevent a party from enforcing its rights in Idaho tribunals. Confronting the contract’s California choice of law provision, the Idaho Supreme Court purported to apply California law, nonetheless holding that, notwithstanding the contract’s designation of California for the arbitration, a California court applying California law would defer to the Idaho statute as controlling.

The takeaway seems to be that contracting with an Idaho party carries an inherent possibility that disputes will need to be arbitrated (or litigated) there, regardless of how emphatically the parties express a contractual intent for a different venue.

My guess is that most practitioners would be surprised to think that failure to assert arbitration as an affirmative defense in an answer would constitute a waiver of the right to arbitrate. However, an Oklahoma intermediate appeals court concluded that it did, resulting in an appeal to the Oklahoma Supreme Court. In Howell’s Well Service, Inc. v. Focus Group Advisors, LLC, the Oklahoma Supreme Court, reversed the appellate court’s decision holding that, per the law of Oklahoma and its comparable federal counterpart, arbitration rights are appropriately raised by separate motion and need not be asserted as an affirmative defense in a party’s answer to a complaint.

John Lewis of Baker Hostetler has this article in Lexology, discussing the Wisconsin District Court’s decision in O’Bryan v. Pember Companies, Inc., , in which the court held that a provision in a 48 page employee handbook requiring the submission of all disputes to arbitration was ineffectual due to an employee acknowledgement form on its last page, which provided:

“Unless I have an individual written employment contract, my employment relationship with Pember . . . is at will.***

“I acknowledge that this handbook is neither a contract of employment nor a legal document.”

As Mr. Lewis points out, the decision emphasizes that “[h]aving an arbitration provision in a handbook with a broad contract disclaimer may prevent its enforcement.”

In WFP Securities, Inc. v. Davis, a California appellate court was confronted with an arbitration agreement between an individual and her former investment advisors that provided as follows:

“I agree that all controversies which may arise between us concerning any transaction, the construction, performance or breach of this or any other agreement between us, whether entered into prior, on or subsequent to the date hereof, or any other matter, shall be determined by arbitration in accordance with the rules of the National Association of Securities Dealers, Inc. then in effect. “

Having lost an arbitration against the advisors “to recover losses allegedly incurred as a result of their bad investment advice,” the investor responded to the advisors’ judicial efforts to enforce and collect on the arbitration award by asking the court to compel arbitration of new claims she wished to assert. As the appellate court recounted the investor’s description of these claims, they were for “civil conspiracy to commit fraud, defamation, fraud, intentional infliction of emotional distress, invasion of privacy, declaratory relief, breach of contract, and conspiracy to cause economic harm.”

In overruling the lower court’s denial of the investor’s request to arbitrate, the appellate court held that

“The arbitration agreement here is the broadest of broad. It provides for arbitration of controversies between the parties concerning (1) ‘any transaction’; (2) the construction,
performance, or breach of (a) the agreement or (b) any other agreement between the parties (regardless of when the parties entered into it); and (3) ‘any other matter.’ And (3) is a whopper:
It provides for arbitration of a controversy between the parties concerning any matter at all, regardless of whether, as some agreements limit the scope of the arbitration provision, the
claims arise out of or relate to the agreement. (3) easily includes the tort claims Davis alleges she has against [the advisors]...

“The phrase appears at the end of the clause and is not modified by any subsequent language limiting its scope, such as “relating to the agreement” or “relating to the investment” or even ‘having something to do with anything financial.’”

In Sunnova Energy Corp v. Spruce Lending, Inc., the Texas Court of Appeals affirmed a lower court’s denial of a party’s motion to compel arbitration, finding that the movant had failed to present the court with a sufficient documentary record to establish that the arbitrability decision was to be made by the arbitrator. As the court explained, the agreements attached to the “motion to compel arbitration were ‘redacted for confidentiality purposes’ and included only the ‘dispute resolution clauses.’ … [W]e cannot look at the arbitration portion of the agreements in a vacuum.”

Since the movant failed to submit the agreements to the court in their entirety, “neither this court nor the trial court could determine whether the parties intended to arbitrate arbitrability…” Accordingly, the movant failed to meet its burden of proving “it was entitled to an order compelling arbitration.”

In two decisions issued this week, the Minnesota Court of Appeals refused invitations to overrule arbitrators’ decisions. In Netter v. Raisch, the court emphatically rejected the proposition that an arbitrator exceeds his powers if he wrongly interprets the law. As the court held,

“While we do not necessarily see any error in the arbitrator’s interpretation of the declaration or application of the law, we note that, even if we accepted Raisch’s argument that the arbitrator erred in these respects, the arbitrator would not have exceeded his powers. In other words, misapplication of the law is not a basis to vacate an arbitrator’s award and an appellate court ‘will not overturn an award merely because [it] may disagree with the arbitrators’ decision on the merits.’”

In Bennett and Koch Construction, LLC v. Jones, the trial court vacated an arbitrator’s decision that refused to award attorneys’ fees, determining that the arbitrator exceeded his powers in failing to follow a contractual provision that entitled the prevailing party to recover fees. The Court of Appeals reversed, holding that the lower court erred in overriding the arbitrator’s decision:

“The issue of attorney fees for the prevailing party was subject to arbitration because it was
included in the contract. Therefore, the arbitrator’s attorney-fees decision was also not subject to de novo review by either the district court or our court and must be reinstated.”

The recent California appellate decision in Alper v. Rotella begins by noting that “four business partners had a dispute that ultimately led to a nine-day arbitration hearing. During the hearing, the arbitrator openly took pain medications. After the arbitrator issued a final ruling, the two losing partners filed a petition in the trial court to vacate the arbitration award. They alleged—for the first time—that the arbitrator was ‘unable to properly perceive the evidence or . . . unable to properly conduct the proceeding.’”

With evidence that was, at best, inconclusive as to any impairment–the victors, of course, asserted that “[the arbitrator] interjected with pointed questions, paid full attention, heard and ruled on motions and objections. He held numerous proceedings before, during and after the arbitration, and considered briefings and argument at each stage of the process,” and even the losing party submitted a letter from a physician asserting a professional opinion that “a dose of Percocet, on its own, does not generate sufficient impairment immediately after taking it, in the experienced user”–the court refused to set aside the award.

The court focused on the loser’s full awareness that the arbitrator admittedly and openly was taking pain killers due to a recent injury, and raised no issue of alleged impairment until after receiving an adverse result. Indeed, the victor’s counsel asserted in a declaration that “I spoke to [plaintiffs’] counsel frequently during breaks in the arbitration, and before and after the arbitration itself. We discussed a myriad of topics and issues, ranging from case related to where to have dinner. Never once did Plaintiffs, Mr. Bailey or Mr. Hargan come close to express any concern or observation to me regarding [the arbitrator’s] competency or ability to be impartial. Nor did I ever observe Plaintiffs or their counsel express concern to [the arbitrator] directly or ask him if he was okay.”