Scott Hefner of Butler Weihmuller Katz Craig LLP offers his assessment of the North Carolina Court of Appeals decision in Mitchell v. Boswell, No. COA19-1077 (N.C. Ct. App. Nov. 3, 2020, in which the court determined that a memorandum of settlement signed by the parties’ attorneys following an ostensibly successful virtual mediation did not serve to satisfy the statute of frauds.

In this article published in JD Supra, Attorney Hefner explains that “[t]he Mitchell opinion serves as a cautionary tale during this time when most mediations are remote. Counsel must make arrangements with their clients and opposing counsel to ensure that all parties have the capability to print, sign, and return an executed copy of the agreement to ensure its enforceability. To facilitate execution, the parties should consider adding provisions to the agreement that allow it to be signed in counterpart or electronically and permitting electronic or facsimile copies to be deemed originals.” 

This article, by Anthony Smith and James Hughes of Beale & Co., available at Lexology, discussing the United Kingdom Supreme Court decision in Halliburton Company v. Chubb Bermuda Insurance Ltd., “provides important guidance for arbitrators on the duty of impartiality and their disclosure obligations in the context of international arbitrations.”

The New Jersey Appellate Division has issued an opinion which provides exceptionally good guidance regarding the court’s role in determining whether parties entered into an enforceable arbitration agreement. In Knight v. Vivint Solar Developer, LLC, the Appellate Division remanded to the trial court with an admonition that, while issues regarding the scope of an arbitration agreement may be for the arbitrator, the court is required to determine whether the parties contracted. Where there are legitimate factual disputes, the court must “resolve[ ] the issues of fact pertaining to the formation of the arbitration provision, and determine[ ] the parties agreed to arbitrate their claims.”

The opinion also is insightful in its discussion of the factual issues concerning contract formation, and serves to educate attorneys on the importance of thoroughly addressing such factual matters.

Muhammed Faridi and Peter Shakro of Patterson Belknap Webb & Tyler LLP authored this article in JD Supra, discussing the decision in Fava v. Morgan Stanley Smith Barney, Inc., 2020 N.Y. Slip Op. 33358(U) (N.Y. Sup. Ct. Oct. 9, 2020). As the authors explain, “[t]he opinion addresses whether a party who objects to an arbitration panel’s jurisdiction but participates in arbitration may vacate an arbitral award on the ground that the arbitrators exceeded the scope of their authority.”

In Croasmun v. Adtalem Global Education, Inc., an Illinois District Court addressed claims brought by former students of DeVry University (renamed Adtalem) , who are seeking to recover in arbitration damages arising our of claims of consumer fraud and breach of contract. Their agreements with DeVry required arbitration before the American Arbitration Association, but counsel for the parties entered into a stipulation that, among other things, modified the arbitration tribunal from AAA to JAMS, and provided that the university owner would pay the costs of arbitration.

The students’ counsel–who apparently represents 300 individuals with claims–sought to require the university to proceed contemporaneously with all claims, which would require it to advance $450,000 in filing fees. The university refused, repudiating the stipulation.

Eight of the students filed with the court a motion to compel arbitration in accordance with the stipulation. The court determined, in the first instance, that the issue of fees is one for the arbitrator to decide, and thus denied the motion to compel. As to the students’ argument that they could be left without a forum if the university failed to pay, the court explained as follows:

“Petitioners assert that Adtalem’s refusal to pay the filing fees blocks the door to the arbitrator and thus is a breach of the agreement to arbitrate. So far, there is no indication that JAMS will not resolve the fees issue if asked. If, however, JAMS declines to take jurisdiction without payment of its fees, petitioners should not face checkmate. Rather, the parties may return to this court for resolution of the meaning of the Stipulation.”

Samura v. Savaseniorcare Administrative Services, LLC presented a Maryland District Court with the issue of whether a lawsuit by a former employee was required to be arbitrated. The court, reviewing an Employment Dispute Resolution Program Agreement, concluded that arbitration was required.

However, the court turned the tables on the employer, who in addition to seeking an order to compel arbitration, sought to recover attorneys’ fees from the plaintiff, claiming that his challenge to the EDR Agreement was frivolous. The court expressed displeasure that the company, for an extended period of time, had failed to meaningfully respond to the former employee’s attempt to avail himself of the arbitration program. As the court explained,

“Plaintiff also details how his attempts to progress through the steps of the EDR Program, starting all the way back in September of 2019, have been stymied at very turn. The EDR Agreement specifies that employees generally must progress through its four-step process in order before reaching Step 4 (Arbitration). See ECF 9-2 at 11, 17 (stating that
employees can only proceed directly to arbitration at ‘the sole discretion of the EDR
Administrator’). Yet Plaintiff was unable to engage in Steps 1 (Open Door) or 2 (Facilitation) because company administrators and the HR Department never responded to his numerous outreach attempts.”

Against this factual background, the court, not only rejected the employer’s request for attorneys’ fees, but held that the employer’s “own motion for attorneys’ fees toes the line of frivolity.” As the court explained,

“Defendants sought attorneys’ fees ‘as a sanction for Plaintiff’s lack of justification for his
refusal to arbitrate, ‘… while simultaneously failing to provide Plaintiff with the ‘required arbitration documents’ or otherwise to respond to Plaintiff’s numerous attempts to engage in the EDR Program over the course of the past year. Even the filing of the lawsuit did not trigger Defendants to respond by engaging in the EDR process with Plaintiff. Indeed, it was only after the Court scheduled a hearing explicitly to learn ‘what steps defendants have taken to advance plaintiff’s claims through the EDR program,’… that Defendants provided Plaintiff with copies of the documentation he needed to invoke mediation or arbitration. To seek sanctions for refusing to arbitrate-after Plaintiff attempted for more than a year to engage in the EDR process to no avail-while simultaneously failing to provide Plaintiff with the necessary EDR paperwork until after filing the motion for sanctions and receiving a request from the presiding judge, appears on its face to be the very definition of frivolous.”

Accordingly, the court determined that, sua sponte, it would consider “whether sanctions should be imposed against Defendants for their conduct. Defendants will be ordered to show cause, under Federal Rule of Civil Procedure 11(c)(3), as to why their pursuit of sanctions for Plaintiff’s alleged ‘refusal to arbitrate’ is not, itself, frivolous and worthy of sanctions.”

In Solomon v. Carite Corporate LLC, the Sixth Circuit overruled the District Court’s denial of summary judgment sought be an employer contending that a former employee’s claims against it and a co-employee were subject to arbitration. In addition to the appellate court finding the arbitration agreement was broad enough to encompass the claims at issue, the court found no triable issue presented by plaintiff’s factual assertions that she was told that “if she didn’t sign, she would be terminated and that, at the time he asked her to sign it, she had very little time to review the agreement because she was busy with her daily work duties.” The court noted that plaintiff “admits, however, that she read through the document for five to ten minutes before signing it, that she possesses some post-secondary education, and that she had experience reviewing car-sales contacts, but she says that she did not understand the arbitration agreement or have the opportunity to consult a lawyer.”

The court held that plaintiff’s factual assertions, even if proven true, failed to meet the legal requirements of coercion, incapacity, lack of mutuality, or knowing waiver.

The Ninth Circuit’s decision in Reichert v. Rapid Investments, Inc. provides a reminder that the enforceability of an arbitration provision requires the same factual analysis applicable to contracts in general. As discussed in this article by Benjamin Stearns of Carlton Fields, published in JD Supra, the court, applying Washington state law, held that two individuals signing a contract with the same arbitration provision may find themselves in different situations regarding arbitrability based on factual circumstances going to the issue of whether there indeed was assent to the agreement.

Contracting parties agreeing that disputes should be submitted to arbitration constitutes only part of the issue for negotiation. Prudent contracting also requires the parties to determine which arbitration tribunal shall administer the proceeding. Rules can vary, with meaningful impact on the course of a potential arbitration.

This article, by Risteard de Paor of Dentons, published in JD Supra, discusses differences in the rules of three leading international tribunals.

In Home Inspections of VA and WV, LLC v. Hardin, the West Virginia Supreme Court reversed a lower court’s determination that a home inspection agreement did not require arbitration of a dispute with a property owner.

The agreement provided as follows:

ARBITRATION: Any dispute concerning the interpretation of
this agreement or arising from this inspection report, except for
inspection fee payment, shall be resolved informally between
the parties.

The court found this language to be an unambiguous statement of the parties’ intent to arbitrate, even though the court “concede[d] that the arbitration provision could certainly have been more artfully drafted. However, this simple fact does not render it ambiguous or unenforceable.”