David Reif has the following interesting post in his November 13, 2020 “ADR Highlights”:

“Fintech Fund, F.L.P. v. Horne, 2020 U.S. App. LEXIS 35418 (5th Cir.) (Nov. 10, 2020) addresses how a court may reconcile potentially dueling arbitration and forum selection clauses. Fintech licensed its biometric technology to its U.K. affiliate, CrossVerify. Horne, the defendant here, was the former CEO of CrossVerify. Fintech alleges that Horne used his position to download confidential information and sued him under various trade secret statutes. While the issue before the Court of Appeals was whether the litigation should be dismissed either for lack of personal jurisdiction or under the doctrine of forum non conveniens, the court’s analysis required reconciliation of three portions of the parties’ contract. In Section 12(A) thereof, the parties agreed to a broad arbitration clause, covering essentially all disputes “except for any claims against [Fintech].” In Section 14, they agreed that “each party irrevocably agrees that the courts of England and Wales shall have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement or its subject matter or formation (including non-contractual disputes or claims), except as to claims against [Fintech].” In Section 12(D), they agreed that, if “the provisions for arbitration are invalidated or deemed unenforceable,” the case would be tried in Houston. Fintech argued that the conflict between Sections 12(A) and 14 meant that the two canceled each other out; that Section 14(D), therefore, became operative; and that Houston must be the venue for trial.

“The Court of Appeals, Owen, C.J., for a panel including Circuit Judges Jones and Stewart, applied English law, which the parties chose under their choice of laws provision. It interprets that law to require courts to “make every attempt to harmonize contractual provisions and . . . determine that two provisions are irreconcilable only as a ‘last resort.’” The court reconciles Section 12(A) and 14 by holding that the latter is only designed to provide a backup to deal with supervisory issues, such as filling a vacancy on the arbitral tribunal if there is no other provision for doing so or removing an arbitrator for misconduct. Thus, the court finds that there is no conflict between those provisions. As a result, both sections remain enforceable and there is no need to exercise the “rescue” position provided by Section 12(D), automatically placing the case in Texas. The Court of Appeals affirms the District Court’s dismissal of the case in favor of the Courts of England and Wales.

“In a routine analysis, the court goes on to hold that the dispute between the parties is within the scope of the arbitration clause.

“While the case applies English law, the underlying principle applies in the U.S.  Where a contract appears to have conflicting terms, a court must try to reconcile the two.  In the context of arbitration, Fintech opines, this is done by limiting the scope of disputes invested in the judiciary, leaving the heavy lifting to the arbitration.  Thus, both provisions serve a purpose.”

For those addressing the issue of waiver of a contractual right to arbitrate, the U.S. District Court for the Western District of Texas’s decision in Spark Connected, LLC v. Semtech Corporation is worth a read. The court’s thorough decision addresses all the major touchstones: pleadings that fail to reference arbitration, a seven month delay, the filing of dispositive motions, institution of discovery, and prejudice.

While any of these issues could have derailed the moving party’s effort to pursue arbitration, the court analyzed each of them in the factual context in which they arose, determining that no waiver had occurred.

Shepard Davidson of Burns & Levinson LLP discusses the Massachusetts Court of Appeals decision in Boursiquot v. United Healthcare Services of Delaware, in this article, available through Lexology, which concludes with an admonition that “if in-house counsel want to have arbitration for reasons of confidentiality, it is critical to include in their arbitration clauses plain text stating: ‘All matters concerning the arbitrability of disputes must be submitted to the arbitrator and may not be decided in any other forum.'” 

“You represent a business owner who ends up arbitrating a dispute with a supplier.  After spending tons of time and money preparing for the 5-day evidentiary hearing, you look up to hear snoring from the arbitrator – he fell asleep for part of the proceedings!  Surely you’ll be able to get the result vacated by the circuit court on appeal, right?  Well, no – not if you slept on your objection by failing to first specifically raise it with the arbitrator…”

Thus begins this article by Gregory Heinen of Foley & Larner LLP, published by The National Law Review, discussing the Wisconsin Court of Appeals’ decision in Loren Imhoff Homebuilder, Inc. v. Lisa Taylor, et al., No. 2019AP2205, 2020 WL 6495102 (Wis. Ct. App. Nov. 5, 2020).

A U.S. District Court in Colorado determined it would be appropriate to permit the plaintiff to pursue discovery prior to the determination of defendant’s motion to dismiss the case in favor of arbitration. In The i4 Group Consulting, LLC v. Scaled Agile, Inc., No. 20-cv-01855-DDD-NRN (D.Colo.)(November 9, 2020) plaintiff acknowledged the existence of a signed arbitration agreement, but argued that it should not be enforced given the high costs of the arbitration fees.

The court held that judicial discovery was not appropriate until such time as the court determined whether the case should be arbitrated.

In Brody v. Culturesource, No. 20-11663 (D.Mich.) (November 9, 2020), a U.S. District Court refused to compel an employee to arbitrate claims against her former employer, finding that an electronically signed employment application did not constitute an enforceable waiver of her right to a judicial forum. According to the court:

“The application was generated by CoStaff HR Services, which provides human resources
services to CultureSource. CoStaff sent Brody an email, which contained a link to the application and a PIN number unique to her. Brody filled in the boxes of the application with her biographical information, including her employment history and educational background. Below the “education” section was a box containing several paragraphs of “Terms and Conditions, ” including a paragraph entitled “Arbitration and Enforcement.” This paragraph reads as follows: “It is agreed that arbitration shall be the mechanism for bringing a legal claim against the Company and/or the Client for matters relating to employment discipline and/or termination. Arbitration must be commenced within one (1) year of the date the claim arises.” Below the “Terms and Conditions” box is the following statement: “I have read each section of the Agreement and I accept the terms and conditions described.” In order to submit the application, Brody clicked a “Validate” button that appeared at the end. This process created a digital signature, with the date and IP address. Brody attests, however, that she never saw the “Terms and Conditions” on her computer screen when she filled out the application, nor did she receive a hard copy.“

In this article available through JD Supra, Victoria Clark of Bryan Cave Leighton Paisner posits as follows:

“The governing law of an arbitration clause is important because it is law that is applied to determine any disputes over the validity, scope or interpretation of the agreement to arbitrate.   For example, if there is a dispute as to whether a particular claim falls within the scope of an arbitration clause, that dispute will be resolved by applying the law governing the arbitration agreement.“

JD Supra has published this article by Eric Johnson of Hudson Cook, LLP discussing the Oklahoma Supreme Court’s decision in Sutton v. David Stanley Chevrolet, Inc., 2020 Okla. LEXIS 94 (Okla. October 13, 2020). The article sets the stage as follows:

“The buyer and a dealership signed a purchase agreement containing a dispute resolution clause (“DRC”). The DRC, in the middle of the purchase agreement, was the only provision in red ink, was in a smaller font and called for the buyer to pay one-half of the arbitrator’s fee. The heading “Dispute Resolution Clause” was in all capital letters.”

By a 4-2 decision, the West Virginia Supreme Court held in Dan Ryan Builders, Inc. v. Williams that a real estate developer waived its right to compel arbitration of claims brought by purchasers of lots and homes alleging “development-wide soil movement, which caused damage to respondents’ properties.” Relying on stipulations signed by the parties, the lower court in 2012 denied the developer’s motion to compel arbitration, under the following conditions:

petitioners would not incur any negative consequences, such as waiver or estoppel, of their “contention that the case should be ordered to arbitration[]” by their participation in discovery during the appeal process. As the Agreed Order reflects, “participation by the defendants in discovery and other pretrial phases of the case in this Court will not preclude the defendants from seeking appellate review of the Court’s arbitration ruling . . . .”

The litigation continued for six years, at which time the developer filed a renewed motion to compel arbitration.

The majority held that the renewed motion was appropriately denied by the lower court based on waiver, while an emphatic dissent argued that, under the circumstances before it, “petitioners never intentionally relinquished their right to arbitration or appeal, regardless of how many depositions they took, how many discovery requests they served, or how many pleadings and motions they filed.”

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In Burgess v. Johnson, the Tenth Circuit affirmed a lower court’s decison refusing to impose upon trust beneficiaries an obligation to arbitrate claims that the trustee wrongfully took trust assets and spent trust money. The trustee argued that he could compel arbitration because the trust instrument authorized the trustee “[t]o compromise, contest, submit to arbitration or settle all claims by or against, and all obligations of, the Trust estate or the Trustees[.]”

Rejecting this argument, the Tenth Circuit held that “the Arbitration Provision only allows the Trustee to agree to resolve disputes through arbitration and does not empower him to compel others—even trust beneficiaries—to submit their disputes to arbitration. The Trustee cannot invoke the Arbitration Provision to compel Plaintiffs to arbitrate this dispute.”