Justia Arbitration & Mediation Opinion Summaries

Donte Jackson received a $30,000 loan from WebBank, which was later sold to Velocity Investments, LLC. After Jackson defaulted on the loan, Velocity, represented by the law firm Protas, Spivok & Collins LLC (PSC), sued Jackson in Maryland state court to collect the debt. Velocity eventually dismissed the state court suit with prejudice. Subsequently, Jackson brought a class action lawsuit against both Velocity and PSC, alleging that their practice of suing on time-barred debts was unlawful.In the United States District Court for the District of Maryland, both Velocity and PSC moved to compel arbitration based on an arbitration clause in Jackson’s original promissory note. The district court found that Velocity, as a subsequent holder of the note, was a party to the arbitration agreement but had waived its right to arbitrate by filing suit in state court. The court ruled that PSC was not a party to the agreement, as it did not fit the contractual definition of an entity “servicing” the note, which the court interpreted in accordance with Maryland law. Only PSC appealed the denial of its motion to compel arbitration.The United States Court of Appeals for the Fourth Circuit reviewed the district court’s ruling de novo. The Fourth Circuit held that PSC, as the law firm representing Velocity, was not a party to the arbitration agreement because it did not “service” the note in the relevant contractual sense, which involves collecting and maintaining a payment schedule for the loan. The court concluded that the arbitration agreement covered only creditors and loan servicers, not lawyers. The Fourth Circuit affirmed the district court’s denial of PSC’s motion to compel arbitration. View "Jackson v. Protas, Spivok & Collins LLC" on Justia Law

A Chilean company contracted with an Italian construction firm to design and build a hospital in Santiago, Chile, with disputes to be resolved by arbitration in Chile. The Italian firm later underwent a restructuring proceeding in Italy, during which it spun off its operating business and merged into another Italian company, Webuild S.p.A., which acquired most of its assets. After the contract was terminated due to project delays, arbitration in Chile resulted in an award in favor of the Chilean company and against the original Italian firm. The Chilean courts reduced but otherwise affirmed the arbitral award, and further appeal was denied.Seeking to enforce the arbitral award in the United States, the Chilean company brought an action in the United States District Court for the District of Delaware against Webuild, claiming it was the successor in interest to the award debtor. The company asked the District Court to assert quasi in rem jurisdiction by attaching Webuild’s shares in a Delaware subsidiary. The District Court granted Webuild’s motion to dismiss for lack of personal jurisdiction, holding that there were insufficient contacts between the forum, Webuild, and the underlying controversy. The District Court also held that, even if an exception to the minimum contacts requirement applied, it would not permit jurisdiction here because no court had yet determined that Webuild was indeed liable for the arbitral debt.On appeal, the United States Court of Appeals for the Third Circuit held that, under the Supreme Court’s decision in Shaffer v. Heitner, a court may exercise traditional quasi in rem jurisdiction to enforce a foreign arbitral award in an action to collect on an already adjudicated debt, without requiring minimum contacts. The appellate court vacated the District Court’s dismissal and remanded for a determination of whether Webuild is the successor in interest to the original award debtor. View "Sociedad Concesionaria Metropolitana de Salud S.A. v. Webuild S.P.A" on Justia Law

A correctional officer who also served as a union representative at a state prison was disciplined after posting materials related to her own prior disciplinary action on a union bulletin board. The materials, which included the surnames of other officers, were visible to inmate workers and were perceived by prison management as potentially fostering a “code of silence” among correctional staff. The officer was suspended for 60 workdays for this posting. She appealed the discipline to the State Personnel Board (SPB), arguing her posting was protected speech regarding the Department’s disciplinary practices. Separately, her union filed a grievance, claiming the suspension violated the memorandum of understanding (MOU) and the Ralph C. Dills Act, which prohibit retaliation for protected union activities.The SPB ultimately upheld the suspension, determining that the posting constituted inexcusable neglect of duty and failure of good behavior, and justified the imposed penalty. The question of whether the discipline was retaliatory under the Dills Act was reserved for arbitration. The arbitrator later found in favor of the union, concluding the Department had retaliated against the officer for protected union activity and failed to prove it would have imposed the same discipline absent that activity. The arbitrator ordered the Department to rescind the discipline and make the officer whole, including backpay.The California Court of Appeal, Third Appellate District, reviewed the trial court’s decision that had struck the arbitrator’s remedy of rescinding the discipline and making the officer whole. The appellate court held that the arbitrator did not exceed her powers by issuing this award and that no explicit public policy or constitutional provision barred the arbitrator’s remedial authority under the MOU and Dills Act. The court reversed the trial court’s judgment and directed entry of a new judgment confirming the arbitration award in its entirety. View "Dept. of Human Resources v. Cal. Correctional Peace Officers" on Justia Law

The case concerns an employee who worked at a Los Angeles hotel and was terminated in March 2020, allegedly due to COVID-19-related staffing issues. The employee sued the hotel and its affiliates in the United States District Court for the Southern District of New York, alleging federal and state law discrimination claims. However, before starting work, the employee had signed an arbitration agreement covering disputes related to employment or termination. The hotel moved to stay the court proceedings and compel arbitration under the Federal Arbitration Act (FAA), and the District Court stayed the case pending arbitration. Arbitration proceeded, resulting in an award against the employee on all claims, as well as sanctions for misconduct.After the arbitrator’s award, the hotel moved to confirm the award in the District Court under §9 of the FAA, while the employee sought to vacate it under §10. The employee argued that the District Court lacked jurisdiction to confirm or vacate the award because the post-arbitration motions did not independently satisfy the requirements for federal-question or diversity jurisdiction. The District Court disagreed, held that it retained jurisdiction, and confirmed the arbitral award. The United States Court of Appeals for the Second Circuit affirmed, distinguishing the case from Supreme Court precedent involving freestanding FAA motions, and holding that the District Court’s original jurisdiction over the employee’s federal claims extended to the post-arbitration proceedings.The Supreme Court of the United States affirmed the Second Circuit’s judgment. It held that when a federal court has original jurisdiction over claims and stays those claims pending arbitration under §3 of the FAA, the court retains jurisdiction to confirm or vacate the resulting arbitral award under §9 and §10. The Court reasoned that nothing in the FAA divests the court of jurisdiction over the original claims while arbitration is pending, and that post-arbitration motions are integral to the resolution of those stayed claims. View "Jules v. Andre Balazs Properties" on Justia Law

A resident of a skilled nursing facility signed an arbitration agreement upon admission. Twelve days later, the resident died. The resident’s husband, acting both individually and as executor of her estate, brought suit in Iowa District Court for Henry County against the nursing facility and several related entities, as well as additional healthcare providers. He alleged negligence, gross negligence, wrongful death, and dependent adult abuse. Nearly a year into the litigation, the nursing facility defendants moved to compel arbitration based on the agreement signed by the decedent.The Iowa District Court for Henry County granted the motion to compel arbitration. The court reasoned that, under the existing Iowa precedent, waiver of the right to arbitrate requires both conduct inconsistent with that right and prejudice to the opposing party—a two-part test established in prior Iowa Supreme Court cases. Applying this standard, the district court found limited prejudice to the plaintiff because discovery had not been extensive and the trial date was still far off. The plaintiff was granted interlocutory appeal.The Supreme Court of Iowa reviewed the case for correction of errors at law. The court determined that the Federal Arbitration Act (FAA) governed because the agreement involved interstate commerce, and that the FAA preempts Iowa's arbitration-specific waiver rule, which requires a showing of prejudice. Instead, the court held that the generally applicable contract law standard for waiver applies: the voluntary or intentional relinquishment of a known right. Applying this standard, the Supreme Court of Iowa concluded that the nursing facility had impliedly waived its contractual right to arbitration by participating in litigation and discovery for months after being aware of the arbitration agreement, and by delaying a motion to compel arbitration. The Supreme Court of Iowa reversed the district court’s order and remanded the case for further proceedings. View "Cole v. Southeast Iowa Orthopaedics and Sports Medicine" on Justia Law

A seaman was severely injured while working on an offshore supply vessel operated by his employer. Following his injury, the employer provided both mandatory and supplemental benefits, including housing and transportation. Six months after the incident, the employer’s executives presented the seaman with an agreement offering continued supplemental benefits in exchange for his commitment to arbitrate any future claims against the company. The agreement included a delegation clause stating that any disputes about the validity, interpretation, or application of the agreement would be resolved by an arbitrator. The seaman signed, acknowledging he had the opportunity to consult an attorney but later alleged he felt pressured and feared losing benefits if he did not sign.The seaman filed suit in the United States District Court for the Eastern District of Louisiana, alleging negligence and seeking a declaration that the agreement and its arbitration provisions were invalid due to fraud, duress, and his medical condition. The employer moved to compel arbitration and to stay the litigation, arguing that the delegation clause required an arbitrator to decide issues of enforceability. The district court denied the motion without prejudice and allowed limited discovery on the enforceability of the agreement, concluding it must decide if a valid arbitration agreement existed.On appeal, the United States Court of Appeals for the Fifth Circuit held that the district court erred by failing to enforce the delegation clause. The appellate court found the seaman’s arguments challenged the agreement as a whole, not the delegation clause specifically. Under Supreme Court precedent, such challenges must be resolved by an arbitrator when a valid delegation clause exists and is not directly challenged. The Fifth Circuit vacated the district court’s order and compelled arbitration, remanding for further proceedings consistent with this holding. View "Hill v. Jackson Offshore Holdings" on Justia Law

Robert Toothman was initially employed by Apex Life Sciences, LLC, a temporary employment agency, which placed him at Redwood Toxicology Laboratory, Inc. During his employment with Apex, Toothman signed an arbitration agreement that required him to arbitrate employment disputes with Apex and its defined affiliates, subsidiaries, and parent companies. In April 2018, Toothman’s employment with Apex ended, after which he was hired directly by Redwood and worked there until June 2022. Toothman and Redwood did not sign an arbitration agreement. Several months after leaving Redwood, Toothman filed a class action alleging Labor Code violations based solely on his direct employment with Redwood, not his prior period as an Apex employee.The Sonoma County Superior Court reviewed Redwood’s motion to compel arbitration and to dismiss the class claims. Redwood argued that it was either a party to the Apex arbitration agreement as an affiliate, a third-party beneficiary, or entitled to enforce the agreement under equitable estoppel. Redwood also claimed that Toothman’s class claims should be dismissed based on the arbitration agreement. The trial court denied Redwood’s motion, finding that Redwood was not a signatory to the arbitration agreement, was not an affiliate as defined by the agreement, and could not compel arbitration under any alternative theory.The California Court of Appeal, First Appellate District, Division Four, reviewed the trial court’s order de novo. It held that Redwood was not a party to the arbitration agreement and did not qualify as an affiliate or third-party beneficiary. The court further determined that Toothman’s claims were not sufficiently intertwined with the arbitration agreement to justify equitable estoppel. The appellate court affirmed the trial court’s order denying Redwood’s motion to compel arbitration and to dismiss the class claims. View "Toothman v. Redwood Toxicology Laboratory" on Justia Law

Roger Tejon subscribed to a video streaming service operated by Zeus Networks, LLC, through its online platform using an Apple device. To register, Tejon chose between an annual or monthly plan by clicking one of two large, red buttons on a “Choose your plan” page. Below these buttons, in small, gray text was a hyperlinked “Terms of Service,” which included a mandatory arbitration clause, but there was no requirement that Tejon click on this link to complete his subscription. Tejon later alleged that Zeus shared his viewing history and personally identifiable information with a social media company without his consent and sued Zeus for violating the Video Privacy Protection Act.Zeus moved to compel arbitration, arguing that Tejon had consented to the arbitration clause by signing up for an account. The United States District Court for the Southern District of Florida denied this motion. The district court found that the terms of service hyperlink was not conspicuous enough to put a reasonably prudent user on inquiry notice of the arbitration provision.The United States Court of Appeals for the Eleventh Circuit reviewed the district court’s denial de novo. The Eleventh Circuit held that the design of Zeus’s subscription page did not provide sufficient inquiry notice of the arbitration agreement to bind Tejon. The court explained that the hyperlink to the terms was small, in gray font, and located beneath prominent action buttons, making it easy to overlook. The court further noted that the page did not explicitly state that clicking the subscription button would bind the user to arbitration. The Eleventh Circuit affirmed the district court’s order denying the motion to compel arbitration. View "Tejon v. Zeus Networks, LLC" on Justia Law

An employee worked as a railcar repairman for a company that performs inspections and repairs on freight cars at a train yard. He was hired with an agreement that required all employment-related disputes to be resolved through arbitration and included a waiver of class and representative actions, except for certain claims that cannot be waived by law. After his employment ended, the employee sued for various wage and hour violations under California law, asserting claims on his own behalf and on behalf of a proposed class of other employees.The Superior Court of Los Angeles County reviewed the case after the employer moved to compel arbitration of the individual claims and to dismiss the class claims. The court ordered further proceedings to clarify whether the arbitration agreement was part of a contract of employment and whether the employee fell within a federal exemption for certain transportation workers. After additional evidence was submitted, the court granted the employer’s motion, compelling arbitration of individual claims and dismissing the class claims, finding the employee was not exempt from arbitration under the Federal Arbitration Act (FAA).On appeal, the California Court of Appeal, Second Appellate District, Division One, affirmed the order dismissing and striking the class claims. The court held that the FAA applied to the arbitration agreement because the employee was neither a “railroad employee” nor a transportation worker directly involved in the interstate transportation of goods under the FAA’s section 1 exemption. The court found that repairing out-of-service railcars did not constitute direct engagement in interstate commerce. The court also held that, because the FAA applied, the waiver of class claims was enforceable under federal law, thus preempting contrary state law. The appeal as to the order compelling arbitration was treated as a petition for writ of mandate and was denied. View "Vela v. Harbor Rail Services of California, Inc." on Justia Law

A group of consumers residing in California purchased products online from a national retailer’s website between 2020 and 2022. To complete their purchases, they were required to agree to the retailer’s Terms and Conditions, which included an arbitration clause mandating that any disputes be resolved through arbitration before the American Arbitration Association (AAA) and that certain pre-arbitration steps be followed. When the consumers later believed that the retailer had engaged in false and deceptive marketing, they followed the pre-arbitration process as outlined, served notices of dispute, attempted mediation, and, after those efforts failed, filed demands for arbitration with the AAA and paid all required fees.After the consumers initiated arbitration, the AAA notified the parties that the retailer had not filed its arbitration agreement with the AAA as required by AAA rules. The AAA requested compliance, but the retailer refused to register its agreement. As a result, the AAA, following its Consumer Arbitration Rules, terminated the arbitration proceedings and closed the consumers’ cases. The consumers then filed a petition in the United States District Court for the Eastern District of Wisconsin seeking to compel arbitration, arguing that the retailer’s refusal to register the agreement and pay related fees constituted a refusal to arbitrate under the Federal Arbitration Act.The district court denied the petition, relying on precedent which holds that, when arbitration proceeds and ends in accordance with the agreed rules—even if terminated by the arbitral forum for procedural reasons—a court may not intervene to compel further arbitration. The United States Court of Appeals for the Seventh Circuit affirmed, holding that because the parties’ agreement delegated procedural questions to the AAA and the AAA exercised its discretion under its rules in terminating the proceedings, there was no refusal to arbitrate that would justify judicial intervention under the Act. View "Bernal v Kohl's Corporation" on Justia Law