Justia Arbitration & Mediation Opinion Summaries

Plaintiff was employed by defendant and, as a condition of employment, electronically signed both an offer letter containing an arbitration provision and a separate nondisclosure agreement (NDIAA) on the same day. The offer letter required arbitration for most employment-related disputes, while the NDIAA included terms such as a waiver of bond for injunctive relief and a heightened burden of proof for public domain information. Plaintiff’s employment ended in March 2023, after which she sued defendant in Alameda County Superior Court for disability discrimination, retaliation, and related claims under California’s Fair Employment and Housing Act, as well as wrongful termination. None of her claims involved confidential information or sought injunctive relief.Defendant moved to compel arbitration, asserting the Federal Arbitration Act (FAA) governed and that plaintiff’s claims fell within the arbitration agreement’s scope. The trial court found the arbitration agreement and NDIAA should be read together under California Civil Code section 1642, determined that certain NDIAA provisions were unconscionable, and concluded that unconscionability permeated the arbitration agreement. The court declined to sever the NDIAA’s unconscionable provisions and denied the motion to compel arbitration.On appeal, the California Court of Appeal, First Appellate District, Division Five, disagreed with the trial court’s refusal to sever. The appellate court held that the FAA does not preempt section 1642, and even assuming the NDIAA’s challenged provisions were unconscionable and properly considered alongside the arbitration agreement, those provisions were collateral to the arbitration agreement’s central purpose and did not affect the claims at issue. Applying Ramirez v. Charter Communications, Inc., the appellate court determined that the unconscionable terms should have been severed and the arbitration agreement enforced. Consequently, the order denying arbitration was reversed. View "Wise v. Tesla Motors, Inc." on Justia Law

Jennifer Gates, a former loan officer at VIP Mortgage, claimed that VIP violated the Fair Labor Standards Act (FLSA) and Arizona state law by failing to pay her required overtime wages. She alleged that she was made to work more than forty hours per week but was instructed to record only eight-hour days on her timesheet. After her resignation in September 2022, Gates initiated arbitration as required by her employment agreement. VIP responded with counterclaims for breach of fiduciary duty and breach of contract, but these were later settled, with both parties agreeing to bear their own attorneys’ fees and costs for the counterclaims.The arbitration took place under the Federal Arbitration Act, and the arbitrator ultimately issued an award in favor of Gates, granting her unpaid overtime, liquidated damages, and attorneys’ fees. Despite the prior stipulation regarding counterclaims, the arbitrator did not distinguish between time spent on Gates’s claims and VIP’s counterclaims when awarding attorneys’ fees. VIP petitioned the United States District Court for the District of Arizona to vacate the award, arguing that the arbitrator erred by awarding attorneys’ fees that included time spent on the counterclaims. The district court found the arbitrator’s decision to be detailed and reasoned, concluding that the arbitrator did not manifestly disregard the law or act irrationally.The United States Court of Appeals for the Ninth Circuit reviewed the case de novo and affirmed the district court’s rulings. The court held that federal courts may vacate arbitration awards based on a factual error only in rare cases where the error involves a “legally dispositive fact” that was obvious and intentionally ignored by the arbitrator. Here, although the factual error was legally dispositive, the arbitrator’s failure to recall the fee stipulation was not so obvious or intentional as to warrant vacatur. The arbitration award was confirmed. View "VIP MORTGAGE INCORPORATED V. GATES" on Justia Law

Two commercial truck drivers, residents of Connecticut, began working as delivery drivers for a baked goods company through a staffing agency, classified as W-2 employees. After several months, the company required them to create corporations and enter into “Distributor Agreements” in their capacities as presidents of those corporations to continue working. These agreements included mandatory arbitration clauses and disclaimed an employee-employer relationship. Despite the new contractual arrangement, the drivers’ daily responsibilities remained unchanged, consisting of picking up baked goods from the company’s warehouse and delivering them to retail outlets.Seeking relief under Connecticut wage and overtime laws, the drivers initiated a putative class action in Connecticut Superior Court. The baked goods company removed the case to the United States District Court for the District of Connecticut, invoking diversity jurisdiction. The company then moved to compel arbitration pursuant to the contractual arbitration clauses. The drivers opposed, arguing that the agreements were “contracts of employment” exempt from the Federal Arbitration Act (FAA) under § 1, that they were not bound in their individual capacities, and that the clauses were unenforceable. The District Court ruled in favor of the company, granting the motion to compel arbitration, and held that the agreements were not “contracts of employment” under § 1 of the FAA.On interlocutory appeal, the United States Court of Appeals for the Second Circuit reviewed the District Court’s order de novo. The Second Circuit held that the agreements, though signed by corporate entities created at the company’s request, were “contracts of employment” within the meaning of § 1 of the FAA, as they were contracts for the performance of work by workers. Consequently, the court vacated the District Court’s order compelling arbitration and remanded for further proceedings. View "Silva v. Schmidt Baking Distribution, LLC" on Justia Law

A Singapore-based company that supplies offshore vessels entered into a charter agreement with a Mexico-based marine oil and gas company. The agreement allowed the Mexican company to charter a vessel for eighteen months, with provisions for termination if payments were not made and an obligation to redeliver the vessel at the end of the term. After the charter expired, the Singaporean company alleged that the Mexican company failed to pay required fees and did not return the vessel, leading to arbitration in Singapore. The arbitrator awarded the Singaporean company damages and ordered the vessel’s return, but the Mexican company did not comply. Meanwhile, an email revealed that the Mexican company was set to receive a large refund from a third party, to be sent to a U.S. bank account in the name of a related U.S. entity.The Singaporean company filed suit in the United States District Court for the Southern District of Texas, seeking to attach the funds in the U.S. account as security for the arbitration award under federal maritime law and, later, Texas state law. The district court initially granted the writ of garnishment, but after limited discovery, vacated the writ, finding no evidence that the Mexican company owned the funds in the U.S. account. The district court also denied the plaintiff’s request for leave to amend its complaint to assert an alter ego theory, which would have permitted attachment based on state law.On appeal, the United States Court of Appeals for the Fifth Circuit held that the district court abused its discretion by failing to consider relevant evidence and legal standards regarding ownership and control of the funds. The appellate court also determined that the district court erred in denying leave to amend without adequate explanation. The Fifth Circuit vacated the district court’s order and remanded the case, instructing the district court to allow the plaintiff to amend its complaint. View "CH Offshore v. Mexiship Ocean" on Justia Law

Aramark, a company that self-funds employee health benefit plans governed by ERISA, contracted with Aetna to serve as third-party administrator for these plans. Under the agreement, Aetna was responsible for processing claims, managing provider networks, and handling various administrative tasks. Aramark alleged that Aetna breached its fiduciary duties by paying improper or fraudulent claims, retaining undisclosed fees, providing inadequate subrogation services, making post-adjudication adjustments detrimental to Aramark, and commingling plan assets.Aramark filed suit in the United States District Court for the Eastern District of Texas, asserting ERISA claims for breach of fiduciary duty and prohibited transactions. Aetna responded by seeking to compel arbitration in a Connecticut federal district court, relying on the arbitration clause in the parties’ Master Services Agreement (MSA), and moved to stay the Texas proceedings pending arbitration. The district court denied the stay, holding that the parties had not “clearly and unmistakably” delegated the threshold question of arbitrability to an arbitrator. The court found that the MSA's arbitration clause carved out disputes seeking equitable relief—such as Aramark’s ERISA claims—from arbitration and that these claims were equitable in nature.On appeal, the United States Court of Appeals for the Fifth Circuit reviewed the district court’s denial of a motion to stay litigation pending arbitration de novo. It held that the threshold issue of arbitrability was not clearly and unmistakably delegated to an arbitrator under the terms of the MSA, especially given the placement of the carve-out for equitable relief. The Fifth Circuit further held that Aramark’s ERISA claims constituted equitable, not legal, relief under Supreme Court and Fifth Circuit precedent. The Fifth Circuit affirmed the district court’s orders, finding no error or abuse of discretion. View "Aramark Services v. Aetna Life Insurance" on Justia Law

Several individuals who worked as waitstaff at a club operated by Benelux Corporation brought a lawsuit in 2024, alleging violations of the Fair Labor Standards Act. In 2020, Benelux had distributed an arbitration agreement to its employees. The agreement included two signature boxes—one for the employee and one for Benelux’s representative—and stated that by signing, both parties represented that they had read and understood the agreement and agreed to be bound by its terms. One employee, Cadena, signed both signature boxes, but Benelux’s general manager did not sign the agreement due to an oversight.After being sued, Benelux moved to compel arbitration based on the unsigned agreement. Cadena argued that the agreement was not enforceable because Benelux had not signed it, stating she did not intend to be bound unless Benelux also signed. The United States District Court for the Western District of Texas adopted the Magistrate Judge’s recommendation and denied Benelux’s motion to compel, finding that the agreement required signatures from both parties to be enforceable, and Benelux had not signed.On appeal, the United States Court of Appeals for the Fifth Circuit reviewed the district court’s decision de novo. Applying Texas contract law, the Fifth Circuit held that the language of the arbitration agreement clearly required signatures from both the employee and Benelux’s representative for the agreement to be enforceable. Because Benelux did not sign, there was no valid arbitration agreement between Benelux and Cadena. The court affirmed the district court’s judgment denying Benelux’s motion to compel arbitration. View "Mertens v. Benelux Corporation" on Justia Law

An employee was hired by a security services company in 2012 and, as a condition of employment, signed an arbitration agreement requiring that any employment-related disputes be resolved through arbitration under the Federal Arbitration Act (FAA). In 2023, the employee was assigned to work at Oracle Park, where he was subjected to hostile and derogatory conduct by supervisors and coworkers based on his perceived sexual orientation, including intrusive questioning, mocking, and reduction of work hours. After formally complaining about this treatment, the employee was terminated. He then filed a lawsuit against his employer and two individuals, asserting multiple claims, including sexual harassment under California’s Fair Employment and Housing Act.The defendants sought to compel arbitration based on the prior agreement, arguing that all claims fell within its scope and that both federal and state law required enforcement. The plaintiff opposed the motion, challenging the agreement’s validity but not specifically referencing the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (EFAA). The Superior Court of the City and County of San Francisco issued a tentative ruling, later adopted as final, finding that the EFAA rendered the arbitration agreement unenforceable because the plaintiff stated a valid sexual harassment claim. The court further found that the EFAA barred arbitration of the entire case, not just the sexual harassment claim, and that the plaintiff’s conduct showed he elected to pursue his claims in court.On appeal, the California Court of Appeal, First Appellate District, Division Three, affirmed the trial court’s denial of the motion to compel arbitration. The court held that the EFAA applies to cases involving sexual harassment claims and bars enforcement of predispute arbitration agreements for the entire case at the plaintiff’s election, without requiring an explicit invocation of the EFAA. The court also held that the trial court properly considered the EFAA’s applicability and provided due process, even without supplemental briefing. View "Quilala v. Securitas Security Services USA" on Justia Law

A woman rented a car from a rental company in 2014 and, after a traffic camera recorded a violation during her rental, the company paid the fine and charged her both the fine amount and an administrative fee. She filed a putative class action in the United States District Court for the District of New Jersey on behalf of customers who were charged fines and fees in similar circumstances, alleging state-law claims such as violations of consumer fraud statutes and unjust enrichment. The rental company later updated its rental agreements in 2016 to include an arbitration clause and class-action waiver, but this provision applied only prospectively to rentals after its adoption. The named plaintiffs’ rentals predated this clause.The District Court, after years of litigation that included several amended complaints, discovery, mediation, and a motion to certify a class, ultimately certified a subclass that included some renters whose agreements contained the arbitration provision. The District Court found that the rental company had waived its right to enforce arbitration by participating in litigation for several years without moving to compel arbitration. The company then filed a motion to compel arbitration for the affected class members, which the District Court denied again on waiver grounds, emphasizing that the company had not sought to enforce arbitration until after class certification.On appeal, the United States Court of Appeals for the Third Circuit reviewed the waiver issue de novo. The Third Circuit held that waiver of the right to compel arbitration did not occur here, because the company’s conduct—such as raising arbitration as an affirmative defense and the futility of seeking to compel arbitration prior to class certification—did not evince an intentional relinquishment of that right. The Third Circuit vacated the District Court’s order denying the motion to compel arbitration and remanded for consideration of other unresolved questions about enforceability. View "Valli v. Avis Budget Group Inc" on Justia Law

The case centers on an employee who brought multiple claims against her former employer, including several for violations of California’s Labor Code and a representative claim under the Private Attorneys General Act (PAGA). The employee had signed an arbitration agreement at the start of her employment. As a result, all non-PAGA claims were compelled to arbitration, while the PAGA claims (both individual and representative) were stayed. The arbitrator found in favor of the employer on all Labor Code violations, concluding that the alleged violations did not occur.Following the arbitration, the Superior Court of San Bernardino County confirmed the arbitrator’s award and granted judgment on the pleadings against the employee on her PAGA claim, ruling that the arbitration results established she was not an “aggrieved employee” under PAGA, and therefore lacked standing to pursue the PAGA claim. When the employee appealed, the California Court of Appeal, Fourth Appellate District, Division Two, affirmed the denial of her motion to vacate the arbitration award but reversed the judgment on the pleadings as to the PAGA claim, holding that the arbitration did not preclude her from pursuing PAGA penalties.Subsequently, the employer filed a renewed motion for judgment on the pleadings, arguing that subsequent appellate court decisions and the California Supreme Court’s decision in Adolph v. Uber Technologies, Inc., constituted an intervening change in the law, rendering the law of the case doctrine inapplicable. The trial court denied this motion, finding that its prior ruling remained law of the case. Reviewing this denial, the California Court of Appeal, Fourth Appellate District, Division Two, held that the law of the case doctrine properly applied because there had been no controlling intervening change in the law. The court denied the employer’s writ petition, confirming that the arbitrator’s findings on non-PAGA claims did not preclude judicial determination of the employee’s standing under PAGA. View "Prime Healthcare Management v. Super. Ct." on Justia Law

Several participants in a terminated employee stock ownership plan asserted claims under the Employee Retirement Income Security Act (ERISA) following the sale and dissolution of their plan. The plan, created by A360, Inc. in 2016, purchased all company stock and became its sole owner. In 2019, A360 and its trustee sold the plan’s shares to another entity, amending the plan at the same time to include an arbitration clause that required all claims to be resolved individually and prohibited representative, class, or group relief. The plan was terminated shortly thereafter, and the proceeds were distributed to participants. The plaintiffs alleged that the defendants undervalued the shares and breached fiduciary duties, seeking plan-wide monetary and equitable relief.The United States District Court for the Northern District of Georgia considered the defendants’ motion to compel arbitration based on the plan’s amended arbitration provisions. The district court determined that although the plan itself could assent to arbitration, the arbitration provision was unenforceable because it precluded plan-wide relief authorized by ERISA. The court found that the provision constituted a prospective waiver of statutory rights and concluded that, per the plan amendment’s own terms, the arbitration provision was not severable and thus entirely void.The United States Court of Appeals for the Eleventh Circuit reviewed the district court’s denial of the motion to compel arbitration de novo. The Eleventh Circuit held that the arbitration provision was unenforceable under the effective vindication doctrine because it barred participants from seeking plan-wide relief for breaches of fiduciary duty, as provided by ERISA. The court joined other circuits in concluding that such provisions violate ERISA’s substantive rights and affirmed the district court’s invalidation of the arbitration procedure and denial of the motion to compel arbitration. View "Williams v. Shapiro" on Justia Law