by
Plaintiff Carmen Zubillaga was injured in an automobile accident. The other driver was at fault. Her insurer, defendant Allstate Indemnity Company (Allstate), rejected her demand for $35,000, the full amount of her remaining underinsured motorist (UIM) coverage, although it made her a series of offers increasing to $15,584 instead. After an arbitrator awarded plaintiff $35,000, the amount of her demand, she sued Allstate for breach of the implied covenant of good faith and fair dealing. While an insurance company has no obligation under the implied covenant of good faith to pay every claim its insured makes, the insurer cannot deny the claim, without fully investigating the grounds for its denial. To protect its insured’s contractual interest in security and peace of mind, it is essential that an insurer fully inquire into possible bases that might support the insured’s claim before denying it. The Court of Appeal found the problem in this case was that the undisputed facts showed the insurer’s opinions were rendered in October and November 2012, but insurer continued to rely on them through the arbitration in September 2013, without ever consulting with its expert again or conducting any further investigation. Summary judgment in favor of the insurer was reversed and the matter remanded for further proceedings. View "Zubillaga v. Allstate Indemnity Company" on Justia Law

by
Rainbow Cinemas, LLC ("Rainbow"), Ambarish Keshani, and Harshit Thakker (collectively, "the defendants") appealed a circuit court order denying their motion to compel arbitration of a contract dispute with Consolidated Construction Company of Alabama ("CCC"). In the contract at issue here, CCC agreed to provide specified services in constructing a movie theater for Rainbow. The parties signed the American Institute of Architects "Document A101-2007 -- Standard Form of Agreement Between Owner and Contractor where the basis of payment is a Stipulated Sum" ("the agreement"). The agreement incorporated by reference American Institute of Architects "Document A201-2007 -- General Conditions of the Contract for Construction" ("the general conditions"). In 2016, after having already initiated the arbitration process, CCC sued the defendants. Among other things, CCC alleged that the defendants had fraudulently induced it into entering into the contract. Specifically, CCC alleged that the defendants knew that the contract required an initial decision maker and that the defendants also "knew they had not contracted for [initial-decision-maker] services from the [initial decision maker]." CCC alleged that the defendants "failed to inform CCC ... that Rainbow had not contracted with [architect Hay] Buchanan to act as [the initial decision maker]." The Alabama Supreme Court reversed and remanded, finding that the contract incorporated the AAA's Construction Industry Arbitration Rules, which state that "[t]he arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement." Although the question whether an arbitration provision may be used to compel arbitration between a signatory and a nonsignatory is a threshold question of arbitrability usually decided by the court, here that question was delegated to the arbitrator. The arbitrator, not the court, had to decide that threshold issue. View "Rainbow Cinemas, LLC v. Consolidated Construction Company of Alabama" on Justia Law

by
Appellants, a group of individual condominium owners in the Kapulua Bay condominium, challenged the vote of the Association of Apartment Owners of Kapulua Bay Condominium to convert the residential community into a hotel. The dispute was submitted to arbitration. On appeal, Appellants challenged the adequacy of the neutral arbitrator’s disclosures in the arbitration. The circuit court concluded that vacatur was not required because the undisclosed relationships did not constitute “evident partiality.” The Supreme Court affirmed, holding that the circuit court did not clearly err in concluding that the arbitrator’s undisclosed connections with certain parties did not constitute evident partiality. View "Narayan v. Ass'n of Apartment Owners of Kapalua Bay Condominium" on Justia Law

by
This case turned on whether an attorney-in-fact who admitted her principal to a residential care facility for the elderly made a “health care” decision. If she did, as the trial court found, she acted outside the scope of her authority under the power of attorney, and the admission agreement she signed, and its arbitration clause this appeal sought to enforce, were void. On these facts the Court of Appeal concluded the decision was health care decision, and the attorney-in-fact who admitted her, acting under the PAL, was not authorized to make those kinds of decisions on behalf of the principal. As a result of this conclusion, the Court affirmed the trial court’s denial of a motion by the residential care facility to compel arbitration. Because the attorney-in-fact acting under the PAL did not have authority to admit the principal to the residential care facility for the elderly, her execution of the admission agreement and its arbitration clause were void. View "Hutcheson v. Eskaton Fountainwood Lodge" on Justia Law

by
Under the circumstances of this case, it was unconscionable to require an employee to pay half the estimated arbitration costs up front in order to access the arbitral forum, and therefore, the requirement was unenforceable. Plaintiff signed and submitted an employment contract that contained an arbitration provision. Plaintiff, however, never did work for Defendant. Plaintiff filed a complaint alleging that Defendant refused to hire her in retaliation for her filing a sexual harassment complaint. Defendant filed a motion to compel arbitration. Plaintiff opposed the motion to compel, arguing, inter alia, that the arbitration agreement was unconscionable because it required her to pay for the arbitration costs in a civil rights matter. The circuit court ultimately granted Defendant’s motion to compel arbitration. The court found it would be unconscionable for Plaintiff to pay half the arbitration estimate to access the arbitral forum but nonetheless concluded that the arbitration clause could be enforced by requiring Defendant to pay for all arbitration fees and costs. The Supreme Court vacated the circuit court’s order, holding that the circuit court (1) correctly concluded that the parties entered into a valid arbitration agreement; but (2) improperly reformed the arbitration agreement instead of invalidating the entire agreement. View "Gabriel v. Island Pacific Academy, Inc." on Justia Law

by
In the absence of an agreement to the contrary, waiver of a contractual right to arbitration is a threshold question of enforceability to be determined by a court, not an arbitrator. Respondents commenced an arbitration against Petitioner pursuant to an agreement between the parties alleging breach of contract. Petitioner ultimately filed a motion for a preliminary and permanent injunction to prohibit Respondents from pursuing their claims through arbitration. The circuit court denied the motion. The Supreme Court reversed and remanded for entry of an order enjoining Respondents from pursuing further arbitration, holding (1) the question of waiver should have been determined by the circuit court rather than an arbitrator; (2) Respondents were not allowed to reinitiate the arbitration process under the American Arbitration Association after having voluntarily abandoned their claims in arbitration under Financial Industry Regulatory Authority, Inc.; and (3) Respondents waived their right to pursue any future arbitration under the agreement. View "Williams v. Tucker" on Justia Law

by
In consolidated class actions, plaintiffs claimed the brokers who represented them in the sale of their homes and a group of companies that provided services in connection with those sales violated their fiduciary duties by failing to disclose alleged kickbacks paid by the service providers to the brokers in connection with the sales. Defendants filed motions to compel arbitration on the basis of three separate agreements, at least one of which was executed by each plaintiff. The trial court found the arbitration clauses in two of the agreements inapplicable, but compelled the signatories of the third agreement to arbitrate with their brokers. Invoking the doctrine of equitable estoppel, the court also required the signatories of the third agreement to arbitrate their claims against the service providers, who were not parties to the arbitration agreements. The court of appeals reversed with respect to the two arbitration clauses the lower court found inapplicable. Each of the plaintiffs executed one or the other of these two agreements. The court dismissed the cross-appeal of the plaintiffs who were required to arbitrate because an order compelling arbitration is not appealable. View "Laymon v. J. Rockcliff, Inc." on Justia Law

by
The Federal Arbitration Act does not preempt all state arbitration law. A party alleging an arbitration agreement is unconscionable must demonstrate some quantum of both procedural and substantive unconscionability. A party's failure to clearly object to a defect in arbitration proceedings prior to or during arbitration may constitute a waiver of the objection. Lynne Thompson appealed a district court order compelling arbitration, a judgment confirming the arbitration award, and an order denying her motion to vacate the judgment or for a new trial. Thompson sued Lithia ND Acquisition Corp. #1, seeking to rescind a contract to purchase a vehicle and for damages for unjust enrichment and unlawful sales practices. Lithia moved to dismiss Thompson's complaint and to compel arbitration, arguing there was an enforceable agreement to arbitrate. Thompson responded to the motion, arguing the arbitration agreement was unenforceable and unconscionable and claiming she was entitled to a jury trial on the issue of the enforceability. The North Dakota Supreme Court affirmed, concluding the district court did not err in compelling arbitration or confirming the arbitrator's award. View "Thompson v. Lithia ND Acquisition Corp. #1" on Justia Law

by
In this arbitration dispute, the district court erred by directing the entry of final judgment rather than staying the proceeding, and the court of appeals, faced with a final appealable judgment, should have vacated the judgment and entered a stay of the underlying action pending completion of the arbitration. Plaintiff sued Defendants to stop arbitration proceedings after Defendants demanded arbitration and an arbitrator determined that the dispute was arbitrable. The district court granted summary judgment for Defendants and compelled arbitration. Instead of staying the underlying action, the district court directed the entry of judgment. Plaintiff appealed, arguing that the district court’s order was a final judgment because it dismissed, rather than stayed, the underlying proceeding. The court of appeals disagreed and dismissed the appeal as taken from a nonfinal order and judgment. The Supreme Court reversed, holding (1) the district court erred by directing the entry of final judgment rather than staying the proceeding, as required by Minn. Stat. 572B.07(f); and (2) the proper course for the court of appeals, faced with a final judgment that was appealable under Minn. R. Civ. App. P. 103.03(a), was to direct the district court to vacate the judgment and enter a stay of the underlying action pending completion of the arbitration. View "City of Rochester v. Kottschade" on Justia Law

by
This case centered on whether the Colorado Common Interest Ownership Act (“CCIOA”) permitted a developer–declarant to retain a right of consent to certain proposed amendments to a common interest community’s declaration. Petitioner Vallagio at Inverness Residential Condominium Association, Inc. (the “Association”), sought damages for alleged construction defects in the Vallagio at Inverness residential development project (the “Project”), a community organized under CCIOA. The Project’s developer and declarant, respondent Metro Inverness, LLC (the “Declarant”), drafted and recorded the Project’s original declaration, which set forth specific dispute resolution procedures for construction defect claims. As pertinent here, certain provisions of the original declaration: (1) required that all construction defect claims be resolved through binding arbitration; and (2) provided that the provisions governing such claims “shall not ever be amended” without the Declarant’s written consent. Shortly before the Association filed the present action, and without obtaining the Declarant’s consent, the requisite number of the Project’s unit owners voted to amend the declaration to delete the foregoing dispute resolution provisions. The Declarant moved to compel arbitration, arguing that the attempted declaration amendment was ineffective absent its written consent and, thus, the Association was bound by the arbitration provision contained in the original declaration. The district court denied the Declarant’s motion, reasoning in pertinent part that the consent-to-amend provision violated and was therefore void under CCIOA. The Colorado Supreme Court concluded that the consent-to-amend provision contained in the Project’s original declaration was consistent with CCIOA and was therefore valid and enforceable. Furthermore, the Court concluded that because the unit owners did not obtain the Declarant’s consent to remove the arbitration provision, the attempted removal was ineffective, and the declaration’s arbitration agreement remained in force. View "Vallagio at Inverness Residential Condo. Assn. v. Metro. Homes, Inc." on Justia Law