Justia Arbitration & Mediation Opinion Summaries

Stephen Hofer, a licensed attorney and founder of Aerlex Law Group, hired Vicky Boladian as a part-time contract attorney in 2008. In 2013, they formed Aerlex Tax Services, LLC (tax LLC) to provide tax-related services. Hofer held a 55% equity interest, and Boladian held 45%. Their relationship deteriorated in 2017-2018, leading to litigation. In 2020, they settled by executing three agreements, each containing arbitration clauses. In 2023, they dissolved the tax LLC and transferred its assets to Aerlex Tax Services, LLP (tax LLP). Boladian later withdrew, forming her own firm and taking clients and assets.The plaintiffs, including Hofer and the tax LLP, filed a lawsuit against Boladian and her new firm, alleging 13 causes of action and seeking various damages and relief. They did not mention arbitration in their complaint. They sought a temporary restraining order and a preliminary injunction, both of which were denied. They also engaged in extensive discovery and demanded a jury trial. Boladian and her firm filed a cross-complaint, and three days later, the plaintiffs moved to compel arbitration.The Superior Court of Los Angeles County denied the motion to compel arbitration, finding that the plaintiffs had waived their right to arbitration by substantially litigating the case in court for over six months. The court applied the waiver standard from St. Agnes Medical Center v. PacifiCare of California, which was later overruled by the California Supreme Court in Quach v. California Commerce Club, Inc.The California Court of Appeal, Second Appellate District, reviewed the case de novo under the new standard set by Quach. The court concluded that the plaintiffs had waived their right to compel arbitration by engaging in extensive litigation conduct inconsistent with an intent to arbitrate. The order denying the motion to compel arbitration was affirmed. View "Hofer v. Boladian" on Justia Law

Sadok Ferchichi and Martina Coronado were involved in a motor vehicle collision with Crystal Krueger, who was driving a vehicle owned by Whataburger Restaurants LLC. Ferchichi sued Krueger and Whataburger for negligence. During mediation, Whataburger's counsel revealed the existence of a surveillance video of the plaintiffs, which they refused to share outside of mediation. Ferchichi filed a motion to compel the video and for sanctions. Whataburger responded with a motion to dismiss the sanctions request under the Texas Citizens Participation Act (TCPA).The trial court denied Whataburger's TCPA motion, but the Fourth Court of Appeals reversed, holding that the motion for sanctions was a "legal action" under the TCPA and that Ferchichi failed to establish a prima facie case for the sanctions request. The court remanded the case to the trial court to award Whataburger its costs and attorney’s fees and to consider sanctions against Ferchichi.In a separate case, Haven at Thorpe Lane, a student-housing complex, was sued by students for fraud and deceptive trade practices. Haven filed a motion to compel discovery from two mothers of the plaintiffs, who had created a Facebook group criticizing Haven. The mothers filed a TCPA motion to dismiss Haven's motion to compel. The trial court denied the TCPA motion, but the Third Court of Appeals reversed, holding that the motion to compel was a "legal action" under the TCPA and that Haven failed to establish a prima facie case.The Supreme Court of Texas reviewed both cases and held that motions to compel and for sanctions are not "legal actions" under the TCPA. Therefore, the TCPA does not apply. The court reversed the judgments of the courts of appeals and remanded both cases to the respective trial courts for further proceedings. View "HAVEN AT THORPE LANE, LLC v. PATE" on Justia Law

The case involves insurance policies issued by certain surplus lines insurers at Lloyd’s, London, which contain identical arbitration clauses. The insured parties, 3131 Veterans Blvd LLC and Mpire Properties LLC, attempted to sue the insurers in Louisiana state court. The insurers then sued in New York federal court to enforce the arbitration clauses under the Federal Arbitration Act (FAA) and the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The insured parties argued that the arbitration clauses were unenforceable under Louisiana law, which prohibits such clauses in insurance contracts, and that the McCarran-Ferguson Act (MFA) allows state insurance laws to reverse preempt federal legislation and non-self-executing treaty provisions.The United States District Court for the Southern District of New York ruled in favor of the insured parties, holding that Louisiana law prohibits arbitration clauses in insurance contracts and that the FAA and the New York Convention were reverse-preempted under the MFA, based on the Second Circuit’s previous decision in Stephens v. American International Insurance (Stephens I).The United States Court of Appeals for the Second Circuit reviewed the case. The court concluded that its reasoning in Stephens I had been undermined by the Supreme Court’s decision in Medellín v. Texas, which established a different test for determining whether a treaty provision is self-executing. Applying the Medellín test, the court found that Article II Section 3 of the New York Convention is self-executing. As a result, the court abrogated Stephens I to the extent that it held that Article II Section 3 is not self-executing, reversed the district court decisions, and remanded the matters for further proceedings consistent with its opinion. View "Certain Underwriters at Lloyds, London, v. 3131 Veterans Blvd LLC" on Justia Law

Mone Yvette Sanders filed a class and representative action against her former employer, Edward D. Jones & Co., L.P., alleging wage and hour claims under the Labor Code and a cause of action under the Private Attorneys General Act (PAGA). The trial court granted Edward Jones's motions to compel arbitration of Sanders's individual claims and stayed the representative PAGA cause of action. Sanders initiated arbitration, but Edward Jones failed to pay $54,000 in fees within 30 days as required by California Code of Civil Procedure section 1281.98. Sanders then moved to vacate the order compelling arbitration and proceed in court.The trial court denied Sanders's motion, finding section 1281.98 preempted by the Federal Arbitration Act (FAA). Sanders filed a petition for writ of mandate, and the Court of Appeal issued an order to show cause.The California Court of Appeal, Second Appellate District, Division Seven, reviewed the case. The court held that section 1281.98 is not preempted by the FAA, as it furthers the goal of expeditious arbitration. The court also rejected Edward Jones's contention that the arbitration agreement required the arbitrator to decide whether Edward Jones was in default. The court found that section 1281.98 vests the employee with the unilateral right to withdraw from arbitration and proceed in court upon the drafting party's failure to timely pay fees. The court concluded that the trial court erred in denying Sanders's motion to vacate the order compelling arbitration and granted the petition for writ of mandate. The case was remanded for further proceedings consistent with this opinion, including consideration of Sanders's request for monetary sanctions. View "Sanders v. Superior Court" on Justia Law

The Los Angeles College Faculty Guild, AFT Local 1521, sought to reverse the trial court’s denial of its motion to compel arbitration of three grievances against the Los Angeles Community College District. The grievances involved safety-related construction projects at Los Angeles City College, the termination of a faculty member at Pierce College, and the miscalculation of retirement benefits for a faculty member at Los Angeles Trade-Technical College.The Superior Court of Los Angeles County partially granted the motion to compel arbitration for the grievance related to backpay for the retirement benefits issue but denied the motion for the other grievances. The court found that the grievances were beyond the scope of the collective bargaining agreement and were preempted by the Education Code and other statutory requirements.The Court of Appeal of the State of California, Second Appellate District, Division Eight, affirmed the trial court’s decision. The appellate court held that the grievances related to construction projects and employment termination were not arbitrable because they were preempted by the Education Code and the Construction Bonds Act. The court also found that the grievance related to retirement benefits was partially arbitrable only concerning the backpay issue, as the Public Employees’ Retirement Law governed the reporting of service credits to CalPERS, and the arbitrator could not order injunctive relief beyond the scope of the collective bargaining agreement.The appellate court concluded that the Guild failed to demonstrate that the grievances were within the scope of representation as enumerated by the Educational Employment Relations Act and affirmed the trial court’s mixed ruling. View "L.A. College Faculty Guild v. L.A. Community College District" on Justia Law

Trinity Energy Services, L.L.C. ("Trinity Energy") and Southeast Directional Drilling, L.L.C. ("Southeast Drilling") were involved in a subcontract for constructing natural gas pipelines. Disputes arose over liability for "stand-by costs" incurred during construction delays. The parties agreed to arbitration, where a panel awarded Southeast Drilling $1,662,000 in stand-by costs from Trinity Energy. Trinity Energy petitioned to vacate the arbitration award, but the district court denied the petition and confirmed the award. Trinity Energy then appealed.The United States District Court for the Northern District of Texas initially denied Trinity Energy's petition to vacate the arbitration award and granted Southeast Drilling's motion to confirm it. Trinity Energy appealed this decision, but the appeal was dismissed as interlocutory by the United States Court of Appeals for the Fifth Circuit. Subsequently, the district court granted Southeast Drilling's cross-motion to confirm the arbitration award, leading to Trinity Energy's timely appeal.The United States Court of Appeals for the Fifth Circuit reviewed the district court's order de novo and emphasized the narrow and deferential standard of review for arbitration awards. The court found that the arbitration panel had construed the subcontract and based its decision on its terms, thus not exceeding its authority under 9 U.S.C. § 10(a)(4). The court also rejected Trinity Energy's argument that the panel manifestly disregarded Texas law, noting that "manifest disregard of the law" is not a valid ground for vacatur under the Federal Arbitration Act. Consequently, the Fifth Circuit affirmed the district court's judgment confirming the arbitration award. Southeast Drilling's request for sanctions against Trinity Energy was denied due to procedural deficiencies. View "Trinity Energy Services v. SE Directional Drilling" on Justia Law

The plaintiffs filed lawsuits against two online-game companies, alleging that the companies' casino-themed social gaming applications constituted illegal gambling. The plaintiffs sought to recover money lost by Alabama residents who played these games, on behalf of the players' families, under an Alabama statute that allows such recovery. The plaintiffs did not play the games themselves and did not name any specific Alabama residents who had played the games.The defendants moved to compel arbitration based on the arbitration agreements included in the terms of service for the games, which players agreed to when they downloaded the games. The defendants also moved to dismiss the cases, arguing that the plaintiffs could not pursue mass claims on behalf of all Alabama residents who played the games and that the games were not gambling. The Franklin Circuit Court denied both the motions to compel arbitration and the motions to dismiss.The Supreme Court of Alabama reviewed the case and held that the plaintiffs, in asserting claims under the Alabama statute, were standing in the legal shoes of the players who had agreed to arbitrate their claims. Therefore, the plaintiffs' claims must be arbitrated. The court reversed the trial court's orders denying the motions to compel arbitration and remanded the cases for the trial court to grant the motions. View "Zynga, Inc. v. Mills" on Justia Law

Defendants, alleged victims of a Ponzi scheme perpetrated by John Woods, sought to bring claims against Woods's employer, Oppenheimer & Co. Inc., in a FINRA arbitration forum. Defendants claimed they were customers of Oppenheimer because they transacted with Woods, an associated person of Oppenheimer. Oppenheimer filed a federal action seeking a declaration that Defendants were not its customers and a permanent injunction to prevent arbitration.The United States District Court for the Western District of Washington granted summary judgment in favor of Oppenheimer, concluding that Defendants were not customers of Oppenheimer or Woods. The court found that Defendants had no direct relationship with Oppenheimer and that their investments were facilitated by Michael Mooney, not Woods. The court also issued a permanent injunction prohibiting Defendants from arbitrating their claims.The United States Court of Appeals for the Ninth Circuit reviewed the case and affirmed the district court's decision. The Ninth Circuit held that a "customer" under FINRA Rule 12200 includes any non-broker and non-dealer who purchases commodities or services from a FINRA member or its associated person. However, the court agreed with the district court that Defendants did not transact with Woods, as their investments were facilitated by Mooney. The court also rejected Defendants' "alter ego" theory, which suggested that their investments in an entity controlled by Woods made them Woods's customers.The Ninth Circuit concluded that Defendants were not entitled to arbitrate their claims against Oppenheimer under FINRA Rule 12200 and upheld the permanent injunction. The court found no errors in the district court's analysis or factual findings and affirmed the decision in full. View "OPPENHEIMER & CO. INC. V. MITCHELL" on Justia Law

Several hair stylists filed a lawsuit against their employer, Lady Jane’s Haircuts for Men, alleging that they were underpaid due to being misclassified as independent contractors instead of employees. This misclassification, they argued, allowed the employer to avoid the Fair Labor Standards Act’s minimum-wage and overtime-pay requirements. The employer moved to dismiss the lawsuit, citing an arbitration agreement in the Independent Contractor Agreement, which required disputes to be resolved through the American Arbitration Association (AAA) under its Commercial Arbitration Rules.The United States District Court for the Eastern District of Michigan reviewed the case and found the arbitration agreement enforceable but severed the cost-shifting provision, which required the stylists to pay arbitration costs exceeding their yearly income. The court ruled that the arbitration would proceed under the less costly AAA employment rules and dismissed the lawsuit in favor of arbitration.The United States Court of Appeals for the Sixth Circuit reviewed the case and affirmed the district court’s decision. The appellate court held that the severability clause in the contract allowed the court to remove the cost-shifting provision while enforcing the rest of the arbitration agreement. The court found that the term “provision” in the severability clause referred to individual clauses within the contract, not entire sections. The court also rejected the stylists’ arguments that the district court had impermissibly reformed the contract and that the arbitration agreement should be unenforceable for equitable reasons. The court concluded that the district court correctly severed the cost-shifting provision and enforced the arbitration agreement under the AAA’s employment rules. View "Gavin v. Lady Jane's Haircuts for Men" on Justia Law

Kassandra Memmer sued her former employer, United Wholesale Mortgage (UWM), alleging discrimination and sexual harassment during her employment. UWM moved to dismiss the lawsuit and compel arbitration based on the employment agreement. Memmer argued that the arbitration agreement was invalid and that she had the right to go to court under the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (EFAA).The United States District Court for the Eastern District of Michigan granted UWM's motion to dismiss and compel arbitration, concluding that the parties had a valid arbitration agreement. The court did not address Memmer's argument regarding the applicability of EFAA. Memmer appealed the decision, asserting that EFAA should apply to her case.The United States Court of Appeals for the Sixth Circuit reviewed the case and concluded that EFAA applies to claims that accrue after its enactment date and to disputes that arise after that date. The court determined that the district court had not applied the correct interpretation of EFAA. The Sixth Circuit reversed the district court's decision and remanded the case for further proceedings to determine when the dispute between Memmer and UWM arose and whether EFAA applies to her claims. View "Memmer v. United Wholesale Mortgage, LLC" on Justia Law