Justia Arbitration & Mediation Opinion Summaries

In 2014, Russia invaded and subsequently asserted control over Crimea, an area internationally recognized as part of Ukraine. Ukrainian businesses operating in Crimea—including an electricity distributor and a group of petrol station owners—had their assets seized and operations transferred to Russian-controlled entities without compensation. These businesses, having made investments under Ukrainian law and while the 1998 Agreement Between the Government of the Russian Federation and the Cabinet of Ministers of Ukraine on the Encouragement and Mutual Protection of Investments (“Investment Treaty”) was in effect, pursued arbitration against Russia for expropriation and treaty violations.The Ukrainian companies initiated separate arbitrations under the Investment Treaty’s arbitration clause. The arbitral tribunals found Russia liable for breaches and awarded significant damages to the companies. Russia challenged the arbitral jurisdiction and the awards in foreign courts, but those efforts were unsuccessful. The companies then filed petitions in the United States District Court for the District of Columbia to enforce the awards under the New York Convention and the Federal Arbitration Act. Russia moved to dismiss, arguing the courts lacked subject-matter and personal jurisdiction under the Foreign Sovereign Immunities Act (FSIA). The District Court rejected Russia’s arguments, finding jurisdiction appropriate under the FSIA’s arbitration exception and personal jurisdiction proper upon valid service.On appeal, the United States Court of Appeals for the District of Columbia Circuit reviewed whether the District Court correctly exercised jurisdiction. The appellate court held that the FSIA’s arbitration exception applied because the companies established the existence of an arbitration agreement, a qualifying arbitral award, and a treaty potentially governing enforcement. The court further held that foreign states are not entitled to the Fifth Amendment’s due process protections against personal jurisdiction. The judgments of the District Court were affirmed. View "Stabil LLC v. Russian Federation" on Justia Law

Two individuals each purchased a Mercedes-Benz vehicle that included a subscription-based system called “mbrace,” which provided various features through a 3G wireless network. When newer cellular technology rendered the 3G-dependent system obsolete, both customers asked their dealerships to replace the outdated system at no charge, but their requests were denied. Subsequently, they filed a class action lawsuit against Mercedes-Benz USA, LLC and Mercedes-Benz Group AG, asserting claims including breach of warranty under federal and state law.The United States District Court for the Northern District of Illinois, Eastern Division, considered Mercedes’s motion to compel arbitration pursuant to the Federal Arbitration Act, based on the arbitration provision within the mbrace Terms of Service. The district court found in favor of Mercedes, concluding that the plaintiffs were bound by an agreement to arbitrate their claims. Since neither party requested a stay, the court dismissed the case without prejudice. The plaintiffs appealed, arguing that they had not agreed to arbitrate.The United States Court of Appeals for the Seventh Circuit reviewed the district court’s factual findings for clear error and legal conclusions de novo. Applying Illinois contract law, the appellate court determined that Mercedes had provided sufficient notice of the arbitration agreement to the plaintiffs through the subscription activation process and follow-up communications. The court found that Mercedes established a rebuttable presumption of notice, which the plaintiffs failed to overcome, as they only stated they did not recall receiving such notice, rather than expressly denying it. The Seventh Circuit held that the plaintiffs had assented to the agreement by subscribing to the service and thus were bound by the arbitration provision. The judgment of the district court was affirmed. View "Jim Rose v Mercedes-Benz USA, LLC" on Justia Law

A dispute arose following the acquisition of an online video game company, where the buyer agreed to pay a base purchase price with the possibility of an additional earnout payment if certain financial targets were met. The merger agreement included a provision requiring disputes over the calculation of this earnout to be resolved by a mutually agreed-upon accounting firm acting as an arbitrator. After closing, the seller representative alleged that the buyer acted in bad faith to reduce the earnout, failed to provide required information and access, and breached both express and implied contractual obligations. The buyer responded by invoking the alternative dispute resolution (ADR) clause and moved to compel arbitration.The Court of Chancery of the State of Delaware granted the buyer’s motion, finding that the seller’s claims—including those alleging bad-faith conduct and denial of information access—were fundamentally disputes over the earnout calculation and thus fell within the scope of the ADR provision. The court held that questions about information access and related procedural matters were for the arbitrator to decide. The seller’s complaint was dismissed with prejudice, and the dispute proceeded to arbitration, where the arbitrator ruled in favor of the buyer. The Court of Chancery later confirmed the arbitrator’s award, rejecting the seller’s arguments regarding undisclosed conflicts of interest.The Supreme Court of the State of Delaware reviewed the case. It affirmed the Court of Chancery’s judgment, holding that the bad-faith breach claims and the information-access claim were properly subject to arbitration under the agreement. The court found no error in the lower court’s refusal to vacate the arbitration award, concluding that the seller failed to demonstrate an undisclosed relationship that would indicate evident partiality. The Court of Chancery’s decisions to compel arbitration and to confirm the award were affirmed. View "Fortis Advisors LLC vs. Stillfront Midco AB" on Justia Law

An airline employee, who began working in 1996 and served as a union representative, was terminated in 2023 after allegedly violating both company policy and the terms of a Last Chance Agreement (LCA) he had previously entered into. The LCA was signed following an earlier incident in which he admitted to theft, and it stipulated that any further violation of company policy during its term would result in immediate termination. In October 2023, the employee entered a restricted area in violation of company policy, leading to his discharge.Following his termination, the employee filed a lawsuit in the United States District Court for the Northern District of Texas, alleging retaliatory termination under the Railway Labor Act (RLA) and asserting that his termination was motivated by anti-union animus due to his activities as a union representative. The airline moved to dismiss the complaint, arguing that the dispute was a “minor” one under the RLA, which meant it was subject to mandatory arbitration as outlined in the collective bargaining agreement (CBA), thus depriving the federal court of subject-matter jurisdiction. The district court agreed and granted the airline’s motion to dismiss under Rule 12(b)(1), finding that the dispute was minor and did not fall within any exceptions allowing for judicial intervention.On appeal, the United States Court of Appeals for the Fifth Circuit reviewed whether the district court properly dismissed the case for lack of subject-matter jurisdiction. The Fifth Circuit affirmed the district court’s decision, holding that the dispute was a minor one under the RLA because it could be resolved by interpreting the LCA and CBA, and that none of the exceptions to exclusive arbitral jurisdiction applied. The court also found no sufficient evidence of anti-union animus to invoke an exception to arbitral exclusivity. View "Reardon v. American Airlines" on Justia Law

A former employee of a bank holding company, who participated in a company-sponsored retirement savings plan, brought suit alleging that the bank, the plan’s administrative committee, and a subsidiary breached their fiduciary duties under ERISA, resulting in financial loss to his plan distribution. After the employee’s separation and payout, the company amended the plan in early 2024 to add a retroactive arbitration clause that required all claims to proceed individually in arbitration, barred class or representative actions, and included a jury trial waiver and a provision that only individual relief could be awarded.The United States District Court for the Western District of Texas denied the defendants’ motion to compel arbitration, holding that the arbitration agreement was not valid under Texas law due to lack of consideration. The company appealed, arguing that the plan’s consent, not the individual participant’s, was sufficient to bind parties to arbitration for claims brought on behalf of the plan under 29 U.S.C. § 1132(a)(2), and that the arbitration clause was enforceable. The company also preemptively addressed potential objections under the effective vindication doctrine and claims that the arbitration provisions unlawfully limited statutory remedies.The United States Court of Appeals for the Fifth Circuit reversed the denial of arbitration as to the § 1132(a)(2) claim, holding that the plan’s consent through its unilateral amendment provision was sufficient to bind the participant to arbitration for plan-based claims, but affirmed the denial as to the participant’s individual claims because he had not consented. The court further held that the arbitration clause’s prohibition on representative actions and its limitation to individual relief violated the effective vindication doctrine, and voided the standard-of-review provision to the extent it applied to fiduciary-breach claims. The case was remanded for the district court to determine whether the offending arbitration provisions could be severed. View "Parrott v. International Bank" on Justia Law

The dispute centers on two neighboring property owners at Priest Lake, Idaho, whose properties are subject to several easements, and who have a history of disagreements concerning the use of a shared beach, lake access, and parking. The parties previously reached a court-mediated settlement agreement addressing these issues, which included a provision for future mediation and arbitration of disputes. Disagreements soon arose, particularly over the construction of a patio by one owner, leading the parties to arbitration as provided by their agreement. The arbitrator, after considering substantial evidence and briefing, ruled in favor of one party on all contested issues, including the patio’s location and construction, the use of easements, and parking arrangements.Prior to this appeal, the District Court of the First Judicial District, Bonner County, reviewed a motion to vacate the arbitration award. The moving party argued that the arbitrator exceeded his authority and was biased, primarily because the award was unfavorable and allegedly altered the terms of the court-approved settlement agreement. After considering the arguments, the district court denied the motion, finding that the arbitrator had acted within the scope of his authority and that no evidence of bias was presented.Upon review, the Supreme Court of the State of Idaho affirmed the district court’s decision. The court held that under Idaho’s Uniform Arbitration Act, judicial review of arbitration awards is extremely limited and does not allow for overturning an award simply due to alleged errors in law or fact, or because the outcome was unfavorable. The court found no evidence that the arbitrator exceeded his authority or acted with bias. Additionally, the court awarded attorney fees on appeal to the prevailing party under Idaho Code section 12-121, concluding the appeal was frivolous and without foundation. The district court’s denial of the motion to vacate was affirmed. View "Khalsa v. Ridnour" on Justia Law

The case centers around an accrediting agency’s decision to withdraw accreditation from an online university operated by a nonprofit educational organization. After years of below-benchmark graduation and employment rates, probation, and repeated warnings, the accrediting agency concluded the university was not compliant with its accreditation standards. The university responded by investing in improvement initiatives and shifting enrollment to a single online institution, but continued to struggle with student achievement. When accreditation was finally withdrawn, the university appealed internally and subsequently sought binding arbitration, arguing that the agency’s process was unfair, especially in its refusal to consider evidence about probationary treatment of other schools.Following arbitration, the arbitrator affirmed the agency’s decision, finding substantial evidence to support the withdrawal and concluding that the excluded evidence regarding other schools was irrelevant. The university then filed a motion to vacate the arbitration award and a complaint in the United States District Court for the Eastern District of Virginia, asserting due process violations and tortious interference. The district court denied the motion to vacate and granted judgment on the pleadings for the accrediting agency, holding that the university’s claims amounted to an impermissible collateral attack on the arbitration award, barred by the exclusivity provisions of the Federal Arbitration Act.On appeal, the United States Court of Appeals for the Fourth Circuit reviewed the district court’s rulings de novo. It affirmed both the denial of the motion to vacate and the grant of judgment on the pleadings. The Fourth Circuit held that the arbitration process did not deprive the university of a fair hearing and that the university’s complaint constituted an impermissible collateral attack on the arbitration award. The court formally adopted the impermissible-collateral-attack rule, concluding that such claims must be dismissed and the district court’s judgment was affirmed. View "Center for Excellence v. Accreditation Alliance" on Justia Law

Lanesborough 2000, LLC and Nextres, LLC entered into a loan agreement for the funding of a self-storage facility in Corning, New York. The deal included an arbitration agreement that required disputes to be resolved by binding arbitration. Lanesborough alleged that Nextres breached the agreement by failing to disburse loan funds as promised. An arbitrator found in favor of Lanesborough, awarding consequential damages, declaratory and injunctive relief, and attorney’s fees based on Nextres’s bad faith conduct. The arbitration agreement contained a waiver of the “right to appeal,” but did not specify its scope.The United States District Court for the Southern District of New York partially confirmed the arbitrator’s awards. It confirmed the awards of consequential damages, declaratory relief, and attorney’s fees, finding that the fee award was permissible because it was based on a finding of bad faith. The District Court also granted Lanesborough’s requests for injunctive relief by ordering Nextres to comply with the loan agreement and enjoining Nextres from pursuing foreclosure actions, including a pending state court foreclosure against a related party. The District Court awarded Lanesborough post-award prejudgment interest and stayed enforcement of its judgment pending appeal.On appeal, the United States Court of Appeals for the Second Circuit first held that the parties’ contractual waiver of the “right to appeal” was ambiguous and not sufficiently clear or unequivocal to preclude appellate review. On the merits, the Second Circuit affirmed the district court’s confirmation of the arbitrator’s awards and its grant of post-award prejudgment interest. However, it vacated the district court’s injunction barring the state-court foreclosure action because the lower court had not considered whether the injunction was consistent with the Anti-Injunction Act. The case was remanded for further proceedings on that issue. View "Lanesborough 2000, LLC v. Nextres, LLC" on Justia Law

Premium Healthcare Solutions, LLC, an Illinois company, had two competing judgment creditors: Vivek Bedi and MedLegal Solutions, Inc. Bedi obtained a state court judgment against “Premier Healthcare Solutions, LLC” in 2022, which was a misnomer for Premium. His lien on Premium’s assets was thus not discoverable to other creditors. MedLegal, a medical billing company, later secured an arbitration award and a federal court judgment against Premium in 2024 after discovering Premium had breached their contract. Both Bedi and MedLegal initiated collection efforts targeting Premium’s assets, particularly its accounts receivable managed by third parties.After Bedi discovered the misnomer in his judgment, he obtained a corrective order in Illinois state court in September 2024, amending his judgment nunc pro tunc to name Premium as the debtor and making the correction effective as of the original judgment date. Concerned that Bedi’s corrected judgment might threaten its priority, MedLegal sought a federal court order establishing its claim as superior. In the United States District Court for the Northern District of Illinois, Bedi intervened but focused his opposition on jurisdictional grounds, invoking the Rooker-Feldman doctrine. The district court rejected this argument and granted MedLegal’s motion for partial summary judgment, ruling MedLegal’s interest as superior. The court subsequently issued a turnover order requiring certain third parties to transfer Premium’s assets to MedLegal.On appeal, the United States Court of Appeals for the Seventh Circuit held that appellate jurisdiction was proper because the February 11, 2025, turnover order was a final decision. The Seventh Circuit also found that Rooker-Feldman did not bar the district court’s jurisdiction, as MedLegal was not a party to the prior state court action. Finally, because Bedi failed to raise any substantive arguments on priority in the district court, the Seventh Circuit affirmed the district court’s turnover order in favor of MedLegal. View "Bedi v Premium Healthcare Solutions LLC" on Justia Law

A prospective employee, Fuentes, applied for work at Empire Nissan and signed an “Applicant Statement and Agreement” that included a mandatory arbitration provision. The document was printed in an extremely small, blurry font that was nearly unreadable and contained a lengthy, complex paragraph filled with legal jargon and statutory references. Fuentes was given only five minutes to review the entire employment packet, was not offered an opportunity to ask questions, and did not receive a copy. Later, she signed two confidentiality agreements that appeared to allow Empire Nissan to seek judicial remedies, not mentioning arbitration. After working at Empire Nissan for over two years, Fuentes was terminated following a request for extended medical leave and subsequently sued the company for wrongful discharge and related claims.Empire Nissan moved to compel arbitration. The Los Angeles County Superior Court denied the motion, finding the arbitration agreement unconscionable due to its illegibility, complexity, and the lack of a meaningful opportunity for review or negotiation, establishing a high degree of procedural unconscionability and a low to moderate degree of substantive unconscionability. The court also found that the confidentiality agreements appeared to carve out certain claims from arbitration for Empire Nissan. The Second District Court of Appeal reversed, holding that “tiny and unreadable print” concerns procedural unconscionability only—not substantive—and, interpreting the agreements as requiring arbitration, found no substantive unconscionability and declined to address procedural unconscionability.The Supreme Court of California reviewed the case and held that a contract’s format, such as illegibility, is generally irrelevant to substantive unconscionability, which concerns the fairness of the contract’s terms. However, courts must more closely scrutinize the terms of contracts that are difficult to read for unfairness or one-sidedness when there is high procedural unconscionability. The Court reversed the Court of Appeal’s judgment and remanded the matter to the trial court for further proceedings consistent with its clarified standards. View "Fuentes v. Empire Nissan" on Justia Law