Justia Arbitration & Mediation Opinion Summaries

An employee, Brandon Smith, was fired by Kansas City Southern Railway Company (KCSR) in 2018. His union, the International Association of Sheet Metal, Air, Rail, and Transportation Workers, Transportation Division (SMART-TD), challenged the dismissal under the collective-bargaining agreement (CBA) and the Railway Labor Act (RLA). The dispute went to arbitration, and in 2022, the National Railroad Adjustment Board (Board) overturned Smith's discharge, ordering his reinstatement with full benefits and back pay without deductions for outside earnings.The district court enforced the arbitration award, rejecting KCSR's argument that the award was ambiguous and required clarification. The court ordered KCSR to provide Smith with back pay without deductions and vacation benefits, and also awarded attorney fees to SMART-TD. KCSR appealed, arguing that the district court lacked jurisdiction and should have remanded the case to the Board for interpretation of the ambiguous award.The United States Court of Appeals for the Eighth Circuit reviewed the case. The court found that the district court erred in enforcing the award without remanding it to the Board for clarification, particularly regarding the vacation benefits, which were not explicitly addressed in the award. The court noted that the district court overstepped by interpreting the CBA, which is outside its jurisdiction under the RLA. The court also acknowledged that the Board had since clarified the back pay issue, rendering that part of the dispute moot.The Eighth Circuit reversed and vacated the district court's judgments, including the award of attorney fees, and remanded the case for further proceedings consistent with its opinion. The court emphasized the need for the Board to interpret any ambiguities in the arbitration award. View "Assoc.of Sheet Metal Workers v. K.C. Southern Railway" on Justia Law

Six small businesses entered into two contracts with Bank of America: one for deposit accounts, which included an arbitration provision, and another for Paycheck Protection Program (PPP) loans, which did not include an arbitration clause. When disputes arose regarding the bank's handling of the PPP loans, the businesses sued the bank in federal court. The bank moved to compel arbitration based on the deposit agreements.The United States District Court for the District of Maryland granted the bank's motion to compel arbitration and dismissed the complaint. The court concluded that the deposit agreements contained a valid and enforceable delegation clause, which required that any disputes about the arbitrability of the claims be decided by an arbitrator, not the court.The United States Court of Appeals for the Fourth Circuit reviewed the case and affirmed the district court's decision. The Fourth Circuit agreed that the deposit agreements clearly and unmistakably delegated the question of arbitrability to the arbitrator. The court noted that the businesses failed to properly raise any fourth-order disputes, which would involve determining which of the two contracts governed the arbitrability of the disputes. The court also found that the businesses did not specifically challenge the validity of the delegation clause itself, which is necessary to avoid its application.The Fourth Circuit held that the district court correctly compelled arbitration and dismissed the complaint, as the businesses did not request a stay of the proceedings pending arbitration. The court emphasized that the businesses' arguments about the scope of the arbitration provision were matters for the arbitrator to decide, given the valid delegation clause in the deposit agreements. View "Modern Perfection, LLC v. Bank of America, N.A." on Justia Law

Karen Ashley, the former Chief Nursing Officer of Clay County Memorial Hospital (CCMH), raised concerns about patient safety issues, including missing fentanyl and procedural errors in blood transfusions. She reported these issues internally and publicly at a CCMH Board meeting. Ashley also advocated for CCMH to terminate its contract with Concord Medical Group PLLC and partner with ACPHealth. Following this advocacy, Ashley alleges that the County, CCMH, and the Foundation retaliated against her by terminating her employment, violating her First Amendment rights.Ashley filed suit against the County and Concord Medical Group, alleging retaliation under the Texas Occupations Code and 42 U.S.C. § 1983. The County moved to dismiss, asserting it was not Ashley’s employer and had taken no adverse actions against her. Ashley amended her complaint to add CCMH as a defendant and narrowed her claims against the County. The County maintained it was not Ashley’s employer and moved to dismiss on governmental immunity grounds. CCMH invoked an arbitration clause in Ashley’s employment agreement and moved to compel arbitration. The district court compelled the County to arbitration alongside CCMH and denied the County’s motion to dismiss as moot.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court held that the district court erred by not addressing the County’s governmental immunity defense before compelling arbitration. The appellate court reversed the district court’s order compelling arbitration and remanded the case with instructions for the district court to resolve the issue of governmental immunity as it pertains to the County’s motion to dismiss before ruling on the motion to compel arbitration. View "Ashley v. Clay County" on Justia Law

Digital Forensics Corporation, LLC ("DFC") was retained by King Machine, Inc. and Hartford Fire Insurance Company to perform electronic-discovery services related to a discovery order in litigation in the Etowah Circuit Court. The plaintiffs alleged that DFC misrepresented its capabilities on its website and through its representatives, leading them to believe DFC could perform the required services. Despite paying DFC $35,291.93, the plaintiffs claimed DFC failed to deliver the data in a usable format, resulting in additional costs and sanctions totaling $50,291.93, plus $107,430.44 in attorneys' fees and expenses.The plaintiffs filed a lawsuit in the Jefferson Circuit Court, alleging breach of contract and fraud in the inducement. DFC removed the case to federal court, which later remanded it back to the circuit court. DFC then filed a motion to compel arbitration based on a clause in their agreement, which included a multi-step dispute resolution process culminating in binding arbitration. The plaintiffs opposed the motion, arguing that the arbitration clause was fraudulently induced.The Jefferson Circuit Court denied DFC's motion to compel arbitration. DFC appealed to the Supreme Court of Alabama, arguing that the arbitration provision should be enforced. The Supreme Court of Alabama reviewed the case de novo and determined that the plaintiffs' fraud claims were directed at the entire agreement, not solely the arbitration clause. Therefore, the allegations of fraud in the inducement did not provide a basis to avoid arbitration.The Supreme Court of Alabama reversed the circuit court's order denying DFC's motion to compel arbitration and remanded the case for further proceedings consistent with its opinion. View "Digital Forensics Corporation, LLC v. King Machine, Inc." on Justia Law

Therese Hood was involved in a three-car accident and subsequently filed multiple lawsuits. Hood's underinsured motorist (UIM) carrier, United Services Automobile Association (USAA), provided her with counsel in a lawsuit filed by the Kucks, who were also involved in the accident. Hood also sued Johnson, the driver who initially hit her, and USAA defended Johnson under Hood's UIM policy. During mediation, USAA offered $200,000, but Hood did not accept it, and the case went to trial, where Hood won. Hood then filed a third lawsuit against USAA, alleging bad faith, negligence, and other claims, arguing that USAA took disparate positions on her headlight use and did not offer its full settlement authority during mediation.The Circuit Court granted summary judgment for USAA on several claims and directed a verdict on others, leaving only the bad faith and negligence claims for the jury. The jury found in favor of USAA on the bad faith claim but in favor of Hood on the negligence claim, awarding her damages. The trial court granted USAA's motion for judgment notwithstanding the verdict (JNOV) on the negligence claim, stating that a first-party insured could only bring a bad faith claim, not a negligence claim. The Court of Appeals affirmed this decision, holding that a first-party insured has no separate cause of action in negligence under the duty of good faith and fair dealing.The South Carolina Supreme Court reviewed the case and affirmed the Court of Appeals' decision. The court held that South Carolina law does not recognize a separate negligence claim between an insured and insurer, only a bad faith claim. The court also found that USAA did not act in bad faith during mediation or by taking a position on Hood's headlight use in the UIM action. The court concluded that USAA's actions were within its rights and that Hood's claims were without merit. View "Hood v. USAA" on Justia Law

The plaintiffs, Robert and Stephen Samuelian, co-founded Life Generations Healthcare, LLC (the Company) and later sold a portion of their ownership interest. The Company adopted a new operating agreement that included a noncompetition provision. The Samuelians challenged the enforceability of this provision in arbitration, where the arbitrator found it invalid per se under California Business and Professions Code section 16600, as it arose from the sale of a business interest. The arbitrator also found the corporate opportunities provision invalid and ruled the Company’s forced buyout of the Samuelians was invalid.The Superior Court of Orange County reviewed the arbitrator’s ruling de novo, as the parties had agreed the arbitrator could not commit errors of law. The court confirmed the arbitrator’s award, finding no legal error in applying the per se standard to the noncompetition provision and agreeing with the arbitrator’s findings on the invalidity of the corporate opportunities provision and the lack of fiduciary duties owed by the Samuelians.The California Court of Appeal, Fourth Appellate District, Division Three, reviewed the case. The court held that the arbitrator erred in applying the per se standard to the noncompetition provision. The court determined that the reasonableness standard should apply to noncompetition agreements arising from the partial sale of a business interest, as such agreements may have procompetitive benefits and are not inherently anticompetitive. The court also found that an operating agreement can impose fiduciary duties on members in a manager-managed company.The Court of Appeal reversed the trial court’s judgment confirming the arbitration award and directed the trial court to deny the Samuelians’ petition to confirm the award and grant the Company’s motion to vacate the entire award, including the portion awarding attorney fees and costs. View "Samuelian v. Life Generations Healthcare, LLC" on Justia Law

Sarah Anoke and other employees initiated arbitration proceedings against their employer, X (comprising Twitter, Inc., X Holdings I, Inc., X Holdings Corp., X Corp., and Elon Musk), to resolve employment-related disputes. The arbitration provider issued an invoice for $27,200, which was mistakenly paid by Anoke’s counsel. The arbitration provider marked the invoice as paid and closed, refunded the payment to Anoke’s counsel, and issued a new invoice to X, which X paid within 30 days.Anoke petitioned the Superior Court of the City and County of San Francisco for an order compelling X to pay their arbitration-related attorney fees and costs, arguing that X’s payment was untimely as it was not made within 30 days of the first invoice. The superior court denied the petition, reasoning that since the arbitrator nullified the first invoice after Anoke’s attorney mistakenly paid it and X timely paid the second invoice, X met the statutory deadline.The Court of Appeal of the State of California, First Appellate District, Division Five, reviewed the case. The court held that the statutory deadline for payment of arbitration fees under Code of Civil Procedure section 1281.97 was not violated. The court found that the first invoice was paid by Anoke’s counsel, and the second invoice was paid by X within the 30-day period. The court concluded that the arbitrator acted within its authority by issuing a second invoice after refunding the mistaken payment. The court affirmed the superior court’s order denying Anoke’s motion to compel arbitration with attorney fees and costs. View "Anoke v. Twitter" on Justia Law

Trudy Maxwell, a 93-year-old resident of Atria Park of San Mateo, died after consuming an industrial strength cleaner mistakenly served as a beverage by an Atria employee. Trudy’s eight children, including James Maxwell III, filed a lawsuit against Atria Management Company and related entities, alleging negligence, wrongful death, and elder abuse. James III, holding a durable power of attorney (DPOA), had signed an arbitration agreement with Atria, which the defendants sought to enforce.The San Mateo County Superior Court denied the defendants' motion to compel arbitration, ruling that James III was not authorized to sign the arbitration agreement because he did not have the authority to make health care decisions for Trudy. The court also found that the arbitration agreement did not bind Trudy’s children regarding their wrongful death claims and that California procedural rules, including section 1281.2(c), were not preempted by the Federal Arbitration Act (FAA).The California Court of Appeal, First Appellate District, Division One, reviewed the case. The court reversed the trial court’s order denying arbitration and remanded the case for further proceedings. The appellate court instructed the trial court to reconsider the validity of the arbitration agreement in light of the California Supreme Court’s decision in Harrod v. Country Oaks Partners, LLC, which held that agreeing to an optional arbitration agreement is not a health care decision. The appellate court also affirmed that the wrongful death claims of Trudy’s children are not subject to arbitration, as they are independent and personal claims not bound by the arbitration agreement. The court further held that section 1281.2(c) was not preempted by the FAA, allowing the trial court to stay or deny arbitration to avoid conflicting rulings. View "Maxwell v. Atria Management Co., LLC" on Justia Law

Petitioners Isai Lopez Rivera and Helen Espinosa purchased a new 2020 Ford Super Duty F-250 from Fairway Ford in San Bernardino, financing the purchase through the dealer. They received a 3-year/36,000-mile warranty from Ford Motor Company (FMC) but did not buy an optional service contract. After experiencing mechanical issues with the truck, they sought repairs at Ford of Ventura, an authorized service center. When the repairs failed, they filed a lawsuit under the Song-Beverly Consumer Warranty Act against FMC and Ford of Ventura, but not against the selling dealer, Fairway Ford.The trial court granted FMC's motion to compel arbitration based on an arbitration provision in the sale contract between the petitioners and the non-party dealer. The court found that FMC could enforce the arbitration provision as a third-party beneficiary and that the petitioners were estopped from refusing arbitration. Petitioners moved for reconsideration twice, citing appellate decisions that disapproved of the precedent relied upon by the trial court, but both motions were denied.The California Court of Appeal, Second Appellate District, reviewed the case. The court concluded that FMC and Ford of Ventura are not third-party beneficiaries of the sale contract and that the petitioners are not estopped from objecting to arbitration. The court found that the sale contract did not show an intent to benefit FMC and that the petitioners' claims against FMC and Ford of Ventura were independent of the sale contract. The appellate court granted the petition for a writ of mandate, directing the trial court to vacate its orders compelling arbitration and denying reconsideration, and to enter a new order denying FMC's motion to compel arbitration. View "Rivera v. Superior Court" on Justia Law

Lisa Enmark was under an LPS conservatorship when she moved into a skilled nursing facility. Her father, Scott Enmark, signed two optional arbitration agreements with the facility as her representative. After Lisa died, her parents sued the facility's owners and operators, asserting both successor and individual claims. The defendants petitioned to compel arbitration, but the trial court denied the petition, finding no evidence of Scott’s authority to bind Lisa to arbitration on the successor claims and noting that neither Scott nor Lisa’s mother, Marilyn Warhol, signed the agreements in their individual capacities.The Superior Court of Los Angeles County found that Scott did not have the authority to sign the arbitration agreements on Lisa’s behalf and that Scott and Marilyn did not sign the agreements in their individual capacities. The court denied the petition to compel arbitration, leading the defendants to appeal the decision.The California Court of Appeal, Second Appellate District, reviewed the case. The court held that the LPS conservatorship order did not confer actual or ostensible authority on Scott to sign the arbitration agreements on Lisa’s behalf. The court also found that the execution of the arbitration agreements was not a health care decision and that Scott’s authority under the conservatorship did not extend to binding Lisa or her heirs to arbitration. Additionally, the court ruled that Scott and Marilyn’s wrongful death claim was not subject to arbitration as they did not sign the agreements in their individual capacities. The court affirmed the trial court’s order denying the petition to compel arbitration. View "Enmark v. KC Community Care" on Justia Law