Justia Arbitration & Mediation Opinion Summaries

Amanda Leigh Huskins and Jay R. Huskins purchased a house from Mungo Homes, LLC, and signed a contract that included an arbitration clause. This clause required any demand for arbitration to be made within ninety days, effectively shortening the statute of limitations for any claims. The Huskins later filed a lawsuit against Mungo Homes, alleging various claims related to the sale. Mungo Homes moved to dismiss the complaint and compel arbitration based on the contract. The Huskins argued that the arbitration clause was unconscionable and unenforceable.The Circuit Court of Richland County granted Mungo Homes' motion to compel arbitration. The Huskins appealed, and the Court of Appeals found the clause limiting the statute of limitations to be unconscionable and unenforceable. However, the Court of Appeals severed this clause from the rest of the arbitration agreement and affirmed the order compelling arbitration.The Supreme Court of South Carolina reviewed the case and reversed the decision of the Court of Appeals. The Supreme Court held that the clause shortening the statute of limitations was void and illegal as a matter of public policy, and therefore unenforceable. The court determined that the absence of a severability clause, the presence of a merger clause, and the fact that the contract was an adhesion contract indicated that the parties did not intend for the arbitration agreement to stand if any part of it fell. Consequently, the entire arbitration agreement was deemed unenforceable. The case was remanded to the circuit court for further proceedings, with the remainder of the contract unaffected by this ruling. View "Huskins v. Mungo Homes, LLC" on Justia Law

Karl Hansen sued Tesla, Inc., its CEO Elon Musk, and U.S. Security Associates (USSA), alleging retaliation for reporting misconduct at Tesla. Hansen, initially hired by Tesla, was later employed by USSA. He reported thefts, narcotics trafficking, and improper contracts at Tesla, and filed a report with the SEC. After Musk saw Hansen at the Gigafactory and demanded his removal, USSA reassigned Hansen, which he claimed was retaliatory.The United States District Court for the District of Nevada ordered most of Hansen’s claims to arbitration, except his Sarbanes-Oxley Act (SOX) claim. The arbitrator dismissed Hansen’s non-SOX claims, finding no contractual right to work at the Gigafactory and no reasonable belief of securities law violations. The district court confirmed the arbitration award and dismissed Hansen’s SOX claim, holding that the arbitrator’s findings precluded relitigation of issues essential to the SOX claim.The United States Court of Appeals for the Ninth Circuit affirmed the district court’s dismissal. The court held that while an arbitrator’s decision cannot preclude a SOX claim, a confirmed arbitral award can preclude relitigation of issues underlying such a claim. The court found that the arbitrator’s decision, which concluded Hansen had no reasonable belief of securities law violations, precluded his SOX claim. The court also held that the arbitrator’s findings on Hansen’s state law claims had a preclusive effect, as they were confirmed by the district court. Thus, the Ninth Circuit affirmed the dismissal of Hansen’s complaint. View "Hansen v. Musk" on Justia Law

A woman and a man were married in July 2003 and separated in March 2022. Before their marriage, the woman had an employer-provided deferred compensation plan with a balance between $63,131.23 and $67,536.80. During the marriage, she continued contributing to the plan until 2006. She made significant withdrawals from the account for marital expenses, including $40,000 in 2009 and $75,000 in 2016. In 2018, the remaining funds were transferred to a USAA account and then to a Charles Schwab IRA account in 2020, which was valued at $102,100.55 at the time of trial. The parties disputed whether these funds were marital or nonmarital.The parties engaged in mediation in March 2022 and appeared before the superior court to memorialize their agreement. The court noted that the parties had agreed to allocate the assets and debts of the marriage with one exception related to the disputed account. The woman was to provide additional information to confirm that the marital portion of the account had already been spent. However, the parties had conflicting interpretations of this proviso, leading to further disputes.The Alaska Supreme Court reviewed the case. The court found that the superior court had erred in its legal conclusions. It ruled that the use of some funds for marital expenditures did not demonstrate an intent to donate the entire account to the marriage. Additionally, the court held that when a mixed account contains both premarital and marital funds, the default rule is "first in, last out," meaning premarital funds are not withdrawn until all marital funds have been exhausted. The court vacated the superior court's decision and remanded the case for further proceedings to determine the respective separate and marital portions of the account. View "Rush v. Rush" on Justia Law

Sky Moore rented a car from Budget Car and Truck Rental of Las Vegas, owned by Malco Enterprises of Nevada, Inc. Sky named Daniel Moore as an additional driver, who later rear-ended Alelign Woldeyohannes while intoxicated. Alelign sued Daniel for negligence and Malco for negligent entrustment. Daniel did not respond, resulting in a default judgment against him. The case proceeded to arbitration, where Alelign was awarded $32,680.26. Malco requested a trial de novo, leading to a short trial where the judge entered a default judgment against Daniel for $37,886.82.Alelign moved to apply the default judgment against Malco under NRS 482.305(1), which holds short-term lessors liable for damages if they fail to provide minimum insurance coverage. Malco opposed, arguing that NRS 482.305 is preempted by the Graves Amendment, which prohibits states from holding vehicle lessors vicariously liable without negligence or wrongdoing. The short trial judge granted Alelign’s motion, and the district court affirmed, concluding that NRS 482.305 is a financial responsibility law preserved by the Graves Amendment’s savings clause.The Supreme Court of Nevada reviewed the case and affirmed the district court’s judgment. The court held that NRS 482.305 is not preempted by the Graves Amendment because it is a financial responsibility law preserved by the savings clause under 49 U.S.C. § 30106(b). The court emphasized that NRS 482.305 imposes a legal requirement for lessors to provide minimum coverage, rather than a mere financial inducement, and does not impose strict vicarious liability on lessors. View "Malco Enterprises of Nevada, Inc. vs. Woldeyohannes" on Justia Law

Plaintiffs BSI Group LLC and International Business Solutions Group, LLC, financial service companies, contracted with EZBanc Corp for financial services. EZBanc collaborated with Solid Financial Technologies, Inc. and Evolve Bank & Trust to provide these services. Plaintiffs alleged that Defendants mishandled funds, withdrawing nearly $9 million from their accounts and failing to process approximately $300,000 in third-party payments. Defendants sought to compel arbitration, arguing that although EZBanc’s contracts with Plaintiffs lacked an arbitration clause, the contracts referred to other terms that included such a clause.The United States District Court for the Eastern District of Arkansas denied Defendants' motions to compel arbitration. The court found that the language in the contracts was too vague to incorporate the Evolve Agreement by reference and that there was a factual dispute regarding whether the terms of the Evolve Agreement were known or easily available to Plaintiffs.The United States Court of Appeals for the Eighth Circuit reviewed the case. The court held that the district court erred in its interpretation of the contract and its denial of the motion to compel arbitration. The appellate court found that there were material disputes of fact regarding whether the Evolve Agreement was effectively communicated to Plaintiffs, which necessitated a trial. Consequently, the Eighth Circuit reversed the district court’s decision and remanded the case for trial to determine if Plaintiffs agreed to be bound by the terms in the Evolve Agreement through the “pop-up” or other aspects of EZBanc’s website. View "BSI Group LLC v. Solid Financial Technologies Inc." on Justia Law

The City and County of Butte-Silver Bow, Montana (BSB) hired Rhonda Staton as a police officer in 2001, promoting her to detective in 2008. Staton received two verbal reprimands in 2017 and 2018 for tardiness and refusal to investigate underage drinking, respectively. In 2019, Staton filed a hostile work environment complaint, which was not substantiated. In early 2020, Staton lost her department-issued taser, leading to a Fit for Duty Evaluation (FFDE) by Dr. George Watson, who found her unfit for duty. Staton was terminated in August 2020 based on this evaluation and her performance issues.The Butte Police Protective Association (BPPA) filed a grievance on Staton’s behalf, leading to arbitration. Arbitrator A. Ray McCoy found Watson’s FFDE unreliable and ruled that BSB had not established just cause for Staton’s termination. McCoy ordered Staton’s reinstatement, back pay, and an additional evaluation to determine rehabilitative strategies. BSB did not comply with the reinstatement or compensation but arranged for an Independent Medical Evaluation (IME) by Dr. William Patenaude, which did not provide a diagnosis or rehabilitative recommendations.BSB petitioned to vacate the arbitration award, arguing it was a manifest disregard of Montana law. The Second Judicial District Court denied the motion to vacate but remanded the matter to the arbitrator to reconcile the award with Staton’s inability to return to service. BSB appealed.The Supreme Court of the State of Montana reviewed the case and held that the arbitrator’s award did not violate Montana law or public policy. The court found that the District Court abused its discretion by remanding the matter, as it exceeded the permissible scope of review for arbitration awards. The Supreme Court reversed the District Court’s order and remanded with instructions to confirm the original arbitration award. View "Butte v Butte Police" on Justia Law

Edgar Gonzalez worked for Nowhere Santa Monica, one of ten related LLCs operating Erewhon markets in Los Angeles. As a condition of employment, Gonzalez signed an arbitration agreement with Nowhere Santa Monica. He later filed a lawsuit against all ten LLCs, alleging various Labor Code violations and claiming they were joint employers. The non-Santa Monica entities moved to compel arbitration based on the agreement with Nowhere Santa Monica, but Gonzalez opposed, arguing they were not parties to the agreement.The Superior Court of Los Angeles County granted the motion to compel arbitration for Nowhere Santa Monica but denied it for the other entities, finding no evidence that Gonzalez's claims against the non-signatory defendants were intertwined with the arbitration agreement. Gonzalez then dismissed his complaint against Nowhere Santa Monica, and the other entities appealed.The California Court of Appeal, Second Appellate District, Division One, reviewed the case. The court held that Gonzalez was equitably estopped from avoiding arbitration with the non-Santa Monica entities because his claims against them were intimately founded in and intertwined with the employment agreement with Nowhere Santa Monica. The court reasoned that Gonzalez's joint employment theory inherently linked his claims to the obligations under the employment agreement, which contained the arbitration clause. Therefore, the court reversed the lower court's order denying the motion to compel arbitration for the non-Santa Monica entities. View "Gonzalez v. Nowhere Beverly Hills LLC" on Justia Law

Stephnie Trujillo filed a complaint against her former employer, J-M Manufacturing Company (JMM), and four former coworkers, alleging unlawful sexual/gender discrimination, harassment, failure to prevent such acts, retaliation, and seeking injunctive relief. The parties negotiated and entered into a post-dispute stipulation for arbitration, which was approved by the trial court. Arbitration commenced, and JMM paid the arbitrator’s invoices timely for over a year. However, JMM paid one invoice late, leading Trujillo to file a motion to withdraw from arbitration under California Code of Civil Procedure section 1281.98, which the trial court granted.The Superior Court of Los Angeles County granted Trujillo’s motion to withdraw from arbitration, finding that JMM’s late payment constituted a material breach under section 1281.98, despite acknowledging that the delay did not prejudice Trujillo. The court lifted the stay on trial court proceedings, allowing the case to proceed in court.The California Court of Appeal, Second Appellate District, Division Eight, reviewed the case and reversed the trial court’s decision. The appellate court held that section 1281.98 did not apply because the parties had entered into a post-dispute stipulation to arbitrate, not a pre-dispute arbitration agreement. Additionally, JMM was not considered the “drafting party” as defined by section 1280, subdivision (e), since the stipulation was primarily drafted by Trujillo. The appellate court remanded the case with instructions to deny Trujillo’s motion to withdraw from arbitration and to reinstate the stay of trial court proceedings pending the completion of arbitration. View "Trujillo v. J-M Manufacturing Co., Inc." on Justia Law

Bluebird Property Rentals, LLC, a Montana limited liability company, and its sole member, Alaina Garcia, received a $450,000 loan from World Business Lenders, LLC (WBL) and its subsidiaries in December 2020. The loan, secured by real property in Gallatin County, had an annual percentage rate of approximately 85% and required weekly payments. Bluebird signed several agreements, including a Business Promissory Note and Security Agreement, which listed Axos Bank as the lender, although Bluebird had no prior dealings with Axos. After falling behind on payments, Bluebird sold the collateral property in a distress sale and paid off the loan in October 2022, having paid a total of $945,990.39.Bluebird sued WBL, alleging that WBL engaged in a "rent-a-bank" scheme to evade Montana's usury laws, claiming that Axos Bank was merely a front and that WBL was the true lender. Bluebird sought a declaration that Montana law applied and sought double the interest paid above the maximum allowable rate under Montana law. WBL filed a motion to dismiss and compel arbitration based on the agreements' arbitration and choice-of-law provisions.The Eighteenth Judicial District Court denied WBL's motion, ruling that Montana law must be applied to determine the enforceability of the arbitration and choice-of-law provisions. The court treated WBL's motion as a Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction and found that the validity of the arbitration clause was for the court to decide, not an arbitrator.The Supreme Court of the State of Montana affirmed the District Court's decision, holding that the general rule that courts determine arbitrability was not overcome by the facts of this case. The court found no clear and unmistakable evidence that the parties agreed to arbitrate arbitrability, despite WBL's arguments regarding the incorporation of AAA rules. The court did not address the merits of the enforceability of the arbitration agreement or the choice-of-law provision. View "Bluebird v. World Business Lenders" on Justia Law

In July 2020, the plaintiff used Uber's app to request a ride. Upon being dropped off in the middle of a roadway, she was struck by another vehicle and sustained injuries. She filed a personal injury lawsuit against Uber in November 2020, serving the complaint via the New York Secretary of State. Uber did not respond within the required 30 days, allegedly due to mail processing delays caused by the COVID-19 pandemic.In January 2021, Uber updated its terms of use, including an arbitration agreement, and notified users via email. The plaintiff received and opened this email. When she next logged into the Uber app, she was presented with a pop-up screen requiring her to agree to the updated terms to continue using the service. She checked a box and clicked "Confirm," thereby agreeing to the terms, which included a clause delegating the authority to resolve disputes about the agreement's applicability and enforceability to an arbitrator.The plaintiff moved for a default judgment in March 2021, and Uber responded by asserting that she had agreed to arbitrate her claims. Uber then sent a Notice of Intent to Arbitrate. The plaintiff moved to stay Uber's arbitration demand, arguing that the arbitration agreement was unconscionable and violated ethical rules. Uber cross-moved to compel arbitration.The Supreme Court granted Uber's motion to compel arbitration, finding that the plaintiff was on inquiry notice of the arbitration agreement and had assented to it. The Appellate Division affirmed, stating that the plaintiff's challenges to the agreement's validity must be decided by an arbitrator due to the delegation provision.The New York Court of Appeals affirmed the Appellate Division's decision, holding that the clickwrap process used by Uber resulted in a valid agreement to arbitrate. The court also held that the delegation provision was valid and that the plaintiff's challenges to the arbitration agreement's enforceability should be resolved by an arbitrator. The court found no abuse of discretion in the lower court's decision not to sanction Uber for the alleged ethical violation. View "Wu v. Uber Tech., Inc." on Justia Law