Justia Arbitration & Mediation Opinion Summaries

In July 2003, Michael Bandler and Michael Bandler & Company, Inc., (collectively “Bandler”) sued Charter One for various claims based primarily on Charter One’s alleged failure to honor advertising promises and other representations in connection with Bandler’s checking account at Charter One. Charter One moved to dismiss the case on the ground that Bandler had failed to exhaust his contractual remedy of arbitration before the American Arbitration Association (AAA) as required by Bandler’s depositor agreements with Charter One.  The trial court granted Charter One’s motion to dismiss and indicated that the parties should arbitrate Bandler’s claims as agreed by contract.  The trial court issued a final judgment in favor of Charter One in November 2003, and subsequently denied Bandler’s post-judgment motions for relief. In November 2004, Bandler made a demand to Charter One to arbitrate under the arbitration clauses in his depositor agreement with Charter One, thereby initiating an arbitration proceeding before the AAA.  Bandler’s initial arbitration demand did not include any class-based claims. The issue before the Supreme Court was whether the superior court had authority to review questions regarding arbitrability in the midst of an arbitration, and outside of the specific review provisions in the Vermont Arbitration Act (VAA). Upon review, the Supreme Court concluded that it did not, and reversed the superior court’s ruling concerning the arbitrability of class claims in this case. View "Bandler v. Charter One Bank " on Justia Law

Morgan Keegan & Company, Inc. and Regions Bank (hereinafter referred to collectively as "Regions") appealed an order of the Baldwin Circuit Court which granted in part and denied in part their motions to compel arbitration in an action filed against them by Baldwin County Sewer Service, LLC ("BCSS"). In 2001 BCSS began discussing with AmSouth Bank ("AmSouth"), the predecessor-in-interest to Regions Bank, options to finance its existing debt. AmSouth recommended that BCSS finance its debt through variable-rate demand notes ("VRDNs").1 In its complaint, BCSS alleged that in late 2008 it received a notice of a substantial increase in the variable interest rates on its 2002, 2003, 2005, and 2007 VRDNs, which constituted BCSS's first notice that the interest-rate-swap agreements recommended by Regions did not fix the interest rate on the VRDNs but, instead, exposed BCSS to "an entirely new increased level of market risk in the highly complex derivative market." BCSS sued Regions Bank and Morgan Keegan asserting that Regions falsely represented to BCSS that swap agreements fixed BCSS's interest rates on all the BCSS debt that had been financed through the VRDNs. Following a hearing on the motions to compel arbitration, the trial court entered an order in which it granted the motions to compel arbitration as to BCSS's claims concerning the credit agreements but denied the motions to compel arbitration as to BCSS's claims concerning the failure of the swap transactions to provide a fixed interest rate. The trial court reasoned that the "Jurisdiction" clause in a master agreement, in combination with its merger clause, "prevent[ed] any argument that the VRDN arbitration agreement applies to disputes concerning the swap agreements" and that those clauses demonstrated that it was "the parties' intention, as it relates to the interest-swap agreement and any transaction related to that agreement, that the parties would not arbitrate but instead [any dispute] would be resolved by proceedings in a court of competent jurisdiction." Upon review, the Supreme Court concluded that Regions presented evidence of the existence of a contract requiring arbitration of the disputes at issue. The Court reversed the order of the trial court denying the motions to compel arbitration of BCSS's claims concerning the master agreement and the swap agreement and remanded the case for further proceedings. View "Regions Bank v. Baldwin County Sewer Service, LLC " on Justia Law

Defendant-Appellant Branch Banking & Trust Company (BB&T) appealed the denial of its motion to compel arbitration of a putative class action brought by Plaintiff-Appellee Lacy Baras, a customer of BB&T. Barras alleged in her complaint on behalf of herself and the class she sought to represent that BB&T charged her and others overdraft fees for payments from checking accounts even when the account contained sufficient funds to cover the payments. She also alleged that BB&T supplied inaccurate and misleading information about account balances, and failed to notify customers about changes to BB&T's policies for processing checking account transactions, thereby increasing overdraft charges assessed against customers. Barras asserted claims under the state Unfair Trade Practices Act for unfair and deceptive trade practices, breach of contract, breach of the covenant of good faith and fair dealing and unconscionability, and sought to certify a class of BB&T account holders who were likewise charged allegedly inflated overdraft fees. BB&T moved to compel arbitration of all of Barras's claims pursuant to a provision in its "Bank Services Agreement" (BSA). The district court denied BB&T's motion, holding that the arbitration agreement was unconscionable under state law, and could not be enforced. Before the Eleventh Circuit decided BB&T's appeal to that order, the Supreme Court decided "AT&T Mobility, LLC v. Concepcion" (131 S.Ct. 1740 (2011). The Eleventh Circuit remanded the case to the district court for reconsideration in light of that decision. On remand, BB&T renewed its motion to compel arbitration, and again the district court denied it. BB&T appealed that ruling, arguing that: (1) the question of whether the arbitration provision was enforceable must be resolved by an arbitrator; (2) the cost-and-fee shifting provision in the agreement that the district court held unconscionable did not apply to the arbitration provision; (3) "Concepcion" prohibited application of the state unconscionability doctrine to the arbitration provision; (4) the cost-and-fee shifting provision is not unconscionable; and (5) the cost-and-fee shifting privision was severable from the arbitration process. Taking each argument in turn, the Eleventh Circuit reversed the district court's decision and remanded the case with instructions to compel arbitration. View "Barras v. Branch Banking & Trust Co." on Justia Law

The United States Bankruptcy Appellate Panel of the Court of Appeals for the Ninth Circuit ("the BAP") certified a question to the Alabama Supreme Court: "In Alabama, is a 'default' judgment premised upon discovery sanctions or other post-answer conduct of the defendant sufficient to support the application of issue preclusion in a later proceeding?" Debtor-Defendant Anthony Malfatti was one of three principals of TA Financial Group ('TAF') purportedly designed to assist credit card holders in arbitration of disputes with the card issuers. The arbitration providers were selected by the card holders from a list provided by TAF. Among the arbitration providers was Arbitration Forum of America, Inc. ('AFOA'). AFOA was not conducting legitimate arbitrations; every arbitration resulted in an award in favor of the card holder, which was then reduced to judgment. Malfatti claims he was unaware that AFOA's practices and the judgments stemming therefrom were illegitimate. At some time after the banks involved learned of the judgments, they filed cross-complaints against the card holders to set aside the judgments as fraudulently obtained. In September 2005, the banks, including Bank of America, N.A. (USA) filed Amended Third Party Complaints against, among others, Malfatti and TAF, alleging tortious interference with contract, abuse of process, wantonness, and civil conspiracy, and sought an injunction against further arbitrations. The Banks moved for default judgments against Malfatti and TAF for failing to comply with discovery orders, repeated failures to appear for depositions, and failure to respond to written discovery. Malfatti and TAF filed a motion to set aside the defaults. The court found Malfatti and TAF to be jointly and severally liable for compensatory damages, awarded punitive damages against Malfatti, and found Malfatti to be liable for punitive damages awarded against TAF under the alter ego doctrine. Malfatti filed for Chapter 7 bankruptcy the Banks filed an adversary proceeding alleging the debt owed to them by Malfatti was nondischargeable. Upon review, the Alabama Supreme Court answered the certified question in the negative: "[f]or purposes of determining whether an issue is precluded by the doctrine of collateral estoppel, Alabama law makes no distinction between a simple default and a penalty default." View "Malfatti v. Bank of America, N.A." on Justia Law

In this derivative action, the parties sought judicial approval of a settlement. Defendants agreed to pay the Fund, on whose behalf the derivative claims were brought, and agreed not to pursue claims for indemnification against the Fund. Certain limited partners in the Fund, including the named plaintiffs, objected to the settlement consideration as inadequate. The court held that the settlement consideration fell within a range of fairness, albeit at the low end. Because the consideration fell within the range of fairness, the court will approve the settlement unless the objectors make the equivalent of a topping bid. View "Forsythe, et al. v. ESC Fund Management Co. (U.S.), Inc., et al." on Justia Law

Plaintiff filed a putative class action against M&T Bank, alleging that it improperly charged its checking account customers overdraft fees. The district court denied M&T Bank's renewed motion to compel arbitration, finding that plaintiff's claims were not within the scope of the parties' arbitration agreement. The court held that, under the delegation provision, the decision of whether plaintiff's claims were within the scope of the arbitration agreement was a decision for an arbitrator, and the district court erred in making the decision itself. Further, the court believed that it was prudent for the district court to reconsider its unconscionability determination in light of AT&T Mobility LLC v. Conception, so the court did not reach whether the arbitration agreement was unconscionable. Accordingly, the court vacated and remanded. View "Given v. M&T Bank Corp, et al." on Justia Law

Plaintiffs brought this putative class action against KeyBank, alleging violations of California's Unfair Competition Law (UCL), Cal. Bus. & Prof. Code 17200, in connection with private student loans that KeyBank extended to plaintiffs. The court concluded that (1) the Federal Arbitration Act (FAA) 9 U.S.C. 1 et seq., preempted the Broughton-Cruz rule and (2) the arbitration clause in the parties' contracts must be enforced because it was not unconscionable. Therefore, the court did not reach the question, presented in Appeal No. 10-15934, whether the NBA and the regulations of the OCC preempted plaintiffs' UCL claims. Accordingly, in Interlocutory Appeal No. 09-16703, the court reversed the district court's denial of KeyBank's motion to compel arbitration, vacated the judgment, and remanded to the district court with instructions to enter an order staying the case and compelling arbitration. Because the disposition of that appeal rendered the district court's subsequent dismissal order a nullity, the court dismissed Appeal No. 10-15934 as moot. View "Kilgore, et al. v. Keybank, et al." on Justia Law

Plaintiffs are personal investment holding corporations owned by two related Panamanian shareholders. Defendants, of who there are two distinct groups, are (1) a related group of banking corporations operating under the umbrella of Banco Santander, which provide banking, investment, and other financial management services; and (2) certain individual officers/employees of Santander. This dispute arose from plaintiff's investment of an undisclosed sum of money with defendants. At issue was whether a district court, having found a valid contract containing an arbitration clause existed, was also required to consider a further challenge to that contract's place within a broader, unexecuted agreement. Having considered those circumstances in light of Granite Rock Co. v. International Brotherhood of Teamsters and other relevant precedent, the court found that the district court properly construed the law regarding arbitrability in dismissing plaintiff's suit. Accordingly, the court affirmed the judgment. View "Solymar Investments, Ltd., et al. v. Banco Santander S.A., et al." on Justia Law

Plaintiffs, Wachovia Bank and WCM, appealed from a judgment of the district court dismissing their action seeking to enjoin an arbitration proceeding brought by VCG before the Financial Industry Regulatory Authority, Inc. (FINRA), against WCM in connection with a credit default swap (CDS) transaction between VCG and WCM. The district court granted VCG's motion for an order compelling arbitration and dismissed the complaint, ruling that the FINRA Code of Arbitration Procedure for Customer Disputes provided for arbitration of disputes between a FINRA member and its customers, and that, as WCM was a FINRA member and negotiated part of the CDS agreement entered into by VCG and Wachovia Bank, VCG should be considered a customer of WCM within the meaning of the FINRA Code. On appeal, plaintiffs contended that the district court erred in ruling that VCG was a customer of WCM. The court held that no rational factfinder could infer that VCG was a customer of WCM. Therefore, Wachovia and WCM were entitled to summary judgment in their favor. The court considered all of VCG's contentions on appeal and found them to be without merit. Accordingly, the judgment of the district court was reversed and the matter remanded for the entry of judgment in favor of plaintiffs, enjoining VCG from proceeding with its FINRA arbitration against WCM with respect to VCG's 2007 credit default swap agreement with Wachovia Bank. View "Wachovia Bank, et al. v. VCG Special Opportunities Master Fund, Ltd." on Justia Law

After Roger Hudspeth's employment with the Bank of the Commonwealth was terminated, Hudspeth filed a complaint against the Bank, alleging the Bank failed to pay him compensation owed for his employment. The Bank filed a motion to stay and compel arbitration before the Financial Industry Regulatory Authority (FINRA), arguing (1) the Bank was a "customer" as defined by the FINRA Code of Arbitration Procedure for Customer Disputes (Customer Code), (2) Hudspeth was an associated person of a "member," and (3) because the dispute was between a customer and an associated person of a member, arbitration was mandatory under the Customer Code. The circuit court denied the Bank's motion, concluding that the Bank was not a customer under the Customer Code. The Supreme Court reversed, holding (1) the Customer Code was susceptible to an interpretation under which the Bank could be considered a customer, and (2) because under the Federal Arbitration Act any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, the circuit court erred when it denied the Bank's motion in this case. Remanded. View "Bank of the Commonwealth v. Hudspeth" on Justia Law