Justia Arbitration & Mediation Opinion Summaries

Rajesh Patel filed for bankruptcy in 2016, which triggered an automatic stay on all creditor actions against him. Despite this, Patel participated in an arbitration proceeding and lost. After a state court affirmed the arbitration award, Patel sought to stay the enforcement of the award in bankruptcy court, arguing that the arbitration violated the automatic stay. The bankruptcy court annulled the stay, finding that Patel had engaged in gamesmanship by participating in the arbitration without raising the stay and then attempting to use it to void the unfavorable outcome.The bankruptcy court's decision was appealed to the United States District Court for the Northern District of Georgia. The district court affirmed the bankruptcy court's annulment of the stay, rejecting Patel's argument that the annulment was contrary to the Supreme Court's decision in Roman Catholic Archdiocese of San Juan v. Acevedo Feliciano. The district court found that Acevedo, which dealt with the jurisdiction of a district court after a case was removed to federal court, did not affect the bankruptcy court's statutory authority to annul the automatic stay for cause.The United States Court of Appeals for the Eleventh Circuit reviewed the case and affirmed the lower courts' decisions. The Eleventh Circuit held that the bankruptcy court had the authority under 11 U.S.C. § 362(d)(1) to annul the automatic stay for cause. The court distinguished the case from Acevedo, noting that Acevedo addressed the removal jurisdiction of a district court and did not impact the bankruptcy court's power to annul a stay. The court also rejected Patel's procedural objections, finding that any error in the process was harmless as Patel had sufficient notice and opportunity to oppose the requested relief. View "Patel v. Patel" on Justia Law

A group of current and former employees of Cracker Barrel Old Country Store, Inc. alleged that the company violated the Fair Labor Standards Act (FLSA) regarding wages for tipped workers. They sought preliminary certification for a collective action to include all servers in states where Cracker Barrel attempts to take a tip credit over the last three years. Cracker Barrel objected, arguing that notice should not be sent to employees who are subject to arbitration agreements or to out-of-state employees with no ties to Arizona.The United States District Court for the District of Arizona granted the plaintiffs' motion for preliminary certification and approved notice to the proposed group, including employees who might have entered into arbitration agreements and out-of-state employees. The court decided to reserve judgment on the arbitration issue until the second stage of proceedings and concluded that nationwide notice was permissible based on the participation of one Arizona-based plaintiff.The United States Court of Appeals for the Ninth Circuit reviewed the case. The court held that the district court did not abuse its discretion in following the two-step procedure for preliminary certification. It also held that where the existence and validity of an arbitration agreement are in dispute, the district court is not required to determine the arbitrability of absent employees' claims before authorizing notice. However, the Ninth Circuit joined other circuits in holding that the Supreme Court's decision in Bristol-Myers Squibb Co. v. Superior Court of California applies to FLSA collective actions in federal court. This means that for specific personal jurisdiction, the district court must assess whether each opt-in plaintiff's claim is sufficiently connected to the defendant's activities in the forum state. The court vacated the district court's order authorizing nationwide notice and remanded for further proceedings consistent with this opinion. View "HARRINGTON V. CRACKER BARREL OLD COUNTRY STORE, INC." on Justia Law

Michael Kosor, Jr., a homeowner in Southern Highlands, a Las Vegas residential common-interest community, sued the Southern Highlands Community Association (HOA) and its developer, Southern Highlands Development Corporation (SHDC), for declaratory and injunctive relief regarding the homeowners' right to elect the HOA's board of directors. Kosor claimed that the community had surpassed the 75% home-sale threshold, ending the declarant control period, yet SHDC continued to appoint three of the five board members, violating homeowners' voting rights. The HOA and SHDC disputed Kosor's interpretation and calculations.The Eighth Judicial District Court of Clark County denied Kosor's motion for a temporary restraining order, largely denied the HOA's and SHDC's motion to dismiss, and denied Kosor's motion for summary judgment. Kosor then sought to voluntarily dismiss the action without prejudice, but the court dismissed it with prejudice and awarded fees and costs to the HOA and SHDC. Kosor appealed but later withdrew his appeal, acknowledging that he could not reinstate it or raise the same issues again. Subsequently, the HOA and SHDC sought additional fees and costs incurred on appeal, prompting Kosor to file a motion under NRCP 60(b)(4), arguing that the district court lacked subject matter jurisdiction due to noncompliance with NRS 38.310's pre-suit ADR requirement.The Supreme Court of Nevada reviewed the case and held that NRS 38.310, which mandates pre-suit mediation or arbitration for certain HOA-related claims, is a procedural claim-processing rule, not a jurisdictional requirement. The court determined that the district court had jurisdiction despite the parties' noncompliance with NRS 38.310 and properly denied Kosor's motion to vacate its judgment and fee-award orders as jurisdictionally void. The Supreme Court of Nevada affirmed the district court's decision. View "KOSOR VS. S. HIGHLANDS CMTY. ASS'N" 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

Cristina Balan, an automotive design engineer, filed a defamation lawsuit against Tesla, Inc. and Elon Musk, alleging that Tesla made defamatory statements about her, including accusations of theft, after an article about her was published in the Huffington Post. Tesla moved to compel arbitration based on an arbitration agreement in Balan's employment contract. The United States District Court for the Western District of Washington partially granted Tesla's motion, compelling arbitration for part of the defamation claim. Balan then amended her arbitration demand to include a defamation claim against Musk.The Western District of Washington initially denied Tesla's motion to compel arbitration in part, but the Ninth Circuit reversed this decision, ruling that the entire defamation claim was subject to arbitration. Consequently, the district court dismissed the case. The arbitrator applied California law and dismissed Balan's defamation claims against Tesla and Musk based on the statute of limitations, issuing an award in favor of Tesla and Musk.Tesla and Musk petitioned the United States District Court for the Northern District of California to confirm the arbitration award. The district court granted the petition, confirming the award. Balan appealed, arguing that the district court lacked subject matter jurisdiction to confirm the award.The United States Court of Appeals for the Ninth Circuit reviewed the case and held that the district court lacked subject matter jurisdiction to confirm the arbitration award. The Ninth Circuit cited the Supreme Court's decision in Badgerow v. Walters, which prohibits looking past the face of a petition under 9 U.S.C. § 9 to establish jurisdiction. Since Tesla's petition to confirm a zero-dollar award did not meet the amount in controversy requirement, the Ninth Circuit vacated the district court's order and remanded the case with instructions to dismiss for lack of jurisdiction. View "TESLA MOTORS V. BALAN" on Justia Law

Maria Wilson purchased an insurance policy from Union National Fire Insurance Company (UNFIC) through agent Robin Wilson. The policy covered personal property at 2170A Tillman Chapel Road, which included a house and a travel trailer. Maria, who is illiterate, relied on Robin's verbal description of the policy. After a fire destroyed the house and her personal property, Maria filed a claim, which was denied by UNFIC, citing that she did not live in the house, a purported requirement for coverage.Maria sued UNFIC, Kemper Corporate Services, Robin Wilson, and others in the Circuit Court of Claiborne County, Mississippi, alleging breach of contract, negligence, fraud, and other claims. The defendants removed the case to federal court, asserting diversity jurisdiction and claiming that the non-diverse defendants were improperly joined. The district court agreed, denied Maria's motion to remand, and compelled arbitration based on the policy's arbitration clause. The arbitrator ruled in favor of the defendants, and the district court confirmed the arbitration award.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court held that the district court erred in denying Maria's motion to remand because non-diverse defendant Robin Wilson was properly joined. The court found that the insurance policy did not clearly require Maria to live in the house for her personal property to be covered, thus her negligence claim against Robin Wilson was viable. Consequently, the Fifth Circuit reversed the district court's denial of the motion to remand, vacated the order compelling arbitration and the confirmation of the arbitration award, and remanded the case to the district court with instructions to remand it to state court. View "Wilson v. Kemper Corporate Services" on Justia Law

Brian Prahl filed a petition to compel arbitration of an uninsured motorist claim, alleging he was involved in a multiple vehicle accident in March 2016 while insured by Allstate Northbrook Indemnity Company. The insurance proceeds from the at-fault drivers were insufficient to cover his damages, leading him to seek arbitration for his underinsured motorist claim. Allstate agreed to arbitration in May 2018, but the arbitration was delayed and not concluded within the five-year deadline set by Insurance Code section 11580.2, subdivision (i). Prahl argued that Judicial Council Emergency Rule 10 extended this deadline by six months due to the COVID-19 pandemic.The Superior Court of Sacramento County denied Prahl's petition, concluding that the five-year deadline had expired and that Emergency Rule 10 did not apply to extend the deadline for arbitration. Prahl also contended that the court should have granted his petition because Allstate's opposition was not filed timely. However, the court found good cause to consider the late opposition, noting that Prahl had filed a reply on the merits.The California Court of Appeal, Third Appellate District, reviewed the case de novo and affirmed the lower court's decision. The appellate court held that Emergency Rule 10, which extends the time to bring a civil action to trial by six months, did not apply to arbitration proceedings. The court reasoned that the term "civil action" refers to court actions and does not include arbitration, which is an alternative to a civil action. Consequently, Prahl's failure to conclude the arbitration within the statutory five-year period resulted in the loss of his right to compel arbitration. The appellate court also upheld the lower court's decision to consider Allstate's late opposition, finding no undue prejudice to Prahl. View "Prahl v. Allstate Northbrook Indemnity Co." on Justia Law

Irma Jordan filed a negligence complaint against Esmerelda Macedo in the circuit court of Cook County following a car accident. The case was referred to mandatory arbitration, where the arbitrator awarded Jordan $13,070. Neither party rejected the award, and Jordan submitted it to the circuit court for judgment. Jordan then filed a motion seeking prejudgment interest and statutory costs, which the circuit court denied, stating the arbitration award included the full amount to be reduced to judgment.The appellate court affirmed the circuit court's denial of statutory costs but reversed the denial of prejudgment interest. The appellate court held that Jordan should have requested costs during arbitration, referencing the Cruz v. Northwestern Chrysler Plymouth Sales, Inc. decision. However, it agreed that prejudgment interest could be requested in the circuit court as it is not considered damages.The Supreme Court of Illinois reviewed the case and held that, according to Illinois Supreme Court Rule 92(e), statutory costs can be sought during arbitration, but failure to do so does not waive the right to seek them in the trial court upon entry of judgment. The court found that Rule 92(e) allows for statutory costs to be requested in the trial court even if not addressed by the arbitrator. The court reversed the appellate court's judgment regarding statutory costs and affirmed the judgment regarding prejudgment interest. The case was remanded to the circuit court for further proceedings consistent with this opinion. View "Jordan v. Macedo" on Justia Law

Fu Jing Wu and Wai Lam set up investment funds for foreign investors, promising opportunities to immigrate to the United States through the EB-5 visa program. They fraudulently diverted millions of dollars from these funds. An investor, Chun Liu, sued them in a Florida court. Wu and Lam removed the case to federal court and moved to compel arbitration based on a purchase agreement. The district court denied the motion to compel arbitration and remanded the case to state court for lack of subject-matter jurisdiction.The United States District Court for the Southern District of Florida reviewed the case. The court found that Wu was not a signatory to the purchase agreement containing the arbitration clause and thus could not enforce it. Consequently, the court ruled that it lacked subject-matter jurisdiction under the Federal Arbitration Act and remanded the case to state court.The United States Court of Appeals for the Eleventh Circuit reviewed the case. The court held that 28 U.S.C. § 1447(d) barred appellate review of the district court's order that both denied the motion to compel arbitration and remanded the case for lack of subject-matter jurisdiction. The court concluded that the denial of the motion to compel arbitration was intrinsic to the jurisdictional decision and could not be reviewed separately. Therefore, the Eleventh Circuit dismissed Wu and Lam’s appeal for lack of jurisdiction. View "Wu v. Liu" on Justia Law

A collective bargaining agreement between the Teamsters Union and Quality Custom Distribution guaranteed that the top 80% of senior employees would receive at least 40 paid hours per week. During the early months of the COVID-19 pandemic, many Starbucks stores in or near Chicago closed or reduced their hours, resulting in senior employees averaging only 30 hours a week. The Union demanded that the employer make up the difference, but the employer refused, citing an exception for Acts of God.The dispute was taken to an arbitrator, who ruled in favor of the Union. The arbitrator determined that while epidemics might be considered Acts of God, the reduction in work was primarily due to the Governor of Illinois' orders, which were not Acts of God. The employer then filed a suit in the United States District Court for the Northern District of Illinois to nullify the arbitrator's decision. The district court judge declined to nullify the decision.The United States Court of Appeals for the Seventh Circuit reviewed the case and affirmed the district court's decision. The court held that as long as the arbitrator interprets the contract, the award must stand. The arbitrator had interpreted the contract's "Act of God" clause, concluding it did not cover the Governor's orders. The court emphasized that judicial review of arbitration awards is limited to ensuring the arbitrator interpreted the contract, not whether the interpretation was correct. The court also noted that the employer's conduct in the litigation process imposed unnecessary costs and ordered the employer to show cause why sanctions should not be imposed. View "Quality Custom Distribution Services LLC v International Brotherhood of Teamsters, Local 710" on Justia Law