Justia Arbitration & Mediation Opinion SummariesArticles Posted in Contracts
Key v. Warren Averett, LLC, et al.
James P. Key, Jr. appealed a circuit court order denying his motion to compel arbitration of his claims against Warren Averett, LLC, and Warren Averett Companies, LLC (collectively, "WA"). Key alleged that he was a certified public accountant who had been employed by WA for 25 years and had been a member of WA for 15 years; that he had executed a personal-services agreement ("PSA") with WA that included a noncompete clause; and that WA had sent him a letter terminating his employment. Key sought a judgment declaring "that the Non-Compete Clause and the financial penalty provision contained in the PSA is not applicable to Key and is an unlawful restraint of Key's ability to serve his clients as a professional." The Alabama Supreme Court found that whether Key's claims against WA had to be arbitrated was a threshold issue that should not have been decided by the circuit court; nor was it appropriate for the Supreme Court to settle the issue in this appeal. Accordingly, the circuit court's order was reversed, and the case was remanded for the circuit court to enter an order sending the case to arbitration for a determination of the threshold issue of arbitrability and staying proceedings in the circuit court during the pendency of the arbitration proceedings. View "Key v. Warren Averett, LLC, et al." on Justia Law
The Terminix International Co., L.P., et al. v. Dauphin Surf Club Association, Inc., et al.
The Terminix International Co., L.P., and Terminix International, Inc. (collectively, "Terminix"), and Ken Stroh, an agent and employee of Terminix, appealed court orders appointing arbitrators, which were entered in two separate actions. The first action was commenced by Dauphin Surf Club Association, Inc. ("DSC"), an incorporated condominium owners' association, and multiple members of that association who owned individual condominium units. The second action was brought by Stonegate Condominium Owners' Association, Inc. ("Stonegate"), and multiple members of that association who owned individual condominium units. In 2006 and 2007, respectively, Terminix entered into contracts with DSC and Stonegate to provide protection from termites for the properties owned by DSC and Stonegate and their members. Both of those contracts included, among other things, an arbitration clause. After disputes regarding termite damage arose between Terminix and DSC and Stonegate, the DSC and Stonegate plaintiffs each petitioned for the appointment of an arbitrator to resolve the disputes. Defendants filed motions in opposition to the petitions, asserting that, because the National Arbitration Forum ("the NAF"), which had been designated as the arbitral forum in the arbitration agreement, was no longer administering consumer arbitrations, the claims could not be arbitrated by the NAF, as the parties had expressly agreed in the arbitration agreement, and that they could not be compelled to arbitrate in a manner inconsistent with the terms of the arbitration agreement. Plaintiffs countered that the contracts containing the arbitration agreement also contained a severability clause that should have been applied; the Federal Arbitration Act ("FAA") governed the agreement; language in the agreement demonstrated Terminix's primary intent was to arbitrate disputes (and that the choice of the NAF as the arbitral forum was an ancillary matter); and that defendants should have been judicially estopped from arguing that the selection of the NAF as the arbitral forum was integral to the arbitration agreement because they had taken the position in prior judicial proceedings that the courts presiding over those proceedings were authorized to appoint substitute arbitrators under the FAA. The Alabama Supreme Court agreed that the designation of the NAF as the arbitral forum in the agreement was ancillary rather than an integral and essential part of the agreements, the trial court therefore correctly granted plaintiffs' petitions to compel arbitration under the FAA. View "The Terminix International Co., L.P., et al. v. Dauphin Surf Club Association, Inc., et al." on Justia Law
Transcor Astra Group S.A. v. Petrobras America Inc.
The Supreme Court reversed the decision of the court of appeals affirming in part and reversing in part the judgment of the trial court holding that the settlement agreement between the parties in this case barred the claims asserted in this suit and in an arbitration proceeding, holding that the trial court did not err.A billion-dollar break-up between two large corporations engaged in the international petroleum business resulted in numerous claims and lawsuits, which the parties finally resolved through a comprehensive settlement agreement. The trial court concluded that the settlement agreement, including its release provisions and a disclaimer of reliance, were valid and enforceable and barred the claims asserted in both this lawsuit and in the arbitration proceeding. The court of appeals reversed in part, concluding that the settlement agreement did not bar certain claims. The Supreme Court reversed and reinstated the final judgment of the trial court, holding that the parties fully and finally resolved the current claims through their comprehensive settlement agreement. View "Transcor Astra Group S.A. v. Petrobras America Inc." on Justia Law
Nano Gas Technologies, Inc. v. Roe
Roe invented a nozzle that transforms gas into liquid. Roe assigned the nozzle to Nano Gas, in exchange for 20% equity in Nano and a board seat. The relationship floundered. Roe left Nano, taking a prototype machine and some of Nano’s intellectual property produced by Hardin, another employee, and continued to develop the technology.An arbitrator determined that Roe should compensate Nano ($1,500,000) but that Roe deserved compensation for his work ($1,000,000) in the form of an offset against Nano's award. The arbitrator noted that Roe remained a Nano shareholder and could benefit financially in the future, then ordered Roe to return the Hardin work-papers to Nano, or, if unable to do that, to pay Nano $150,000. Nano sought to enforce the award and obtained judgment for $650,000. Nano filed a turnover motion seeking Roe’s Nano stock, valued at approximately $117,000. Roe argued that the award explicitly stated he could pay the remaining amount “in such manner as Roe chooses,” and provided he would remain a shareholder.The district court reasoned that Roe could choose how to pay the $500,000 award, but ordered Roe to turn over the stock or identify other assets to satisfy the $150,000 award. The Seventh Circuit reversed regarding Roe’s discretion to satisfy the $500,000 award and affirmed the $150,000 award for the Hardin papers. The award is devoid of any language indicating Roe shall remain a shareholder indefinitely or that Roe has complete discretion to decide if, when, and how Roe pays the award. View "Nano Gas Technologies, Inc. v. Roe" on Justia Law
Nelson v. Dual Diagnosis Treatment Center
Dual Diagnosis Treatment Center, Inc., d/b/a Sovereign Health of San Clemente, and its owner, Tonmoy Sharma, (collectively Sovereign) appealed the trial court's denial of Sovereign's motion to compel arbitration of claims asserted by Allen and Rose Nelson for themselves and on behalf of their deceased son, Brandon. The Nelsons alleged a cause of action for wrongful death, and on behalf of Brandon, negligence, negligence per se, dependent adult abuse or neglect, negligent misrepresentation, and fraud. According to the complaint, despite concluding that 26-year-old "Brandon requires 24 hour supervision ... at this time" after admitting him to its residential facility following his recent symptoms of psychosis, Sovereign personnel allowed him to go to his room alone, where he hung himself with the drawstring of his sweatpants. The trial court denied Sovereign's motion to compel arbitration because: (1) the court found Sovereign failed to meet its burden to authenticate an electronic signature as Brandon's on Sovereign's treatment center emollment agreement; and (2) even assuming Brandon signed the agreement, it was procedurally and substantively unconscionable, precluding enforcement against Brandon or, derivatively, his parents. Sovereign challenged the trial court's authentication and unconscionability findings. Finding no reversible error, the Court of Appeal affirmed the trial court's judgment. View "Nelson v. Dual Diagnosis Treatment Center" on Justia Law
Gulfstream Aerospace Corporation v. Oceltip Aviation 1 PTY LTD
Gulfstream, a Georgia corporation, and Oceltip, an Australian company, entered a sales agreement (“Agreement”). Gulfstream terminated the Agreement after Oceltip failed to pay the full amount or cure a defect within the ten-day cure period.Oceltip submitted a demand for arbitration to the AAA, seeking a finding that Gulfstream had anticipatorily repudiated the Agreement and that this conduct suspended Oceltip’s duties, allowing Oceltip to recoup the money it had paid, and entitled Oceltip to damages. On appeal, Oceltip asserts that federal jurisdiction is lacking. It also argues that the district court erred in confirming the arbitration award and denying vacatur because, in Oceltip’s view, the Georgia Arbitration Code’s standards for vacatur—not the FAA’s—govern, and the arbitrators manifestly disregarded the law.First, the court found it has jurisdiction under Sec 203 of the FAA. Next, in resolving the disagreement the court analyzed whether arbitrators’ “manifest disregard of the law” supplies a basis for vacating the award. Under the Georgia Arbitration Code, it does, but federal law—the New York Convention and its implementing statute (Chapter 2 of the FAA)—sets forth seven exclusive grounds for vacatur, which does not include “manifest disregard of the law.” The court concluded that the Agreement’s choice-of-law provision does not supplant federal standards for confirmation or vacatur of an arbitral award, reasoning that the plain meaning of the contractual language does not support Oceltip’s position. Thus, the court affirmed the judgment of the district court. View "Gulfstream Aerospace Corporation v. Oceltip Aviation 1 PTY LTD" on Justia Law
Boyle v. Anderson
The Supreme Court held that the Virginia Uniform Arbitration Act, Va. Code 8.01-581.01 to -.016 (VUAA), and the Federal Arbitration Act, 9 U.S.C. 1-16 (FAA), do not compel enforcement of an arbitration clause in a trust.The decedent created an inter vivos irrevocable trust that was divided into three shares for his children and grandchildren. The trust contained an unambiguous arbitration clause. Plaintiff filed a complaint against Defendant, the trust's trustee, alleging breach of duty. Defendant filed a motion to compel arbitration, which the circuit court denied. The Supreme Court affirmed, holding (1) a trust is neither a contract nor an agreement that can be enforced against a beneficiary; and (2) therefore, neither the VUAA nor the FAA compel arbitration. View "Boyle v. Anderson" on Justia Law
Noble Capital Fund v. US Capital Global
This case arises from a dispute regarding a joint financial venture between Noble Capital Fund Management, L.L.C. (“Noble”) and US Capital Global Investment Management, L.L.C. (“US Capital”). Noble created two separate funds, collectively the “Feeder Funds."Noble and the Feeder Funds initiated a JAMS arbitration against US Capital, alleging various claims including the breach of contractual and fiduciary duties. US Capital was unable to pay the arbitration fees, and the JAMS panel terminated the arbitration.On November 24, 2020, Noble and the Feeder Funds sued US Capital in Texas state court for various claims including fraud and fraudulent inducement. US Capital appeals the denial of its motion to compel arbitration and stay judicial proceedings and the denial of its motion to transfer.The court explained the Federal Arbitration Act requires that, where a suit is referable to arbitration, judicial proceedings be stayed until arbitration "has been had." Here, there is no arbitration to return this case to and parties may not avoid resolution of live claims by compelling a new arbitration proceeding after the first proceeding failed. Further, the court found no pendent jurisdiction over the denial of the motion to transfer. The court affirmed the district court’s ruling and dismissed the appeal of the district court’s denial of the motion to transfer. View "Noble Capital Fund v. US Capital Global" on Justia Law
DANIEL BERMAN V. FREEDOM FINANCIAL NETWORK LLC
Plaintiffs used the defendants’ websites but did not see a notice stating, “I understand and agree to the Terms & Conditions, which includes mandatory arbitration.” When a dispute arose, defendants moved to compel arbitration, arguing that plaintiffs’ use of the website signified their agreement to the mandatory arbitration provision found in the hyperlinked terms.The Ninth Circuit held that plaintiffs did not unambiguously manifest their assent to the terms and conditions when navigating through the websites. As a result, they never entered into a binding agreement to arbitrate their dispute, as required under the Federal Arbitration Act. The panel explained that the courts have routinely enforced “clickwrap” agreements, which present users with specified contractual terms on a pop-up screen requiring users to check a box explicitly stating “I agree” to proceed. However, courts are more reluctant to enforce browsewrap agreements, which provides notice only after users click a hyperlink.Finally, the panel held that the district court properly exercised its discretion in denying the defendants’ motion for reconsideration based on deposition testimony taken two months prior to the district court’s ruling on the motion to compel arbitration. Plaintiffs did not unambiguously manifest their assent to the terms and conditions when navigating the website. Thus, they never entered into a binding agreement to arbitrate. The court affirmed the district court’s order denying the defendants’ motion to compel arbitration. View "DANIEL BERMAN V. FREEDOM FINANCIAL NETWORK LLC" on Justia Law
In re: Rotavirus Vaccines Antitrust Litigation v.
Under "loyalty contracts," Physician Buying Groups (PBGs) members are entitled to discounts if they buy a large enough percentage of their vaccines from Merck. The loyalty contracts include an arbitration provision. Membership contracts between PBGs and medical practices give medical practices discounts on Merck vaccines for enrolling in PBGs. PBGs contract with both Merck and medical practices and are middlemen but PBGs never possess the vaccines. Medical practices buy their vaccines directly from Merck, receiving discounts for belonging to a PBG. The Pediatricians, members of PBGs that contracted with Merck, never signed contracts containing an arbitration clause.The Pediatricians filed federal suits alleging Merck’s vaccine bundling program was anticompetitive. Merck moved to compel arbitration. On remand, following discovery, the district court again denied Merck’s motion and granted the Pediatricians summary judgment, reasoning that the Pediatricians were not bound under an agency theory. The Third Circuit reversed. The PBG membership contract made the PBG a “non-exclusive agent to arrange for the purchase of goods and services,” and the PBG acted on this authority by executing the loyalty contract with Merck that included the arbitration clause. The Pediatricians simultaneously demonstrated intent to create an agency relationship and exercised control over the scope of the PBG’s agency by contract. View "In re: Rotavirus Vaccines Antitrust Litigation v." on Justia Law