Justia Arbitration & Mediation Opinion Summaries

A homeowner, Mohammad Rafiei, sued his builder, Lennar Homes, alleging personal injuries due to a construction defect. The purchase contract between Rafiei and Lennar contained an agreement to submit disputes to arbitration under the Federal Arbitration Act, including issues of formation, validity, or enforceability of the arbitration agreement. Lennar moved to compel arbitration, but Rafiei argued that the arbitration agreement was unconscionable because the cost of arbitration was prohibitively high. The trial court denied Lennar's motion to compel arbitration.The Court of Appeals for the Fourteenth District of Texas affirmed the trial court's decision, holding that Rafiei had sufficiently demonstrated that the cost to arbitrate was excessive, making the arbitral forum inadequate to vindicate his rights. The court of appeals concluded that if Rafiei were required to pay more than $6,000, he would be precluded from pursuing his claims.The Supreme Court of Texas reversed the judgment of the court of appeals. The court held that the record failed to support a finding that the parties' delegation clause was itself unconscionable due to prohibitive costs to adjudicate the threshold issue in arbitration. The court noted that Rafiei had not provided sufficient evidence to show that he could not afford the cost of arbitrating the arbitrability question. The court also noted that Rafiei had not provided evidence of how the fee schedule would be applied to resolve the unconscionability issue. The court remanded the case to the trial court for further proceedings consistent with its opinion. View "Lennar Homes Of Texas Inc. v. Rafiei" on Justia Law

The Supreme Court of California considered whether a health care agent, who had signed two contracts with a skilled nursing facility on behalf of a principal, had the authority to sign an optional, separate arbitration agreement. The first contract ensured the principal’s admission to the facility, while the second made arbitration the exclusive method for resolving disputes with the facility. The court concluded that the execution of the arbitration contract was not a "health care decision" within the authority of the health care agent. Therefore, the facility’s owners and operators could not rely on the agent’s execution of the arbitration agreement to compel arbitration of claims arising from the principal’s alleged maltreatment. The court affirmed the judgment of the Court of Appeal and remanded the case for further proceedings. View "Harrod v. Country Oaks Partners, LLC" on Justia Law

In this case, Damien T. Davis and Johnetta H. Lane ("the plaintiffs") filed suit against Nissan North America, Inc. and Nissan of San Bernardino ("Nissan") after they allegedly bought a faulty Nissan vehicle with a defective transmission. Nissan attempted to compel arbitration as per the arbitration clause in the sale contract between plaintiffs and the dealership. However, the trial court denied the motion, ruling that Nissan, not being a party to the contract, could not invoke the clause based on the doctrine of equitable estoppel.Nissan appealed the decision, arguing that the trial court erred by refusing to compel arbitration based on equitable estoppel. However, the Court of Appeal, Fourth Appellate District Division One, State of California, agreed with the trial court's ruling reasoning that Nissan's reliance on the doctrine of equitable estoppel was misplaced. It explained that equitable estoppel applies when a party's claims against a non-signatory are dependent upon the underlying contractual obligations. Here, the plaintiffs' claims were not founded on the sale contract's terms, but rather on Nissan's statutory obligations under the Song-Beverly Act relating to manufacturer warranties. The court concluded that the plaintiffs are pursuing their statutory and tort claims in court, and there was no inequity in allowing them to do so.Therefore, Nissan's motion to compel arbitration was denied, and the trial court's order was affirmed. View "Davis v. Nissan North America, Inc." on Justia Law

The United States Court of Appeals for the Eighth Circuit heard an appeal brought by DRE Health Corporation, a personal protective equipment (PPE) wholesaler, against a district court's decision to deny its motion to stay litigation and compel arbitration under the Federal Arbitration Act (FAA) with Anhui Powerguard Technology Company, a Chinese PPE manufacturer. Anhui had filed a breach-of-contract action alleging that DRE Health failed to pay for over $9 million in fulfilled purchase orders.The crux of the case revolved around an agreement between the parties where Anhui agreed to reduce DRE Health's debt in exchange for the latter's promise to purchase additional shipments of gloves. This agreement stipulated that future disputes would be subjected to binding arbitration, but the court had to determine whether this stipulation was conditional on DRE Health's completion of initial payments.The court, applying the series-qualifier canon of contract interpretation and Missouri law, determined that the prefatory phrase in the agreement, “AFTER THE INITIAL PAYMENT OF $1,970,000.00 USD,” served as a condition precedent to all the obligations enumerated in the agreement, including the agreement to arbitrate. As DRE Health had not completed the initial payment, there was no contract between the parties to arbitrate.The court thus affirmed the district court’s judgment, concluding that the parties did not agree to submit their dispute to arbitration. View "Anhui Powerguard Tech Co, Ltd v. DRE Health Corporation" on Justia Law

The United States Court of Appeals for the Ninth Circuit heard an appeal by Cathay Pacific Airways Limited, from a district court's decision denying its motion to compel arbitration in a class action lawsuit. The plaintiffs, Winifredo and Macaria Herrera, alleged that Cathay Pacific breached their contract by failing to issue a refund following flight cancellations for tickets they purchased through a third-party booking website, ASAP Tickets.The court ruled that when a non-signatory, in this case Cathay Pacific, seeks to enforce an arbitration provision, an order denying a motion to compel arbitration based on the doctrine of equitable estoppel is reviewed de novo. Applying California contract law, the court held that the plaintiffs' allegations that Cathay Pacific breached its General Conditions of Carriage were intimately intertwined with ASAP’s alleged conduct under its Terms and Conditions. Thus, it was appropriate to enforce the arbitration clause contained in ASAP’s Terms and Conditions.Accordingly, the court reversed the district court’s denial of Cathay Pacific’s motion to compel arbitration and remanded with instructions to either dismiss or stay the action pending arbitration of the plaintiffs’ breach-of-contract claim. View "HERRERA V. CATHAY PACIFIC AIRWAYS LIMITED" on Justia Law

Marvin Jackson attended a World Wrestling Entertainment (WWE) event and alleges that a pyrotechnics blast caused him to lose most of his hearing in his left ear. The tickets were purchased as a surprise gift by his nephew, Ashton Mott, on SeatGeek.com. All ticket purchases required agreement to various terms and conditions, including an arbitration agreement, and stated that entry to the event would constitute acceptance of these terms. Jackson sued WWE in Texas state court for negligence, but WWE moved the case to federal court and requested arbitration per the ticket agreement. The district court granted WWE’s motion, stating that Mott acted as Jackson's agent and that Jackson was therefore bound by the terms of the ticket, including the arbitration agreement.Jackson appealed the decision, arguing that Mott did not have the authority to act on his behalf and therefore the arbitration agreement should not be enforceable against him. The United States Court of Appeals for the Fifth Circuit disagreed with Jackson's argument. The court held that although Mott purchased the tickets without Jackson's knowledge or control, he acted as Jackson’s agent when he presented the ticket on Jackson's behalf for admittance to the event. The ticket's terms and conditions were clear that use of the ticket would constitute acceptance of the arbitration agreement. Therefore, the court affirmed the district court's decision to compel arbitration, as the arbitration agreement is enforceable against Jackson. View "Jackson v. World Wrestling" on Justia Law

In this case, decided by the United States Court of Appeals for the First Circuit, the dispute involved Aeroballoon USA, Inc., and its owner Douglas Hase (collectively, Aeroballoon/Hase), and Jiajing (Beijing) Tourism Co., Ltd. (Jiajing). In 2016, Jiajing contracted Aeroballoon for two tethered helium balloons at a total price of $1.8 million. Despite Jiajing making regular payments totaling $1,018,940, Aeroballoon failed to deliver the balloons. An arbitration panel awarded Jiajing $1,410,739.01 plus interest for Aeroballoon's breach of contract. Following the award, Hase dissolved Aeroballoon and Jiajing subsequently filed a complaint seeking enforcement of the arbitration award.The case focused on two counts: fraudulent transfers in violation of the Massachusetts Uniform Fraudulent Transfer Act (UFTA) and unfair business practices under Chapter 93A of the Massachusetts General Laws. The jury awarded Jiajing $1.6 million for each count. The district court later reduced the damages to $1.113 million for each count, a decision unchallenged by either party.The Court of Appeals affirmed the lower court's decision. The court held that the evidence was sufficient to support a finding that Aeroballoon had engaged in fraudulent transfers of at least $1.113 million. The court further held that even a single fraudulent transfer is sufficient to create liability under Chapter 93A, thereby affirming the verdict on the claim of unfair business practices. The court also awarded costs to Jiajing. View "Jiajing (Beijing) Tourism Co. Ltd. v. AeroBalloon USA, Inc." on Justia Law

In the case of Maryann Jones v. Solgen Construction, LLC and GoodLeap, LLC, the Court of Appeal of the State of California Fifth Appellate District affirmed the trial court's decision not to compel arbitration. The case concerned a business relationship involving the installation of home solar panels. The appellants, Solgen Construction and GoodLeap, had appealed the trial court's denial of their separate motions to compel arbitration, arguing that the court had erred in several ways, including by concluding that no valid agreement to arbitrate existed.Jones, the respondent, had filed a lawsuit alleging fraudulent misrepresentation, fraudulent concealment, negligence, and violations of various consumer protection laws. She contended that she had been misled into believing she was signing up for a free government program to lower her energy costs, not entering into a 25-year loan agreement for solar panels. The appellants argued that Jones had signed contracts containing arbitration clauses, but the court found that the appellants had failed to meet their burden of demonstrating the existence of a valid arbitration agreement. The court also held that the contract was unenforceable due to being unconscionable.The appellate court affirmed the trial court's decision, rejecting the appellants' arguments that an evidentiary hearing should have been held and that the court had erred in its interpretation of the evidence and the law. It found that the trial court had not abused its discretion and that its finding that the appellants failed to meet their burden of proof was not erroneous as a matter of law. View "Jones v. Solgen Construction" on Justia Law

This case involves a group of plaintiffs who were minors at the time their guardians purchased and activated DNA test kits from Ancestry.com. The plaintiffs, through their guardians, provided their DNA samples to Ancestry.com for genetic testing and analysis. The plaintiffs later sued Ancestry.com, alleging that the company violated their privacy rights by disclosing their confidential genetic information to another business. Ancestry.com moved to compel arbitration based on a clause in its Terms & Conditions agreement, which the plaintiffs' guardians had agreed to when they purchased and activated the test kits.The United States Court of Appeals for the Seventh Circuit, applying Illinois law, held that the plaintiffs were not bound to arbitrate their claims under the agreement between their guardians and Ancestry.com. The court reasoned that the plaintiffs neither signed the agreement nor created Ancestry.com accounts, and did not independently engage with Ancestry.com's services. Furthermore, the court refused to bind the plaintiffs to the agreement based on equitable principles, including the doctrine of direct benefits estoppel. The court noted that while the plaintiffs theoretically could benefit from Ancestry.com's services, there were no allegations that the plaintiffs had actually accessed their DNA test results.The court therefore affirmed the district court's decision denying Ancestry.com's motion to compel arbitration. The court's holding clarified that under Illinois law, a minor cannot be bound to an arbitration agreement that their guardian agreed to on their behalf, unless the minor independently engaged with the services provided under the agreement or directly benefited from the agreement. View "Coatney v. Ancestry.com DNA, LLC" on Justia Law

In a dispute between SmartSky Networks, LLC and DAG Wireless, Ltd., DAG Wireless USA, LLC, Laslo Gross, Susan Gross, Wireless Systems Solutions, LLC, and David D. Gross over alleged breach of contract, trade secret misappropriation, and deceptive trade practices, the United States Court of Appeals for the Fourth Circuit ruled that the district court did not have the jurisdiction to enforce an arbitration award. Initially, the case was stayed by the district court pending arbitration. The arbitration tribunal found in favor of SmartSky and issued an award, which SmartSky sought to enforce in district court. The defendants-appellants argued that, based on the Supreme Court decision in Badgerow v. Walters, the district court lacked subject matter jurisdiction to enforce the arbitration award. The Fourth Circuit agreed, noting that a court must have a basis for subject matter jurisdiction independent from the Federal Arbitration Act (FAA) and apparent on the face of the application to enforce or vacate an arbitration award. The court concluded that the district court did not have an independent basis of subject matter jurisdiction to confirm the arbitration award. As such, the court reversed and remanded the case to the district court for further proceedings. View "Smartsky Networks, LLC v. DAG Wireless, LTD." on Justia Law