Justia Arbitration & Mediation Opinion Summaries

In June 2009, defendant filed an arbitration demand against plaintiff alleging claims for wrongful termination and breach of contract based on plaintiff's failure to pay a performance bonus. Defendant subsequently filed a new demand for arbitration in October 2010, which included his original claims plus claims of fraud and breach of contract, after the arbitrator denied his motion to amend the original arbitration demand when he discovered evidence suggesting that plaintiff had padded estimated revenues for defendant's companies by $17 million. Plaintiff argued on appeal that the district court erred by not granting its motion for a preliminary injunction and temporary restraining order; that defendant's withdrawal from the first arbitration waived his right to a second arbitration; and that the first arbitration's October Order, denying defendant leave to amend, was an enforceable arbitration award. The court held that the Federal Arbitration Act, 9 U.S.C. 16(b)(4), precluded the court's review of the district court's order refusing to enjoin the arbitration. The court also held that a final decision with respect to an arbitration required an official dismissal of all claims and thus, where the district court stayed proceedings in lieu of dismissal, the decision was not final. The court further concluded that an arbitration award was a final adjudication of a claim on the merits and a procedural ruling that denied leave to amend was not an award since the decision had no effect on the merits of the proposed claims. Accordingly, the court dismissed the appeal for lack of jurisdiction.

Plaintiff-Appellee Spiska Engineering, Inc. (Spiska) sued Defendant-Appellee SPM Thermo-Shield, Inc. (Thermo-Shield) for breach of contract. Following a number of proceedings and appeals relating to the arbitration of the dispute, an arbitration award was confirmed, and Spiska obtained a money judgment against Thermo-Shield. A receiver was appointed to satisfy the judgment by liquidating Thermo-Shield's assets. Appellant Joseph Raver was Thermo-Shield's president, CEO and sole shareholder. Mr. Raver was not a party to the arbitration proceedings. The receiver mailed Mr. Raver a motion and notice of its intent to sell Thermo-Shield's assets. Mr. Raver appeared at a hearing at the circuit court, and objected to the sale. The court denied Mr. Raver's objection, and approved the sale. Though injunctive relief was not an issue at the hearing, the receiver included language in his proposed findings and conclusions that permanently enjoined Mr. Raver from competing with Thermo-Shield. The court adopted the receiver's findings in its final order. Mr. Raver appealed the award of injunctive relief, arguing that the court lacked jurisdiction over Mr. Raver to enjoin him. Upon review, the Supreme Court concluded that the circuit court lacked jurisdiction to enjoin Mr. Raver from competing with Thermo-Shield. The Court remanded the case for further proceedings.

Plaintiff makes glucose monitors and other diabetes-related products that incorporate software written by defendant, under a contract that entitles it to use the software for two years after the contractâs initial term, 2006-2010, and any extension. It also gives plaintiff a right of first refusal should defendant agree to sell its stock or assets to one of plaintiffâs competitors "during the term of this Agreement." Defendant would not extend the contract after the original expiration date. Plaintiff learned that investors in defendant were negotiating to sell stock to a company that plaintiff considers a competitor. Defendant asserted that, because the transaction would not close until 2011, the right of first refusal did not apply. Plaintiff sought an injunction pending arbitration. Based on concerns about irreparable harm to each party, the district court entered an injunction to allow the sale to proceed, subject to a requirement that plaintiff be allowed to use the software through 2012; the injunction expires when the arbitrator renders a decision. The Seventh Circuit affirmed, modifying to add conditions to ensure that defendant remains a separate firm so that the transaction can be undone if the arbitrator rules in plaintiffâs favor.

Gregory and Kerry Brown appealed the circuit court's confirmation of an arbitration award that was granted to their former general contractor C-Sculptures. C-Sculptures built the Browns' house. The Browns claimed C-Sculptures was precluded from enforcing a contract between them because the contractor's license limited the contractor to work totaling $100,000. C-Sculptures' final invoice totaled over $800,000, and when the Browns refused to pay, the contractor placed a lien on their property for the unpaid amount. The arbitrator awarded C-Sculptures the money it was owed, and the Browns appealed the arbitrator's award to the circuit court, arguing that the statutory limit on the contractor's license limited payment to $100,000. On review, the Supreme Court found that the arbitrator followed the statutory scheme to make his determination in favor of the contractor. Accordingly, the Court affirmed the lower court's confirmation of the arbitrator's award.

Gregory and Kerry Brown appealed the circuit court's confirmation of an arbitration award that was granted to their former general contractor C-Sculptures. C-Sculptures built the Browns' house. The Browns claimed C-Sculptures was precluded from enforcing a contract between them because the contractor's license limited the contractor to work totaling $100,000. C-Sculptures' final invoice totaled over $800,000, and when the Browns refused to pay, the contractor placed a lien on their property for the unpaid amount. The arbitrator awarded C-Sculptures the money it was owed, and the Browns appealed the arbitrator's award to the circuit court, arguing that the statutory limit on the contractor's license limited payment to $100,000. On review, the Supreme Court found that the arbitrator followed the statutory scheme to make his determination in favor of the contractor. Accordingly, the Court affirmed the lower court's confirmation of the arbitrator's award.

Respondents filed a complaint against AT&T Mobility LLC ("AT&T"), which was later consolidated with a putative class action, alleging that AT&T had engaged in false advertising and fraud by charging sales tax on phones it advertised as free. AT&T moved to compel arbitration under the terms of its contract with respondents and respondents opposed the motion contending that the arbitration agreement was unconscionable and unlawfully exculpatory under California law because it disallowed classwide procedures. The district court denied AT&T's motion in light of Discover Bank v. Superior Court and the Ninth Circuit affirmed. At issue was whether the Federal Arbitration Act ("FAA"), 9 U.S.C. 2, prohibited states from conditioning the enforceability of certain arbitration agreements on the availability of classwide arbitration procedures. The Court held that, because it "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress," quoting Hines v. Davidowitz, California's Discover Bank rule was preempted by the FAA. Therefore, the Court reversed the Ninth Circuit's ruling and remanded for further proceedings consistent with the opinion.