Justia Arbitration & Mediation Opinion Summaries

Defendants, alleged victims of a Ponzi scheme perpetrated by John Woods, sought to bring claims against Woods's employer, Oppenheimer & Co. Inc., in a FINRA arbitration forum. Defendants claimed they were customers of Oppenheimer because they transacted with Woods, an associated person of Oppenheimer. Oppenheimer filed a federal action seeking a declaration that Defendants were not its customers and a permanent injunction to prevent arbitration.The United States District Court for the Western District of Washington granted summary judgment in favor of Oppenheimer, concluding that Defendants were not customers of Oppenheimer or Woods. The court found that Defendants had no direct relationship with Oppenheimer and that their investments were facilitated by Michael Mooney, not Woods. The court also issued a permanent injunction prohibiting Defendants from arbitrating their claims.The United States Court of Appeals for the Ninth Circuit reviewed the case and affirmed the district court's decision. The Ninth Circuit held that a "customer" under FINRA Rule 12200 includes any non-broker and non-dealer who purchases commodities or services from a FINRA member or its associated person. However, the court agreed with the district court that Defendants did not transact with Woods, as their investments were facilitated by Mooney. The court also rejected Defendants' "alter ego" theory, which suggested that their investments in an entity controlled by Woods made them Woods's customers.The Ninth Circuit concluded that Defendants were not entitled to arbitrate their claims against Oppenheimer under FINRA Rule 12200 and upheld the permanent injunction. The court found no errors in the district court's analysis or factual findings and affirmed the decision in full. View "OPPENHEIMER & CO. INC. V. MITCHELL" on Justia Law

Plaintiffs created accounts on justanswer.com and paid to ask questions. According to JustAnswer's Terms of Service, paying for answers automatically enrolled plaintiffs in a recurring monthly subscription. Plaintiffs alleged that JustAnswer violated the Electronic Funds Transfer Act and various state consumer protection laws by enrolling them in the subscription service without their consent and making cancellation difficult. JustAnswer sought to compel arbitration based on a provision in its Terms of Service, asserting that plaintiffs were put on inquiry notice of those terms and agreed to arbitrate any claims arising from their use of the site.The United States District Court for the Northern District of California denied JustAnswer's motion to compel arbitration. The court held that plaintiffs did not receive sufficient notice of JustAnswer's Terms of Service containing the arbitration clause, and thus no contract was formed. The court found that the payment pages and other advisals presented to plaintiffs were not sufficiently conspicuous to put them on inquiry notice of the terms, and the advisals did not explicitly inform users that clicking a button would constitute assent to the terms.The United States Court of Appeals for the Ninth Circuit affirmed the district court's order. The Ninth Circuit concluded that no contracts were formed between plaintiffs and JustAnswer under an inquiry theory of notice. The court held that the website did not provide reasonably conspicuous notice of the terms, and the advisals did not unambiguously manifest the plaintiffs' assent to those terms. Therefore, plaintiffs were not bound by the arbitration provision in JustAnswer's Terms of Service, and the motion to compel arbitration was denied. View "GODUN V. JUSTANSWER LLC" 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

Kiana Jones, along with thousands of other claimants, initiated dispute-resolution proceedings against Starz Entertainment, LLC, alleging violations of federal and state privacy laws. The arbitration provider, Judicial Arbitration and Mediation Services (JAMS), ordered the consolidation of these filings to be presided over by a single arbitrator. Jones petitioned the district court to compel individual arbitration, arguing that the consolidation violated the Starz Terms of Use, which she claimed required individual arbitration.The United States District Court for the Central District of California denied Jones's petition, holding that she was not "aggrieved" within the meaning of the Federal Arbitration Act (FAA) because Starz had not failed, neglected, or refused to arbitrate. The court also held that the consolidation did not present a gateway question of arbitrability for the courts to address.The United States Court of Appeals for the Ninth Circuit affirmed the district court's decision. The panel held that Jones was not a "party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate," as required by 9 U.S.C. § 4, because Starz never failed, neglected, or refused to arbitrate. The court distinguished this case from Heckman v. Live Nation Ent., Inc., noting that the consolidation by JAMS did not present a gateway question of arbitrability. The panel also held that the FAA did not allow Jones, as the party seeking arbitration, to raise the argument that the Terms of Use were unconscionable to the extent that they allowed pre-arbitration consolidation by JAMS. The decision of the district court was affirmed. View "JONES V. STARZ ENTERTAINMENT, LLC" on Justia Law

The plaintiff, Katherine Chabolla, purchased a one-month subscription from ClassPass, a company offering access to gyms and fitness classes, in January 2020. Due to the COVID-19 pandemic, ClassPass paused charges but resumed them when gyms reopened. Chabolla filed a lawsuit alleging that ClassPass violated California’s Automatic Renewal Law, Unfair Competition Law, and Consumers Legal Remedies Act by resuming charges without proper notice.The United States District Court for the Northern District of California denied ClassPass’s motion to compel arbitration, which argued that Chabolla had agreed to arbitrate any claims by using their website. The district court found that the website did not provide reasonably conspicuous notice of the Terms of Use, which included the arbitration clause, and that Chabolla did not unambiguously manifest assent to those terms.The United States Court of Appeals for the Ninth Circuit reviewed the case and affirmed the district court’s decision. The court held that ClassPass’s website, which resembled a sign-in wrap agreement, did not provide reasonably conspicuous notice of the Terms of Use on the landing page or the first screen. Even if the second and third screens provided such notice, Chabolla did not unambiguously manifest her assent to the Terms of Use on those screens. The court concluded that Chabolla’s use of the website did not amount to an unambiguous manifestation of assent to the Terms of Use, and therefore, she was not bound by the arbitration clause within those terms. The court affirmed the district court’s order denying ClassPass’s motion to compel arbitration. View "CHABOLLA V. CLASSPASS, INC." on Justia Law

Plaintiff filed a class action against C.H. Robinson, alleging misclassification claims regarding overtime pay requirements. On appeal, C.H. Robinson challenged the district court's denial of its motion to compel arbitration. The court rejected plaintiff's argument that the Incentive Bonus Agreement at issue was procedurally and substantively unconscionable. In regards to procedural unconscionability, the court concluded that, under California law, the degree of procedural unconscionability of such an adhesion agreement is low. In regard to substantive unconscionability, the court concluded that any argument that the judicial carve-out was not substantively unconscionable has been waived; the waiver of representative claims was not substantively unconscionable where the unenforceability of the waiver of a Private Attorneys General Act (PAGA), Cal. Labor Code 2698-2699.5, representative action does not make this provision substantively unconscionable; and the venue provision, confidentiality provision, sanctions provision, unilateral modification provision, and discovery limitations are not substantively unconscionable. Therefore, the court concluded that the dispute resolution provision is valid and enforceable once the judicial carve-out clause is extirpated and the waiver of representative claims is limited to non-PAGA claims, and the district court erred in holding otherwise. The court reversed and remanded. View "Poublon v. C.H. Robinson Co." on Justia Law

Plaintiff filed a class action against Samsung, alleging that it made misrepresentations as to the performance of the Galaxy S4 phone. The district court denied Samsung's motion to compel arbitration based on an arbitration provision contained in a warranty brochure included in the Galaxy S4 box. Determining that its analysis is governed by California contract, rather than warranty, law, the court concluded plaintiff did not assent to any agreement in the brochure, nor did he sign or otherwise act in a manner that showed he accepted the arbitration agreement. The court concluded that Samsung failed to demonstrate the applicability of any exception to the general California rule that an offeree’s silence does not constitute consent. Therefore, in the absence of an applicable exception, California’s general rule for contract formation applies. The court also concluded that, under the circumstances of this case, Samsung's inclusion of a brochure in the Galaxy S4 box, and plaintiff's failure to opt out, does not make the arbitration provision enforceable against plaintiff. Finally, the court concluded that Samsung's argument that plaintiff agreed to arbitrate his claims by signing the Customer Agreement with Verizon Wireless is meritless. The court explained that Samsung is not a signatory to the Customer Agreement between Verizon Wireless and its customer. Furthermore, Samsung is not a third-party beneficiary to the Customer Agreement. Accordingly, the court affirmed the judgment. View "Norcia v. Samsung Telecommunications" on Justia Law

In connection with an attempted purchase of a California residence, Kum Tat filed a motion to compel arbitration of a claim against Linden Ox. The district court denied the motion and Kum Tat filed this interlocutory appeal. The court held that the order denying the motion to compel arbitration was not an order from which section 16(a)(1) of the Federal Arbitration Act (FAA), 9 U.S.C. 16(a)(1), permits an interlocutory appeal. In this case, Kum Tat's motion was neither under section 3 nor 4 of the FAA, and the motion expressly urged application only of California arbitration law and contained no citation to the FAA. Significantly, Kum Tat later emphasized that the motion was not made under the FAA. In the alternative, the court concluded that the district court's order was not clearly erroneous and did not warrant mandamus relief. Here, the district court did not clearly err in reserving for itself the question whether the parties agreed to arbitrate, nor did the district court clearly err in concluding the parties did not form a contract. Accordingly, the court dismissed the appeal for lack of jurisdiction. View "Kum Tat Limited v. Linden Ox Pasture, LLC" on Justia Law

Move commenced arbitration proceedings alleging that Citigroup mismanaged $131 million of Move’s funds by investing in speculative auction rate securities. FINRA provided the parties with a list of thirty proposed arbitrators and their employment histories, including ten proposed arbitrators from FINRA’s chairperson roster. Move ranked “James H. Frank” first who, according to the FINRA Arbitrator Disclosure Report (ADR), received a law degree from Southwestern University in 1975 and was licensed to practice law in California, New York, and Florida. Mr. Frank subsequently served as the chairperson of the panel along with Arthur T. Berggren, a licensed attorney, and Daniel R. Brush, a Certified Public Accountant and Certified Financial Planner. After Move subsequently discovered that Mr. Frank lied about his qualifications, Move filed a complaint arguing that vacatur was warranted because of Mr. Frank's misrepresentations. On appeal, Move challenges the district court's dismissal of its action and denial of its motion to vacate the arbitration award under the Federal Arbitration Act (FAA), 9 U.S.C. 1 et seq. The court held that Move’s motion was not untimely because the FAA is subject to equitable tolling. The court also held that Move’s right to a fundamentally fair hearing was prejudiced by the fraudulent misrepresentations of the arbitration panel’s chairperson, resulting in proceedings led by an arbitrator who should have been disqualified from the dispute under the rules and regulations of FINRA. Accordingly, the court reversed and remanded. View "Move, Inc. v. Citigroup Global Markets, Inc." on Justia Law

Plaintiff filed suit against his employer, alleging violations of the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA), 38 U.S.C. 4301-4334. Plaintiff claimed that he was fired from his job after providing notice of his deployment to Afghanistan in the United States Navy Reserve. The court joined its sister circuits and held that the plain text of USERRA does not preclude the compelled arbitration of disputes arising under its provisions. Furthermore, plaintiff has failed to establish that the legislative history evinces Congress’s intent to prevent the enforcement of the arbitration agreement he signed. Accordingly, the court affirmed the district court's order compelling arbitration and dismissing the complaint. View "Ziober v. BLB Resources" on Justia Law