Justia Arbitration & Mediation Opinion Summaries

Kentucky ruling that authority to bind a principal to arbitration must be explicitly stated in power of attorney violated the Federal Arbitration Act.When the patients moved into Kindred’s nursing home, their relatives used powers of attorney to complete necessary paperwork, including an agreement that any claims arising from the patient’s stay at Kindred would be resolved through binding arbitration. After the patients died, their estates filed suits alleging that Kindred’s substandard care had caused their deaths. The trial court denied Kindred’s motions to dismiss. The Kentucky Supreme Court affirmed, finding the arbitration agreements invalid because neither power of attorney specifically entitled the representative to enter into an arbitration agreement. Because the Kentucky Constitution declares the rights of access to the courts and trial by jury to be “sacred,” the court reasoned, an agent could deprive her principal of such rights only if expressly provided in the power of attorney. The U.S. Supreme Court reversed. The Kentucky Supreme Court’s clear-statement rule violates the Federal Arbitration Act, 9 U.S.C. 2, by singling out arbitration agreements for disfavored treatment. The Act preempts any state rule that discriminates on its face against arbitration or that covertly accomplishes the same objective by disfavoring contracts that have the defining features of arbitration agreements. The FAA is concerned with both the enforcement and initial validity of arbitration agreements. View "Kindred Nursing Centers, L. P. v. Clark" on Justia Law

DIRECTV and its customers entered into service agreements that included a binding arbitration provision with a class-arbitration waiver. It specified that the entire arbitration provision was unenforceable if the “law of your state” made class-arbitration waivers unenforceable. The agreement also declared that the arbitration clause was governed by the Federal Arbitration Act, 9 U.S.C. 2. After California customers entered into the agreement, the Supreme Court held that California’s rule invalidating class-arbitration waivers was preempted by the Federal Act. When California customers sued, the trial court denied DIRECTV’s request to order the matter to arbitration. The California Court of Appeal affirmed, finding the entire arbitration provision unenforceable under the agreement because the parties were free to refer in the contract to California law as it would have been absent federal preemption. The U.S. Supreme Court reversed. The California court’s interpretation does not place arbitration contracts “on equal footing with all other contracts,” as required by the Act. California courts would not interpret contracts other than arbitration contracts the same way. The language the court used to frame the issue focused only on arbitration. View "DIRECTV, Inc. v. Imburgia" on Justia Law

An investment treaty between the U.K. and Argentina authorizes a party to submit a dispute to “the competent tribunal of the Contracting Party in whose territory the investment was made,” and permits arbitration if, 18 months after such submission, the tribunal has not made a final decision. BG, a British firm, had an interest in MetroGAS, an Argentine entity licensed to distribute natural gas in Buenos Aires. At the time of BG’s investment, Argentine law provided that gas tariffs would be calculated in U.S. dollars and would be set at levels sufficient to assure gas distribution firms a reasonable return. Argentina later changed the calculation basis to pesos. Profits became losses. BG sought arbitration, which was conducted in Washington, D. C. BG claimed that Argentina had violated the Treaty, which forbids expropriation of investments and requires each nation to give investors fair and equitable treatment. Argentina denied the claims and argued that the arbitrators lacked jurisdiction because BG had not complied with the local litigation requirement. The arbitration panel concluded that Argentina’s enactment of laws that hindered recourse to its judiciary excused compliance and that Argentina had not expropriated BG’s investment but had denied fair and equitable treatment. The district court confirmed the award. The District of Columbia Circuit vacated, holding that the arbitrators lacked jurisdiction. The Supreme Court reversed. The local litigation requirement was a matter for arbitrators to interpret and apply; courts should review that interpretation with deference. Courts presume that the parties intended arbitrators to decide disputes about application of procedural preconditions to arbitration, including claims of waiver, delay, defense to arbitrability, time limits, notice, laches, or estoppel. The provision is procedural; it determines when the contractual duty to arbitrate arises, not whether there is a duty to arbitrate. It is a claims-processing rule. The fact that contract is a treaty does not make a difference. The Treaty contains no evidence that the parties had intentions contrary to the ordinary presumptions about who should decide threshold arbitration issues. View "BG Group plc v. Republic of Argentina" on Justia Law

An agreement between American Express and merchants who accept American Express cards, requires that all of their disputes be resolved by arbitration and provides that there “shall be no right or authority for any Claims to be arbitrated on a class action basis.” The merchants filed a class action, claiming that American Express violated section 1 of the Sherman Act and seeking treble damages under section 4 of the Clayton Act. The district court dismissed. The Second Circuit reversed, holding that the class action waiver was unenforceable and that arbitration could not proceed because of prohibitive costs. The Circuit upheld its reversal on remand in light of a Supreme Court holding that a party may not be compelled to submit to class arbitration absent an agreement to do so. The Supreme Court reversed. The FAA reflects an overarching principle that arbitration is a matter of contract and does not permit courts to invalidate a contractual waiver of class arbitration on the ground that the plaintiff’s cost of individually arbitrating a federal statutory claim exceeds the potential recovery. Courts must rigorously enforce arbitration agreements even for claims alleging violation of a federal statute, unless the FAA mandate has been overridden by a contrary congressional command. No contrary congressional command requires rejection of this waiver. Federal antitrust laws do not guarantee an affordable procedural path to the vindication of every claim or indicate an intention to preclude waiver of class-action procedures. The fact that it is not worth the expense involved in proving a statutory remedy does not constitute the elimination of the right to pursue that remedy. View "Am. Express Co. v. Italian Colors Rest." on Justia Law

Sutter provided medical services to patients insured by Oxford under a fee-for-services contract that required binding arbitration of contractual disputes. Sutter filed a purported class action in state court, claiming that Oxford failed to fully and promptly pay him and other physicians. The court compelled arbitration. The arbitrator concluded that the contract authorized class arbitration. The district court rejected Oxford’s motion to vacate, which asserted that the arbitrator had exceeded his authority under the Federal Arbitration Act, 9 U.S.C. 1. The Third Circuit affirmed. After the Supreme Court held that an arbitrator may employ class procedures only if the parties have authorized them, the arbitrator reaffirmed his conclusion. Oxford unsuccessfully renewed its motion to vacate and the Third Circuit affirmed. A unanimous Supreme Court affirmed. The arbitrator’s decision survives the limited judicial review allowed by section 10(a)(4) of the Act. The parties bargained for the arbitrator’s construction of their agreement, so the arbitral decision must stand, regardless of a court’s view of its merits. The arbitrator twice did what the parties asked: considered their contract and decided whether it reflected an agreement to permit class proceedings. To overturn his decision, a court would have to find that he misapprehended the parties’ intent; section 10(a)(4) bars that. View "Oxford Health Plans LLC v. Sutter" on Justia Law

Nitro-Lift contracts with operators of oil and gas wells to provide services. Howard and Schneider entered a confidentiality-noncompetition agreement with Nitro-Lift that contained an arbitration clause” After working for Nitro-Lift on wells in Oklahoma, Texas, and Arkansas, they quit and began working for one of Nitro-Lift’s competitors. Nitro-Lift served them with a demand for arbitration. The former employees filed suit Oklahoma, asking the court to declare the agreements void and enjoin enforcement. The court dismissed. The Oklahoma Supreme Court ordered the parties to show cause why the matter should not be resolved by application of Okla. Stat., Tit. 15, 219A, which limits the enforceability of noncompetition agreements. Nitro-Lift argued that any dispute as to the contracts’ enforceability was a question for the arbitrator. The Oklahoma Supreme Court held that the existence of an arbitration agreement in an employment contract does not prohibit judicial review of the underlying agreement. The U.S. Supreme Court vacated, holding that the state court misconstrued the Federal Arbitration Act, 9 U.S.C. 1, which favors arbitration. View "Nitro-Lift Techs., L.L.C. v. Howard" on Justia Law

Although respondents' credit card agreement required their claims to be resolved by binding arbitration, they filed a lawsuit against petitioner and a division of petitioner bank, alleging, inter alia, violations of the Credit Repair Organizations Act (CROA), 15 U.S.C. 1679 et seq. At issue was whether the CROA precluded enforcement of an arbitration agreement in a lawsuit alleging violations of the Act. The Court held that because the CROA was silent on whether claims under the Act could proceed in an arbitrable forum, the Federal Arbitration Act (FAA), 9 U.S.C. 1 et seq., required the arbitration agreement to be enforced according to its terms. View "CompuCredit Corp. v. Greenwood" on Justia Law

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.