Justia Arbitration & Mediation Opinion Summaries
Articles Posted in US Court of Appeals for the Ninth Circuit
Hansen v. Musk
Karl Hansen sued Tesla, Inc., its CEO Elon Musk, and U.S. Security Associates (USSA), alleging retaliation for reporting misconduct at Tesla. Hansen, initially hired by Tesla, was later employed by USSA. He reported thefts, narcotics trafficking, and improper contracts at Tesla, and filed a report with the SEC. After Musk saw Hansen at the Gigafactory and demanded his removal, USSA reassigned Hansen, which he claimed was retaliatory.The United States District Court for the District of Nevada ordered most of Hansen’s claims to arbitration, except his Sarbanes-Oxley Act (SOX) claim. The arbitrator dismissed Hansen’s non-SOX claims, finding no contractual right to work at the Gigafactory and no reasonable belief of securities law violations. The district court confirmed the arbitration award and dismissed Hansen’s SOX claim, holding that the arbitrator’s findings precluded relitigation of issues essential to the SOX claim.The United States Court of Appeals for the Ninth Circuit affirmed the district court’s dismissal. The court held that while an arbitrator’s decision cannot preclude a SOX claim, a confirmed arbitral award can preclude relitigation of issues underlying such a claim. The court found that the arbitrator’s decision, which concluded Hansen had no reasonable belief of securities law violations, precluded his SOX claim. The court also held that the arbitrator’s findings on Hansen’s state law claims had a preclusive effect, as they were confirmed by the district court. Thus, the Ninth Circuit affirmed the dismissal of Hansen’s complaint. View "Hansen v. Musk" on Justia Law
HECKMAN V. LIVE NATION ENTERTAINMENT, INC.
Plaintiffs brought a putative class action against Live Nation Entertainment, Inc., and Ticketmaster LLC, alleging anticompetitive practices in violation of the Sherman Act. The plaintiffs had purchased tickets through Ticketmaster’s website, which required them to agree to Ticketmaster’s Terms of Use. These terms included an arbitration agreement mandating that disputes be resolved by an arbitrator from New Era ADR, using expedited/mass arbitration procedures.The United States District Court for the Central District of California denied the defendants' motion to compel arbitration. The court found that the clause delegating the authority to determine the validity of the arbitration agreement to the arbitrator was unconscionable under California law, both procedurally and substantively. The court also held that the entire arbitration agreement was unconscionable and unenforceable. The defendants appealed this decision.The United States Court of Appeals for the Ninth Circuit affirmed the district court’s decision. The appellate court held that the delegation clause and the arbitration agreement as a whole were unconscionable under California law. The court found that the delegation clause was part of a contract of adhesion and that the terms on Ticketmaster’s website exhibited extreme procedural unconscionability. Additionally, the court identified several features of New Era’s arbitration rules that contributed to substantive unconscionability, including the mass arbitration protocol, lack of discovery, limited right of appeal, and arbitrator selection provisions.The Ninth Circuit also held that the application of California’s unconscionability law to the arbitration agreement was not preempted by the Federal Arbitration Act (FAA). As an alternate and independent ground, the court held that the FAA does not preempt California’s prohibition of class action waivers in contracts of adhesion in large-scale small-stakes consumer cases, as established in Discover Bank v. Superior Court. The court concluded that Ticketmaster’s Terms and New Era’s Rules were independently unconscionable under Discover Bank. The decision of the district court was affirmed. View "HECKMAN V. LIVE NATION ENTERTAINMENT, INC." on Justia Law
International Petroleum Products and Additives Co, Inc. v. Black Gold S.A.R.L.
The case involves International Petroleum Products and Additives Company (IPAC), a California-based company, which entered into sales and distribution agreements with Black Gold S.A.R.L., a Monaco-based company. Black Gold breached these agreements by using IPAC’s confidential information to develop competing products. IPAC won an arbitration award of over $1 million against Black Gold. However, Black Gold declared bankruptcy in Monaco, complicating IPAC’s efforts to collect the award.The United States District Court for the Northern District of California confirmed the arbitration award and entered judgment against Black Gold. During post-judgment discovery, Black Gold engaged in misconduct, leading the district court to sanction Black Gold and add Lorenzo and Sofia Napoleoni, Black Gold’s owners, as judgment debtors on the grounds that they were Black Gold’s alter egos. Black Gold’s petition for recognition of its Monaco bankruptcy proceedings was initially denied by the bankruptcy court, but this decision was later reversed by the Bankruptcy Appellate Panel (BAP), which mandated recognition of the Monaco proceedings.The United States Court of Appeals for the Ninth Circuit reviewed the case. The court held that the automatic bankruptcy stay under 11 U.S.C. § 1520 did not retroactively apply to the date of the bankruptcy court’s initial denial of Black Gold’s petition. The court also held that the automatic stay did not extend to IPAC’s alter ego claim against the Napoleonis. The court affirmed the district court’s judgment and the award of attorneys’ fees and costs in favor of IPAC, concluding that the alter ego claim was not the property of Black Gold’s estate under California law. View "International Petroleum Products and Additives Co, Inc. v. Black Gold S.A.R.L." on Justia Law
Ronderos v. USF Reddaway, Inc.
The plaintiff, Jose Emilio Ronderos, applied for a job with USF Reddaway, Inc. and Yellow Corporation (collectively, "Reddaway") and was required to sign an arbitration agreement as part of the application process. Ronderos later filed employment-related claims against Reddaway, alleging age and disability discrimination, retaliation, and other violations under California law. Ronderos claimed that the arbitration agreement was procedurally and substantively unconscionable and therefore unenforceable.The United States District Court for the Central District of California denied Reddaway's motion to compel arbitration. The court found that the arbitration agreement was procedurally unconscionable because it was a contract of adhesion presented on a take-it-or-leave-it basis, involved significant oppression, and contained a substantively opaque cost-splitting provision. The court also found that the agreement was substantively unconscionable due to its one-sided filing provision and preliminary injunction carve-out, which unfairly favored Reddaway. The district court declined to sever the unconscionable provisions and enforce the remainder of the agreement.The United States Court of Appeals for the Ninth Circuit affirmed the district court's decision. The appellate court agreed that the arbitration agreement was both procedurally and substantively unconscionable. It held that the agreement involved significant oppression and some surprise, making it procedurally unconscionable. The court also found that the one-sided filing provision and preliminary injunction carve-out were substantively unconscionable. The Ninth Circuit concluded that the district court did not abuse its discretion by declining to sever the unconscionable provisions and affirmed the denial of Reddaway's motion to compel arbitration. View "Ronderos v. USF Reddaway, Inc." on Justia Law
LOPEZ V. AIRCRAFT SERVICE INTERNATIONAL, INC.
Danny Lopez, an airline fuel technician, filed a wage-and-hour lawsuit under California law against his employer, Menzies Aviation (USA), Inc. Lopez alleged that Menzies violated state requirements for meal periods, rest periods, overtime wages, minimum wages, and other employment conditions. Menzies sought to compel arbitration based on an arbitration agreement Lopez signed as part of his employment.The United States District Court for the Central District of California denied Menzies' motion to compel arbitration. The court found that Lopez, as a transportation worker engaged in foreign or interstate commerce, was exempt from the Federal Arbitration Act (FAA) under 9 U.S.C. § 1. The court reasoned that Lopez’s role in fueling airplanes used in interstate and foreign commerce was integral to the transportation process, thus qualifying him for the exemption.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 fuel technician who places fuel in planes used for foreign and interstate commerce is a transportation worker engaged in commerce. The court emphasized that such a worker plays a direct and necessary role in the free flow of goods across borders. The court clarified that there is no requirement for the worker to have hands-on contact with goods or be directly involved in their transportation to fall within the FAA exemption. Consequently, the Ninth Circuit concluded that Lopez was exempt from the arbitration requirements of the FAA and affirmed the district court’s denial of Menzies' motion to compel arbitration. View "LOPEZ V. AIRCRAFT SERVICE INTERNATIONAL, INC." on Justia Law
CAREMARK, LLC V. CHOCTAW NATION
The Choctaw Nation and several pharmacies it owns and operates entered into agreements with Caremark, LLC, and its affiliates to facilitate insurance reimbursements for the Nation’s costs for pharmacy services for its members. The Nation filed a lawsuit in the Eastern District of Oklahoma, alleging that Caremark unlawfully denied pharmacy reimbursement claims in violation of the Recovery Act. After the matter was stayed in the Eastern District of Oklahoma, Caremark petitioned to compel arbitration of the Nation’s claims in the District of Arizona. The district court granted the petition, concluding that the parties’ agreements included arbitration provisions with delegation clauses and therefore an arbitrator must decide the Nation’s arguments that its claims are not arbitrable.The Ninth Circuit Court of Appeals affirmed the district court’s decision. The court held that most of the Nation’s arguments challenging the district court’s arbitration order were foreclosed by a previous case, Caremark, LLC v. Chickasaw Nation, which addressed the enforceability of identical arbitration provisions. The court also held that the Nation’s remaining argument that the District of Arizona lacked subject-matter jurisdiction over the petition to compel arbitration failed because the Nation contractually agreed to arbitrate its claims against Caremark in Arizona, and in those contracts specifically “agree[d] to such jurisdiction.” Thus, the Nation expressly waived its tribal sovereign immunity as a bar to arbitration in the District of Arizona. View "CAREMARK, LLC V. CHOCTAW NATION" on Justia Law
Diaz v. Macy’s West Stores, Inc.
Yuriria Diaz, a former employee of Macy's West Stores, Inc., filed a lawsuit under the California Private Attorneys General Act (PAGA) for alleged violations of California's labor code. Macy's appealed the district court's order compelling arbitration of all Diaz's claims. The United States Court of Appeals for the Ninth Circuit affirmed the district court's order compelling arbitration of Diaz's individual PAGA claims, but vacated the order to the extent it compels arbitration of her non-individual claims.Previously, the district court had compelled arbitration of all Diaz's claims, interpreting the arbitration agreement between Diaz and Macy's to include non-individual PAGA claims. The court denied Diaz's request for a stay and closed the case, stating there were no remaining claims before the court.The Ninth Circuit concluded that it had jurisdiction to review the district court's order as a final decision with respect to arbitration. The court found that at the time of contracting, the parties consented only to arbitration of individual claims relating to Diaz's own employment. The agreement's language was strongly indicative of an intent to exclude any amalgamation of employees’ claims—including non-individual PAGA claims—from arbitration.The court rejected Macy's request that the district court on remand be instructed to dismiss the non-individual claims because under a recent California Supreme Court decision, those claims cannot be dismissed. The court remanded with instruction to treat the non-arbitrable non-individual claims consistent with the California Supreme Court’s decision, anticipating that the parties will, per their agreement, request a stay with respect to those claims. View "Diaz v. Macy’s West Stores, Inc." on Justia Law
KEEBAUGH V. WARNER BROS. ENTERTAINMENT INC.
A group of individuals, including a minor, filed a class action lawsuit against Warner Bros. Entertainment, Inc. for alleged misrepresentations related to the mobile application Game of Thrones: Conquest (GOTC). The plaintiffs claimed that Warner Bros. engaged in false and misleading advertising within the game. In response, Warner Bros. moved to compel arbitration of all claims based on the GOTC Terms of Service, which users agree to by tapping a “Play” button located on the app’s sign-in screen. The district court denied Warner Bros.' motion, finding that the notice of the Terms of Service was insufficiently conspicuous to bind users to them.The case was appealed to the United States Court of Appeals for the Ninth Circuit. The lower court had found that Warner Bros. failed to provide reasonably conspicuous notice of its Terms of Service, thus denying the motion to compel arbitration. The district court focused on whether the context of the transaction put the plaintiffs on notice that they were agreeing to the Terms of Service, concluding that the app did not involve a continuing relationship that would require some terms and conditions.The Ninth Circuit Court of Appeals reversed the district court's decision. The appellate court held that the district court erred in finding that Warner Bros. failed to provide reasonably conspicuous notice. The court found that the context of the transaction and the placement of the notice were both sufficient to provide reasonably conspicuous notice. The court also rejected the plaintiffs' argument that the arbitration agreement was unconscionable due to its ban on public injunctive relief. The court concluded that the unenforceability of the waiver of one’s right to seek public injunctive relief did not make either this provision or the arbitration agreement unconscionable or otherwise unenforceable. The case was remanded for further proceedings. View "KEEBAUGH V. WARNER BROS. ENTERTAINMENT INC." on Justia Law
FLI-LO Falcon, LLC V. Amazon.com, Inc.
The case involves a dispute between Amazon and its delivery service partners (DSPs), who are business entities that entered into Delivery Service Program Agreements with Amazon. These agreements contained an arbitration provision, stipulating that disputes arising from the agreements would be resolved by binding arbitration conducted by the American Arbitration Association, rather than in court. The plaintiffs, who are or were DSPs, argued that the Federal Arbitration Act's (FAA) "transportation worker exemption" applied to them, which would exempt them from the FAA's coverage and allow them to bring their dispute to court.The United States District Court for the Western District of Washington rejected the plaintiffs' argument and granted Amazon's motion to compel arbitration, dismissing the case without prejudice. The plaintiffs appealed this decision.The United States Court of Appeals for the Ninth Circuit affirmed the district court's decision. The court held that the FAA's "transportation worker exemption" did not extend to business entities or to commercial contracts like the DSP Agreement. The court also rejected the plaintiffs' argument that the arbitration agreement was unconscionable. The court found that the arbitration agreement contained a delegation provision, which incorporated AAA rules delegating threshold issues to the arbitrator. The court concluded that the delegation provision was between sophisticated parties, incorporated the AAA rules, and therefore must be enforced. Thus, the plaintiffs' remaining unconscionability arguments directed at the arbitration agreement as a whole must be decided by the arbitrator. View "FLI-LO Falcon, LLC V. Amazon.com, Inc." on Justia Law
SIKOUSIS LEGACY, INC. V. B-GAS LIMITED
In this case, the United States Court of Appeals for the Ninth Circuit affirmed the district court's decision to vacate the plaintiffs' quasi in rem attachment of a vessel owned by Bergshav Aframax Ltd., a defendant in an admiralty action seeking fulfillment of arbitration awards. The arbitration awards were owed to the plaintiffs by B-Gas Ltd., renamed Bepalo, a different corporate entity. The plaintiffs tried to hold Aframax liable for the arbitration awards by arguing that Aframax and Bepalo were alter egos, essentially the same entity.However, the court found that the plaintiffs failed to show a reasonable probability of success on their veil piercing theory, which would be required to establish that Aframax and Bepalo were alter egos. The court found that the plaintiffs did not demonstrate that Bepalo was dominated and controlled by the Bergshav Group, the parent corporate group of Aframax. The court noted that the minority shareholders of Bepalo exercised independent judgment in approving the relevant transactions, countering the claim that the Bergshav Group had total domination of Bepalo. Therefore, the court concluded that the plaintiffs had not met their burden of demonstrating a reasonable probability of success on their veil-piercing claim, leading to the affirmation of the district court's decision to vacate the attachment of the vessel. View "SIKOUSIS LEGACY, INC. V. B-GAS LIMITED" on Justia Law