Articles Posted in US Court of Appeals for the Seventh Circuit

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When Goplin began working at WeConnect, he signed the “AEI Alternative Entertainment Inc. Open Door Policy and Arbitration Program,” which referred to AEI throughout; it never mentioned WeConnect. Goplin brought a collective action under the Fair Labor Standards Act. WeConnect moved to compel arbitration, Fed.R.Civ.P. 12(b)(3), attaching an affidavit from its Director of Human Resources stating, “I am employed by WeConnect, Inc.—formerly known as Alternative Entertainment, Inc. or AEI.” Goplin claimed that WeConnect was not a party to the agreement and could not enforce it. He cited language on WeConnect’s website: WeConnect formed when two privately held companies, Alternative Entertainment, Inc. (AEI) and WeConnect Enterprise Solutions, combined in September 2016… we officially became one company. WeConnect asserted that WeConnect and AEI were two names for the same legal entity, stating: This was a name change, not a merger. The court held that WeConnect did not establish that it was a party to the agreement or otherwise entitled to enforce it. The court rejected subsequently-submitted corporate-form documents and affidavits, stating that new evidence cannot be introduced in a motion for reconsideration unless the movant shows “not only that [the] evidence was newly discovered or unknown to it until after the hearing, but also that it could not with reasonable diligence have discovered and produced such evidence.” The Seventh Circuit affirmed. View "Goplin v. WeConnect, Inc." on Justia Law

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Brokers Webb and Beversdorf were fired by Jefferies. They challenged their termination. As their employment contracts required, they filed claims in the Financial Industry Regulatory Authority’s arbitration forum. They signed FINRA's required “Arbitration Submission Agreement.” Their dispute proceeded in arbitration for two-and-a-half years. They withdrew their claims before a final decision was rendered. Under FINRA’s rules, that withdrawal constituted a dismissal with prejudice. Webb and Beversdorf then sued FINRA in Illinois, alleging that FINRA breached its contract to arbitrate their dispute with Jefferies by failing to properly train arbitrators, failing to provide arbitrators with appropriate procedural mechanisms, interfering with the arbitrators’ discretion, and failing to permit reasonable discovery. They sought damages in “excess of $50,000” and a declaratory judgment. The district court held that FINRA was entitled to arbitral immunity and dismissed the suit. The Seventh Circuit vacated, concluding that the federal courts lacked jurisdiction under the diversity statute, 28 U.S.C. 1332, which grants jurisdiction when there is complete diversity of citizenship between the parties and the amount in controversy exceeds $75,000, exclusive of interest and costs. While Illinois law permits plaintiffs to recover legal expenses as damages in limited circumstances, those circumstances are not present here, so the amount in controversy requirement was not satisfied. View "Webb v. Financial Industry Regulatory Authority" on Justia Law

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Credit One repeatedly called A.D.’s (a minor) cell phone about payments owed on her mother’s account. A.D., by and through her mother, Serrano, brought a putative class action under the Telephone Consumer Protection Act, 47 U.S.C. 227(b)(1)(A), seeking compensation for telephone calls placed by Credit One to her telephone number in an effort to collect a debt that she did not owe. During discovery, Credit One realized that its caller ID capture system had added A.D.’s phone number to its database when Serrano used A.D.’s phone to access her account. A.D. had apparently used the card, once, at her mother’s request, when she was 14 years old, in 2014. Credit One moved to compel arbitration and to defeat A.D.’s motion for class certification based on a cardholder agreement between Credit One and Serrano. The district court granted the motion to compel arbitration but certified for interlocutory appeal the question whether A.D. is bound by the cardholder agreement. The Seventh Circuit reversed the order compelling arbitration. A.D. is not bound by the terms of the cardholder agreement to arbitrate and has not directly benefited from the cardholder agreement such that equitable principles require the application of the arbitration clause against her. View "A.D. v. Credit One Bank, N.A." on Justia Law

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In 2006, Warciak’s mother signed an agreement with T-Mobile to begin cell phone service. In 2012, she signed another agreement when she purchased a new phone. Each agreement contained an arbitration clause. Although Warciak uses a phone on his mother’s plan and is an authorized user who can make changes to the account, he never signed either agreement nor is he otherwise a party to them. In 2016, Warciak received a spam text message promoting a Subway sandwich. He sued Subway under federal and state consumer protection statutes. Subway moved to compel arbitration based on the agreements between T-Mobile and Warciak’s mother. In the district court, Subway argued that federal estoppel law required Warciak to arbitrate under his mother’s contracts. Warciak countered that under Illinois law he is not bound by his mother’s contracts. The district court applied federal law. The Seventh Circuit reversed, holding that state law applies and that Subway cannot claim estoppel because it cannot show detrimental reliance. View "Warciak v. Subway Restaurants, Inc." on Justia Law

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In 2006, Warciak’s mother signed an agreement with T-Mobile to begin cell phone service. In 2012, she signed another agreement when she purchased a new phone. Each agreement contained an arbitration clause. Although Warciak uses a phone on his mother’s plan and is an authorized user who can make changes to the account, he never signed either agreement nor is he otherwise a party to them. In 2016, Warciak received a spam text message promoting a Subway sandwich. He sued Subway under federal and state consumer protection statutes. Subway moved to compel arbitration based on the agreements between T-Mobile and Warciak’s mother. In the district court, Subway argued that federal estoppel law required Warciak to arbitrate under his mother’s contracts. Warciak countered that under Illinois law he is not bound by his mother’s contracts. The district court applied federal law. The Seventh Circuit reversed, holding that state law applies and that Subway cannot claim estoppel because it cannot show detrimental reliance. View "Warciak v. Subway Restaurants, Inc." on Justia Law

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Hyatt and Shen Zhen entered into an agreement providing that Shen Zhen would renovate a Los Angeles hotel and operate it using Hyatt’s business methods and trademarks. Two years later Hyatt declared that Shen Zhen was in breach. An arbitrator concluded that Shen Zhen owes Hyatt $7.7 million in damages plus$1.3 million in attorneys’ fees and costs. The Seventh Circuit affirmed the district court’s order of enforcement, upholding the arbitrator’s refusal to issue a subpoena to Cadwalader, who represented Shen Zhen during the contract negotiations. The dispute arose two years after Cadwalader stopped working for Shen Zhen. The contract has an integration clause that forecloses resort to the negotiating history as an interpretive tool. The arbitrator also declined to disqualify Hyatt’s law firm, which Cadwalader joined about three years after the contract was signed, finding that the firm’s ethics screen ensured that no confidential information would reach Hyatt's lawyers. The court also rejected an argument that the award disregarded federal and state franchise law and should be set aside under 9 U.S.C. 10(a)(4), which covers situations in which “the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.” View "Hyatt Franchising, L.L.C. v. Shen Zhen New World I, LLC" on Justia Law

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The Unions represent engineers employed by the Railroad, which is an amalgamation of several carriers. As a result, the Railroad is a party to multiple collective bargaining Agreements (CBAs). The Railroad modified disciplinary rules; the new policy was set forth in “MAPS," and supplanted UPGRADE. The Railroad had previously made changes to UPGRADE over the Union’s objections. When it shifted from UPGRADE to MAPS it did not consult the Union. The Railway Labor Act, 45 U.S.C. 151–88 allows employers to change “rates of pay, rules, or working conditions of ... employees” in any way permitted by an existing CBA or by going through the bargaining and negotiation procedure prescribed in section 156. MAPS falls within the scope of “rules” and “working conditions.” The Railroad argued that the change was permitted under the CBA. The Seventh Circuit affirmed the dismissal of the Union’s suit. If a disagreement arises over the formation or amendment of a CBA, it is considered a “major” dispute under the Act, and it must be decided by a court. If it relates only to the interpretation or application of an existing agreement, it is labeled “minor” and must go to arbitration. In this case, there is at least a non-frivolous argument that interpretation of the agreement between the parties, not change, is at stake. View "Brotherhood of Locomotive Engineers and Trainmen v. Union Pacific Railroad Co." on Justia Law

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In 2013, Scheurer applied to work at Richelieu which outsourced its staffing needs to Remedy, a temporary staffing agency. The application form she signed with Remedy for placement with Richelieu contained an arbitration agreement. She was assigned to work for Richelieu, but that assignment ended after some months. About a year later, Remedy placed Scheurer with Fromm. Scheurer alleges that while working at Fromm, her supervisor sexually harassed her and that Fromm took no serious action to address the sexual harassment and instead fired her. Fromm tried to arrange a work situation that would have separated Scheurer from the supervisor, but when that proved “impossible,” Fromm asked Remedy to assign Scheurer to another client. Scheurer filed suit against Fromm, but not Remedy, alleging sexual harassment and retaliation, 42 U.S.C. 2000e‐2(a)(1) & 2000e‐3(a). Fromm argued that arbitration should be compelled under the contract law principle of equitable estoppel and because Fromm was a third‐party beneficiary of the Remedy agreement. The district court denied Fromm’s motion. The Seventh Circuit affirmed. There was no basis for finding that Fromm relied on Scheurer’s arbitration agreement since Fromm did not even know about it and Fromm was not a third‐party beneficiary of Remedy’s agreement with Scheurer. View "Scheurer v. Fromm Family Foods, LLC" on Justia Law

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Hyatt and Local 1 are parties to a collective bargaining agreement (CBA) that prohibits the hotel’s managerial employees from performing work normally performed by bargaining-unit employees absent an emergency. The CBA provides for the arbitration of any disputes not resolved by the grievance procedure. In 2013-2014, there were several incidents in which managers performed bargaining-unit work in circumstances that Local 1 did not regard as emergencies. The union took grievances to arbitration; both resulted in awards in Local 1's favor. Ninety days passed without Hyatt filing a petition to vacate; the union filed a petition to confirm the awards (Labor Management Relations Act, 29 U.S.C. 185(a)). The union alleged that Hyatt “has failed and refused and continues to fail and refuse to comply with” the awards. Local 1 cited 41 examples of managers allegedly performing bargaining unit work in 2015. The Seventh Circuit affirmed confirmation of the awards, rejecting Hyatt’s argument that the matter was either moot or did not present an appropriate case for confirmation. The district court’s “modest action” places the court’s contempt power behind the prospective relief ordered by the arbitrators, while reserving the merits of pending or future grievances for arbitration. Local 1 has conceded that any contempt petition would be based solely on the outcome of arbitrations post-dating the confirmation order. Confirming the awards does not undermine the agreement to resolve disputes through arbitration. View "Unite Here Local 1 v. Hyatt Corp." on Justia Law

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Hunt worked as a truck driver. In 2010, he signed an Independent Contractor Operating Agreement with Moore Brothers, a small Norfolk, Nebraska company. Three years later, Hunt and Moore renewed the Agreement. Before the second term expired, however, relations between the parties soured. Hunt hired Attorney Rine. Rine filed suit in federal court, although the Agreements contained arbitration clauses. Rine resisted arbitration, arguing that the clause was unenforceable as a matter of Nebraska law. Tired of what it regarded as a flood of frivolous arguments and motions, the district court granted Moore’s motion for sanctions under 28 U.S.C. 1927 and ordered Rine to pay Moore about $7,500. The court later dismissed the action without prejudice. The Seventh Circuit affirmed. It was within the district court’s broad discretion, in light of all the circumstances, to impose a calibrated sanction on Rine for her conduct of the litigation, culminating in the objectively baseless motion she filed in opposition to arbitration. View "James Hunt v. Moore Brothers, Inc." on Justia Law