Justia Arbitration & Mediation Opinion SummariesArticles Posted in US Court of Appeals for the Seventh Circuit
United Natural Foods, Inc. v. Teamsters Local 414
A collective bargaining agreement (CBA), covered employees at United’s Indiana distribution center, prohibiting strikes and lock-outs during the life of the agreement. Negotiations over a successor agreement were ongoing when the existing agreement expired in September 2019. The agreement provided: So long as negations are ongoing, all terms and provisions of the existing CBA will continue to apply. However, “[i]n the event of a strike, the provisions of this section do not apply.” Bargaining over a new agreement came to a standstill on September 20. On December 12, Local 414 went on strike with a picket line at the Indiana facility. On December 17, Local 414 began additional picketing at United’s Minnesota and Wisconsin distribution centers. Workers there walked off the job. On December 18, Local 414 ended the strike and ceased picketing at the other sites. In July 2020, Local 414 engaged in another strike in Indiana.United filed suit under the Labor Management Relations Act, 29 U.S.C. 185, alleging that the strikes violated the CBA’s no-strike provisions. Local 414 moved to compel arbitration of the claim. The Seventh Circuit affirmed that the claims were not subject to arbitration. The arbitration procedure is focused exclusively on employee-initiated grievances and does not apply to employer-initiated grievances. The arbitration clause is not reasonably susceptible to an interpretation that includes an employer-initiated dispute regarding the CBA’s terms. View "United Natural Foods, Inc. v. Teamsters Local 414" on Justia Law
Johnson v. Mitek Systems, Inc.
HyreCar is an intermediary between people who own vehicles and people who would like to drive for services such as Uber and GrubHub. Before leasing a car, HyreCar sends an applicant’s information, including a photograph, to Mitek, which provides identity-verification services. Johnson, a HyreCar driver, brought a putative class action, alleging Mitek used that information without the consent required by the Illinois Biometric Privacy Act. Mitek asked the district court to send the case to arbitration, citing an Arbitration Agreement in Johnson’s contract with HyreCar, applicable to drivers, HyreCar, and “any subsidiaries, affiliates, agents, employees, predecessors in interest, successors, and assigns, as well as all authorized or unauthorized users or beneficiaries of services or goods provided under the Agreement.The district court concluded that suppliers such as Mitek were not covered. The Seventh Circuit affirmed, rejecting Mitek’s claim that it is a “beneficiary of services or goods provided under the Agreement.” The “services or goods provided under the Agreement” are vehicles. Mitek cannot be classified as a “user” of HyreCar’s services or goods. Mitek has its own contract with HyreCar, but does not have a contract with any HyreCar driver. The Federal Arbitration Act, 9 U.S.C. 2 does not change the result. The court noted that claims under the Illinois Act cannot be litigated in federal court unless the plaintiff can show concrete harm. Johnson seeks only statutory damages. Johnson’s claim must be remanded to state court. View "Johnson v. Mitek Systems, Inc." on Justia Law
Rock Hemp Corp. v. Dunn
Rock Hemp contracted with CBDINC to purchase 6,000 hemp seeds. CBDINC is a fictitious business name used by Dunn, Davies, and Kolodny (Appellees). The contract contains an arbitration clause requiring “[a]ny dispute arising out of this Agreement” be resolved through “binding arbitration” in Denver, Colorado. Disappointed with CBDINC’s hemp seeds, Rock sued the Appellees individually, not CBDINC, in Wisconsin state court. The Appellees removed the case to federal court and moved to dismiss the case for failure to comply with the arbitration clause. Rock sought remand under 28 U.S.C. 1447.The Seventh Circuit affirmed the judgment in favor of the Appellees. Based on the date when Rock “specifically disclose[d] the amount of monetary damages sought,” the district court correctly found that removal was timely. The Appellees did not fully litigate the merits of the case in state court. The allegations in the complaint make clear that CBDINC was not a distinct legal entity from the Appellees, and Rock does not allege it was confused or deceived by the use of the d/b/a; the district court correctly concluded that the contract is valid and Appellees have standing to enforce it. View "Rock Hemp Corp. v. Dunn" on Justia Law
CCC Intelligent Solutions Inc. v. Tractable Inc.
CCC and Tractable use algorithms and data generated by repair centers to provide estimates of the cost to repair damaged vehicles. Tractable dispatched its employee to obtain a license for CCC’s software. Using a false name, the employee purported to represent “JA,” a small, independent appraiser. CCC issued a license. The contract forbids assignment of the license without consent and represents that JA is acting on its own behalf, not as an agent for any third party, and forbids disassembly of the software or its incorporation into any other product. Tractable disassembled the software and incorporated some features into its own product. In CCC’s subsequent suit, Tractable moved for arbitration under the agreement between CCC and JA., arguing that “JA” is a name that Tractable uses for itself. The Seventh Circuit affirmed the denial of the motion. Tractable is not a party to the agreement. CCC could not have discovered that Tractable uses the name “JA.” Contractual meaning reflects words and signs exchanged between the negotiators, not unilateral, confidential beliefs. If a misrepresentation as to the character or essential terms of a proposed contract induces conduct that appears to be a manifestation of assent by one who neither knows nor has reasonable opportunity to know of the character or essential terms of the proposed contract, his conduct is not effective as a manifestation of assent.. The identity of CCC’s trading partner was a vital element of the deal. View "CCC Intelligent Solutions Inc. v. Tractable Inc." on Justia Law
Nano Gas Technologies, Inc. v. Roe
Roe invented a nozzle that transforms gas into liquid. Roe assigned the nozzle to Nano Gas, in exchange for 20% equity in Nano and a board seat. The relationship floundered. Roe left Nano, taking a prototype machine and some of Nano’s intellectual property produced by Hardin, another employee, and continued to develop the technology.An arbitrator determined that Roe should compensate Nano ($1,500,000) but that Roe deserved compensation for his work ($1,000,000) in the form of an offset against Nano's award. The arbitrator noted that Roe remained a Nano shareholder and could benefit financially in the future, then ordered Roe to return the Hardin work-papers to Nano, or, if unable to do that, to pay Nano $150,000. Nano sought to enforce the award and obtained judgment for $650,000. Nano filed a turnover motion seeking Roe’s Nano stock, valued at approximately $117,000. Roe argued that the award explicitly stated he could pay the remaining amount “in such manner as Roe chooses,” and provided he would remain a shareholder.The district court reasoned that Roe could choose how to pay the $500,000 award, but ordered Roe to turn over the stock or identify other assets to satisfy the $150,000 award. The Seventh Circuit reversed regarding Roe’s discretion to satisfy the $500,000 award and affirmed the $150,000 award for the Hardin papers. The award is devoid of any language indicating Roe shall remain a shareholder indefinitely or that Roe has complete discretion to decide if, when, and how Roe pays the award. View "Nano Gas Technologies, Inc. v. Roe" on Justia Law
K.F.C. v. Snap Inc.
K.F.C., age 11, signed up for a Snapchat account. Snapchat's terms specify that a person must be at least 13 to have an account. K.F.C. lied about her age. Before she turned 18, K.F.C. sued, alleging that Snapchat’s features amount to facial recognition, which violates the Illinois Biometric Privacy Act, K.F.C. acknowledges that she accepted Snapchat’s terms but denies that its arbitration clause binds her although she continued using Snapchat after turning 13.The Seventh Circuit affirmed the dismissal of the case. An arbitrator, not a court, must decide whether K.F.C.’s youth is a defense to the contract’s enforcement. While even the most sweeping delegation cannot send the contract-formation issue to the arbitrator, state law does not provide that agreements between adults and children are void but treats such agreements as voidable (capable of ratification), so the age of the contracting parties is a potential defense to enforcement. The Federal Arbitration Act provides that arbitration is enforceable to the extent any promise is enforceable as a matter of state law, 9 U.S.C. 2. A challenge to the validity (as opposed to the existence) of a contract goes to the arbitrator; K.F.C.’s arguments about her youth and public policy concern the contract’s validity, not its existence. View "K.F.C. v. Snap Inc." on Justia Law
Campbell v. Keagle Inc
When she began work, Campbell signed a contract with Keagle, the bar’s owner; it included an arbitration clause. After a dispute arose, the district judge denied Keagle’s motion to refer the matter to arbitration, finding several parts of the arbitration clause unconscionable: Keagle had reserved the right to choose the arbitrator and location of arbitration. Campbell had agreed not to consolidate or file a class suit for any claim and to pay her own costs, regardless of the outcome. The judge did not find that the contract was one-sided as a whole. Keagle accepted striking the provisions found to be unconscionable but sought to arbitrate rather than litigate.The Seventh Circuit remanded with instructions to name an arbitrator, reasoning that the mutual assent to arbitration remains. The Federal Arbitration Act, 9 U.S.C. 4, provides that, absent a contrary agreement, the arbitration takes place in the same judicial district as the litigation; “who pays” may be determined by some other state or federal statute, such as the Fair Labor Standards Act, on which Campbell’s suit rests. The chosen arbitrator can prescribe the procedures. Under 9 U.S.C. 5, “if for any … reason there shall be a lapse in the naming of an arbitrator" the court shall designate an arbitrator. View "Campbell v. Keagle Inc" on Justia Law
Harshaw v. Harshaw
Anne and Donald divorced in 1996 after 25 years of marriage. They later reconciled but did not re‐marry, then separated again. Because divorce laws no longer applied, Anne sued Donald in Indiana state court under equitable theories to seek redress for her contributions to the relationship during their second period together. They agreed to binding arbitration. The arbitrator awarded Anne $435,000, half the increase in value of Donald’s retirement savings during their unmarried cohabitation. Donald declared bankruptcy and sought to discharge the arbitrator’s award as a money judgment. Anne argued that the arbitrator had awarded her an interest in specific property so that the award could not be discharged in Donald’s bankruptcy.The bankruptcy court sided with Anne. The district court reversed. The Seventh Circuit affirmed, in favor of Donald. Anne was awarded a money judgment, not a property interest. The award does not identify a required source of funds or manner of payment but only lists options for satisfying the obligation. The payment of cash would suffice; the award provided for post-judgment interest. The arbitrator’s award said that “this judgment should not be dischargeable in bankruptcy” but that language is not controlling. View "Harshaw v. Harshaw" on Justia Law
Bartlit Beck, LLP v. Okada
Okada, “a titan of the gambling industry,” hired Bartlit to represent him in a multi-billion-dollar lawsuit against Wynn Resorts. The litigation settled in Okada’s favor for $2.6 billion. Okada refused to pay the $50 million contingent fee specified in the parties’ engagement agreement, which included an arbitration clause. Bartlit initiated arbitration before CPR in Chicago, the agreed-upon forum. Okada participated in the arbitration for over a year.Less than 72 hours before the evidentiary hearing, Okada informed the arbitrators that he would not be attending. The Panel stated that it would proceed without him and that his nonattendance could subject him to default. Okada replied that he rejected the validity of the engagement agreement and was unable to make the journey from Japan to Chicago for undisclosed medical reasons. Okada announced that he would not authorize his attorneys to participate in the arbitration, and canceled all witnesses, reservations, and services. The Panel held him to be in default and found that Okada owed the firm $54.6 million, including a $963,032 sanction for the costs and fees of the proceeding.Okada moved to vacate the award, arguing that he had been deprived of a fundamentally fair proceeding when the Panel decided the case without his participation or his evidence. The district court and Seventh Circuit rejected his argument. The Panel had several reasonable bases for proceeding without him and there was nothing unfair about the proceeding. View "Bartlit Beck, LLP v. Okada" on Justia Law
Smith v. Board of Directors of Triad Manufacturing, Inc.
Plaintiff filed a class action complaint under the Employee Retirement Income and Security Act (ERISA) against the fiduciaries of the retirement plan offered by his former employer, Triad, for alleged financial misconduct.The Seventh Circuit concluded that the ERISA provisions that plaintiff invokes have individual and plan-wide effect. However, the arbitration provision in Triad's defined contribution retirement plan precludes relief that "has the purpose or effect of providing additional benefits or monetary or other relief to any Eligible Employee, Participant or Beneficiary other than the Claimant." Therefore, this provision prohibits relief that ERISA expressly permits. Accordingly, the court affirmed the district court's denial of Triad's motion to compel arbitration or, in the alternative, to dismiss. View "Smith v. Board of Directors of Triad Manufacturing, Inc." on Justia Law