Justia Arbitration & Mediation Opinion Summaries

Articles Posted in US Court of Appeals for the Sixth Circuit
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The Sixth Circuit vacated the judgment of the district court vacating an arbitration award to the extent that it applied to Greenhouse Holdings, LLC (Greenhouse), holding that it was disputed whether Greenhouse consented to arbitrate, and therefore, the evidence should be weighed by the district court in the first instance.At issue was whether an arbitrator has the authority to bind someone who hasn't signed the underlying arbitration agreement to an arbitration award. A Union filed a grievance against "Clearview Glass," alleging that it violated the parties' collective bargaining agreement. An arbitrator concluded that Greenhouse was bound by an in violation of the CBA. The district court vacated the award to the extent it applied to Greenhouse because it was unclear whether Greenhouse ever assented to the CBA. The Sixth Circuit vacated the judgment, holding that remand was required for the district court to first decide whether Greenhouse consented to arbitrate the threshold arbitrability question. View "Greenhouse Holdings, LLC v. International Union of Painters" on Justia Law

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Delek uses third-party specialty inspectors to ensure that Delek’s projects comply with industry and regulatory requirements. Cypress employs and assigns these specialty inspectors to companies like Delek. Becker worked as an electrical inspector for Cypress, which set Becker’s compensation as a day rate and issued his paychecks. Cypress deemed Becker an administrative employee and considered him overtime-exempt under the Fair Labor Standards Act, 29 U.S.C. 201 (FLSA). Becker signed an employment agreement, acknowledging that he “underst[ood] that [his] employment is based on a specific project to be performed for a designated customer” and that any dispute related to this employment relationship would be arbitrated. Becker was assigned by Cypress to work at a Delek location.Becker filed an FLSA complaint against Delek, arguing that “Delek’s day-rate system violates the FLSA because [he] and those similarly situated workers did not receive any overtime pay for hours worked over 40 hours each week.” Becker claimed Delek was his employer because he worked 12-15 hours a day for six-seven days a week at Delek's location, reported to Delek, performed work essential to Delek’s core business, and had his pay and schedule directed by Delek. Cypress was allowed to intervene and moved to compel arbitration. The Sixth Circuit reversed the denial of the motion. Becker’s challenge is not “specific” to the arbitration agreement’s delegation provision, leaving the question of whether Delek can enforce the arbitration agreement for an arbitrator to decide. View "Becker v. Delek US Energy, Inc." on Justia Law

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Dorsa joined Miraca, which offers pathology services for healthcare providers. His employment agreement contained a binding arbitration clause. Dorsa claims that, during his employment, he observed Miraca giving monetary donations and free services to healthcare providers to induce pathology referrals, in violation of the AntiKickback Statute, the Stark Law, and the False Claims Act (FCA), 31 U.S.C. 3729(a)(1). Dorsa lodged internal complaints. Dorsa claims that Miraca fabricated a sexual harassment complaint against him. Dorsa filed a qui tam action against Miraca in September 2013. Days later, Miraca fired Dorsa, citing workplace harassment. Dorsa added an FCA retaliation claim.The government investigated the FCA claims and, in 2018, intervened for purposes of settlement, under which Miraca agreed to pay $63.5 million to resolve FCA claims. Miraca moved to dismiss the remaining retaliation claim, citing the arbitration clause, Dorsa argued that the clause did not apply because his claim was independent from the employment agreement. Miraca then asserted that the court did not have the authority to decide a threshold question of arbitrability. The district court ruled in favor of Dorsa. Miraca later moved to stay the proceedings and compel arbitration. The Sixth Circuit affirmed the denial of that motion. Miraca forfeited and waived its arguments about the district court’s authority to decide threshold questions of arbitrability and its ruling on the merits. Filing the motion to dismiss was inconsistent with Miraca’s later attempts to rely on the arbitration agreement. View "Dorsa v. Miraca Life Sciences, Inc." on Justia Law

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The Cintas “defined contribution” retirement plan has a “menu” of investment options in which each participant can invest. Each Plan participant maintains an individual account, the value of which is based on the amount contributed, market performance, and associated fees. Under the Employment Retirement Income Security Act (ERISA), 29 U.S.C. 1102(a)(1), the Plan’s fiduciaries have the duty of loyalty—managing the plan for the best interests of its participants and beneficiaries—and a duty of prudence— managing the plan with the care and skill of a prudent person acting under like circumstances. Plaintiffs, two Plan participants, brought a putative class action, contending that Cintas breached both duties. Plaintiffs had entered into multiple employment agreements with Cintas; all contained similar arbitration provisions and a provision preventing class actions.The district court declined to compel arbitration, reasoning that the action was brought on behalf of the Plan, so that it was irrelevant that the two Plaintiffs had consented to arbitration through their employment agreements–the Plan itself did not consent. The Sixth Circuit affirmed. The weight of authority and the nature of ERISA section 502(a)(2) claims suggest that these claims belong to the Plan, not to individual plaintiffs. The actions of Cintas and the other defendants do not support a conclusion that the plan has consented to arbitration. View "Hawkins v. Cintas Corp." on Justia Law

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Attorney Romanzi referred a personal injury case to his employer, the Fieger law firm; meanwhile, creditors were winning default judgments against Romanzi. The case settled for $11.9 million; about $3.55 million was awarded as attorney’s fees after Romanzi quit the firm. Romanzi’s employment at the firm entitled him to a third of the fees. Before Romanzi could claim his due, his creditors forced him into Chapter 7 bankruptcy. The trustee commenced an adversary proceeding against the firm to recover Romanzi’s third of the settlement fees for the bankruptcy estate. The parties agreed to arbitration.Two of the three arbitrators found for the trustee in a single-paragraph decision that was not "reasoned" to the firm’s satisfaction. The district court remanded for clarification rather than vacating the award. On remand, the panel asked for submissions from both parties, which the trustee provided; the firm refused to participate. The arbitrators’ subsequent supplemental award, approved by the district court, awarded the trustee the fees plus interest. The Sixth Circuit affirmed, rejecting arguments that the arbitrators’ original award was compromised according to at least one factor allowing vacation under the Federal Arbitration Act, 9 U.S.C. 10(a); that the act of remanding and the powers exercised by the arbitrators on remand violated the doctrine of functus officio; and that the supplemental award should have been vacated under the section 10(a) factors. The district court’s and panel’s actions fall under the clarification exception to functus officio. View "In re: Romanzi" on Justia Law

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Beginning in 1986, Arabian was the sole authorized dealer for Ford brands in Kuwait. In a 2005 Agreement, the companies agreed to use “binding arbitration” as the “exclusive recourse” for any dispute. Ford ended the Agreement in 2016 and applied to the American Arbitration Association for a declaration that it permissibly ended the Agreement. Arabian sued, seeking an injunction prohibiting Ford from proceeding with arbitration and asserting breach of contract and fraud. Arabian argued that the Motor Vehicle Franchise Contract Arbitration Fairness Act, 15 U.S.C. 1226, requires that arbitration between dealers and car manufacturers requires that the parties consent to it after the dispute arises. The district court denied the motion, deciding that the arbitrator must resolve the gateway issue.The arbitral tribunal decided that the Act did not deprive it of authority and held that Ford permissibly terminated the Agreement; it taxed Arabian $1.35 million for fees and costs. Arabian brought counterclaims for breach of contract and fraud but withdrew them before the award. The Sixth Circuit confirmed the award. On remand, Ford moved to stay the federal action to allow the arbitrator to resolve Arabian’s common law claims. The district court dismissed the case without prejudice. The Sixth Circuit reversed. The Act’s command, 9 U.S.C. 3, that a district court “shall on application of one of the parties stay the trial,” conveys a mandatory obligation. Dismissal, unlike a stay, permits an objecting party to file an immediate appeal; a dismissal order undercuts the Act's pro-arbitration appellate-review provisions. View "Arabian Motors Group W.L.L. v. Ford Motor Co." on Justia Law

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Eight named plaintiffs, including two minors, brought a nationwide putative class action against e-commerce provider StockX for allegedly failing to protect millions of StockX users’ personal account information obtained through a cyber-attack in May 2019. Since 2015, StockX’s terms of service included an arbitration agreement, a delegation provision, a class action waiver, and instructions for how to opt-out of the arbitration agreement. Since 2017, StockX's website has stated: StockX may change these Terms without notice to you. “YOUR CONTINUED USE OF THE SITE AFTER WE CHANGE THESE TERMS CONSTITUTES YOUR ACCEPTANCE OF THE CHANGES. IF YOU DO NOT AGREE TO ANY CHANGES, YOU MUST CANCEL YOUR ACCOUNT.The Sixth Circuit affirmed the dismissal of the suit and an order compelling arbitration. The court rejected arguments that there is an issue of fact as to whether four of the plaintiffs agreed to the current terms of service and that the defenses of infancy and unconscionability render the terms of service and the arbitration agreement (including the delegation provision) invalid and unenforceable. The arbitrator must decide in the first instance whether the defenses of infancy and unconscionability allow plaintiffs to avoid arbitrating the merits of their claims. View "I. C. v. StockX, LLC" on Justia Law

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AtriCure, an Ohio company, that develops medical devices to treat atrial fibrillation, contracted with Dr. Meng’s company, ZenoMed, to serve as AtriCure’s exclusive Chinese distributor. AtriCure later believed that another of Meng's Chinese companies (Med-Zenith) was attempting to market a dangerous knockoff medical device. AtriCure and ZenoMed had a “Distribution Agreement” that included confidentiality and noncompete clauses and an arbitration clause designating a Chinese entity as the forum. AtriCure let the Distribution Agreement expire and demanded that ZenoMed pay for or return its inventory. Receiving no response, AtriCure filed a federal complaint in Ohio against Meng and Med-Zenith for improperly manufacturing and selling counterfeit products. ZenoMed, Meng, and Med-Zenith sought to stay the lawsuit against them under the Federal Arbitration Act, 9 U.S.C. 16(a) While Meng and Med-Zenith were not parties to the Distribution Agreement, they argued equitable estoppel and agency theories. The court denied their motion.The Sixth Circuit remanded. Although Supreme Court has promoted a “healthy regard” for the Federal Arbitration Act’s “federal policy favoring arbitration," the Act’s text compels states only to treat arbitration contracts the same way that they treat “any contract.” Ohio law permits the defendants to enforce an arbitration clause even though they did not sign the contract. The defendants' “equitable estoppel” theories failed but the district court failed to ask the right question under Ohio law when rejecting their agency theory. View "AtriCure, Inc. v. Meng" on Justia Law

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Southard worked for Newcomb, then filed a putative class action, alleging violations of the Fair Labor Standards Act, 29 U.S.C. 201, plus state-law claims. Newcomb removed the case to federal court. Southard amended his complaint to delete the FLSA claim. Newcomb moved to dismiss Southard’s complaint or to stay the action pending arbitration. The district court concluded that the parties did not form an agreement to arbitrate under the Federal Arbitration Act, 9 U.S.C. 3-4 and denied Newcomb’s motion, then remanded Southard’s remaining state-law claims to state court.The Sixth Circuit affirmed. To invoke FAA remedies, the parties must have entered into a “written agreement for arbitration.” Courts evaluate whether an agreement qualifies as FAA arbitration based on the common features of classic arbitration: a final, binding remedy by a third party, an independent adjudicator, substantive standards, and an opportunity for each side to present its case. Southard’s application for employment states: I accept that any complaint or conflict that cannot be resolved internally may be referred to Alternative Dispute Resolution unless prohibited by law, before any other legal action is taken. The employee handbook states the employee agrees "to Alternative Dispute Resolution a forum or means for resolving disputes, as arbitration or mediation, that exists outside the state or federal judicial system, unless prohibited by law," and If there is a conflict that cannot be resolved, "both agree that the matter will be referred to mediation.”. The parties agreed to alternative dispute resolution generally, not arbitration specifically. View "Southard v. Newcomb Oil Co., LLC" on Justia Law

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Boykin, a 73-year-old African-American veteran, worked in managerial roles for Family Dollar Stores. On July 8, 2018, Boykin had a dispute with a customer. Family Dollar fired Boykin weeks later. Boykin sued, alleging age and race discrimination. Family Dollar moved to compel arbitration, introducing a declaration that Family Dollar employees must take online training sessions, including a session about arbitration. When taking online courses, employees use their own unique ID and password. During the arbitration session, they must review and accept Family Dollar’s arbitration agreement. According to Family Dollar, Boykin completed the session on July 15, 2013. Boykin replied under oath that he did not consent to or acknowledge an arbitration agreement at any time, that he had no recollection of taking the arbitration session, and that no one ever told him that arbitration was a condition of his employment. Boykin requested his personnel file, which did not include an arbitration agreement. The district court granted Family Dollar’s motion.The Sixth Circuit reversed. Although the Federal Arbitration Act requires a court to summarily compel arbitration upon a party’s request, the court may do so only if the opposing side has not put the making of the arbitration contract “in issue.” 9 U.S.C. 4. Boykin’s evidence created a genuine issue of fact over whether he electronically accepted the contract or otherwise learned of Family Dollar’s arbitration policy. View "Boykin v. Family Dollar Stores of Michigan, LLC" on Justia Law