Justia Arbitration & Mediation Opinion Summaries

Presley Karlin, a 17-year-old, was injured at Urban Air Springfield, a trampoline and adventure park, due to allegedly inadequate protective cushions. After turning 18, Karlin sued Urban Air for negligence. Urban Air responded by filing a motion to compel arbitration based on an arbitration agreement signed by Karlin’s mother on his behalf. Karlin argued that his mother lacked the authority to sign the agreement and that the agreement only applied to claims arising on the day it was signed, not to his injury four months later.The Circuit Court of Greene County overruled Urban Air’s motion to compel arbitration. Urban Air appealed, limiting its arguments to the arbitration agreement signed by Karlin’s mother. The court reviewed the case de novo, focusing on whether the arbitration agreement contained a delegation clause that required threshold issues of arbitrability to be decided by an arbitrator.The Supreme Court of Missouri found that the arbitration agreement did contain a delegation clause, which required any disputes about the scope, arbitrability, or validity of the agreement to be settled by arbitration. Since Karlin did not specifically challenge the delegation clause itself, the court held that the clause was valid and enforceable. Consequently, Karlin’s claims regarding the validity and scope of the arbitration agreement must be presented to the arbitrator.The Supreme Court of Missouri vacated the circuit court’s order and remanded the case with instructions to sustain Urban Air’s motion to compel arbitration. View "Karlin vs. UATP Springfield, LLC" on Justia Law

Jason and Kacie Highsmith hired Shelter, LLC to manage a home renovation project and later contracted with Design Gaps, Inc. to design and install cabinets and closets. The contracts required arbitration for disputes but did not specify completion dates. Design Gaps failed to meet multiple promised deadlines, leading the Highsmiths to terminate the contracts and hire another company. The Highsmiths shared Design Gaps' copyrighted drawings with the new contractor. They then filed for arbitration, alleging breach of contract and other claims, while Design Gaps counterclaimed for various issues, including copyright infringement.The arbitrator held a three-day hearing, during which the Highsmiths presented multiple witnesses, while Design Gaps only presented David Glover. The arbitrator found in favor of the Highsmiths, awarding them damages and attorney’s fees, and denied Design Gaps' counterclaims, including the copyright claim, citing fair use and lack of evidence for copyright registration.Design Gaps petitioned the United States District Court for the District of South Carolina to vacate the arbitration award, arguing the arbitrator disregarded the law and failed to issue a reasoned award. The district court denied the petition and confirmed the arbitration award, also granting the Highsmiths' motion for attorney’s fees.The United States Court of Appeals for the Fourth Circuit reviewed the case. The court dismissed the appeal, citing lack of federal jurisdiction based on the precedent set in Friedler v. Stifel, Nicolaus, & Co., which held that federal courts do not have jurisdiction over motions to vacate arbitration awards unless there is an independent basis for federal jurisdiction beyond the Federal Arbitration Act. The court concluded that the petition did not meet this requirement. View "Design Gaps, Inc. v. Shelter, LLC" on Justia Law

Kiana Jones, along with thousands of other claimants, initiated dispute-resolution proceedings against Starz Entertainment, LLC, alleging violations of federal and state privacy laws. The arbitration provider, Judicial Arbitration and Mediation Services (JAMS), ordered the consolidation of these filings to be presided over by a single arbitrator. Jones petitioned the district court to compel individual arbitration, arguing that the consolidation violated the Starz Terms of Use, which she claimed required individual arbitration.The United States District Court for the Central District of California denied Jones's petition, holding that she was not "aggrieved" within the meaning of the Federal Arbitration Act (FAA) because Starz had not failed, neglected, or refused to arbitrate. The court also held that the consolidation did not present a gateway question of arbitrability for the courts to address.The United States Court of Appeals for the Ninth Circuit affirmed the district court's decision. The panel held that Jones was not a "party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate," as required by 9 U.S.C. § 4, because Starz never failed, neglected, or refused to arbitrate. The court distinguished this case from Heckman v. Live Nation Ent., Inc., noting that the consolidation by JAMS did not present a gateway question of arbitrability. The panel also held that the FAA did not allow Jones, as the party seeking arbitration, to raise the argument that the Terms of Use were unconscionable to the extent that they allowed pre-arbitration consolidation by JAMS. The decision of the district court was affirmed. View "JONES V. STARZ ENTERTAINMENT, LLC" on Justia Law

OptumRx, Inc. ("OptumRx"), a national pharmacy-benefits manager, entered into contracts with Dalton Drug Co., Inc., and Hartford Pharmacy, LLC ("the Pharmacies") in 2015. These contracts included an arbitration provision for resolving disputes. In December 2021, the Pharmacies notified OptumRx of disputes regarding alleged fraudulent pricing and reimbursement schemes. After a failed resolution attempt via a telephone call in March 2022, OptumRx filed complaints in the Geneva Circuit Court seeking a declaratory judgment to enforce the arbitration provision.The Geneva Circuit Court consolidated the actions and denied the Pharmacies' motion to dismiss, which argued that no justiciable controversy existed. OptumRx then moved for summary judgment, asserting that the Pharmacies' refusal to arbitrate created a justiciable controversy. The Pharmacies opposed, denying refusal to arbitrate and reiterating the lack of a justiciable controversy. The trial court granted summary judgment in favor of OptumRx, ordering arbitration.The Supreme Court of Alabama reviewed the case and determined that no justiciable controversy existed when OptumRx filed its actions. The court noted that the Pharmacies had up to a year to decide whether to pursue arbitration, and OptumRx's rights had not been "frustrated or affected" at the time of filing. Consequently, the trial court lacked subject-matter jurisdiction, rendering its summary judgment void. The Supreme Court of Alabama reversed the trial court's judgment and remanded the case with instructions to dismiss the actions without prejudice. View "Dalton Drug Co., Inc. v. OptumRx, Inc." on Justia Law

The plaintiff, Katherine Chabolla, purchased a one-month subscription from ClassPass, a company offering access to gyms and fitness classes, in January 2020. Due to the COVID-19 pandemic, ClassPass paused charges but resumed them when gyms reopened. Chabolla filed a lawsuit alleging that ClassPass violated California’s Automatic Renewal Law, Unfair Competition Law, and Consumers Legal Remedies Act by resuming charges without proper notice.The United States District Court for the Northern District of California denied ClassPass’s motion to compel arbitration, which argued that Chabolla had agreed to arbitrate any claims by using their website. The district court found that the website did not provide reasonably conspicuous notice of the Terms of Use, which included the arbitration clause, and that Chabolla did not unambiguously manifest assent to those terms.The United States Court of Appeals for the Ninth Circuit reviewed the case and affirmed the district court’s decision. The court held that ClassPass’s website, which resembled a sign-in wrap agreement, did not provide reasonably conspicuous notice of the Terms of Use on the landing page or the first screen. Even if the second and third screens provided such notice, Chabolla did not unambiguously manifest her assent to the Terms of Use on those screens. The court concluded that Chabolla’s use of the website did not amount to an unambiguous manifestation of assent to the Terms of Use, and therefore, she was not bound by the arbitration clause within those terms. The court affirmed the district court’s order denying ClassPass’s motion to compel arbitration. View "CHABOLLA V. CLASSPASS, INC." on Justia Law

Packers Sanitation Services Ltd., LLC (Packers) employed Jose A. Parra Rodriguez (Parra) in California from April 2019 to July 2021. In February 2022, Parra filed a complaint against Packers under the Labor Code Private Attorneys General Act of 2004 (PAGA), seeking civil penalties for alleged violations of the Labor Code and California Code of Regulations. Packers moved to compel arbitration based on an agreement Parra allegedly signed, which included a clause for binding individual arbitration. Parra opposed the motion, arguing he did not recall signing the agreement, his PAGA claims lacked an individual component, and the claims fell under exceptions to arbitration.The Superior Court of Imperial County held an evidentiary hearing and found Parra had signed the agreement. However, the court denied the motion to compel arbitration, interpreting "current law" to mean the law as it stood in 2019, when Iskanian v. CLS Transportation Los Angeles, LLC held PAGA claims were not subject to arbitration. The court concluded the parties had not agreed to arbitrate PAGA claims at all.The Court of Appeal, Fourth Appellate District, Division One, State of California, reviewed the case. Packers argued that under Viking River Cruises, Inc. v. Moriana, Parra’s individual PAGA claim should be compelled to arbitration, and non-individual claims should be dismissed. Parra contended his complaint did not include individual PAGA claims, citing Balderas v. Fresh Start Harvesting, Inc., which held a plaintiff could forgo individual relief and bring a representative PAGA action.The Court of Appeal affirmed the lower court's decision, agreeing with Parra that his complaint did not assert individual PAGA claims. The court found that Parra had not sought individual PAGA relief and thus, there were no individual claims to compel to arbitration. The court did not address whether a PAGA action must include an individual claim, as this issue was not ripe for consideration in this appeal. View "Rodriguez v. Packers Sanitation Services" on Justia Law

Gary Waetzig, a former employee of Halliburton Energy Services, Inc., filed a federal age-discrimination lawsuit against the company. He later submitted his claims for arbitration and voluntarily dismissed his federal lawsuit without prejudice under Federal Rule of Civil Procedure 41(a). After losing in arbitration, Waetzig sought to reopen his dismissed lawsuit and vacate the arbitration award, citing Federal Rule of Civil Procedure 60(b) as the basis for reopening the case.The U.S. District Court for the District of Colorado reopened the case, ruling that a voluntary dismissal without prejudice counts as a "final proceeding" under Rule 60(b) and that Waetzig made a mistake by dismissing his case rather than seeking a stay. The District Court also granted Waetzig's motion to vacate the arbitration award. Halliburton appealed, and the Tenth Circuit reversed the District Court's decision, holding that a voluntary dismissal without prejudice does not count as a "final judgment, order, or proceeding" under Rule 60(b).The Supreme Court of the United States reviewed the case and held that a case voluntarily dismissed without prejudice under Rule 41(a) counts as a "final proceeding" under Rule 60(b). The Court reasoned that a voluntary dismissal is "final" because it terminates the case and aligns with the definitions and historical context of the term "final." The Court also concluded that a voluntary dismissal qualifies as a "proceeding" under Rule 60(b), encompassing all steps in an action's progression. The judgment of the Tenth Circuit was reversed, and the case was remanded for further proceedings consistent with the Supreme Court's opinion. View "Waetzig v. Halliburton Energy Services, Inc." on Justia Law

Angelica Ramirez sued her former employer, Charter Communications, Inc., under the California Fair Employment and Housing Act (FEHA) for discrimination, harassment, retaliation, and wrongful discharge. Charter moved to compel arbitration based on an arbitration agreement signed by Ramirez during her onboarding process. The trial court found the agreement contained unconscionable provisions and refused to enforce it.The Superior Court of Los Angeles County found the arbitration agreement to be a contract of adhesion and identified several substantively unconscionable provisions, including shortened filing periods for claims, improper allocation of attorney fees, and lack of mutuality in claims subject to arbitration. The court denied Charter's motion to compel arbitration. Charter appealed, and a different panel of the Court of Appeal affirmed the trial court's decision, agreeing that the agreement contained multiple unconscionable provisions.The California Supreme Court reviewed the case and concurred that three provisions were substantively unconscionable but remanded the matter to the Court of Appeal to reconsider whether the unconscionable provisions could be severed from the agreement. On remand, the Court of Appeal concluded that severing the unconscionable provisions would not further the interests of justice. The court found that the agreement's central purpose was tainted with illegality and that the multiple unconscionable provisions indicated a systematic effort by Charter to impose arbitration in a manner that favored the employer. Therefore, the Court of Appeal affirmed the trial court's refusal to enforce the arbitration agreement. View "Ramirez v. Charter Communications, Inc." on Justia Law

Eido Hussam Al-Nahhas, an Illinois resident, took out four loans from Rosebud Lending LZO, operating as ZocaLoans, with interest rates up to nearly 700%, far exceeding Illinois law limits. Al-Nahhas alleged that ZocaLoans was a front for two private equity firms, 777 Partners, LLC, and Tactical Marketing Partners, LLC, to evade state usury laws by claiming tribal sovereign immunity through the Rosebud Sioux Tribe. He sued ZocaLoans and the firms for violating Illinois usury statutes and the federal Racketeer Influence and Corrupt Organizations Act.The defendants participated in litigation for fourteen months, including filing an answer, engaging in discovery, and attending status conferences. They later sought to compel arbitration based on an arbitration provision in the loan agreements. The United States District Court for the Northern District of Illinois denied the motion, finding that the defendants had waived their right to compel arbitration by participating in litigation.The United States Court of Appeals for the Seventh Circuit reviewed the case. The court affirmed the district court's decision, holding that the defendants waived their right to arbitrate through their litigation conduct. The court also found that the case was not moot despite the settlement between Al-Nahhas and ZocaLoans, as punitive damages were still at issue. The court granted the parties' motions to file documents under seal. View "Hussam Al-Nahhas v 777 Partners LLC" on Justia Law

In this wage-and-hour class action, the plaintiffs, employees of ACE American Insurance Company (ACE), alleged that ACE misclassified them as exempt employees and failed to provide benefits required for nonexempt employees under state law. The plaintiffs also added claims under the Private Attorneys General Act of 2004 (PAGA) for the same alleged violations. The plaintiffs had signed arbitration agreements as a condition of their employment, which required them to submit employment-related legal claims to arbitration.The Superior Court of Los Angeles County initially granted ACE's motion to compel arbitration and stayed the case pending arbitration. However, neither party initiated arbitration. The plaintiffs then moved to lift the stay, arguing that ACE was required to initiate arbitration and had waived its right to arbitrate by failing to do so. The trial court agreed with the plaintiffs, finding that ACE's inaction was inconsistent with its right to arbitrate and lifted the stay.The Court of Appeal of the State of California, Second Appellate District, reviewed the case. The court held that the plaintiffs, not ACE, were required to initiate arbitration under the terms of the arbitration agreements. The agreements specified that the party wanting to start the arbitration procedure should submit a demand, and in this context, it referred to the plaintiffs who had employment-related legal claims. The court concluded that ACE did not breach the arbitration agreements or waive its right to arbitration by failing to initiate the process. Consequently, the trial court's order lifting the stay was reversed, and ACE was awarded its costs on appeal. View "Arzate v. ACE American Insurance Company" on Justia Law