Justia Arbitration & Mediation Opinion Summaries

Trinity Energy Services, L.L.C. ("Trinity Energy") and Southeast Directional Drilling, L.L.C. ("Southeast Drilling") were involved in a subcontract for constructing natural gas pipelines. Disputes arose over liability for "stand-by costs" incurred during construction delays. The parties agreed to arbitration, where a panel awarded Southeast Drilling $1,662,000 in stand-by costs from Trinity Energy. Trinity Energy petitioned to vacate the arbitration award, but the district court denied the petition and confirmed the award. Trinity Energy then appealed.The United States District Court for the Northern District of Texas initially denied Trinity Energy's petition to vacate the arbitration award and granted Southeast Drilling's motion to confirm it. Trinity Energy appealed this decision, but the appeal was dismissed as interlocutory by the United States Court of Appeals for the Fifth Circuit. Subsequently, the district court granted Southeast Drilling's cross-motion to confirm the arbitration award, leading to Trinity Energy's timely appeal.The United States Court of Appeals for the Fifth Circuit reviewed the district court's order de novo and emphasized the narrow and deferential standard of review for arbitration awards. The court found that the arbitration panel had construed the subcontract and based its decision on its terms, thus not exceeding its authority under 9 U.S.C. § 10(a)(4). The court also rejected Trinity Energy's argument that the panel manifestly disregarded Texas law, noting that "manifest disregard of the law" is not a valid ground for vacatur under the Federal Arbitration Act. Consequently, the Fifth Circuit affirmed the district court's judgment confirming the arbitration award. Southeast Drilling's request for sanctions against Trinity Energy was denied due to procedural deficiencies. View "Trinity Energy Services v. SE Directional Drilling" on Justia Law

The plaintiffs filed lawsuits against two online-game companies, alleging that the companies' casino-themed social gaming applications constituted illegal gambling. The plaintiffs sought to recover money lost by Alabama residents who played these games, on behalf of the players' families, under an Alabama statute that allows such recovery. The plaintiffs did not play the games themselves and did not name any specific Alabama residents who had played the games.The defendants moved to compel arbitration based on the arbitration agreements included in the terms of service for the games, which players agreed to when they downloaded the games. The defendants also moved to dismiss the cases, arguing that the plaintiffs could not pursue mass claims on behalf of all Alabama residents who played the games and that the games were not gambling. The Franklin Circuit Court denied both the motions to compel arbitration and the motions to dismiss.The Supreme Court of Alabama reviewed the case and held that the plaintiffs, in asserting claims under the Alabama statute, were standing in the legal shoes of the players who had agreed to arbitrate their claims. Therefore, the plaintiffs' claims must be arbitrated. The court reversed the trial court's orders denying the motions to compel arbitration and remanded the cases for the trial court to grant the motions. View "Zynga, Inc. v. Mills" on Justia Law

Defendants, alleged victims of a Ponzi scheme perpetrated by John Woods, sought to bring claims against Woods's employer, Oppenheimer & Co. Inc., in a FINRA arbitration forum. Defendants claimed they were customers of Oppenheimer because they transacted with Woods, an associated person of Oppenheimer. Oppenheimer filed a federal action seeking a declaration that Defendants were not its customers and a permanent injunction to prevent arbitration.The United States District Court for the Western District of Washington granted summary judgment in favor of Oppenheimer, concluding that Defendants were not customers of Oppenheimer or Woods. The court found that Defendants had no direct relationship with Oppenheimer and that their investments were facilitated by Michael Mooney, not Woods. The court also issued a permanent injunction prohibiting Defendants from arbitrating their claims.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 "customer" under FINRA Rule 12200 includes any non-broker and non-dealer who purchases commodities or services from a FINRA member or its associated person. However, the court agreed with the district court that Defendants did not transact with Woods, as their investments were facilitated by Mooney. The court also rejected Defendants' "alter ego" theory, which suggested that their investments in an entity controlled by Woods made them Woods's customers.The Ninth Circuit concluded that Defendants were not entitled to arbitrate their claims against Oppenheimer under FINRA Rule 12200 and upheld the permanent injunction. The court found no errors in the district court's analysis or factual findings and affirmed the decision in full. View "OPPENHEIMER & CO. INC. V. MITCHELL" on Justia Law

Several hair stylists filed a lawsuit against their employer, Lady Jane’s Haircuts for Men, alleging that they were underpaid due to being misclassified as independent contractors instead of employees. This misclassification, they argued, allowed the employer to avoid the Fair Labor Standards Act’s minimum-wage and overtime-pay requirements. The employer moved to dismiss the lawsuit, citing an arbitration agreement in the Independent Contractor Agreement, which required disputes to be resolved through the American Arbitration Association (AAA) under its Commercial Arbitration Rules.The United States District Court for the Eastern District of Michigan reviewed the case and found the arbitration agreement enforceable but severed the cost-shifting provision, which required the stylists to pay arbitration costs exceeding their yearly income. The court ruled that the arbitration would proceed under the less costly AAA employment rules and dismissed the lawsuit in favor of arbitration.The United States Court of Appeals for the Sixth Circuit reviewed the case and affirmed the district court’s decision. The appellate court held that the severability clause in the contract allowed the court to remove the cost-shifting provision while enforcing the rest of the arbitration agreement. The court found that the term “provision” in the severability clause referred to individual clauses within the contract, not entire sections. The court also rejected the stylists’ arguments that the district court had impermissibly reformed the contract and that the arbitration agreement should be unenforceable for equitable reasons. The court concluded that the district court correctly severed the cost-shifting provision and enforced the arbitration agreement under the AAA’s employment rules. View "Gavin v. Lady Jane's Haircuts for Men" on Justia Law

Kassandra Memmer sued her former employer, United Wholesale Mortgage (UWM), alleging discrimination and sexual harassment during her employment. UWM moved to dismiss the lawsuit and compel arbitration based on the employment agreement. Memmer argued that the arbitration agreement was invalid and that she had the right to go to court under the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (EFAA).The United States District Court for the Eastern District of Michigan granted UWM's motion to dismiss and compel arbitration, concluding that the parties had a valid arbitration agreement. The court did not address Memmer's argument regarding the applicability of EFAA. Memmer appealed the decision, asserting that EFAA should apply to her case.The United States Court of Appeals for the Sixth Circuit reviewed the case and concluded that EFAA applies to claims that accrue after its enactment date and to disputes that arise after that date. The court determined that the district court had not applied the correct interpretation of EFAA. The Sixth Circuit reversed the district court's decision and remanded the case for further proceedings to determine when the dispute between Memmer and UWM arose and whether EFAA applies to her claims. View "Memmer v. United Wholesale Mortgage, LLC" on Justia Law

In this case, the plaintiffs, Weston and Carrie Twigg, hired Rainier Pacific Development LLC to build a home. After taking possession, they discovered various construction defects, including issues with the garage floor. Rainier Pacific agreed to make repairs, but failed to meet deadlines, leading to arbitration. The parties settled through a "Repair Agreement," but Rainier Pacific's subsequent repairs were also defective, prompting the Twiggs to reinitiate arbitration. The arbitrator found Rainier Pacific's work defective and awarded the Twiggs $150,000 for the garage floor repairs.The Multnomah County Circuit Court granted summary judgment to Admiral Insurance Company, Rainier Pacific's insurer, concluding that the damages did not arise from an "accident" as required by the commercial general liability (CGL) policy. The court relied on the precedent set by Oak Crest Construction Co. v. Austin Mutual Insurance Co., which held that damages solely from a breach of contract do not qualify as an "accident."The Oregon Court of Appeals affirmed the trial court's decision, agreeing that the damages arose solely from a breach of contract and not from an "accident" as defined by the CGL policy. The court emphasized that the Twiggs had not contended that Rainier Pacific's liability arose from a separate duty of care, i.e., a tort.The Oregon Supreme Court reversed the Court of Appeals and the trial court's decisions. The Supreme Court held that whether an insurance claim seeks recovery for an "accident" does not depend on the plaintiff's pleading decisions but on whether there is a factual basis for imposing tort liability. The court found that there were material factual disputes regarding whether Rainier Pacific's defective work constituted an "accident" under the CGL policy. Therefore, the case was remanded to the circuit court for further proceedings. View "Twigg v. Admiral Ins. Co." on Justia Law

Plaintiffs Charles and Grant Adler, through their business entity CM Adler LLC, distributed tortillas and other food products of Defendant Gruma Corporation to grocery stores in central New Jersey under a "Store Door Distributor Agreement" (SDDA). When Defendant terminated the relationship, Plaintiffs filed a lawsuit alleging retaliatory termination due to their organizing efforts with other distributors. Plaintiffs claimed violations of state and federal labor laws, including failure to pay minimum wages and unlawful deductions, and argued that the SDDA was a franchise agreement subject to New Jersey's Franchise Practices Act, which forbids termination without cause.The United States District Court for the District of New Jersey dismissed the case, concluding that Texas law governed under the SDDA and the case should proceed to arbitration. The District Court did not address the applicability of the Federal Arbitration Act (FAA) or Plaintiffs' exemption argument under 9 U.S.C. § 1. It found the parties had contracted for Texas law, under which the arbitration agreement was enforceable, and rejected Plaintiffs' bid to apply New Jersey law instead. The District Court also decided that Charles and Grant Adler, who did not sign the contract, were estopped from challenging its arbitration provision because they acted as parties to the contract when they performed the LLC’s work.The United States Court of Appeals for the Third Circuit reviewed the case and concluded that the FAA does not apply to the SDDA because Plaintiffs are transportation workers engaged in interstate commerce. The Court of Appeals found that the District Court erred in its choice-of-law analysis by failing to consider the impact of New Jersey public policies on its arbitrability ruling. The Court of Appeals vacated the order compelling arbitration and remanded for the District Court to complete the choice-of-law analysis under the correct framework and to reevaluate whether the individual Plaintiffs, who did not sign the arbitration agreement, are bound by its terms. View "Adler v. Gruma Corporation" on Justia Law

Plaintiffs created accounts on justanswer.com and paid to ask questions. According to JustAnswer's Terms of Service, paying for answers automatically enrolled plaintiffs in a recurring monthly subscription. Plaintiffs alleged that JustAnswer violated the Electronic Funds Transfer Act and various state consumer protection laws by enrolling them in the subscription service without their consent and making cancellation difficult. JustAnswer sought to compel arbitration based on a provision in its Terms of Service, asserting that plaintiffs were put on inquiry notice of those terms and agreed to arbitrate any claims arising from their use of the site.The United States District Court for the Northern District of California denied JustAnswer's motion to compel arbitration. The court held that plaintiffs did not receive sufficient notice of JustAnswer's Terms of Service containing the arbitration clause, and thus no contract was formed. The court found that the payment pages and other advisals presented to plaintiffs were not sufficiently conspicuous to put them on inquiry notice of the terms, and the advisals did not explicitly inform users that clicking a button would constitute assent to the terms.The United States Court of Appeals for the Ninth Circuit affirmed the district court's order. The Ninth Circuit concluded that no contracts were formed between plaintiffs and JustAnswer under an inquiry theory of notice. The court held that the website did not provide reasonably conspicuous notice of the terms, and the advisals did not unambiguously manifest the plaintiffs' assent to those terms. Therefore, plaintiffs were not bound by the arbitration provision in JustAnswer's Terms of Service, and the motion to compel arbitration was denied. View "GODUN V. JUSTANSWER LLC" on Justia Law

Cristina Balan, an automotive design engineer, filed a defamation lawsuit against Tesla, Inc. and Elon Musk, alleging that Tesla made defamatory statements about her, including accusations of theft, after an article about her was published in the Huffington Post. Tesla moved to compel arbitration based on an arbitration agreement in Balan's employment contract. The United States District Court for the Western District of Washington partially granted Tesla's motion, compelling arbitration for part of the defamation claim. Balan then amended her arbitration demand to include a defamation claim against Musk.The Western District of Washington initially denied Tesla's motion to compel arbitration in part, but the Ninth Circuit reversed this decision, ruling that the entire defamation claim was subject to arbitration. Consequently, the district court dismissed the case. The arbitrator applied California law and dismissed Balan's defamation claims against Tesla and Musk based on the statute of limitations, issuing an award in favor of Tesla and Musk.Tesla and Musk petitioned the United States District Court for the Northern District of California to confirm the arbitration award. The district court granted the petition, confirming the award. Balan appealed, arguing that the district court lacked subject matter jurisdiction to confirm the award.The United States Court of Appeals for the Ninth Circuit reviewed the case and held that the district court lacked subject matter jurisdiction to confirm the arbitration award. The Ninth Circuit cited the Supreme Court's decision in Badgerow v. Walters, which prohibits looking past the face of a petition under 9 U.S.C. § 9 to establish jurisdiction. Since Tesla's petition to confirm a zero-dollar award did not meet the amount in controversy requirement, the Ninth Circuit vacated the district court's order and remanded the case with instructions to dismiss for lack of jurisdiction. View "TESLA MOTORS V. BALAN" on Justia Law

Maria Wilson purchased an insurance policy from Union National Fire Insurance Company (UNFIC) through agent Robin Wilson. The policy covered personal property at 2170A Tillman Chapel Road, which included a house and a travel trailer. Maria, who is illiterate, relied on Robin's verbal description of the policy. After a fire destroyed the house and her personal property, Maria filed a claim, which was denied by UNFIC, citing that she did not live in the house, a purported requirement for coverage.Maria sued UNFIC, Kemper Corporate Services, Robin Wilson, and others in the Circuit Court of Claiborne County, Mississippi, alleging breach of contract, negligence, fraud, and other claims. The defendants removed the case to federal court, asserting diversity jurisdiction and claiming that the non-diverse defendants were improperly joined. The district court agreed, denied Maria's motion to remand, and compelled arbitration based on the policy's arbitration clause. The arbitrator ruled in favor of the defendants, and the district court confirmed the arbitration award.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court held that the district court erred in denying Maria's motion to remand because non-diverse defendant Robin Wilson was properly joined. The court found that the insurance policy did not clearly require Maria to live in the house for her personal property to be covered, thus her negligence claim against Robin Wilson was viable. Consequently, the Fifth Circuit reversed the district court's denial of the motion to remand, vacated the order compelling arbitration and the confirmation of the arbitration award, and remanded the case to the district court with instructions to remand it to state court. View "Wilson v. Kemper Corporate Services" on Justia Law