Justia Arbitration & Mediation Opinion Summaries

A dispute arose between two companies, one a contractor and the other a developer, over a construction project in Maui. The disagreement was submitted to binding arbitration, resulting in an award in favor of the developer. The developer sought to confirm the award in the Circuit Court of the First Circuit, but the contractor challenged the award, alleging the arbitrator was evidently partial due to undisclosed relationships. The circuit court initially confirmed the award, but on appeal, the Supreme Court of Hawai‘i remanded the case for an evidentiary hearing on the partiality claim. After the hearing, the circuit court found evident partiality, denied confirmation, vacated the award, and ordered a rehearing before a new arbitrator.Following this, the contractor moved for taxation of costs incurred on appeal, which the circuit court granted. The developer sought to appeal the costs order, but the circuit court denied an interlocutory appeal. A new arbitration was held, again resulting in an award for the developer, which was confirmed in a new special proceeding with a final judgment entered. The developer then appealed the earlier costs order from the first special proceeding.The Intermediate Court of Appeals (ICA) dismissed the appeal as untimely, reasoning that the circuit court’s order vacating the first arbitration award and ordering a rehearing was an appealable final order under Hawai‘i Revised Statutes (HRS) § 658A-28(a)(3), making the subsequent costs order also immediately appealable.The Supreme Court of Hawai‘i reviewed the case and held that an order vacating an arbitration award and directing a rehearing is not an appealable order under HRS § 658A-28(a). The court clarified that such orders lack finality, regardless of whether the rehearing is full or partial, and reaffirmed the majority rule previously adopted in State of Hawaii Organization of Police Officers (SHOPO) v. County of Kauai. The Supreme Court vacated the ICA’s dismissal and remanded the case for entry of a final judgment, so the merits of the appeal could be addressed. View "Nordic PCL Construction, Inc. v. LPIHGC, LLC" on Justia Law

Several former employees of a social media company were required, as part of their hiring process, to sign agreements mandating that any employment-related disputes be resolved through individual arbitration before a specified arbitral body. These agreements allowed employees to opt out within 30 days, but those who did not were bound to arbitrate disputes under the arbitral body’s rules. After being terminated, the employees initiated arbitration proceedings, but a dispute arose over who was responsible for paying the ongoing arbitration fees. The company argued for a pro-rata split based on the agreements, while the arbitral body, referencing its own rules and minimum standards (incorporated by reference into the agreements), required the company to pay all but the initial case management fees. The company refused to pay the full amount, citing a clause that fee disputes should be resolved by the arbitrator, not the arbitral body. As a result, the arbitral body stayed the proceedings, refusing to appoint arbitrators until the fees were paid.The employees then filed a petition in the United States District Court for the Southern District of New York, seeking to compel the company to pay the fees under the Federal Arbitration Act, arguing that the company’s refusal constituted a failure to arbitrate. The district court agreed, holding that it had authority to compel the company to pay the fees as allocated by the arbitral body, and ordered the company to do so.On appeal, the United States Court of Appeals for the Second Circuit reversed the district court’s decision. The Second Circuit held that disputes over the payment of ongoing arbitration fees in the context of an ongoing arbitral proceeding are procedural matters for the arbitrator or arbitral body to resolve, not the courts. The court concluded that a party’s refusal to pay such fees does not constitute a “failure, neglect, or refusal to arbitrate” under 9 U.S.C. § 4, and therefore, the district court lacked authority to compel payment. The case was remanded with instructions to deny the petition. View "Frazier v. X Corp." on Justia Law

Karl and Tonya Williams contracted with Whitson Builders, LLC to purchase a custom modular home manufactured by Franklin Structures, LLC. The sales contract specified that Franklin would provide all warranties for the home, and Whitson would assemble it on the Williamses’ property. After moving in, the Williamses experienced significant issues with the home’s construction and alleged that Franklin and Whitson failed to properly repair these defects despite multiple requests. The Williamses subsequently filed suit in Baldwin Circuit Court against Franklin, Whitson, and other parties, asserting claims including breach of contract, fraud, negligence, and breach of express and implied warranties.In Baldwin Circuit Court, Franklin moved to compel arbitration based on a provision in its homeowner’s manual, which required disputes to be submitted first to nonbinding mediation and, if unresolved, to binding arbitration. Franklin argued that the Williamses were bound by this provision because they had accepted warranty services and asserted express-warranty claims. The Williamses opposed, contending they never received or signed the manual containing the arbitration clause and did not assent to its terms. The trial court denied Franklin’s motion to compel arbitration in part.The Supreme Court of Alabama reviewed the trial court’s denial de novo. The Court held that the Williamses were contractually bound by the arbitration provision in Franklin’s warranty because they accepted warranty services and asserted express-warranty claims, following precedent from Southern Energy Homes, Inc. v. Ard. The Court found that the trial court erred by not compelling mediation and, if necessary, arbitration as required by the warranty’s terms. The Supreme Court of Alabama reversed the trial court’s order and remanded the case for entry of an order consistent with the arbitration provision. View "Franklin Structures, LLC v. Williams" on Justia Law

Leslie Cruz made two purchases from the website operated by subsidiaries of Tapestry, Inc. in early 2024. She later filed a lawsuit in the Superior Court of Los Angeles County, alleging that the companies engaged in unfair competition and false advertising by promoting misleading sales discounts. Cruz claimed that the advertised sale reductions were deceptive because the merchandise was rarely, if ever, sold at the full price listed, and sought restitution and disgorgement of unjust enrichment resulting from these practices.The defendants moved to compel arbitration, relying on an arbitration clause in their website’s Terms of Use. The checkout pages on the website included a line of gray, small-font text below the order submission button stating that by clicking, the user agreed to the Terms of Use and Privacy Policy, with hyperlinks to those documents. The trial court, after reviewing screenshots of the checkout pages, found that the notice of the arbitration agreement was not sufficiently conspicuous. The court emphasized that the notice was less prominent than other visual elements on the page and that the transaction did not create an expectation of an ongoing contractual relationship governed by extensive terms. The court concluded that Cruz had not assented to the arbitration agreement and denied the motion to compel arbitration.The California Court of Appeal, Second Appellate District, Division One, reviewed the trial court’s decision de novo. It held that the defendants failed to provide reasonably sufficient notice to Cruz that clicking the order button would bind her to the Terms of Use, including the arbitration provision. The court found that the design of the checkout pages did not adequately call attention to the notice text, and affirmed the trial court’s order denying the motion to compel arbitration. View "Cruz v. Tapestry" on Justia Law

A physician assistant employed by a Michigan hospital, later affiliated with the University of Michigan Health System, was terminated after she refused, on religious and medical grounds, to use gender identity-based pronouns or refer patients for gender reassignment procedures. The hospital had required her to complete training on serving LGBTQ+ patients, which she believed conflicted with her Christian faith and medical judgment. After seeking a religious accommodation and participating in meetings with hospital administrators, she was fired for her refusal to comply with the hospital’s requirements.She filed suit in the United States District Court for the Western District of Michigan against the hospital and several administrators, alleging violations of federal constitutional rights under 42 U.S.C. § 1983, Title VII, and Michigan law. The hospital and its administrators moved to dismiss all claims on the merits, and the district court granted the motion in part and denied it in part, allowing several of her claims to proceed. Only after this partial denial, and more than a year into the litigation, did the hospital invoke an arbitration clause from her employment agreement and move to compel arbitration. The district court granted this motion, found the arbitration clause enforceable, and dismissed the case in favor of arbitration.On appeal, the United States Court of Appeals for the Sixth Circuit reviewed whether the hospital had forfeited its right to arbitrate by substantially litigating the case before seeking arbitration. The Sixth Circuit held that the hospital’s conduct—seeking a complete judicial victory on the merits before invoking arbitration—was inconsistent with the right to arbitrate and constituted “default” under the Federal Arbitration Act. The court reversed the district court’s order compelling arbitration and remanded the case for further proceedings. View "Kloosterman v. Metropolitan Hospital" on Justia Law

Joanne Sudakow entered into a contract with CleanChoice Energy, Inc. to purchase electricity. The initial agreement, which she accepted in October 2021, did not include an arbitration clause and specified that New York would be the exclusive venue for any lawsuits. About three weeks after the contract was executed, CleanChoice sent Sudakow a “Welcome Package” containing new terms, including an arbitration provision, but Sudakow did not sign or otherwise expressly assent to these new terms. She continued to pay for her electricity service until she terminated it in August 2022.Sudakow later filed a putative class action in the United States District Court for the Southern District of New York, alleging breach of contract and deceptive business practices by CleanChoice. CleanChoice moved to compel arbitration based on the arbitration provision in the subsequently mailed terms. The district court denied the motion, finding that Sudakow did not have sufficient notice of the arbitration provision and had not assented to it.On appeal, the United States Court of Appeals for the Second Circuit reviewed the district court’s denial of the motion to compel arbitration de novo. The Second Circuit held that Sudakow was not bound by the arbitration provision because CleanChoice failed to provide clear and conspicuous notice of the new terms, and a reasonable person would not have understood that making payments constituted assent to those terms. The court also found that the language of the subsequent terms indicated that a signature was required for assent, which Sudakow never provided. Accordingly, the Second Circuit affirmed the district court’s judgment denying CleanChoice’s motion to compel arbitration. View "Sudakow v. CleanChoice Energy, Inc." on Justia Law

Four individuals who worked as drivers for a ride-sharing company alleged that the company misclassified them as independent contractors rather than employees, resulting in violations of federal and Illinois wage laws. The drivers claimed they were denied minimum wage, overtime pay, and reimbursement for business expenses. Each driver had entered into agreements with the company that included arbitration provisions, but these agreements also allowed drivers to opt out of arbitration within a specified period. One driver, Ken Zurek, opted out of the arbitration provision in a later agreement after not opting out of an earlier one.Before joining the federal lawsuit, Zurek had filed a separate case in Illinois state court, where the company sought to compel arbitration based on the earlier agreement. The state court found that Zurek’s opt-out from the later agreement meant he was not bound to arbitrate claims arising during the period covered by that agreement, even if he had not opted out of the earlier one. The state court did not decide whether Zurek had actually agreed to the earlier arbitration provision, finding it unnecessary for the resolution of the case. The parties later settled the state court case.In the United States District Court for the Northern District of Illinois, the company again moved to compel arbitration for all four drivers. The district court granted the motion for three drivers but denied it for Zurek, holding that the state court’s decision precluded relitigation of whether Zurek was bound by the earlier arbitration agreement. The United States Court of Appeals for the Seventh Circuit reviewed the case and affirmed the district court’s denial of the motion to compel arbitration as to Zurek, holding that issue preclusion applied because the state court had already decided the relevant issue. View "Agha v. Uber Technologies, Inc." on Justia Law

A primary contractor entered into a subcontract with a heating and cooling company to install HVAC systems in an apartment complex. The subcontract included an arbitration clause allowing the contractor, at its sole option, to require arbitration of disputes. Over several years, the relationship between the parties deteriorated, leading the heating and cooling company to file suit for breach of contract and related claims. The contractor failed to respond timely to an amended complaint due to a breakdown in communication with its registered agent, resulting in a default being entered against it. After being properly served, the contractor and the heating and cooling company stipulated to set aside the default, and the contractor then filed an answer and counterclaims. Only after several months did the contractor move to stay proceedings and compel arbitration under the subcontract.The Eighteenth Judicial District Court, Gallatin County, denied the contractor’s motion to compel arbitration. The court found that the contractor had acted inconsistently with its right to arbitrate by failing to assert the arbitration right when reentering the litigation and by not including the arbitration defense in its initial answer. The court also determined that the delay prejudiced the heating and cooling company, which had incurred additional costs and surrendered its default judgment without knowing the contractor would later seek arbitration.The Supreme Court of the State of Montana reviewed the case and affirmed the District Court’s decision. The Supreme Court held that the contractor had waived its right to compel arbitration by acting inconsistently with that right and by causing prejudice to the opposing party. The court found no error in the District Court’s application of the waiver standard and declined to address arguments regarding federal arbitration law, as the waiver was established under Montana law. View "Monarch v. Petra" on Justia Law

After two Category 5 hurricanes struck the U.S. Virgin Islands in 2017, the Virgin Islands Housing Finance Authority undertook extensive restoration projects and sought reimbursement from the Federal Emergency Management Agency (FEMA) for over $594 million in costs. FEMA denied approximately $85 million of the claimed costs, and after an internal appeal, the Authority recovered an additional $8.5 million. To pursue the remaining disputed amount, the Authority opted for arbitration before the Civilian Board of Contract Appeals. The arbitration panel, originally composed of three members, issued its decision with only two members after one took extended leave, denying the Authority full reimbursement.Following the arbitration, the Authority requested the Board to vacate the award, arguing that the decision was invalid due to the lack of a quorum. The Board denied this request. The Authority then filed a motion in the United States District Court for the District of Columbia to vacate the award under the Federal Arbitration Act (FAA) and also sought relief under the Administrative Procedure Act (APA). The District Court denied the motion, finding that the Authority had missed the FAA’s three-month deadline for serving notice and that the APA claim was precluded by the availability of review under the FAA.On appeal, the United States Court of Appeals for the District of Columbia Circuit affirmed the District Court’s decision. The Court held that the FAA’s three-month deadline for serving notice of a motion to vacate an arbitration award applies even when the challenge is based on the arbitrators allegedly exceeding their authority or lacking a quorum. The Court also held that the FAA provides an adequate and exclusive remedy for challenging arbitration awards, thereby precluding review under the APA in this context. The judgment of the District Court was affirmed. View "Virgin Islands Housing Finance Authority v. FEMA" on Justia Law

Brian Flores, a current NFL coach, brought a putative class action against the National Football League and several of its member clubs, including the Denver Broncos, New York Giants, and Houston Texans, alleging racial discrimination under federal, state, and local law. Flores’s claims stemmed from his interviews and employment experiences with these teams, during which he alleged discriminatory hiring practices. His employment contracts with various NFL teams incorporated the NFL Constitution, which contains a broad arbitration provision granting the NFL Commissioner authority to arbitrate disputes between coaches and member clubs.The United States District Court for the Southern District of New York reviewed the defendants’ motion to compel arbitration based on Flores’s employment agreements. The District Court granted the motion for claims against the Miami Dolphins, Arizona Cardinals, and Tennessee Titans, but denied it for Flores’s claims against the Broncos, Giants, Texans, and related claims against the NFL. The court found the NFL Constitution’s arbitration provision illusory and unenforceable under Massachusetts law, as it allowed unilateral modification by the NFL and lacked a signed agreement in one instance. The District Court also denied the defendants’ motion for reconsideration.On appeal, the United States Court of Appeals for the Second Circuit affirmed the District Court’s orders. The Second Circuit held that the NFL Constitution’s arbitration provision, which vested unilateral substantive and procedural authority in the NFL Commissioner, did not qualify for protection under the Federal Arbitration Act and was unenforceable because it failed to guarantee Flores the ability to vindicate his statutory claims in an impartial arbitral forum. The court also affirmed the denial of the motion for reconsideration, concluding there was no abuse of discretion. View "Flores v. N.Y. Football Giants" on Justia Law