Justia Arbitration & Mediation Opinion Summaries

An attorney, Morris S. Getzels, challenged the constitutional validity of State Bar Rule 2.30, which prevents inactive licensees from acting as private arbitrators and mediators. Getzels argued that this rule violates the Equal Protection Clauses of the federal and California Constitutions by treating inactive licensees differently from others. He claimed that the rule impinges on the fundamental liberty of "freedom of contract" and that there is no rational basis for the rule.The Superior Court of Los Angeles County sustained the State Bar's demurrer without leave to amend, leading to a judgment of dismissal. The court found that rational basis review was the appropriate standard for evaluating Getzels's equal protection claim. It concluded that funding the State Bar’s regulatory functions was a legitimate government purpose and that requiring licensees to pay the active membership fee was related to this purpose. The court determined that the State Bar had sufficiently articulated a rational basis for the disparate treatment of inactive licensees.The California Court of Appeal, Second Appellate District, Division Four, reviewed the case. The court held that rational basis review was the correct standard, as the rule did not involve a suspect class or a fundamental right. The court found that the State Bar had a legitimate interest in maintaining a competent bar and ensuring the professional conduct of its licensees. It concluded that Rule 2.30’s distinction between active and inactive licensees was rationally related to this goal, as inactive licensees acting as private arbitrators and mediators could burden the State Bar’s regulatory system. The court affirmed the judgment of dismissal, upholding the constitutionality of Rule 2.30. View "Getzels v. The State Bar of California" on Justia Law

Michael Lindell, a Minnesota entrepreneur, challenged the legitimacy of the 2020 presidential election, claiming to have data proving Chinese interference. Lindell Management LLC (LMC) hosted a "Cyber Symposium" in August 2021, offering a $5 million reward to anyone who could prove the data provided was not from the November 2020 election. Robert Zeidman, a software developer, participated in the challenge, reviewed the data, and concluded it did not contain any information related to the election. The challenge judges disagreed and denied his claim.Zeidman filed for arbitration, and the arbitration panel unanimously found in his favor, ordering LMC to pay the $5 million reward. The panel determined that the contract required participants to prove the data was not related to the election and that Zeidman had met this burden. Zeidman then moved to confirm the arbitration award in the United States District Court for the District of Minnesota, while LMC sought to vacate it. The district court confirmed the panel's decision, finding that the panel had arguably interpreted and applied the contract.The United States Court of Appeals for the Eighth Circuit reviewed the case and concluded that the arbitration panel had exceeded its authority by using extrinsic evidence to interpret the unambiguous contract terms. The court held that the panel effectively amended the contract by requiring the data to be packet capture data, which violated Minnesota contract law and arbitration precedents. Consequently, the Eighth Circuit reversed the district court's decision and remanded the case with directions to grant LMC's motion to vacate the arbitration award. View "Zeidman v. Lindell Management LLC" on Justia Law

Christopher Fucci and over 50 other individuals and family entities (Plaintiffs) purchased interests in real estate development projects in Florida and Ohio. Each sale was documented in a Purchase and Sale Agreement (PSA) containing an arbitration clause. However, none of the projects were completed, and Plaintiffs sued First American Title Insurance Company (First American) and its employee Kirsten Parkin (FA Defendants), who acted as the escrow agent in the closing of each sale. Although the FA Defendants were not signatories to the PSAs, they moved to compel arbitration based on the arbitration clauses in the agreements.The United States District Court for the District of Utah denied the motion to compel arbitration. The FA Defendants argued on appeal that they could enforce the arbitration clauses because they were parties to the PSAs, third-party beneficiaries, agents of a party to the PSAs, and that Plaintiffs were equitably estopped from avoiding arbitration. The district court had previously denied the motion without prejudice, waiting for a related case ruling. After the related case was decided, the FA Defendants filed a renewed motion to compel arbitration, which was denied by a magistrate judge. The district court overruled the FA Defendants' objections and adopted the magistrate judge's order.The United States Court of Appeals for the Tenth Circuit reviewed the case and affirmed the district court's decision. The court held that the FA Defendants were not parties to the PSAs, were not third-party beneficiaries, and could not compel arbitration as agents because Rockwell, the principal, had waived the arbitration provision. Additionally, the court ruled that equitable estoppel could not be invoked to expand the scope of the arbitration clause to include disputes between Plaintiffs and the FA Defendants. View "Fucci v. First American Title Insurance Co." on Justia Law

The Brotherhood of Maintenance of Way Employees (BMWE), representing BNSF Railway Company employees, filed a lawsuit against BNSF alleging violations of the Railway Labor Act (RLA). BMWE claimed BNSF improperly reduced the number of maintenance-of-way workers in favor of subcontractors, failed to maintain collective bargaining agreements (CBAs), and did not deal with BMWE in good faith. BNSF moved to dismiss the case, arguing it was a "minor dispute" under the RLA, requiring arbitration. The district court agreed and dismissed the case for lack of subject matter jurisdiction.The United States District Court for the District of Nebraska granted BNSF's motion to dismiss, determining the dispute was minor and thus outside the court's jurisdiction. The court explained that minor disputes, which involve interpreting specific terms of CBAs, must be resolved through arbitration. BMWE's claims were found to hinge on the interpretation of the CBAs, specifically regarding BNSF's use of subcontractors, making it a minor dispute.The United States Court of Appeals for the Eighth Circuit reviewed the case and affirmed the district court's decision. The appellate court held that BMWE's arguments required interpretation of the CBAs, classifying the dispute as minor. Consequently, the court lacked jurisdiction, as minor disputes must be resolved by the National Railroad Adjustment Board (NRAB). The court also rejected BMWE's argument that the dispute was a direct violation of § 2 First of the RLA, agreeing with other circuits that such claims still require contract interpretation and thus fall under minor disputes. The judgment of the district court dismissing BMWE’s complaint was affirmed. View "Brotherhood of Maintenance of Way Employees v. BNSF Railway Co." on Justia Law

Employers’ Innovative Network and its president, Jeff Mullins, entered into contracts with Bridgeport Benefits, Capital Security, and other parties to secure a new health insurance policy for their employee healthcare benefit plan. The relationship between the parties deteriorated, leading Employers’ Innovative Network to file a lawsuit in West Virginia state court in April 2018, alleging breach of contract, fraud, slander, and violations of the West Virginia Unauthorized Insurers Act. The case was removed to federal court but was stayed pending arbitration in Bermuda, as stipulated in the contracts.The arbitration was conducted in Bermuda, where the arbitrator, Delroy Duncan, ruled in favor of the defendants. Employers’ Innovative Network later challenged Duncan’s impartiality, citing conflicts of interest, but the Bermuda Arbitration Institute upheld Duncan’s position. The plaintiffs did not appeal this decision to the Bermuda Supreme Court. Subsequently, the defendants sought to enforce the arbitral award in the United States under Chapter 2 of the Federal Arbitration Act (FAA), and the Southern District of West Virginia granted their request, rejecting the plaintiffs’ public policy defense.The United States Court of Appeals for the Fourth Circuit reviewed the case. The court vacated the district court’s decision and remanded the case for further fact-finding to determine whether Chapter 1 or Chapter 2 of the FAA applies. The appellate court noted that the arbitration might be governed by Chapter 1, which includes an “evident partiality” defense, or by Chapter 2, which does not explicitly include such a defense but allows for non-enforcement on public policy grounds. The court emphasized the need to clarify the citizenship of Capital Security and the nature of the parties’ relationship to determine the applicable chapter. View "Employers' Innovative Network, LLC v. Bridgeport Benefits, Inc." on Justia Law

Lackie Drug Store, Inc. filed a putative class action against OptumRx, Inc. and other pharmacy benefit managers (PBMs), alleging violations of several Arkansas statutes due to the PBMs' failure to disclose, update, and notify pharmacies of changes to their Maximum Allowable Cost (MAC) lists. Lackie claimed this resulted in under-reimbursement for prescriptions. The case was initially filed in Arkansas state court and later removed to federal court. Lackie amended its complaint to include five claims, and OptumRx moved to dismiss the complaint on various grounds, including failure to state a claim and failure to exhaust administrative remedies.The United States District Court for the Eastern District of Arkansas dismissed two of Lackie's claims but retained three. The court also denied OptumRx's motion to dismiss based on the argument that Lackie failed to comply with pre-dispute procedures outlined in the Network Agreement. OptumRx later filed an answer and participated in discovery. After Lackie amended its complaint again, adding two new claims and tailoring the class definition to OptumRx, OptumRx moved to compel arbitration based on the Provider Manual's arbitration clause.The United States Court of Appeals for the Eighth Circuit reviewed the case. The court held that OptumRx waived its right to compel arbitration for the original three claims by substantially invoking the litigation machinery before asserting its arbitration right. However, the court found that OptumRx did not waive its right to compel arbitration for the two new claims added in the amended complaint. The court also held that the district court erred in addressing the arbitrability of the new claims because the Provider Manual included a delegation clause requiring an arbitrator to decide arbitrability issues.The Eighth Circuit affirmed the district court's decision in part, reversed it in part, and remanded the case with instructions to grant OptumRx's motion to compel arbitration for the two new claims. View "Lackie Drug Store, Inc. v. OptumRx, Inc." on Justia Law

Two Mauritian mining companies, Amaplat Mauritius Ltd. and Amari Nickel Holdings Zimbabwe Ltd., filed a lawsuit against the Republic of Zimbabwe, the Zimbabwe Mining Development Corporation (ZMDC), and Zimbabwe’s Chief Mining Commissioner. The plaintiffs sought to recognize and enforce a judgment from the High Court of Zambia, which confirmed an arbitral award issued in Zambia. The plaintiffs argued that the defendants waived their immunity under the Foreign Sovereign Immunities Act (FSIA) through the arbitration exception and the implied waiver exception.The United States District Court for the District of Columbia ruled on the scope of the FSIA exceptions. The court determined that the arbitration exception did not apply because it covers actions to confirm arbitral awards, not actions to recognize and enforce foreign court judgments. However, the district court held that the implied waiver exception applied, reasoning that by signing the New York Convention and agreeing to arbitrate in Zambia, the defendants waived their immunity from the action to recognize a foreign court judgment.The United States Court of Appeals for the District of Columbia Circuit reviewed the case. The court agreed with the district court that the arbitration exception did not apply, as the exception covers only actions to confirm arbitral awards, not actions to recognize foreign court judgments. The court also concluded that the implied waiver exception did not apply, as signing the New York Convention and agreeing to arbitrate in a signatory state did not demonstrate an intent to waive immunity from judgment recognition actions. Consequently, the court reversed the district court's determination of subject matter jurisdiction, vacated the remaining orders, and remanded the case with instructions to dismiss for lack of jurisdiction. View "Amaplat Mauritius Ltd. v. Zimbabwe Mining Development Corp." on Justia Law

The case involves plaintiffs-appellees, trustees of the Peter and Elizabeth C. Tower Foundation, who brought claims against UBS Financial Services, Inc. and Jay S. Blair (collectively, the "UBS Defendants") under the Investment Advisers Act of 1940 and New York state law. The plaintiffs allege that the UBS Defendants breached their fiduciary duties in managing the Foundation's investment advisory accounts. Specifically, they claim that John N. Blair, the father of Jay Blair, improperly used his position to place the Foundation’s assets with his son's investment firm, which later became affiliated with UBS.The United States District Court for the Western District of New York denied the UBS Defendants' motion to compel arbitration. The court found that the plaintiffs had presented sufficient evidence to question the validity of the arbitration agreement, warranting a trial on that issue. The UBS Defendants had previously moved to stay or dismiss the action under the Colorado River abstention doctrine, which was also denied.The United States Court of Appeals for the Second Circuit reviewed the case. The court applied the Supreme Court's 2022 decision in Morgan v. Sundance, Inc., which held that courts may not impose a prejudice requirement when evaluating whether a party has waived enforcement of an arbitration agreement. The Second Circuit concluded that the UBS Defendants waived their right to compel arbitration by seeking a resolution of their dispute in the District Court first, thus acting inconsistently with the right to arbitrate. Consequently, the Second Circuit affirmed the District Court’s denial of the UBS Defendants’ motion to compel arbitration on the alternative ground of waiver. View "Doyle v. UBS Financial Services, Inc." on Justia Law

Plaintiffs in this multi-district products liability suit allege that they purchased defective Chrysler Pacifica minivans from FCA, which were recalled due to a risk of battery explosions. After the recall, plaintiffs filed seven putative class action suits, which were consolidated in the Eastern District of Michigan. During discovery, FCA discovered that some plaintiffs had agreed to arbitration clauses when purchasing their minivans and moved to compel arbitration for those plaintiffs. The district court denied FCA’s motion, finding that FCA had waived its right to arbitrate by moving to dismiss the entire complaint.The United States District Court for the Eastern District of Michigan denied FCA’s motion to compel arbitration, concluding that FCA had waived its right to arbitrate by engaging in litigation conduct inconsistent with that right, specifically by moving to dismiss the plaintiffs’ claims. The district court made this finding sua sponte, without the plaintiffs raising the issue of waiver.The United States Court of Appeals for the Sixth Circuit reviewed the case and reversed the district court’s decision. The appellate court held that a party cannot waive its right to arbitration without knowledge of that right. The court found that FCA did not know about the arbitration clauses until it obtained the relevant purchase agreements through discovery. Additionally, the appellate court determined that the district court erred by raising the issue of waiver on its own, violating the principle of party presentation. The Sixth Circuit concluded that the district court’s decision was clearly erroneous and remanded the case for further proceedings consistent with its opinion. View "Berzanskis v. FCA US, LLC" on Justia Law

Laurence Bonday, a former employee of Nalco Company LLC, filed an arbitration demand against Nalco, alleging that the company violated its severance plan by demoting him without offering severance pay. Nalco argued that a court needed to determine the scope of the arbitration agreement before proceeding. However, the arbitrator concluded that Bonday’s severance claim fell outside the scope of the arbitration agreement and awarded him nothing on that claim. Instead, the arbitrator awarded Bonday $129,465.50 on an ERISA discrimination claim that he never raised.Nalco moved to vacate the arbitration award, arguing that the arbitrator exceeded her powers by deciding the scope of the arbitration agreement and awarding relief on a claim Bonday never made. The United States District Court for the Middle District of Florida granted Nalco's motion, concluding that the arbitrator exceeded her powers by interpreting the scope of the arbitration agreement and awarding relief on an unraised ERISA discrimination claim.The United States Court of Appeals for the Eleventh Circuit reviewed the case and affirmed the district court's decision. The appellate court agreed that the arbitrator exceeded her powers by granting relief on an ERISA discrimination claim that Bonday did not submit for arbitration. The court emphasized that an arbitrator can only bind the parties on issues they have agreed to submit and that the arbitrator's decision to award relief on an unsubmitted claim was beyond her authority. The court did not address the district court's first reason for vacating the award, as the second reason was sufficient to affirm the decision. View "Nalco Company LLC v. Bonday" on Justia Law