ADR Cases

Volume 18 No. 4

By

“Reasoned” Arbitration Award Does Not Require Full Report on Findings of Fact, Conclusions of Law

In Rain CII Carbon, LLC v. ConocoPhillips Co., No. 11-30669, 674 F.3d 469 (5th Cir. March 9, 2012), the U.S. Court of Appeals for the Fifth Circuit found that an arbitrator’s eight-page award satisfied an arbitration agreement requirement for a “reasoned” award, even if it did not include full “findings of fact and conclusions of law.”  

The parties had a long-term supply agreement for green anode coke. The supply agreement used a complex formula to determine the market price of coke. Under the agreement, if the formula did not yield market price and no new formula could be agreed upon through negotiations, then the parties would use “baseball arbitration,” wherein each would submit a formula proposal and the arbitrator would select one of the proposals. After three years, defendant opened market price negotiations, and after no agreement was reached, the parties submitted the matter to arbitration.

After the arbitrator selected plaintiff’s proposal, which was the original formula, plaintiff submitted a motion requesting the arbitrator remove two paragraphs in the award that had been taken from defendant’s proposal. The arbitrator granted plaintiff’s motion and removed the two inadvertently included paragraphs from the final award. After the district court refused to vacate the award, the defendant appealed. The Fifth Circuit affirmed, holding that defendant’s argument that the arbitrator exceeded his powers was meritless.

FAA Preempts State Law on Substantive Unconscionability Question for Consumer Arbitration Agreement’s Class Action-Waiver

The Ninth Circuit ruled that Washington state substantive unconscionability laws specific to arbitration agreements were preempted by the Federal Arbitration Act (FAA), overturning a district court decision.

In Coneff v. AT&T Corp., No. 09-35563, 673 F.3d 1155 (9th Cir. March 16, 2012), plaintiff and other current and past customers of AT&T filed a class action lawsuit for unjust enrichment and breach of contract. AT&T moved to compel individualized arbitration under the arbitration clause of the service agreement, but the district court denied the motion, finding the class-action waiver substantively unconscionable under Washington state law.

Citing the Supreme Court’s 2011 holding in AT&T Mobility v. Concepción, the Ninth Circuit on appeal determined that the Washington state prohibition of class-action waiver in arbitration was very similar to the California state rule that the Supreme Court had deemed preempted by the FAA. The court remanded the case to consider the issue of procedural unconscionability of the plaintiffs’ service agreement under Washington state law that was not pre-empted by the FAA.

Clause Delegating to the Arbitrator Issues of Substantive Arbitrability for Any Claim Valid under the FAA

The Eleventh Circuit Court of Appeals ruled in March that the FAA permits a clause in an arbitration agreement delegating matters of substantive arbitrability to the arbitrator.

In In re Checking Account Overdraft Litigation, No. 11-14282, 459 Fed. Appx. 855 (11th Cir. March 21, 2012), the plaintiff brought suit against defendants for damages and injunctive relief related to overdraft fees incurred on her checking account.  Defendants moved to compel arbitration because plaintiff’s account agreement contained an arbitration clause for any dispute relating to the account with the caveat that non-monetary relief requests were not subject to arbitration.

After actions were consolidated into multidistrict litigation, the district court denied the motion to compel arbitration, holding that the arbitration agreement was unconscionable under Maryland state law. On appeal, the Eleventh Circuit remanded the case for further consideration after the Supreme Court’s ruling in Concepción. Defendants moved to compel arbitration again, and the district court denied the motion on the grounds that plaintiff’s claims were not subject to arbitration because she sought injunctive relief in part. One of the defendants appealed.

The Eleventh Circuit reversed, holding that the arbitrator should decide whether the claims were subject to arbitration because the arbitration agreement included the delegation clause. The court determined that this clause was clear and unmistakable evidence that manifested the intent to delegate those issues. The court also rejected the plaintiff’s argument that the agreement was ambiguous and that the agreement’s procedural unconscionability obviated the requisite manifestation of intent.

Plaintiff’s Case Dismissed after Willful Breach of Confidentiality in Court Ordered-Mediation

The Tenth Circuit held in April that a trial court did not abuse its discretion in ordering dismissal of an Americans with Disabilities Act (ADA) lawsuit as a sanction because a plaintiff intentionally and completely disregarded the mediation confidentiality rule. 

In Hand v. Walnut Valley Sailing Club, No. 11-3228, ___ F.3d ___ (10th Cir. April 4, 2012), plaintiff brought suit against his former sailing club for revoking his membership when he complained about its failure to comply with the ADA. After court-ordered mediation did not result in a settlement, plaintiff emailed the details of the mediation and disparaging remarks about the club’s participation in the mediation to at least 40 other members of the club in violation of a district court mediation confidentiality rule. Defendant moved for dismissal of plaintiff’s lawsuit as a sanction.

The trial court granted the motion to dismiss, citing plaintiff’s admission of complete disregard for the court’s authority and holding that dismissal was the only adequate sanction given the prejudicial effect of plaintiff’s action.

The Tenth Circuit affirmed, rejecting plaintiff’s novel argument on appeal that he did not fully know or understand the district court’s rules because he had failed to raise his ignorance-of-the-rules argument before the district court and had relied solely on the argument that dismissal was too harsh a sanction.

Parties’ Agreement to Arbitrate Must Contemplate Class Action for Arbitrator to Order Class Arbitration

The Fifth Circuit Court of Appeals held that an arbitrator’s decision permitting class arbitration should be overturned because the decision had no basis in the terms of the arbitration agreement, overturning a lower court finding. 

In Reed v. Florida Metropolitan University, Inc., No. 11-50509, 681 F.3d 630 (5th Cir. May 18, 2012), plaintiff brought a putative class action case after discovering that his online paralegal degree issued by defendant university was not accepted as legitimate by potential employers. The lawsuit was to include online students in Texas for violating provisions of the Texas Education Code. 

Defendants removed the case to district court and the court ordered arbitration pursuant to the arbitration provision in the enrollment agreement, reserving the issue of class arbitration to the arbitrator. The arbitrator found that the parties implicitly agreed to class arbitration and found for the plaintiff class. The district court confirmed the arbitration award over defendants’ objection that the arbitrator exceeded his powers.

On appeal, the Fifth Circuit first held that the district court did not err in allowing the arbitrator to decide on the class arbitration issue. But the court reversed the district court’s refusal to vacate the arbitrator’s award, holding that the arbitrator “exceeded his powers” and “forced the parties into class arbitration without a contractual basis for doing so.” Even with a highly deferential standard of review, the court found the arbitrator’s decision permitting class arbitration deficient because there was no evidence of implied consent to class arbitration in the parties’ agreement sufficient to override the presumption for bilateral arbitration agreements.

 

 

Herbert Hill is a law student at George Washington Law School in Washington, D.C., and a legal intern with the ABA Section of Dispute Resolution.

 

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