Nothing from the Circuits today, but a number of factually interesting District Court cases, presenting common issues in unusual circumstances.
Jury trial on a motion to compel
Every issue of “ADR Highlights” features court-side decisions on motions to compel arbitration. Mendez v. LoanMe, Inc., 2020 U.S. Dist. LEXIS 189500 (S.D. Cal.) (Oct. 13, 2020) reminds us that a jury trial is also available to resolve the underlying factual issues.
The arbitrability dispute in Mendez is common. Plaintiff brought an action alleging that defendant gave him a loan with the “sole purpose” of causing a default and, thereafter, “baited and switched” him into a $26,500 business loan at a 104% APR for ten years. Defendant sought to compel arbitration. The case centers on whether the Plaintiff exercised his contractual right to opt out of arbitration within sixty days of execution of the loan agreement. Judge Bashant holds that the question raises a factual issue which requires an evidentiary hearing. What keeps the case from being routine is Plaintiff’s attempt to obtain a jury trial on this issue, an option provided by the Federal Arbitration Act. To the probable surprise of many, 9 U.S.C. §4, which governs motions to compel arbitration, provides:
Where [a factual issue related to the formation or performance of an arbitration agreement] is raised, the party alleged to be in default may, except in cases of admiralty, on or before the return day of the notice of the application, demand a jury trial of such issue, and upon such demand the court shall make an order referring the issues to a jury in the manner provided by the Federal Rules of Civil Procedure or may specially call a jury for that purpose.
The Plaintiff had made a common demand for trial by jury in his complaint and argued that he had thereby triggered the cited requirement. Recognizing that there is no Ninth Circuit authority on point, the court holds that the FAA requires a party seeking a jury trial regarding an arbitration to serve a demand addressed specifically to the motion to compel; it may not rely upon a general demand that issues in the case be so tried. Accordingly, the court sets a date for a court-side evidentiary hearing.
Dismissal for lack of venue
Numerous cases discuss the issue of whether the dismissal of a case, upon the granting of a motion to compel arbitration of the underlying dispute, should be rendered under Fed. R. Civ. P. 56 (summary judgment) or Rule 12(b)(6) (dismissal for failure to state a claim). In Dhani v. Visa, Inc. 2020 U.S. Dist. LEXIS 189226 (S.D. Ind.) (Oct. 13, 2020), Judge Miller adopts a totally different procedure, dismissing the case under Rule 12(b)(3) for lack of venue.
Arbitration of claims under Title VII
Plaintiffs in Orozco v. JP Morgan Chase Bank, N.A., 2020 U.S. Dist. LEXIS 189040 (S.D. Tex.) (Oct. 13, 2020), a purported class action, claimed that the defendant, in violation of Title VII, discriminated against Hispanic employees by assigning them to less lucrative branch locations. The two named plaintiffs, Orozco and Rosales, had signed now fairly standard arbitration agreements as part of their employment package. In opposition to defendant’s attempt to enforce those clauses, plaintiffs argued that, because the agreements impeded their ability to obtain a judicial resolution of Title VII claims, the arbitration provision violated public policy and was void. Citing SCOTUS in Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991) (authorizing a mandate to arbitrate statutory claims) and Fifth Circuit authority, Alford v. Dean Witter Reynolds, Inc., 939 F.2d 229 (5th Cir. 1991), the court, Rosenthal, J. compels arbitration.
Execution of an arbitration agreement by an agent
Perry Street Software, Inc. v. Jedi Technologies, Inc., 2020 U.S. Dist. LEXIS 190503 (S.D.N.Y.) (Oct. 14, 2020) is a browsewrap case. What makes the case interesting is a dispute as to whether access to a website by the attorney for Jedi triggered a clause which compelled his client to arbitrate its patent infringement dispute with Perry Street. The underlying case includes a claim by Jedi that a product of Plaintiff’s, a website dating app known as SCRUFF, violates one of Jedi’s patents. The website had a hyperlink to its “Terms of Service,” which included a provision referring “any dispute or claim arising out of or relating in any way to these terms or your access to or use of the service” to binding arbitration. Perry Street argued that, under applicable state law, an attorney acts as agent for his or her client and has the ability to bind that client to a contract. Therefore, it concluded, counsel’s access to the website triggered the provisions of the hyperlinked arbitration clause, compelling Jedi to arbitrate its patent dispute. Jedi’s counsel, on the other hand, claimed that he was not acting on behalf of his client when he went on the site, but was reviewing the SCRUFF site as part of his own presuit obligations under Rule 11 to establish a reasonable basis for his client’s claims. Judge McMahon opines that, in order for a principal to be bound by the actions of its agent, there “must be at least some indication that the principal was aware of the contract and that it manifested its agreement to the contract through its agent.” The court holds that, since the issue of Jedi’s consent to be contractually bound is a factual one and the record was devoid of any affidavit from counsel as to his reasons for viewing the site (the parties apparently relied solely on pleadings, briefs, and exhibits), she would grant a preliminary injunction against continuing the litigation, but directed the parties to support their positions within thirty days. However, Judge McMahon makes it clear that, if the supplemented record “provides evidence that [Jedi’s] lawyer signed up for SCRUFF for Rule 11 purposes,” she would ultimately deny the application to stay the litigation in deference to arbitration.
In reading the arbitration clause, I wondered whether this patent dispute would even fall within its narrow scope. In a footnote, the Court holds that question is to be resolved by the arbitrator should the case move in that direction.
I will hopefully be able to follow the matter in future “ADR Highlights.”
Don’t take me out to a ball game
Ajzenman v. Office of the Comm’r of Baseball, d/b/a Major League Baseball, 2020 U.S. Dist. LEXIS 190401 (C.D. Cal.) (Sept. 14, 2020) arises out of the truncated baseball season. Plaintiffs brought a class action against StubHub (and other defendants, including Major League Baseball, who are not relevant to the opinion) arising from an alleged delay in issuing refunds for tickets to cancelled Major League Baseball games. The case raises the usual browsewrap issues, with Judge Fischer holding that the format of the StubHub registration page contained sufficient information to put Plaintiffs on inquiry notice as to the arbitration clause.
As did the plaintiffs in Herrara v. Wells Fargo, N.A., 2020 U.S. Dist. LEXIS 186448 (C.D. Cal.) (Sept. 8, 2020), summarized in the October 9th “ADR Highlights,” Ajzenman argued that the arbitration clause in his agreement, which prohibited the arbitrator from granting a “public injunction”, i.e. “’relief that would affect [consumers] other than [the plaintiff]’ and eliminates any ‘right or authority for any dispute to be brought, heard, or arbitrated as a class, collective, mass, private attorney general, or representative action. . . .” was void under California’s Consumer Legal Remedies Act and Unfair Competition Law. As did the court in Herrara, Judge Fischer holds that the real relief sought by Plaintiffs is an individual benefit inuring only to members of the class and, accordingly, does not constitute a request for any “public” injunction.
One interesting sidebar to the case – how can you not love a matter in which over four pages of a ten-page opinion are consumed by a recitation of counsel engaged in the litigation?
Jarndyce v. Jarndyce ends
In Bleak House, Dickens writes about a case that lingers so long that “Innumerable children have been born into the cause; innumerable young people have married into it; innumerable old people have died out of it.” The arbitration equivalent to Jarndyce is a matter arising out of a 1999 maritime accident, which, over a twenty-year stretch, moved through arbitration in India, multiple litigations in Louisiana state and appellate courts, and the U.S. District Court. The matter has finally – maybe? – come to an end. In Neptune Shipmanagement Services (PTE.), Ltd. v. Dahiya, 2020 U.S. Dist. LEXIS 190093 (E.D. La.) (Oct. 14, 2020), Judge Feldman “permanently enjoin[s]” “all pending or future legal actions arising from the personal injuries the defendant sustained while aboard the M/T EAGLE AUSTIN in 1999.” Oh, well, there is always an appeal to the Fifth Circuit.
An earlier opinion in the matter is discussed in the September 18, 2020 “ADR Highlights.”
Have a good weekend and, as they said at the start of Hill Street Blues, “let’s be careful out there.”