Most of the issues that courts decide are on the arbitration side of ADR. Today, we get the rare case that arises out of a mediation. Also, a look at the world of “out there” arbitration forums.
Discovery of mediation materials
The assumption is that mediations are confidential and mediator contracts and state statutes reenforce that perception. Accent Delight International, Ltd. v. Sotheby’s, 2020 U.S. Dist. LEXIS 230272 (S.D.N.Y. Dec. 8, 2020) discusses exceptions to that rule. The case has an interesting factual background related to alleged attempts by an art dealer to defraud the Plaintiffs of approximately $1 billion in connection with an art purchase, including the well-publicized Christ as Salvator Mundi which may or may not have been painted by Leonardo da Vinci. After mediation, Sotheby’s settled a separate suit with the sellers of the painting. Plaintiffs in this case sought to compel disclosure of the settlement agreement, mediation statement, and approximately 250 other documents, including communications between Sotheby’s counsel and the mediator. Asserting a mediation confidentiality privilege, Sotheby’s opposed disclosure.
The court’s analysis begins with the Second Circuit’s heightened standard for obtaining mediation materials, as set forth in In re: Teligent Inc., 640 F. 3d 53 (2nd Cir. 2011) – the requesting party must demonstrate that it has a “special need” for the materials, that there is resulting unfairness from a lack of discovery, and that the need for the evidence outweighs the interest in maintaining confidentiality. As a threshold matter, Judge Furman holds that Teligent, which arose from a court-ordered mediation, also applies to private mediations, such as the one at issue here. After analyzing the reasoning of District Court cases within the Circuit on both sides of the issue, the court holds that, although “the question is a close one,” there is no reason to exclude private mediations from the scope of the privilege. To do so would discourage private mediations and reduce the assurance of confidentiality necessary to the information sharing which mediations require. Turning to the merits, the court holds that Plaintiffs are not entitled to the materials, as they did not demonstrate that they could not get the information contained in the withheld documents, as opposed to the documents themselves, from another source. “If Plaintiffs were correct that the inability to obtain the specific documents was dispositive, the Teligent test would be met in virtually every case. Instead, the relevant inquiry is whether the party seeking discovery can otherwise obtain the information in the withheld documents. . . .” (Emphasis in original). Since Plaintiffs already knew the nature of Sotheby’s claims against the painting’s seller, there was no compelling need for discovery of the mediation documents laying out those theories.
“Unusual” arbitration forums
Before writing today, I looked to see whether there was a full moon, because three cases decided in the last few days address the enforceability of “arbitration awards” issued by forums that do not seem to require the consent of all parties to the dispute before issuing a decision.
King v. Trump, 2020 U.S. Dist. LEXIS 231428 (S.D.N.Y. Dec. 8, 2020) refuses to enforce a $6 billion award in favor of the incarcerated Plaintiff against President Trump, Chief Justice Roberts, Speaker Nancy Pelosi, Senator Charles Grassley, Attorney General Barr, and the United States. The award was issued by an arbitrator on behalf of Sittcomm Arbitration Association. There is no indication in the record that the United States or any of the individual respondents ever agreed to arbitration with plaintiff, let alone to a proceeding before that tribunal. The court quotes from what “appears to be the purported arbitration award,” including its ringing “qui tam pro domino rege quam pro se ipso in hac parte sequitur. Pro rex regum et heredes. . ,” and holds that the award is invalid and “legally frivolous.” Chief Judge McMahon cites to numerous cases questioning the validity of Sittcomm and a LEXIS search shows a variety of cases refusing to enforce its “awards.” But there must be money in managing such forums, because within the last week courts also refused to enforce “awards” issued unilaterally by “HMP Arbitration Association,” Nash v. Bank of America, N.A. 2020 U.S. Dist. LEXIS 230723 (M.D. Fla. Dec. 1, 2020), and “American Arbitration Management Services,” Elfar v. Wilmington Trust, N.A., 2020 U.S. Dist. LEXIS 227377 (E.D. Cal. Dec. 3, 2020). Notably in all three of the cases, the plaintiffs appeared pro se and, in the latter two, utilized the “arbitration” services in an attempt to avoid foreclosures upon and the loss of their homes.
Review of arbitration procedures
LTF Construction Co., LLC v. Centos Solutions, Inc., 2020 U.S. Dist. LEXIS 229813 (S.D.N.Y. Dec. 7, 2020) is an action in which LTF seeks to confirm and Centos seeks to vacate an award of $1.8 Million in LTF’s favor after a proceeding under the AAA’S Construction Industry Arbitration Rules. On appeal, Defendant objects to the presentation of the case to a single arbitrator, rather than a three-person panel, as provided for in the CIA rules for larger cases; the arbitrator’s refusal to grant a continuance after Centos discharged its lawyer; and his rendering of a standard, rather than a reasoned, award. In her review, Judge Preska recognizes that the actions of an arbitrator are overruled only where there has been “manifest disregard of the law.” Reviewing the record, she holds that none of the alleged process errors rises to that level. The absence of counsel arose because Centos made a conscious decision that its exposure did not justify further legal expenses, a bet gone very wrong. In addition, it did not make a timely objection to either panel size or the nature of the award. Based on those facts, the court confirms the award.
English language agreements to arbitrate
While there are numerous cases holding otherwise, in Mikeladze v. Raymours Furniture Company, Inc. 2020 U.S. Dist. LEXIS 230919 (E.D. Pa. Dec. 8, 2020) Judge DuBois denies a motion to compel arbitration under an employment agreement, where the employee, a Georgian and Russian speaker, had limited English skills. He distinguishes contrary authority on the basis of his finding that Plaintiff did not have an opportunity to obtain a translation of the document and his supervisor, who presented him with the contract, failed to advise that there was an arbitration mandate. Accordingly, the court opines that Mikeladze did not know that there was such a requirement; thus, he could not have consented thereto. Absent a contract, there need not be an arbitration.
Jine v. OTA Franchise Corporation, 2020 U.S. Dist. LEXIS 229903 (C.D. Cal. Nov. 13, 2020) in dictum reminds the parties that, when the court compels arbitration, there is an appeal if it dismisses the underlying litigation with prejudice, but not if it merely grants a stay thereof. Bear that dichotomy in mind when framing the remedy you want the court to order if it grants your motion to compel arbitration.
Formalities of contract execution
The defendant in Byars v. Asbury Management Services, LLC, 2020 U.S. Dist. LEXIS 230341 (S.D. Miss. Dec. 7, 2020) drafted a contract containing an arbitration clause which specifically required signing by all parties in order to become effective. However, Asbury never signed its agreement with Byars. Based on that failure, the court holds that the contract never became effective and denies Asbury’s motion to compel arbitration.
Discovery under 28 U.S.C. §1782
The September 25, 2020 “ADR Highlights” discussed the Circuit split on the issue of whether Section 1782 may be used to obtain discovery for use in foreign arbitrations. The Supreme Court may resolve that conflict. A petition for cert. was filed on December 7, 2020 in one of the cases cited, Servtronics, Inc. v. Rolls-Royce, PLC, 975 F. 3d 689 (7th Cir. 2020), which held that the section’s provisions do not apply to private proceedings. Stay tuned.
Enjoy your weekend. I will be pulling for the Steelers over Buffalo. Still recovering from Monday’s loss to Washington and the end of the hopes for an undefeated season. See you Monday.
 In an interesting footnote, Judge Furman raises, but does not resolve, the issue of what qualifies as a “mediation.”