Only one big case today, focusing on the New York Convention. But there a lot of “Quick Hits” that reenforce basics.
Everything you want to know about the New York Convention
There are some opinions in which the court walks through its analysis in a transparent, orderly way. Judge Lemelle’s opinion in 1010 Common, LLC v. Certain Underwriters at Lloyd’s, London, 2020 U.S. Dist. LEXIS 233867 (E.D. La. Dec. 14, 2020) exemplifies that approach. The case centers on a motion to remand an action regarding the amount due under the flood loss provisions of a commercial property insurance policy. Plaintiff’s property suffered losses as a result of severe flooding in downtown New Orleans in July 2019. The Certain Underwriters and Plaintiff disagreed over the value of some line items in the claim and the determination of the applicable deductible. 1010 Common brought a breach of contract claim against the Underwriters in Louisiana state District Court; defendants removed the case and sought to invoke an arbitration clause in the policy. The court faced two basic issues. First, did it have subject matter jurisdiction? Second, was the dispute subject to the arbitration provision of the policy?
The court did not address claims of diversity jurisdiction. Rather, it found federal question jurisdiction under 28 U.S.C. §1331, since Section 203 of the Federal Arbitration Act provides that “an action falling under the [New York] Convention shall be deemed to arise under the laws and treaties of the United States.” The court, therefore, examines in detail whether the parties’ claims are “falling under the Convention,” ultimately, based on the citizenship of various of the insurers, rejecting The Underwriters’ position that the Convention is inapplicable on its face. The court, then, conducts a “very limited inquiry”, as required by Fifth Circuit precedent, and determines that the claims have a “nonfrivolous connection to an international arbitration agreement.” Accordingly, it finds federal jurisdiction and denies the motion to remand.
Having found that the court has jurisdiction, Judge Lemelle then determines whether the claims are arbitrable. Working right down through the analysis tree, he considers a choice of law issue, nuances arising from the interface between the McCarran-Ferguson Act and Louisiana’s prohibition of agreements which divest the state of jurisdiction over claims against insurers, contract formation, and the ultimate question of the scope of the arbitration provision itself. Ultimately opining that the arbitration clause in the subject insurance policy delegates the determination of arbitrability to the arbitrator, he dismisses the case, without prejudice to any appropriate post-arbitration applications.
Reading this opinion feels like watching someone do a math proof, as the court details each step it takes before it moves on to the next issue. Even if you have no interest in arbitration (although, if not, you probably would not have read this far), consider 101 Common as an example of how lawyers should reason – and judges should write.
Tobia v. Lakewood Board of Education, 2020 U.S. Dist. LEXIS 234236 (D.N.J. Dec. 14, 2020) is a reminder that an arbitration can provide the basis for a defense of collateral estoppel in a later action. The primary issue in this case was whether the cause of the termination of Plaintiff’s employment had been a necessary part of a prior arbitration. For those who are arbitrators, the case is an object lesson in the importance, when writing a reasoned award, of enumerating all the considerations and factual bases for the decision. Not only does such specificity help explain the issues covered in case a collateral estoppel issue arises, but it also demonstrates to a reviewing court that you have applied any relevant contract or substantive law and, therefore, are entitled to broad discretion in the judgment you reach.
General Electric Company v. APR Energy, PLC, 2020 U.S. Dist. LEXIS 234524 (S.D.N.Y. Dec. 14, 2020) is a very fact intensive review of a discovery dispute in which G.E. seeks certain mediation materials presented by APR in a mediation in another action. The actual holding is probably not relevant to anyone other than the parties since the case is decided narrowly on the facts. The broader, more interesting issue, which APR lays out in argument and the court never directly answers, is a choice of law question. What substantive law does the court apply in determining whether the mediation privilege has been waived? This case, in which GE seeks the mediation material, is pending in New York. However, the mediation in which the material was presented took place in Illinois. The court applies New York law, but without any discussion as to why it rejects Illinois’ confidentiality statute.
American Specialty Oils Co. v. eWorkplace Solutions, Inc., 2020 U.S. Dist. LEXIS 234222 (E.D. Mich. Dec. 14, 2020) is a reminder that a challenge based on unconscionability must be addressed to the arbitration clause itself in order to create a gateway issue. An attack on the agreement as a whole will result in the question being referred to the arbitrator for resolution.
Section 1782 discovery
The dispute between Circuits over the applicability of 28 U.S.C. §1782 discovery to private arbitrations is relevant to the decision in In re: P.T.C. Production & Trading Company, A.G., 2020 U.S. Dist. LEXIS 234511 (W.D. N.C. Dec. 11, 2020). Applying precedents from the Fourth Circuit, which covers North Carolina, Servotronics, Inc. v. Boeing Co., 954 F. 3d 209 (4th Cir. 2020), but recognizing the existence of contrary authority in the Seventh Circuit, Servotronics, Inv. V. Rolls-Royce PLC, 975 F. 3d 689 (7th Cir. 2020), the court grants P.T.C.’s ex parte application to serve a subpoena upon a third party for use in an ICC arbitration. Please, SCOTUS, accept the pending application for cert. in the Rolls-Royce litigation and resolve this split.
Multiple AAA rules
The main issue in Hagan v. Park Miller, LLC, 2020 U.S. Dist. LEXIS 234643 (N.D. Cal. Dec. 11, 2020) is whether Plaintiffs waived their right to rely upon the arbitration clause in an agreement underlying the parties’ dispute. A two-paragraph portion of the opinion rejects defendant’s claim that the court should order the American Arbitration Association to apply its commercial rules, rather than the consumer rules, to administration of the dispute. “[I]t is for the AAA, not the Court, to decide whether the AAA consumer or commercial rules apply. And the AAA has decided to apply its consumer rules. . . . Neither the parties’ agreement nor any other authority cited by Park Miller empowers the Court to second-guess the AAA’s decision or otherwise short-circuit the arbitration process.” Drafting lesson – if you want to require an arbitral tribunal to apply a particular set of its rules, say so in the agreement.
FINRA arbitration of employment disputes
Plaintiff in Ramirez Rodriguez v. Stanley, 2020 U.S. Dist. LEXIS 234231 (D.N.J. Dec. 14, 2020) claimed that she was terminated in violation of the Americans with Disability Act, Title VII, and the federal Family Leave Act. She sought arbitration under FINRA’s auspices. The court denied the application. The FINRA Code of Arbitration provides that “[a] claim alleging employment discrimination. . . .in violation of a statute, is not required to be arbitrated under the Code. Such a claim may be arbitrated only if the parties have agreed to arbitrate it, either before or after the dispute arose.” Finding that there was no such agreement, the court denies Plaintiff’s motion to compel arbitration. The case also demonstrates the deference given pro se parties, as the court allows Ms. Ramirez Rodriguez to file a fourth amended complaint to cure deficiencies in her underlying complaint on issues unrelated to the arbitration.
The weather bureau predicts eight inches to a foot of snow here tonight through mid-day Thursday. But, in this era of remote schooling, there are no more “snow days.” Sorry kids and teachers; technology rules us all. And, as for “ADR Highlights,” we will see you Friday, regardless of whether the driveway is shoveled.