Whether it was because power came back on in portions of Texas or due to a backlog from the long weekend, there was a deluge of opinions published on Friday and over the weekend. Since a lot of them are worth reading, all I am writing today is a series of Quick Hits. I hope the captions take you to some opinions that are relevant to your practice or just look interesting.
Last mile carriers and arbitrability under the FAA
It looks like the Circuit split over the standard to be applied in determining whether last-mile carriers are workers in interstate commerce will continue. SCOTUS this morning denied the petition for cert. in Amazon.com, Inc. v. Rittman, Dkt. No. 20-622. The petition sought to resolve the issue of whether couriers who transport goods which have traveled in interstate commerce, but who do not themselves cross state lines, fall with the FAA’s exemption for workers “engaged in interstate commerce.” 9 U.S.C. §1. As usual, there is no indication as to why the court denied certiorari, but this seemed an ideal situation for the Justices to resolve an important issue. The opinion below is Rittman v. Amazon.com, Inc. 971 F. 3d 904 (9th Cir. 2020).
Arbitrator’s denial of a continuance
Carroll v. Wells Fargo Clearing Services, LLC, 2021 U.S. Dist. LEXIS 29935 (S.D.N.Y. Feb. 17, 2021) arises from an arbitration over a promissory note in the amount of $1,100,000 which Carroll, a broker, gave to Wells Fargo, for whom he was a registered representative. By its terms, the note became due and payable when Carroll resigned from Wells. Wells brought an arbitration on November 20, 201, seeking to recover approximately $700,000 which it claimed was still owed. Carroll did answer the claim after receiving the initial demand or even after FINRA sent an overdue notice. Finally, on February 25, 2020, he provided FINRA a letter that stated, “I need more time on this case to respond,” citing unspecified “personal reasons” and the need to “obtain different counsel.” Although Wells did not object to a 10-day extension, the arbitrator denied the request on March 13, 2020. There was still no response from Carroll and, on March 30, 2020, the arbitrator determined that he was liable on the note and awarded damages and attorneys’ fees. The award specifically references Carroll’s failure to appear. The award apparently woke Carroll, and, through counsel, he moved to vacate. The court, Castel, J. denies the motion. After reciting the opportunities to respond to the claim which Carroll ignored, the court holds that the arbitrator acted within his discretion in denying a continuance.
Interim award as “final” for purposes of appeal; arbitration with former union member
1199SEIU United Health Care Workers East v. PSC Community Services, 2021 U.S. Dist. LEXIS 30859 (S.D.N.Y. Feb. 18, 2021) discusses two issues of interest – one of which is relevant to all arbitration practitioners and one suited to labor lawyers. Procedurally, the case addresses an interim award in which the arbitrator dealt only with threshold issues related to the scope of the arbitration. While the arbitrator held that the subject wage and hour grievances were arbitrable, he did not decide the merits. The Union filed this action to confirm. The court, Koeltl, J., holds that the subject award is “final” and, therefore, subject to judicial review under the FAA. The test of “finality,” he opines, “depends on the arbitration agreement and whether the parties intended to ‘resolve finally the issues submitted’ to the arbitrator.” Quoting Corporate Printing Co. v. New York Typographical Union, 1994 U.S. Dist. LEXIS 9728 (S.D.N.Y. July 18, 1994)(Sotomayor, J.). Here, the parties had asked the arbitrator to resolve, at the outset of the case, the question of whether he had jurisdiction to arbitrate wage and hour claims for former union members. Since the interim award fully resolved those questions, the court deemed it final and subject to federal court consideration
On the merits, the court addresses whether the arbitrator exceeded his authority by resolving issues involving former employees who were no longer union members when the employer and Union “clarified” that grievances related to violations of the Fair Labor Standards Act and New York state wage laws must be arbitrated under the Collective Bargaining Agreement. The court holds that former employees remain bound by the result of an arbitration brought by the Union under a CBA, even if there were changes to the agreement after they ceased employment. “Proposed intervenors’ arguments that former employees cannot be bound by a CBA or cannot be represented by their Union in arbitration is without merit. To accept that conclusory argument would ‘essentially allow Union members to opt-out of their obligations under a collective bargaining agreement by simply withdrawing from their union prior to bringing suit.’” Quoting Germosan v. ABM Industries Corp., 2014 U.S. Dist. LEXIS 119092 (S.D.N.Y. Aug. 26, 2014)
Warning – Do not read this case too broadly. It does not say that all or even most interim awards or arbitrator orders are subject to appeal. Both parties here specifically asked that the arbitrator bifurcate these arbitrability questions. Therefore, despite authorities such as this, parties must still think about finality and appealability before asking for an interim “award,” rather than just a memorandum of decision resolving a limited issue. For their part, arbitrators should be careful to indicate whether such an interim decision is to be deemed “final.”
Filing a settlement agreement
Dilliner v. General Motors, LLC, 2021 U.S. Dist. LEXIS 31337 (S.D.W.Va. Feb. 19, 2021) is a reminder that everything that arises from a mediation is not hidden from public eyes. The case arises from settlement of an action in which the decedent allegedly died due to a manufacturing defect in a GM vehicle. Under West Virginia law, a court must approve any wrongful death. Here, the parties, in seeking such approval, sought to file the settlement agreement under seal. Finding that the judicial system’s transparency outweighs the parties’ need for confidentiality, the court, Goodwin, J., essentially denies the motion, although he allows redaction of the amount of the settlement payment. It is clear from the opinion that the court does not think highly of confidential settlements generally. “Manufacturers may pay, and victims may be willing to accept, more money ‘to bury those facts that are most likely to induce liability in confidential [settlement] agreements.’” (citation omitted). It is important to note that the scope of this case is limited to those instances in which a court must approve a settlement. Judge Goodwin recognizes that, if this were an injury case which did not result in death, disclosure of the agreement would not be necessary.
Jones Act cases, the New York Convention, and foreign law
Jones Act cases, which involve injuries to seafarers, normally may not be removed from state to federal court. However, Sungaralingum v. Carnival Corp., 2021 U.S. Dist. LEXIS 31360 (S.D. Fla. Feb. 18, 2021) holds that this prohibition does not apply where, as here, the claim is subject to an arbitration agreement enforceable under the New York Convention, which, by statute, creates federal question jurisdiction. Having found that the District Court, therefore, has subject matter jurisdiction, Chief Magistrate Judge O’Sullivan reviews the Convention’s four-pronged jurisdictional requirements and holds that the plaintiff’s claim meets each of those criteria. Plaintiff further claimed that Panamanian law, applicable under his Seafarer’s Contract of Employment, would deny him the protections available under the Jones Act and that arbitration should, therefore, not go forward. The court deems that “meaningful relief” claim to be premature, holding that such defenses, while they may be relevant in an action to enforce or vacate the ultimate award, do not, under the Convention, preclude the arbitration itself. Accordingly, the Magistrate Judge recommends dismissing the case and compelling arbitration.
Disqualification of a party appointed arbitrator
What is the role of a party-appointed arbitrator? That question is raised in Clean Pro Carpet & Upholstery Care, Inc. v. Upper Pontalba of Old Metairie Condominium Ass’n, Inc., 2021 U.S. Dist. LEXIS 30111 (E.D. La. Feb. 18, 2021), where the insurer appointed its expert to sit as an arbitrator on the defendant’s fire damage claim. Chief Judge Brown holds that, under the FAA, an application to disqualify the proposed arbitrator for a conflict of interest is a procedural question for resolution by the arbitration panel. A court may address any such conflict, she opines, only post-arbitration on a motion to vacate the award. Even if the court were to decide the issue, she writes in dictum, she would not disqualify the Insurer’s arbitrator. The parties chose New York substantive law in their agreement. Under that jurisprudence, the court opines, “the very reason each of the parties contracts for the choice of his own arbitrator is to make certain that his ‘side’ will, in a sense, by represented in the tribunal.” Quoting Astoria Medical Group v. Health Insurance Plan of Greater New York, 11 N.Y. 2d 128 (1962).
A caution is in order. Despite the strong language quoted by the court, arbitrators and parties need to be clear as to the party-appointed arbitrator’s role. Canon IX and X of the ABA Code of Ethics for Arbitrators in Commercial Disputes and tribunal rules, such as Rule 13 of the AAA, address the need for an early determination as to whether the arbitrator is sitting as a neutral and the scope of communication which he or she may have with a party.
Public Injunctions and the California McGill rule
For those in California, Dicarlo v. Moneylion, Inc, 2021 U.S. App. LEXIS 4817 (9th Cir. Feb. 19, 2021), resolves an important question regarding the validity and scope of an agreement which prohibits a party to an arbitration from seeking relief that may affect the public at large. In McGill v. Citibank, N.A. 393 P.3d 85 (Cal. 2017), the California Supreme court held that “no one may contractually waive all rights to seek public injunctive relief.” Here, the parties’ arbitration clause provided that Dicarlo may not “join or consolidate claim(s) involving you with claims involving any other person.” By its terms, the arbitration provision was null and void if any part thereof were held to violate California law. Plaintiff claimed that Moneylion, an on-line lender, placed her in a “high-tech debt trap” by requiring her to continue to pay monthly “membership” fees, in addition to loan payments and interest, until she paid off her loan. In addition to damages, she sought an injunction against Moneylion’s advertising to the public that the credit-builder program contains no hidden fees. In opposing arbitration, Plaintiff argued that, since she sought a state-wide injunction, the limitations imposed by the agreement against “claims involving other persons” violated McGill, triggering the poison pill. Accordingly, she argued, the court could not compel arbitration. (Ironically, this put the parties in the opposite position from the usual posture. Ordinarily, corporate defendants want to narrow potential relief. Here, however, defendant argued that the arbitrator had the authority to issue a statewide injunction, while the consumer denied that he or she could address anything other than DiCarlo’s individual damages). Circuit Judge Thapar, sitting by designation, writing for himself and Circuit Judges Bea and Collins, holds that the prohibition in the agreement against consolidation of claims “involving other people” refers not to the remedy sought, but to the joinder of claims asserted by multiple people into one proceeding. The court relies, in part, on the arbitration agreement’s authorization for the arbitrator to “award all [injunctive] remedies available in an individual lawsuit under [California] law.” Thus, the panel holds, the agreement does not violate McGill and the District Court properly compelled arbitration.
The court also discusses California specific issues related to private attorneys general. For those in a broader audience, however, the case is significant in its guidance as to the ability of an arbitrator to grant relief extending beyond the parties in front of him or her. As such, it is an important read for drafters seeking to deny the arbitrator the ability to craft such a far-reaching remedy.
Nursing home arbitration clauses
As arbitration has become a more prevalent way of resolving nursing home cases, numerous opinions have addressed whether a family member may bind a patient, who may have limited mental capacity, to arbitrate any disputes for medical negligence. Scholz v. Americare at Adams Pointe Assisted Living, LLC, 2021 U.S. Dist. LEXIS 30725 (C.D. Ill. Feb. 19, 2021) is such a case. Mrs. H was admitted as a patient at defendant’s assisted living facility. Plaintiff, who is her guardian, alleges that Mrs. H, despite warnings to staff from her family, was left alone with a remote control for her chair lift. She used the remote incorrectly, serious injuring herself when the chair crushed her. In response to a medical negligence action, Americare sought to compel arbitration under an agreement which was purportedly part of the admission package. At the time of admission, Mrs. H’s daughter executed an Assisted Living Establishment Contract, but did not sign a separate Arbitration Agreement. The facility argued that arbitration was incorporated by reference into the Contract. At the time she signed the Contract, the daughter held a power of attorney “authorizing her to make decisions relating to certain financial accounts belong to Mrs. [H].” Applying Illinois law, the court, Myerscough, J., holds that such a limited power did not extend to non-financial contract terms, either as an agent or apparent agent, even though the daughter signed the Contract as “Daughter-POA.” Finally, the court holds that an Illinois statute permitting execution of nursing home contracts by immediate family of the patient “does not authorize a family member who would not otherwise have the authority to enter into an arbitration agreement on behalf of her relative to do so.”
Sorry for the quick discussion of these cases. Hopefully, things will be a little quieter this week and allow some more in-depth analysis on Wednesday. See you then.
David A. Reif