The big action today is a reversal in Servotronics’ fortunes in obtaining discovery for use in its arbitration in London.  International arbitration also comes into focus in a case dealing with the applicability of U.S. law to a waiver question under the New York Convention. For those who focus on domestic arbitration, there is an opinion on both delegation of the determination of unconscionability and its resolution, another look at the challenges of nursing home arbitration agreements, and various cases on stays.

Servotronics update

This is the case that just keeps giving for anyone teaching Civil Procedure or arbitration. There has been a complete reversal on the issuance of a subpoena in this foreign arbitration since Friday’s “Highlights.”  As I reported there, last Wednesday the U.S. District Court in Charleston held in abeyance the decision on whether to issue a subpoena under 28 U.S.C. § 1782 for use in a London-based arbitration between Servotronics and Rolls-Royce, pending the Supreme Court’s resolution of a Circuit split as to the applicability of the statute to private arbitrations, In re: Servotronics, 2021 U.S. Dist. LEXIS 72128 (D.S.C. April 14, 2021).  The Court of Appeals for the Fourth Circuit, one of the Circuits which has ruled in favor of issuance of a subpoena in connection with this arbitration, Servotronics, Inc. v. Boeing Co., 954 F. 3d 209 (4^th Cir. 2020), was not pleased. So, on Thursday, the Circuit Court issued a mandamus “directing the district court to issue, without delay, the subpoenas to the witnesses within its jurisdiction and take their testimony for use in the UK Arbitration.”  On Friday, District Judge Norton did just that, In re: Servotronics, 2021 U.S. Dist. LEXIS 73807 (D.S.C. April 16, 2021).  The opinion, which, based on its detail must have been in a drawer awaiting use, is a detailed explanation of the considerations for issuing Section 1782 discovery, although the Court of Appeals made it clear that it was giving the District Court no such discretion. “While we recognize that the Supreme Court has determined to review the Seventh Circuit’s decision on the same issue we addressed in our earlier decision, our mandate remains in force until the Supreme Court rules otherwise.  Moreover, to stay proceedings, as the district court seeks to do, could render moot our decision, as the UK arbitration remains scheduled to begin on May 10, 2021, despite efforts to postpone it,” Order on Petition for Writ of Mandamus, In re: Servotronics, Dkt. 21-1305 (4^th Cir. April 15, 2021) [1]  So, unless the Fourth Circuit or SCOTUS issues a stay, it looks like at least some discovery will take place in this much contested proceeding.  As I have written earlier, I hope that completion of the arbitration does not remove SCOTUS’s willingness and ability to decide this important issue.

Availability of defenses under the FAA; arbitrability of waiver

Staying with international arbitration for a moment, Goldgroup Resources, Inc. v. Dynasource de Mexico, S.A. de C.V., 2021 U.S. App. LEXIS 11002 (10^th Cir. April 16, 2021) addresses whether a U.S. court may apply the FAA’s vacatur standards when considering confirmation of a nondomestic award under the New York Convention, where the award was rendered in the U.S.  Anyone interested in the issue needs to get the complex facts, which involve conflicting decisions from a U.S. and Mexico court, from the opinion.  For our purposes, it is enough to know that the opinion revolves around whether the arbitrator exceeded his authority in holding that Goldgroup did not waive its right to arbitrate. Applying FAA defenses, the court holds that the parties’ incorporation of the AAA rules demonstrates “clear and unmistakable evidence that the parties agreed to arbitrate. . . . the issue of waiver.” Even if the arbitrator exceeded his authority, Judge Kelly, writing for himself, Chief Judge Tymkovich and Judge Phillips, opines that the arbitrator’s decision was correct and vacatur, “which is permissive, rather than mandatory” under the FAA, is not justified.  Accordingly, the panel affirms the District Court’s confirmation of the award.  For those not practicing international arbitration, the case has interesting dictum applicable to domestic matters, as the parties raise, but the court holds it need not decide, the question of whether an arbitrator’s decision on waiver is subject to the “extremely deferential standard of review” established in Oxford Health Plans LLC v. Sutter, 569 U.S. 564 (2013) or to de novo review.

Delegation of gateway issues; unconscionability

Jean v. Bucknell University, 2021 U.S. Dist. LEXIS 73384 (M.D. Pa. April 16, 2021) arises out of alleged hazing by the local chapter of Kappa Delta Rho, which plaintiff claims resulted in alcohol poisoning and head and other physical injuries.  The local fraternity and two brothers, who were named individually, moved to arbitrate pursuant to an on-line “Claim and Dispute Resolution Plan” which Jean executed when he received his bid and which required arbitration of “any legal or equitable Claim, Dispute, demand or controversy” between a member and KDR or between fraternity members. The court, Brann, J., first holds that he, not the arbitrator, decides whether the claims are arbitrable.  The court reviews the contractual language in detail, concluding that the three provisions upon which defendants rely in support of referring gateway questions do not demonstrate a “clear and unmistakable intent to delegate questions of arbitrability to an arbitrator.  The Court consequently finds that [Defendants] have not overcome the onerous burden of rebutting the presumption that courts determine arbitrability.” (Emphasis added).  Applying Pennsylvania law, the court, then, holds that the fraternity’s unilateral right to terminate the agreement and its control over the choice of arbitrators and administering body render the provision substantively unconscionable. Further, the court holds the agreement is procedurally unconscionable; its length, internal inconsistencies, and “ambiguous and confusing language” render it “so confusing” that Plaintiff, who, while a Dean’s List student, “lacked a legal background or education” “could not have meaningfully agreed to the terms of the plan when they were presented to him.”  The court denies Defendants’ motion to compel arbitration.

The opinion uses footnotes to reference around fifty citations from Pennsylvania and elsewhere on the issues of delegation and unconscionability.  It provides a good starting point for anyone looking to analyze and research those questions and deserves a place in arbitration notebooks.

Nursing home arbitration agreements

Tammy Fowler, personal representative v. SSC Seneca Operating Company, LLC, 2021 U.S. Dist. LEXIS 73249 (D.S.C. April 16, 2021) is another in the line of cases regarding the enforceability of an arbitration agreement signed by a nursing home resident’s family.  When Mr. Owens was admitted to defendant’s facility, his wife signed a resident admission agreement and a separate Dispute Resolution Program Agreement, the second of which provided for arbitration of disputes.  Mr. Owens fell while in the facility and subsequently died.  Plaintiff alleges that the fall was the result of the facility’s negligence and caused the decedent’s death.  The court holds that decedent’s wife did not either actual or apparent authority to enter into the arbitration agreement on Mr. Owens’s behalf. Applying South Carolina law, Judge Herlong rejects the defendant’s argument that Mr. Owens “held his wife out as his representative by allowing her to sign various admissions documents,” finding that, since he was “adjudged incompetent” at the time of his admission, decedent could not have undertaken that voluntary act. Further, the court finds that the admission agreement and the arbitration agreement were separate documents which did not merge. Therefore, Mr. Owens’ rights to treatment under the former did not trigger arbitration through equitable estoppel.

Cases like Fowler raise interesting issues for those drafting health care admission documents, as they struggle with how to bind a patient to arbitration, when he or she may have limited capacity upon an unexpected admission. For those litigating the issue, proof issues abound. Fowler was dismissed under a summary judgment standard.  What extraneous proof as to the resident’s intentions to authorize his family to act on his behalf might be admissible and how do a state’s parole evidence rules play into the question?  Bottom line for those of us who might someday be patients, think through the scope of your health care proxy.

Appeals and stays

Appeals re: procedural issues

In Sullivan v. Feldman, 2021 U.S. Dist. LEXIS 73642 (S.D. Tex. April 16, 2021), Judge Rosenthal  declines to decide two issues raised by defendants.  First, Feldman sought a court order determining whether the arbitration could be heard on a class-wide basic.  The court rules that, under Fifth Circuit precedent, the parties may delegate this gateway issue to the arbitrator; without detailing the contract’s provisions, he holds that they have done so in this instance.  Second, Defendants sought review of the arbitrators’ decision on certain discovery disputes. “[W]hen as here, the arbitration clause is broad and the arbitrator’s exclusive powers include discovery, the court should not step in to second guess discovery rulings during the arbitration.”  The court’s view is summed up in one sentence – “A party’s repeated return to court when disappointed by interim arbitration rules, particularly in arbitration proceedings the party agree to and before the arbitrators it selected, is antithetical to the purpose of arbitration.”

Stay pending appeal

The court in Hawkins v. Cintas Corporations, 2021 U.S. Dist. LEXIS 72511 (S.D. Ohio April 15, 2021) had previously denied defendants’ motion to compel arbitration of this ERISA claim.  Here, the court, Black, J., adopts several theories in granting Cintas’s for a stay pending appeal of that order under the Federal Arbitration Act. First, the court holds that the appeal divests it of jurisdiction to move forward with the case, effectively staying the action as a matter of law. While opining that allowing continued litigation would, if the Court of Appeals were to reverse the District Court order denying arbitration, require any interim rulings to be “undone,” the court does not cite authority for the proposition that this potential inconvenience rises to a jurisdictional level.  However, as an alternative ground for decision, the court holds that the four factors underlying the resolution of a motion for a discretionary stay – a strong showing on the merits, irreparable injury to the movant, the absence of substantial injury to the party opposing the stay if it is granted, and the public interest – weigh in favor of a stay pending the Court of Appeal’s action.

Dismissal despite request for a stay

The Stones told us that “You can’t always get what you want. . . But if you try, sometimes you find, you get what you need.”  In Marquez v. Department Stores National Bank, 2021 U.S. Dist. LEXIS 73926 (S.D. Cal. April 16, 2021), the parties had agreed to arbitrate their dispute and sought a stay pending the completion of that proceeding. Finding that “all claims are subject to binding arbitration, so there is nothing left before this Court to except [sic] to execute judgment,” Judge Benitez dismisses the matter sua sponte.

Stay safe.  I will see you Wednesday.

David A. Reif
Reif ADR
Dreif@reifadr.com
Reifadr.com

[1] The order is available on Pacer, but has not been published by LEXIS.