Since there are not any heavy cases today, here’s a set of “Quick Hits” to smaller, recent decisions covering regularly occurring issues. If any of these questions are on your desk or mind, these cases may be a good starting point for or supplement to your research.
Implementation of an arbitration provision after class litigation starts
Last Friday’s “ADR Highlights” included a case in which the court, albeit it in dictum, laid out how an employer might successfully add an arbitration clause after its employees brought litigation, Garcia-Alvarez v. Fogo de Chao Churrascaria (Pittsburgh), LLC., 2021 U.S. Dist. LEXIS 234194 (E.D. Tex. December 7, 2021). Since then, other courts have denied motions to compel in two cases in which the defendants were unsuccessful in making a change. Both hold that any attempt to impose an arbitration provision on those already engaged in litigation must fully inform the counterparty as to the effect of the agreement on its pending case and must provide a reasonable opportunity to opt out. See, Glikin v. Major Energy Electric Services, LLC, 2021 U.S. Dist. LEXIS 237902 (S.D.N.Y. December 13, 2021)(Briccetti, J.), and Custom Hair Designs by Sandy, LLC v. Central Payment Co., 2021 U.S. Dist. LEXIS 2377888 (D. Neb. December 9, 2021)(Bataillon, J.).
Time frame for seeking vacatur under the New York Convention
Commodities & Minerals Enterprise, Ltd. v. CVG Ferrominera Orinoco, C.A., 2021 U.S. Dist. LEXIS 238087 (S.D. Fla. December 2, 2021)(Gayles, J.), is a reminder that, under the Convention, as with the FAA, it is “fatal” if a party “fails to seek vacatur” of an arbitration award, within the three-month statutory period. Waiting until your opponent seeks to enforce the award will be ineffective, since the aggrieved party is “barred from later raising defenses in opposition to a motion to confirm. . . .”
Waiver of arbitration
Assert your right to arbitrate early and often. That is the lesson of Gile v. Dolgen California, LLC., 2021 U.S. Dist. LEXIS 238142 (C.D. Cal. November 15, 2021)(Scarsi, J.), an earlier case that was only recently published. Defendant did not move to arbitrate until almost a year after it removed the case to federal court and, even then, only after it lost a motion to dismiss. Considering the “totality of the parties’ actions,” the court holds that defendant’s “extended silence and much delayed demand for arbitration indicates a ‘conscious decision to . . . seek judicial judgment on the merits of [the] arbitrable claims.’” (Internal citations omitted). The court further finds that the delay prejudiced plaintiffs by imposing on them “significant costs that they would not have incurred had Defendant moved to compel arbitration” earlier.
Arbitration award as a basis for determining non-dischargability
Ahuja v. Fleming (In re: Fleming), 2021 Bankr. LEXIS 3355 (Bank. D. Conn. December 9, 2021), is a bankruptcy law dispute over whether a debt is non-dischargeable, but it touches on arbitration issues. A FINRA arbitration panel entered an award against the Debtor in excess of $400,000, which a state court confirmed, Ahuja v. Fleming, 2020 Conn. Super. LEXIS 1554 (Conn. Super. Ct., December 10, 2020). The Debtor filed bankruptcy, and plaintiff here sought to avoid the discharge of that award. Bankruptcy Judge Manning denies discharge based on the provisions of 11 U.S.C. § 523(a)(19), which preclude the discharge of judicially confirmed debts for securities law violations and “common law, fraud, deceit, or manipulation in connection with the purchase or sale of any security.” The Award, she holds, “established that, at the very least, the Defendant made material misrepresentations and omissions regarding the securities he purchased and that he breached his fiduciary duty to the Plaintiffs in connection [therewith].”
The award, from which the court quotes, seems to be “standard,” rather than “reasoned.” For an arbitration nerd, assuming that the quote is the entire award, an interesting question is how the court determines that the award is based on the Claimant’s allegations of “misrepresentations of risk” or “breach of fiduciary duty,” rather than its claims of “unsuitability” – all of which are in the portion of the claim which the court quotes. Is Bankruptcy Judge Manning implicitly holding that all awards in FINRA customer cases are non-dischargeable? Is she viewing an allegation of “unsuitability” as a per se assertion of a violation of “Federal securities laws. . . State securities laws, or any regulation or order issued thereunder. . . ?“ In any case, the decision is a reminder to arbitrators and litigators of the risks inherent in a standard award’s vagueness.
Presumptions of arbitrability and contract formation
Duncan v. International Markets Live, Inc. 2021 U.S. App. LEXIS 36436 (8th Cir. December 10, 2021)(Circuit Judges Kelly, Erickson, and Grasz, per curiam), reiterates the principle that a determination of whether parties have agreed to arbitrate is ultimately fact-driven. “Despite arbitration’s ‘favored status,’ a party cannot be compelled to arbitrate unless it has contractually agreed to be bound by arbitration. . . .“ Since the parties filed conflicting affidavits in the District Court as to whether they so agreed, the Court of Appeals reverses the lower court’s denial of defendant’s motion to confirm and remands for an evidentiary hearing.
Short and sweet
In Alers v. JPMorgan Chase Bank, N.A., 2021 U.S. App. LEXIS 36504 (9th Cir., December 10, 2021), Circuit Judges Kelly, sitting by designation; M. Smith; and Forrest demonstrate one way to resolve an appeal when the Court of Appeals agrees with the reasoning below. In a non-precedential opinion which runs two paragraphs, the court “affirms for substantially the same reasons given by the district court which concluded that the arbitration award was an enforceable final judgment with respect to the plaintiffs’ claims and that plaintiffs had failed to show fraud, corruption, or any other factor rendering the award unsound pursuant to 9 U.S.C. § 10(a).” If, as here, the District Court’s opinion is published, see Alers v. JPMorgan Chase Bank, N.A., 2021 U.S. Dist. LEXIS 69514 (C.D. Cal. March 17, 2021), and the appellate court is going to merely repeat the reasoning below without providing additional guidance, why bother to write an opinion that adds nothing new?
The pictures and interviews from the areas affected by the recent tornado are heartbreaking. For those located elsewhere, please consider contributing to the relief of the people who have lost everything through Team Western Kentucky Relief Fund, the Community Foundation of Western Kentucky, or any of the many other faith-based and civic groups providing much needed support throughout the affected regions.
See you Friday.
David A. Reif, FCIArb
 Time for a pet peeve. We need a better term for an award that lays out the tribunal’s rationale than “reasoned.” Just because the arbitrator does not lay out the roadmap for his or her thinking, it does not mean she or he has not “reasoned” through to that result.