There are some important cases in this issue, but, to brighten your day, read the mediation article cited below.
But, Is It an Arbitration
The last issue of “Highlights” included a case holding that an accountant whose determination of asset value was binding on the parties was acting as an arbitrator, Regal Games LLC v. SellerX Eight GMBH, 2024 U.S. Dist. LEXIS 13736 (S.D.N.Y. January 25, 2024). Magistrate Judge Fallon disagrees with that proposition. Barnard v. Marchex, Inc., 2024 U.S. Dist. LEXIS 19058 (D. Del. February 2, 2024), involves litigation over the Earnings Buyout in a Sale Purchase Agreement. The agreement provided that certain disputes would be referred to an accounting firm for resolution and that the accountants’ determination “shall be final and binding to the parties” – language that is essentially the same as that involved in Regal Games. Defendant moved to compel arbitration. Magistrate Judge Fallon holds that the accountants’ role is merely to give an “expert determination of narrow, accounting-related disputes,” not to act as an arbitrator. She, therefore, recommends that the District Court Judge deny the motion to compel.
In reaching that conclusion, the Magistrate Judge relies on three of the four factors laid out by the Third Circuit Court of Appeals in Sapp v. Industrial Action Services, LLC, 75 F. 4th 205 (3d Cir. 2023). First, the agreement does not give the accountants a broad scope of authority; rather, it covers “only those items still in dispute with respect to the Earnout Statement.” Second, the 30-day deadline for the accountants to resolve the dispute “was insufficient to perform the broad-based type of investigation undertaken by an arbitrator.” Query – Does this criterion recognize that parties may place very short time constraints into what is clearly an arbitration clause in order to force an expedited resolution of their dispute? Third, the accounting firm’s “decision-making process” did not provide any “standard set of rules like those of the American Arbitration Association.”
So, why did these two judges reach contrary results? The difference is the perspective from which they view the question. Here, Magistrate Judge Fallon looks at the process by which the accountants reach their decision. In Regal Games, on the other hand, Judge Ramos looks at the effect of the decision upon the parties; like an arbitration award the Auditor’s determination is final and binding.
Institution’s Termination of Proceedings
The Federal Arbitration Act allows a court to lift a stay against continued litigation when “an arbitration has been had in accordance with the terms of the [parties’] agreement.” A recurring question is the circumstances under which dismissal of an arbitration by the governing arbitral body allows termination of the stay. Miller v. Plex, Inc., 2024 U.S. Dist. LEXIS 16378 (N.D. Cal. January 30, 2024), addresses a unique situation. Plex commenced an arbitration before JAMS, which the institution terminated. Judge Van Keulen finds that the dismissal was contrary to the JAMS rules. Specifically, she holds that JAMS extended the time for Plex to pay the arbitration fee and that the defendant paid the fee within that enlarged window. While the unusual fact pattern limits the case’s utility as precedent, it is still an important one for practitioners to keep at hand. In the course of its opinion, the Court cites numerous cases holding that the FAA preempts state arbitration law (although mostly from U.S. District Courts in California) and opinions from various jurisdictions addressing the grounds under which such a termination justifies lifting the litigation stay.
Every once in a while a useful article is also fun to read. That is the case in Michael Balmages’s article on the importance of a mediator’s ability to connect with counsel and the parties. Balmages relates two great stories of mediations that failed and the mediators who did not bring the case home, Balmages, Feature: Rapport is the Mediator’s Ultimate Tool, 66 Orange County Lawyer 40 (January 2024), available on Lexis at FEATURE: RAPPORT IS THE MEDIATOR’S ULTIMATE TOOL, 66 Orange County Lawyer 40 (lexis.com). His practice tips are reflected in the article’s title.
Personal Jurisdiction over Post-Arbitration Proceedings
Conti 11, Container Schifffarts-GMBH & Co. KG M.S. MSC Flaminia v. MSC Mediterranean Shipping Co. S.A., 2024 U.S. App. LEXIS 1928 (5th Cir. January 29, 2024), addresses the question of what contacts are relevant in determining whether there is personal jurisdiction over parties to a post-arbitration proceeding. (It also is the early season leader in the contest for the longest citation). Conti sued MSC to confirm a $200,000,000 arbitration award. The arbitration was held in London; Petitioner sought confirmation in the Eastern District of Louisiana. MSC moved to dismiss the petition for lack of personal jurisdiction, arguing that the court could only consider MSC’s contacts with London as the subject award was rendered there. In a citation-rich opinion, Judge Duncan, writing for himself and Judges Jones and Stewart, rejects that contention. Rather, the panel holds that, for personal jurisdictional purposes, the court should look to the locations which are connected with the underlying dispute, which here involved the shipment of goods from New Orleans. The court distinguishes Badgerow v. Walters, 596 U.S. 1 (2022), limiting that holding to subject matter, not personal, jurisdiction.
Still fighting the computer demons, so tomorrow may bring radio silence for “Highlights.”
David Reif, FCIArb