Opinions from Courts of Appeals are important because they affect a whole Circuit’s trial courts and are more persuasive elsewhere than a District Court decision.  Last week was busy at the appellate level as the Second, Fourth, Fifth, and Eleventh Circuits all issued important decisions.  Since I try to keep Highlights to three pages – and, therefore, easier to read while waiting for the coffee to brew – here are two of those cases, and I will follow up with the others in Thursday’s edition.

Forum non Conveniens; Change of Arbitral Institution

What happens when the institution which the parties have selected to manage an arbitration ceases to exist?  The Fifth Circuit addressed that question in Baker Hughes Saudi Arabia Co Ltd.. v. Dynamic Industries, Inc., 2025 U. S. App. LEXIS 1752 (5^th Cir. January 27, 2025).

In 2017, the parties executed a subcontract in connection with an oil and gas project in Saudi Arabia.  The agreement contained an unusual arbitration provision.  Under Schedule A to the contract, Dynamic could demand arbitration in Saudi Arabia.  If it did not do so, Schedule E to the agreement allowed either party to demand arbitration under the rules of the DIFC-LCIA, a partnership between the Dubai International Financial Centre and the London Court of Arbitration (“LCIA”).  In 2021, the UAE abolished the DIFC-LCIA and created a new institution, the Dubai International Arbitration Centre (“DIAC”), which the Baker Hughes opinion characterizes as “functionally identical to its predecessor in all key respects.”  In 2023, after the original center’s dissolution, Baker Hughes sued Dynamic in a contract dispute; Dynamic moved to dismiss the action under the doctrine of forum non conveniens or, alternatively, to compel arbitration under Schedule E.

The District Court denied both the motion to dismiss and the motion to compel, finding that the dissolution of the center made arbitration under the agreement unenforceable.

Circuit Judge Edith Brown Clement, writing for herself; Graves, C.J.; and Ramirez, C.J., first holds that a motion to dismiss for forum non conveniens is not the proper procedure to enforce an arbitration clause, opining that neither the FAA nor the New York Convention mentions that doctrine.  Rather, a party seeking to send a dispute to arbitration  – in this case, Dynamic – should move to compel arbitration.  Therefore, the panel treats this case as if it were resolving the appeal from the denial of such a motion.

Moving to the merits, the court reverses the District Court.  The subject Schedule E arbitration provision provided that “the dispute shall be referred by either Party to and be finally resolved by arbitration under the Arbitration Rules of the DIFC LCIA.”  The panel holds that such language only provides that the parties are to proceed under that forum’s rules; it does not designate the institution as the governing institution.  Finding that an alternative reading “requires some serious acrobatics,” the court holds that “the plain text of Schedule E designates only the rules and not an exclusive forum.”   The opinion first analyzes the provision’s language in a depth worthy of my high school writing teacher.  The court opines on the placement of the word “to,” the “split[ting] open of a defined  term,” and the question of whether the phrase “the DIFC LCIA” is “the object of the first or second clause.”  Moving on from the grammar lesson, the Court distinguishes arbitration “under the rules” of the institution from arbitration before the tribunal itself.  The opinion recognizes that the Second, Fourth, and Eleventh Circuits disagree with that view and hold that “adopting the rules of a specific institution implicitly selects that institution as a – or the – forum”; the opinion is a good source for citations to cases in support of that principle.

After three pages on the rule interpretation issue, however, the court opines that what it just wrote was unnecessary to decide the issue before it because “a court will decline to appoint a substitute arbitrator only if the parties’ choice of a forum is ‘so central to the arbitration agreement that the unavailability of the arbitrator [brings] the agreement to an end.’” (Internal Citation omitted; brackets in opinion).  This agreement, the court holds, does not contain such centrality.  The parties’ “dominant purpose was to arbitrate.”   The arbitration provision only references the DIFC-LCIA twice and never states that the DIFC-LCIA is the “sole body competent to apply the DIFC-LCIA rules.”  Further, there was “considerable overlap and continuity in management, resources and rules as the designated forum transitioned to its successor.”

Having held that the parties did not intend to designate the DIFC-LCIA as the only forum in which to arbitrate the dispute, the court reverses the District Court and remands with an instruction “to consider whether the DIFC-LCIA rules can be applied by any other forum that may be available – including the LCIA, DIAC, or a forum in Saudi Arabia – consistent with the parties’ objective intent.”  If so, the District Court must compel arbitration in that forum; if not, the lower court is to consider whether it can compel  arbitration in Saudi Arabia under Schedule A.

Not many arbitral institutions close their doors, so the precise issue considered in this case will only be of interest to international arbitrators who are faced with agreements predating the termination of the DCIF-LCIA venture and invoking that forum or its rules.  However, domestic arbitrators should keep Baker Hughes in their notebook for reference in the more frequent issue of the effect of a provision which provides for arbitration “under the rules” of an institution, but does not specifically state that the proceeding will be “before” that body.  It is citation-rich on both sides of that question.   

Servicemembers Civil Relief Act Does not Preclude Enforcement of an Arbitration Clause

The Servicemembers Civil Relief Act, 50 U.S.C. § 3901, et. seq., (“SCRA”) provides certain protections to military personnel while on active duty and caps the interest rate on their credit obligations, such as credit cards.  Further, it provides that a service member may bring class actions “notwithstanding any previous agreement to the contrary.”  In Espin v. Citibank, N.A., 2025 U.S. App. LEXIS 1717 (4^th Cir. January 27, 2025),  Plaintiffs brought a class action alleging that Citibank violated that statute by resuming the imposition of higher “civilian interest” rates after the named plaintiffs and others left active duty.  Citibank moved to compel arbitration on an individual basis under the terms of the parties’ credit card agreements.  The District Court denied the motion to compel, holding that the SCRA’s guarantee of the right to bring class actions overrode the arbitration provision.

Relying upon CompuCredit Corp. v. Greenwood, 565 U.S. 95 (2012),  Circuit Judge Niemeyer, writing for himself, Circuit Judge Floyd, and District Judge Bell, sitting by designation, opines that, “unless they do so explicitly, federal statutory remedies do not override agreements to arbitrate.”  The SCRA, the court holds, contains no such statement.  The Court contrasts the language of the Ending Forced Arbitration of Sexual Assault and Harassment Act of 2021, in which “Congress made clear that a ‘predispute joint-action waiver,’ ‘whether or not part of a predispute arbitration agreement,’ was unenforceable. Similar language, however, is not included it in the SCRA; it remains silent on the point.”  (Emphasis in opinion; statutory citation omitted).  The court also looks to the SCRA’s legislative history.  In both 2019 and 2021, Congress declined to adopt a provision in the Defense Appropriation Act which would have prohibited pre-dispute provisions mandating arbitration of SCRA claims.  In addition, in 2019, Congress commissioned a report on the effect of arbitration clauses, in which it specifically referenced arbitration of claims under the SCRA.  The court opines that “Congress’s commission of that study also signals an understanding that [SCRA] does not prohibit arbitration, because that study would be pointless if Congress had already banned arbitration provisions with class waivers.”  (As if Congress never commissioned “pointless” studies).

The Court, therefore, reverses and remands with a direction to compel arbitration, except, perhaps, as to claims brought under Military Lending Act, 10 U.S.C. § 987; the Court directs the District Court to consider the applicability of that latter statute to the Plaintiffs’ claims.

Snow hit Connecticut last night.  It’s nice to see a white cover – although the fact that someone else shovels my driveway and walk might have something to do with that sense of joy.  Enjoy the next couple of days.  See you Thursday.

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