As heavy as the caseload was in Monday’s “Highlights,” it is equivalently sparse today. Maybe I can use the time saved in writing to attend an additional one of the excellent programs being presented virtually during New York Arbitration Week.  Check the website – nyarbitrationweek.com – and see what interests you from a broad range of international and domestic programs.

Enforcement of arbitration by a third-party

Zeto v. BMW of North America, 2020 U.S. Dist. LEXIS 213947 (S.D. Cal.) (Nov. 16, 2020) revisits the well-trod path of determining whether an automobile manufacturer may enforce an arbitration provision contained in the contract between the dealer and a finance arm on the one hand and the customer on the other. In determining whether there is an underlying agreement to arbitrate, Judge Curiel reiterates the distinction between the application of state law to determine whether the parties have formed a contract and the application of federal common law to determine the scope of the arbitration. (The same principle is laid out in  another case decided Monday, Peterson v. Midland Funding, LLC, 2020 U.S. Dist. LEXIS 213708 (N.D. Ill.) (Nov. 16, 2020)). Having found that the dealer, BMW Finance and the customer entered into an arbitration provision as part of their lease agreement, the court turns to the question of whether BMW of North America, which warranted the car, may compel arbitration even though it is not a signatory to the agreement.  The lease requires arbitration of “Claims,” which it defines as “any claim, dispute or controversy, . . . between me [the customer] and you [the dealer and BMW Finance] or your employees, officers, directors, affiliates, successors or assignees or between me and any third parties if I assert a Claim against such third parties in connection with a Claim I assert against you. . . “ (Emphasis added in opinion).  Based on a witness’s declaration that is not described in the opinion and a prior District Court decision, Fikhman v. BMW Of N. Am. LLC, 2019 WL 6721626 (C.D. Cal.) (Oct. 15 2019), Judge Curiel holds that BMW North America is an “affiliate” of BMW Financial and compels arbitration.  The opinion is instructive in its comparison of the arbitration clause in Zeto, which it quotes, with the clause, which it also quotes, which caused a court to rule that BMW NA could not take advantage of the arbitration provision, Jurosky v. BMW of N.Am., 441 F. Supp. 3d 963 (S.D. Cal. 2020).  Any drafters who want their agreement to apply to claims against related parties should read this case.

Specificity required in an appraisal

Appraisal proceedings are similar to arbitrations.  Magistrate Judge Valle’s recommended ruling in Cathedral of Praise Worship Center, Inc. v. Scottsdale Insurance Co., 2020 U.S. Dist. LEXIS 213321 (S.D. Fla.) (Nov. 13, 2020) discusses the need for a delineated appraisal award, holding that such line item specificity is not required by a clause providing that the appraisers and umpire “shall state separately the value of the property and the amount of the loss.”

New York Convention

Maglana v. Celebrity Cruises, Inc., 2020 U.S. Dist. LEXIS 212965 (S.D. Fla.) (Oct. 7, 2020) is both a case dealing with arbitration standards under the New York Convention and a look at the challenges faced by cruise line employees during the COVID virus.  In this class action, plaintiffs allege that, as a result of the pandemic, defendant suspended all of its cruises on March 13, 2020, but that Filipino crewmembers were kept on board “for weeks, and even months, without pay or a ticket home.”  Plaintiffs estimated that their class consists of 1,700 Filipino workers aboard the Celebrity Cruise fleet and a total of 7,000 crewmembers serving on all ships of Celebrity and its related brands.  They brought claims for false imprisonment, intentional infliction of emotional distress, employment discrimination based on nationality, and wage/hour violations. Celebrity sought arbitration under a provision of the crewmembers’ Sign-On Employment Agreement.   Plaintiffs tried to avoid arbitration by arguing that Celebrity’s failure to provide the benefits for which crewmembers bargained and the doctrines of unclean hands and estoppel nullified any such obligation.  The court, Martinez, J., citing both 7^th and 11^th Circuit authority, rejects that argument and compels arbitration.  He holds that the only defenses to contract formation under the Convention’s “null and void clause” are fraud, duress, waiver, mistake or other defenses that “can be applied neutrally on an international scale.”   Plaintiffs’ defenses, he holds, meet none of those criteria.  Having found that the parties formed an agreement, the court determines that the claims asserted are arbitrable under the SOEA, as, “but for” Plaintiffs’ service as seamen, they would not have encountered the conduct to which they object.  In addition, the Court holds that the national origin discrimination claims, which arise under U.S. law, are probably not enforceable under Maltese law, which is invoked by the SOEA’s choice of laws provision.  As a side bar, I wondered how common the application of Maltese law is in the shipping world.  A LEXIS search brought up about ten cruise ship citations over the last seven years, so this 112 square mile archipelago definitely punches above its weight.

Maybe the case decision world will heat up during the rest of the week.  In the meantime, let’s hope the day comes soon when we’re able to sit by the pool on the Lido deck with a beverage and watch the gulls go by.  See you Friday.

Dave Reif
Reif ADR
Dreif@reifadr.com
Reifadr.com