by: Peter J. Gallagher (LinkedIn)
Arbitration awards are rarely overturned. The standard to vacate an award is high, and judicial review of awards is often unexacting. So when a court overturns an award, it is usually worth a closer look. And one recent decision from the U.S. Court of Appeals for the Ninth Circuit, Monster Energy Company v. City Beverages , LLC, is definitely worth a closer look. In Monster, the court vacated an arbitration award based on the “evident partiality” of the arbitrator. The main evidence of the arbitrator’s “evident partiality” was his ownership interest in JAMS, a fact he did not disclose before the arbitration. At the risk of revealing my own ignorance, I did not know that JAMS is owned, at least in part, by some of the neutrals who mediate/arbitrate cases through JAMS. But it is, and after Monster, those owners should disclose that relationship to the parties before beginning an arbitration.
The defendant in Monster was a beer distributor. In 2006, it signed an agreement with plaintiff to be the exclusive distributor of plaintiff’s energy drinks for 20 years in a specific geographical territory. But the agreement contained an out for plaintiff – it could terminate the agreement without cause if it paid a severance fee to defendant in an amount agreed upon by the parties in the agreement. Eight years after signing the agreement, plaintiff exercised this clause, paid the severance fee, and terminated the agreement. Defendant objected, arguing that the termination violated Washington’s Franchise Investment Protection Act.
The agreement between the parties contained an arbitration provision, requiring that any dispute be resolved by JAMS Orange County. After plaintiff served its arbitration demand, JAMS provided the parties with a list of seven neutrals. The parties chose their arbitrator from this list. The chosen arbitrator then provided a disclosure statement, which included the following: “I practice with JAMS. Each JAMS neutral, including me, has an economic interest in the overall financial success of JAMS.” The arbitrator also disclosed that he had arbitrated one matter for plaintiff in the past five years, and that he had ruled against plaintiff in that case, which involved a dispute between plaintiff and another distributor.
Continue reading “Arbitration Award Vacated Because Arbitrator Hid Ownership Interest In Arbitration Service”
by: Peter J. Gallagher (LinkedIn)
In the final scene of the movie Scent of a Woman, Al Pacino’s character defends Chris O’Donnell’s character, who is about to be expelled from the (fictional) prestigious Baird School. Among many other things, Pacino’s character exclaims: “I don’t know who went to this place. William Howard Taft. William Jennings Bryant. William Tell, whoever. Their spirit is dead, if they ever had one.” Similarly, although slightly less dramatically, a fee dispute between counsel in Meister v. Verizon New Jersey Inc. led the trial court to eulogize the law as a profession:
This unfortunate fee dispute, coming as it does in the midst of seemingly final negotiations of a settlement, should resolve, with certainty, any lingering doubt that the practice of law, that storied profession of Marshall and Jefferson and Lincoln, is really now just another capitalist enterprise.
The court walked these comments back, slightly, by
acknowledging that “[t]he practice of law is not a hobby” and “[h]ard working
and industrious counsel who take risks to advance a client’s case and to maximize
a client’s recovery should be rewarded.” But it then immediately returned to
its original thesis:
However, while lawyers may indeed make a client’s life better through their advocacy and vigilant protection of that client’s interests, they are uniquely able to make it seem as though they are not doing so when quarreling, as they are here, over who gets to spell out how much they should be paid from their paralyzed client’s recovery and why one is more entitled to do so than another.
This is probably not how the lawyers in the case hoped the court
would start its opinion.
Continue reading “Fee Dispute Between Counsel Inspires Court To Bemoan The Death Of The Practice Of Law As A Profession”
by: Peter J. Gallagher (LinkedIn)
I don’t usually write about personal jurisdiction because it is . . . well . . . a little boring. But I do enjoy creative legal arguments (including creative arguments about jurisdiction), so I am going to make an exception here.
The Third Circuit recently issued its decision in in Robinson v. Section 23 Property Owner’s Association, Inc., which is the latest in what appears to be a running battle between plaintiff and more than two dozen defendants arising out of the foreclosure of defendant’s mother’s home. The district court described the various lawsuits plaintiff filed as follows:
The subject of all of [plaintiff’s] cases, including this case, arises out of his residence at his mother’s home in Florida. Beginning with disputes over the enforcement of deed restrictions, such as parking and property maintenance, Plaintiff’s cases have evolved into claims against essentially every person or entity that has been involved either directly or indirectly in the ultimate foreclosure of the . . . house and his resulting eviction from the property. The main thrust of Plaintiff’s claims is that all the Defendants have conspired to illegally purchase his mother’s home and steal all of his personal and intellectual property inside. Plaintiff alleges that Defendants have done so to quash his investigation of their international money laundering and fraud scheme.
If this sounds like a Florida-centric dispute, it is. None of the defendants had any meaningful connection to New Jersey, so they all moved to dismiss plaintiff’s lawsuit for lack of jurisdiction. In response, plaintiff made several, traditional jurisdictional arguments, including that defendants were subject to jurisdiction in New Jersey because his mother currently lived in New Jersey and because she had filed for Chapter 7 bankruptcy in New Jersey and listed the Florida property as an asset in her bankruptcy petition.
Continue reading “Third Circuit Answers The Question: Can a Texan Living In Georgia Sue Two Dozen Florida Defendants In New Jersey Federal Court?”
Some of the best parts of the movie “My Cousin Vinny” are the interactions between Vinny, played by Joe Pesci, and Judge Haller, played by the late Fred Gwynne. In one scene, Judge Haller admonishes Vinny for failing to dress appropriately for court. When Vinny comes to court the next day wearing exactly the same thing he had on the day before, the following exchange occurs:
Judge Haller: Mr. Gambini, didn’t I tell you that the next time you appear in my court that you dress appropriately?
Vinny: You were serious about that?
Judge Haller was serious, and Vinny spent a night in jail as a result. I was reminded of this scene when I read Schiavo v. Marina District Development Company, LLC d/b/a Borgata Casino Hotel & Spa, where the Appellate Division had to remind the trial court that it was serious about a prior decision.
Schiavo has been pending for more than a decade. Plaintiffs worked as “costumed beverage servers” in the defendant’s “BorgataBabes” program. (Disclaimer: This is the actual name of the program, not my name for it.) They claimed that “defendant’s adoption and application of personal appearance standards (PAS) subjected them to illegal gender stereotyping, sexual harassment, disparate treatment, disparate impact, and . . . resulted in adverse employment actions.”
Continue reading ““BorgataBabes” Lawsuit Revived As Trial Court Is Chided For Ignoring Appellate Division”
In Harrah’s Atlantic City Operating Co. v. Dangelico, plaintiff, a casino, lent defendant, a “casino gambler,” $160,000 against a $200,000 line of credit. The loan was secured by checks drawn on defendant’s bank account, coupled with defendant’s representation that he had sufficient funds in that account to cover the loan. Want to bet how this story unfolds?
Continue reading “Being A Compulsive Gambler Is No Defense To Breaching Line Of Credit With Casino”
by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)
What happens when the same parties enter into three contracts, all related to the same underlying services, the first two of which require the parties to litigate any disputes while the third provides that the parties “may” settle any disputes through binding arbitration? When a dispute arises, do you have to sue in court, can you arbitrate instead, if one side chooses arbitration, is the other side stuck with that choice? These were the issues in the Appellate Division’s recent decision in Medford Township School District v. Schneider Electric Building Americas, Inc.
In Medford Township, plaintiff contracted with defendant to “design and implement upgrades to several of [plaintiff’s] schools and its transportation and operations center.” The initial contract between the parties did not contain an arbitration provision. To the contrary, it contained a provision requiring that any disputes be resolved under the law of the state where the services were provided, and in the “federal, state, or municipal courts serving the county in which the services [were] performed.”
Some time later, plaintiff issued a request for proposals (RFP) for a related job. The RFP did not contain an arbitration provision. Instead, it required the winning bidder to agree that “any action or proceeding that [arose] in any manner out of performance of the RFP [or the resulting contract] . . . shall be litigated in the Superior Court of New Jersey, Burlington County.”
Continue reading “Three Contracts, But Only One Arbitration Provision, Means Arbitration Cannot Be Compelled”
by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)
Keith Richards once said: “I look for ambiguity when I’m writing because life is ambiguous.” This would probably be number one on the list of things a lawyer would never say. Lawyers generally do not like ambiguity. Courts don’t like it either, including the U.S. Supreme Court, and including when it evaluates the availability of class arbitration under an arbitration agreement. Several years ago, in Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., the Supreme Court held that courts could not compel class arbitration when the underlying agreement was “silent” on the issue. In Lamps Plus, Inc. v. Varela, the U.S. Supreme Court extended this holding to ambiguous agreements, holding that class arbitration is not available under an arbitration agreement that is ambiguous about the availability of such arbitration.
Plaintiff in Lamps Plus was a company that sold, you guessed it, “lighting fixtures and related products.” In 2016, the company suffered a data breach that revealed the tax information of approximately 1,300 of its employees. Soon after, a fraudulent tax return was filed in defendant’s name. He sued in California federal court on behalf of himself and a putative class of employees whose tax information had been compromised. But, like most of plaintiff’s employees, defendant had signed a broad arbitration agreement when he started working at the company. Thus, in response to defendant’s complaint, plaintiff moved to compel arbitration on an individual, not classwide, basis. The district court granted the motion to compel arbitration, but rejected plaintiff’s request for individual arbitration. The U.S. Court of Appeals for the Ninth Circuit affirmed.
The Ninth Circuit determined that the arbitration agreement was ambiguous on the issue of classwide arbitration. So it applied the state law doctrine of contra proferentem – an equitable principle under which any ambiguities in a contract are construed against the drafter – and construed this ambiguity against plaintiff. The Ninth Circuit held that Stolt-Nielsen was not controlling because the arbitration agreement in that case was silent on classwide arbitration, while the arbitration agreement in Lamps Plus was ambiguous on the issue. The Ninth Circuit used contra proferentum to resolve that ambiguity.
Continue reading “Supreme Court : Classwide Arbitration Unavailable Under Ambiguous Agreement”