Unenforceable Clause In Arbitration Agreement Does Not Void Agreement

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

One of my children's preschool teachers was fond of saying, "you get what you get and you don't get upset." (Not to my little angel, of course, but to other children.) In Curran v. Curran, the Appellate Division basically applied this admonition to the parties to an arbitration agreement, holding that they got what they intended out of the agreement, therefore they could not argue, after the fact, that an unenforceable provision in the agreement voided the entire agreement.

In Curran, plaintiff filed for divorce from defendant. With the advice of counsel, the parties entered into a consent order to refer all issues incident to their divorce to arbitration under the New Jersey Arbitration Act. In the consent order, the parties acknowledged that any arbitration award that was entered could only be set aside or modified by a court under the limited grounds set forth in the Arbitration Act — e.g., the award was procured by fraud, corruption, or undue means, the court found evidence of "evident partiality" by the arbitrator, the arbitrator exceeded his or her powers, etc. But the parties also included a handwritten provision, which provided: "The parties reserve their rights to appeal the arbitrator's award to the appellate division as if the matter was determined by the trial court." This is the provision that would cause all of the problems.

After the arbitrator entered a preliminary award, plaintiff requested reconsideration. The arbitrator then issued a comprehensive award setting forth his findings of fact and conclusions of law. Plaintiff filed a motion in the Law Division for an order modifying the award, citing eight alleged "mistakes of law" made by the arbitrator. Plaintiff also argued that the intent of the handwritten provision was not to allow for direct appeal to the Appellate Division, but was instead was evidence that the parties intended a more searching review of the award that what would normally be allowed under the Arbitration Act. The trial court agreed, holding that the paragraph itself was unenforceable because it purported to "create subject matter jurisdiction by agreement." The trial court noted that "[t]he authority of a court to hear and determine certain classes of cases rests solely with the Constitution and the Legislature." But the trial court agreed with plaintiff that the handwritten provision demonstrated the parties' intent to provide for "a little more review" than what would normally be allowed under the Arbitration Act. Therefore, the trial court "in essence act[ed] as the Appellate Division of the arbitrator." It performed a comprehensive review of the arbitrator's decision and affirmed the award.

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This Never Would Have Happened On The Nina, Pinta, Or Santa Maria.

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

If the name of your company is Christopher Columbus, LLC then it is probably reasonable for you to expect that you will be subject to the maritime jurisdiction of the federal courts. Nonetheless, this was the issue presented in a recent Third Circuit decision, In The Matter Of The Complaint Of Christopher Columbus, LLC (t/a Ben Franklin Yacht), As Owner Of The Vessel Ben Franklin Yacht, For Exoneration From Or Limitation Of Liability.

The case involved a "drunken brawl which erupted among passengers who were enjoying a cruise on the Delaware River onboard the vessel Ben Franklin Yacht." Specifically, plaintiffs alleged that they were assaulted by other passengers on the vessel while the boat was docking, and at least one alleged that the assault continued in the parking lot near the dock. They alleged that the boats crew members caused their injuries by "providing inadequate security and overserving alcohol to passengers." Plaintiffs sued in state court, and Defendant responded by filing a "limitation action" in federal court. (A "limitation action" is a unique wrinkle in maritime law that allows the "owner of a vessel" to limit its liability to "an amount equal to the value of the owner's interest in the vessel and pending freight.") Both sides then moved for summary judgment. But, while these motions were pending, the district court, sua sponte, invited briefing on whether the court had jurisdiction. After briefing and oral argument, the district court found that maritime jurisdiction was lacking and, therefore, dismissed defendant's limitation action.

Defendant appealed. This is where, I think, it gets interesting, at least for someone who does not generally practice maritime law. (Although I did write about a different case not too long ago, which is actually cited in the Christopher Columbus case, so maybe I am developing a niche.)

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Court Approves Service Of Complaint Via Facebook, No Word On How Many “Likes” It Received

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Facebook is useful for a lot of things — humble bragging about your children, posting professionally taken candid photographs of your smiling family, announcing your engagement/marriage/pregnancy/baby's gender to several hundred of your closest friends, etc. In K.A. v. J.L., a New Jersey court added another item to this list. After observing that courts in other jurisdictions were almost evenly split on the issue, the court allowed plaintiffs in that case to serve defendant via Facebook. (When it researched the issue, I assume the court reviewed one of my prior posts about two New York courts that also allowed service via Facebook.)

K.A. involved very unusual facts. Plaintiffs sued defendant to "enjoin defendant from holding himself out as the father of their [adopted] son." Defendant, who was not the son's biological father of record, sent the son a friend request over Facebook. The son declined. Defendant then reached out to the son over Instagram, claiming that he was the son's biological father. Defendant allegedly informed the son that he knew where the son was born, and disclosed both the identity of the son's birth mother and that the son had "biological siblings at large." (Plaintiffs allege that defendant also sent a Facebook friend request to the son's sister, who, like the son, declined the invite.) Defendant also "incorporated a picture of [the son] into an image comprised of three separate photographs, each featuring a different person," and purportedly claimed that the collage was a picture of his children. Defendant shared this picture with the public on his Facebook account. Plaintiffs believe defendant obtained the image of the son from the son's Facebook account.

Plaintiffs claimed that defendant was a "complete stranger to them," and that they had no contact with him prior to the events that led to the litigation. Plaintiffs' counsel attempted to serve cease and desist letters on defendant at his last known address via certified and regular mail. The certified letters were returned as unclaimed, but the letters sent by regular mail were never returned. Plaintiffs then sued, seeking an injunction preventing defendant from contacting their son or claiming to be his father. They sought permission from the court to serve the complaint on defendant via Facebook.

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“Knee Deep In The Water Somewhere . . .” Plaintiff Injured by flying coffee cup cannot invoke maritime jurisdiction

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

If you are like me, you have probably wondered: If I were standing on a boat in the Virgin Islands and was injured when someone tossed "an empty insulated coffee cup" at me, could I invoke a federal court's maritime jurisdiction? Well, we now have the answer in the form of the Third Circuit's opinion in Hargus v. Ferocious and Impetuous, LLC.

In Hargus, plaintiff was a passenger on a boat, the "One Love," which was owned by Ferocious and Impetuous, LLC. He rented the boat along with some friends to sail from St. Thomas to various points in the U.S. Virgin Islands. Hargus was standing on the deck of the boat while it was anchored in "knee deep" water, close to shore. Some of the other passengers, who were standing on shore, threw beer cans at Hargus (the opinion does not explain why they did this). Upon seeing this, the captain of the boat, who was standing nearby the passengers who threw the beer cans, threw "an empty insulated plastic coffee cup at Hargus" (the opinion does not explain this either). The coffee cup hit him in the temple. He did not lose consciousness or complain about any injury at the time, and the boat continued on its voyage without further incident.

Two days after the incident, plaintiff sought medical attention after experiencing pain and impaired vision, which he attributed to being hit by the coffee cup. He was diagnosed with a concussion and a mild contusion. (The opinion notes that he had a history of head trauma, having suffered 10-12 prior concussions.) He was not prescribed any medication and was allowed to return to work without restrictions. He did not seek additional treatment until one year later when he went back to the doctor, complaining of headaches, memory loss, mood swings, and neck pains.

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Enforcement Action Against Rating Agency Allowed To Proceed

by: Peter J. Gallagher (@pjsgallagher)

In an interesting decision issued today, Judge Katz (Essex County) denied a motion to dismiss filed by the ratings agency Standard & Poor's ("S&P") in an enforcement action brought against S&P by the New Jersey Attorney General. In Hoffman v. McGraw-Hill Financial, Inc., the Attorney General alleged that S&P violated the Consumer Fraud Act ("CFA") by misrepresenting to New Jersey consumers that S&P's analysis and rating of structured finance securities was independent and objective. The opinion contains decisions on both procedural personal jurisdiction issues and substantive CFA issues that all litigators should find interesting.

[Lawsuits against ratings agencies are nothing new. Several years ago, I wrote an article about these lawsuits and, at the time, the relative success the rating agencies had defending against them. (If you did not save your copy of the article, click here for another copy.) Historically, the rating agencies argued that their ratings were proetced under the First Amendment, but at least one court rejected this argument in the context of a motion to dismiss in a lawsuit that eventually settled.]

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