Archives: October 2007
Wed Oct 17, 2007
Arbitration & Recievers
The Sixth Circuit draws a distinction between claims arising before the court appointed a reciever and after appontment. The Receiver cannot arbitratie crediotr claims such as fraud or wrongful inducemtn but only thisse for disogegemrnt or wrongfullyu disbursed commissions. The dissent dsimisees this anauylysis as "not meanigful.
Disagreement among the Circuits on arbitrating claims sin bankruptacy excist and apparnely the same split will occur onreceivership estates nd may depend on the local federal rules of the partiular bandrukptcy judge.
Arbitration & Recievers
The Sixth Circuit draws a distinction between claims arising against the receivership estate before the court appointed a Receiver and those occurring after after appointment. The Receiver cannot arbitrate creditor claims such as fraud or wrongful inducement, only those for disgorgement or wrongfully disbursed commissions. The dissent dismisses this analysis as "not meaningful."
Disagreement among the Circuits on arbitrating claims in bankruptacy exist and apparently the same split will occur on receivership estates depending on local federal rules and the particular bankruptcy judge.
See, Text: Ch. I: Receivers: www.ArbitrationAdr.com
Fri Oct 05, 2007
Arbitration-Cases of Interest: 10/4/2007
Cases noted but not necessarily summarized in www.ArbitrationAdr.com
The Second Circuit has vacated an arbitration award on the grounds the arbitrators "manifestly disregarded" the law; Porzig v. Dresdner, Kleinwort, Benson, No. America, LLC, 2007 WL 2241592 (2d. Cir.N.Y.) Not reported in Text.
The Sixth Circuit has refused to vacate an award on the same ground; Visconsi v. Lehman Bros., Inc., 2007 WL 2258827 (6th Cir. Ohio). Not reported in Text.
The Third Circuit confronted the conflict between an accelerated arbitration clause and a state statute of limitations in determining arbitrability. See, Text: www.ArbitrationAdr.com: Ch.IV-H-3; Statute of Limitations.
Vocational School not a third party beneficiary of promissory note to lender; Smith v. Micro Skills San Diego, L.P., 153 Cal.App.4th 892 (2007). Not reported in Text.
Arbitrator's role in hearing evidence; Rosensweig v. Morgan Stanley & Co., Inc. 2007 WL 2265515. Not reported in Text. Accord, Serling v. American Airlines, Inc., 2007 WL 2228352. Not reported in Text.
www.ArbitrationAdr.com
Vacating Awards: Evident Partiality of Arbitrator
Evident Partiality of Arbitrator 10/4/2007
Federal courts have clearly rejected vacating an arbitration award on grounds of arbitrator error in applying the law or the facts, but non-prevailing parties in arbitration are now searching resources to determine if the arbitrator was subject to disqualification pursuant to 9.U.S.C. 10 (a) (2) authorizing vacatur “where there was evident partiality or corruption in the arbitrators, or either of them.” Although the plain language of this section refers to “evident partiality”of an arbitrator, a phrase applicable to the conduct of the arbitration, the Supreme Court in Commonwealth Coatings Corp. v. Continental Casualty Co., 393 U.S. 145 (1968) interpreted the statute to require, under certain circumstances, disclosure by the arbitrator of prior professional or personal relationships among counsel or the parties.
Commonwealth is a plurality opinion and federal circuit courts have interpreted the case differently. In a Fifth Circuit case the court held non-disclosure alone does not require vacating an arbitral award for “evident partiality;” non-disclosure must involve a “significant compromising connection to one of the parties.”
The case is an en banc rehearing and several judges dissented but the Supreme Court denied cert. on June 11. The issue of non-disclosure of an arbitrators’s prior personal and professional relationships with the parties will not go away any time soon. See, Ovitz v. Schulman, 133 Cal.App.4th 830 (2005) interpreting CCP 1281.85 (a); 1281.9 (a) (2); 1281.95 and 1286.2 (a) (6) (A) [all relating to arbitrator disclosure]. Cf: Hayden v. Robertson Stephens, Inc., 150 Cal.App.4h 360 (2007).
According to the Fifth Circuit, the Ninth Circuit interpretation of Commonwealth Coatings in Schmitz v. Zilveti, 20 F.3d 1043 (9th Cir. 1994) interpreting the standard of “evident partiality” as the equivalent of a “reasonable impression of bias” is an “outlier.”
See, Text, www.ArbitrationAdr.com: Ch. V-D-2: Evident Partiality of Arbitrator
Mandamus in lieu of Appeal
Mandamus & Arbitration 10/4/2007
The Ninth Circuit has invoked mandamus to reverse a District Court order granting a motion to compel arbitration and an order staying the underlying action; These orders are non-appealable under the FAA; 9 U.S.C.16 (b). Despite that specific statutory prohibition, coupled with the FAA provision allowing appeals only from orders denying arbitration and refusing to stay litigation (9 U.S.C. 16 (a) (1), the Ninth Circuit cited the basis for issuing mandamus lies in the All Writs Act; 28 U.S.C. 1651: “The Supreme Court and all courts established by an Act of Congress may issue all writs necessary or appropriate in aid of their respective jurisdictions and agreeable to the usages and principles of law.” Mandamus is within the scope of the Act.t.
The Ninth Circuit panel, citing its own previous interpretation of 28 U.S.C. 1651 in Bauman v. U.S. District Court, 557 F.2d 650 (9th Cir. 1977), quoted language from a Supreme Court case that “only exceptional circumstances amounting to a judicial ‘usurpation of power’ will justify this extraordinary remedy [mandamus].” The Ninth Circuit panel then outlines appellate guidance for invoking the writ, identifying five judicially created benchmarks, and concludes all are met.
The principle and indispensable benchmark to issue mandamus requires an appellate court to find a district court order “clearly erroneous as a matter of law.” (Of course, that finding will justify any breach of contract.). The court panel holds the underlying action (a consumer class action) is procedurally unconscionable despite petitioner’s opportunity for meaningful alternative (telephone) service. The Ninth Circuit had previously held, in an extremely controversial decision, that the option for alternative service in consumer arbitration does not foreclose a finding of procedural arbitrability; Nagrampa v. MailCoups, Inc., 469 F.3d 1257 (9th Cir. 2006).
The contract in this case contained a New York choice of law clause, but New York law is not in accord with the Nagrampa decision (Ranieri v. Bell Atl. Mobile, 759 N.Y.S.2d 448 (App. Div. 2003), causing the reader to wonder about the “clearly erroneous as a matter of law” benchmark. But California choice of law holds the availability of alternative service to consumers is irrelevant, or minimal, in determining procedural arbitrability. California law trumps, said the court.
See, www.ArbitrationAdr.com, Ch. IV-H-12: Mandamus