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Posts Tagged ‘choice of law’

Modern Perfection, LLC v. Bank of America: Fourth Circuit Says Arbitrator gets to Decide which of Two Contracts’ Conflicting Dispute Resolution Provisions Applies

January 27th, 2025 Application to Stay Litigation, Arbitrability, Arbitrability | Clear and Unmistakable Rule, Arbitrability | Existence of Arbitration Agreement, Arbitration Agreement Invalid, Arbitration Agreements, Arbitration Law, Arbitration Practice and Procedure, Authority of Arbitrators, Challenging Arbitration Agreements, Clear and Unmistakable Rule, Delegation Provision, Existence of Arbitration Agreement, FAA Chapter 1, FAA Section 2, Federal Arbitration Act Enforcement Litigation Procedure, Federal Arbitration Act Section 3, Federal Arbitration Act Section 4, Federal Subject Matter Jurisdiction, Motion to Compel Arbitration, Practice and Procedure, Richard D. Faulkner, Section 2, Section 3 Stay of Litigation, Section 4, Stay of Litigation, Stay of Litigation Pending Arbitration, United States Court of Appeals for the Fourth Circuit, United States Supreme Court Comments Off on Modern Perfection, LLC v. Bank of America: Fourth Circuit Says Arbitrator gets to Decide which of Two Contracts’ Conflicting Dispute Resolution Provisions Applies

Introduction: Delegation Provisions and Modern Perfection

Delegation Provisions | Arbitrability ChallengeDelegation provisions clearly and unmistakably assign arbitrability determinations to arbitrators, which means they provide for arbitrators to decide arbitrability-related disputes.

Coinbase v. Suski, 602 U.S. 143 (2024) set forth the allocation of power between courts and arbitrators for four “orders” of arbitrability-related disputes:

  1. A “first order” dispute is “[a] contest over the merits of the dispute[,]” the determination of which “depends on the applicable law and relevant facts.” 602 U.S. at 148 (quotation omitted).
  2. A “second order dispute” concerns “whether [the parties] agreed to arbitrate the merits” of the first order dispute. 602 U.S. at 148 (quotation omitted).
  3. A “third order dispute” concerns “who should have the primary power to decide” a second order dispute.” 602 U.S. at 149.
  4. A “fourth order” dispute is one where there are “multiple agreements that conflict as to the third-order question of who decides arbitrability.” 602 U.S. at 149.

Coinbase held that fourth-order disputes are for the courts, which are to decide them based on “traditional contract principles.” 602 U.S. at 149.

In a recent U.S. Court of Appeals for the Fourth Circuit decision, Modern Perfection, LLC v. Bank of America, No. 23-1965, slip op. (4th Cir. Jan. 13, 2025), the Court was faced with what appeared to be a “fourth-order” dispute as defined by Suski. The question was who gets to decide arbitrability questions when one contract contained a broad arbitration agreement and a delegation provision and the other a clause that expressly contemplated judicial resolution of disputes.

The problem was that Suski was not decided until briefing in both the district court and the Fourth Circuit was complete, and the arbitration challengers’ argument centered on the scope of the delegation provisions, not on whether the contracts contemplating judicial resolution of disputes superseded the delegation provisions.

The Suski fourth-order dispute issue was first raised in a Fed. R. App. P. 28(j) letter the challenger submitted once Suski was decided.  Because the argument had not been raised in the parties’ appellate briefs, the Court would not hear it, and ruled that, under the terms of the delegation provisions, the arbitrator gets to decide whether the dispute was arbitrable.

Background

Over a five-year period a bank issued to each of six plaintiffs two Continue Reading »

Ineffective Objections and Untimely Filings Lead to FAA Forfeiture: Sivanesan v. YBF, LLC, ___ A.D. 3d ___, 2024 N.Y. Slip Op. 4327 (2d Dep’t 2024)

September 4th, 2024 Applicability of Federal Arbitration Act, Application to Confirm, Application to Vacate, Arbitrability, Arbitrability - Nonsignatories, Arbitrability | Clear and Unmistakable Rule, Arbitrability | Existence of Arbitration Agreement, Arbitration Agreements, Arbitration as a Matter of Consent, Arbitration Law, Arbitration Practice and Procedure, Authority of Arbitrators, Award Confirmed, Challenging Arbitration Awards, Clear and Unmistakable Rule, Confirm Award | Exceeding Powers, Confirmation of Awards, Delegation Agreements, Enforcing Arbitration Agreements, Existence of Arbitration Agreement, FAA Chapter 1, FAA Section 10, FAA Section 11, FAA Section 9, Federal Arbitration Act Enforcement Litigation Procedure, Federal Arbitration Act Section 10, Federal Arbitration Act Section 11, Federal Arbitration Act Section 9, First Department, First Options Reverse Presumption of Arbitrability, First Principle - Consent not Coercion, Formation of Arbitration Agreement, Grounds for Vacatur, Modify or Correct Award, New York Arbitration Law (CPLR Article 75), Petition or Application to Confirm Award, Petition to Vacate Award, Post-Award Federal Arbitration Act Litigation, Practice and Procedure, Procedural Arbitrability, Questions of Arbitrability, Rights and Obligations of Nonsignatories, Second Department, Section 10, Section 11, Section 9, Service of Process, State Arbitration Law, Time Limit for Vacating, Modifying, or Correcting Award, Vacate Award | 10(a)(4), Vacate Award | Arbitrability, Vacate Award | Excess of Powers, Vacate Award | Existence of Arbitration Agreement Comments Off on Ineffective Objections and Untimely Filings Lead to FAA Forfeiture: Sivanesan v. YBF, LLC, ___ A.D. 3d ___, 2024 N.Y. Slip Op. 4327 (2d Dep’t 2024)

Objections Must be Timely and Effective in Federal Arbitration Act Litigation, Including Litigation Relating to Consulting AgreementsA good chunk of FAA practice and procedure —including FAA practice and procedure in state court—involves knowing when, how, and why to make timely and effective objections and filings in arbitration enforcement litigation.  Sivanesan v. YBF, LLC, ___ A.D. 3d ___, 2024 N.Y. Slip Op. 4327 (2d Dep’t 2024), which New York’s Appellate Division, Second Department, decided on August 28, 2024, illustrates this point well.

Appellants were not signatories to the arbitration agreement, did not agree to arbitrate any matters, and did not clearly and unmistakably agree to arbitrate questions of arbitrability. But the Court found that they participated in the arbitration without lodging adequate objections to the arbitrator’s jurisdiction and did not timely file in the confirmation litigation their petition to vacate the awards at issue. Accordingly, the Appellants were—by their participation in the arbitration without effective objections to the arbitrator’s jurisdiction—deemed to have impliedly consented to arbitrate all issues before the arbitrator, including whether they were bound by the contract and arbitration agreement as successors-in-interest. Not a happy place to be.

Background

The transactions pertinent to Sivanesan began in 2008 when YBF, LLC (“YBF”) sold to Cosmetics Specialties, East LLC (“CSE”) an exclusive license to Continue Reading »

Choice-of-Law Provisions, Conflict-of-Law Rules, the Statute of Limitations, and the Borrowing Statute: Ontario, Inc. v. Samsung

January 7th, 2017 Choice-of-Law Provisions, Conflict of Laws, Conflict-of-Law Rules, New York State Courts, Statute of Limitations Comments Off on Choice-of-Law Provisions, Conflict-of-Law Rules, the Statute of Limitations, and the Borrowing Statute: Ontario, Inc. v. Samsung

Introduction

Photographer: PictureguyA—an Ontario-based corporation–commences a New York state court lawsuit against B—a New York-based corporation–in New York state court for breach of contract. The contract contains a mandatory New York choice-of-forum clause and a very broad choice-of-law provision, which, among other things, designates New York law to govern the contract and its “enforcement.” If Ontario’s two-year statute of limitations applies, then the suit is time barred, but if New York’s six-year statute of limitations applies, then the suit is timely. Is A’s suit barred by the statute-of-limitations? Continue Reading »

First Circuit Court of Appeals Decides Close Case in Favor of Confirming FINRA Arbitration Panel Award: Raymond James Financial Services, Inc. v. Fenyk

May 1st, 2015 Arbitration Practice and Procedure, Authority of Arbitrators, Awards, Choice-of-Law Provisions, Confirmation of Awards, Federal Courts, Grounds for Vacatur, Judicial Review of Arbitration Awards, Manifest Disregard of the Agreement, Manifest Disregard of the Law, Securities Arbitration, Statute of Limitations, United States Court of Appeals for the First Circuit Comments Off on First Circuit Court of Appeals Decides Close Case in Favor of Confirming FINRA Arbitration Panel Award: Raymond James Financial Services, Inc. v. Fenyk

Introduction

Probably most of the Federal Arbitration Act Section 10(a)(4) outcome-review challenges that parties file are disposed of pretty easily because the applicable highly-deferential standard of review forecloses relief as long as the arbitrators were at least arguably interpreting the parties’ agreement, the applicable law or both. The most challenging cases are those falling either on or close to that imaginary, blurry line dividing arguable interpretation from clear disregard of the contract.  Cf. Chicago Typographical Union v. Chicago Sun-Times, 935 F.2d 1501, 1506 (7th Cir. 1991) (“The zanier the award, the less plausible it becomes to ascribe it to a mere error in interpretation rather than to a willful disregard of the contract. This approach can make the line between error and usurpation waver.”).

yay-14640034-digitalIn Raymond James Financial Services, Inc. v.  Corp. v. Fenyk, No. 14-1252, slip op. (3rd Cir. Mar. 11, 2015), the U.S. Court of Appeals for the First Circuit addressed one of those challenging cases. The panel in a FINRA arbitration (the “FINRA Arbitration Panel” or “Panel”) awarded a discharged stock broker $600,000.00 in back pay for wrongful termination, but the district court vacated the arbitration award because it concluded that the FINRA Arbitration Panel did not have the authority to award back pay in the circumstances. On appeal the First Circuit reversed, explaining in clear and cogent terms why the case, while close, was not one warranting Section 10(a)(4) vacatur.

Facts

Mr. Fenyk served as a Raymond James Financial Services (“Raymond James” or “James”) securities broker for seven years. His career there began in New York City, but he worked in Vermont beginning in 2004, managing a small branch office. He had an independent contractor agreement with Raymond James, entitled “Independent Sales Associate Agreement,” which stipulated that Florida law would govern any disputes. He also executed a Business Ethics Policy, which required him to arbitrate disputes “arising out of the independent contractor relationship.”

yay-17336082-digitalIn May 2009 Raymond James, during a routine client-communication review, discovered an e-mail sent to Fenyk’s former domestic partner, which suggested that Fenyk had an alcohol problem.  The e-mail referred to “Fenyk’s ‘slip’ and his ‘need [for] meetings and real sobriety for a dialoug [sic] with you.'” The e-mail also explained that “Fenyk’s ‘new AA friend was very hard on [him] last night.'” Slip op. at 3.

Raymond James terminated its relationship with Fenyk after it learned about Fenyk’s apparent alcohol problem. About  two years later, Fenyk filed suit “in Vermont state court alleging that he had been fired on account of his sexual orientation and his status as a recovering a recovering alcoholic, in violation of Vermont’s Fair Employment Practices Act (“VFEPA”), Vt. Stat. Ann. tit. 21, § 495.” Slip op. at 4. Fenyk subsequently agreed to dismiss his complaint and commence a Financial Industry Regulatory Authority (“FINRA”) arbitration, as required by his agreement with Raymond James. Continue Reading »

What Standards Apply to Lance Armstrong’s Putative Challenge to the $10,000,000.00 Arbitration Award?

March 1st, 2015 Arbitrability, Arbitration Agreements, Arbitration Practice and Procedure, Authority of Arbitrators, Choice-of-Law Provisions, Contract Interpretation, Convention on the Recognition and Enforcement of Foreign Arbitral Awards, FAA Preemption of State Law, Judicial Review of Arbitration Awards, New York Convention, Practice and Procedure, State Courts, Texas Supreme Court, United States Supreme Court Comments Off on What Standards Apply to Lance Armstrong’s Putative Challenge to the $10,000,000.00 Arbitration Award?

SCA v. Armstrong:

Anatomy of an Arbitration Award—Part II

What Standards Apply to Lance Armstrong’s Putative Challenge to the Arbitrators’ $10,000,000.00 Sanctions Award?

 

yay-10447276-digitalAs discussed in Part I, if Lance Armstrong (“Armstrong”) and Tailwind Sports Corp. (“Tailwind”) (collectively, the “Armstrong Parties”) challenge the Armstrong Arbitration Award, that challenge will be based on the Panel allegedly exceeding its powers. To meaningfully assess whether the Panel exceeded its powers we need to consider what law applies. Continue Reading »

ROM Management Reinsurance Mgt. Co. v. Continental Ins. Co.: Can Parties Agree State Arbitration Law Governs their Arbitration even if the Federal Arbitration Act Applies?

April 15th, 2014 Arbitrability, Arbitration Agreements, Arbitration and Mediation FAQs, Arbitration Practice and Procedure, Authority of Arbitrators, Choice-of-Law Provisions, Contract Interpretation, New York Court of Appeals, New York State Courts, Nuts & Bolts: Arbitration, Practice and Procedure, Reinsurance Arbitration, State Arbitration Law, Statute of Limitations, Stay of Arbitration, United States Supreme Court Comments Off on ROM Management Reinsurance Mgt. Co. v. Continental Ins. Co.: Can Parties Agree State Arbitration Law Governs their Arbitration even if the Federal Arbitration Act Applies?

Introduction

The Federal Arbitration Act (the “FAA”)’s ordinarily trumps state-law rules of arbitrability in state- and federal-court  disputes involving agreements falling under it.  But what happens when parties to an FAA-governed arbitration agreement have agreed that state law governs their agreement, or the enforcement of their agreement?

Odd as it may seem, the FAA allows parties to agree that state-law rules of arbitrability govern if the parties unambiguously agree that they govern, even if the result is that an issue subject to arbitration under the FAA is excluded from arbitration because of the parties’ choice of state arbitration law. That holds true so long as enforcing the parties’ choice of law does not “stand[] as an obstacle to the accomplishment and execution of the full purposes and objectives” of the FAA. See Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 58-64 (1995); Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ., 489 U. S. 468, 474-78 (1989); Diamond Waterproofing Sys., Inc. v. 55 Liberty Owners Corp., 4 N.Y.3d 247, 252-53 (2005); see, generally, Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, __, 130 S. Ct. 1758,1773-74 (2010). Because the whole point of the FAA is to promote arbitration by enforcing the parties’ arbitration agreement according to its terms, and because parties are free to clearly exclude issues from the scope of their arbitration agreement, giving effect to a applying a state-law rule of arbitrability does not contravene the FAA or its purposes and objectives. See Stolt-Nielsen, 130 S. Ct. at 1773 (“[W]e have said on numerous occasions that the central or primary purpose of the FAA is to ensure that private agreements to arbitrate are enforced according to their terms.”), 1774 (“Underscoring the consensual nature of private dispute resolution, we have held that parties are generally free to structure their arbitration agreements as they see fit[].  .  .  .  [and] may agree to limit the issues they choose to arbitrate.  .  .  .”) (quotations and citations omitted); Volt, 489 U.S. at 476-78.

In Re Rom Management Reinsurance Mgt. Co. v. Continental Ins. Co., ___ A.D.3d ___, 2014 N.Y. Slip Op. 01546 (1st Dep’t March 11, 2014).  New York’s Appellate Division, First Department (New York’s intermediate appellate court with jurisdiction over New York and Bronx Counties (i.e., New York City’s Boroughs of Manhattan and the Bronx)), succinctly demonstrated how the parties’ unambiguous agreement to apply state-law arbitrability rules can narrow the issues that the parties would have been required to submit to arbitration had FAA rules of arbitrability applied. Continue Reading »

Recent United States Supreme Court Decision May Further Undermine ReliaStar Life Ins. v. EMC National Life Co. Holding

May 8th, 2009 Arbitrability, Authority of Arbitrators, Awards, Life Reinsurance, New York Court of Appeals, United States Court of Appeals for the Second Circuit, United States Supreme Court 1 Comment »

We recently critiqued ReliaStar Life Ins. Co. v. EMC National Life Co., ___ F.3d ___ (2009) (Raggi, J.), in which the United States Court of Appeals for the Second Circuit held that an arbitration panel was authorized to award under the bad faith exception to the American Rule attorney and arbitrator fees to a ceding company in a case where the parties had agreed that each “shall bear the expense of its own arbitrator.  .  .  and related outside attorneys’ fees, and shall jointly and equally bear with the other party the expenses of the third arbitrator.”  We believe that the majority opinion did not faithfully apply New York’s strict rules of contract interpretation and construction, which the parties expressly agreed would apply.  You can find our critique here, and a report on the case here.   Continue Reading »