Justia Civil Procedure Opinion Summaries

Plaintiff was employed by defendant and, as a condition of employment, electronically signed both an offer letter containing an arbitration provision and a separate nondisclosure agreement (NDIAA) on the same day. The offer letter required arbitration for most employment-related disputes, while the NDIAA included terms such as a waiver of bond for injunctive relief and a heightened burden of proof for public domain information. Plaintiff’s employment ended in March 2023, after which she sued defendant in Alameda County Superior Court for disability discrimination, retaliation, and related claims under California’s Fair Employment and Housing Act, as well as wrongful termination. None of her claims involved confidential information or sought injunctive relief.Defendant moved to compel arbitration, asserting the Federal Arbitration Act (FAA) governed and that plaintiff’s claims fell within the arbitration agreement’s scope. The trial court found the arbitration agreement and NDIAA should be read together under California Civil Code section 1642, determined that certain NDIAA provisions were unconscionable, and concluded that unconscionability permeated the arbitration agreement. The court declined to sever the NDIAA’s unconscionable provisions and denied the motion to compel arbitration.On appeal, the California Court of Appeal, First Appellate District, Division Five, disagreed with the trial court’s refusal to sever. The appellate court held that the FAA does not preempt section 1642, and even assuming the NDIAA’s challenged provisions were unconscionable and properly considered alongside the arbitration agreement, those provisions were collateral to the arbitration agreement’s central purpose and did not affect the claims at issue. Applying Ramirez v. Charter Communications, Inc., the appellate court determined that the unconscionable terms should have been severed and the arbitration agreement enforced. Consequently, the order denying arbitration was reversed. View "Wise v. Tesla Motors, Inc." on Justia Law

A Singapore-based company that supplies offshore vessels entered into a charter agreement with a Mexico-based marine oil and gas company. The agreement allowed the Mexican company to charter a vessel for eighteen months, with provisions for termination if payments were not made and an obligation to redeliver the vessel at the end of the term. After the charter expired, the Singaporean company alleged that the Mexican company failed to pay required fees and did not return the vessel, leading to arbitration in Singapore. The arbitrator awarded the Singaporean company damages and ordered the vessel’s return, but the Mexican company did not comply. Meanwhile, an email revealed that the Mexican company was set to receive a large refund from a third party, to be sent to a U.S. bank account in the name of a related U.S. entity.The Singaporean company filed suit in the United States District Court for the Southern District of Texas, seeking to attach the funds in the U.S. account as security for the arbitration award under federal maritime law and, later, Texas state law. The district court initially granted the writ of garnishment, but after limited discovery, vacated the writ, finding no evidence that the Mexican company owned the funds in the U.S. account. The district court also denied the plaintiff’s request for leave to amend its complaint to assert an alter ego theory, which would have permitted attachment based on state law.On appeal, the United States Court of Appeals for the Fifth Circuit held that the district court abused its discretion by failing to consider relevant evidence and legal standards regarding ownership and control of the funds. The appellate court also determined that the district court erred in denying leave to amend without adequate explanation. The Fifth Circuit vacated the district court’s order and remanded the case, instructing the district court to allow the plaintiff to amend its complaint. View "CH Offshore v. Mexiship Ocean" on Justia Law

A former hourly employee brought a class action lawsuit against his former employer, a large wood products company, alleging various wage and hour violations under California law. The proposed classes included both employees who had signed arbitration agreements and those who had not. While some nonexempt employees had signed arbitration agreements requiring individual arbitration and waiving class actions, the named plaintiffs had not. The employer did not initially assert arbitration as a defense and, when ordered by the court to produce copies of signed arbitration agreements for putative class members, failed to do so for several years.During the course of discovery in the Superior Court of Shasta County, the employer repeatedly resisted requests to identify or produce arbitration agreements for employees who had signed them, leading to multiple discovery sanctions. The employer participated in extensive discovery and mediation involving employees who had signed arbitration agreements, without distinguishing them from other putative class members. Only after class certification did the employer finally produce thousands of signed arbitration agreements and immediately moved to compel arbitration for those employees. Plaintiffs opposed, arguing the employer had waived its right to arbitrate by years of litigation conduct inconsistent with an intent to arbitrate, and sought evidentiary and issue sanctions for delayed production.The California Court of Appeal, Third Appellate District, reviewed the case. Applying the California Supreme Court’s standard from Quach v. California Commerce Club, Inc., the appellate court held that the employer waived its right to compel arbitration by clear and convincing evidence. The employer’s prolonged failure to produce arbitration agreements and its conduct throughout litigation was inconsistent with an intention to enforce arbitration. The order denying the motion to compel arbitration was affirmed, and the appeal from the order granting evidentiary and issue sanctions was dismissed as nonappealable. View "Sierra Pacific Industries Wage and Hour Cases" on Justia Law

The dispute centers on insurance policies purchased by several Louisiana public entities, including the Town of Vinton, from a group of foreign and American insurers. The policies included an arbitration clause and a contract endorsement stating that each policy is a “separate contract” between the insured and each insurer. After alleged breaches, the insured entities sued all participating insurers in Louisiana state court. Subsequently, the insureds dismissed the foreign insurers with prejudice, leaving only American insurers as defendants.Following the dismissal of the foreign insurers, the remaining American insurers removed the cases to the United States District Court for the Western District of Louisiana. They sought to compel arbitration under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards and the Federal Arbitration Act. The district court denied these motions, holding that the contract endorsement created separate agreements between each insurer and the insured, and, since the foreign insurers were no longer parties, no agreement involved a non-American party. The court also rejected the American insurers’ equitable estoppel argument, finding it precluded by Louisiana law, which expressly bars arbitration clauses in insurance contracts covering property in the state.On appeal, the United States Court of Appeals for the Fifth Circuit affirmed the district court’s decision. The Fifth Circuit held that the Convention does not apply because no foreign party remains in any agreement to arbitrate. The court further concluded that Louisiana law prohibits enforcement of arbitration clauses in these insurance contracts and that equitable estoppel cannot override this prohibition. Lastly, the court determined that the delegation clause in the arbitration agreement could not be enforced because Louisiana law prevents the valid formation of an arbitration agreement in this context. View "Town of Vinton v. Indian Harbor" on Justia Law

Two neighbors in a residential community disagreed about a tree branch that obstructed one neighbor’s view. Jinshu Zhang, the owner seeking the view, used his homeowners association’s dispute resolution process, which included mediation and arbitration services provided by Charles Peterson, an independent mediator. When the association dismissed Zhang’s application, Zhang sued Peterson for breach of fiduciary duty, claiming Peterson was a director or officer of the association and thus owed him such a duty. However, Peterson was neither a director nor an officer, but an independent contractor. Zhang lost his lawsuit against Peterson following a nonsuit at trial, and did not appeal.After that case concluded, Peterson filed a malicious prosecution action against Zhang, alleging Zhang’s earlier suit was baseless and continued without probable cause once Zhang had evidence Peterson was not an officer or director. In response, Zhang filed a special motion to strike under California’s anti-SLAPP statute (Code of Civil Procedure section 425.16), seeking to dismiss Peterson’s malicious prosecution claim. The Superior Court of Los Angeles County denied Zhang’s anti-SLAPP motion, finding Peterson’s case had at least minimal merit based on evidence showing Zhang lacked probable cause and may have acted with malice in pursuing the prior suit.The California Court of Appeal, Second Appellate District, Division Eight, reviewed Zhang’s appeal. The court affirmed the denial of Zhang’s anti-SLAPP motion, holding that the denial of a discretionary sanctions motion in the underlying suit did not establish probable cause under the “interim adverse judgment rule,” and did not bar the malicious prosecution claim. The court concluded that Peterson’s evidence on lack of probable cause and malice was sufficient to allow his case to proceed, and remanded for further proceedings. View "Peterson v. Zhang" on Justia Law

A dispute arose from the design and installation of cabinetry in a luxury home in Charleston, South Carolina. Design Gaps, Inc., owned by David and Eva Glover, had a longstanding business relationship with Shelter, LLC, a general contractor operated by Ryan and Jenny Butler. After being dissatisfied with Design Gaps’ performance, the homeowners, Dr. Jason and Kacie Highsmith, and Shelter terminated their contract with Design Gaps and hired Distinctive Design & Construction LLC, owned by Bryan and Wendy Reiss, to complete the work. The Highsmiths and Shelter initiated arbitration against Design Gaps, which led to the arbitrator ruling in favor of the homeowners and Shelter on their claims, and against Design Gaps on its counterclaims, including those for copyright infringement, tortious interference, and unfair trade practices.After the arbitration, Design Gaps sought to vacate the arbitration award in the United States District Court for the District of South Carolina, but the court instead confirmed the award. Concurrently, Design Gaps filed a separate federal lawsuit against several parties, including some who were not part of the arbitration. The defendants moved to dismiss, arguing that res judicata and collateral estoppel barred the new claims, or alternatively, that the claims failed on other grounds such as the statute of limitations and laches. The district court agreed, dismissing most claims based on preclusion or other legal bars, and granted summary judgment on the remaining claims.The United States Court of Appeals for the Fourth Circuit reviewed the district court’s decisions. The court held that res judicata and collateral estoppel applied to bar most of Design Gaps’ claims, even against parties not directly involved in the arbitration but in privity with those who were. For the remaining claims, the court found they were properly dismissed on grounds such as the statute of limitations, waiver, or laches. The Fourth Circuit affirmed the district court’s judgment in full. View "Design Gaps, Inc. v. Distinctive Design & Construction LLC" on Justia Law

A law firm sought to recover over $1.7 million in fees and costs for representing the Los Angeles County Sheriff, Alex Villanueva, and the Sheriff’s Department in litigation initiated by the County of Los Angeles. Due to a conflict of interest, the County’s Board of Supervisors offered Villanueva independent counsel, allowing him to select his attorney but reserving discretion over compensation. Villanueva chose the law firm, which entered into an engagement agreement with him. The County, however, sent its own retainer agreement to the firm, which the firm refused to sign. The firm continued its representation but was never paid. After the firm demanded arbitration under its engagement agreement, the County and related plaintiffs filed suit seeking a declaration that no valid agreement to arbitrate existed and an injunction against the arbitration.The Superior Court of Los Angeles County granted a preliminary injunction, then summary judgment for the County plaintiffs, finding the Sheriff lacked authority to enter into the engagement agreement. The court denied the law firm’s post-judgment motion for leave to file a cross-complaint, citing both untimeliness and bad faith. The firm then filed a separate lawsuit against the County and related defendants, asserting breach of contract and related claims. The trial court sustained the County’s demurrer, dismissing the complaint with prejudice on grounds that the claims were compulsory cross-claims in the earlier action and for failure to allege compliance with the Government Claims Act.The California Court of Appeal, Second Appellate District, Division Eight, affirmed both the judgment in the County’s action and the dismissal of the law firm’s separate lawsuit. The court held that the Sheriff did not have authority to retain counsel on his own; only the Board of Supervisors could contract for legal services. The law firm’s claims were barred as compulsory cross-claims and for failure to comply with the Government Claims Act. View "County of Los Angeles v. Quinn Emanuel Urquhart & Sullivan, LLP" on Justia Law

Puerto Rico Telephone Company (PRTC) sought to confirm an arbitration award against WorldNet Telecommunications in federal court under section 9 of the Federal Arbitration Act (FAA). PRTC relied on then-existing First Circuit precedent, which allowed federal courts to exercise subject-matter jurisdiction over such applications if the underlying dispute involved a federal question. After the district court dismissed PRTC’s action for lack of Article III standing, PRTC appealed.The United States District Court for the District of Puerto Rico dismissed the case, finding that PRTC had not shown the necessary injury-in-fact to establish standing under Article III of the Constitution. PRTC then appealed to the United States Court of Appeals for the First Circuit. While the appeal was pending, the United States Supreme Court decided Badgerow v. Walters, which held that federal courts lack subject-matter jurisdiction over applications to confirm or vacate arbitration awards under sections 9 and 10 of the FAA, except in circumstances not present in this case. PRTC requested that the First Circuit vacate the district court’s judgment and direct dismissal without prejudice for lack of subject-matter jurisdiction, so that PRTC could pursue relief in the Commonwealth courts. WorldNet argued that the First Circuit should instead affirm the district court’s dismissal on standing grounds.The United States Court of Appeals for the First Circuit held that, in light of Badgerow v. Walters, federal courts do not have subject-matter jurisdiction over PRTC’s application to confirm the arbitration award under section 9 of the FAA. The First Circuit vacated the district court’s judgment and remanded with instructions to dismiss the case without prejudice for lack of subject-matter jurisdiction. The court did not address the standing issue. View "Puerto Rico Telephone Co. v. Worldnet Telecommunications, LLC" on Justia Law

A group of plaintiffs, including a medical practice, individual physicians, a medical society, and two patients, brought various claims against a health insurer, alleging that the insurer interfered with doctor-patient relationships, denied or delayed coverage for medical services, and caused significant harm to patients. The claims included tortious interference with contractual rights, unfair competition, RICO violations, and emotional distress, with specific factual allegations that the insurer’s actions led to worsened medical outcomes for the patients involved.The Circuit Court of the Third Circuit reviewed the insurer’s motion to compel arbitration based on arbitration clauses in provider agreements and member handbooks. Instead of determining whether the claims were subject to arbitration, the circuit court focused on the alleged unconscionability of the contracts as a whole, finding them to be contracts of adhesion and unconscionable, and denied the motion to compel arbitration. The court also denied summary judgment as to one patient’s claims and did not stay the medical society’s claims pending arbitration.The Supreme Court of the State of Hawaiʻi reviewed the case and held that the circuit court erred by not following the required analytical framework for arbitrability. The Supreme Court vacated the lower court’s order in part, holding that claims arising under the Participating Physician Agreement must be referred to arbitration because the agreement delegated the question of arbitrability to the arbitrator. Claims under the Medicare and QUEST Agreements were also subject to arbitration, as the arbitration clauses were not shown to be substantively unconscionable. However, the Court held that the claims of one patient and the physician as a patient were not subject to mandatory arbitration, and another patient’s claims were not subject to a grievance and appeals clause. The case was remanded for further proceedings consistent with these holdings. View "Frederick A. Nitta, M.D., Inc. v. Hawaii Medical Service Association." on Justia Law

The founder and former CEO of a national pizza company brought suit against a public relations firm that had previously provided services to the company. The dispute arose after the plaintiff alleged that the firm leaked confidential and damaging information about him to the press, in violation of a nondisclosure agreement (NDA) that included an arbitration clause. The NDA was executed after the company requested the firm sign it, anticipating close work with the plaintiff during a period of reputational crisis. The relationship between the parties deteriorated following a conference call in which the plaintiff made controversial remarks, which were later reported in the media, leading to his resignation from the company’s board.The case was initially filed in state court and then removed to the United States District Court for the Western District of Kentucky. Over several years, the litigation involved multiple amended complaints, extensive discovery, and dispositive motions. The defendant did not move to compel arbitration until after the district court denied summary judgment on the NDA claim. The district court held a bench trial and found that the NDA was enforceable and contained a binding arbitration provision. However, the court concluded that the defendant had defaulted on its right to arbitrate by actively litigating the case for years before seeking arbitration, and thus denied the motion to compel arbitration.On appeal, the United States Court of Appeals for the Sixth Circuit determined it lacked jurisdiction to review the district court’s contract formation ruling but had jurisdiction to review the default determination. The Sixth Circuit affirmed the district court’s finding that the defendant defaulted on its arbitration rights by seeking a merits resolution in court before moving to compel arbitration. The court dismissed the appeal in part for lack of jurisdiction, otherwise affirmed the district court’s judgment, and denied the plaintiff’s request for sanctions. View "Schnatter v. 247 Group, LLC" on Justia Law