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NEWS
FOR NATIONAL ARBITRATION FORUM NEUTRALS |
December 2007, ISSUE
31 |
Legal developments. Arbitration cases. ADR updates. FORUM
news. Staff assignments. Neutral accomplishments.
The FORUM Link provides the latest in arbitration,
mediation, ADR, and on FORUM developments. We want you to be fully
informed, and we ask you to inform us about your accomplishments.
Send us your questions, comments, and suggestions. Email us
directly, and we can all be regularly informed through the FORUM
Link. Just hit the "Inform the FORUM" button located below.
All of us understand and appreciate the excellent work you do to
provide civil justice to all parties involved in arbitrations and
mediations. The FORUM Link will help spread the word to each
of you.
FORUM’s 2008 Winter Conference to be held in St. Petersburg,
Florida – January 2008
Come one, Come all to the FORUM’s 2008 Winter
Conference to be held at the beautiful Sandpiper
Hotel and Suites in St. Petersburg, FL, on Thursday, January 24,
2008. We would like to extend a special invitation to all FORUM
Neutrals. We are excited about this conference in particular because
of the location in sunny St. Petersburg! This is a great chance to
escape the snow and chill of winter. It is also an excellent
opportunity to earn free CLE credits, learn more about the
FORUM's Code of Procedure, updates on ADR Law, the FORUM's
expansion, and to meet and mingle with FORUM staff and fellow
Neutrals. Please submit your RSVP
to Erin Hinderks at ehinderks@adrforum.com as
soon as possible. Other hotels located conveniently nearby are the
Sirata
Beach Resort, The
Grand Plaza Hotel, and The
Beachcomber Beach Resort. We look forward to seeing you in the
sunshine of Florida!
FORUM/ABA Arbitration Moot Court Finals
In conjunction with this year’s Winter Conference, the
FORUM and the ABA are co-sponsoring the annual Law Student
Division’s Arbitration Competition on January 25 and 26, 2008. The
ABA Law Student Division and the FORUM developed this moot court
competition in 2005 to provide law students with arbitration
education and training, and to promote excellence in arbitration
advocacy. Participating students prepare and present an arbitration
case and are involved in opening statements, witness examinations,
exhibit introductions, evidentiary presentations, and summations.
The competition teaches what it is to be a professional, competent,
and ethical advocate.
We want this competition to be very successful and
your participation as an experienced arbitrator will help us achieve
that goal. The competition is hosted by Stetson University College
of Law on their Gulfport/St. Petersburg Campus. The college is
within 10 minutes of the Sandpiper Hotel where the FORUM’s
conference will be held. If you are interested in serving as a
volunteer judge at the competition finals in St. Petersburg on
January 25 or 26, please submit your RSVP
to Erin Hinderks at ehinderks@adrforum.com as
soon as possible. Thanks for all your help in advance. This
competition would not be possible without volunteer judges and we
appreciate your time and effort.
The FORUM Adopts Arbitration Class
Procedures
The FORUM has made Arbitration
Class Procedures available on our website. These Procedures
provide for the administration of class arbitrations should such
claims arise under the Code of Procedure. These Procedures do
not change any rules under the Code of Procedure.
These Arbitration Class Procedures apply the governing
law regarding the power and jurisdiction of arbitrators over
parties who consent to or are ordered to class arbitration. They
provide all parties to a class action dispute with fair, due process
procedures.
These Procedures apply to cases where a court has properly
ordered a specific case to proceed to class arbitration, where an
arbitrator has properly determined that the parties have agreed to
class arbitration, or where the law clearly mandates that an
arbitration proceed as a class arbitration as properly determined by
a court or arbitrator.
The FORUM adopted these Arbitration Class Procedures to comply
with and follow the Code of Procedure, and the law applicable
to arbitration cases involving class claims. An accompanying Fee
Schedule lists the reasonable fees applicable to cases involving
requests for class arbitrations.
The availability of these Procedures should not be taken as
either the FORUM favoring or disfavoring class arbitrations. We
follow the law and continue to be a neutral administrator of all
matters brought before the FORUM.
The existence of these Arbitration Class Procedures should have
no bearing on any determination by an arbitrator or court that a
dispute ought or ought not be arbitrated as a class arbitration. For
instance, the existence of the Procedures should in no way indicate
that the parties contemplated class arbitration or consented to
participate in a class arbitration when they agreed to arbitrate
disputes in accord with the National Arbitration Forum Code of
Procedure.
You can read all the up-to-date, current arbitration and ADR
developments at www.adrforum.com
Consumer’s Use of Internet Debt Reduction “Scam” Does Not
Frustrate Award Confirmation
An internet debt reduction “scam” encouraging consumers to
contest credit card debts and arbitration agreements on specious
grounds is ineffective in relieving debt or frustrating arbitration,
according to a federal district court in California.
In Carmack
v. The Chase Manhattan Bank (USA), No. C 07-02124 WHA, 2007
WL 3274151 (N.D. Cal. Aug. 3, 2007), Carmack entered into a credit
card agreement with Chase. After becoming delinquent on the credit
card account, Carmack obtained the services of Internet firm NAES to
help her “eliminate” her debt.
With a formula provided by NAES, referred to by the Court as “an
Internet scam… perpetrated on consumers over their heads in debt and
looking for a way out,” Carmack sent Chase a letter alleging
unspecified billing errors on the account in an attempt to invoke
the Truth in Lending Act (TILA) and frustrate Chase’s attempt to
collect on the account while a billing dispute was pending.
Chase did not respond to Carmack’s letter, and instead filed a
claim for arbitration with the National Arbitration Forum (FORUM).
Carmack responded with an NAES formula letter, objecting to the
FORUM’s jurisdiction and alleging that she never agreed to arbitrate
with Chase. Carmack then refused to participate in any of the
arbitration proceedings. The FORUM arbitrator entered an award in
favor of Chase.
Carmack then filed suit against Chase, alleging TILA violations,
breach of contract, and violations of due process. Chase
counterclaimed for confirmation of the arbitration award. The Court
rejected all of Carmack’s claims, and confirmed the award.
The Court found Chase had not violated TILA by failing to respond
to Carmack’s “billing inquiry” and by proceeding to arbitration. The
Court agreed that TILA required that creditors respond to billing
error inquiries before attempting to collect disputed debt, but
found Carmack’s inquiry letter only relied on her supposed
“misunderstanding,” and failed to allege any specific error on the
statement. Instead, she merely suggested that her debt had been
previously paid off by promissory notes without providing any
evidence that such notes were sent or would have been accepted as
payment by Chase.
The Court also found no breach of contract in Chase’s pursuit of
an arbitral remedy against Carmack. Carmack alleged that she had
never received amendments to the original cardholder agreement that
contained an arbitration clause, but the Court noted that the
original agreement contained a valid arbitration agreement, and
Carmack had failed to contest that she received the original
agreement.
The Court further found that Carmack’s right to due process under
the law had not been violated during arbitration. The Court stated
that the FORUM provided all the necessary procedural safeguards
required under the law, and noted that “[t]he [National Arbitration
Forum] has been recognized by other courts as a viable alternative
to the judicial system.”
Without any statutory grounds for vacatur or modification of the
underlying award, the Court then granted Chase’s motion to confirm.
Carmack had alluded to arbitrator bias in her complaint, but the
Court found no evidence of actual bias that would warrant vacatur of
the award.
Later, the Court denied Carmack’s motion for reconsideration of
the confirmation. In her motion, Carmack claimed that she had a jury
right under the Federal Arbitration Act (FAA) as to whether a valid
arbitration agreement existed. The Court rejected her claim, finding
that the FAA jury right applied to motions to compel arbitration,
but not to motions to confirm an award.
Finally, Chase moved for an award of attorney’s fees, claiming
that it was entitled to such fees as the prevailing party under the
arbitration agreement. The Court granted Chase’s motion, finding the
fees provision in the agreement valid, and finding the award of fees
to the prevailing party permissible under California law.
Court Describes Discover Bank As a “Minority Position”
in Upholding Class Waiver Under South Dakota Law
A federal district court in New York, applying South Dakota law,
upheld a class waiver in an arbitration agreement, finding that the
cardholder’s ability to opt out of the agreement precluded a finding
of procedural unconscionability. Moreover, as the Court noted, the
case law limiting the enforceability of class waivers is a “minority
position.”
In Dumanis
v. Citibank (South Dakota), N.A., NO. 07-CV-6070, 2007 WL
3253975 (W.D. N.Y. Nov. 2, 2007), Dumanis transferred a large sum of
credit card debt onto a Citibank Platinum credit card under the
assumption that he would receive a 1.99% interest rate until the
balance was paid in full.
Dumanis later received notice that an arbitration agreement was
being added to his cardholder agreement. The arbitration agreement
contained a class action waiver barring class-wide proceedings.
Dumanis was given the option to opt out of the agreement and retain
his card until it expired. But he did not exercise this option.
When the interest rate on the card increased to 19.74%, Dumanis
filed a class action lawsuit against Citibank. In response, Citibank
moved to compel arbitration. In opposing the motion, Dumanis argued
that the class action waiver rendered the arbitration agreement
unconscionable.
The cardmember agreement contained a South Dakota choice-of-law
provision, but there is no South Dakota case law on the
enforceability of class waivers, so Dumanis relied on California law
– specifically, Discover Bank v. Superior Court, 113 P.3d
1100, 1110 (2005) in arguing that the class waiver rendered the
agreement unconscionable.
In rejecting Dumanis’ reliance on California law, the Court
explained that Discover Bank and its progeny are “the
minority position among courts in the United States.”
Moreover, the Court found that the opt-out provision precluded the
requisite finding of procedural unconscionability.
Reliance on Armendariz to Render Employee Arbitration
Agreement Unconscionable Unfounded Where Mutuality Exists
A California federal court held that an employment arbitration
agreement was valid despite a bar on punitive damages awards
because, unlike in previous cases, both parties to this
agreement were precluded from seeking punitive damages.
In Sinclair
v. ServiceMaster Co., No. CIV. 07-611 FCD/KJM, 2007 WL 3407138
(E.D. Cal. Nov. 14, 2007), Ken Sinclair was employed with
ServiceMaster and entered into an employment agreement that
contained an arbitration agreement.
He later signed a compensation agreement which promised him a
restricted stock award. When he did not receive the restricted
stock, he expressed concern. Sinclair was fired, allegedly for
cause, a few months later. Shortly after, ServiceMaster announced a
merger with an investment group.
Sinclair filed suit against ServiceMaster, alleging various
claims including wrongful termination, failure to pay wages, and
breach of good faith. ServiceMaster moved to compel arbitration.
Sinclair contended that the agreement was unconscionable because
it denied him the opportunity to seek punitive damages. See
Armendariz v. Foundation Health Psychcare Services, 6 P.3d
669 (2000). The Court found Sinclair’s “reliance on
Armendariz…unfounded.” Unlike in Armendariz, mutuality
existed in this case. Here, both parties were precluded from
seeking punitive damages, rather than just the employee. Such
preclusion of a remedy for both parties does not “shock the
conscience.”
Finally, the punitive damages exclusion “would not preclude any
remedy [Sinclair] may be entitled to under statute,” as only one of
Sinclair’s claims was based on a statute. For these reasons, the
Court found the arbitration agreement to be valid and
enforceable.
Arbitration Award by Unauthorized Entity Does Not Impede
Confirmation of Legitimate Award
The Tennessee Court of Appeals affirmed confirmation of an
arbitration award issued in favor of a credit card issuer even
though the cardholder presented a separate arbitration award in his
favor because only the award in favor of the issuer was obtained in
accordance with the cardmember agreement.
In MBNA
America Bank, N.A. v. Baker, No. M2004-02239-COA-R3-CV, 2007 WL
3443600 (Tenn. Ct. App. Nov. 15, 2007), Baker had an unpaid balance
on his MBNA credit card. MBNA attempted to collect, but Baker
withheld payment, which led to two arbitration proceedings.
Baker filed an arbitration claim with an entity known as the
American Arbitration Forum (AAF). This entity granted a “default
judgment” in Baker’s favor. MBNA filed an arbitration claim with the
National Arbitration Forum (FORUM), the arbitration administrator
named in Baker’s cardmember agreement. The FORUM arbitrator issued
an award in MBNA’s favor.
MBNA filed a court action seeking confirmation of the FORUM
award. Baker cited the AAF award in opposing confirmation. The trial
court confirmed the award.
On appeal, the Court held that the trial court properly confirmed
the award because the “[t]he cardholder agreement clearly call[ed]
for arbitration to be conducted by the National Arbitration Forum.”
In reaching its holding, the Court did not address various arguments
raised by Baker, describing them as “convoluted.”
Limits On Arbitration Would Burden Courts and
Taxpayers
The above entitled article
was published in The Metropolitan Corporate Counsel in its December
2007 issue. It was written by FORUM’s Mark Fellows, Legal Counsel
and Manager of Legal Research and Education. The article highlights
cost savings for parties, cost savings for businesses and consumers,
and substantial taxpayer savings. Fellows encourages readers to take
this information and use it to rebut arguments made in favor of
anti-arbitration bills that are circulating at state and federal
levels. These bills threaten to deprive businesses and consumers of
arbitration as an expeditious and cost effective alternative to
court.
Unpaid Credit-Card Bills Giving Rise to Lawsuits
The above entitled article
was published earlier this year in Fort Worth Star-Telegram and was
written by Teresa Mcusic. The article discusses recent changes to
Texas law, and the resultant impact on small claims litigation
related to consumer debt disputes. The article provides support for
arbitration as an effective and efficient means of resolving the
same disputes in a manner that does not burden tax payers and which
also relieves congestion of the court docket.
Judge Harold Kalina honored as recipient of Civil
Justice Award
On December 1, 2007, the National Arbitration Forum
presented its inaugural "Civil Justice Award" to Honorable Harold
Kalina, for whom the award will be named.
Judge Harold Kalina, a graduate of the University of
Minnesota law school, began his career at Scholle, Schweiger &
Kalina in Minneapolis where he practiced law from 1954 to 1972 and
was a partner. He served as a Minnesota State Senator for four terms
from 1955 to 1971 and as an Assistant Minority Leader for the Senate
from 1971 to 1972.
In 1972, he began his term as Judge of the Hennepin
County District Court, Fourth Judicial District, Minnesota. In 1981,
Kalina became Chief Judge of the Fourth Judicial District. He was
Partner at Oppenheimer Wolff & Donnelly in Minneapolis from 1983
to 1990. He then returned to the bench as a Fourth Judicial District
Court Judge from 1990 to 1995.
Judge Kalina began serving Minnesota courts as a
retired judge and was approved by the Minnesota Supreme Court as an
arbitrator and neutral mediator practicing in all alternative
dispute resolution areas. He joined the National Arbitration Forum
panel of arbitrators and mediators in 2001, and began hearing and
deciding cases over disputed domain names.
"Judge Kalina is a truly remarkable and sincere
individual who has made a significant impact in the legal
profession," said National Arbitration Forum Managing Director Roger
Haydock.
"Dignified jurists and neutrals like Judge Kalina
merit recognition for their knowledge, experience, skills and
abiding commitment to providing access to justice for all Americans.
The Honorable Harold Kalina Civil Justice Award program will shine
the spotlight on recipients that inspire both developing and
longstanding dispute resolution professionals around the
nation."
FORUM Panelist Teaches Advanced Commercial
Mediation in Slovenia
As a part of United States Embassy efforts to promote
and support judicial reform in Slovenia, Lynn H. Cole led a three
day training in October. It was organized by the Slovenian
Association of Mediators and co-funded by Embassy Ljublajana.
Participants included representatives from law offices, companies,
government ministries, courts and law schools. They received
training in the practice of business mediation and reaching
agreement with the assistance of a third party.
Cole is an Adjunct Professor of ADR at Stetson
University College of Law in Tampa Bay, Florida and is Florida and
Harvard trained in Mediation. Recently, she was elected to the
Florida Academy of Mediators, Board of Directors. She also serves as
the Chair of the ADR Section of the Federal Bar Association. Cole
has served as a FORUM Neutral since 2004.
FORUM Neutral Named Chair of ALFA International
FORUM Neutral Michael W. Hawkins of Cincinnati, Ohio, was named
Chair of Global Legal Network for ALFA International. ALFA
International is an organization of independent law firms whose
member firms endeavor to provide their clients with superior legal
services at reasonable costs by supplementing their own expertise
and resources with those of other members. ALFA’s membership is
compromised of 125 international law firms (85 U.S. based firms, 40
non U.S. based firms) employing over 8,500 lawyers and 10,000 other
legal professionals. Member firms are located in nearly every U.S.
state as well as Canada, Mexico, across Europe, Latin America, South
America, the Pacific Rim and Africa.
Hawkins, a seasoned labor and employment attorney for 35 years,
has also been a leading member of the International Services
Committee for the American Red Cross as well as a Board Member for
Refugees International for numerous years. Hawkins is a partner in
the law firm Dinsmore & Shohl, LLP, in Cincinnati, Ohio. He is
an Adjunct Professor at Xavier University specializing in Conflict
Resolution and Mediation. Hawkins has served as a FORUM Neutral
since 2001. Congratulations on this honor!
January 17 – 18, 2008 ~ CPR 2008 Annual
Meeting
Waldorf-Astoria Hotel
New York, NY
January 31, 2008 ~ LCIA (The London Court of International
Arbitration) Young International Group Symposium
New York, NY
February 1, 2008 ~ “The New York Convention: 50 years” –
11th IBA International Arbitration Day
Waldorf-Astoria
Hotel
New York, NY
February 6 – 12, 2008 ~ ABA’s 2008 Midyear
Meeting
Hyatt Regency Century Plaza
Los Angeles, CA
February 8, 2008 ~ The ABA Section of Dispute Resolution
Presents: Arbitrating the Mega-Case: Surviving and Succeeding in the
Mega-Arbitration
The Millennium Biltmore Hotel
Los Angeles, CA
March 5 – 7, 2008 ~ Keys to Success in Labor Relations:
Tools and Approaches that Work
The 19th Annual Center for
Collaborative Solutions (CCS) Labor-Management Conference is
co-sponsored by the California State Mediation and Conciliation
Service (CCMCS), the Federal Mediation and Conciliation Service
(FMCS) and the Public Employment Relations Board (PERB)
Disney’s
Paradise Pier Hotel
Anaheim, CA
UPCOMING FORUM
CONFERENCES
January 24, 2008 ~ FORUM Arbitrator Conference
To be held in conjunction with the ABA/FORUM Arbitration Moot
Court Competition on, January 25 - 26, 2008
St.
Petersburg, FL
Inform the Forum
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