The “Summer of Arbitration” continues. In this edition, I focus on four big recent cases from the Second Circuit. One vacated an arbitrator’s certification of a class action. A second refused to vacate an award, despite an allegation of perjury. And the last two relate to nearly 1.7 billion dollars worth of international arbitration awards. (Although I refuse the designation of “flyover country” for my beloved Midwest, I do have to acknowledge that the New York courts get much sexier arbitration cases than we do, and more of them.)
With all the buzz about class action waivers in arbitration clauses (and the CFPB trying to end their use in the financial industry), it is easy to forget that it is possible for class actions to go forward in arbitration. In Jock v. Sterling Jewelers, Inc., 2017 WL 3127243 (2d Cir. July 24, 2017), the arbitrator certified a class of plaintiffs that included “absent” class members. The district court concluded that it was “law of the case” that the arbitrator had the necessary authority to do that, based on a 2011 decision from the Second Circuit in the same matter. However, the Second Circuit found that the district court misunderstood – it had only ruled that the arbitrator had authority to determine whether some class arbitration was permissible – but had not ruled on the question of whether individuals who had not expressly opted into the class could be part of the class. So, this case goes back to the district court; a continuation of its seven-year class action purgatory.
In another case seeking vacatur, the Second Circuit had the opportunity to clarify when a party’s alleged fraud is sufficient to vacate an arbitration award. It held that for “fraud to be material within the meaning of Section 10(a)(1) of the FAA, petitioner must demonstrate a nexus between the alleged fraud and the decision made by the arbitrators, although petitioner need not demonstrate that the arbitrators would have reached a different result.” Odeon Capital Group, LLC v. Ackerman, __ F.3d__ (2d Cir. July 21, 2017). In this case, that meant that the employer was not able to vacate the $1.4 M award in favor of the employee, based on the employee’s alleged perjury, because the topic of the perjury had nothing to do with the claim on which he was awarded damages. (The general damage to his credibility was not sufficient.)
The two cases on international arbitration are better served by a blog focused on that topic. (I read enough cases as it is! I am sticking with my exclusive arrangement with the FAA.) But, the executive summary is that the Second Circuit declared that an opposing party deserves personal service of a petition seeking judgment on a $1.6 billion dollar award, not just ex parte proceedings under New York state law. Mobil Cerro Negro, Ltd. V. Bolivarian Republic of Venezuela, 2017 WL 2945603 (2d Cir. July 11, 2017). It also declared that district courts should grant “significant weight to considerations of international comity” in the rare instance that the winner in arbitration properly confirms a judgment in the U.S., but the award is later nullified (well after the deadline) by courts in another nation, and the loser in arbitration makes a Rule 60 motion to vacate that judgment. Thai-lao Lignite Co. v. Government of the Lao People’s Democratic Republic, __ F.3d__ (July 20, 2017).