On March 20, 2015, in First State Ins. v. National Casualty Co., the First Circuit affirmed a District Court’s refusal to vacate an arbitral remedy that the party seeking vacation claimed was “plucked out of thin air” and not derived from any term in the contract at issue. When reviewing an arbitral award, the only question is whether the arbiter was even arguably construing the agreements. Here, the First Circuit found that the arbiter unquestionably was doing so. Moreover, the contracts at issue directed the arbiter to consider each agreement as “an honorable engagement rather than merely a legal obligation” and relieved the arbiters “of all judicial formalities and may abstain from following the strict rules of law.” This provision permitted arbiters to grant equitable remedies, which is precisely what they did. Justice Souter sat on the panel and joined in Judge Selya’s opinion for the unanimous panel.
On March 25, 2015, the Eight Circuit decided Torres v. Simpatico, Inc. The issue in that case was that a number of franchisees claimed that an arbitration provision in a franchise agreement was unconscionable because the individual arbitration processes were prohibitively expensive. The Eighth Circuit affirmed the District Court’s finding that plaintiffs had not met their burden of establishing that the arbitration costs would be prohibitively high for any particular plaintiff. The court also rejected plaintiffs claim that non-signatories to the arbitration agreement could not seek to compel arbitration. In this case, the non-signatories were third-party beneficiaries entitled to invoke the arbitration provision.
On March 27, 2015, the Sixth Circuit decided Shy v. Navistar Int’l, Corp. That case involved claims that Navistar was improperly classifying aspects of its business activities and structuring its business so as to evade its profit-sharing obligations under an agreement relating to a consent decree in a litigation relating to Navistar employee retirement benefits. The Sixth Circuit affirmed the District Court’s finding that the claims were subject to an arbitration provision in the parties’ agreement. However, it reversed the District Court’s finding that Navistar’s conduct amounted to a waiver of its right to compel arbitration. The case was remanded with instructions to compel arbitration. Judge Clay dissented, finding both that the parties had not contemplated arbitrating claims of this scope that that Navistar had waived its right to arbitration “by engaging in an unmistakable campaign of avoidance and delay both before and after the SBC intervened to enforce the settlement agreement in the instant litigation.”
