Justia Contracts Opinion Summaries

A surety who issued a performance bond on a subcontract was not bound by that contract’s arbitration clause when the surety was jointly and severally liable for the “performance of” the subcontract and the entire subcontract was incorporated into the bond by reference.Petitioner entered into a contract with an electrical subcontractor pursuant to a master subcontract agreement that included a mandatory arbitration clause. Petitioner later entered into a subcontract with the electrical subcontractor to perform work on a project. The subcontract incorporated the entire master subcontract agreement by reference. The subcontractor obtained a performance bond from Respondent stating that Respondent was jointly and severally liable for the performance of the construction contract, which was incorporated into the bond by reference. Petitioner terminated the subcontract after a dispute with the electrical subcontractor and filed a demand for arbitration that included Respondent. Respondent requested a declaratory judgment that it was not bound by the arbitration clause. The circuit court granted partial summary judgment in favor of Respondent. The court of special appeals affirmed, ruling that Respondent could not be compelled to participate in the pending arbitration proceedings between Petitioner and the electrical subcontractor. The Court of Appeals affirmed for the reasons stated above. View "Schneider Electric Buildings Critical Systems, Inc. v. Western Surety Co." on Justia Law

The Supreme Court reversed the district court’s conclusion that, in this construction dispute, the express terms of a subcontract did not bind the subcontractor to the dispute resolution process within the general contract, and therefore, there was no arbitration agreement between the subcontractor and the project’s owner and general contractor. The Supreme Court held that the owner and general contractor’s motion to compel arbitration in the manner provided for in the general contract should have been sustained because the subcontract included a mutually agreed-to arbitration clause governed by the Federal Arbitration Act, and the subcontractor’s claims were governed by the clause. The court remanded with directions that the court stay the action and compel arbitration pursuant to the agreement. View "Frohberg Electric Co. v. Grossenburg Implement, Inc." on Justia Law

Plaintiffs filed suit against Vivint Solar, seeking rescission of an agreement in which Vivint Solar agreed to install a solar power generating system on their property in exchange for their agreement to purchase solar power generated by the system. Plaintiffs alleged individual and class claims for declaratory relief and violations of the Unfair Competition Law (UCL). The Court of Appeal held that the delegation clause in the arbitration provision of the agreement was enforceable and therefore it was the arbitrator, not the court, who was required to determine the enforceability of the arbitration provision and whether it covered class claims. The court issued a peremptory writ of mandate commanding the trial court to vacate that portion of its order in which it found the arbitration provision was not unconscionable or unenforceable, the claims asserted in the complaint were arbitrable, and the arbitration provision's prohibition against bringing class claims was enforceable. The court also vacated the order dismissing the class claims. The court denied in all other respects. View "Aanderud v. Superior Court of Kern County" on Justia Law

In this employment dispute, Employee filed an action in superior court alleging an unjust enrichment claim against Employee. Employee moved to compel arbitration under the parties’ employment contract’s arbitration provision and brought a claim for severance pay. The superior court granted the motion. Employer asserted various counterclaims. The arbitrator ruled in favor of Employer, finding that Employer properly rescinded the contract based on Employee’s underlying misrepresentations and omissions. The final arbitration award fully settled all claims and counterclaims submitted. The superior court confirmed the award but also granted Employer leave to amend its complaint to reassert its counterclaims. The superior court granted Employer’s motion to amend its complaint. The Supreme Court reversed, holding that Employer, having not specifically challenged the contract’s arbitration provision, may not amend its complaint and litigate its various claims against Employee in this action. View "Hamblen v. Honorable Ralph Hatch" on Justia Law

In 2013, Scheurer applied to work at Richelieu which outsourced its staffing needs to Remedy, a temporary staffing agency. The application form she signed with Remedy for placement with Richelieu contained an arbitration agreement. She was assigned to work for Richelieu, but that assignment ended after some months. About a year later, Remedy placed Scheurer with Fromm. Scheurer alleges that while working at Fromm, her supervisor sexually harassed her and that Fromm took no serious action to address the sexual harassment and instead fired her. Fromm tried to arrange a work situation that would have separated Scheurer from the supervisor, but when that proved “impossible,” Fromm asked Remedy to assign Scheurer to another client. Scheurer filed suit against Fromm, but not Remedy, alleging sexual harassment and retaliation, 42 U.S.C. 2000e‐2(a)(1) & 2000e‐3(a). Fromm argued that arbitration should be compelled under the contract law principle of equitable estoppel and because Fromm was a third‐party beneficiary of the Remedy agreement. The district court denied Fromm’s motion. The Seventh Circuit affirmed. There was no basis for finding that Fromm relied on Scheurer’s arbitration agreement since Fromm did not even know about it and Fromm was not a third‐party beneficiary of Remedy’s agreement with Scheurer. View "Scheurer v. Fromm Family Foods, LLC" on Justia Law

The Supreme Court affirmed its decision in Narayan I, in which the court held that Plaintiffs, a group of individual condominium owners, could not be compelled to arbitrate claims arising from the financial breakdown of a condominium project. Specifically, the court held in Narayan I that the arbitration clause was unenforceable because the terms of the documents at issue were ambiguous with respect to Plaintiffs’ intent to arbitrate and that portions of the arbitration clause were unconscionable. The United States Supreme Court vacated and remanded Narayan I for further consideration in light of its recent decision in DIRECTV, Inc. v. Imburgia, 577 U.S. __ (2015), which held that state law must place arbitration agreements on equal footing with all other contracts. After recognizing this principle, the Hawaii Supreme Court held that that the arbitration clause at issue in the present case was unconscionable under common law contract principles. View "Narayan v. Ritz-Carlton Development Co." on Justia Law

In case no. 1130590, Kathryn L. Honea appealed the denial of her motion to vacate an arbitration award entered in favor of Raymond James Financial Services, Inc. ("Raymond James"), and Bernard Michaud, an employee of Raymond James (collectively, "RJFS"). In case no. 1130655, RJFS appealed the trial court's denial of its motion to dismiss for lack of jurisdiction; that appeal was dismissed. Honea opened several investment accounts with Raymond James. Honea and Raymond James executed a "client agreement" that included an arbitration provision. Honea filed a complaint in the Jefferson Circuit Court asserting that she had opened four accounts with Raymond James and that Michaud had acted as her financial advisor as to those accounts. She alleged that RJFS engaged in "abusive brokerage practices" in that her investments were not diversified, "were far too risky," and "were of poor quality." The arbitration panel dismissed Honea's breach-of-fiduciary-duty, negligence, wantonness, fraud, and Alabama Securities Act claims and proceeded to hear the breach-of-contract claims. An arbitration panel entered an award in favor of RJFS. The arbitration panel found that "Michaud did not sufficiently know his client nor make sufficient inquiry to attempt to know his client, her holdings, and/or her investment experience. These failures contributed to losses in [Honea's] account." However, the arbitration panel "denied" Honea's breach-of-contract claims, stating that they were "barred by the applicable statutes of limitations." Although the Alabama Supreme Court found one contract appeared to govern this case and that RJFS breached its duties by failing to properly understand Honea's investment knowledge before March 2000, Honea contended that allegedly improper transactions--the excessive use of margin and overly aggressive, high-risk trading occurring after March 2000--represented independent breaches of the FINRA rules. Those claims accrued within the six-year limitations period before her complaint was filed. Further, any knowledge by Honea of her losses did not mean that the trading activity was proper. Thus, to the extent that any transactions after March 2000 would be considered separate breaches of contract unrelated to the failure to properly know Honea, her holdings, or her investment experience, or setting up an "unsuitable" account, the Court found Honea demonstrated probable merit--for purposes of a Rule 59(g) hearing--that those claims would not be barred by the statute of limitations. Honea demonstrated that, in relation to the certain breach-of-contract claims, she was entitled to a Rule 59(g) hearing on her motion to vacate the arbitration award. View "Honea v. Raymond James Financial Services, Inc." on Justia Law

A final determination of liability but not damages in arbitration can satisfy the final requirement of Article V(1)(e) of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards when the parties have agreed to submit the issue of liability to the arbitrator for a distinct determination prior to a separate proceeding to assess damages.At issue in this appeal was the district court’s judicial recognition of an English arbitrator’s determination of joint contract liability against the seller and the renovator of a building. The parties agreed to bifurcate litigation of the liability and damages issues. Accordingly, the district court treated the liability judgment, which was decided before the damages issues, as final and thus entitled to judicial recognition. Specifically, the district court held the contractor for the renovation work bound as a party to the agreement providing for arbitration of disputes. The renovator and contractor appealed, claiming that the arbitrator’s judgment of liability in the bifurcated arbitration proceeding lacked the finality required for judicial confirmation of a foreign arbitral award under 9 U.S.C. 207. The First Circuit affirmed, holding that the arbitrator’s liability judgment was final in this instance and that the contractor could indeed be subjected to arbitration. View "University of Notre Dame (USA) in England v. TJAC Waterloo, LLC" on Justia Law

The Eighth Circuit affirmed the district court's order compelling arbitration and dismissing plaintiff's case without prejudice where he alleged violations of minimum wage laws, as well as fraud. In this case, plaintiff signed a Volunteer Release, Waiver and Indemnification Agreement when he volunteered as a concession worker for a fundraiser. The court held that the agreement was not unconscionable under Missouri law because the agreement was easy to understand, with no evidence that it was non-negotiable. Furthermore, the agreement did not lack consideration where the consideration was that plaintiff was giving up his right to sue in return for his opportunity to volunteer and DNCS's contribution to Washington University, something neither was legally bound to do. Finally, the underlying factual allegations were covered by the arbitration provision. View "Leonard v. Delaware North Companies Sport Service, Inc." on Justia Law

Rainbow Cinemas, LLC ("Rainbow"), Ambarish Keshani, and Harshit Thakker (collectively, "the defendants") appealed a circuit court order denying their motion to compel arbitration of a contract dispute with Consolidated Construction Company of Alabama ("CCC"). In the contract at issue here, CCC agreed to provide specified services in constructing a movie theater for Rainbow. The parties signed the American Institute of Architects "Document A101-2007 -- Standard Form of Agreement Between Owner and Contractor where the basis of payment is a Stipulated Sum" ("the agreement"). The agreement incorporated by reference American Institute of Architects "Document A201-2007 -- General Conditions of the Contract for Construction" ("the general conditions"). In 2016, after having already initiated the arbitration process, CCC sued the defendants. Among other things, CCC alleged that the defendants had fraudulently induced it into entering into the contract. Specifically, CCC alleged that the defendants knew that the contract required an initial decision maker and that the defendants also "knew they had not contracted for [initial-decision-maker] services from the [initial decision maker]." CCC alleged that the defendants "failed to inform CCC ... that Rainbow had not contracted with [architect Hay] Buchanan to act as [the initial decision maker]." The Alabama Supreme Court reversed and remanded, finding that the contract incorporated the AAA's Construction Industry Arbitration Rules, which state that "[t]he arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement." Although the question whether an arbitration provision may be used to compel arbitration between a signatory and a nonsignatory is a threshold question of arbitrability usually decided by the court, here that question was delegated to the arbitrator. The arbitrator, not the court, had to decide that threshold issue. View "Rainbow Cinemas, LLC v. Consolidated Construction Company of Alabama" on Justia Law