Justia U.S. 2nd Circuit Court of Appeals Opinion Summaries

Articles Posted in Arbitration & Mediation
by
The United States Court of Appeals for the Second Circuit has decided an appeal from The Resource Group International Limited, TRG Pakistan Limited, Mohammed Khaishgi, and Hasnain Aslam against Muhammad Ziaullah Khan Chishti. The appellants sought to avoid arbitration proceedings initiated by the appellee, arguing that a later-executed release agreement superseded the arbitration agreement in the original Stock Purchase Agreement. The appellants also sought a preliminary injunction to halt the ongoing arbitration, but the District Court denied their request, asserting that they failed to show a likelihood of success on their claims and that they would suffer irreparable harm without the injunction.On appeal, the Circuit Court held that it had jurisdiction over the case, finding that the parties had chosen New York law to govern the arbitration proceedings, thereby bypassing the restrictions on appellate review under the Federal Arbitration Act. The court also held that the District Court had relied on an erroneous view of the law in concluding that the appellants failed to show a likelihood of success on the merits of their claims and that they would suffer irreparable harm. The court found that the release agreement, which contained a forum selection clause, superseded the Stock Purchase Agreement's arbitration clause. The court also clarified that being forced to arbitrate a non-arbitrable claim could constitute irreparable harm, particularly where attorneys' fees and arbitration costs could not adequately compensate the harm.As a result, the court vacated the District Court's decision and remanded the case for further proceedings. View "The Resource Group International Limited v. Chishti" on Justia Law

by
In the case involving the Restaurant Law Center and the New York State Restaurant Association against the City of New York and the Commissioner of the City’s Department of Consumer and Worker Protection, the plaintiffs challenged a New York City law prohibiting the wrongful discharge of fast-food restaurant employees. The plaintiffs argued that the law was preempted by federal law and violated the dormant Commerce Clause of the United States Constitution.The United States Court of Appeals for the Second Circuit affirmed the decision of the United States District Court for the Southern District of New York, which had granted the defendants’ motions for summary judgment. The appellate court concluded that the city's Wrongful Discharge Law did not violate federal law nor the United States Constitution.The court held that New York’s Wrongful Discharge Law was not preempted by the National Labor Relations Act (NLRA) because it established minimum labor standards that regulated the substance, rather than the process, of labor negotiations. The court also held that the law did not violate the dormant Commerce Clause of the U.S. Constitution, which acts as a safeguard against economic protectionism. The court found that the law did not discriminate against interstate commerce either on its face, in its purpose, or in its practical effect. View "Restaurant Law Center v. City of New York" on Justia Law

by
Defendant Klarna, Inc. ("Klarna") provides a "buy now, pay later" service that allows shoppers to buy a product and pay for it in four equal installments over time without incurring any interest or fees. Plaintiff paid for two online purchases using Klarna. Plaintiff incurred $70 in overdraft fees. Plaintiff brought this action on behalf of herself and a class of similarly situated consumers, alleging that Klarna misrepresents and conceals the risk of bank-overdraft fees that consumers face when using its pay-over-time service and asserting claims for common-law fraud and violations of the Connecticut Unfair Trade Practice Act ("CUTPA"). Klarna moved to compel arbitration. The district court denied Klarna's motion.   The Second Circuit reversed he district court's order and remanded with instructions to grant Klarna's motion to compel arbitration. The court explained that when Plaintiff arrived at the Klarna Widget, she knew well that purchasing the GameStop item with Klarna meant that she was entering into a continuing relationship with Klarna, one that would endure at least until she repaid all four installments. The Klarna Widget provided clear notice that there were terms that would govern this continuing relationship. A reasonable internet user, therefore, would understand that finalizing the GameStop transaction, entering into a forward-looking relationship with Klarna, and receiving the benefit of Klarna's service would constitute assent to those terms. The court explained that Plaintiff was on inquiry notice that her "agreement to the payment terms," necessarily encompassed more than the information provided on the Klarna Widget, and the burden was then on her to find out to what terms she was accepting. View "Najah Edmundson v. Klarna Inc." on Justia Law

by
Petitioner is a former employee of International Business Machines Corporation (“IBM”) who signed a separation agreement requiring confidential arbitration of any claims arising from her termination. Petitioner arbitrated an age-discrimination claim against IBM and won. She then filed a petition in federal court under the Federal Arbitration Act (“FAA”) to confirm the award, attaching it to the petition under seal but simultaneously moving to unseal it. Shortly after she filed the petition, IBM paid the award in full. The district court granted Petitioner’s petition to confirm the award and her motion to unseal. On appeal, IBM argued that (1) the petition to confirm became moot once IBM paid the award, and (2) the district court erred in unsealing the confidential award.   The Second Circuit vacated the district court’s confirmation of the award and remanded with instructions to dismiss the petition as moot. The court reversed the district court’s grant of the motion to unseal. The court explained that Petitioner’s petition to confirm her purely monetary award became moot when IBM paid the award in full because there remained no “concrete” interest in enforcement of the award to maintain a case or controversy under Article III. Second, any presumption of public access to judicial documents is outweighed by the importance of confidentiality under the FAA and the impropriety of Petitioner’s effort to evade the confidentiality provision in her arbitration agreement. View "Stafford v. Int'l Bus. Machs. Corp." on Justia Law

by
Plaintiffs are twenty-six former employees of International Business Machines Corporation (“IBM”) who signed separation agreements requiring them to arbitrate any claims arising from their termination by IBM. The agreements set a deadline for initiating arbitration and included a confidentiality requirement. Plaintiffs missed the deadline but nonetheless tried to arbitrate claims under the Age Discrimination in Employment Act of 1967 (“ADEA”). Their arbitrations were dismissed as untimely. They then sued IBM in district court, seeking a declaration that the deadline is unenforceable because it does not incorporate the “piggybacking rule,” a judge-made exception to the ADEA’s administrative exhaustion requirements. Shortly after filing suit, Plaintiffs moved for summary judgment and attached various documents obtained by Plaintiffs’ counsel in other confidential arbitration proceedings. IBM moved to seal the confidential documents. The district court granted IBM’s motions to dismiss and seal the documents. On appeal, Plaintiffs argued that (1) the filing deadline in their separation agreements is unenforceable and (2) the district court abused its discretion by granting IBM’s motion to seal.   The Second Circuit affirmed. The court first wrote that the piggybacking rule does not apply to arbitration and, in any event, it is not a substantive right under the ADEA. Second, the court held that the presumption of public access to judicial documents is outweighed here by the Federal Arbitration Act’s (“FAA”) strong policy in favor of enforcing arbitral confidentiality provisions and the impropriety of counsel’s attempt to evade the agreement by attaching confidential documents to a premature motion for summary judgment. View "In re IBM Arb. Agreement Litig." on Justia Law

by
Petitioner appealed from a district court judgment dismissing his to confirm an arbitral award. The court held that a forum selection 2 clause in the parties’ arbitration agreement required that any confirmation action be brought in the state courts of New Jersey or New York, and that this deprived the district court of subject matter jurisdiction.   The Second Circuit vacated. The court concluded that the district court erred in dismissing Petitioner’s petition. First, the court held that the petition adequately pleaded subject matter jurisdiction based on diversity of citizenship. Because parties cannot contractually strip a district court of its subject matter jurisdiction, it was error to conclude that the forum selection clause did so. Second, the court interpreted the relevant forum selection clauses as permissive arrangements that merely allow litigation in certain fora, rather than mandatory provisions that require litigation to occur only there. Accordingly, applying the modified forum non conveniens framework, the court held that the forum selection clauses did not bar proceedings from going forward in the United States District Court for the Southern District of New York. View "Rabinowitz v. Kelman" on Justia Law

by
Respondent the State of Libya (“Libya”) appealed from a district court judgment granting Petitioner Olin Holdings Limited’s (“Olin”) petition to confirm an arbitration award issued under a bilateral investment treaty between Libya and the Republic of Cyprus and denying Libya’s cross-motion to dismiss the petition on forum non-conveniens grounds. On appeal, Libya’s primary argument is that the district court erred by declining to independently review the arbitrability of Olin’s claims before confirming the final award.   The Second Circuit affirmed. The court held that Libya was not entitled to de novo review of the arbitral tribunal’s decisions because it “clearly and unmistakably” agreed to submit questions of arbitrability to the arbitrators in the first instance. The court further concluded that the district court properly confirmed the final award and rejected Libya’s cross-motion to dismiss the petition. The court explained that regarding the public and private interest factors, the district court held that Libya fell well short of satisfying its heavy burden because it “failed to identify even one” factor that weighed in favor of dismissal. On appeal, Libya makes “no persuasive argument identifying an error in the factual or legal components of the district court’s discretionary decision.” View "Olin Holdings Ltd. v. State of Libya" on Justia Law

by
Respondent is a former employee who won a judgment in Argentina's National Court of Labor Appeals against Citibank, N.A. Petitioner, the Argentinian branch of Citibank, N.A., filed a demand for arbitration with the American Arbitration Association and brought the proceedings below. The district court compelled arbitration, preliminarily enjoined the employee from enforcing the Argentinian judgment against Petitioner, and held Respondent in contempt of court. It also denied his motion to dismiss.   The Second Circuit reversed and remanded. The court held that the district court lacked subject matter jurisdiction over the Petition. Therefore, the district court was without authority to issue its orders in this case. The court reversed the district court's orders -- including its order to compel arbitration, the preliminary injunction it entered against Respondent, its order finding Respondent in contempt, and its order requiring Respondent to pay the Branch's attorneys' fees and costs. The court concluded that because the Branch has not shown it enjoys independent legal existence and Citibank has not sought to substitute itself or join this action as the real party in interest, there has been no party adverse to Respondent. Without adverse parties, there can be no subject matter jurisdiction under Article III. View "The branch of Citibank, N.A., established in the Republic of Argentina v." on Justia Law

by
Defendant Niagara Mohawk Power Corporation (the "Company"), which does business as National Grid, is an electric and natural gas utility that operates throughout New York State. According to Plaintiff Local Union 97, International Brotherhood of Electrical Workers, AFL-CIO (the "Union"), Defendant agreed to provide to certain retired employees, former members of the Union. The Union filed a motion to compel arbitration pursuant to section 301(a) of the Labor Management Relations Act, 29 U.S.C. Section 185(a). The same day, the Company filed a motion for summary judgment dismissing the Complaint. The district court granted the Union's motion to compel arbitration, denied the Company's motion for summary judgment, and ordered that the case be closed.   The Second Circuit affirmed, holding that the agreement covers the dispute. The court explained that when it negotiated the Agreement, the Union bargained both for health insurance benefits for retired employees and for a grievance procedure that included, where necessary, access to arbitration. The court explained that it expressed no view on the merits of the Union's grievance; that is a question for the arbitrator. But interpreting the collective bargaining agreement in light of the principles the Supreme Court reaffirmed in Granite Rock, it is clear that the parties intended to arbitrate this dispute. View "Local Union 97, Int'l Bhd. of Elec. Workers, AFL-CIO v. Niagara Mohawk" on Justia Law

by
Plaintiff Tutor Perini Building Corp. appealed from the district court’s order affirming an order of the United States Bankruptcy Court, which held that Plaintiff may not use 11 U.S.C. Section 365(b)(1)(A) to assert a “cure claim” against the Trustee for the Trustee’s assumption of an unexpired lease to which Plaintiff was neither a party nor a third-party beneficiary.   The Second Circuit affirmed. The court held that a creditor who seeks to assert a “cure claim” under Section 365(b)(1)(A) must have a contractual right to payment under the assumed executory contract or unexpired lease in question, and the court agreed that Plaintiff is not a third-party beneficiary of the assumed lease. The court explained that Tutor Perini’s expansive view of the priority rights conferred by 11 U.S.C. Section 365(b)(1)(A) is inconsistent with applicable principles of Bankruptcy Code interpretation, and its third-party beneficiary argument is inconsistent with controlling principles of New York contract law. View "In re: George Washington Bridge" on Justia Law