Recent News
2003 Newsletter

For Week Ending October 6, 2003
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THIS WEEK:

1. Arbitration: Broad arbitration clauses encompass unforeseeable
disputes, including those arising out of tortuous conduct. (7th Cir. (Wis.))

2. Mediation: The California statute giving the court authorization
to make custody and visitation orders implicitly allows the court to
make collateral orders, such as counseling orders, that are reasonably
related to the custody and visitation orders. (Cal. Ct. App.)

3. Arbitration:An arbitrator's decision to reinstate a fired
employee is subject to vacation on the grounds of fraud if discovered
that employee lied at the arbitration hearing. (8th Cir. (Iowa))

4. Arbitration: Borrower's claims against home mortgage company held
arbitrable. (11th Cir. (Ala.))
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CASE SUMMARY:

1. Arbitration: Broad arbitration clauses encompass unforeseeable
disputes, including those arising out of tortuous conduct.
Deputy v. Lehman Bros. Inc., 2003 WL 22227977 (7th Cir. (Wis.), Sept. 29, 2003).

Doris Deputy (Deputy) sued Lehman Brothers, Inc. (Lehman) in the United
states District Court for the Eastern District of Wisconsin for various
state law claims relating to fraud perpetrated by her investment advisor
(one of Lehman's brokers). Citing the existence of a broad arbitration
clause in its client agreement with Deputy, Lehman unsuccessfully moved
to stay the action and compel arbitration. In reversing and remanding
the case, the United States Court of Appeals for the Seventh Circuit
rejected Deputy's alternative grounds for affirmance.
Specifically, the court held that even if Deputy could not reasonably
foresee the occurrence of her investment advisor's fraud at the time she
allegedly signed the client agreement, her claim relating to such
unforeseeable tortuous conduct nevertheless "fell within the broad scope
of the arbitration clause." (DD)

Full opinion available at:
http://www.ca7.uscourts.gov/op3.fwx?submit1=showop&caseno=02-4305.PDF

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2. Mediation: The California statute giving the court authorization
to make custody and visitation orders implicitly allows the court to
make collateral orders, such as counseling orders, that are reasonably
related to the custody and visitation orders.
In re Nicholas H., 2003 WL 22220522 (Cal. Ct. App., Sept. 26, 2003).

Kimberly H. contends that the juvenile court erred by issuing an exit
order requiring Nicholas' mother, Kimberly, and presumed father, Thomas,
to reach a mediated agreement regarding the method to be used to inform
Nicholas that Thomas is not his biological father. The Court of Appeal
for the State of California affirmed the judgment of the lower court and
discussed two primary reasons why the order was proper. First, the
order was proper under section 362.4 of the state's family law code
because it was a collateral order reasonably related to the court's
custody and visitation orders. Second, the exit order is also proper
under section 362 (c) since the parents' dispute about the nature of
Thomas' relationship with Nicholas is the reason for the original
filing. The dispute continues to affect the parents' relationship and
the parent-child relationship. Thus, the court held that the lower
court could have reasonably concluded that the mediation requirement is
necessary to protect Nicholas from future harm. The court also
emphasized how a mediation requirement promotes the "strong public
interest in preventing the juvenile dependency system from being used to
subsidize private child custody disputes." (CF)

Full opinion available online at:
http://www.courtinfo.ca.gov/opinions/documents/A100434.PDF

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3. Arbitration: An arbitrator's decision to reinstate a fired
employee is subject to vacation on the grounds of fraud if discovered
that employee lied at the arbitration hearing.
MidAmerican Energy Co. v. Int'l Bhd. Elec. Workers Local 499 2003 WL
22218762 (8th Cir. (Iowa), Sept. 26, 2003)

MidAmerican fired Ronald Turner because he left the job site for several
hours while acting as the sole security and safety monitor of the liquid
natural gas tanks. After a hearing, the arbitrator ordered MidAmerican
to reinstate Turner, albeit not necessarily in the same safety
capacity. Turner testified at the arbitration hearing that he left the
job site because his wife phoned and urged him to look for their missing
son. In his decision, the arbitrator noted Turner's lengthy and
previously unblemished work record, and the forthright way he
acknowledged his errors and took responsibility. MidAmerican later
received an anonymous tip that Turner had been with his mistress that
night. After obtaining a confirming deposition from the mistress,
MidAmerican moved to vacate the arbitration award due to fraud. The
United States District Court refused to vacate the award. The United
States Court of Appeals Eighth Circuit reversed, and remanded the case
to the District Court for factual findings on whether the award was a
result of fraud on the part of Turner. (DG)

Full opinion available at:

http://www.ca8.uscourts.gov/opndir/03/09/023826P.pdf

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4. Arbitration: Borrower's claims against home mortgage company held
arbitrable.
Anders v. Hometown Mortgage Services, Inc., 2003 WL 22209334 (11th Cir.
(Ala.) Sept. 25, 2003).

Jonah Anders brought suit against Hometown Mortgage Services, Inc. in
United States District Court citing violations of the federal Truth in
Lending Act (TILA) and the Real Estate Settlement Procedures Act
(RESPA). Hometown filed a motion to compel arbitration based on an
arbitration agreement signed by Anders when he borrowed funds from
Hometown to finance the purchase of his home. The district court issued
an order to compel arbitration. Anders appealed arguing that the
agreement to arbitrate did not reach his claims, was unenforceable
because he could not afford arbitration, and was invalid because of its
restrictions on available remedies. The Court of Appeals for the 11th
Circuit found that the arbitration agreement was sufficiently broad to
include claims under the TILA and RESPA, and that Hometown's stipulation
in district court that it would pay Anders' arbitration fees disposed of
his argument that arbitration would be prohibitively expensive. On the
issue of remedies, the court noted that the agreement between Anders and
Hometown contained a severability provision which provided that in the
event a portion of the agreement was held invalid, the remainder of the
agreement should be enforced. Because the agreement specified that
disputes arising under the agreement should be arbitrated under Alabama
law, and Alabama law favors severability, the court determined that the
validity of the clause restricting remedies should be decided by the
arbitrator. (AL)

Full opinion available online at:
http://www.ca11.uscourts.gov/opinions/ops/200214448.pdf

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Writers: Sabrina Axt, Dawn Douglas, Cayce Falck, Diane Gould & Ann Ledgerwood
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