Recent Developments in Dispute Resolution
Willamette University, College of Law
Center for Dispute Resolution

November 24-30, 2003
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THIS WEEK:

1. Arbitration: A domestic liquor distributor cannot invoke the Twenty-first Amendment to invalidate a forum selection clause contained in an international arbitration agreement; however, when a state specifically requires that its substantive law apply to distributorship transactions, a foreign choice-of-law clause is invalid. (7th Cir.)

2. Mediation: Mediation as condition precedent for attorney fee award enforceable only against moving party. (Cal. App. 1st Dist.)

3. Arbitration: An arbitrator's decision under a collective bargaining agreement may not preclude an employee from suing to enforce his statutory rights, unless the collective bargaining agreement specifically waived employee's judicial remedies. (Cal. Ct. App.)

4. Arbitration: Plaintiff is equitably estopped from asserting that nonsignatory to contract cannot invoke arbitration clause. (Ga. App.)

5. Arbitration: Arbitration clause was found unenforceable as against public policy when the contract limited remedies that were provided by a consumer protection statute. (Fla. App. 2nd Dist.)

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CASE SUMMARY:

1. Arbitration: A domestic liquor distributor cannot invoke the Twenty-first Amendment to invalidate a forum selection clause contained in an international arbitration agreement; however, when a state specifically requires that its substantive law apply to distributorship transactions, a foreign choice-of-law clause is invalid.

Stawski Distrib. Co., Inc. v. Browary Zywiec S.A., 2003 WL 22724674 (7th Cir., Nov. 21, 2003).

An Illinois beer distributor (Stawski) and a Polish brewer (Zywiec) entered into a liquor supply contract agreeing to arbitrate any disputes arising under the contract in Poland and under Polish law. When a dispute arose, Zywiec notified Stawski of its intention to sell beer through another Illinois distributor. In response, Stawski sued Zywiec for violating the Illinois Beer Industry Fair Dealing Act (Act). Zywiec then moved to stay the litigation in favor of arbitration. Finding that the Twenty-first Amendment permits Illinois to displace both the NY Convention and the FAA for its liquor business, the district court found in favor of Stawski. On appeal, the United States Court of Appeals, Seventh Circuit rejected the lower court's finding regarding the Twenty-first Amendment. Instead, the court held that the FAA preempts the Act's requirement that an arbitration agreement between a distributor and a brewer be a "separate item on an ala carte menu." Thus, the parties' standard-form contract, including the provision naming Poland as the arbitration venue is valid. The Seventh Circuit also held that since the choice-of-law clause violates Illinois' requirement that its substantive law be applied to distributorship transactions, the portion of the agreement requiring that Polish law govern their arbitration must be invalidated. (DD)

Full opinion available online at: http://www.ca7.uscourts.gov/op3.fwx?submit1=showop&caseno=03-2553.PDF

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2. Mediation: Mediation as condition precedent for attorney fee award enforceable only against moving party.

Bay Area Luxury Homes v. Lee, et al., 2003 WL 22664648 (Cal. App. 1 Dist., Nov. 12, 2003).

William and Leslie Lee entered into a contract to buy land and construct a home on that land with Bay Area Luxury Homes. The parties agreed to mediate any dispute before going to court. If the party commencing a court action refused to take part in mediation, attorney fees awarded in court could be set aside at the discretion of the judge. A dispute arose, and the parties mediated three times. Mrs. Lee did not appear at the first two mediations (although she was available by telephone, and Mr. Lee contacted her several times throughout the mediations). The parties did not settle, and Bay Area sued. The trial court ruled in favor of the Lees, and awarded them attorney fees. Bay Area appealed the award of attorney fees, arguing that even though they commenced the action, Mrs. Lee's failure to participate in person at the mediations barred the award because of reciprocity. The California Court of Appeals affirmed the award of attorney fees, stating that the contract had express limitations on attorney fee awards. Mediation was a condition precedent to an award, but only for the party commencing court action. Even without the condition precedent, the appeal would fail because the contract gave specific discretion to the judge, and Mrs. Lee's telephone contact evidenced her participation in the mediations.

Full opinion available online at: http://www.courtinfo.ca.gov/opinions/nonpub/A098667.PDF

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3. Arbitration: An arbitrator's decision under a collective bargaining agreement may not preclude an employee from suing to enforce his statutory rights, unless the collective bargaining agreement specifically waived employee's judicial remedies.

Taylor v. Lockheed Martin Corp. 2003 WL 22700897 (Cal. Ct. App. Nov. 17, 2003)

Lockheed Martin Corporation (Lockheed) fired Taylor after he refused counseling following an altercation with fellow employees. Taylor sued, claiming his discharge was in retaliation for an earlier complaint he had filed with California's Occupational Safety and Health Division. Taylor also filed a grievance under his union's collective bargaining agreement (CBA), which mandated arbitration. The arbitrator decided that Lockheed had terminated Taylor for just cause. The trial court then granted Lockheed's motion for summary judgment on the retaliatory discharge claim, citing the preclusive effect of the arbitrator's decision. Taylor appealed. Lockheed claimed that Taylor waived his rights to a judicial remedy by voluntarily submitting his claim to arbitration under the CBA. The California Court of Appeals disagreed; an arbitrator's decision may not preclude a later statutory claim unless the CBA clearly and unmistakably waives the employee's right to a judicial remedy. (DG)

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

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4. Arbitration: Plaintiff is equitably estopped from asserting that nonsignatory to contract cannot invoke arbitration clause.

AutoNation Fin. Services Corp., v. Arain, 2003 WL 22724649 (Ga. App., Nov. 20, 2003).

While buying a new car from George Sutherlin Nissan, Inc. (Sutherlin), Khalid Arain purchased a Theft Protection Program (TPP) through AutoNation Financial Services Corporation (AutoNation). Arain brought suit against both AutoNation and Sutherlin alleging that the parties worked in concert to charge exorbitant rates for the TPP. AutoNation and Sutherlin moved to compel arbitration pursuant to a clause in the installment sales contract signed by Arain. Subsequently, Arain dropped Sutherlin from the suit. The trial court denied AutoNation's motion to compel arbitration on the ground that AutoNation was a nonsignatory to the contract. On review, the Georgia Court of Appeals reversed the trial court, and held that Arain was equitably estopped from denying AutoNation's enforcement of the arbitration clause. Relying on case law from the 11th Circuit Court of Appeals, the court determined that two bases existed for the application of equitable estoppel: 1) when the claims relate to the contract or 2) when claims against the signatory and nonsignatory arise out of interdependent and concerted misconduct by those parties. Here, Arain's complaint fulfilled both requirements because it was directly related to the installment contract and asserted that the parties had acted in concert to defraud him. (AL)

Full opinion available online at: http://www.gaappeals.us/

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5. Arbitration: Arbitration clause was found unenforceable as against public policy when the contract limited remedies that were provided by a consumer protection statute.

Holt et al. v. O'Brien Imports of Ft. Myers, Inc., 2003 WL 22681423 (Fla. App. 2nd Dist. Nov. 14, 2003).

Automobile purchasers (Holt) sued dealer, O'Brien Imports, under the Florida Deceptive and Unfair Trade Practices Act (FDUTPA) and the Motor Vehicle Retail Sales Finance Act (MVRSFA). Holt asserted that O'Brien did not provide certain disclosures and documentation as required by the MVRSFA. O'Brien successfully moved to dismiss the complaints and compel arbitration pursuant to the purchase contracts. The appeals court reversed, finding the arbitration agreement unenforceable. The FDUTPA authorizes declaratory and injunctive relief but the arbitration clause contained in O'Brien's contracts limit the arbitrator to an award of damages, fees, and costs. Because the clause limited the statutorily-created remedies, it was held to be contrary to public policy. The arbitration clause was further found to be unenforceable due to a provision that allowed an award of attorney fees to any party incurring costs associated with compelling arbitration under the contract; this however, was found to be in violation of the FDUTPA, which provides a nonwaivable right to attorney fees for willful violations of the MVRSFA. (CN)

Full opinion available online at: http://www.2dca.org/opinion/November%2014,%202003/2D02-3994.pdf

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