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

February 25, 2007 - March 3, 2007
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THIS WEEK:

1. Arbitration: A lender may waive the right to pursue arbitration when he proceeds substantially into foreclosure proceedings
and does not enforce his otherwise enforceable right to proceed to arbitration. (Ky.App.).

2. Arbitration: Parties must manifest a clear intent to apply standards other than those specified in the Federal Arbitration
Act. (C.A.3(N.J.)).

3. Arbitration: When there is ambiguous language about the scope of rewards available, the contract is to be read in favor of
the arbitrator’s findings of fact. (C.A.5(Tex.)).

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Arbitration: A lender may waive the right to pursue arbitration when he proceeds substantially into foreclosure proceedings
and does not enforce his otherwise enforceable right to proceed to arbitration. (Ky.App.).

Green Tree Servicing, LLC. v. Phelps, WL 625077 (Ky.App., Mar. 2, 2007).

Green Tree Servicing, LLC (Green Tree) brought an action against Scott and Pam Phelps to foreclose on a loan. There was an
arbitration agreement between the parties that allowed the lender to seek collection on a defaulted loan in the courts and then
later remove the matter to arbitration when the borrower countersued on the same loan. The circuit court denied Green Tree’s
motion to compel arbitration because the parties had already moved substantially through litigation over the course of four years.
The court of appeals affirmed, holding that a lender’s right to remove from the courts to arbitration may be waived when it is a
belated attempt to forum shop and would be unfairly prejudicial to the borrowers. (MS).

Full opinion available online at Westlaw.

Arbitration: Parties must manifest a clear intent to apply standards other than those specified in the Federal Arbitration
Act. (C.A.3(N.J.)).

Sutter, M.D. v. Oxford Health Plans, LLC., WL 625625 (C.A.3(N.J.) Feb. 28, 2007).

Oxford Health Plan, LLC (Oxford) and John Sutter, M.D. (Sutter) were parties to an arbitration agreement governed by the American
Arbitration Association (AAA). The Parties arbitrated a dispute in which the arbitrator awarded class certification to Sutter. Oxford filed
a motion in district court to vacate the award and the district court denied the motion under the deferential standards set forth in the
Federal Arbitration Act (FAA). Oxford appealed to the Third Circuit Court of Appeals arguing that the AAA’s rules allowing for “judicial
review” of class determinations required the Court to conduct a higher standard of review than that specified in the FAA. The Court
held that the FAA applied unless the Parties manifested a clear intent to the contrary. The Parties failed to manifest a clear intent
because although the AAA rules called for judicial review, the rules were silent regarding what standard of review applied. Therefore,
the district court did not err in applying the FAA’s deferential standard of review. (TH).

Full opinion available online at Westlaw.

Arbitration: When there is ambiguous language about the scope of rewards available, the contract is to be read in favor of
the arbitrator’s findings of fact. (C.A.5(Tex.)).

Apache Bohai Corporation LDC v. Texaco China, 2007 WL 587233 (C.A.5 (Tex.), Feb. 27, 2007).

Texaco China (Texaco) hired Apache Bohai Corporation (Apache) to drill for oil. Midway through the contract, Apache repudiated the
contract and attempted to withdraw from the agreements. Texaco demanded that Apache fulfill its obligations. When Apache declined
to do so the matter went to arbitration. At arbitration, damages were awarded to Texaco because the arbitrator found the clause barring
damages was void under New York law. The arbitrator also refused to reduce damages for failure to mitigate damages, which Apache
claims Texaco should have done. The U.S. Court for the southern district of Texas affirmed the arbitrator’s decision. On appeal, Apache
argued that the arbitrator exceeded his powers by invalidating a contract clause and disregarding Texaco’s duty to mitigate. The Fifth
Circuit Court of Appeals held that where there is doubt as to whether an arbitrator has exceeded her powers, the court should uphold the
arbitration. The court also supported the arbitrator’s refusal to reduce damages by deferring to the arbitrator’s finding of fact. (TR).

Full opinion available online on Westlaw. This opinion is not yet
available on Findlaw or the 5th Circuit’s website.

Spring Editor: Myah Osher
Writers: Todd Heideman, Theodore Reuter, Megan Smith
Faculty Advisors: Richard Birke/A. Lee Jordan

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