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

June 24, 2007 - June 30, 2007
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1. Arbitration: Contract of adhesion which mandates arbitration silent as to class actions ruled not unconscionable
by Oregon Court of Appeals and referred to arbitrator who would make determination as to application of arbitration
clause to the class. (Or.App.).

2. Arbitration: Party may not claim arbitrator acted outside scope of authority on appeal when party did not raise claim
during the mediation. (Cal.App. 2 Dist.).

3. Mediation: Non-prevailing party cannot be ordered to pay mediation fees as taxable costs under 28 U.S.C. § 1920. (5th Cir.).

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Arbitration: Contract of adhesion which mandates arbitration silent as to class actions ruled not unconscionable
by Oregon Court of Appeals and referred to arbitrator who would make determination as to application of arbitration
clause to the class. (Or.App.).

Sprague v. Quality Restaurants Northwest, Inc., 2007 WL 1829401, (Or. App., June 27, 2007.)

Plaintiff Sprague filed a class action suit alleging violations of Oregon employment statutes by her former employer, Quality
Restaurants Northwest, Inc. (QRN) when, after terminating her employment, her final paychecks were delayed and one was
returned for insufficient funds. QRN moved to compel arbitration pursuant to a clause in the employee handbook. The clause
was in clear language and set off clearly for easy notice by the reader, but was silent as to class actions. Sprague argued that
the arbitration clause was unconscionable and the trial court agreed based on presumed lack of ability to sue as a class,
prompting QRN to appeal. The Court determined that the contract was adhesive, but that contracts of adhesion are not
automatically unconscionable under Oregon law, and that this clause was not more procedurally unconscionable than the
average consumer contract. Substantively, under American Arbitration Association employment dispute rules, the arbitrator
determines whether or not a class action is allowed, and the Court ruled it was therefore possible and reversed and remanded
the case to the trial court for referral to arbitration. (KS).

Full opinion available on Westlaw.

Arbitration: Party may not claim arbitrator acted outside scope of authority on appeal when party did not raise claim
during the mediation. (Cal.App. 2 Dist.).

Gury Company v. Nippon Carbide Industries (USA) Inc., 2007 WL 1874245 (Cal.App. 2 Dist., June 29, 2007).

Gury Company (“Gury”) bought reflective sheeting from Nippon Carbide Industries Inc. (“Nippon Carbide”) to produce reflective
signs. The sales contract contained an arbitration clause, a warranty disclaimer, and a consequential damage exclusion. Gury
claimed Nippon Carbide’s sheeting was defective and sought reimbursement. Nippon Carbide refused the reimbursement and
the parties entered arbitration. The arbitrator ruled in Gury’s favor, found the warranty disclaimer and consequential damage
exclusion were unconscionable and awarded consequential damages to Gury. Gury and Nippon Carbide filed petitions to confirm
and vacate, respectively, in trial court. The trial court confirmed the decision. Nippon Carbide appealed, claiming the arbitrator
exceeded his powers. While the arbitration clause did limit the arbitrator’s power to modify or alter the terms of the contract, the
Appeals Court ruled that the Nippon Carbide waived the limitation because they did not raise the argument during the arbitration
and were barred from arguing such on appeal. (MW).

Full opinion available on Westlaw.

Mediation: Non-prevailing party cannot be ordered to pay mediation fees as taxable costs under 28 U.S.C. § 1920. (5th Cir.).

Cook Children’s Medical Center v. The New England PPO Plan of General Consolidated Management Inc., 2007 WL 1842117
(5th Cir., June 28, 2007).

Miller was employed by General Consolidated Management Inc (“General”) but did not enroll his son in the General Consolidated
ERISA plan, opting instead to use Medicaid. Miller’s son had surgery at Cook Children’s Medical Center (“Cook”) while under
Medicaid. When the Medicaid coverage expired, Miller enrolled his son in General’s coverage through New England PPO (“PPO”).
Medicaid paid Cook for the surgery but Cook refused and sought payment from General. General refused to pay the claim since
the surgery occurred prior to General’s coverage. Cook filed suit in district court against General and General sought indemnification
from PPO. The parties attended mediation but no agreement was reached. On summary judgment, General and the PPO prevailed
and were awarded mediation costs. Cook appealed. The Fifth Circuit Court of Appeals affirmed the summary judgment but reversed
the award of mediation costs. The Court held that mediation costs could not be awarded under 28 U.S.C. § 1920 because the mediation
fees do not fall within any categories of expenses listed in the statute, mediators are not court appointed experts by statutory definition,
and case law does not support such an award. (MW).

Full opinion available online at Westlaw.

Summer Editors: Katrina Horn Simons, Matthew Walls
Faculty Advisors: Richard Birke, A. Lee Jordan
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