Justia U.S. 7th Circuit Court of Appeals Opinion SummariesArticles Posted in Arbitration & Mediation
Smith v. Board of Directors of Triad Manufacturing, Inc.
Plaintiff filed a class action complaint under the Employee Retirement Income and Security Act (ERISA) against the fiduciaries of the retirement plan offered by his former employer, Triad, for alleged financial misconduct.The Seventh Circuit concluded that the ERISA provisions that plaintiff invokes have individual and plan-wide effect. However, the arbitration provision in Triad's defined contribution retirement plan precludes relief that "has the purpose or effect of providing additional benefits or monetary or other relief to any Eligible Employee, Participant or Beneficiary other than the Claimant." Therefore, this provision prohibits relief that ERISA expressly permits. Accordingly, the court affirmed the district court's denial of Triad's motion to compel arbitration or, in the alternative, to dismiss. View "Smith v. Board of Directors of Triad Manufacturing, Inc." on Justia Law
Continental Casualty Co. v. Certain Underwriters at Lloyds of London
Continental’s primary insurance companies covered risks such as mass tort and pollution liability and purchased reinsurance policies from Underwriters. For over 40 years, the parties agreed on the methodology for calculating reinsurance obligations. In 2010, Continental outsourced its claims handling to Resolute, which made higher demands for payment from Underwriters under a new methodology. Underwriters objected and sought arbitration. A panel conducted a hearing and found Continental’s new methodology contrary to the parties’ established course of dealings. Concerned that the Final Award was not clear about Underwriters’ future reinsurance liability obligations, Continental asked the Panel to clarify whether the statement “Petitioners have paid the full amount due” related only to past bills or if it was meant to cover past and future billings. The Panel denied Continental’s motion for clarification but added that Underwriters had "fully and finally discharged its past, present and future obligations" for the accounts. Continental argued the award amounted to a sanction and that the Panel lacked the authority to issue sanctions or penalties.Continental then sought confirmation of the Final Award but vacatur of the subsequent Order, citing the Federal Arbitration Act (FAA), 9 U.S.C. 9–10. The district court confirmed everything. The Seventh Circuit affirmed, noting the FAA’s narrow set of reasons that may support a court’s confirmation, vacatur, or modification of an award. View "Continental Casualty Co. v. Certain Underwriters at Lloyds of London" on Justia Law
Posted in: Arbitration & Mediation
Sosa v. Onfido, Inc.
Onfido provides biometric identification software that is incorporated into its customers’ products and mobile apps for verifying users’ identities. Onfido partnered with OfferUp—an online consumer marketplace—to verify users’ identities. Sosa verified his identity with OfferUp using the technology provided by Onfido—the app’s TruYou feature. To complete the verification process, Sosa uploaded a photograph of his driver’s license and a photograph of his face. Sosa alleges that Onfido then used biometric identification technology without his consent to extract his biometric identifiers and compare the two photographs.Sosa brought class action claims against Onfido under the Illinois Biometric Information Privacy Act. Onfido moved to stay the case and to compel individual arbitration based on an arbitration provision in OfferUp’s Terms of Service. The district court rejected each of Onfido’s nonparty contract enforcement theories and denied Onfido’s motion. The Seventh Circuit affirmed. Onfido failed to establish that there was an outcome-determinative difference between Illinois and Washington law, and the district court properly applied Illinois law—the law of the forum state—to determine that Onfido failed to establish that it was a third-party beneficiary of the Terms of Service or that it could otherwise enforce the contract’s arbitration provision either as an agent of OfferUp or on equitable estoppel grounds. View "Sosa v. Onfido, Inc." on Justia Law
Dr. Robert L. Meinders, D.C., Ltd. v. United HealthCare Services, Inc.
Meinders offers chiropractic services. United provides or administers insurance plans nationwide. In 2006, Meinders became a “participating provider” with United to expand his customer base; he signed a provider agreement with ACN. which provided administrative and network management services for chiropractors, and had a preexisting master services agreement with United. The agreement allowed ACN, “in its sole discretion,” to “assign its rights, duties or obligations” under the agreement.“ The agreement stated that if a dispute arose, either party “may” submit the issue “to arbitration” and any arbitration decision would be “final and binding.”Meinders submitted claims for United-insured patients directly to United; United paid those claims. Those claims were submitted on United forms and if an explanation of benefits was requested, United provided it. Meinders confirmed a patient’s eligibility either through United’s website or through a United phone number. ACN became a wholly-owned subsidiary of United.In 2013, United sent a fax to Meinders, who believed that United had violated the Telephone Consumer Protection Act and filed suit. After remands, the district court held that “United … assumed the material obligations of ACN …, a wholly-owned subsidiary of United, under the Provider Agreement, which authorizes United to enforce the arbitration clause.” The Third Circuit affirmed. View "Dr. Robert L. Meinders, D.C., Ltd. v. United HealthCare Services, Inc." on Justia Law
Saxon v. Southwest Airlines Co.
As a Chicago Midway International Airport ramp supervisor, Saxon supervises, trains, and assists a team of ramp agents—Southwest employees who physically load and unload planes. Ostensibly her job is purely supervisory but Saxon and other ramp supervisors frequently fill in as ramp agents. The ramp agents are covered by a collective bargaining agreement. Supervisors are excluded and agree annually as part of their contract of employment—not separately—to arbitrate wage disputes. Believing that Southwest failed to pay ramp supervisors for overtime work, Saxon filed a putative collective action under the Fair Labor Standards Act, 29 U.S.C. 201–219. Southwest moved to dismiss or stay the suit pending arbitration (Federal Arbitration Act (FAA), 9 U.S.C. 3).The Seventh Circuit reversed the dismissal of the suit, citing the FAA exemption for “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” The last category refers not to all contracts of employment, but only to those belonging to “transportation workers.” The act of loading cargo onto a vehicle to be transported interstate is commerce, as that term was understood at the time of the FAA’s 1925 enactment. Airplane cargo loaders, as a class, are engaged in that commerce, as seamen and railroad employees were; Saxon and the ramp supervisors are members of that class. View "Saxon v. Southwest Airlines Co." on Justia Law
Brotherhood of Locomotive Engineers & Trainmen GCA UP v. Union Pacific Railroad Co.
In 2020 Union Pacific Railroad announced a change to its employee attendance policy. Several regional branches of the union opposed the change and sought an order under the Railway Labor Act, 45 U.S.C. 151a (RLA), requiring Union Pacific to submit the change to collective bargaining. The district court dismissed for lack of jurisdiction; the claim belonged in arbitration before the National Railroad Adjustment Board.The Seventh Circuit affirmed and granted Union Pacific’s motion for sanctions under Federal Rule of Appellate Procedure 38 for the frivolous appeal. For the second time in three years, the Brotherhood has pressed a position squarely foreclosed by settled law. The union’s challenge to the revised policy amounted to a “minor dispute” subject to mandatory arbitration under the RLA. Given the parties’ course of dealing over workplace attendance requirements, there was a clear pattern and practice of Union Pacific modifying its policies many times over many years without subjecting changes to collective bargaining, which provided the railroad with a nonfrivolous justification to unilaterally modify its attendance policy. That reality made this dispute a minor one subject to resolution through mandatory arbitration. View "Brotherhood of Locomotive Engineers & Trainmen GCA UP v. Union Pacific Railroad Co." on Justia Law
Wisconsin Department of Workforce Development v. Taylor
The Randolph-Sheppard Act, 20 U.S.C. 107(a), provides economic opportunities by granting blind persons priority to operate vending facilities at certain government properties. When a blind vendor, Belsha, was awarded certain vending operations in Racine County, Wisconsin, a different blind vendor, Taylor, became unhappy and challenged the award. The Act is administered by state licensing agencies; Taylor’s challenge traveled first through Wisconsin’s regulatory process. Although Taylor achieved some success through the Wisconsin Division of Vocational Rehabilitation, she commenced federal administrative proceedings with the Secretary of Education. An arbitration panel awarded Taylor money damages and a permanent vending machine services contract for a site in Racine.The district court vacated the arbitration decision, ruling that there were no material deficiencies in the choice of Belsha for the Racine site, that the arbitration panel’s key factual findings were not supported by substantial evidence, and the arbitration panel’s ultimate conclusion was arbitrary and capricious. The Seventh Circuit affirmed. The arbitration panel mistakenly substituted the APA standard of review for the burden of proof of a disappointed vendor under the Act. View "Wisconsin Department of Workforce Development v. Taylor" on Justia Law
Matlin v. Spin Master Corp.
In 1997, Plaintiffs co-founded Gray Matter Holdings. A 1999 Withdrawal Agreement with Gray Matter entitled Plaintiffs to royalties on the sales of “Key Products.” In 2003, Gray Matter sold some assets to Swimways. After that sale, Plaintiffs took Gray Matter to arbitration four times over their royalty rights. The third arbitration determined that Gray Matter did not transfer its royalty obligations under the Withdrawal Agreement to Swimways but only transferred its intellectual property rights; Gray Matter, not Swimways, remained responsible for any royalty compensation owed to Plaintiffs. The fourth arbitration found no evidence to support Plaintiffs’ claim that Swimways tendered fraudulent filings to the Patent and Trademark Office regarding the intellectual property rights in the Key Products and that all intellectual property rights in the Key Products at issue had been transferred to Swimways.Plaintiffs filed suit, alleging that they were entitled to royalties for the Key Products and that Swimways tendered the alleged fraudulent filings. The Seventh Circuit affirmed the dismissal of the complaint and the imposition of $271,926.92 in sanctions. The claims were barred by principles of res judicata and the arbitrations were “binding and final” under the Withdrawal Agreement. An accounting showed that attorneys and staff spent 273.1 hours, charging an average rate of about $1,000 per hour, preparing the motions to dismiss and for sanctions. View "Matlin v. Spin Master Corp." on Justia Law
Servotronics, Inc. v. Rolls-Royce PLC
An aircraft engine caught fire during testing in South Carolina. Rolls-Royce had manufactured and sold the engine to Boeing for incorporation into a 787 Dreamliner aircraft. Boeing demanded compensation from Rolls-Royce. In 2017, the companies settled for $12 million. Rolls-Royce then sought indemnification from Servotronics, the manufacturer of a valve. Under a long-term agreement between Rolls-Royce and Servotronics, any dispute not resolved through negotiation or mediation must be submitted to binding arbitration in England, under the rules of the Chartered Institute of Arbiters (CIArb). Rolls-Royce initiated arbitration with the CIArb. Servotronics filed an ex parte application in the Northern District of Illinois, seeking a subpoena compelling Boeing to produce documents for use in the London arbitration. The subpoena was issued, then quashed.The Seventh Circuit ruled in favor of Rolls-Royce. A district court may order a person within the district to give testimony or produce documents “for use in a proceeding in a foreign or international tribunal,” 28 U.S.C. 1782(a). Section 1782(a) does not authorize the district court to compel discovery for use in a private foreign arbitration. View "Servotronics, Inc. v. Rolls-Royce PLC" on Justia Law
Wallace v. Grubhub Holdings, Inc.
Grubhub, an online and mobile food-ordering and delivery marketplace, considers its delivery drivers to be independent contractors rather than employees. The plaintiffs alleged, in separate suits, that Grubhub violated the Fair Labor Standards Act by failing to pay them overtime but each plaintiff had signed a “Delivery Service Provider Agreement” that required them to submit to arbitration for “any and all claims” arising out of their relationship with Grubhub. Grubhub moved to compel arbitration. The plaintiffs responded that their Grubhub contracts were exempt from the Federal Arbitration Act (FAA). Section 1 of the FAA provides that “nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce,” 9 U.S.C. 1. Both district courts compelled arbitration.The Seventh Circuit affirmed. The FAA carves out a narrow exception to the obligation of federal courts to enforce arbitration agreements. To show that they fall within this exception, the plaintiffs had to demonstrate that the interstate movement of goods was a central part of the job description of the class of workers to which they belong. They did not even try to do that. View "Wallace v. Grubhub Holdings, Inc." on Justia Law