As part of the 2011 Year-End Highlights, we present noteworthy arbitration opinions from the Circuit Courts.
• The Ninth Circuit refused to compel arbitration because arbitration clause was not broad enough to cover dispute. In Cape Flattery Limited v. Titan Maritime, LLC, No. 09-15682 (9th Cir. July 26, 2011), Cape Flattery, a ship owner had contracted with Titan, a salvage company, to remove a stranded vessel from a reef.
• The Eleventh Circuit ruled that the plaintiff’s act of amending its complaint may allow a defendant to resurrect its previously-waived right to arbitrate. In Krinsk v. Suntrust Banks, Inc., No. 10-11912 (11th Cir. Sept. 7, 2011), the defendant had participated in the case for nine months without enforcing its right to arbitrate the class action claims.
• The Second Circuit held that an issuer who purchases auction-facilitating services for its auction rate securities from a broker-dealer is a “customer” of that broker-dealer within the meaning of the Financial Industry Regulatory Authority (“FINRA”) Rule 12200.
• The Ninth Circuit ruled that pre-dispute mandatory arbitration clause is invalid under the Magnuson-Moss Warranty Act. In Kolev v. Euromotors West/The Auto Gallery, 2011 U.S. App. LEXIS 19254 (9th Cir. Cal. Sept. 20, 2011), a pre-owned car Diana Kolev (“Kolev”) purchased developed serious mechanical problems during the warranty period and the dealership refused to honor her warranty claims. Kolev sued for breach of warranties under the Magnuson-Moss Warranty Act (“MMWA”), 15 U.S.C. Section 2301 et seq., breach of contract, and unconscionability.
• The Seventh Circuit held that “manifest disregard of the law” is not an independent ground for vacatur in a patent case under the Federal Arbitration Act (“FAA”). See Affymax, Inc. v. Ortho-McNeil-Janssen Pharmaceuticals, Inc. , No. 11-2070 (7th Cir. Oct. 3, 2011).
• The Second Circuit held that the term “customer” under FINRA Rule 12200 does not include a broker-dealer non-party to a credit default swap agreement. See Wachovia Bank v. VCG Special Opportunities Master Fund Ltd., No. 10-1648-cv (2d Cir. N.Y. Oct. 28, 2011).