Before I can sum up 2015 in arbitration (next post!), I need to report on some new cases coming out of the federal and state appellate courts in recent weeks. Two are just good reminders of basic arbitration law, but the third addresses an interesting question of double recovery.
Our first “reminder” case comes from New York’s highest court. In Cusimano v. Schnurr, 2015 WL 8787554 (N.Y. Dec. 16, 2015), that court held that the Federal Arbitration Act applies, even to intrafamily transactions among New York residents (sing: “it’s a family affaaaair…”), and even when defendants argue their family business is “passive” and has no impact on interstate commerce. The court basically said family shmamily, look at the type of business you have and what it owns. “The idea that the intrafamilial nature of the agreements has some bearing on whether the FAA is applicable finds no support in the caselaw.” Instead, the fact that the family business owned commercial properties inside and outside New York was key. (But, the plaintiffs waived their right to arbitrate by litigating aggressively for a year.)
The second “reminder” comes from the Eleventh Circuit and relates to appeal timing. In the Wise Alloys case, 2015 WL 8119326 (11th Cir. Dec. 8, 2015), that court held that the defendant did not appeal the district court order compelling arbitration within the allowed deadline. (The court had fun with this one, quoting Carole King to say “it’s too late…”) Critically, the entire complaint related to the union’s effort to compel the defendant company to arbitration. The district court compelled arbitration in June of 2012, but the company did not appeal until after the arbitration was complete and the award had been confirmed in late 2014 (well beyond the 30-day deadline in the federal rules). The lesson from this case is that while Section 16 of the FAA commands that “interlocutory” orders compelling arbitration are not immediately appealable, not all orders compelling arbitration are interlocutory: if the only relief a complaint seeks is an order compelling arbitration, then the order granting that relief is final and immediately appealable.
The most interesting outcome in this group comes from the Ninth Circuit (with Judge Shira Scheindlin from SDNY sitting by designation on the opposite coast). In Uthe Technology Corp. v. Aetrium, Inc., 2015 8538090 (9th Cir. Nov. 19, 2015), the plaintiff had already been awarded millions of dollars against related defendants in an arbitration and then brought a RICO claim for treble damages in U.S. federal court for the same conspiracy. The question was whether that RICO claim was precluded by the “one satisfaction” rule that avoids double recovery. (P.s. That arbitration lasted two decades. Score one for litigation.) The Ninth Circuit found the RICO claims were not precluded, largely because the arbitration claim was against a different set of defendants, and RICO provides remedies that were not available to Uthe in the arbitration, and the arbitration award specifically noted that it was made without prejudice to Uthe’s right to bring further claims in federal court. The 9th Circuit did note that any damages in the RICO case must be offset by the sums paid as a result of the arbitral award