2011 Arbitration Case Law | Fifth Circuit

During this year, the U.S. Court of Appeals for the Fifth Circuit decided the following arbitration cases:

• On July 22, 2011, the Fifth Circuit denied a motion to compel arbitration in multi-billion-dollar ponzi scheme case. In Janvey v. Alguirre, No. 10-10617 (5^th Cir. July 22, 2011) the Securities and Exchange Commission (“SEC”) brought suit against the investment company Standford Group Company (“SGC”) and related entities for allegedly perpetrating a massive Ponzi scheme. Read more here.

• On August 4, 2011, the Fifth Circuit held that corporate officers are not bound personally by an arbitration agreement and overturned an arbitral award. In DK Joint Venture 1 v. Weyand, No. 09-11000 (5^th Cir. August 4, 2011) six business entities (the “plaintiffs”) filed an arbitration demand against Richard Weyand and Peter Theiessen and fifteen corporations controlled by them (the “defendants”). Weyand and Thiessen were respectively the chief executive officer and chief financial officer. The plaintiffs alleged that defendants committed fraud, breach of contract, and breaches of fiduciary duty in order to induce their investment of money in a purported oil and gas venture. Read more here.

• On August 10, 2011, the U.S. Court of Appeals for the Fifth Circuit held that corporate officers did not personally agree to arbitrate and were not bound by an arbitration agreement. Covington v. Aban Offshore, No. 10-40449 (5^th Cir. August 10, 2011) involves a dispute between Aban Offshore Limited (“Aban”), owner of an oil rig, and Guy Covington and Russell Covington, officers and employees of Beacon Maritime, Inc. (“Beacon”) a contractor hired to refurbish the rig. In 2005, Guy, as Vice President and on behalf of Beacon, executed a contract with Aban. Russell did not sign it at all. Read more here.

• On September 15, 2011, the Fifth Circuit ruled on arbitrability of labor union grievances under the CBA. In Paper, Allied-Industrial Chem. & Energy Workers Int’l Union, Local 4-12 v. Exxon Mobil Corp., 657 F.3d 272 (5th Cir. La. 2011), plaintiff (the “Union”) filed suit to compel defendant corporation (“Exxon”) to arbitrate two labor grievances, pursuant to a provision in the collective bargaining agreement (“CBA”). Read more here.

• On September 19, 2011 the Fifth Circuit held that class arbitration is not a class action under CAFA. In Williams v. Homeland Ins. Co., No. 11-30646 (5th Cir. Sept. 19, 2011), George Raymond Williams brought a class action suit in Louisiana state court on behalf of Louisiana medical providers against operator of preferred provider organization (“PPO”) network and other defendants, alleging violation of PPO notice provisions of Louisiana law. Read more here.

• On October 5, 2011, the Fifth Circuit finds information contained in arbitration award insufficient to determine insurance coverage. In American Home Assurance Company v. Cat Tech, L.L.C., No. 10-20499 (5th Cir. Oct. 5, 2011) Ergon Refining, Inc. (“Ergon”) hired Cat Tech, L.L.C. (“Cat Tech”) to service a hydrotreating reactor at its Mississippi refinery. In the course of servicing the reactor, Cat Tech damaged several of the reactor’s components. The matter was submitted to arbitration and the arbitrators awarded Ergon almost $2 million, including damages, prejudgment interest, attorney’s fees, and an offset for the unpaid contract price. Cat Tech sought indemnification under two insurance policies: (1) a commercial general liability policy issued by American Home Assurance Company (“AHA” ), and (2) a commercial umbrella policy issued by National Union Fire Insurance Company of Pittsburgh, Pennsylvania (“NUFIC”). Read more here.

• On October 26, 2011, the Fifth Circuit compelled a non-signatory to arbitrate. In Blaustein v. Huete, No.11-30057 (5th Cir. La. Oct. 26, 2011) Burt David Huete along with Richard and Gail Blaustein, formed Special Projects Limited, L.L.C. (“SPL”) in connection with their application for a provisional patent for a wireless tracking device they had invented. SPL retained Timothy and Christopher Maier of Maier & Maier, P.L.L.C. (“the Maiers”) to prepare the patent application. Maier’s representation agreement included an arbitration clause and listed SPL as the client, with Huete and Richard Blaustein serving as signatories for SPL. When Huete’s relationship with Maier & Maier soured, he retained outside counsel. Read more here.

• On November 1, 2011, the Fifth Circuit held that a district court is not required to stay proceedings on merits pending appeal of denial of a motion to compel arbitration. In Weingarten Realty Investors v. Miller, No. 11-20676 (5th Cir. Nov. 1, 2011), Weingarten Realty Investors (“WRI”) and Miller Sheriden, LLC (“Miller”), created a joint venture. WRI loaned that joint venture $75,000,000 under the Loan Agreement between WRI and the joint venture. Miller did not sign the Loan Agreement individually but did sign a third-party guarantee (“Limited Guarantee”) for the loan, on the same day the Loan Agreement was executed, in which guarantee he and Miller guaranteed half of the loan. Read more here.

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