In a patent infringement case, the U.S. Court of Appeals for the Federal Circuit declined to recognize a federal mediation privilege. In Kimberly-Clark Worldwide v. First-Quality Baby Products (Fed. Cir. 2011), Kimberly-Clark Worldwide, Inc. (“K-C”), owner of patents related to disposable absorbent products (such as diapers) brought a patent infringement action against competitor First Quality Baby Products, LLC (“First Quality”). Fist Quality sought discovery with regard to dispute resolution agreements between K-C and another alleged infringer. K-C appealed the order of the U.S. District Court which required K-C to produce the dispute resolution agreements. K-C argued that the agreements were protected from disclosure under a federal mediation privilege, and that the proceedings under the agreements were privileged mediations. The appellate court held, however, that the agreements established an arbitration proceeding rather than a mediation, and thus the agreements were not subject to any mediation privilege. The Federal Circuit noted that (a) the agreements set up an adversarial proceeding in which a panel expressly described as “arbitrators” issued formal findings of fact and conclusions of law; (b) the fact that the arbitration panel’s decision was not binding did not by itself establish that the proceeding was a mediation to facilitate settlement; and (c) the decision affected the parties rights concerning limitations of damages and shifting of fees of the arbitrators and attorneys. Accordingly, the Federal Circuit affirmed the order requiring K-C to produce the agreements. The court stated, “[b]ecause we conclude that K-C failed to show that the district court abused its discretion in concluding that the Dispute Resolution Agreements did not provide for mediation, we decline to determine if, in light of reason and experience, we should recognize a mediation privilege.”

The Second Circuit held recently 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). In the present case, Wachovia Bank, N.A. (“Wachovia Bank”) and Wachovia Capital Markets, LLC (“WCM”) (collectively “Wachovia”) sued VCG Special Opportunities Master Fund, Ltd., (“VCG”) in connection with a credit default swap (or “CDS”) transaction.Wacovia asserted that there was no arbitration agreement between VCG and Wacovia Bank. The district court the motion ruling that the FINRA Code of Arbitration Procedure for Customer Disputes (“FINRA Code”) provides for arbitration of disputes between a FINRA member and its “customer[s],” and that, as WCM was a FINRA member and negotiated part of the CDS agreement entered into by VCG and Wachovia Bank, VCG should be considered a customer of WCM within the meaning of the FINRA Code. The Second Circuit concluded that no rational fact-finder could infer that VCG was a customer of WCM. Thus, Wachovia should have been granted summary judgment. Technorati Tags: law, ADR, arbitration

As Computerworld reports, Seagate has been awarded $525 million in arbitration against competitor Western Digital. The companies are the top two hard-drive manufacturers in the market. Seagate alleged that Western Digital and a former Seagate employee misappropriated confidential information and trade secrets. Read more about the arbitration award here and here. Technorati Tags: law, ADR, arbitration

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”). The CBA defined “arbitrable grievance” as “good faith claim by one party that the other party has violated a written provision of this agreement.” The district court granted the Union’s motion for summary judgment, but only as to one of the grievances, and both sides appealed. The issue before the Court of Appeals for the Fifth Circuit is whether the Union’s grievances are arbitrable. Because the element of “good faith” was included in the arbitration clause, the court concluded that only “good faith” claims by one party that the other party had violated a written provision of the CBA were arbitrable. The Fifth Circuit held that the Union’s grievances, based upon employer’s contracting out of process work as it was expressly allowed to do under an unambiguous provision of the CBA, or based on employer’s performance of expressly authorized management function, were not asserted in “good faith” as required for it to be arbitrable. For the same reasons that section of the CBA could not serve as a basis for requiring arbitration of the post-reduction claim. Accordingly, the court reversed the district court’s grant of the Union’s motion for summary judgment with regard to the contracting-out grievance, affirmed the district court’s denial of the Union’s motion for summary judgment with regard to the post-reduction grievance, and reversed the district court’s denial of Exxon’s motion for summary judgment.