Class Arbitration?

Recently, because of a split of authority, the U.S. Supreme Court heard argument on whether an arbitrator exceeded his powers under the Federal Arbitration Act in determining parties agreed to authorize class arbitration using broad contractual language. Justices apparently expressed an unwillingness to create a special standard for reviewing class arbitration decisions for this particular result. Cases like Stolt-Nielsen and Concepcion established a presumption of no consent to class arbitration without a clear meeting of the minds. However, the Court repeatedly gives a highly deferential standard of review to decisions by arbitrators, preventing most inquiries into the merits of an arbitrator’s award. There are generally very limited grounds for vacating an arbitration award. To argue the arbitrator exceeded his power requires manifest disregard of the law or clearly governing legal principle. Still, the Court appeared skeptical of the capability of arbitrators to handle class actions, even questioning incentive. In this case, the class involved some 20,000 doctors. Inquiries into arbitrator compensation and experience went unanswered, since that information is non-public. Congress passed the Federal Arbitration Act in 1925 to encourage litigants to settle disputes without resorting to litigation. Should the Court rule for business here, arbitration of class actions could squelch these cases before they become high stakes gambles. See docket- Oxford Health Plans v. Sutter http://www.supremecourt.gov/Search.aspx?FileName=/docketfiles/12-135.htm and discussion here- http://bit.ly/121VC1l and article here- http://onforb.es/14lln2A

Mediation Confidentiality upheld in Dodgers Divorce

This week, Delaware U.S. Bankruptcy Judge Kevin Gross (who reportedly initiated a 2011 mediation between the bankrupt Los Angeles Dodgers and Major League Baseball) blocked former Dodgers owner Frank McCourt's ex-wife from obtaining confidential mediation documents she sought to convince a California court to reconsider her $131 million divorce settlement. Discovery requests seeking documents developed during the mediation process were ordered withdrawn, as such information was found to remain confidential under prior orders, as well as local rules. The judge enforced conditions that confidential documents provided to the mediator are privileged and are not to be produced. The original order appointing the mediator laid out that documents produced could not be used in any other forum. The divorce was based on a $294 million valuation of the Dodgers and other assets. However, the bankrupt team was sold last year for a record $2 billion to an investors led by Magic Johnson. Counsel representing the Dodgers and MLB's commissioner argued that confidentiality promised by the meditation order must be upheld. Judge Gross attributed success of the deal to the nature of the mediation process itself, which allowed parties in a highly visible case to negotiate confidentially. Mrs. McCourt's move to obtain information amounted to an “attempt to invade the mediation process,” Judge Gross said, and was “frankly, shocking to the court's conscience.” Limitations, however, include documents that are otherwise discoverable and not immune to discovery simply because they were submitted to the mediator. See story here- http://bit.ly/11nqY53 See also, In re: Los Angeles Dodgers LLC et al., case number 1:11-bk-12010, in the U.S. Bankruptcy Court for the District of Delaware.

Spider-Man musical settles, avoiding the sticky web of trial

Producers of the musical “Spider-Man: Turn Off the Dark” and its former director, Julie Taymor, settled a lawsuit over copyright claims, artistic credit and profits for the most expensive show ever on Broadway. Taymor originally filed suit on copyright grounds after being fired, claiming producers made money from her ideas and script and owed her more than $1 million. The producers countersued, saying they fired her for breach of contract. U2's Bono and the Edge, and Marvel Entertainment (licensor for the Spider-Man brand), were also involved. Taymor had approval of future tours and versions of scripts that ended with the deal, freeing future transformation of the show for venues like Las Vegas. Despite confidentiality, reported sources with knowledge of the settlement said the terms included reductions in royalties due to the high operating cost, with financial concessions improving the show’s prospects for a continuing run and to recoup the $75M production. Spider-Man has become one of the top-grossing musicals on Broadway, as well as a fan favorite-- despite negative reviews. Trial was set to begin next month in Manhattan federal court. A highly publicized trial would serve no one’s interests, according to several associates of Taymor and the producers. Tours and new productions are planned and trial apparently threatened to complicate those efforts. The fate of a documentary about the creation of the musical remains unclear. See news item here- http://nyti.ms/111rQvG

BP Settlement Fund business loss payouts to continue per Judge

New Orleans U.S. District Judge Carl Barbier denied BP's attempt to halt payments from a settlement fund to reimburse businesses and individuals for losses from the 2010 Deepwater Horizon accident in the Gulf of Mexico. The court rejected BP's arguments that the fund administrator misinterpreted claims and miscalculated payments, amounting to fictitious claims. The judge previously upheld interpretation of settlement terms governing payments to businesses affected by the spill. BP sought an injunction blocking making payments to businesses. BP maintains decisions made in claims handling expose the company to losses never contemplated in the settlement. Attorneys who brokered last year's deal with BP say the request was designed to set up an appeal to the United States Court of Appeals for the Fifth Circuit to review the matter. The oil company filed a notice of appeal and is reportedly evaluating how to proceed following the ruling to preserve rights and prevent so-called meritless awards. Last year, BP estimated it would pay roughly $7.8 billion to resolve tens of thousands of claims by businesses and individuals covered by the settlement. The company now claims it can't give a reliable estimate for the total value of the deal. According to experts, it appears difficult to reopen the settlement at the appellate level because of extensive negotiation and ultimate approval by BP and its legal team. The hearing last Friday took place during a break in the sixth week of the continuing civil trial aimed at determining the degree of culpability that BP and other companies have for the accident. See stories-- http://on.wsj.com/14KdZxJ and http://usat.ly/10kDou3

Diamonds are Forever; What's in a slogan?

U.S. District Court Judge John Adams of Ohio ordered Sterling Jewelers Inc. and Zale Corporation into mediation in a diamond advertising lawsuit. Sterling, a unit of Signet, sued Zale last fall, alleging Zale's advertisements for the Celebration Fire diamond as "the most brilliant diamond in the world" were false and misleading. Sterling, based in Akron, said its tests found that its own diamonds are as glittery as those sold in Zales. In the lawsuit, Sterling demanded that Zale's advertisements be pulled. However, multimillion-dollar ads remained in place throughout the winter holiday shopping season and the court denied Sterling's request to pull them. At a preliminary injunction hearing earlier this year, the judge said that Sterling had not shown that it would suffer financially, even if it could prove that Zale's boast of the most brilliant polished diamond in the world was false. In accordance with the referral to mediate, both parties have until April 10th to review, confer and appoint court approved federal mediators and must come to agreement by May 2nd. Sometimes a mediation following a TRO, which is like a mini-trial, is more productive, as the parties have seen a preview of the court's reaction to claims and defenses and are ready for a self-determined solution. See stories here-- http://bit.ly/13QA3b1 and http://bit.ly/11WJgJP and http://on.wsj.com/11VSx7J