Justia U.S. 3rd Circuit Court of Appeals Opinion Summaries

Articles Posted in Arbitration & Mediation
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Under "loyalty contracts," Physician Buying Groups (PBGs) members are entitled to discounts if they buy a large enough percentage of their vaccines from Merck. The loyalty contracts include an arbitration provision. Membership contracts between PBGs and medical practices give medical practices discounts on Merck vaccines for enrolling in PBGs. PBGs contract with both Merck and medical practices and are middlemen but PBGs never possess the vaccines. Medical practices buy their vaccines directly from Merck, receiving discounts for belonging to a PBG. The Pediatricians, members of PBGs that contracted with Merck, never signed contracts containing an arbitration clause.The Pediatricians filed federal suits alleging Merck’s vaccine bundling program was anticompetitive. Merck moved to compel arbitration. On remand, following discovery, the district court again denied Merck’s motion and granted the Pediatricians summary judgment, reasoning that the Pediatricians were not bound under an agency theory. The Third Circuit reversed. The PBG membership contract made the PBG a “non-exclusive agent to arrange for the purchase of goods and services,” and the PBG acted on this authority by executing the loyalty contract with Merck that included the arbitration clause. The Pediatricians simultaneously demonstrated intent to create an agency relationship and exercised control over the scope of the PBG’s agency by contract. View "In re: Rotavirus Vaccines Antitrust Litigation v." on Justia Law

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The Unions represent PG employees. Each union's collective bargaining agreement (CBA) with PG required PG to provide health insurance to union employees. A separate provision governed dispute resolution with a grievance procedure that culminated in binding arbitration. The CBAs had durational clauses and expired in March 2017; the arbitration provisions had no separate durational clauses. Two months before their expiration, PG sent letters to the unions, stating that upon expiration, "all contractual obligations of the current agreement shall expire. [PG] will continue to observe all established wages, hours and terms and conditions of employment as required by law, except those recognized by law as strictly contractual, after the Agreement expires. With respect to arbitration, the Company will decide its obligation to arbitrate grievances on a case-by-case basis." While negotiating new CBAs, the parties operated under certain terms of the expired agreements. The unions claim that in 2019, PG violated the expired CBAs by failing to provide certain health-insurance benefits. The unions filed grievances under the dispute-resolution provisions. PG refused to arbitrate, stating that the grievance involved occurrences that arose after the contract expired. The Unions argued implied-in-fact contracts had been formed.The district court granted PG summary judgment. The Third Circuit affirmed, overruling its own precedent. As a matter of contract law, the arbitration provisions here, because they do not have their own durational clauses, expired with the CBAs. View "Pittsburgh Mailers Union Local Union 22 v. PG Publishing Co., Inc." on Justia Law

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PG sought to vacate a labor arbitration award. In many labor disputes, both the Labor Management Relations Act (LMRA), 29 U.S.C. 185(a), and the Federal Arbitration Act (FAA), 9 U.S.C. 10, provide means for seeking vacatur or confirmation of arbitration awards. The statutes employ distinct procedural vehicles, require litigants to meet different legal standards, and prescribe separate limitations periods. PG argued that even if it filed its complaint outside of the applicable limitations period for an LMRA action, it filed within the FAA’s 90-day limitations period for motions to vacate an arbitration award.The Third Circuit affirmed the dismissal of PG’s action as untimely. Although a party may bring both an LMRA action and an FAA motion challenging or confirming certain labor arbitration awards, PG did not proceed by motion as required by the FAA, and so did not properly invoke that statute. PG’s LMRA Section 301 action was untimely. The court clarified the procedures for seeking to vacate or confirm an arbitration award under the LMRA and under the FAA. View "PG Publishing Co v. Newspaper Guild of Pittsburgh" on Justia Law

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SHI, owned by Vik, borrowed funds from Deutsche Bank (Bank). SHI entered a limited partnership (LP) agreement with Devon and invested $25 million, Bank issued margin calls. SHI claimed that it lacked funds to satisfy the calls. Bank sued SHI in England and Wales and received a $235,646,345 judgment, which SHI has not satisfied. SHI transferred the Devon Interest to CPR (allegedly related to Vik's father). SHI paid Devon millions of dollars for the transfer. Devon made fund distributions to the limited partners but had difficulties transmitting proceeds to CPR. CPR initiated arbitration to compel Devon to release the Proceeds. The arbitrator denied Bank’s request to intervene. Devon raised counterclaims, seeking a declaration whether the assignment to CPR was enforceable.Meanwhile, Bank sued CPR, SHI, and Devon in Delaware, alleging a conspiracy to commit fraud. The arbitrator denied Devon’s motion to stay proceedings. Devon then refused to participate in the arbitration. The arbitrator awarded CPR the proceeds, plus prejudgment interest, CPR petitioned to confirm the arbitration award; in the Eastern District of Pennsylvania, Devon attempted to interplead Deutsche Bank. Bank answered and sought to set aside the purported transfer of the Devon Interest to CPR, to declare SHI and CPR alter egos, and to find Devon, CPR, and SHI liable for fraud and conspiracy. The Third Circuit affirmed orders confirming the arbitration award, striking the interpleader complaint, and dismissing all third parties and claims and Devon’s counterclaim. View "CPR Management SA v. Devon Park Bioventures LP" on Justia Law

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In 1972, P&A signed a collective bargaining agreement (CBA) with Local 15024. In the early 1980s, according to P&A, Local 825 pressured P&A to employ them instead. P&A created Utility Systems to hire Local 825 workers. Utility signed a CBA with Local 825. In 2016-2018, Utility subcontracted a number of construction projects to P&A, which used its workers from Local 15024 on those jobs. Local 825 brought grievances against Utility. P&A feared that if Local 825’s arbitrator ruled that Utility’s subcontractors must use Local 825 workers, that might force P&A to violate its CBA with Local 15024. P&A and Utility filed suit, requesting an order compelling joint arbitration with both employers and both unions. The district court held that it could enforce joint arbitration under the Labor Management Relations Act, 29 U.S.C. 185(a), but that it would be inappropriate here because there was an insufficient risk that P&A and Utility would face conflicting arbitration awards simultaneously granting the same jobs to both unions. It also determined that P&A and Utility could not be deemed a single or joint employer.The Seventh Circuit affirmed. Joint arbitration is available under the Act as a general matter, either before or after the bipartite arbitration award at issue has become final, but the employers here which are two at least nominally separate companies, cannot invoke that general rule. View "P&A Construction Inc v. International Union of Operating Engineers" on Justia Law

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The Arbitration Board, in its Merits Award, held that Verizon violated a Collective Bargaining Agreement (CBA) with its Union by contracting with common carriers to deliver FiOS TV set-top boxes to “existing customers” for self-installation, work that used to be performed exclusively by Union Service Technicians. Months later, the Board, in creating a “remedy,” expanded the scope of the violation to include deliveries to both existing and new customers and also the accompanying self-installations.The Third Circuit affirmed the district court in vacating the Remedy Award to the extent that it awards damages for work that falls beyond the outer bounds of the Merits Award--the delivery of boxes to existing customers. The deference given to arbitration awards is almost unparalleled, but not absolute. An arbitrator’s powers are limited by the parties’ agreement, which is made against a background of default legal rules. Under these default rules, an arbitrator who has decided an issue is prohibited from revising that decision without the consent of the parties. He can decide other issues submitted by the parties, correct clerical errors, and clarify his initial decision— but nothing more. The Board improperly awarded punitive damages, which are not permitted under the CBA. View "Verizon Pennsylvania LLC v. Communications Workers of America" on Justia Law

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Harper runs deliveries under the “Amazon Flex” program, which supplements Amazon’s traditional delivery services. Interested drivers use an app to sign up to drive packages from Amazon warehouses, affiliated grocers, and participating restaurants to home shoppers. Harper signed up, clicking on a brightly colored button stating, “I AGREE AND ACCEPT” following the Terms of Service. The Terms included an arbitration provision with an “opt-out” process and specified that Washington law applies. Harper filed a putative class action on behalf of similarly situated New Jersey Amazon Flex drivers, alleging that Amazon misclassified them as independent contractors when they really are employees. Amazon moved to compel arbitration under the Federal Arbitration Act. Harper cited the exemption for a “class of workers engaged in foreign or interstate commerce,” 9 U.S.C. 1, noting that the drivers make some deliveries across state lines. Amazon argued that the claim is also arbitrable under state law. The district court ordered discovery to determine whether Harper falls within the FAA exception, declining to reach Amazon’s alternative state law argument.The Third Circuit vacated. Federal courts sitting in diversity must decide state law claims, including state arbitrability, even where the FAA may apply. That is a threshold inquiry, ensuring prompt review of state law claims, particularly before turning to discovery to sort through a comparatively complex federal question. View "Harper v. Amazon.com Services, Inc." on Justia Law

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The Union represents about 165 employees at the Clinton research facility, staffed by EMRE. In 2015, a bargaining unit member retired. After advertising internally failed to fill the open position, EMRE used independent contractors to staff the position. The Union filed a grievance regarding the propriety of EMRE contracting out bargaining unit positions and attempting to permanently fill bargaining unit positions with contractors. The Collective Bargaining Agreement (CBA) allows the Company to “let independent contracts” as long as: during any period of time when an independent contractor is performing work of a type customarily performed by employees and employees qualified to perform such work together with all of the equipment necessary in the performance of such work are available in the Company facilities, the Company may not because of lack of work demote or lay off any employee(s) qualified to perform the contracted work."Arbitrator Klein found that the CBA “expressly limits contracting to a ‘period of time” and that EMRE pursued a plan to replace employees with contractors as they left EMRE. She concluded that EMRE’s actions undermined the composition and breadth of the bargaining unit. The Third Circuit affirmed the arbitration award preventing EMRE from permanently contracting out bargaining unit positions at the Clinton facility. Rejecting an argument that the arbitrator improperly considered extrinsic evidence contrary to the CBA, the court noted that the standard of review for upholding arbitration awards is highly deferential. The award “withstands the minimal level of scrutiny.” View "Independent Laboratory Employees' Union, Inc. v. ExxonMobil Research and Engineering Co." on Justia Law

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Motorized-wheelchair users filed a purported class action, alleging that Uber discriminated against individuals with mobility disabilities by not offering a “wheelchair accessible vehicle” (WAV) option in the Pittsburgh area, citing the Americans with Disabilities Act (ADA), 42 U.S.C. 12181. They argued that but for the unavailability of WAVs, Plaintiffs would download the Uber app and use its ridesharing service. Uber moved to compel arbitration under the Federal Arbitration Act, 9 U.S.C. 3–4, contending that although Plaintiffs had never registered for an Uber account or accepted its Terms of Use, they were nevertheless bound by the mandatory arbitration clause of that agreement; Plaintiffs could not establish standing to sue in federal court unless they “step into the shoes” of actual Uber Rider App users.The Third Circuit affirmed an order denying Uber’s motion. Plaintiffs’ failure to download the Uber app, agree to the terms and perform the “futile gesture” of requesting a WAV ride did not prevent them from pleading an injury in fact. Plaintiffs’ disability discrimination claim did not rely on or concerncUber’s Terms of Use, but was based on the ADA. On interlocutory appeal from the denial of a motion to compel arbitration, appellate jurisdiction is confined to review of that order; the court has no independent obligation to review non-appealable orders, even jurisdictional ones concerning standing. View "O'Hanlon v. Uber Technologies Inc" on Justia Law

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In a dispute concerning a construction company’s liability for contributions to the Benefits Fund, the Fund unilaterally scheduled arbitration. The company sought to enjoin arbitration, alleging fraud in the execution of the agreement it signed. The district court concluded that the court had the primary power to decide whether fraud in the execution vitiated the formation or existence of the contract containing the arbitration provision. The court enjoined arbitration pending resolution of factual issues that bear upon that claim.The Third Circuit affirmed. Under the Federal Arbitration Act (FAA), 9 U.S.C. 4, questions about the “making of the agreement to arbitrate” are for the courts to decide unless the parties have clearly and unmistakably referred those issues to arbitration in a written contract whose formation is not in issue. Here, the formation of the contract containing the relevant arbitration provision is at issue. View "MZM Construction Co. Inc. v. NJ Building Laborers Statewide BenefitsFunds" on Justia Law