TBA Law Blog

Posted by: Christy Gibson on Mar 13, 2012

by Marnie Huff*

I.               U.S.  SUPREME COURT

U.S. Supreme Court Enforces Pre-Dispute Binding Arbitration Clause in CompuCreditCompuCredit Corp. et al. v. Greenwood et al., No. 10–948, ___ U.S. ___ (January 10, 2012 ) involved a class action alleging violations of the Credit Repair Organizations Act (CROA).  The consumers’ credit card agreement included a pre-dispute binding arbitration clause.  The district court denied the defendants’ motion to compel arbitration, and the Ninth Circuit Court of Appeals affirmed.  Reversing the Ninth Circuit, the U.S. Supreme Court found that the CROA is silent on whether claims under the Act can proceed in an arbitration.  It held that the Section 2 of the Federal Arbitration Act (FAA) re­quires enforcement of the arbitration agreement.  The Court noted the long-standing interpretation of Section 2 as establishing “a liberal federal policy favor­ing arbitration,” citing Moses H. Cone Memorial Hospital v. Mercury Con­str. Corp., 460 U. S. 1, 24 (1983).  Slip op. at 2.  The FAA requires courts to enforce arbitration agreements according to their terms, even if a federal statu­tory claim is at issue, unless a “a contrary congressional command “overrides the FAA’s requirement, citing Shearson/American Express Inc. v. McMahon, 482 U. S. 220, 226 (1987).  Slip op. at 2-3.  The Court rejected the consumers’ argument that there is such a congressional command, given the CROA’s disclosure and non-waiver provision.  The disclosure provision requires credit repair organizations to give a written statement to consumers that, “‘You have a right to sue a credit repair organization that violates the [Act],’” 15 U. S. C. §1679c(a).  The CROA’s anti-waiver provision in 15 U.S.C. §1679f(a) states that any waiver of any protection under the CROA “ ‘(1) shall be treated as void; and (2) may not be enforced by any Federal or State court or any other person.’ ”  The Court found that the disclosure provision does not give consumers a right to sue in a court of law - it creates only an “obligation on credit repair organizations to supply consumers with a specific statement . . . in the statute.”  Slip op at 4.  That does not override the FAA’s mandate.  Moreover, the Court’s interpretation does not mean that the CROA “effectively requires that credit repair organizations mislead consumers.”  Slip op at 7.  Lastly, when Congress passed the CROA in 1996, arbitration claus­es such as the one at issue were not rare in consumer contracts.  If Congress wanted to prohibit pre-dispute binding arbitration in the CROA, it would have done so “in a manner less obtuse than what the [consumers] suggest.”  Slip op at 8.  Copy of opinion, concurring opinion and dissent at http://www.supremecourt.gov/opinions/11pdf/10-948.pdf.

Piecemeal Proceedings.  In KPMG LLP v. Robert Cocchi et al., 565 U.S. ___, No. 10-1521 (November 7, 2011), the Florida Court of Appeal had upheld a trial court’s decision, denying KPMG’s motion to compel arbitration.  The Supreme Court found that the lower court erred in refusing arbitration solely on the basis that two out of four claims in the lawsuit were nonarbitrable.  The Court of Appeal had failed to determine whether the other two claims were arbitrable.  Therefore, the Court vacated the Court of Appeal’s judgment and remanded the case for further proceedings.  The Court reiterated that arbitration is required for arbitrable claims, “‘even where the result would be the possibly inefficient maintenance of separate proceedings in different forums.’”  Slip op. at 4, quoting Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 217 (1985).  Copy of opinion at http://www.supremecourt.gov/opinions/11pdf/10-1521.pdf.


In Christopher John Savoie v. Judge James G. Martin, III, et al, No. 10-6529 (6th Cir. March 6, 2012), plaintiff Savoie sued defendant Martin individually, in his official capacity as a judge, in his official capacity as a Tennessee Supreme Court Rule 31 Neutral, and as a party to a Rule 31 mediation contract.   Savoie sued Stites & Harbison, PLLC, in its capacity as employer of Martin when he was a mediator, and a court-ordered parental coordinator.  Before becoming a judge, Martin had served as a court-appointed mediator of a divorce case involving Savoie and his wife.  He later presided as judge over a hearing on Savoie’s motion to modify the parenting plan in that divorce case.  When Martin inquired about his prior role as mediator, the parties’ agreed to have Martin hear the issue.  Subsequently, after Martin ruled in favor of the wife, Savoie sued in federal court on 42 U.S.C. 1983 and state law negligence and contract claims.  Affirming the district court’s dismissal of all claims, the Sixth Circuit Court of Appeals stated in dicta that Martin “probably should have recused himself because of his prior involvement” as the court-appointed mediator in a contested custody dispute.  The Court held that Martin was entitled to judicial immunity for his actions during the court hearing.  Although Rule 31 provided that a person serving as a Rule 31 neutral “‘shall not participate as . . . judge . . . in the matter in which the dispute resolution was conducted,’” the Court held there is no support for the plaintiff’s claim that violation of Rule 31 would result in Martin losing jurisdiction as a judge.  Rejecting the plaintiff’s claim that Martin relied on confidential information learned during the mediation and became a witness in the court proceeding, the Court found that Martin’s remarks during the hearing “served only to clarify his understanding of the matter before him and explain his perspective to the parties,” and Martin was not acting in any non-judicial capacity.  The Court also rejected the argument that Martin’s remarks, allegedly disclosing confidential information learned during the mediation, violated Martin’s obligations as a mediator.  The Court affirmed dismissal of the pendent state court claims because Martin was entitled to judicial immunity on those claims as well.  Regarding the 1983 claim against Stites & Harbison, the Court rejected Savoie’s theory that the firm, as employer of an employee providing court-ordered mediation, was analogous to a private prison which can be treated as a state actor.  The Court also noted that a defendant such as this firm cannot be held liable under 1983 under respondeat superior or vicarious liability theories.  Martin had received the training required under Rule 31; Savoie did not allege that Martin’s law firm had any independent duty to provide additional training of Martin as a mediator.  Lastly, the district court did not abuse its discretion in dismissing Savoie’s claims for injunctive and declaratory relief. 


Ex Parte Communication with Arbitrator per Agreement; Award not Vacated.  In Herbal Integrity, LLC, et al. v. Scott Huntley, Jr., et al., No. M2011-00810-COA-R3-CV (Tenn. Ct. App. January 11, 2012), the parties agreed to submit valuation of the defendants' membership in Herbal Integrity LLC to binding arbitration.  An agreed order provided that “All parties may supply the Arbitrator with whatever documents or information that they deem relevant to the process. . . . [Subject to deadlines], the arbitrator shall have the discretion to determine the documents and information that the parties may be required or permitted to produce, as well as how, when, and where such documents and information will be produced.  Each party shall serve counsel for opposing parties with copies of any materials that are submitted to the arbitrator.”  An engagement letter with the arbitrator provided that the arbitrator would provide copies of information provided to him “upon request.”  The defendants moved to vacate the arbitrator's award under T.C.A. § 29-5-313(a) on multiple grounds.  On appeal, the defendants asserted that the arbitrator exceeded his authority because certain documents were not served on them by opposing counsel and they were not given an opportunity to respond to documents and information provided ex parte to the arbitrator.  Given the provisions of the engagement letter, the Court of Appeals agreed with the trial court’s determination that the arbitrator was not responsible to provide copies of the evidence absent a request from the defendants.  The defendants did not dispute that they received emails advising them that opposing counsel was providing documents to the arbitrator.  They never demanded copies from the arbitrator or opposing counsel.  Copy of opinion at http://www.tba2.org/tba_files/TCA/2012/huntleys_011212.pdf.

Impact of Failure to Amend Damages Claim not Avoided through Motion to Compel Arbitration.  In Sheila Brown v. Rico Roland, No. M2009-01885-SC-R11-CV (Tenn.  January 18, 2012), the Court affirmed the Court of Appeals decision inBrown v. Roland, No. M2009-01885-COA-R3-CV, 2010 WL 3732169 (Tenn. Ct. App. Sept. 23, 2010).  The Tennessee Supreme Court held that 1) the amount of damages the plaintiff sought to recover, after an appeal from general sessions to circuit court, was limited to the amount sought in the general sessions warrant because the plaintiff failed to file an amendment to increase the amount of damages; and 2) the circuit court did not err in denying the plaintiff’s motion to compel arbitration.  Copy of opinion at  http://www.tba2.org/tba_files/TSC/2012/browns_011812.pdf.

Divorce Mediation Issues Not Addressed by Court of Appeals. 

In Megan A. Rowe Ellis v. Sammy D. Rowe, Jr., No. E2011-00375-COA-R3-CV-FILED- Tenn. Ct. App. February 8, 2012), two of the issues raised on appeal by the pro se appellant were whether the trial court erred in 1) ordering mediation, and 2) assessing mediation costs to the father who had not appeared for the mediation.  The appellant failed to file a transcript, failed to cite to the record, and failed to cite any legal authority in the argument section of his brief.   The Court affirmed the trial court’s judgment.  Copy of opinion at http://www.tba2.org/tba_files/TCA/2012/elliism_020812.pdf

In James Fitzpatrick Dendy v. Amy Michelle Dendy, No. E2010-02319-COA-R3-CV (Tenn. Ct. App. March 5, 2012), one of the 20 issues raised on appeal was whether the trial court erred in ordering the mother to attend a mediation without assistance of counsel.  This issue was not properly before the Court of Appeals because the trial court’s order for mediation and the mediation itself occurred after the mother had filed a notice of appeal in the case.  Copy of corrected  opinion at https://www.tba.org/sites/default/files/dendyj_COR_030612.pdf

Mediated Settlement Did Not Resolve All Issues.  InReynaldo Collazo et al. v. Joe Haas d/b/a Haas Construction et al., No. M2011-00775-COA-R3-CV (Tenn. Ct. App. December 15, 2011), the plaintiff sought recovery of uninsured motorist benefits.  The unidentified driver of the defendant’s vehicle left the scene of a two vehicles collision accident. The defendant owner of the vehicle denied knowing the identity of the driver and claimed no one had permission to operate the vehicle at the time of the accident.  Plaintiffs' uninsured motorist insurance carrier was Nationwide Insurance Co. and the defendant owner had coverage through State Farm Insurance Co.  After a mediation in which Nationwide participated with the parties, the plaintiffs settled all claims against the defendant-owner and State Farm for $90,000, which was $10,000 less than the uninsured motorist limits with Nationwide.  The plaintiffs asserted the settlement with the vehicle’s owner did not bar their claims against the uninsured John Doe driver. The trial court granted Nationwide’s motion for summary judgment because there was no “uninsured motor vehicle” under T.C.A. § 56-7-1202(a)(1), given that the defendant vehicle owner had $100,000 of liability insurance, the same amount of coverage as the plaintiffs’ uninsured motorist coverage with Nationwide.  Reversing the trial court, the Court of Appeals noted that a “UM carrier must pay benefits where:  (1) a claimant is legally entitled to recover damages from the uninsured motorist and, (2) the total amount of liability coverage available to the insured is less than the insured’s uninsured motorist coverage limits.”  Opinion at 6.  In this case, notwithstanding the $90,000 settlement and full release of the driver, there was no determination of the allocation of fault between the vehicle’s owner and the John Doe driver.  If the vehicle owner were found to be 100% at fault, there would be no recovery against UM carrier Nationwide.  But that determination has not been made.  On remand, Nationwide will be entitled to a $90,000 credit against any UM liability under T.C.A. § 56-7-1206(i), which is not affected by principles of comparative fault.  Opinion at 11.  Copy of opinion at  http://www.tba2.org/tba_files/TCA/2011/collazor_121611.pdf.

Another Settlement in a Uninsured Motorist Case.  In Shavon Hurt v. John Doe, et al., No. M2011-00604-COA-R3-CV (Tenn. Ct. App. January 13, 2012), the plaintiff filed a personal injury action naming defendant Brown as the owner of the car that allegedly struck the plaintiff.  After discovery, the plaintiff amended the complaint to add "John Doe/Jane Doe" as a defendant, served process on her uninsured motorist carrier, settled with defendant Brown, and then dismissed the action against Brown.  The trial court erred in dismissing the action against the uninsured motorist carrier.  The carrier did not cite any authority for the proposition that the amended complaint failed to state a claim.  Copy of unpublished Memorandum Opinion at http://www.tba2.org/tba_files/TCA/2012/hurts_011712.pdf.

Workers Comp Settlement:  Reconsideration Not Available Due to Voluntary Resignation.

In Rochelle M. Evans v. Ford Motor Company, No. M2010-02254-WC-R3-WC (Tenn. February 10, 2012), the pro se employee sought reconsideration of her 2005 workers' compensation settlement.  She returned to work, was put on medical leave in 2006, and then resigned effective Sept. 1, 2007 to take advantage of a buyout involving an educational opportunity program.  A few months later, the employee was not able to continue in the program and received a lump sum payment from the employer.  She then filed a petition for reconsideration of the previous settlement.  Affirming the trial court, the Court found that she had voluntarily resigned and was therefore not eligible to receive reconsideration.  Copy of opinion at http://www.tba2.org/tba_files/TSC_WCP/2012/evansr_021012.pdf


* Marnie Huff is past Chair and currently serves on the Executive Council of the TBA Dispute Resolution Section.  She also serves on the elected Council of the ABA Section of Dispute Resolution and chairs the Section’s Membership Committee.  She is an independent mediator, arbitrator and workplace conflict management consultant in Nashville.  Her website is at www.MargaretHuffMediation.com.