Articles Posted in Arbitration & Mediation

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Property owner Crescent City Property Partners, L.L.C., and a builder, Greystar Development and Construction, LP, entered into a contract in March, 2002 for the construction of a mixed-use development in Lafayette. Alleging defects in the builder's performance, and pursuant to the arbitration clause in the construction contract, Crescent filed an arbitration claim against Greystar in 2008, also naming as a defendant Greystar's surety, American Manufacturers Mutual Insurance Company. In response, Greystar filed a third party demand against various subcontractors. The Supreme Court granted writs in consolidated cases to consider whether the court of appeal correctly vacated the arbitration award, which had been confirmed by the district court. The court of appeal vacated the award on the basis the arbitration panel, in applying a statute of peremption incorrectly, disturbed a vested right of the plaintiff and, thus, the panel violated the plaintiff's due process rights. The court of appeal found the arbitration panel's interpretation of the law placed an impossible burden on the plaintiff, a burden the panel deemed fundamentally unfair, thereby requiring vacatur of the arbitration panel's award. After its review, the Supreme Court found that the court of appeal essentially misinterpreted the laws concerning arbitration, and, thus, erred in failing to limit its review to the factors mandating vacatur articulated in La. Rev. Stat. 9:4210. In reversing the court of appeal's decision, the Court reiterated well-settled law that otherwise fairly and honestly obtained arbitration awards may not be overturned merely for errors of fact or law. View "Crescent Property Partners, LLC v. American Manufacturers Mutual Insurance Co." on Justia Law

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Based on an agreement, an oilfield operator was authorized to charge certain costs against revenues prior to paying the oilfield owners. After a dispute arose, an auditor examined the oilfield operator's costs charged to the oilfield owners and found approximately $1 million as being unsubstantiated and, therefore, impermissibly charged to the owners by the operator. The arbitrator reached a different conclusion regarding what charges were permissible and awarded the owners approximately $1.6 million. Satisfied with the arbitrator's decision, the oilfield brought an action in the district court to confirm the award. The oilfield operator, however, moved to vacate the award. The operator argued that the arbitrator improperly considered certain employment documents and that the arbitration was limited in scope by the auditor's findings of the unsubstantiated charges. The district court confirmed the award and denied the operator's motion. The court of appeal affirmed, with one judge dissenting. The issue this case presented for the Supreme Court's review as whether an accountant, serving as an arbitrator, exceeded his arbitral authority. Finding that the arbitrator acted pursuant to the authority lawfully and contractually vested in him by the parties, the Supreme Court affirmed. View "Mack Energy Co. v. Expert Oil & Gas, LLC" on Justia Law

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The issue before the Supreme Court in this case centered on a binding arbitration clause in an attorney-client retainer agreement and whether that clause was enforceable where the client filed suit for legal malpractice. This case presented two important countervailing public policies: Louisiana and federal law explicitly favor the enforcement of arbitration clauses in written contracts; by the same token, Louisiana law also imposes a fiduciary duty "of the highest order" requiring attorneys to act with "the utmost fidelity and forthrightness" in their dealings with clients, and any contractual clause which may limit the client's rights against the attorney is subject to close scrutiny. After its careful study, the Supreme Court held there is no per se rule against arbitration clauses in attorney-client retainer agreements, provided the clause is fair and reasonable to the client. However, the attorneys' fiduciary obligation to the client encompasses ethical duties of loyalty and candor, which in turn require attorneys to fully disclose the scope and the terms of the arbitration clause. An attorney must clearly explain the precise types of disputes the arbitration clause is meant to cover and must set forth, in plain language, those legal rights the parties will give up by agreeing to arbitration. In this case, the Defendants did not make the necessary disclosures, thus, the arbitration clause was unenforceable. Accordingly, the judgment of the lower courts was affirmed. View "Hodges v. Reasonover" on Justia Law

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The issue on appeal to the Supreme Court was whether the appellate court erred in reversing a trial court's denial of Harold Wright's exception of res judicata. Mr. Wright was paralyzed and incapacitated by a medical accident in 1973. He received $1.7 million in damages. The court declared Mr. Wright an interdict and appointed his wife as his curatrix. In conjunction with the proceeding, the court issued an order allowing the curatrix to invest the damages in long-term bonds. No portion of the Mr. Wright's capital estate could be withdrawn from any long range investments without specific orders from the court. Through his investment bank Defendant A.G. Edwards & Sons, Inc. (and with the court's permission), Mr. Wright received disbursements from the invested damages award. In 2002, Mrs. Wright sued Defendant alleging breach of fiduciary duty. Specifically, she argued that A.G. Edwards and its agents misappropriated the entire $1.7 million and disbursed principal in violation of the court's order. Furthermore, Mrs. Wright alleged that when one of her account managers left A.G. Edwards to work for Morgan Stanley, he took Mr. Wright's remaining principal with him. The dispute went to arbitration. While pending, Mr. Wright died, thereby terminating the interdiction proceeding. An arbitration panel issued an award in favor of Defendants. Mr. Wright's estate then filed a motion with the district court, and Defendants filed several exceptions including an exception of res judicata where they contended the arbitration proceeding precluded further court action. The trial court denied the exception, and the appellate court reversed, dismissing the estate's claims. Upon review, the Supreme Court found that the arbitration award was unconfirmed, and therefore did not have a preclusive effect. Accordingly, the Court reversed the appellate court's ruling and remanded the case for further proceedings. View "Interdiction of Harold Wright" on Justia Law