News

    A trial court in Missouri denied a stay while BNSF Railway's petition to compel arbitration is pending in federal court. Last month, CCL President Robert S. Peck argued that the stay should be denied for multiple reasons, including that the arbitration clause was unconstitutional, that the arbitration agreement did not apply to many of the plaintiffs in this train derailment case, and that arbitration had been waived by BNSF's participation in the state court litigation. 

     The court's ruling came after extensive additional briefing. 

     After BNSF Railway petitioned a federal court in St. Louis to stay state court proceedings and order mandatory arbitration of claims arising from a train derailment, CCL filed a motion to dismiss for lack of subject-matter jurisdiction. The case, previously reported in this blog on November 3, involves deaths and injuries from a train's crash with a dump truck near Mendon, Missouri.

     BNSF contends that it is premature to determine the validity of the Amtrak arbitration agreement that it relies upon, even though that is the first step a court must undertake in response to either BNSF's motion to stay proceedings or the plaintiffs' motion to dismiss. CCL's reply brief in support of dismissal makes that point and suggests that BNSF's refusal to defend the basis of its arbitration agreement waives it and warrants immediate dismissal of the federal case so that the state case may proceed.

     In Holsapple v. BNSF, CCL filed a supplemental brief asserting that BNSF Railway waived any right it had to mandatory arbitration of cases brought as a result of a train derailment near Mendon, Missouri.

     In a post on the CCL blog on November 3, CCL provided background on the case and the court's request for supplemental briefing on whether arbitration was waived. In the brief filed today, CCL argued that a party seeking arbitration must tell the court at the earliest feasible moment, under relevant precedent, and cannot otherwise participate in the case without waiving arbitration. In this case, BNSF opposed adding Amtrak as a third-party defendant, supported a stay pending an investigation by the National Transportation Safety Board, and filed for a change of venue to another court. Those actions forfeited any arbitration rights BNSF might have had because it expended time and resources in the trial court without alerting the court to the arbitration issue. It is therefore inconsistent with any claimed right to arbitration.

      The court is expected to rule on BNSF's motion to stay proceedings pending arbitration shortly.

     Arguing that BNSF Railway had no right to stay court proceedings in favor of its federal motion to compel arbitration for deaths and injuries arising from a train derailment, CCL President Robert S. Peck urged the trial court in Chariton County, Missouri that BNSF's claim that the plaintiffs had agreed to arbitration was factually incorrect, that the arbitration agreement was unconstitutional because of its source, that the agreement, if valid, could not apply to the wrongful death claimants, and that BNSF had waived any right to arbitration through its participation in proceedings in the court.

      The dispute arises out of a June 27, 2022 derailment that occurred when Amtrak Train 4, known as the Southwest Chief, traveling from Los Angeles to Chicago, struck a dump truck near Mendon, Missouri. BNSF operated the train for Amtrak and claimed the benefit of an Amtrak pop up that occurs when purchasing tickets online that requires a potential passenger to agree to mandatory arbitration for any disputes resulting from the ticket purchase or travel.

      After injured passengers and survivors of the passengers killed filed their state court lawsuits, BNSF waited three months, participating in the state court case, before seeking a stay of proceedings and filing an action to compel arbitration in federal court against the plaintiffs. In court, Peck explained that because Amtrak is a government agency and not a private party, it is obligated to comply with the Constitution, where plaintiffs have a right of access to the courts and a right to trial by jury. The government cannot require a person to waive those rights in order to participate in government services, which the mandatory arbitration provision seeks to do. It is therefore null and void and cannot be claimed by BNSF.

      In addition, if there were a valid arbitration agreement, participating in court proceedings, deciding that it did not like the direction the case was going, and then invoking arbitration constitutes a waiver of any arbitration rights, because a party cannot game the system to find a more favorable venue for its case.

      Furthermore, Peck explained that tickets on the train were purchased in a variety of ways. Some may have used Amtrak's website with the arbitration pop-up, but other tickets were purchased at a ticket window where no arbitration agreement is revealed or agreed to, at travel agencies that do not convey the arbitration agreement such as AAA, and on behalf of others where the purchaser was not authorized to agree to arbitration as the traveler's agent in order to purchase the ticket. 

    Finally, Peck argued that, under Missouri law, a wrongful death case is not a derivative action, so that even if the decedent had agreed to arbitration, she could not bind those with survival claims, which is a wholly different cause of action than a personal injury claim. 

    The court took the matter under advisement, but asked the parties for supplemental briefs on the waiver issue.

     On the same day, making similar arguments, a brief authored by CCL was filed by co-counsel Davis Bethune & Jones LLC in the federal court in St. Louis, opposing BNSF's preliminary injunction motion.

     CCL argued that a Missouri trial court should not stay its proceedings growing out of a train derailment because Defendant BNSF seeks mandatory arbitration of the wrongful death and injury claims by passengers and their estates. Joining with Davis Bethune Jones of Kansas City, CCL President Robert S. Peck argued that BNSF has no valid arbitration clause because it relies on its status as a third-party beneficiary of Amtrak, which sold the tickets. Amtrak, however, is a government agency and, as such, is required to observe constitutional rights. A mandatory arbitration requirement would abrogate the injured parties rights to trial by jury and access to the courts, the brief argues. 

     In addition, the brief adds that some passengers obtained their tickets through means other than the Amtrak website, such as over the phone, at ticket windows, and travel agencies, where they received no notice of any arbitration requirement, invalidating the imposition of arbitration under traditional contract principles. Finally, the brief argues that the Amtrak arbitration agreement makes a purchaser an agent for all who might later make a claim based on their purchase of a ticket, a form of agency that also violates contract principles and, in the cases of wrongful death, improperly treats all claims as derivative in violation of Missouri law.

      The parties' different positions on the issues of the validity of the arbitration provision will be the subject of a hearing on November 3.

     CCL joined its co-counsel, Shapiro Blasi Wasserman Hermann, in filing a preliminary injunction motion, seeking to prevent implementation of new property insurance policies in Florida that add mandatory arbitration to the policies and abrogate a homeowner's right to attorney fees when the insurer wrongly denies a claim.

     The case names Florida Insurance Commissioner David Altmaier, who approved the policy, along with American Integrity Insurance, which requested the approval, as defendants. Plaintiffs Restoration Association of Florida and Air Quality Assessors argue that the commissioner lacked authority to approve the policies, violating separation of powers, and that the new provisions violate the Florida Constitution's access to courts, due process, and equal protection guarantees. 

     A hearing on the motion is scheduled November 15.

The Pennsylvania Supreme Court held on Oct. 27, 2015 that a nursing home that had required arbitration of disputes “in accordance with the National Arbitration Forum Code of Procedure” could not compel arbitration of claims of abuse and neglect. Wert v. Manorcare of Carlisle, Pa., LLC, No. 62 MAP 2014.

When plaintiff admitted her mother into defendant’s skilled nursing facility, she signed an agreement that all disputes be resolved by arbitration exclusively “in accordance with the National Arbitration Forum Code of Procedure.” Within six months, plaintiff’s mother died, allegedly due to abuse and neglect. Plaintiff filed suit and the nursing home filed preliminary objections, seeking to enforce the arbitration agreement. The trial court overruled the objections, finding the agreement unenforceable because NAF had entered into a consent decree in 2009 that barred it from administering arbitrations of consumer disputes. The court held that this provision was integral to the agreement and was therefore not severable from the remainder of the arbitration agreement. The Pennsylania Superior Court affirmed, and the Pennsylvania Supreme Court granted review.

The American Association for Justice filed an amicus curiae brief supporting plaintiff, authored by CCL Senior Counsel Jeffrey R. White. The brief emphasized that the nursing home was not simply asking the court for a substitute arbitrator, but for an alternative arbitral forum and administrator, which would require extensive rewriting of the parties’ agreement. Moreover, § 5 of the Federal Arbitration Act, which the nursing home heavily relied upon as authority for appointing a substitute arbitrator, does not authorize the court to appoint a substitute arbitral forum.

The Pennsylvania Supreme Court affirmed in a 3-2 decision. The court found the NAF designation integral and non-severable, “[d]oing otherwise would require this Court to rewrite the Agreement.” The court noted AAJ’s argument regarding the scope of § 5 of the FAA, but found it unnecessary to reach that issue. “Regardless of whether Section five may apply where there is a lapse in the administrator, by its own rules, the NAF must administer its code unless the parties agree to the contrary.” The court also held that plaintiff’s own testimony that she did not read the agreement was not relevant to whether the NAF designation was integral. “[P]remising the integrality of a contractual term on the subjective understanding of a far less sophisticated non-drafting party is ill-advised public policy that would further distort an already lopsided balance of power.”

Have employers hijacked federal protections for seafarers enacted by Congress by using mandatory arbitration clauses in their employment contracts for those who work aboard U.S. based vessels? On March 23, 2015, CCL filed an amicus curiae brief on behalf of the American Association for Justice asking the Supreme Court to halt this erosion of federal statutory rights by accepting Pysarenko v. Carnival Corp., Docket No.14-12378, for review.

Vitalii Pysarenko, a citizen of Ukraine (now a permanent resident of the U.S.), was employed by Carnival Cruise Lines, headquartered in Miami. He was injured while moving heavy equipment aboard the Carnival Dream in Port Canaveral, Fla. Pysarenko brought suit under the Jones Act and the Seamen’s Wage Act. Carnival moved to compel arbitration, alleging that the manadory arbitration provision in Pysarenko’s employment contract was enforceable under Chapter 2 of the Federal Arbitration Act, which implements the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, including those between U.S citizens and citizens of foreign countries. The district court granted Carnival’s motion to compel arbitration in Monaco while applying Panamanian law as provided in the employment contract. The Eleventh Circuit affirmed.

AAJ’s amicus brief supporting Pysarenko’s Petition for Certiorari, prepared by CCL Senior Counsel Jeffrey R. White, emphasized the Court’s historic role in protecting the rights of seafarers, long deemed “wards of the admiralty.” That role remains essential with respect to the cruise industry, which makes use of “flags of convenience” to evade safety regulations. AAJ also pointed out to the Court that the enforcement of mandatory arbitration agreements under Chapter 2 of the FAA also extends to U.S. citizen seamen who hire onto foreign vessels and to U.S. seamen working aboard U.S. vessels, where the employment contract has some connection with a foreign nation.

Enforcement of the arbitration provision under Chapter 2 of the FAA raises three important issues that should be resolved by the Supreme Court. First, enforcement violates § 1 of the FAA, which states that “nothing herein contained shall apply to contracts of employment of seamen.”  Second, enforcement violates the Federal Employers Liability Act, 45 U.S.C. § 55, which is incorporated into the Jones Act and states that any contract “the purpose or intent of which shall be to enable any common carrier to exempt itself from any liability created by this chapter, shall to that extent be void.” Third, enforcement violates the Court’s precedents stating that federal statutory rights may be the subject of arbitration only where the party may vindicate his federal rights in the arbitral forum. In this case, because the laws of Panama offer no rights to seafarers comparable to the Jones Act and Seamen’s Wage Act, the mandatory arbitration provision operates as a prohibited prospective waiver of federal statutory rights.

The Massachusetts Supreme Judicial Court today vacated a lower court’s order to compel arbitration in a nursing home case.  In this case, the estate of a nursing home resident sued the home for negligence that allegedly caused the resident’s death.  The nursing home sought to enforce an arbitration agreement executed by the resident’s wife as his health care agent.   The Massachusetts high court said that no language in the health care proxy statute gives a patient’s health care agent “authority over any decision other than medical treatment” which directly involves the provision of “medical services, procedures, or treatment of the [patient’s] physical or mental condition.”  Further that statute reflects no intent to allow the health care agent to waive a [patient’s] right of access to the courts and to trial by jury by agreeing to binding arbitration.”

The plaintiffs in Johnson v. Kindred Healthcare, Inc., were represented by former CCL attorney John Vail and by David J. Hoey of North Reading, MA.

“Arbitration is not health care,”  CCL’s John Vail told the Massachusetts Supreme Judicial Court yesterday, urging it not to enforce an arbitration agreement signed by a person authorized to make health care decisions for a nursing home resident whose death allegedly was caused by the nursing home’s  neglect.

An active bench peppered Vail and opposing counsel with questions.  In response to one, Vail noted that deciding when a patient gets mail, or what he eats, are, unlike arbitration, necessary incidents of providing health care to an incompetent person in a residential setting.  Illustrating her point that it was questionable whether a health care proxy had even the power to use the principal’s money to pay health care bills, one Justice asked Vail’s opponent whether a proxy was empowered to sell a principal’s house to pay them.   No cogent answer came forth.

The Court, which recently issued two opinions finding that prior decisions about arbitration were pre-empted under recent Supreme Court decisions, speculated about whether the Federal Arbitration Act would permit it to treat paying bills as within the scope of the health care proxy but agreeing to arbitration as outside the scope.

The plaintiffs in Johnson v. Kindred Healthcare, Inc., are represented, in addition to Vail, by David J. Hoey of North Reading, MA.  The case was consolidated for argument with Licata v. GGNSC Malden Dexter, LLC.  A decision is expected within 130 days.