In Williams v. Homeland Ins. Co., No. 11-30646 (5th Cir. Sept. 19, 2011), George Raymond Williams brought a class action suit in Louisiana state court on behalf of Louisiana medical providers against operator of preferred provider organization (“PPO”) network and other defendants, alleging violation of PPO notice provisions of Louisiana law. One year later, Williams amended the petition and added three defendants: Corvel Corporation (“Corvel”), Homeland Insurance Company (“Homeland”), and Executive Risk Specialty Insurance (“Executive Risk”). Corvel and the plaintiff class agreed to settle, however, before the state court approved the settlement, Executive Risk removed to federal court claiming federal jurisdiction under Class Action Fairness Act (“CAFA”). See 28 U.S.C. Sections 1332(d), 1453, and 1711–1715. Both Williams and Corvel moved for remand, arguing that CAFA’s local controversy exception applied. See 28 U.S.C. § 1332(d)(4). The district court determined that Williams satisfied all the elements of the CAFA exception and remanded the case to state court. Upon remand, the state trial judge gave preliminary approval of Corvel’s settlement. One day later, however, Homeland appealed. Homeland argues that Williams failed to satisfy any of the elements of the local controversy exception. The issue before the Fifth Circuit was whether that class arbitration counted as a “class action” that would preclude application of CAFA’s local controversy exception. CAFA grants federal courts jurisdiction over class actions in which at least $5 million is at stake and minimum diversity requirements are met. However, under 28 U.S.C. § 1332(d)(4)(A), a “local controversy” is excluded from CAFA. The court explained that the “local controversy exception” requires the district court to decline jurisdiction under CAFA if : (1) more than two-thirds of the proposed class members are citizens of the forum state; (2) the “principal injuries” resulting from the alleged conduct were incurred in the forum state; (3) no class action asserting similar factual allegations has been filed against any of the defendants in the preceding three years; and (4) at least one defendant is a forum-state citizen from whom “significant relief is sought” and whose alleged conduct is a “significant basis” of the claims. The parties dispute whether a class arbitration qualifies as a class action under CAFA. The district court, citing Black’s Law Dictionary, had decided that a class arbitration is not a class action, because “arbitration” resolves disputes outside of court, while a “class action” is a form of lawsuit within the court. The Fifth Circuit agreed, reasoning that: CAFA defines the term “class action” to mean “any civil action filed under rule 23 of the Federal Rules of Civil Procedure or similar State statute or rule of judicial procedure.” § 1332(d)(1)(B). Homeland argues for an expansive reading of the term to encompass arbitrations, which often are commenced under rules that mimic Rule 23. However, if “any civil action” includes arbitrations, then CAFA would require district courts to exercise original jurisdiction over any arbitration that satisfies CAFA’s threshold requirements. See § 1332(d)(2). The Fifth Circuit held that prior class arbitration did not constitute a class action, for purposes of CAFA. Technorati Tags: law, ADR, arbitration

The October 2011 issue of the ABA Journal Magazine features an interesting article about the IFC ‘s Alternative Dispute Resolution project in Pakistan. In 2005, a pilot commercial mediation center was opened in Karachi. This center is expected to serve as the model for conflict mediation in Pakistan and throughout the entire Middle East and North Africa Region. Here is an excerpt: Backlogged courts, litigation-happy parties and risk-averse businesses may sound like the sorts of problems plaguing the U.S. legal system, but it’s also true in Pakistan, where a branch of the World Bank has been trying to convince lawyers that alternative dispute resolution may be a solution. The International Finance Corp. started promoting ADR in Pakistan in 2005 when it began helping to establish the Karachi Centre for Dispute Resolution. The IFC, which works to encourage economic investment, became involved because of the business climate there. Roughly 90 percent of commercial cases in Pakistan go to trial, and the court backlog is estimated to be near 1.5 million cases, says Atlanta lawyer Glenn Hendrix, a past chair of the ABA’s International Law Section who has been traveling to Karachi to help train Pakistani lawyers in mediation. Read the full article here. Technorati Tags: law, ADR, arbitration

As the Wall Street Journal reports, a federal judge in Houston has ordered claimant Jamie Leigh Jones to pay the court costs (nearly $150,000) for suing her former employer Halliburton/KBR. The judge, however, refused to award Halliburton/KBR the attorney’s fees (of over $2 million) the company recently requested. “The fact that Jones presented prima facie claims of sexual harassment and hostile work environment highlights the impropriety of an award of attorneys’ fees in this case,” the judge wrote, concluding that her case was not frivolous. Related Posts: Jamie Leigh Jones v. Halliburton/KBR | Halliburton/KBR Sues Jones to Recover Attorneys’ Fees and Costs (Aug. 22, 2011) Jamie Leigh Jones v. Halliburton/KBR | Jury Reaches Verdict (July 9, 2011) Jones v. Halliburton/KBR: Trial Begins, Not Arbitration (June 25, 2011) Jones v. Halliburton: Halliburton and KBR Withdraw U.S. Supreme Court Appeal (Mar. 24, 2010) Halliburton/KBR Files Cert. in Jones v. Halliburton (Feb. 8, 2010) Guest-Post Part II | Employment Arbitration: Short-Term Value but Long-Term Harm (Jan. 7, 2010) Guest-Post Part I | Employment Arbitration: Short-Term Value but Long-Term Harm (Jan. 6, 2010) 2009 Developments: Consumer and Employment Arbitration (Dec. 23, 2009) Defense Contractor Mandatory Arbitration Passes Senate (Oct. 13, 2009) Jones v. Halliburton: Fifth Circuit Rules on Arbitration of Tort Claims by an Employee (Sept. 18, 2009) Employment and Consumer Arbitration: NPR Article (June 10, 2009) Technorati Tags: ADR, law, arbitration

As discussed at the ADR Prof Blog, the Second Circuit held that an issuer who purchases auction-facilitating services for its auction rate securities from a broker-dealer is a “customer” of that broker-dealer within the meaning of the Financial Industry Regulatory Authority (“FINRA”) Rule 12200. FINRA Rule 12200 governs whether FINRA members must submit to FINRA arbitration. In UBS Financial Services Inc. v. West Virginia University Hospitals Inc. No. 11-235-cv (2nd Cir. Sept. 22, 2011), UBS Financial Services, Inc. and UBS Securities LLC (“UBS”) are FINRA member entities (subject to FINRA’s Code of Arbitration Procedure for Customer Disputes) engaged in a range of finance-based businesses. West Virginia University Hospitals, Inc. (“WVUH”) is a not-for-profit health consortium that has issued bonds to finance capital improvements and refinance existing debt. UBS appeals the denial of their motion for a preliminary injunction enjoining the defendants from proceeding with an arbitration before FINRA and require that the arbitration proceed in New York County. In the arbitration, the defendants seek damages for UBS’s alleged fraud in connection with the defendants’ issuances of auction rate securities. The District Court for the Southern District of New York denied the requested injunction and held that a forum selection clause in one of the agreements between the parties was unenforceable because it conflicts with FINRA’s rules, and ordered that the arbitration proceed in West Virginia. The Second Circuit held that: The defendants are entitled to arbitration because they became UBS’s “customer” under FINRA’s rules when they undertook to purchase auction services from UBS; and The enforceability of the forum selection clause is a procedural issue for FINRA arbitrators to address and that the District Court lacked jurisdiction to resolve it. Technorati Tags: law, ADR, arbitration