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

As reported by WIRED, Sony recently revised its online Terms of Service and User Agreement. The move was prompted by the multiple security breaches of earlier this year in which hackers stole data from nearly 75 million Sony PlayStation customers. Section 15 of the revised agreement includes an arbitration clause with a class action waiver provision. Sony, however, provides for a right to op-out of the binding arbitration and class action waiver if customers follow the notification procedure stated within the provision. Here is part of the arbitration clause: Class Action Waiver. ANY DISPUTE RESOLUTION PROCEEDINGS, WHETHER IN ARBITRATION OR COURT, WILL BE CONDUCTED ONLY ON AN INDIVIDUAL BASIS AND NOT IN A CLASS OR REPRESENTATIVE ACTION OR AS A NAMED OR UNNAMED MEMBER IN A CLASS, CONSOLIDATED, REPRESENTATIVE OR PRIVATE ATTORNEY GENERAL ACTION, UNLESS BOTH YOU AND THE SONY ENTITY WITH WHICH YOU HAVE A DISPUTE SPECIFICALLY AGREE TO DO SO IN WRITING FOLLOWING INITIATION OF THE ARBITRATION. THIS PROVISION DOES NOT PRECLUDE YOUR PARTICIPATION AS A MEMBER IN A CLASS ACTION FILED ON OR BEFORE AUGUST 20, 2011. Will the new arbitration clause (which spans across three pages) pass judicial scrutiny? Let us know your thoughts. Related Posts: FBI Arrests Suspected LulzSec Member in Connection with Sony Cyber Attacks, Security Week Sony cleared of PSN Privacy Breach, The Sidney Morning Herald Own Motion Investigation Report Sony PlayStation Network, Australian Government Let the Litigation Begin – Sony PlayStation Data Breach Class Action Filed in Boston, Privacy & Security Matters Sony Says PlayStation Credit Cards Were Encrypted, WIRED Technorati Tags: law, ADR, arbitration

Last week, the Chartered Institute of Arbitrators (“CIArb”) launched the results of the CIArb’s survey into the costs of international arbitration. The survey was completed by arbitrators and lawyers from five continents and includes information on 254 arbitrations conducted between 1991 and 2010. Here are some of the highlights: The survey results indicate that the costs of international arbitration vary depending on where the arbitration takes place, with the UK as the most commonly chosen arbitral seat for survey respondents. Claimant costs noted in this survey averaged nearly 10% higher in the rest of Europe compared with in the UK, while external legal fees were over 26% higher in the rest of Europe. Common costs, such as arbitrators’ fees, were reportedly over 18% higher in Europe than in the UK. Furthermore party costs were returned as around 13% higher in civil law countries than common law countries. The survey results also showed that claimants spent 12% more than respondents, and that the average length of an arbitration was between 17 and 20 months. According to the survey, 62% of arbitral proceedings were administered by an institution, with the ICC appearing as the most popular choice for institutional arbitrations. The press release about the survey is here. You may download (free of charge) the results of the survey here. Technorati Tags: law, ADR, arbitration

To address the problem of excessive costs of the discovery process, particularly in patent litigation, the Advisory Council of the Federal Circuit created recently a task force to draft a model rule for e-discovery governance. The final product, “Model Order on E-Discovery in Patent Cases” was unveiled on September 27 by Chief Judge Randall R. Rader at the 2011 E.D. Texas Bench and Bar Conference. The goal of the Model Order, Chief Judge Rader said, is to “streamline e-discovery, particularly email production, and require litigants to focus on the proper purpose of discovery—the gathering of material information—rather than on unlimited fishing expeditions.” The 14 provisions of the Model Order address cost shifting, metadata, and the treatment of privileged information. The majority of the provisions address e-mail discovery. Download Chief Judge Randall R. Rader’s speech (pages 1-20) and Model Order (pages 21-28) here.