Articles Posted in Arbitration & Mediation

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Plaintiffs and Defendant, members of an accounting firm (Firm), were parties to a stockholder agreement (Agreement) that contained an arbitration clause. The parties’ agreement to arbitrate was governed by the Massachusetts Uniform Arbitration Act for Commercial Disputes. When Plaintiffs voted to require the withdrawal of Defendant as a director and stockholder in the Firm, Defendant opened his own accounting firm. The nature and terms of Defendant’s withdrawal from the Firm and his subsequent competition with the Firm were the bases of a dispute between the parties. The dispute was submitted to binding arbitration. The arbitrator issued a final award awarding the Firm $1.7 million plus interest. The superior court confirmed the arbitration award. Defendant appealed, arguing (1) the arbitrator fundamentally misinterpreted the agreement, and (2) he was entitled to have a court consider the merits of his claim because, in the arbitration clause of the agreement, the parties specifically provided for judicial review of an award to determine if there was flagrant error by the arbitrator. The Supreme Judicial Court affirmed the motion judge’s confirmation award, holding (1) the grounds of judicial review in this case were limited to those delineated in Mass. Gen. Laws ch. 215, 12 and 13; and (2) Defendant’s claim was not reviewable by the Court. View "Katz, Nannis & Solomon, P.C. v. Levine" on Justia Law

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After a fire broke out at the Beacon Towers Condominium, the board of trustees for the Beacon Towers Condominium Trust, the unit owners’ organization for the condominium, assessed George Alex $62,995 for the two units that he owned. Alex commenced an arbitration action challenging the propriety of the trustees’ conduct regarding the fire damage repairs and the imposition of the assessment. The arbitration panel found in favor of Alex. Although the panel recognized that the arbitration agreement in the trust’s bylaw did not provide for an award of fees, the panel nonetheless awarded fees, reasoning that the American Arbitration Association allowed an award of fees where “substantially all of the defenses were wholly insubstantial, frivolous and not advanced in good faith.” The trust filed suit, claiming that the arbitrators’ award of attorney’s fees exceeded the scope of the parties’ arbitration agreement. A superior court judge vacated the award of attorney’s fees, concluding that such an award was not authorized by Mass. Gen. Laws ch. 231, 6F when ordered by an arbitrator because section 6F does not authorize an arbitrator to award attorney’s fees. The Supreme Judicial Court affirmed, holding that an arbitrator lacks the authority to award attorney’s fees under the circumstances of this case. View "Beacon Towers Condo. Trust v. Alex" on Justia Law

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A stock transfer restriction required a selling shareholder first to offer his stock to the company at his desired price and then, if the company rejected it, to offer it at a price to be determined by arbitrators. Plaintiff invoked this process by tendering an offer to the company (Defendant) but later changed his mind regarding his desire to sell. When Plaintiff sought to withdraw from the process of valuing his stock, Defendant moved to compel arbitration. The superior court denied the motion to compel, concluding that a mere disagreement over the value of stock was legally insufficient to give rise to arbitration. The Supreme Judicial Court affirmed on other grounds, holding (1) a stock valuation may be conducted through arbitration so long as an actual controversy exists regarding the value of the stock; and (2) because the shareholder in this case decided not to sell the stock prior to the commencement of arbitration, the controversy to be arbitrated was rendered moot. View "Vale v. Valchuis" on Justia Law

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A franchisee janitorial worker, on behalf of himself and other similarly situated individuals, filed a complaint against System4 LLC, a master franchisor, and NECCS, Inc., a regional subfranchisor, alleging, among other claims, breach of contract, misclassification as independent contractors in their franchise agreements, and rescission of the franchise agreements. The franchise agreements, signed only by Plaintiffs and NEECS, required the franchisees to arbitrate virtually all disputes. Defendants, citing the arbitration clause in the franchise agreement, moved to stay the court proceedings pending arbitration. The judge concluded that because System4 was not a nonsignatory to the agreements, Plaintiffs could proceed to litigate their claims against System4 in court. The Supreme Judicial Court reversed, holding that, by reason of equitable estoppel, System4 could compel Plaintiffs to arbitrate their substantive claims in accordance with the arbitration provision in Plaintiffs’ franchise agreements. Remanded. View "Machado v. System4 LLC" on Justia Law

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After the Town of Athol unilaterally increased copayment amounts that members of the Professional Firefighters of Athol, Local 1751, I.A.F.F. (Union) pay for medical services under their health insurance plans, the Union filed a grievance under the parties’ collective bargaining agreement (CBA). An arbitrator determined that the Town violated the CBA by making the changes unilaterally. The Town filed a complaint in the superior court seeking to vacate the award and other relief. The superior court confirmed the portion of the award compelling the parties to collectively bargain over changes to copayment rates and vacated two remedial aspects of the award. The Supreme Judicial Court reversed in part, holding that the superior court judge erred in vacating any portion of the award. Remanded for entry of a judgment confirming the award in its entirety. View "Town of Athol v. Prof’l Firefighters of Athol, Local 1751, I.A.F.F." on Justia Law

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A school librarian having professional teacher status was suspended for conduct deemed to be unbecoming a teacher. An arbitrator considered the merits of the suspension. Applying a “just cause” standard, the arbitrator overturned the suspension, concluding that the school district failed to meet its burden of proof. A superior court judge confirmed the arbitrator’s award. The Supreme Judicial Court affirmed, holding that the arbitrator did not exceed his authority by reviewing the merits of the librarian’s twenty-day suspension and concluding that the school district had not met its burden of proving the alleged just cause for the suspension. View "Superintendent-Dir. of Assabet Valley Reg’l Sch. Dist. v. Speicher" on Justia Law

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The Lexington school district superintendent dismissed Mark Zagaeski, a Lexington high school teacher, from his position for conduct unbecoming a teacher. Zagaeski timely filed an appeal from the school district’s dismissal decision, which resulted in arbitration proceedings. The arbitrator (1) concluded that the school district carried its burden to show facts amounting to conduct unbecoming a teacher but that Zagaeski’s conduct only “nominally” constituted a basis for dismissal; and (2) reinstated Zagaeski as a teacher on the basis of “the best interests of the pupils.” The superior court confirmed the arbitrator’s award. The Supreme Judicial Court reversed the decision of the superior court judge and vacated the arbitration award, holding that, under the facts of this case, the arbitrator exceeded the scope of his authority by awarding Zagaeski's reinstatement. View "Sch. Comm. of Lexington v. Zagaeski" on Justia Law

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When Rita Licata was transferred to a nursing facility operated by Defendant Rita’s son Salvatore signed an agreement with the facility to arbitrate disputes arising from Rita’s stay at the facility. Salvatore signed the agreement in the space provided for the resident’s “authorized representative.” Rita suffered personal injuries at the nursing facility resulting in her death. Salvator filed a complaint as administrator of Rita’s estate against Defendant for, inter alia, wrongful death and negligence. Defendant filed a motion to dismiss the complaint and to compel arbitration. The motion judge denied the motion, concluding that Salvatore lacked authority to execute the arbitration agreement on Rita’s behalf. The Supreme Court affirmed, holding (1) Salvatore lacked authority to execute the agreement on Rita’s behalf; and (2) the arbitration agreement did not otherwise bind Rita’s estate. View "Licata v. GGNSC Malden Dexter LLC" on Justia Law

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Barbara Johnson, in her capacity as her husband Dalton’s health care agent, signed an agreement with a nursing facility to arbitrate disputes arising from Dalton’s stay at the facility. While a resident of the facility, Dalton suffered burns and later died. The administrators of Dalton’s estate, filed a complaint against nursing home defendants and others, arguing that Barbara, as Dalton’s health care agent, did not have the authority to execute the arbitration agreement on his behalf. A superior court judge entered an order compelling mediation or arbitration. The Supreme Court vacated the order of the superior court, holding that a health care agent’s decision to enter into an arbitration agreement is not a health care decision under the health care proxy statute, and therefore, an agreement to arbitrate all claims arising out of a principal’s stay in a nursing facility does not bind the principal where the agreement was entered into solely by a health care agent under the authority of a health care proxy. View "Johnson v. Kindred Healthcare, Inc." on Justia Law

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Karl McGhee, a financial advisor at LPL Financial, acted as financial planner for Plaintiff. Plaintiff filed a complaint against McGhee and LPL, asserting claims for, inter alia, violations of Mass. Gen. Laws ch. 93A. Defendants moved for an order compelling the parties to proceed to arbitration due to an arbitration agreement signed by Plaintiff. The motion judge denied the motion, concluding that none of Plaintiff's claims could be compelled to arbitration because claimants under chapter 93A, section 9 are not required to submit to arbitration. The Supreme Court reversed, holding (1) claims alleging an unfair or deceptive trade practice in violation of chapter 93A, section 9 must be referred to arbitration where the contract involves interstate commerce and the agreement is enforceable under the Federal Arbitration Act (FAA); and (2) because Plaintiff and Defendants in this case entered into a valid contract whereby they agreed to settle all controversies related to Plaintiff's financial account by arbitration, and because the arbitration agreement was governed by the FAA, Defendants as a matter of law were entitled under the FAA to a stay of judicial proceedings and an order compelling arbitration. Remanded. View "McInnes v. LPL Fin., LLC" on Justia Law