Archive for June, 2011

A Significant Second Circuit Ruling on RICO Civil Liability

Wednesday, June 29th, 2011

Dear Readers:

On my general website today, I report on a very significant Second Circuit decision concerning civil liability under the RICO (federal racketeering) statute. The case has already once been to the U.S. Supreme Court, and a petition for certiorari from this further decision can be expected.  My report is found under Legal Developments at

National holiday greetings to U.S. and Canadian readers.


Some Vitality Remains for Class Arbitration After Concepcion

Tuesday, June 28th, 2011

Class arbitration in the US may have some remaining vitality, under arbitration agreements made before the recent Concepcion decision and which do not include express class action waivers. A recent decision from a federal district judge in San Francisco indicates this, as the Court held that it was for the arbitrators to decide whether the language of the arbitration clauses at issue permits classwide arbitration. (Hayes v. Servicemaster Global Holdings, Inc., 2011 WL 2471001 (N.D. Cal. June 22, 2011).

After sorting through the Supreme Court’s decisions in Bazzle, Stolt-Nielsen, and (by implication) Concepcion, this Court concluded that there were legitimate questions about the intent of the parties as well as questions about precisely what arbitration clause language each of the plaintiffs had agreed to in their employment contract.  The fact that the arbitration clauses were “silent” about class arbitration, in the sense of containing no express reference to class arbitration, was not dispositive, the Court held. Stolt-Nielsen should not be read broadly to preclude arbitrators from permitting arbitration whenever there is such “silence.” The “silence” of the arbitration clause in Stolt-Nielsen was of special significance, said this Court: it connoted, in light of a stipulation of the parties, that they had made no agreement about class arbitration. Without such a stipulation, the Court reasoned, arbitrators after Stolt-Nielsen may still apply to the class arbitration issue rules of state contract law concerning implication of missing terms.

Further, in looking for the intent of the parties, the Court holds, arbitrators may take into consideration that the state of State law concerning class arbitration at the time of the arbitration agreement – which, in the case of California, included the rule treating as unconscionable an arbitration agreement in an adhesion contract that purported to exclude class arbitration.  That rule (the so-called “Discover Bank Rule”) was expressly overruled by the Supreme Court in Concepcion. But it survives, this Court holds, at least as evidence of parties’ intentions in regard to arbitration clauses signed while the Discover Bank Rule was good law.

It has been widely assumed that after Concepcion, consumer and employment contracts will be widely reviewed to include class action waivers if they do not already.  But even if this does occur, there will remain situations where, due to contracting customs, or relatively more equal bargaining power, the arbitration clause will not expressly address the class actions question. While the Supreme Court majority in Concepcion spoke unfavorably toward class arbitration, nevertheless the Court did not hold that the question of whether class arbitration is permitted must always be taken away from the arbitrator by the courts.  It is reasonable to expect that many arbitrators will continue to be asked to decide whether the agreements permit class arbitration, and that some class arbitrations will proceed based on such decisions.

May Foreign Companies Be Subpoenaed at the Offices of Their US Subsidiaries?

Sunday, June 26th, 2011

Dear Readers:

Foreign companies may be exposed to US discovery sought for use in litigation outside the United States. A recent federal court decision rejected an attempt to serve a subpoena for such discovery on a Chinese company at the Chicago offices of its wholly-owned subsidiary. A discussion can be found in the Legal Developments section of my general website.


Marc Goldstein

Pro-Arbitration Foreign Anti-Suit Injunctions: An Overextension of US Judicial Hegemony?

Wednesday, June 22nd, 2011

“International comity” is the term that first springs to mind when the subject under discussion is a foreign anti-suit injunctions (which, for purposes of this commentary, means an order from a US court enjoining a party before it from proceeding with foreign litigation).  Numerous US federal appellate cases admonish district courts to permit foreign anti-suit injunctions sparingly because they interfere, indirectly but tangibly, with the exercise of jurisdiction by the judiciary of a foreign sovereign state.

What should become of that admonition, and what remains of respect for the sovereignty of a foreign state’s judiciary, when the foreign litigation involves a dispute that the US court — enforcing the commands of Article II (3) of the New York Convention – decides must be resolved in arbitration?  

A decision last week by a federal district judge in Manhattan granting a pro-arbitration foreign anti-suit injunction against proceedings in Brazil. suggests upon close analysis that foreign anti-suit injunctions in arbitrable disputes are to be granted almost as a matter of course in view of the strong federal policy favoring arbitration of international commercial disputes. (Stolt Tankers BV v. Allianz Seguros, S.A., 2011 WL 2436662 (S.D.N.Y. June 16, 2011)).  But even granted the importance of this pro-arbitration policy, does not “comity” require that, before granting the injunction, there should be at least some indication that the foreign court, and not the litigants alone, is complicit in violation of that policy? And should not “comity” require that, before granting the injunction, the US court should be satisfied that it would be futile for the movant to present the injunction issue to the foreign court itself, or that there would be irreparable injury to the movant from the proceedings in the foreign court before the time when the foreign court could decide whether or not to stay its own proceedings?

In Stolt Tankers, the contract (charter party) between ship owner and charterer provided for arbitration of disputes in New York.  The charter party was incorporated by reference in bills of lading between the ship owner Stolt and the consignees in Brazil of certain shipments of caustic soda.  The goods were damaged in transit; the consignees obtained insurance recoveries; and the insurers based on subrogation brought suit against Stolt in Brazil.  Stolt then demanded arbitration, but the insurers refused to nominate an arbitrator. Stolt then petitioned the federal court to compel arbitration and to enjoin the Brazil litigation.

Only the Court’s grounds for granting the anti-suit injunction concern us here: first, that the Brazil lawsuit would “frustrate the general federal policy of promoting arbitration”; second, that the Brazilian court would not apply the Carriage of Goods by Sea Act, so that the outcomes “could be inconsistent”; third, equitable considerations such as deterring forum shopping favor the injunction; and fourth “adjudication of the same issues in two separate actions would result in inconvenience, inconsistency, and a possible race to judgment.”


But there is nothing in the Court’s rationale that persuasively justifies the conclusion that the proper forum to decide a motion to enjoin or stay the foreign litigation should in the first instance have been the US rather than the foreign court.  Brazil as a party to the New York Convention has an international obligation toward the United States and other member States to enforce written arbitration agreements, and nothing in the record here suggests that Brazil’s courts intended to violate those obligations.  And if there was no imminent stage of the Brazil proceedings in which Stolt’s rights to arbitral determination according to arbitral procedure would be impaired, would it not have been more sound to deny the injunction without prejudice, and to direct the movant to present the order compelling arbitration to the foreign court in support of an application to stay or dismiss? If that application were the made and denied, or not decided, by the foreign court, the granting of the anti-suit injunction by the US Court would then be supported by the very convincing reason that Brazil would be in violation of its international obligations under the New York Convention.  To deny Brazil’s courts the opportunity to “do the right thing,” does in the circumstances seem to offend international comity more than necessary; foregoing this intermediate step where there is no clear indication that the foreign court will disregard the arbitration clause arguably fuels a perception abroad of US courts as imperialist over-extenders of their judicial hegemony.     

The Stolt Tankers  decision may be usefully contrasted with another pro-arbitration foreign anti-suit injunction case in New York last year:  Amaprop Ltd. v. Indiabulls Financial Services Ltd., 2010 WL 1050988 (S.D.N.Y. Mar. 23, 2010).  In Amaprop, the record before the US Court that supported issuance of an anti-suit injunction included, crucially, the fact that the party seeking to litigate in India rather than arbitrate in New York had obtained an anti-arbitration injunction, initially on an ex parte basis, from a first instance court in Mumbai.  That party was also guilty of some duplicity, having represented to the ICDR that it intended to participate fully in the arbitration, when in fact it was in the process of obtaining the Mumbai anti-arbitration injunction. There was also expert evidence that civil litigation in India’s courts can be expected to continue for a decade or more without resolution. But the critical element, I submit, was that the foreign court was part of the problem, and therefore could not reasonably be expected to be part of the solution.  India, also a member State of the New York Convention, was in violation of its international obligations under that treaty, and therefore there was no reason for the US court first to direct the movant to take the order compelling arbitration to the Mumbai court and to ask that court to stay or dismiss its own proceedings.

It will be useful here briefly to juxtapose this sampling of recent US anti-suit injunction case law with the situation in Europe. (There is now a vast literature on this. My summary draws only on an article, recently published in the American Review of International Arbitration Volume 21, by the French jurist Dominique Hascher.  Any misunderstandings resulting from my lack of grounding in EU law are apologized for, in advance, and are certainly not attributable to Judge Hascher). The European position starts with a famous case called West Tankers, whose facts were not very different from Stolt Tankers, except that the subrogee insurers (including in both instances Allianz) sought to litigate in Italy and the pro-arbitration foreign anti-suit injunction was obtained from the High Court in London. On appeal, the House of Lords asked the European Court of Justice for an advisory ruling on whether the High Court’s order was consistent with Brussels Regulation 44 of 2001, which generally prohibits anti-suit injunctions from one EU Member State’s courts that impact proceedings in courts of another EU Member State.  The ECJ ruled that the High Court’s injunction was improper, and that it was an interference with the Italian court’s right to decide whether its jurisdiction was ousted or affected by the alleged agreement to arbitrate.

Comity, I suggest, should lead to the same result, presumptively but not categorically, between the United States and other countries that are member States of the New York Convention, even without a formal regulated union such as exists among the European countries. There should a presumption that the foreign court in which the litigation is pending has the right to consider in the first instance the effect of the arbitration agreement on its own jurisdiction (but not to reconsider the validity or existence of the arbitration agreement if the US court properly had jurisdiction to decide that question). That presumption may be rebutted by evidence that the foreign court has ignored or intends to ignore an agreement to arbitrate that is clearly sufficient, under the New York Convention, to impose on the foreign court an obligation to refer the parties to arbitration.  This is an approach that strikes a reasonable balance between American arbitration policy and respect for the jurisdictional sovereignty of foreign courts. 


Competition Stiffens for New York ADR Engagements

Wednesday, June 22nd, 2011

Dear Readers

It is not usually the function of Arbitration Commentaries merely to report news of the day, but while a new post on anti-suit injunctions in aid of international arbitration is in preparation, I invite your attention to an article in today’s New York Times reporting that a disbarred former lawyer, having completed his prison term for paying kickbacks to secure clients, is seeking engagements as an arbitrator and mediator.   Read further at under Legal Developments, where there is a link to the article itself, and if you wish, post your comments here. 

Warm Regards.

Marc Goldstein

New US Developments on Civil Liability for International Law Violations

Sunday, June 19th, 2011

Dear Readers:

On the general website of my law practice,, you will find an essay on recent developments in US litigation under the Alien Tort Statute (“ATS”).