State Roundup: Top Courts Uphold Third-Party Arbitration & Require Mediation Writing (Web)

Arbitration Agreement Benefitting Third-Party Is Valid Despite Opt-Out Clause.

Where an arbitration agreement between a retailer and purchaser stated that it also "inured to the benefit of the manufacturer," but gave the manufacturer the right to opt-out of arbitration, the Texas Supreme Court required the purchaser to arbitrate a dispute with both the manufacturer and the retailer. The Court rejected claims that the opt-out clause caused the agreement to lack consideration, that there was no valid arbitration agreement, and that the contract was substantively or procedurally unconscionable. In re Palm Harbor Homes Inc., No. 04-0490, 2006 WL 1562546 (June 9, 2006)(more information at http://www.supreme.courts.state.tx.us/historical/060906.asp).


Claim Is Estopped by Reasonable Reliance, Although a Mediation Settlement Agreement Mediation Is Faulty.

The Wisconsin Supreme Court held that a plaintiff was estopped from pursuing its claims, despite the fact that an earlier settlement agreement did not meet Wisconsin law requirements. The Court found that the plaintiff had "induced reasonable reliance" on the defendant’s part because the plaintiff had not acted when its insurance company sent a check to the defendant pursuant to a supposed settlement agreement. Affordable Erecting Inc. v. Neosho Trompler Inc., Case No. 2004AP2746, 2006 WL 1566418 (June 9, 2006)(available at www.wicourts.gov/sc/opinion/DisplayDocument.pdf?content=pdf&seqNo=25481).


Alabama State Law Requires Settlement Agreements Reached in Mediation to Be in Writing.

The Alabama Supreme Court reversed a trial court decision enforcing an oral settlement agreement during mediation. The Court held that regardless of whether there actually was an agreement, it did not meet the state law requirement that a settlement agreement be made in writing or recorded in the minutes of a court. Cincinnati Insurance Co. v. Barber Insulation Inc., No. 1050485, 2006 WL 1577847 (June 9, 2006).

--Clifford Blair, Law Clerk, White & Case LLP, New York.