Eleventh Circuit Applies "Look-Through" Jurisdiction Rule to Allow Federal Petition to Compel Arbitration

In Community State Bank v. Strong, No. 06-11582 (11th Cir. Aug. 25, 2011), the Eleventh Circuit affirmed federal jurisdiction over a petition to compel arbitration because the underlying claims presented a federal question.  When a borrower sued a payday lender and its affiliates in state court, all defendants moved to compel arbitration.  The defendants removed the case to federal court where the case was remanded on a finding that no federal question was involved. 

The defendants then filed an independent federal action to compel arbitration under 9 U.S.C. § 4.  The borrower moved to dismiss that case, arguing that there was no diversity or federal question jurisdiction.  Applying the principle of "look-through" jurisdiction announced by the U. S. Supreme Court in Vaden v. Discover Bank, the Eleventh Circuit affirmed.  The Court held that the underlying dispute to be arbitrated presented a federal question and therefore the petition to compel arbitration was proper.  The Court declined to extend its ruling to certain defendants against whom the arbitration defense had been stricken in state court as a discovery sanction.  As to those defendants, the Eleventh Circuit held that the arbitration issue had been finally adjudicated and could not be revived with the filing of a federal action.      

Eleventh Circuit Refuses to Limit Concepcion i Enforcing Arbitration Clause Containing Class Action Waiver

In Cruz v. Cingular Wireless, No. 08-16080 (11th Cir. Aug. 11, 2011), the Eleventh Circuit applied the U. S. Supreme Court's recent decision in AT&T Mobility, Inc. v. Concepcion to require enforcement of an arbitration clause containing a class action waiver, holding that a state statute specifically permitting class action practice was preempted by the Federal Arbitration Act.  The plaintiff filed a putative class action against Cingular, alleging consumer protection claims under the Florida Deceptive and Unfair Trade Practices Act.  When Cingular moved to compel arbitration, the plaintiff attempted to distinguish its case from Concepcion, arguing that the FDUTPA enumerated specific reasons for mandating class action treatment.  The district court granted the motion to compel arbitration and the Eleventh Circuit affirmed, holding that the FDUTPA's specific provision for class treatment of small-dollar claims was preempted by the FAA.  Applying Concepcion, the Court held that the FAA preempts even "desirable" state rules mandating the availability of class arbitration for consumer protection claims, even though preemption may result in many potential claims going unprosecuted. 

Alabama Supreme Court Rules That Product Liability Defendant May Shield Trade Secret from Plaintiff's Expert Witness

In Ex parte Delta Int'l. Mach. Corp., No. 1091049 (Ala. July 29, 2011), the Alabama Supreme ruled that a defendant was not required to turn over a product containing secret technology to the plaintiff's expert witness for inspection as part of the plaintiff's case.  The plaintiff sued Delta, a saw manufacturer, for personal injuries and sought inspection of similar, newer saws that were developed by a joint venture in which Delta was a member.  Plaintiff's counsel intended to employ an employee of one of Delta's competitors to conduct the inspection.  Delta opposed the discovery, contending that the newer saws were not available when the saw operated by the plaintiff was manufactured and therefore an inspection of the newer saws was not reasonably calculated to lead to admissible evidence.  Delta further opposed disclosing its confidential information to the competitor who had been employed as Plaintiff's expert.  The trial court granted the motion to inspect, and Delta petitioned for mandamus.  The Supreme Court granted the writ, reasoning that the safety feature technology in question did not exist at the relevant time and the feature could not have been retrofitted.  Furthermore, because the technology in issue was a protected trade secret under Alabama law, allowing access to a competitor through discovery would be an abuse of discretion.

About the Author

Luther M. (Rusty) Dorr, Jr. is a shareholder in the Birmingham, Alabama firm of Maynard, Cooper & Gale, where he specializes in the defense of financial institutions in the areas of securities and fiduciary litigation. He can be reached at rdorr@maynardcooper.com.