October 21, 2019

October 21, 2019

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Court of Appeals Finds District Court Did Not Err in Lifting Stay Ordered to Refer Case to Arbitration

Lawren Freeman entered into a contract with SmartPay Leasing LLC to lease a smartphone. The contract included an arbitration clause. Freeman filed suit in the federal district court against SmartPay. Shortly after, the parties filed a joint motion to stay to refer the case to arbitration, which was granted on July 12, 2017. After that referral, a dispute arose between SmartPay and the arbitrator regarding the parties’ respective obligations to pay the arbitration fee. On October 19, the arbitrator closed the arbitration file due to nonpayment of the fee. In November 2017, Freeman filed a motion in the district court to lift the stay in the civil action due to SmartPay’s nonpayment of the fee. In January 2018, the district court granted an order lifting the stay. SmartPay filed an appeal of the district court’s order. As an initial matter, the court of appeals held that it had jurisdiction over the appeal pursuant to the Federal Arbitration Act (FAA). Section 16 of the FAA governs appeals as of right from the district court’s arbitration decision, and it permits immediate appeal from an order “refusing a stay.” On the merits, the court of appeals held that SmartPay acted inconsistently with its contractual right to arbitrate when it refused to pay the initial fee as expressly required by the arbitration agreement and, therefore, it waived its right to arbitration. Further, the court of appeals held that any alleged conflict between the arbitration agreement and the JAMS’s Consumer Minimum Standards was reconcilable, and therefore when SmartPay would not comply with the JAMS’s Consumer Minimum Standards it waived its right to arbitration. Lastly, the court of appeals found that it was appropriate to lift the stay on the civil action because the arbitration underlying the stay had been in accordance with the terms of the agreement, and SmartPay was in default by failing to pay the fee.

Freeman v. SmartPay Leasing, LLC, No. 18-10380 (11th Cir. May 3, 2019)

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About this Author

Rachel Schwartz Insurance Attorney

Rachel J. Schwartz represents property and casualty insurance industry clients in litigation and counsels them on varied coverage matters, including coverage disputes arising under Commercial General Liability and Directors & Officer policies.

Rachel drafts pleadings, discovery requests and responses, and motions regarding declaratory judgment actions. She reviews insurance policies and conducts legal research on various insurance coverage topics, including late notice, policy exclusions, duty to defend, allocation, and NY Ins. L. 3420(d). She prepares tenders, carrier position...