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Arbitration Law Memo January 2004
by Ross Runkel at LawMemo
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Arbitration - Individual contracts ***
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MT - No consent to arbitration because of ambiguity in employee handbook.
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MD - Arbitration agreement lacked consideration because employer reserved right to amend (2-1).
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11th - Attorney fee-shifting clause not enough to avoid arbitration.
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9th - Employer who defaulted at arbitration couldn't later compel arbitration under FAA.
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Arbitration - Collective bargaining agreements ***
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CA - Arbitrator's decision was not given preclusive effect in state law statutory retaliation suit.
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WA - Arbitrator, not court, to decide whether employee was a member of bargaining unit (6-3).
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OH - Arbitration award vacated with respect to last chance agreement.
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OH - Employee had no standing to challenge arbitration award.
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11th - Railway Labor Act's (RLA) notice provisions applied to airline adjustment boards.
*** Arbitration - Individual contracts ***
TN
- Employee was not compelled to arbitrate; choice of law provision and
arbitration provision were irreconcilable.
Brown v. Balaton Power
(Tennessee Ct App 12/31/2003)
http://www.tsc.state.tn.us/OPINIONS/TCA/PDF/034/BrownR.pdf
The choice of law provision
contained language that a legal action for breach of contract "will be
commenced and maintained" in a court of law. The arbitration provision
required arbitration in the same appropriate jurisdiction as set out in the
choice of law provision. The court affirmed the trial court in denying the
employer's motion to compel arbitration. The court found no contractual
agreement between the parties giving up their rights of redress in a court of
law. Therefore, there was no agreement that arbitration would be the exclusive
means of dispute resolution.
MT - No consent to arbitration because of ambiguity in employee handbook.
Hubner v. Cutthroat
Communications (Montana 12/04/2003)
http://www.lawlibrary.state.mt.us/dscgi/ds.py/Get/File-24588/03-060.pdf
Hubner
signed a form acknowledging receipt of an employee handbook, which handbook
contained an arbitration clause. The Montana Supreme Court found that the handbook
contained an ambiguity because it both disclaimed itself as a contract in a
number of places including the acknowledgment and referred to itself as “this
contract” just before the arbitration provision. Because that ambiguity must
be resolved against the drafter (the employer), there was no consent to
arbitration.
MD - Arbitration agreement lacked consideration because employer reserved right to amend (2-1).
Cheek v. United Healthcare of
the Mid-Atlantic (Maryland Ct App 11/13/2003)
http://www.courts.state.md.us/opinions/coa/2003/141a02.pdf
Cheek sued the employer for
breach of contract. The trial court granted the employer's motion to compel
arbitration. The Maryland Court of Appeals reversed.
The issue before the court was
whether a valid arbitration agreement existed where the employer, at its sole
discretion, had reserved the right to alter, amend, modify or revoke the
arbitration agreement at any time and without notice, even though it had not
exercised that option in this case.
The court found that the
employer's promise to arbitrate was illusory because the employer had reserved
the rights to alter, amend, modify or revoke the arbitration agreement. The
court held the arbitration agreement lacked consideration. The court declined to
find consideration for the arbitration agreement in the underlying employment of
the employee. To do so, the court stated, it would have strayed into deciding
the nature of the employment agreement and the merits of the case. The court
noted that to find consideration for the arbitration agreement in the employment
relationship would prohibit the court from ever holding an arbitration agreement
invalid for lack of consideration.
The DISSENT argued that the
mutual obligations supported the arbitration agreement and that consideration
for the employment contract likewise supported the arbitration agreement.
11th - Attorney fee-shifting clause not enough to avoid arbitration.
Summers v. Dillard's Inc (11th
Cir 11/26/2003)
http://caselaw.lp.findlaw.com/data2/circs/11th/0311334p.pdf
Summers attempted to avoid going
to arbitration on her Title VII claim by arguing that an attorney fee-shifting
clause placed an undue burden on her ability to vindicate her statutory rights.
The attorney fee clause provided that she could recover attorney fees only if
she completely prevailed at arbitration; Title VII allows at least partial
recovery of attorney fees for a partial victory. The 11th Circuit compelled
arbitration. "A Title VII plaintiff seeking to avoid his agreement to
arbitrate his discrimination claim by arguing that prohibitive arbitration cost
would undermine his statutory remedy has to demonstrate that he is likely to
bear such costs." A mere possibility is not enough. The court also noted
that the issue of excessive costs can be raised on judicial review of the
arbitrator's award.
8th - FLSA overtime claims were subject to arbitration even though agreement limited employees' rights.
Bailey v. Ameriquest Mortgage
(8th Cir 10/14/2003)
http://caselaw.lp.findlaw.com/data2/circs/8th/021444p.pdf
Employees
sued claiming violations of the overtime provisions of the Fair Labor Standards
Act (FLSA). The trial court denied the employer's motion to compel arbitration;
the 8th Circuit reversed. The employees argued that the arbitration agreement
was not enforceable because
its one-year statute of limitations unlawfully limits the damages they may
recover under the FLSA; because the agreement’s cost-sharing provision may
impose significantly greater costs than a judicial forum; because the California
venue provision may increase costs and discourage the assertion of FLSA claims;
and because the agreement does not expressly provide for collective action, as
the FLSA does. The 8th Circuit compelled arbitration, noting that the
arbitration agreement gave the arbitrator - not the courts - "exclusive
authority to resolve" disputes over the validity of any part of the
agreement.
9th - Employer who defaulted at arbitration couldn't later compel arbitration under FAA.
Sink v. Aden Enterprises (9th
Cir 12/10/2003)
http://caselaw.lp.findlaw.com/data2/circs/9th/0235323p.pdf
Sink sued the employer alleging
breach of contract. Pursuant to an
arbitration agreement between Sink and his employer, the trial court stayed the
action and ordered the parties to arbitration.
The employer defaulted at arbitration, and the employee moved to lift the
stay. The employer objected and
moved for an order returning the parties to arbitration.
The trial court granted the employee's motion, denied the employer's
motion, and ordered that the case proceed to trial.
The 9th Circuit affirmed.
The court framed the primary
issue on appeal as "whether the Federal Arbitration Act requires a district
court to stay an action and order arbitration when the party seeking to compel
arbitration has previously defaulted in proceeding with arbitration."
Section 3 of the Federal Arbitration Act (FAA) provides that prior to
granting a stay of proceedings pending arbitration a court must determine that
the "issue involved" is "referable to arbitration under such an
agreement" and that "the applicant for the stay is not in default in
proceeding with such arbitration." The employer argued that, the language
of Section 3 notwithstanding, it was entitled to an order compelling arbitration
pursuant to FAA Section 4. The
court rejected that argument, stating "[i]n our view, it cannot sensibly be
maintained that a district court is required to enter an order under Section 4
compelling parties to return to arbitration under circumstances where Section 3
precludes the district court from staying its own proceeding."
NY - U-4 agreement trumped later employment agreement.
Credit Suisse Fist Boston v.
Pitofsky (New York App Div 11/25/2003)
http://www.courts.state.ny.us/reporter/slips/18909.htm
The employer sued the employees
to stay arbitration before the New York Stock Exchange (NYSE) and to direct
arbitration to proceed under the provisions of the employment agreement. The
trial court ruled in favor of the employer. The New York Appellate Division
reversed. The NYSE's Constitution Article XI, section 1 and Rule 347 required
arbitration to proceed in the NYSE forum. This obligation was imposed on the
employer and employees due to their affiliation with and assent to the rules of
the NYSE. Employment agreements did not supercede previously executed form U-4
agreements.
2nd - Court to adhere more stringently to Green Tree Financial's interpretation of "appealable final decisions."
Gap Gemini Ernst & Young,
U.S. v. Nackel (2nd Cir 10/14/2003)
http://caselaw.lp.findlaw.com/data2/circs/2nd/029447p.pdf
Nackel sued his employer in
California state court asserting retaliation claims under California's Fair
Employment and Housing Act (FEHA). The
employer filed an action in federal court, seeking to compel arbitration in
accordance with its arbitration agreement with Nackel.
The trial court granted the employer's motion to compel arbitration.
Nackel appealed that decision, but it was unclear on appeal whether the
trial court's order was an appealable "final decision." The court ultimately determined that it was, but offered
comments as to the requirements of an appealable "final decision" in
this context.
Section 16 of the Federal
Arbitration Act (FAA) permits immediate appeal from "a final decision with
respect to an arbitration." That Section also expressly prohibits appeal
from an interlocutory order compelling arbitration or staying an action pending
arbitration, unless the district court certifies an interlocutory appeal
pursuant to 28 USC Section 1292(b). In
Green Tree Financial Corp. v. Randolph, 531 US 79 (2000), the United States
Supreme Court held that the term "final decision" under Section 16
must be given "its well-established meaning" as a "decision that
ends the judgment."
The court and parties expended
substantial effort in determining whether the trial court's decision was a final
appealable order. The court stated
that "[a]lthough we permitted the parties in this case to seek confirmation
of jurisdiction due to the ambiguity in the record, henceforth, we will abide by
both the letter and spirit of Green Tree and require an official dismissal of
all claims before reviewing an order to compel arbitration."
The court stated additionally, "[w]e further emphasize that parties
and district courts have an obligation to ensure that the finality of the
district court's decision is evident from the record, so that no further
reconstruction of the district court's intent need be attempted on appeal."
*** Arbitration - Collective bargaining agreements ***
CT - Arbitrator exceeded his powers when he issued a late award without mutual agreement of the parties to extend the deadline.
AFSCME, Council 4, Local 704 v.
Dept of Public Health (Connecticut Ct App 10/21/2003)
http://www.jud.state.ct.us/external/supapp/Cases/AROap/AP80/80ap490.pdf
The arbitrator held hearings
that ended August 29, 2000. The parties submitted post-hearing briefs on
unspecified dates. On January 3, 2001 both parties signed a letter discharging
the arbitrator for failure to comply with the collective bargaining agreement's
30 days time limit for issuing an award. On January 5 the arbitrator wrote
requesting an extension of time; the union granted the request and the employer
did not respond. The arbitrator issued an award on January 16, holding against
the union. The employer sued to confirm the award and the union moved to vacate
the award. The Connecticut Court of Appeals held that the award should be
vacated. The arbitrator did not comply with the terms of the collective
agreement, and the union did not waive that defect.
CA - Arbitrator's decision was not given preclusive effect in state law statutory retaliation suit.
Taylor v. Lockheed Martin Corp.
(California Ct App 11/17/2003)
http://www.courtinfo.ca.gov/opinions/documents/B162846.DOC
Pursuant to a collective
bargaining agreement, Taylor filed a grievance with his union after he was
discharged. An arbitrator found
that Taylor was discharged "for cause."
Taylor then sued the employer in state court, asserting a claim under
California Labor Code Section 6310. That
section prohibits retaliation against an employee for filing a Cal/OSHA
complaint. The issue to be decided
was whether an arbitration decision under a collective bargaining
agreement (CBA) has preclusive effect in a civil suit for retaliatory discharge
under Labor Code section 6310, subdivision (b).
The court concluded that "it does not, unless (1) the CBA clearly
and unmistakably provided for binding arbitration of the employee's statutory
claim under the Labor Code, and (2) the arbitration was conducted in a manner
that allowed for a full litigation and fair adjudication of the Labor Code
claim."
WA - Arbitrator, not court, to decide whether employee was a member of bargaining unit (6-3).
Mount Adams School Dist v. Cook
(Washington 12/18/2003)
Court: http://www.courts.wa.gov/opinions/?fa=opinions.opindisp&docid=731713MAJ
Dissent: http://www.courts.wa.gov/opinions/?fa=opinions.opindisp&docid=731713DI1
The issue on appeal was whether
the trial court or an arbitrator should decide whether the employee was a member
of the bargaining unit covered by the collective bargaining agreement (CBA). The
employee's teaching certificate was not timely renewed and the employer stated
the teaching contract was not valid because the employee did not have a valid
teaching certificate. The court held that the CBA could not be said with
positive assurance to preclude the employee's grievance. Thus, the arbitrator
must decide the issue.
The DISSENT argued that because
the employee was not certificated and did not have a valid teaching contract,
the CBA did not apply.
NY - Federal regulations on drug testing trump arbitrator's reinstatement of employee who refused to take a drug test.
Dowleyne v. New York City
Transit Authority (New York App Div 10/14/2003)
http://www.courts.state.ny.us/reporter/slips/17432.htm
The employee was deemed to have
"refused" to give a urine sample after being repeatedly unable to
produce a sufficient sample. The employer announced its intention to discharge
the employee, and the matter went to arbitration. An arbitration board held that
the employer lacked just cause for discipline. The court held that federal
regulations requiring random drug testing of transit workers overrode the
collective bargaining agreement, and therefore the arbitration award violated
public policy.
OH
- Arbitration award vacated with respect to last chance agreement.
Trumbull County Sheriff's Office
v. Ohio Patrolmen's Benevolent Assoc (Ohio Ct App 12/31/2003)
http://www.sconet.state.oh.us/rod/documents/11/2003/2003-ohio-7207.doc
The collective bargaining
agreement (CBA) did not contain any references to last chance agreements. The
term of the CBA was two years. The last chance agreement did not have a term
provision. The arbitrator determined the last chance agreement's term coincided
with the term of the CBA. The court held the arbitrator exceeded his authority
because the last chance agreement by its express terms lasted for the duration
of the employee's employment.
9th - Employer not required to arbitrate no-strike claim because it was not an employee-initiated grievance.
Standard Concrete Products v.
General Truck Drivers (9th Cir 12/18/2003)
http://caselaw.lp.findlaw.com/data2/circs/9th/0157256p.pdf
The trial court ruled that the
employer was not required to arbitrate its dispute with the union and awarded
damages to the employer for the union's violation of the no-strike provisions of
the collective bargaining agreement (CBA) and for refusing to cross a picket
line which the trial court held was not a sympathy strike. The employer was not
required to arbitrate the dispute because the CBA's grievance procedure referred
only to employee-initiated grievances.
OH - Employee had no standing to challenge arbitration award.
Leon v. Boardman Township (Ohio
12/24/2003)
http://www.sconet.state.oh.us/rod/documents/0/2003/2003-ohio-6466.doc
Following an arbitration
pursuant to a collective bargaining agreement, the employee sued the employer to
vacate the arbitration award. The Ohio Supreme Court held that the employee was
not a party to the arbitration, and therefore did not have standing to petition
a court to vacate the arbitration award. Unless the CBA expressly gave the
employee an independent right to submit disputes to arbitration, only the union
could petition to vacate the award.
11th - Railway Labor Act's (RLA) notice provisions applied to airline adjustment boards.
Steward v. Mann (11th Cir
12/04/2003)
http://caselaw.lp.findlaw.com/data2/circs/11th/0215185p.pdf
The Steward group of pilots sued
the Mann group of pilots to vacate an arbitrator's award. The trial court
vacated the arbitration award. The 11th Circuit Court affirmed.
The underlying issue was the
seniority rights of pilots from different companies under a new company formed
by a series of mergers and acquisitions. The major issue before the court was
whether the RLA's due notice requirements applied to proceedings before an
airline board of adjustment.
When Congress extended the RLA
to the airline industry, the statutory notice provisions of the RLA (45 USC
Section 153) were not made applicable to airline adjustment boards. The United
States Supreme Court had suggested that provisions of the RLA not applicable to
the airline industry should be judged against the RLA and its purposes and
enforced or invalidated in a fashion consistent with the statutory scheme. Based
on the RLA's purpose of providing quick and final resolution of grievances and
the Supreme Court's suggestion, the court concluded that the RLA's due notice
requirement (45 USC Section 153 First (j)) applied to proceedings conducted by
airline adjustment boards. The arbitrator failed to comply with the RLA's notice
provision.
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Editor: Ross Runkel, Professor of Law Emeritus. email Ross@LawMemo.Com, Phone 503-399-8028. Copyright LawMemo, Inc.
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