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Arbitration Law Memo May 2004
by Ross Runkel at LawMemo
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Arbitration - Individual Contracts ***
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Arbitration - Individual Contracts ***
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7th - Court upholds award requiring drug testing of union and non-union employees.
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PA - Award reducing discharge to suspension did not exceed arbitrator's authority.
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PA - Award reducing discharge to a suspension passed the essence test.
*** Arbitration - Individual Contracts ***
CA - Arbitrator must disclose prior service in which union's attorneys represented a party in non-collective bargaining cases, but not in collective bargaining cases.
Intl
Alliance of Theatrical Stage Employees v. Laughon (California Ct App 04/22/2004)
http://caselaw.lp.findlaw.com/data2/californiastatecases/a101839.pdf
Laughon sued the union claiming sex discrimination. They settled and agreed that disputes about the settlement agreement would be arbitrated. A dispute arose, and was arbitrated. The arbitrator did not disclose: (1) prior service as a neutral arbitrator in a non-collective bargaining case in which the union's attorneys represented a party and (2) prior service as a neutral arbitrator in collective bargaining cases in which union's attorneys represented a party. The arbitrator entered an award in favor of the union, and Laughon petitioned to have the award vacated. The California Court of Appeal held that the award should be vacated. California Code of Civil Procedure Section 1281.9, subdivision (a)(4) required the arbitrator to disclose "all prior or pending noncollective bargaining cases" involving any party or lawyer. Code of Civil Procedure, section 1286.2, subdivision (a) required the court to vacate the award in this circumstance. The court first found that there was not a waiver of this requirement. The court held that the arbitrator was required to disclose non-collective bargaining cases, but the statute did not require disclosure of collective bargaining cases.
3rd - FAA doesn't empower arbitrators to subpoena non-parties for pre-hearing production of documents.
Hay
Group, Inc. v. E.B.S. Acquisition Corp. (3rd Cir 03/12/2004)
http://caselaw.lp.findlaw.com/data2/circs/3rd/031161p.pdf
An employer and former employee commenced arbitration pursuant to an arbitration clause in a separation agreement. The arbitration panel subpoenaed the employee's new employer, requiring it to turn over certain documents prior to the arbitration hearing. The new employer, not a party to the arbitration, objected on the basis that the arbitration panel lacked authority under the Federal Arbitration Act (FAA) to issue the subpoena. The trial court issued an order enforcing the subpoena. The 3rd Circuit reversed.
In enforcing the subpoena, the trial court accepted the view of the 8th Circuit that the FAA authorizes arbitration panels to issue subpoenas on non-parties for pre-hearing document production. The court rejected that view. The court relied on the plain language of Section 7 of the FAA, which provides that arbitrators "may summon in writing any person to attend before them ... as a witness and in a proper case to bring with him or them any book, record, document or paper which may be deemed material as evidence in the case."
CA - FAA preempts state agency from seeking victim specific remedies that were available in arbitration.
Ralphs
Grocery Company v. Massie (California Ct App 03/11/2004)
http://caselaw.lp.findlaw.com/data2/californiastatecases/d042249.pdf
The employee filed an employment discrimination complaint with the California Division of Labor Standards Enforcement (DLSE). The employer petitioned to compel arbitration and stay administrative action by DLSE. The trial court denied the petition. The California Court of Appeal reversed.
The court found that the trial court did not determine if the employee was bound by a valid and enforceable arbitration agreement. The court held that the trial court must first determine the issue of unconscionability in order to find whether the arbitration agreement was enforceable against the employee. On remand, if the trial court found the arbitration agreement enforceable, it must reach the second issue of arbitrability: whether the arbitration agreement applied to the employee's statutory discrimination claim filed with DLSE. The court advised that the Federal Arbitration Act (FAA) preempted the DLSE from seeking victim specific remedies that could be obtained in arbitration. If DLSE sought remedies that were not victim specific, or exercised DLSE's authority to protect employees' civil rights through such remedies, the FAA did not preclude such administrative agency action.
CA - Trial court lacked jurisdiction over employee's motion to compel review of arbitration award by a second arbitrator.
Finley
v. Saturn of Roseville (California Ct App 04/23/2004)
http://caselaw.findlaw.com/data2/californiastatecases/C043997.PDF
Finley
sued the employer asserting various state law claims arising from his discharge.
The employer moved to compel arbitration, and the trial court granted
that motion. An arbitrator found in
favor of the employer. Finley
notified the employer of his intent to appeal the arbitrator's decision to
another arbitrator (an avenue of appeal contemplated by the arbitration
agreement between Finley and the employer).
The employer refused to engage in the arbitral review process, on the
basis that Finley's notice of appeal was untimely.
Finley then filed a motion to compel review of the arbitration award by a
second arbitrator. The trial court
denied the motion on the basis that Finley's notice of appeal to the employer
was untimely. The court affirmed,
but for a different reason. The
court reasoned that the trial court lacked jurisdiction to entertain Finley's
motion, since the arbitration process (which included the review stage) was not
completed. The trial court observed
that the trial court "had no jurisdiction to decide if [Finley] waived [his
right] of review by failing to make a [timely] written request .... This is a
matter to be decided in the arbitration proceedings."
9th - Court lacked subject matter jurisdiction to review trial court's order denying arbitration in one forum but compelling it in another.
Bushley
v. Credit Suisse First Boston (9th Cir 03/16/2004)
http://caselaw.lp.findlaw.com/data2/circs/9th/0315901p.pdf
Bushley
sued the employer asserting various state law claims.
The employer moved to compel arbitration under
NASD "Form U-4", as well as under its own internal alternative
dispute resolution program. The
trial court denied the motion as to the Form U-4, but granted it as to the
employer's dispute resolution program. The
trial court did not rule on the employer's motion to either stay the action
pending arbitration or dismiss the action outright.
The employer appealed the trial court's denial of its motion to compel
arbitration pursuant to Form U-4. The
9th Circuit dismissed the appeal, concluding that it lacked subject matter
jurisdiction. The court noted that
"[a]lthough the district court did not rule upon the motion to stay the
proceedings, Bushley's action is effectively stayed pending the conclusion of
the ... arbitration .... The district court's order therefore is not final and
appealable under Section 16 (a)(3) [of the Federal Arbitration Act]."
*** Arbitration - Individual Contracts ***
7th - Court upholds award requiring drug testing of union and non-union employees.
Lid
Electric v. Intl Brotherhood of Electrical Workers (7th Cir 03/29/2004)
http://caselaw.lp.findlaw.com/data2/circs/7th/033767p.pdf
The
union bargained with an association of electrical contractors.
One of the contractors refused to implement a program set forth in the
CBA requiring drug testing for all employees (both union and non-union).
The union filed a grievance, and an arbitrator ordered that the union not
refer any members to the contractor until the contractor complied with the drug
testing program. The trial court
vacated the award. The 7th Circuit
reversed. The trial court's
reasoning was that the union and association had no authority to make rules
binding on non-union employees. The
7th Circuit court concluded that the trial court erred, since the drug testing
policy bound the contractor (and other employers) and not the employees.
4th - Award vacated because arbitrator refused to consider pertinent parts of benefit plan expressly incorporated into CBA.
Kennametal
v. United Steelworkers of America (4th Cir 04/19/2004)
http://pacer.ca4.uscourts.gov/opinion.pdf/031775.U.pdf
The
employer ceased making matching 401(k) contributions for its employees.
The union filed a grievance, claiming that the employer's actions
violated the collective bargaining agreement (CBA).
An arbitrator found for the union, but the trial court vacated the
arbitration award. The 4th Circuit
affirmed. The court agreed that the
arbitrator had refused to even consider pertinent portions of the benefit plan
at issue, which was expressly incorporated into the CBA.
PA - Award reducing discharge to suspension did not exceed arbitrator's authority.
Office
Of Attorney General v. Council 13, AFSCME (Pennsylvania 03/22/2004)
http://www.courts.state.pa.us/OpPosting/Supreme/out/J-63-2001mo.pdf
A state narcotics officer was discharged for, among other things, misconduct. His union grieved the discharge and he was eventually reinstated pursuant to an arbitration award rendered as part of the grievance process. The arbitrator found that even though the officer committed the violations as alleged, the penalty of discharge was not warranted. The lower court vacated the award, and the Supreme Court of Pennsylvania reversed. On appeal, the public employer argued that the arbitrator exceeded his authority by reducing the discipline imposed once he found that the violations were committed. That argument was rejected by the court. The court noted that the lower court erred in essentially equating "just cause" for discharge with the existence of misconduct justifying the imposition of some level of discipline. The court reasoned that the arbitrator had, in essence, simply interpreted the term "just cause" under the collective bargaining agreement.
PA - Award reducing discharge to a suspension passed the essence test.
Norristown
Area Sch Dist v. Norristown Ed Support Personnel Assn (Pennsylvania Cmwlth
04/26/2004)
http://www.courts.state.pa.us/OpPosting/CWealth/out/2137CD03_4-26-04.pdf
The
employer discharged one of its custodians for taping conversations with
coworkers without their permission. The
union grieved the discharge, and an arbitrator ordered the employee reinstated.
The arbitrator found that although discipline was warranted, discharge
was too harsh a penalty. The trial
court affirmed the arbitration award, and the court affirmed.
The court concluded that the arbitration award passed the
"essence" test, and that the arbitrator was empowered to impose a
lesser form of discipline.
6th - Award in favor of union was irrelevant, since union only challenged one of the two grounds relied upon by employer in discharging employee.
Intl Brotherhood of Boilermakers
v. Thyssenkrupp Elevator (6th Cir 04/23/2004)
http://laws.findlaw.com/6th/04a0119p.html
The union grieved
the discharge of an employee. The
employer gave two separate grounds for discharging the employee, and both were
grieved through the initial stages of the grievance process.
Both grievances were denied by the employer, and the grievance process
proceeded to the final stage - arbitration.
At that stage, however, the union only challenged one of the two bases
for discharge. The arbitrator ordered the employee reinstated, but the trial
court refused to enforce the arbitration award. The 6th Circuit affirmed, agreeing that the arbitration award
was irrelevant. The court observed
that "[e]ven if the arbitrator set aside the [challenged] ground for ...
discharge, the discharge would still remain in effect because of the
unchallenged alternative ground upon which it also rested."
PA - Award requiring municipality to fill vacancies in the rank of police captain may have violated municipality's financial recovery plan.
Fraternal Order of
Police v. City of Chester (Pennsylvania Cmwlth 03/23/2004)
http://www.courts.state.pa.us/OpPosting/CWealth/out/1506CD03_3-23-04.pdf
The union appealed
an order of the trial court vacating an arbitration award rendered in favor of
the union. That award directed the
employer, a financially distressed municipality, to fill vacancies in the rank
of police captain. The court
reversed, and remanded the case back to the trial court for determination of
whether the award "in any manner violated, expanded, or diminished the
provisions of the [municipality's financial] recovery plan" or
"substituted the discretion of the arbitrator for that of the City's
elected officials."
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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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