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Arbitration Law Memo June 2004
by Ross Runkel at LawMemo
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Arbitration - Individual Contracts ***
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CA - Arbitration unconscionable because one-sided and imposed costs on employee.
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5th - Continuing to work was assent to new arbitration policy.
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8th - Cost-splitting and attorney fee provisions were not unconscionable.
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6th - Employee's arbitration costs may have rendered arbitration agreement unenforceable.
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WV - Employee did not prove arbitration was prohibitively expensive.
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3rd - Stay required by Section 3 of the Federal Arbitration Act.
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Arbitration - Collective Bargaining Agreements ***
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MA - Transfer of court stenographer was governed by CBA, not statute.
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MN - 90 day limitations period applies to hybrid DFR/PELRA claims (2-1).
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NY - "Status quo" included overtime provision in expired interest arbitration award.
*** Arbitration - Individual Contracts ***
CA - Arbitration unconscionable because one-sided and imposed costs on employee.
CA - Trial court cannot appoint a second arbitrator, after contractually agreed upon arbitrator refused to hear the case.
Martinez
v. Master Protection (California Ct App 04/29/2004)
http://caselaw.lp.findlaw.com/data2/californiastatecases/b166087.pdf
Martinez
sued the employer asserting claims under California's Fair Employment and
Housing Act (FEHA) and the California Labor Code.
The trial court compelled arbitration of the claims.
The California Court of Appeal reversed.
1)
The court concluded that the arbitration agreement (entered into as a
condition of employment) was both substantively and procedurally unconscionable,
and hence unenforceable. With
respect to procedural unconscionability, the court found that the agreement was
a contract of adhesion, and noted that "[a]n arbitration agreement that is
an essential part of a 'take it or leave it' employment condition, without more,
is procedurally unconscionable." With
respect to substantive unconscionability, the court determined that the
agreement lacked mutuality since the agreement forced employees to arbitrate the
claims they were most likely to bring, but specifically excluded the claims most
likely to be brought by the employer. The
court also found that the agreement "unacceptably imposes costs on an
employee which he would not be required to bear in a judicial forum."
Finally, the court determined that the six-month limitations period set
forth in the agreement "unlawfully restricts an employee's ability to
vindicate his civil and statutory rights."
2)
The court also concluded that the trial court erred when it appointed a
second arbitrator after the first arbitrator refused to hear the case.
The arbitration agreement required that arbitration be conducted in
accordance with specific procedures promulgated by the American Arbitration
Association (AAA). The AAA refused
to arbitrate the matter however, and the trial court appointed another
arbitrator. This was error. California Code of Civil Procedure Section 1281.6 provides
that "[i]f the arbitration agreement provides a method of appointing an
arbitrator, that method shall be followed."
The court concluded that Section 1281.6 does not permit a trial court to
choose an alternative arbitrator when the contractually indicated arbitrator
refuses to hear the case. The court interpreted the arbitration agreement as
requiring arbitration by the AAA. Thus,
the matter should have proceeded before the trial court.
5th - Continuing to work was assent to new arbitration policy.
May
v. Higbee Corp (5th Cir 06/08/2004)
http://caselaw.lp.findlaw.com/data2/circs/5th/0360759p.pdf
May
sued the employer alleging gender discrimination (failure to promote) in
violation of Title VII. The employer moved to compel arbitration.
The trial court denied the motion, and the 5th Circuit reversed.
The court concluded that it had jurisdiction over the appeal pursuant to
9 USC Section 16 (a)(1), and that the trial court erred in concluding that the
element of mutual assent was missing from the contract to arbitrate. May
received a copy of the employer's new arbitration policy which informed her that
continuing to work would be assent, and she did continue to work.
8th - Cost-splitting and attorney fee provisions were not unconscionable.
Faber
v. Menard Inc (8th Cir 05/21/2004)
http://www.ca8.uscourts.gov/opndir/04/05/033075P.pdf
Faber
sued the employer asserting claims for age discrimination and retaliation under
the Age Discrimination in Employment Act (ADEA).
The trial court denied the employer's motion to compel arbitration, and
the employer filed an interlocutory appeal.
The 8th Circuit reversed. The
arbitration agreement provided that the parties would split the costs and fees
of the arbitrator. The court could not find this provision unconscionable
because Faber did not provide proof of what the costs and fees would be, or that
he would be unable to pay them. The agreement also provided that the parties
would pay their own attorney fees. The court found that it should be for the
arbitrator to decide whether this clause constituted a waiver of Faber's
statutory right to prevailing-party attorney fees.
6th - Employee's arbitration costs may have rendered arbitration agreement unenforceable.
Cooper
v. MRM Investment Co. (6th Cir 05/03/2004)
http://laws.findlaw.com/6th/04a0126p.html
Cooper
sued the employer under Title VII. The
employer moved to compel arbitration pursuant to an arbitration agreement.
The trial court held that the arbitration agreement was unenforceable, on
the grounds that 1) the agreement was unconscionable; 2) the agreement did not
make it clear that Cooper was waiving her right to a jury trial; and 3) the
agreement was likely to impose arbitration costs that would be prohibitively
expensive under Green Tree Financial Corp. of Alabama v. Randolph, 531 US 79
(2000). The 6th Circuit reversed as
to the first two grounds, and vacated as to the third (for determination of
"whether the likely costs of arbitration are so high that they will deter
Cooper or similarly situated employees from exercising their right to
arbitrate").
WV - Employee did not prove arbitration was prohibitively expensive.
Wells v. Matish (West Virginia 05/07/2004)
http://www.state.wv.us/wvsca/docs/spring04/31684.htm
Wells
sued the employer asserting, among other things, claims for breach of contract
and wrongful discharge in violation of public policy. The trial court granted the employer's motion to compel
arbitration of these claims. The
Supreme Court of West Virginia concluded that the arbitration agreement was not
unconscionable. Wells was a sophisticated person and his agreement was
negotiated. Although Wells asserted that the cost of arbitration (apparently the
forum fees alone) could be as high as $8,500, that assertion was "not
supported by the record and is simply speculative."
3rd - Stay required by Section 3 of the Federal Arbitration Act.
Lloyd
v. Hovensa, LLC (3rd Cir 05/13/2004)
http://caselaw.lp.findlaw.com/data2/circs/3rd/031502p.pdf
Lloyd
sued the employer for violation of Title VII. The trial court granted the
employer's motion to compel arbitration and dismissed the case with prejudice
rather than granting a stay. The 3rd Circuit Court reversed. Section 3 of the
Federal Arbitration Act (FAA) provided in pertinent part: "... the court
... shall on application of one of the parties stay the trial of the action
until such arbitration has been had...." The court held that section 3 of
the FAA afforded the trial court no discretion to dismiss a case where one of
the parties requested a stay. The court noted that allowing the trial court to
dismiss the case granted the immediate right to appeal a final order of the
court which interfered with the arbitration process. The court found the
reasoning of the other circuits which allowed dismissal where all claims were
arbitrable did not comply with the statute.
NV
- Stay of trial court proceedings granted on employer's appeal of denial of
motion to compel arbitration.
Mikohn
Gaming Corp v. McCrea (Nevada 05/12/2004)
http://www.leg.state.nv.us/scd/120NevAdvOpNo29.html
The
trial court denied part of the employer's motion to compel arbitration. The
employer sought a stay pending consideration of this appeal which the trial
court denied. The Nevada Supreme Court granted the employer's motion for stay
pending resolution of the appeal. The court placed greater emphasis on the first
stay factor: whether the object of the appeal will be defeated if the stay was
denied. The court advised that trial courts should grant stays and that the
court would expedite stay appeals.
5th - Arbitration agreement was ambiguous as to whether the parties intended to provide for expanded judicial review.
Prescott
v. Northlake Christian School (5th Cir 05/04/2004)
http://caselaw.lp.findlaw.com/data2/circs/5th/0330201p.pdf
Prescott
sued the employer asserting, among other things, a claim for breach of contract.
The trial court compelled arbitration, an arbitrator rendered an award in
Prescott's favor. The trial court
confirmed the award, and the 5th Circuit reversed.
The primary issue on appeal was whether the parties intended their
arbitration agreement to provide for expanded judicial review of the arbitration
award. The trial court found that
the arbitration agreement, on its face, provided for no such thing.
The 5th Circuit found that the agreement was ambiguous on this point, and
remanded the case back to the trial court.
***
Arbitration - Collective Bargaining Agreements ***
MA - Transfer of court stenographer was governed by CBA, not statute.
Chief
Justice v. Office and Professional Employees Intl Union (Massachusetts
05/10/2004)
http://www.socialaw.com/sjcslip/sjcMay04d.html
A
court stenographer grieved her permanent transfer to another county.
The matter proceeded to arbitration pursuant to a collective bargaining
agreement (CBA) between the union and the Chief Justice for Administration and
Management of the Trial Court (CJAM). The
arbitrator found that the employee's permanent transfer violated the terms of
the CBA and ordered her reinstated, and the court affirmed.
The court concluded that "the procedure for involuntarily
transferring employees permanently was a proper subject for collective
bargaining and thus governed by the binding arbitration provisions of the
agreement." The court rejected
the CJAM's argument that he lacked authority to bargain over the permanent
transfer of court stenographers.
PA - CBA provision impinged on the inherent right of judiciary to hire, supervise, and fire judicial employees.
Kleinfelter v. Commissioners
(Pennsylvania Cmwlth Ct 06/04/2004)
http://www.courts.state.pa.us/OpPosting/CWealth/out/2639CD03_6-4-04.pdf
A presiding county judge
appealed from an arbitration award rendered in a contract dispute between the
county judges and a bargaining unit of court-appointed employees. The award provision at issue subjected disputes relating to
the hiring, supervision, and discharge of employees to a grievance process.
The court struck the provision, stating "this procedure clearly
diminishes and interferes with the inherent power of the judiciary by allowing
inquiry into their decision-making process in direct contravention of statute
and well-settled case law."
MN - 90 day limitations period applies to hybrid DFR/PELRA claims (2-1).
Allen v. Hennepin County
(Minnesota Ct App 06/01/2004)
http://www.lawlibrary.state.mn.us/archive/ctappub/0406/opa031752-0601.htm
Allen sued the employer and his
union, asserting a "hybrid" wrongful discharge/duty of fair
representation claim under Minnesota's Public Employment Labor Relations Act (PELRA).
The court held that "[t]he 90-day statute of limitations for
vacating an arbitration award under the Uniform Arbitration Act applies to
employee's claims against their employers and unions
for wrongful discharge and breach of the duty of fair representation
under the Public Employment Labor Relations Act."
NY - "Status quo" included overtime provision in expired interest arbitration award.
Town
of Southampton v. NY State PERB (New York 06/03/2004)
http://www.law.cornell.edu/ny/ctap/I04_0084.htm
The
Public Employment Relations Board (PERB) found that the employer violated
Section 209-a(1)(d) of the Taylor Law (Civil Service Law Section 200 et seq.) by
failing to continue the status quo during negotiations with the police officers'
union. The court agreed.
The court concluded that the PERB properly defined "status quo"
to encompass an overtime provision in an expired interest arbitration award.
7th - Injunction was no longer necessary, since "minor" dispute was resolved via mandatory arbitration under RLA.
Burlington Northern
v. Brotherhood of Locomotive Engineers (7th Cir 05/04/2004)
http://caselaw.lp.findlaw.com/data2/circs/7th/033626p.pdf
Rail carriers brought an action
seeking injunctive relief against threatened strikes by the union.
The union had threatened to strike in response to the rail carriers'
decisions to adopt remote control technology and to employ members of a rival
union to operate the remote control devices.
The trial court concluded that the dispute was a "minor"
dispute subject to mandatory arbitration under the Railway Labor Act (RLA), and
granted a preliminary injunction to preserve the jurisdiction of the special
board of adjustment. The special board of adjustment resolved the dispute
predominantly in favor of the rail carriers, and the union moved to dismiss the
rail carriers' complaint. The trial
court agreed that the injunction was no longer needed to maintain the status
quo, and entered an order dismissing the case and dissolving the injunction.
The 7th Circuit affirmed.
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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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