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Arbitration Law Memo October 2004
by Ross Runkel at LawMemo
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Arbitration - Individual Contracts ***
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TX - Arbitration agreement was substantively unconscionable.
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FL - Arbitration clause enforceable in Florida courts under FAA.
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TX - Court, not arbitrator, decides whether an agreement was made.
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Arbitration - Collective Bargaining Agreements ***
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UT - Court, not arbitrator, decides whether employee's discharge was arbitrable.
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CT - Reinstating employee who abused retarded patient didn't violate public policy.
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3rd - Court rejects award holding that employer’s zero tolerance drug policy was unreasonable.
*** Arbitration - Individual Contracts ***
TX - Arbitration agreement was substantively unconscionable.
In re Luna (Texas
Ct App 09/09/2004)
http://www.1stcoa.courts.state.tx.us/opinions/htmlopinion.asp?OpinionId=80856
Luna
sued the employer, asserting claims for wrongful discharge and retaliation based
on alleged retaliatory actions taken by the employer as the result of a workers'
compensation claim. The trial court
granted the employer's motion to compel arbitration.
The court concluded that the trial court erred, holding that "[the]
arbitration agreement, as [a] whole, was so one-sided as to render it
substantively unconscionable." The offensive provisions were: (1) splitting
arbitration fees, with a cap on the employee’s cost at the highest month’s
salary of the preceding year, (2) limiting available remedies, (3) limiting
discovery, (4) disallowing an arbitrator’s application of a “good cause”
standard to employment claims, and (5) making the arbitration agreements binding
as to any future claims that the employee could bring, even for disputes arising
after the employer-employee relationship had terminated.
FL - Arbitration clause enforceable in Florida courts under FAA.
Gilman & Ciocia, Inc. v. Wetherald (Florida Ct App
09/22/2004)
http://www.4dca.org/Sept2004/09-22-04/4D03-3821.pdf
Wetherald sued the employer for breach of contract and other claims. The trial court denied the employer's motion to compel arbitration. The Florida District Court of Appeal reversed. The court noted that the employment agreement included a choice of law provision (New York) and that Florida arbitration law did not apply to employment agreements. The court stated that the trial court was correct in finding the arbitration agreement voidable at the election of either party, however, the arbitration clause was still enforceable under the Federal Arbitration Act (FAA). The court pointed out that the agreement required Wetherald maintain her securities licenses and required the exchange of data between Florida and New York which evidenced a transaction in commerce. The court noted that the only employment agreements excluded from the FAA were those of transportation workers involved in the actual movement of goods in interstate commerce. The court held that it was plain that this employment agreement was subject to the FAA and enforceable in Florida courts.
CA - Employee's defamation claim is subject to arbitration.
Ruiz v. Sysco Food Service (California Ct App 09/08/2004)
http://caselaw.lp.findlaw.com/data2/californiastatecases/d041833.pdf
Ruiz sued the employer, asserting a claim for defamation (in addition to various other tort claims). The employer moved to compel arbitration, but that motion was denied. The court reversed, stating "[r]equiring arbitration under California law is within the scope of the CBA arbitration provision and the scope of the original petition to compel arbitration as pled, and is consistent with general Federal Arbitration Act (FAA) policy in favor of arbitration (FAA, 9 USC Section 1 et seq.)."
TX - Court, not arbitrator, decides whether an agreement was made.
American Medical Technologies v. Miller (Texas Ct App
09/28/2004)
http://www.14thcoa.courts.state.tx.us/opinions/htmlopinion.asp?OpinionId=80084
Miller sued the employer for
breach of contract. The employer moved to compel arbitration. The trial court
denied the employer's motion. The Texas Court of Appeals affirmed. The court
found that the employment agreement affected interstate commerce because of the
transfer of stock options to Miller. Thus the court held that the Federal
Arbitration Act (FAA) applied and not the Texas General Arbitration Act (TGAA).
The court dismissed the interlocutory appeal under the TGAA for lack of
jurisdiction.
With respect to the petition for
mandamus under the FAA, the court noted that the employer's position that there
was not a valid employment agreement undercut the employer's attempt to enforce
the arbitration clause of the employment agreement. The court held that when the
validity of the employment agreement was called into question, the separability
doctrine did not apply; and the court, not the arbitrator, was required to
decide if an agreement was reached by the parties.
UT - Arbitration awards not afforded collateral effect, unless the parties expressly provided for that prior to arbitration proceedings.
Buckner v. Kennard (Utah Ct App 09/17/2004)
http://www.utcourts.gov/opinions/supopin/buckner091704.htm
Deputies asserted various claims seeking back wages as a remedy for alleged pay inequities. The deputies asserted claims under the state's civil service statutes, as well as claims for breach of contract and negligent misrepresentation. The dispute arose after the employer instituted a new pay plan that credited law enforcement experience outside the sheriff's department more heavily than experience within the sheriff's department. In reversing the trial court's grant of summary judgment in the deputies' favor, the court addressed two primary issues on appeal.
1) Collateral estoppel, otherwise known as "issue preclusion," precludes "the relitigation of all issues that could have been litigated as well as those that were, in fact, litigated in [a] prior action." The court addressed, as a matter of first impression, whether an arbitration award should be given collateral estoppel effect. Generally speaking, other jurisdictions have taken one of two prevailing approaches: the case-by-case approach and the California approach. Not surprisingly, the case-by-case approach (which is the majority approach) determines on a case-by-case basis whether to give preclusive effect to a particular arbitration award. On the other hand, the California approach follows a bright line rule pursuant to which an arbitration award is not afforded collateral effect unless the parties expressly provided for such preclusive effect before the prior arbitration proceedings. The court adopted the California approach, stating "we hold that in Utah, third parties will only be permitted to invoke collateral estoppel in subsequent litigation if provided for by the parties to the original arbitration proceeding."
2)
The deputies asserted their statutory claims for the alleged pay
inequities under two Utah acts - the County Personnel Management Act (CPMA) and
the Merit Act. The court held that
neither of these acts create a private statutory right of action for employees
seeking back pay for alleged pay inequities.
*** Arbitration - Collective Bargaining Agreements ***
NY - Constitution required opportunity to be heard before arbitrator removed non-complaining employee from position.
Kramer v. County of Nassau (New York App Div 09/20/2004)
http://www.courts.state.ny.us/reporter/3dseries/2004/2004_06647.htm
The Supreme Court, Appellate Division affirmed the trial court's decision vacating the arbitrator's award. The arbitrator decided that the promotion of Arnedos (with 5 years experience) over Kramer (with 22 years experience) violated the collective bargaining agreement. The court remitted the matter to the arbitrator for further proceedings at which Arnedos was constitutionally required to be provided an opportunity to be heard before his removal.
UT - Court, not arbitrator, decides whether employee's discharge was arbitrable.
Amalgamated Transit Union v. Utah Transit Authority (Utah
Ct App 09/10/2004)
http://www.utcourts.gov/opinions/appopin/amalgamated091004.htm
The union filed a complaint against the public employer, alleging that an employee's discharge during his probationary period was subject to arbitration under a collective bargaining agreement. The trial court compelled the employer to arbitrate. The court reversed, based in part on its conclusion that "[the] trial court was required to determine whether [the employee's] termination was subject to arbitration, and thus [the] trial court could not submit [the] threshold arbitrability question to [an] arbitrator."
CT - Reinstating employee who abused retarded patient didn't violate public policy.
State v. New England Health Care Employees Union
(Connecticut 09/14/2004)
Majority:
http://www.jud.state.ct.us/external/supapp/Cases/AROcr/CR271/271cr132.pdf
Dissenting:
http://www.jud.state.ct.us/external/supapp/Cases/AROcr/CR271/271CR132E.pdf
The state employer appealed from the trial court's judgment confirming an arbitration award rendered in favor of the union. The arbitrator concluded that the employee had abused a mentally retarded patient, but the employer lacked just cause to discharge the employee, and ordered reinstatement with a 30 day suspension. The court affirmed. The court based its affirmance, in part, on the conclusion that the award didn't violate public policy.
3rd - Court rejects award holding that employer’s zero tolerance drug policy was unreasonable.
Citgo Asphalt Refining Co v. Paper Workers Union (3rd Cir 10/14/2004)
http://caselaw.lp.findlaw.com/data2/circs/3rd/031503p.pdf
The employer filed a complaint challenging an arbitrator’s decision that its zero tolerance drug abuse policy was unreasonable. The trial court confirmed the award. The 3rd Circuit reversed, concluding that 1) the arbitrator’s decision failed to draw its essence from the collective bargaining agreement; and 2) the arbitrator’s decision was not supported by the record.
3rd - Company that purchased employer during Chapter 11 proceedings wasn't liable to employees for accrued sick leave.
Allegheny Health Education and Research Foundation v.
National Union Of Hospital And Health Care Employees (3rd Cir 09/20/2004)
http://caselaw.lp.findlaw.com/data2/circs/3rd/032085p.pdf
The employer was purchased by another company during Chapter 11 bankruptcy proceedings. The successor company and union disagreed as to whether the company was obligated to pay sick leave benefits under the collective bargaining agreements between the union and employer. The union filed a grievance, and prevailed in arbitration. The successor company then filed suit in bankruptcy court, seeking (among other things) to vacate the arbitration award. The bankruptcy court determined that the successor company was only liable for prospective sick leave obligations, and was not liable for sick leave obligations that accrued prior to the date the successor company's purchase of the employer closed. The trial court affirmed those conclusions, as did the 3rd Circuit.
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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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