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Arbitration Law Memo January 2005
by Ross Runkel at LawMemo
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Arbitration - Individual Contracts ***
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WA - Substantive unconscionability alone will support a claim of unconscionability.
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WA - Arbitration agreement's 180-day limitations period was substantively unconscionable.
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WA - Arbitration agreement's confidentiality provision was substantively unconscionable.
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CA - Temp agency employees' claims weren't covered by arbitration agreement.
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8th - Arbitration award was confirmed and individual claims were collaterally estopped.
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11th - Court had jurisdiction under FAA to enforce forum selection in arbitration agreement.
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Arbitration - Collective Bargaining Agreements ***
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CA - Grievances are arbitrable under ambiguous arbitration clause.
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OR - Employer's policy used as extrinsic evidence was proper.
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NY - CBA was prevented from providing shorter probationary period than civil service rules.
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RI - Arbitrator awarded damages for theft of employee's car under CBA.
*** Arbitration - Individual Contracts ***
WA - Substantive unconscionability alone will support a claim of unconscionability.
WA - Arbitration agreement's 180-day limitations period was substantively unconscionable.
Adler v. Manor (Washington 12/23/2004)
Majority:
http://www.courts.wa.gov/opinions/?fa=opinions.opindisp&docid=747016MAJ
Concurring:
http://www.courts.wa.gov/opinions/?fa=opinions.opindisp&docid=747016CO1
Adler asserted various state law claims against the employer, including claims under the Washington Law Against Discrimination (WLAD). The trial court granted the employer's motion to compel arbitration pursuant to an arbitration agreement executed by Adler as a condition of employment. The court found that certain provisions of the arbitration agreement were substantively unconscionable, and remanded the case back to the trial court for resolution of certain factual disputes.
1) The court noted, "[w]e have not explicitly addressed whether a party challenging a contract must show both substantive and procedural unconscionability." In Maxwell v. Fidelity Financial Services, Inc., 907 P.2d 51 (1995), the Arizona Supreme Court held that "a claim of unconscionability can be established with a showing of substantive unconscionability alone, especially in cases involving either price-cost disparity or limitation of remedies." The court stated, "[w]e agree with the Arizona Supreme Court. In some instances, individual contractual provisions may be so one-sided and harsh as to render them substantively unconscionable despite the fact that the circumstances surrounding the parties' agreement to the contract do not support a finding of procedural unconscionability." The court thus concluded, "we how hold that substantive unconscionability alone will support a claim of unconscionability."
2) The arbitration agreement contained an 180-day limitations period, which was substantially shorter than that provided under the WLAD. The 9th Circuit has held that even one-year contractual limitations periods are substantively unconscionable, since they deprive employees of the benefits of the continuing violation and tolling doctrines under state and federal discrimination laws. Stating "we agree with the 9th Circuit," the court concluded that "the 180-day limitations provision in the agreement unreasonably favors [the employer] and thus, is substantively unconscionable."
WA - Arbitration agreement's confidentiality provision was substantively unconscionable.
Zuver v. Airtouch Communications (Washington 12/23/2004)
Majority:
http://www.courts.wa.gov/opinions/?fa=opinions.opindisp&docid=741565MAJ
Concurring and Dissenting:
http://www.courts.wa.gov/opinions/?fa=opinions.opindisp&docid=741565IP1
Zuver sued the employer,
claiming disability discrimination under the Washington Law Against
Discrimination (WLAD). The trial
court granted the employer's motion to compel arbitration pursuant to an
arbitration agreement signed by Zuver as a condition of employment.
The court held that certain provisions in the employer's arbitration
agreement were substantively unconscionable, but severed them from the rest of
the agreement and otherwise affirmed the trial court's order compelling
arbitration.
The arbitration agreement
contained a confidentiality provision, pursuant to which "[a]ll arbitration
proceedings, including settlements and awards, under the Agreement will be
confidential." The court held
that this provision was substantively unconscionable, stating "[t]he effect
of the provision here benefits only [the employer]."
The court observed that, "[a]s written, the provision hampers an
employee's ability to prove a pattern of discrimination or to take advantage of
findings in past arbitrations. Moreover,
keeping past findings secret undermines an employee's confidence in the fairness
and honesty of the arbitration process and thus, potentially discourages that
employee from pursuing a valid discrimination claim."
The court noted that the 9th Circuit concluded in a similar case (Ting v.
AT&T, 319 F.3d 1126 (9th Cir), cert. denied, 540 US 811 (2003)), that a
similar confidentiality provision was substantively unconscionable because
"AT&T ... placed itself in a far superior legal posture by ensuring
that none of its potential opponents have access to precedent while, at the same
time, AT&T accumulates a wealth of knowledge on how to negotiate the terms
of its own unilaterally crafted contract."
The court also found that a
remedies limitation provision in the agreement was substantively unconscionable,
on the basis that it "appears to heavily favor" the employer.
That provision stated that the employee waives "the right to seek
punitive damages on common law claims."
The DISSENT disagreed with the majority's determination that the
provision was unconscionable.
NC - Trial court should have sent entire case to arbitration, rather than sending certain claims to arbitration and retaining others for trial.
Eddings v. Southern Orthopedic
(North Carolina Ct App 12/21/2004)
http://www.aoc.state.nc.us/www/public/coa/opinions/2004/031298-1.htm
Eddings sued the employer,
asserting various state law claims (including but not limited to breach of
contract, fraud, and breach of fiduciary duty). The employer moved to compel arbitration, based on a written
employment agreement. The trial
court concluded that the agreement and transactions between Eddings and the
employer involved interstate commerce, so it granted the motion to compel
arbitration with respect to claims relating to the agreement or to transactions
between Eddings and the employer, but declined to compel arbitration of Eddings'
other claims. The court affirmed in
part and reversed in part - concluding that the trial court should have sent the
entire matter to arbitration.
CA - Temp agency employees' claims weren't covered by arbitration agreement.
Balandran v. Labor Ready
(California Ct App 12/17/2004)
http://caselaw.lp.findlaw.com/data2/californiastatecases/b166798.pdf
Temp agency employees sued the
temp agency and one of its customers claiming that the service agreed to send
only male workers to the customer's job site. The agency and customer moved to
compel arbitration, relying on an arbitration clause in the service's
application. The trial court denied
the petition. The California Court
of Appeal affirmed, stating "defendants are bound by the restrictive
definition of employment in their job application.
That definition, by its terms, limited the scope of the arbitration
clause and thereby precluded arbitration of plaintiffs' pre-employment
claims."
8th - Arbitration award was confirmed and individual claims were collaterally estopped.
Manion v. Nagin (8th Cir 12/16/2004)
http://caselaw.lp.findlaw.com/data2/circs/8th/032869p.pdf
The trial court granted the employer's motion to confirm an arbitration award upholding Manion's discharge. The 8th Circuit Court affirmed. The court found no error in the confirmation of the arbitration award. The court stated the individual claims consolidated for this appeal were either collaterally estopped or lacked an underlying tort for support.
11th - Court had jurisdiction under FAA to enforce forum selection in arbitration agreement.
Sterling Financial Investment Group v. Hammer (11th Cir
12/16/2004)
http://caselaw.lp.findlaw.com/data2/circs/11th/0315745p.pdf
The employer filed a motion seeking a stay of arbitration in Texas and compelling arbitration in Florida. The trial court granted the employer's motion. The 11th Circuit Court affirmed. The court held that the trial court has jurisdiction under section 4 of the Federal Arbitration Act (FAA) to enforce a forum selection clause in a valid arbitration agreement that has been disregarded by the arbitrators.
*** Arbitration - Collective Bargaining Agreements ***
FL - Civil Rights Act claims were not precluded by union arbitration nor preempted by Airline Regulation Act.
Selim v. Pan
American Airways Corp (Florida Ct App 12/08/2004)
http://www.4dca.org/DEC%202004/12-08-04/4D04-29.pdf
Selim sued the employer for violation of the Florida Civil Rights Act (FCRA) and the Florida Whistleblower Act. The trial court granted the employer's motion for summary judgment that Selim's claims were precluded and preempted by union arbitration and the Airline Deregulation Act (ADA). The Florida District Court of Appeal reversed. The court found that the union could not waive Selim's statutory claims and that exceptions to that rule did not apply. The court concluded that Selim's FCRA claims were not based on airline services and were not preempted by the ADA. The court stated that Selim's claims were independent of and did not require interpretation of the collective bargaining agreement and were not preempted by the Railway Labor Act (RLA).
CA - Grievances are arbitrable under ambiguous arbitration clause.
Hartnell Community
Coll v. Superior Court (California Ct App 12/15/2004)
http://caselaw.lp.findlaw.com/data2/californiastatecases/h025540.pdf
The
union for a college faculty sued to compel the employer to arbitrate two
grievances that arose under a collective bargaining agreement. The trial court
ordered the employer to arbitrate; the California Court of Appeal affirmed. The
collective agreement contained language which the employer argued gave it the
unilateral right to determine which grievances went to arbitration: "Not
included in this definition of grievance is a complain [sic] which may, or
should as interpreted by the District, be appealed or redressed through some
other complaint, appellant [sic], or redress process." The court found this
language ambiguous, which allowed the court to examine extrinsic evidence. The
court looked at the past practice of the employer; prior to the present
grievances, the employer "had never refused to arbitrate a faculty
grievance on the ground that the grievance could be resolved by some other
process such as collective bargaining." This established that the intent of
the parties was that these grievances should go to arbitration.
OR - Employer's policy used as extrinsic evidence was proper.
Arlington Educ Assn
v. Arlington School Dist (Oregon Ct App 12/15/2004)
http://www.publications.ojd.state.or.us/A118084a.htm
The union sought an order compelling arbitration. The Employment Relations Board (ERB) compelled arbitration. The Oregon Court of Appeals affirmed. The sole issue decided on appeal was whether the employer was required to arbitrate under the collective bargaining agreement (CBA). The court found that the reference to the grievance procedure by the CBA created an ambiguity and that the use of the employer's policies as extrinsic evidence was proper.
NY - Arbitrator's award was modified.
New York State Correctional Officers Assn v. State (New
York App Div 12/23/2004)
http://www.courts.state.ny.us/reporter/3dseries/2004/2004_09575.htm
The arbitrator awarded paid administrative leave to the employee who was suspended. The trial court found the arbitrator exceeded his authority and modified the award to provide reinstatement with back pay. The New York Supreme Court, Appellate Division modified the trial court's order by reversing the award of back pay. The court found the arbitrator made no finding that probable cause for suspension was lacking.
7th - Arbitrator did not ignore CBA's "plain language."
Intl Union Of Operating Engineers v. J.H. Findorff &
Son (7th Cir 12/30/2004)
http://caselaw.lp.findlaw.com/data2/circs/7th/041834p.pdf
A dispute evolved between the union and employer over which employees should perform certain work. An arbitrator ruled in the union's favor, but the trial court vacated the award - on the basis that the arbitrator ignored the collective bargaining agreement's "plain language." The 7th Circuit reversed. The court criticized the trial court's analysis, noting that under the trial court's approach "[o]nce the court finds an agreement's meaning clear, no arbitrator may read it otherwise .... Yet, [the employer and the union] agreed that an arbitrator, not a judge, would interpret and apply this contract."
CT - Court declined to examine arbitrator's reasoning.
Connecticut
State Police Union v. Dept of Public Safety (Connecticut Ct App 12/28/2004)
http://www.jud.state.ct.us/external/supapp/Cases/AROap/AP86/86AP91.pdf
A
state trooper petitioned the trial court, seeking to vacate an arbitration award
that upheld his discharge. The
trial court denied the petition, and the court affirmed.
The court concluded that "the [trial] court appropriately declined
to examine the arbitrator's reasoning in arriving at the award and properly
found that the award conformed to the submission."
NY - Arbitrator erred by adding an infraction to the CBA.
New
York City Transit v. Transport Workers Union (New York App Div 12/20/2004)
http://www.courts.state.ny.us/reporter/3dseries/2004/2004_09513.htm
The
trial court vacated an arbitration award reducing a transit employee's discharge
to a suspension. The court
affirmed. The employee had been
discharged for his failure to provide a sufficient urine sample (deemed a
refusal under the collective bargaining agreement).
The court concluded that the arbitrator exceeded his power by creating a
new category of infraction ("failure" to comply) and imposing a lesser
penalty. These actions by the arbitrator constituted an amendment of the
collective bargaining agreement.
NY - CBA was prevented from providing shorter probationary period than civil service rules.
County of Fulton v. Civil Service Employees Assn (New York
App Div 10/06/2005)
http://www.courts.state.ny.us/reporter/3dseries/2005/2005_00061.htm
The employer sought a stay of arbitration with respect to a conflict between the probationary period negotiated in the collective bargaining agreement (CBA) and the county classified civil service rules. The trial court denied the request for a stay. The New York Supreme Court, Appellate Division reversed. The court held that the parties could not negotiate a shorter probationary period than the minimum period established by the civil services rules.
5th - Award reinstating airline employee who was discharged for violating last chance agreement was not an "arguable interpretation."
Continental Airlines v. Intl Brotherhood of Teamsters (5th
Cir 11/15/2004)
http://caselaw.lp.findlaw.com/data2/circs/5th/0420136p.pdf
The airline/employer appealed the trial court's grant of summary judgment in the union's favor, in the employer's action seeking to vacate a grievance arbitration award under the Railway Labor Act (RLA). The award reinstated an employee who was discharged for allegedly violating a "last chance agreement" after testing positive for alcohol. The 5th Circuit reversed, concluding that the System Board's interpretation of the last chance agreement and the EAP agreement between the union and employer was not an "arguable interpretation" of those agreements.
RI - Arbitrator awarded damages for theft of employee's car under CBA.
State v. Rhode Island Alliance (Rhode Island 12/01/2004)
http://www.courts.state.ri.us/supreme/pdf-files/03-600.pdf
The arbitrator awarded the
employee damages resulting from the theft of employee's car at work under the
health and welfare provisions of the collective bargaining agreement (CBA). The
Rhode Island Supreme Court affirmed. The court found the arbitrator did not
exceed his powers and the award drew its essence from the CBA.
7th - Motion to vacate was not timely filed.
McKinney Restoration v. Illinois Dist Council No 1 (7th Cir
12/15/2004)
http://caselaw.lp.findlaw.com/data2/circs/7th/033253p.pdf
The employer filed suit to vacate two arbitration awards. The trial court granted the union's motion for partial summary judgment on the first arbitration award. The 7th Circuit Court affirmed. The sole issue was whether the employer's action to vacate the first arbitration award was filed outside the statute of limitations. The employer argued that the first award left open some issues that were decided in the second award, so the first award was not final until the second award was issued. The court found the first arbitration award had all the indications that it was a final order, including language that the employer would be liable for costs, legal fees, and interest for failure to abide by its terms.
DC - union's unfair labor practice charge was timely filed.
Natl Treasury Employees Assoc v.
FLRA (DC Cir 12/17/2004)
http://caselaw.lp.findlaw.com/data2/circs/dc/031423a.pdf
A federal employees' union
petitioned for review of the Federal Labor Relations Authority's (FLRA's)
decision dismissing its unfair labor practices complaint as untimely.
The union charged that the federal employer committed an unfair labor
practice by failing to comply with an arbitration award rendered in the union's
favor. The FLRA had concluded that
the six-month statutory limitations period for filing the charge (set forth in 5
USC Section 7118(a)(4)) had expired, since more than six months had passed since
the date the arbitration award became final.
The DC Circuit reversed, concluding that "[t]he plain language of
the statute ... requires that the filing period cannot begin at least until
there has been a failure to comply with an arbitration award."
The court rejected the FLRA's argument that the employer had an
obligation to comply with the award as soon as it became final, stating
"[the FLRA's] reading confuses the onset of the obligation with the onset
of the failure to fulfill that obligation."
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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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