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Arbitration Law Memo February 2005
by Ross Runkel at LawMemo
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Arbitration - Individual Contracts ***
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9th - Arbitration agreement unconscionable under Washington law (2-1).
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TX - Arbitration agreement was wrongfully procured by economic duress.
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11th - FAA did not exempt workers who incidentally transported goods in interstate commerce.
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Arbitration - Collective Bargaining Agreements ***
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3rd - Award upheld where CBA language relied upon was not in CBA (2-1).
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DC - Government agency terminated arbitrator and need not enforce arbitrator's award.
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CT - Union unilaterally waived right to challenge timeliness of arbitrator's decision.
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6th - Interpretation of moratorium provision of CBA was minor dispute under RLA (2-1).
*** Arbitration - Individual Contracts ***
4th - Federal question in underlying dispute supports jurisdiction to hear petition to compel arbitration.
Discover Bank v.
Vaden (4th Cir 01/24/2005)
http://caselaw.lp.findlaw.com/data2/circs/4th/041848p.pdf
This is a banking case that should have an impact on employment cases. The bank sued its customer in federal court under Federal Arbitration Act Section 4 to compel arbitration of state law claims that the customer had filed in state court.
The issue was whether the presence of a federal question in the underlying dispute is enough to support subject matter jurisdiction. The 4th Circuit held that it was.
Courts of Appeals are split on the question of whether, in a Section 4 suit, a federal district court has subject matter jurisdiction when the underlying dispute between the parties raises a federal question. One line of authority is that the basis for federal jurisdiction must appear on the face of the arbitration petition itself. That would require that there be some basis for jurisdiction other than the underlying dispute - such as diversity of citizenship or admiralty. The other line of authority (adopted by the 4th Circuit) allows the district court to look through the arbitration petition and "assess whether the overall controversy between the parties 'raises a federal question.'"
9th - Arbitration agreement unconscionable under Washington law (2-1).
Al-Safin
v. Circuit City Stores (9th Cir 01/14/2005)
http://caselaw.lp.findlaw.com/data2/circs/9th/0335297p.pdf
Al-Safin
sued the employer, asserting state and federal discrimination claims.
The employer moved to compel arbitration.
The trial court denied the motion, concluding that the arbitration
agreement between Al-Safin and the employer was unconscionable under Washington
state law and hence enforceable. The
9th Circuit affirmed.
The court found seven provisions that it previously had held unconscionable under California law, and held they were also unconscionable under Washington law: (1) forcing employees to arbitrate claims against Circuit City, but not requiring Circuit City to arbitrate claims against employees; (2) limiting remedies; (3) splitting costs and fees; (4) imposing a one-year statute of limitations; (5) prohibiting class actions; (6) regarding the filing fee and waiver of the fee; and (7) giving Circuit City the unilateral right to terminate or modify the agreement.
The
DISSENT argued, "I believe that the modification provision in Rule 19 ...
is enforceable under Washington law (or, at least, that there is sufficient
doubt as to certify that question to the Washington Supreme Court) ...."
TX - Arbitration agreement was wrongfully procured by economic duress.
RLS Legal Solutions v. Rogers (Texas Ct App 01/27/2005)
http://www.9thcoa.courts.state.tx.us/opinions/htmlopinion.asp?OpinionId=7753
The employer's motion to compel arbitration was denied by the trial court. The Texas Court of Appeals affirmed. The court found the evidence was sufficient to support a determination that the employer withheld the employee's compensation for work already performed for the purpose of obtaining her agreement to arbitrate employment disputes and that the withholding of her compensation for work already performed defeated the employee's free agency.
11th - FAA's exemption for "seamen's employment contracts" doesn't apply to arbitration agreements covered by the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
Bautista v. Star Cruises (11th
Cir 01/18/2005)
http://caselaw.lp.findlaw.com/data2/circs/11th/0315884p.pdf
A boiler exploded on a ship, killing or injuring several crewmembers. The crewmembers (or their representatives) sued, seeking damages for negligence and unseaworthiness under the Jones Act and for failure to provide maintenance and cure under general maritime law. Each crewmember's employment agreement included an arbitration clause, which the trial court enforced pursuant to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (U.S.T. 2517, 330 U.N.T.S. 3) and its implementing legislation (9 USC Sections 202-208).
The primary issue on appeal, a matter of first impression in the 11th Circuit, was "whether the FAA [Federal Arbitration Act] exemption for seamen's employment contracts applies to arbitration agreements covered by the Convention Act." The 5th Circuit has held that it does not (Freudensprung v. Offshore Tech. Servs., Inc., 379 F.3d 327 (5th Cir 2004)). The court agreed, concluding "[t]he statutory framework of title 9 and the language and context of the Convention Act preclude the application of the FAA's seamen's exemption, either directly as an integral part of the Convention Act or residually as a non-conflicting provision of the FAA."
11th - FAA did not exempt workers who incidentally transported goods in interstate commerce.
Hill v. Rent-A-Center (11th Cir 02/04/2005)
http://caselaw.lp.findlaw.com/data2/circs/11th/0315608p.pdf
Hill sued the employer for employment race discrimination. The trial court compelled arbitration. The 11th Circuit Court affirmed. The issue on appeal was whether Hill, an accounts manager who made deliveries of furniture and appliances across state lines, was a transportation worker for purposes of the Federal Arbitration Act (FAA). The court noted that the exemption to the FAA applied to a "class of workers engaged in ... interstate commerce" within the meaning of the FAA. The court found there was no indication Congress meant to exempt workers from the FAA who incidentally transported good interstate.
CA - Right to three-arbitrator panel upheld.
Parker v. McCaw (California Ct App 01/27/2005)
http://caselaw.lp.findlaw.com/data2/californiastatecases/b167028.pdf
Parker sued the employer for breach of contract of two agreements and other claims. The trial court compelled arbitration before one arbitrator, although one agreement required three arbitrators. The California Court of Appeal reversed that part of the arbitration award relating to the agreement requiring three arbitrators. The court found that the right to a three-arbitrator panel was a substantial right. The court stated a three-arbitrator panel minimized the risk of factual or legal error, which error generally was not reviewable pursuant to the law of arbitration. The court noted that trial court ordered consolidation substantially altered the employer's contractual rights.
CA - California Department of Managed Health Care didn't violate private employee's right to a jury trial when it approved health care service plans containing mandatory binding arbitration clauses.
Viola v. Department of Managed Health Care (California Ct
App 02/01/2005)
http://caselaw.lp.findlaw.com/data2/californiastatecases/b174455.pdf
The California Department of
Managed Health Care has approved health care service plans containing mandatory
binding arbitration clauses. Viola's
employer attempted to obtain a plan without such a clause, but was unable to do
so. Viola sued the Department,
alleging that her state and federal constitutional rights to a jury trial and
her right to due process were violated by state action when the department
approved plans containing mandatory binding arbitration clauses. She argued that the Department was compelled to insist that
health care plan contracts provide insureds with a choice to decline mandatory
arbitration. The court disagreed,
stating "the action cannot be maintained because, under established law, an
employer has the authority to negotiate ... a contract [containing a mandatory
binding arbitration clause] on behalf of its employees."
*** Arbitration - Collective Bargaining Agreements ***
3rd - Award upheld where CBA language relied upon was not in CBA (2-1).
Brentwood Medical Associates v. United Mine Workers (3rd
Cir 01/28/2005)
http://caselaw.lp.findlaw.com/data2/circs/3rd/041955p.pdf
The issue on appeal was whether an arbitration award should be upheld where an arbitrator cited language from the collective bargaining agreement (CBA) in his decision that was not in the CBA. The arbitrator permitted the employee to exercise bumping rights outside her classification. The court found support for the arbitrator's decision in the CBA, which expressly identified seniority in terms of the entire bargaining unit. Thus, the award did not rely solely on the language that the arbitrator erroneously cited, and the award drew its essence from the CBA. The DISSENT argued the arbitrator directly contradicted the plain language of the CBA and exceeded the scope of his powers.
DC - Government agency terminated arbitrator and need not enforce arbitrator's award.
Battle v. Federal Aviation Administration (DC Cir
01/11/2005)
http://caselaw.lp.findlaw.com/data2/circs/dc/035120a.pdf
Battle sued the employer (the Federal Aviation Administration (FAA)), seeking to enforce an arbitration award rendered in his favor. The trial court granted summary judgment in favor of the employer. The DC Circuit affirmed. The court concluded that the trial court had jurisdiction over Battle's action, and that the FAA didn't violate its own rules when it terminated a neutral arbitrator's services. During the arbitration, Battle had attempted to inject allegations of discrimination into the FAA's "Guaranteed Fair Treatment" (GFT) process - in spite of the fact that he hadn't pursued the appropriate forum for resolution of such allegations. The court determined that the FAA didn't break its own rules when it terminated the arbitrator's services after it became clear that she was going to entertain the discrimination allegations in violation of GFT rules.
CT - Union unilaterally waived right to challenge timeliness of arbitrator's decision.
AFSCME v. Dept of Public Health (Connecticut 02/01/2005)
http://www.jud.state.ct.us/external/supapp/Cases/AROcr/CR272/272CR27.pdf
The union granted a time extension for a decision to the arbitrator and the employer did not. The arbitrator ruled in favor of the employer. The union sought to vacate the award. The issue on appeal was whether the union waived its right to challenge an unfavorable arbitration award as untimely when it expressly granted the arbitrator's request for an extension. The Connecticut Supreme Court ruled that the union waived its right to challenge the award. The court noted that the collective bargaining agreement (CBA) required mutual consent to extend deadlines for a decision, but that this language did not similarly suggest that unilateral consent could not operate as a waiver. The court found there was sufficient evidence to find that the union waived the time limitation.
6th - Interpretation of moratorium provision of CBA was minor dispute under RLA (2-1).
CSX Transportation v. United Transportation Union (6th Cir
01/19/2005)
http://caselaw.lp.findlaw.com/data2/circs/6th/034345p.pdf
The issue on appeal was whether
the dispute over the substantive scope of a national moratorium on contractual
negotiations was minor or major under the Railroad Labor Act (RLA). The trial
court found the dispute was major. The 6th Circuit Court reversed.
The court noted that the
moratorium provisions of the collective bargaining agreement (CBA) appeared to
apply to the section 6 notice sent by the union. The court found that the
employer's argument that the moratorium provisions of the CBA applied to this
dispute were arguably justified. The court found that the scope of the
moratorium required resolution by arbitration and that the trial court exceeded
its authority in determining the dispute was major.
The DISSENT argued that the
union was seeking to create new rights which was a major dispute.
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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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