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Arbitration Law Memo April 2005
by Ross Runkel at LawMemo
National
Academy of Arbitrators 2005 Annual Meeting - May 25-28
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Arbitration - Individual Contracts ***
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6th - Arbitration agreements unenforceable under state and federal law.
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1st - Failing to demand arbitration during the pendency of an EEOC investigation is not waiver.
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FL - Statute of limitation was not tolled by arbitration proceeding.
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MS - Arbitration clause of employment contract applied to asset purchase agreement (4-3).
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5th - Convention on foreign arbitral awards preempts state anti-arbitration statute.
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Arbitration - Collective Bargaining Agreements ***
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MA - Award reinstating police officer violated public policy.
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OH - Award ordering reinstatement vacated; no rational nexus (2-1).
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CT - Trial court erred by substituting its judgment for the arbitrator's.
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8th - Ownership of shares in retirement plan from demutualization required arbitration under RLA.
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RI - Court says past practices are considered only if intent of parties was unclear.
Read the blogs
Arbitration Blog - http://www.lawmemo.com/arbitrationblog/
Recent entries: "Can non-signatory successor union force arbitration?" "Reinstatement violated public policy" "Arbitrator went outside the contract" "Arbitrator, not court, decides unconscionability issue - sometimes" "A frolic of its own" "Volt revisited, with a twist"
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Recent entries: "Class Action Fairness Act does not apply . . ." "Four-fifths test is not a safe harbor" "Physicians' non-compete clause OK in New Jersey" "ADEA allows disparate impact claims - sort of" "Transfer was not retaliation" "An arbitration system goes down in flames"
National Academy of Arbitrators 2005 Annual Meeting - May 25-28
The National Academy of Arbitrators will be holding its 2005 Annual Meeting at the beautiful Fairmont Hotel, in the exciting city of Chicago, IL., on May 25 through 28, 2005. On May 25, there will be a full day Advocate's training, with separate Basic and Advanced sessions. From May 26 through 28, advocates and arbitrators will benefit from the plenary and concurrent sessions involving current and provocative topics. Several of the major presentations include, "The Conflict between Worklife and Family," "Discovering Basic Principles of Evidence in Labor Arbitration," "Employer Neutrality Agreements and Card Checks," "Resolving Workplace Violence Grievances," "Arbitration in the Fishbowl - Ethical Disclosure Obligations," and several breakout sessions for industry-specific discussions. The NAA has enlisted an outstanding faculty of nationally known advocates and arbitrators. All Lawmemo.Com readers are invited to attend. Information about registration, lodging, the program agenda, and local fun can be found on the NAA's website at www.naarb.org., or by contacting Kate Reif, the NAA Operations Manager, at (607) 756-8363.
*** Arbitration - Individual Contracts ***
6th - Arbitration agreements unenforceable under state and federal law.
Walker
v. Ryan's Family Steak House (6th Cir 03//2005)
http://caselaw.findlaw.com/data2/circs/6th/036468p.pdf
Walker and other former employees sued claiming violations of the Fair Labor Standards Act (FLSA). The employer responded with a motion to compel arbitration under an agreement signed at the time the employees applied for their jobs. The trial court refused to enforce the arbitration agreement; the 6th Circuit affirmed.
The employer had a three-party arbitration arrangement. (1) Potential employees signed an agreement with Employment Dispute Services, Inc. (EDSI), an arbitration service-provider, agreeing to use EDSI as an arbitration forum. In theory, the employer could enforce that contract as a third-party-beneficiary. (2) The employer and EDSI had a contract in which the employer agreed to use EDSI to resolve employee disputes. In theory, an employee could enforce that contract as a third-party-beneficiary.
(1) The 6th Circuit held that the arbitration agreements were unenforceable under Tennessee law for three main reasons. (a) Lack of consideration. EDSI provided no consideration to the employees because EDSI retained the right to modify its arbitration rules at any time. The employer provided no consideration because it was not obligated to submit its employment disputes to EDSI. (b) No knowing and voluntary waiver of the right to a jury trial. Plaintiffs were poorly educated, in dire financial circumstances, were hired quickly with no time to read the arbitration policy, and possibly got misleading information from managers. (c) Lack of mutual assent. The arbitration language was on page 10 of an 11 page contract; it was a take-it-or-leave it deal in which the employees had no bargaining power; the employees were poorly educated; and the agreement was not adequately explained.
(2) The 6th Circuit held that the arbitration agreements were unenforceable under the Federal Arbitration Act (FAA) because they did not allow for effective vindication of their FLSA claims. The main reason was the court's finding that the EDSI arbitration forum was not neutral. EDSI is a for-profit company and the employer provided 42 percent of its gross income during one year. Said the court, "[the employer] effectively determines the ... pools of arbitrators." Also, EDSI had no protocol for selecting potential arbitrators out of its pools of arbitrators.
1st - Failing to demand arbitration during the pendency of an EEOC investigation is not waiver.
Marie
v. Allied Home Mortgage (1st Cir 03/16/2005)
http://laws.findlaw.com/1st/041403.html
The court framed the primary issue on appeal as "whether an employer waives its contractual right to compel arbitration of a Title VII claim by not filing for arbitration when the employee initiates an EEOC [Equal Employment Opportunity Commission] complaint, but instead waiting and only moving to compel arbitration after the employee later files a civil claim in federal court." The court concluded, "we hold that an employer does not waive its right to arbitration by failing to demand arbitration during the pendency of an EEOC investigation." The court noted that "[o]ur reasoning rests in part on EEOC v. Waffle House, Inc., 534 US 279 (2002), which held that an employer cannot preclude the EEOC from bringing an enforcement action based on an employee's complaint by relying on an arbitration clause between the employer and employee." The court reasoned, "[i]f the EEOC's investigation of an employer cannot be stopped by invoking an arbitration agreement, then forcing the employee and employer to begin an arbitration proceeding during the pendency of that investigation will automatically result in two adjudications involving the same issue at the same time …. "
On a more general note, the court also held that "the issue of waiver of the right to arbitrate due to inconsistent activity in another litigation forum remains an issue for the court," notwithstanding Howsam v. Dean Witter Reynolds, Inc., 537 US 79 (2002) and Green Tree Fin. Corp. v. Bazzle, 539 US 444 (2003). The court noted, however, that "the issue of compliance with a contractual time limit should, in the first instance, be addressed by the arbitrator."
FL - Statute of limitation was not tolled by arbitration proceeding.
Haskins
v. Fort Lauderdale (Florida Ct App 03/30/2005)
http://www.4dca.org/Mar
2005/03-30-05/4D04-507.pdf
Haskins sued the employer for invasion of privacy and negligent investigation. The trial court granted the employer's motion for summary judgment. The Florida District Court of Appeal affirmed. The court found that Haskins claims were time barred. The court concluded that the statute of limitations was not tolled by the arbitration proceeding because it dealt with only the employment dispute and not the claims of invasion of privacy and negligent investigation.
MS - Arbitration clause of employment contract applied to asset purchase agreement (4-3).
Sullivan
v. Protex (Mississippi 03/31/2005)
http://www.mssc.state.ms.us/Images/Opinions/CO25004.pdf
Sullivan sued the employer for fraud, breach of contract, breach of duty of good faith and fair dealing, and misrepresentation. The trial court granted the employer's motion to compel arbitration. The Mississippi Supreme Court affirmed.
Sullivan signed an employment contract with an arbitration clause and an asset purchase agreement (APA) without an arbitration clause on the same date. The court first reasoned that Sullivan's entire complaint involved a dispute arising out of the employment contract, which bound Sullivan to arbitrate the claims. The court also found that the employment contract and the APA were part of a global transaction and that the arbitration provision of the employment contract was an integral part of the APA.
The DISSENT argued that Sullivan alleged separate and independent claims concerning the APA, which are not subject to arbitration, and that the entire agreement provisions of the employment contract and the APA did not refer to one another.
5th - Convention on foreign arbitral awards preempts state anti-arbitration statute.
Lim
v. Offshore Specialty Fabricators (5th Cir 03/24/2005)
http://caselaw.lp.findlaw.com/data2/circs/5th/0330380p.pdf
Lim sued the employer for violation of the Fair Labor Standards Act (FLSA). The employer moved to dismiss based upon Lim's international employment contract, which was controlled by the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The trial court denied the employer's motion to dismiss and held that the arbitration clause violated Louisiana law. The 5th Circuit Court reversed. The court found the Convention, as the supreme Law of the Land, preempts the Louisiana anti-forum-selection-clause statute. The court stated that no exceptions were applicable in this case and noted that public policy favored enforcing arbitration agreements.
*** Arbitration - Collective Bargaining Agreements ***
MA - Award reinstating police officer violated public policy.
City
of Boston v. Boston Police Assn (Massachusetts 04/04/2005)
http://www.socialaw.com/slip.htm?cid=15109&sid=120
An arbitrator ordered a police officer reinstated, reducing his discharge to a 1-year suspension without pay. The arbitrator found that the police officer had engaged in "egregious" and "outrageous" conduct toward two civilians. The arbitrator also found that the officer's reports regarding that incident demonstrated that he was "lacking" in both "integrity" and "trust." The court vacated the arbitration award, stating "[t]his case presents one of those 'rare instances' in which an arbitrator's award must be vacated as contrary to 'an explicit, well-defined, and dominant public policy.'" The court opined that the police officer's continued employment "would frustrate strong public policy against the kind of egregious dishonesty and abuse of official position in which he was proved to have engaged."
OH - Award ordering reinstatement vacated; no rational nexus (2-1).
Cincinnati
v. Queen City Lodge No. 69 (Ohio Ct App 04/01/2005)
http://www.sconet.state.oh.us/rod/newpdf/1/2005/2005-ohio-1560.pdf
The employee, a police officer, was discharged for lying under oath in a criminal trial. The employer appealed an arbitrator's award reinstating the employee and reducing the discharge to a three-day suspension, relying upon the employer's disciplinary rules manual. The trial court vacated the award concluding that the disciplinary rules manual was not incorporated into the collective bargaining agreement (CBA). The Ohio Court of Appeals affirmed. Because the arbitrator relied on a source outside the CBA, the court found there was no rational nexus between the CBA and the arbitrator's award. The DISSENT argued that the award was appropriately based upon the employer's own disciplinary rules.
CT - Trial court erred by substituting its judgment for the arbitrator's.
Bd of Educ v.
Civil Service Employees (Connecticut Ct App 04/19/2005)
http://www.jud.state.ct.us/external/supapp/Cases/AROap/AP88/88AP256.pdf
A public
school employees' union appealed the trial court's decision vacating a grievance
arbitration award rendered in favor of a school bus driver.
The court reversed, noting that "the [trial] court improperly
substituted its interpretative judgment for that of the [arbitration]
panel."
5th - Subcontracting award is vacated.
Beaird
Industries v. Local 2297, Automobile Workers (5th Cir 03/29/2005)
http://caselaw.lp.findlaw.com/data2/circs/5th/0430333p.pdf
The union grieved the employer's decision to subcontract-out certain work. An arbitrator found in the union's favor and the employer moved to vacate the arbitrator's decision. The trial court vacated the award, and the 5th Circuit affirmed. The court observed that "[t]he conclusion that the subcontracting rights were not limited by the CBA should have ended the Arbitrator's inquiry -- the remainder of his decision, which balanced the interests of the Union with Beaird's economic savings, can only be characterized as the Arbitrator's 'own brand of industrial justice.'"
MA - Arbitrator's FMLA decision is upheld.
Town of
Watertown v. Watertown Municipal Employees (Massachusetts Ct App 04/15/2005)
http://www.socialaw.com/slip.htm?cid=15140&sid=119
A municipal
employee was discharged for allegedly abusing his Family and Medical Leave Act (FMLA)
leave. An arbitrator ordered the
employee reinstated, on the basis that the discharge decision was not supported
by "just cause." The
trial court affirmed the arbitration award.
The court affirmed, stating "[i]t is not our role to reinterpret the
facts or to measure the level of misconduct justifying discipline or discharge
under the contract."
PA - Arbitrator's reinstatement is set aside.
Allegheny
County Airport Authority v. Laborers Union (Pennsylvania Cmwlth 04/11/2005)
http://www.courts.state.pa.us/OpPosting/CWealth/out/1413CD04_4-11-05.pdf
The employer operates the Pittsburgh International Airport. The employer discharged employee Allen; the matter was arbitrated under a collective bargaining agreement and the arbitrator converted the discharge to a thirty-day suspension. The trial court confirmed the award; the Pennsylvania Commonwealth Court reversed and vacated the award.
The arbitrator found that Allen had been insubordinate, had filled out time sheets that did not match his badge swipes, reported late, left early, and used the phone excessively for personal business. The arbitrator balanced this misconduct against a number of mitigating factors, and ordered reinstatement. The court concluded that Allen was guilty of theft of services, that this jeopardized the core function and mission of the public agency, and that arbitrators cannot force public employers "to relinquish powers that are essential to the proper discharge of their functions."
NY - Arbitration required under present CBA.
Town of Ramapo v. Ramapo Police Assn
(New York App Div 04/11/2005)
http://www.courts.state.ny.us/reporter/3dseries/2005/2005_02863.htm
The union filed a request for arbitration under the collective bargaining agreement (CBA), which contained an arbitration provision. The employer sought a stay of arbitration on the ground that the date of the grievance occurred during the prior CBA, which did not contain an arbitration provision. The trial court stayed the arbitration. The New York Supreme Court, Appellate Division reversed. The court noted that the CBA now in effect provided for a claim involving a past practice of the employer. The court could not conclude that the present CBA unequivocally excluded grievances prior to its effective date.
8th - Ownership of shares in retirement plan from demutualization required arbitration under RLA.
Bloemer v. Northwest Airlines (8th Cir
03/25/2005)
http://caselaw.lp.findlaw.com/data2/circs/8th/033968p.pdf
Bloemer sued the employer for shares received in a demutualization of an annuity contract for a retirement plan. The trial court dismissed the suit for lack of subject matter jurisdiction, finding that the Railway Labor Act (RLA) required arbitration of ownership of the shares. The 8th Circuit Court affirmed. The court found that Bloemer's claims originated in rights and duties in the collective bargaining agreement (CBA), which therefore must be interpreted. The court stated that state law claims that depend on interpreting the CBA were preempted by the RLA.
RI - Court says past practices are considered only if intent of parties was unclear.
Pawtucket Police v. City of Pawtucket
(Rhode Island 03/16/2005)
http://www.courts.state.ri.us/supreme/pdf-files/04-154.pdf
The arbitrator determined that the revised method of calculating the cost of purchasing service credits was correct, that the collective bargaining agreement (CBA) was unambiguous, and that past practice of the parties was irrelevant. The trial court vacated the award. The Rhode Island Supreme Court reversed. The court noted that the parties did not agree that the unrevised CBA's provision covering purchase of service credits was ambiguous. The court reaffirmed its view that past practices were considered only if the intent of the parties was unclear from the language of the CBA. The court found that the arbitrator's award was not only "passably plausible" but also "drew its essence" from the CBA and led to a rational result.
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