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Arbitration Law Memo July 2005
by Ross Runkel at LawMemo
*** Arbitration - Individual Contracts ***
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5th - Continued employment constituted consent to arbitration.
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DC - Sever the ban on punitive damages and compel arbitration.
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6th - Employee bound by implied-in-fact arbitration agreement.
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4th - Internal dispute program was not part of arbitration agreement.
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CA - Arbitrator's award enforcing covenant not to compete was upheld.
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CT - Arbitrators' award did not violate public policy against theft.
*** Arbitration - Collective Bargaining Agreements ***
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8th - Dispute wasn't a grievance covered by CBA's arbitration clause.
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OH - Employee required to arbitrate, not litigate, wrongful discharge.
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MO - Arbitration was part of exhaustion of administrative remedies.
*** Arbitration - Individual Contracts ***
5th - Continued employment constituted consent to arbitration.
Marino
v. Dillard's Inc (5th Cir 06/21/2005)
http://caselaw.lp.findlaw.com/data2/circs/5th/0430911p.pdf
Marino sued the employer for violation of the Americans with Disabilities Act (ADA) alleging wrongful discharge and failure to accommodate. The trial court denied the employer's motion to compel arbitration. The 5th Circuit reversed. The court noted that Marino signed an Acknowledgement of Receipt of Rules for Arbitration and continued to work for the employer. The court stated that Louisiana law did not require written acceptance of an arbitration agreement.
DC - Sever the ban on punitive damages and compel arbitration.
Booker
v. Robert Half Intl (DC Cir 07/01/2005)
http://caselaw.lp.findlaw.com/data2/circs/dc/047089a.pdf
Booker sued the employer, asserting a race discrimination claim under the District of Columbia Human Rights Act (DCHRA). The trial court granted the employer's motion to compel arbitration, after severing an unenforceable provision in the employer's arbitration agreement that precluded punitive damages. The DC Circuit affirmed. The court stated, "[t]he existence of an express severability clause in the agreement, the fact that the agreement is otherwise valid and enforceable, and a 'healthy regard for the federal policy favoring arbitration,' ... lead us to affirm the decision below, severing the ban on punitive damages and compelling arbitration.
6th - Employee bound by implied-in-fact arbitration agreement.
Johnson
v. Long John Silver's Restaurants (6th Cir 07/05/2005)
http://www.ca6.uscourts.gov/opinions.pdf/05a0288p-06.pdf
Johnson sued the employer in a class action under the Fair Labor Standards Act (FLSA). The trial court granted the employer's motion to compel arbitration. The 6th Circuit affirmed. The court noted that the employer was unable to produce a signed arbitration agreement, but concluded that Johnson was bound "by an implied-in-fact arbitration agreement under Missouri law."
8th - Award didn't evidence "manifest disregard for law."
St. John's Mercy Medical v. Delfino (8th
Cir 07/12/2005)
http://caselaw.lp.findlaw.com/data2/circs/8th/041672p.pdf
Delfino and the employer arbitrated a dispute relating to the employer's failure to defend Delfino pursuant to a clause in Delfino's employment contract. The arbitrator rendered an award in Delfino's favor, and the employer petitioned the trial court seeking to vacate the award. The 8th Circuit confirmed the arbitrator's award in its entirety - based on its conclusion that the award didn't evidence "manifest disregard for law."
10th - Interlocutory appeal from the denial of a motion to compel arbitration divests a district court of jurisdiction to proceed.
McCauley v. Halliburton Energy Services
(10th Cir 06/28/2005)
http://laws.findlaw.com/10th/056011.html
McCauley sued the employer, asserting various state law claims. The trial court granted the employer's motion to arbitrate certain claims, but denied the motion as to other claims and ordered the parties to proceed to trial. The employer appealed the partial denial of its motion to compel arbitration, as permitted by 9 USC Section 16(a)(1)(C) of the Federal Arbitration Act (FAA). The employer also filed a motion to stay proceedings in the trial court pending resolution of the appeal. The trial court denied that motion too, so the employer requested a stay from the appellate court. The 10th Circuit granted the employer's motion for a stay of the trial court's proceedings pending resolution of the appeal.
The court framed the primary question on appeal, an issue of first impression in the 10th Circuit, as "[w]hether an interlocutory appeal [under Section 16(a)] from the denial of a motion to compel arbitration divests a district court of jurisdiction to proceed on the merits of the underlying claim while the appeal is pending." There is a split among the circuits on this issue. The 2nd and 9th Circuits have refused to stay proceedings while an arbitrability issue is pending on appeal. The 7th and 11th Circuits have taken the contrary approach. The court adopted the latter approach, stating "we are persuaded by the reasoning of the [7th and 11th Circuits] ... that upon the filing of a non-frivolous Section 16(a) appeal, the district court is divested of jurisdiction until the appeal is resolved on the merits."
The 9th Circuit has expressed concern over potential exploitation of a categorical divestiture rule, which "would allow a defendant to stall a trial simply by bringing a frivolous motion to compel arbitration." Addressing that concern, the court noted that "upon the filing of a motion to stay litigation pending an appeal from the denial of a motion to compel arbitration, the district court may frustrate any litigant's attempt to exploit the categorical divestiture rule by taking the affirmative step, after a hearing, of certifying the Section 16(a) appeal as frivolous or forfeited."
4th - Internal dispute program was not part of arbitration agreement.
Hill v. PeopleSoft (4th Cir 06/22/2005)
http://caselaw.lp.findlaw.com/data2/circs/4th/042187p.pdf
Hill sued the employer alleging claims of sexual harassment, hostile work environment, retaliation, and race discrimination. The trial court denied the employer's motion to compel arbitration. The 4th Circuit Court reversed. The court found that the trial court's reasoning that the arbitration agreement lacked consideration because the employer reserved the right to change the internal dispute solution (IDS) program was flawed. The court stated the IDS program was not part of the arbitration agreement.
CA - Arbitrator's award enforcing covenant not to compete was upheld.
Jones v. Humanscale Corp (California Ct
App 06/17/2005)
http://www.courtinfo.ca.gov/opinions/documents/G034387.PDF
The employer petitioned to confirm an arbitrator's award enforcing a covenant not to compete and nondisclosure of trade secrets. The trial court denied the employer's petition. The California Court of Appeal reversed. The court first noted that this case involved judicial review of an arbitrator's findings as to the enforceability of a covenant not to compete in a contract containing a choice of law provision applying the law of another state. The court stated that the agreement authorized the arbitrator to determine both the applicable law and the enforceability of the covenant not to compete. The court found the arbitrator's findings and decision on the enforceability of the covenant not to compete were not palpably erroneous under California law. The court amended the award to direct the employer to pay all of the fees and expenses of arbitration.
CT - Arbitrators' award did not violate public policy against theft.
Metropolitan District v. AFSCME
(Connecticut Ct App 06/21/2005)
http://www.lawmemo.com/docs/ct/metro.pdf
The arbitrators found that the penalty of discharge was disproportionate to the employee's action of taking a magazine from a customer's house and initially lying about it for fear of losing her job. The trial court denied the employer's application to vacate the award. The Connecticut Appellate Court affirmed. The issue on appeal was whether the award violated a clearly articulated public policy against theft. The court stated it was bound by the arbitrators' finding that the magazine found its way into the employee's lunch pail by error or oversight. The court found that the arbitrators' award did not violate any clearly defined, explicit public policy.
*** Arbitration - Collective Bargaining Agreements ***
8th - Dispute wasn't a grievance covered by CBA's arbitration clause.
United
Steelworkers v. Duluth Clinic (8th Cir 07/06/2005)
http://caselaw.lp.findlaw.com/data2/circs/8th/043238p.pdf
The union sued the employer seeking arbitration of a dispute over retiree health benefits. The a collective bargaining agreement contained an arbitration clause but all the language dealing with retiree benefits was in a side agreement that had no arbitration clause. The 8th Circuit concluded that the dispute was not a "grievance" covered by the collective agreement's arbitration clause. The 8th Circuit said, "the present dispute is collateral and not subject to arbitration."
OH - Employee required to arbitrate, not litigate, wrongful discharge.
Knipp
v. Lawrence County (Ohio Ct App
06/14/2005)
http://www.sconet.state.oh.us/rod/newpdf/4/2005/2005-ohio-3103.pdf
Knipp sued the employer for wrongful discharge in violation of RC 329.02 in that the employer did not obtain the approval of the County Board of Commissioners before discharge. The trial court dismissed the complaint finding that Knipp's exclusive remedy was to file a grievance. The Ohio Court of Appeals affirmed. The court found the collective bargaining agreement (CBA) required arbitration of disputes related to the terms and conditions of Knipp's employment.
PA - Award of punitive damages vacated (5-1).
Philadelphia
Office of Housing v. AFSCME (Pennsylvania 06/21/2005)
http://www.courts.state.pa.us/OpPosting/Supreme/out/J-132-2003mo.pdf
The arbitrator found the employer violated the collective bargaining agreement by subcontracting with non-union workers and awarded monetary damages. The damages were payable to the union, and equaled the wages the union employees would have earned. The Commonwealth Court reversed the award, determining the damages were punitive. The Pennsylvania Supreme Court affirmed. The court found the award would give the union a windfall while exacting retribution on the taxpayers. The court concluded it was inappropriate for the arbitrator to award such damages. The DISSENT argued that the arbitrator's award must be affirmed under the deferential essence test traditionally applied in the labor arbitration setting.
DC - Federal employer was exercising "management rights" when it implemented policy governing employee assignments and overtime.
Natl Treasury Employees Union v. FLRA
(DC Cir 07/08/2005)
http://caselaw.lp.findlaw.com/data2/circs/dc/041137a.pdf
The federal employees' union petitioned for review of a Federal Labor Relations Authority (FLRA) order setting aside an arbitration award rendered in the union's favor. The court denied the petition, finding that (1) the employer exercised protected management rights when it implemented a revised National Inspectional Assignment Policy; and (2) the employer was not obligated to bargain over the union's "ground rule" proposal.
CT - Untimely award did not exceed authority.
Local 1339 v. City of Waterbury
(Connecticut 07/12/2005)
http://www.jud.state.ct.us/external/supapp/Cases/AROcr/CR274/274CR87.pdf
The municipal employer and union entered into arbitration before the city's "oversight board" over the terms of a new collective bargaining agreement. The board was unable to render an award within the time period prescribed un S.A.01-1, and scheduled new arbitration proceedings which ultimately resulted in an award. The trial court granted the union's application to vacate the award, on the basis that it was not rendered within the applicable time limits. The court reversed, rejecting the union's argument that the oversight board exceeded its authority under S.A.01-1 and the Municipal Employees Relations Act (MERA).
MO - Arbitration was part of exhaustion of administrative remedies.
Parker v. City of Saint Joseph (Missouri
Ct App 06/28/2005)
http://www.lawmemo.com/docs/mo/parker.htm
Parker sought review of his discharge from public employment, under the Missouri Administrative Procedure Act (MAPA). The trial court dismissed the case for lack of subject matter jurisdiction, based on its determination that Parker failed to exhaust his administrative remedies. The court affirmed, noting that "Parker failed to arbitrate his employment grievance, as required by the City's administrative procedure."
Fed - Arbitrator's error was harmless.
Martin v. Dept of Veterans Affairs (Fed
Cir 06/24/2005)
http://caselaw.lp.findlaw.com/data2/circs/fed/043023p.pdf
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