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Arbitration Law Memo May 2007
by Ross Runkel at LawMemo
Arbitration Law Memo May 2007
by LawMemo - World's Best
Also available by free monthly email.
US
- Supreme Court will decide whether parties can expand scope of judicial
review.
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Arbitration - Individual Contracts ***
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OH - Standard of review clause is severed from agreement (6-1).
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OR - "Non-mutual" arbitration agreement wasn't unconscionable.
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TX - Economic duress as to whole contract is no defense to agreement to arbitrate.
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Arbitration - Collective Bargaining Agreements ***
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OH - Arbitrator properly defined "good cause" for discharge.
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CT - Arbitration award did not violate public policy against marijuana use.
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PA - Arbitrator did not exceed authority as to pension board composition, attorney fees, and costs.
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PA - Arbitration award did not cause loss of control of core functions.
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NY - Grievance wasn't arbitrable under collective bargaining agreement.
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6th - RLA grievance arbitration award didn't violate public policy.
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CT - Grievance arbitration award didn't violate public policy.
US - Supreme Court will decide whether parties can expand scope of judicial review.
Hall Street Associates LLC v. Mattel
Inc (Docket No. 06-989)
Certiorari granted May 29, 2007.
Details: http://www.lawmemo.com/sct/06/HallStreet/
While a lawsuit was pending, the parties agreed to arbitrate. The agreement provided that the federal district court shall vacate, modify, or correct the arbitrator's award "where the arbitrator's conclusions of law are erroneous." The 9th Circuit refused to enforce this provision because the Federal Arbitration Act specifies that arbitration awards can be vacated only in limited cases involving such things as fraud, corruption, partiality, or when the arbitrators exceed their powers. Therefore, the arbitrator's award was upheld even though it contained possible errors of law. The US Supreme Court granted certiorari to review the 9th Circuit judgment. Oral arguments will be in October 2007 or later.
*** Arbitration - Individual Contracts ***
9th - Law firm's agreement was unconscionable.
Davis v. O'Melveny & Myers (9th
Cir 05/14/2007)
http://caselaw.lp.findlaw.com/data2/circs/9th/0456039p.pdf
Davis sued, asserting (among other things) claims under the Fair Labor Standards Act (FLSA). The 9th Circuit held that an arbitration agreement between the parties was unconscionable under California law. It was procedurally unconscionable because the employee had to either sign or go work somewhere else. (There was no undue pressure, no concealment, no fine print, no surprise. The employee had three months to consider whether to sign.) It was substantively unconscionable on three grounds: (1) Notice of a claim had to filed within one year of when it became “known to the employee or with reasonable effort ... should have been known to him or her.” (2) The confidentiality clause unconscionably favored the employer. (3) The agreement contained a "non-mutual provision" exempting the employer from arbitration for “claims by the Firm for injunctive and/or other equitable relief for violations of the attorney-client privilege or work product doctrine or the disclosure of other confidential information.”
In addition, the court held that it was a violation of public policy to include the following: "Neither you nor the Firm will initiate or pursue any lawsuit or administrative action (other than filing an administrative charge of discrimination with the Equal Employment Opportunity Commission, the California Department of Fair Employment and Housing, the New York Human Rights Commission or any similar fair employment practices agency) in any way related to or arising from any Claim covered by this Program.
OH - Standard of review clause is severed from agreement (6-1).
Ignazio v. Clear Channel (Ohio
05/09/2007)
http://www.sconet.state.oh.us/rod/newpdf/0/2007/2007-ohio-1947.pdf
An arbitration agreement between Ignazio and her employer contained a provision that a party opposing enforcement of the arbitrator's award could bring suit, and "the standard of review will be the same as that applied by an appellate court reviewing a decision of a trial court sitting without a jury." The parties did not dispute that this provision provides for a standard of review that is not permitted by Ohio statute. The dispute was whether the offending provision could be severed or whether the arbitration agreement was unenforceable. Ignazio argued that severing the provision would convert the agreement from non-binding dispute resolution into binding arbitration. The court held that this single provision was not fundamental to the whole agreement, and could be severed. This is consistent with the state policy favoring arbitration and with the parties' express severance clause.
CA - Wage claim subject to FAA but not Armendariz rules.
Giuliano
v. Inland Empire Personnel (California Ct App 04/19/2007)
http://www.courtinfo.ca.gov/opinions/documents/B190771.PDF
Giuliano sued for breach of contract seeking unpaid wages of a bonus payment and a severance payment under the California Labor Code. The California Court of Appeal held the parties' arbitration agreement was enforceable. The court concluded the minimum requirements for arbitration set forth in Armendariz v Foundation Health Psychcare Services, Inc 24 Cal 4th 83 (2000), did not apply where Giuliano's contract claim for a $5 million to $8 million bonus and a $500,000 severance payment was distinguishable from statutory overtime or minimum wage claims and was not based on a fundamental public policy that was tied to a constitutional or statutory provision.
OH - "No attorney fees" clause unconscionable (2-1).
Post v. Procare Automotive (Ohio Ct
App 05/03/2007)
http://www.sconet.state.oh.us/rod/newpdf/8/2007/2007-ohio-2106.pdf
The court found the arbitration clause was substantively unconscionable because it deprived an employee of his rights to recover attorney fees. The court remanded so that the trial court could hold a required hearing (which, from the record, was not held) limited to determining whether the arbitration clause was also procedurally unconscionable. The DISSENT argued that the arbitration clause was neither substantively nor procedurally unconscionable.
OR - "Non-mutual" arbitration agreement wasn't unconscionable.
Motsinger
v. Lithia Rose (Oregon Ct App 04/04/2007)
http://www.publications.ojd.state.or.us/A128192.htm
An arbitration agreement required Motsinger to submit all of her potential claims to arbitration while imposing no similar requirement on her employer. The Oregon Court of Appeals held that this was not unconscionable. Courts in other jurisdictions have taken a variety of approaches to such "non-mutual" arbitration clauses between parties of unequal bargaining power. The court stated, "[w]e conclude that an approach that focuses on the one-sided effect of an arbitration clause - rather than on its one-sided application - to evaluate substantive unconscionability is most consistent with the common law in Oregon regarding unconscionability of other kinds of contractual provisions and with state and federal policies regarding arbitration." The court thus declined to dwell on the non-mutuality of the arbitration agreement - opting instead to focus on the effects of its provisions on the parties. Applying that analysis, the court declined to invalidate the arbitration agreement as unconscionable.
TX - Economic duress as to whole contract is no defense to agreement to arbitrate.
In Re RLS Legal Solutions (Texas 04/20/2007)
http://www.supreme.courts.state.tx.us/historical/2007/apr/050290.htm
Maida claimed that the employer withheld her salary payment in order to force her to sign an employment agreement that contained an arbitration provision. She argued that the arbitration provision was unenforceable because of economic duress. The Texas Supreme Court held that the arbitration provision could be enforced. The evidence showed that any duress was directed at the agreement as a whole, and not directed specifically at the arbitration provision.
*** Arbitration - Collective Bargaining Agreements ***
OH - Arbitrator properly defined "good cause" for discharge.
Summit
County v. Communication Workers (Ohio 05/09/2007)
http://www.sconet.state.oh.us/rod/newpdf/0/2007/2007-ohio-1949.pdf
An arbitrator issued an award reinstating an employee who had been discharged. The employer argued that the arbitrator improperly defined the term "good cause" in the collective bargaining agreement, asserting that only an ordinary definition such as from Black's Law Dictionary could be used. The Ohio Supreme Court held that it was not improper for the arbitrator to use the seven-part test made famous by Arbitrator Carroll Daugherty.
CT - Arbitration award did not violate public policy against marijuana use.
Town
of Enfield v. AFSCME (Connecticut Ct App 04/10/2007)
http://www.jud.state.ct.us/external/supapp/Cases/AROap/AP100/100AP212.pdf
The employer applied to vacate an arbitration award reducing discharge to a suspension. The trial court vacated the award on the ground that it violated public policy against the use of marijuana. The Connecticut Appellate Court reversed. The arbitration panel found that the employee, a police dispatcher, used marijuana in his home but not on duty, that the use did not impact his job performance, that he completed a drug education program, and that he had a flawless work record. The court concluded that, on the basis of the findings set forth in the arbitration award and considerations of the various competing policies, the employer failed to carry its burden of proving a clear violation of an established public policy.
PA - Arbitrator did not exceed authority as to pension board composition, attorney fees, and costs.
City
of Scranton v. Fire Fighters (Pennsylvania Cmwlth 05/08/2007)
http://www.courts.state.pa.us/OpPosting/CWealth/out/1908CD06_5-8-07.pdf
Pensions for the City's fire fighters are managed by a pension board, and two members of the board were fire fighters. The City changed the board's composition by adding several members who were not fire fighters. The union grieved under the collective bargaining agreement, and the arbitrator concluded that the City violated the collective agreement. The arbitrator also concluded that the City acted in bad faith and awarded costs and attorney fees. The court upheld the award, finding that the arbitrator did not exceed his powers and did not require the City to carry out an illegal act.
PA - Arbitration award did not cause loss of control of core functions.
Dept
of Correction v. Corrections Officers (Pennsylvania Cmwlth 05/03/2007)
http://www.courts.state.pa.us/OpPosting/CWealth/out/2132CD06_5-3-07.pdf
The upheld an arbitration award converting a discharge to a five-day suspension. The employee was discharged for off-duty conversation and text messaging and untruthfulness during the investigation and preliminary conference. The court found that the award was rationally derived from the collective bargaining agreement and the off-duty misconduct provisions in the employer's code of ethics; and it did not cause the employer to lose essential control over its core function of providing a safe and secure prison for both inmates and staff.
NY - Grievance wasn't arbitrable under collective bargaining agreement.
City
of Long Beach v. Civil Service (New York 05/01/2007)
http://www.courts.state.ny.us/reporter/3dseries/2007/2007_03755.htm
The state employer petitioned for a stay of grievance arbitration proceedings initiated by the union on behalf of several discharged employees. The appellate court below granted the petition. The court affirmed, concluding that the dispute was not arbitrable under the parties' collective bargaining agreement (CBA). The court reasoned that the CBA provisions relied upon by the union were unenforceable as a matter of law - and hence "meaningless." As a result, an arbitrator would be powerless to grant any relief pursuant to those provisions.
OH - Arbitration did not bar later FMLA suit.
Miller
v. Pond (Ohio Ct App 04/30/2007)
http://www.sconet.state.oh.us/rod/newpdf/5/2007/2007-ohio-2084.pdf
Miller sued the employer, asserting a claim under the Family and Medical Leave Act (FMLA). The trial court granted summary judgment in favor of the employer. The court reversed, concluding that the trial court erred in determining that the claim was barred by res judicata based on prior grievance arbitration proceedings. The court noted that Miller's grievance referenced only the parties' collective bargaining agreement (making no mention of the FMLA), and that in fact the agreement "prohibited arbitration of [Miller's] FMLA claims."
6th - RLA grievance arbitration award didn't violate public policy.
NetJets v. Intl Brotherhood of
Teamsters (6th Cir 05/15/2007)
http://caselaw.lp.findlaw.com/data2/circs/6th/063851p.pdf
The employer discharged one of its pilots because he made a video depicting the shooting of the employer's DVD supporting a contract agreement. The System Board of Adjustments ordered reinstatement. The employer sought to vacate the award on the ground that it violated public policy. The 6th Circuit upheld the award, concluding that "the award at issue does not violate any public policy that conceivably could warrant" vacating a Railway Labor Act (RLA) arbitration award. The court declined to decide whether public policy review of an arbitration award is permitted under the RLA.
CT - Grievance arbitration award didn't violate public policy.
Brantley v. City of New Haven
(Connecticut App Ct 05/01/2007)
http://www.jud.state.ct.us/external/supapp/Cases/AROap/AP100/100AP259.pdf
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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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