« Arbitration Law Memo July 2007 | Main | Arbitration Law Memo September 2007 »
Arbitration Law Memo August 2007
by Ross Runkel at LawMemo
Arbitration Law Memo August 2007
by LawMemo - World's Best
Also available by free monthly email.
***
Arbitration - Individual Arbitration Agreements ***
-
CA - Class arbitration waiver may violate public policy (4-3).
-
CA - Arbitration opt-out provision does not eliminate unconscionability analysis (4-3).
-
2nd - Arbitrators cannot use contingency fee agreement to cap statutory attorney fees.
***
Arbitration - Collective Bargaining Agreements ***
-
NH - Arbitrator applied traditional just cause standard (3-2).
-
9th - Trial court lacked personal jurisdiction over out-of-state employer sued by local union.
-
1st - Arbitrability was a question for the trial court - not the arbitrator.
-
7th - Grievance arbitration award didn't violate public policy.
-
MA - Appointment of veterans' services director was subject to CBA.
-
OH - Employer required to give preference to licensed employees for coaching positions.
-
7th - Trivial ambiguity is not a ground for refusing to enforce arbitration award.
-
10th - Employer was obligated to negotiate for renewal of expired pre-hire agreement.
*** Arbitration - Individual Arbitration Agreements ***
CA - Class arbitration waiver may violate public policy (4-3).
CA - Arbitration opt-out provision does not eliminate unconscionability analysis (4-3).
Gentry v. Superior Court [Circuit City]
(California 08/30/2007)
http://www.courtinfo.ca.gov/opinions/documents/S141502.PDF
Gentry brought a class action suit claiming that the employer had misclassified salaried customer service managers as exempt from the overtime provisions of the California Labor Code. Because Gentry had signed an agreement to arbitrate, and the agreement contained a class action waiver, the trial court ordered arbitration on an individual basis. The California Court of Appeal affirmed; the California Supreme Court (4-3) reversed.
(1) The Court held that in some cases a class arbitration action waiver may be contrary to public policy. Rather than relying on the unconscionability doctrine, the court focused on the fact that Gentry's claim dealt with the "unwaivable" statutory right to receive overtime pay. The court concluded that "under some circumstances such a provision would lead to a de facto waiver and would impermissibly interfere with employees' ability to vindicate unwaivable rights and to enforce the overtime laws." "[W]hen it is alleged that an employer has systematically denied proper overtime pay to a class of employees and a class action is requested notwithstanding an arbitration agreement that contains a class arbitration waiver, the trial court must consider the factors discussed above: the modest size of the potential individual recovery, the potential for retaliation against members of the class, the fact that absent members of the class may be ill informed about their rights, and other real world obstacles to the vindication of class members’ right to overtime pay through individual arbitration. If it concludes, based on these factors, that a class arbitration is likely to be a significantly more effective practical means of vindicating the rights of the affected employees than individual litigation or arbitration, and finds that the disallowance of the class action will likely lead to a less comprehensive enforcement of overtime laws for the employees alleged to be affected by the employer’s violations, it must invalidate the class arbitration waiver to ensure that these employees can 'vindicate [their] unwaivable rights in an arbitration forum.'" The court remanded for findings on these issues.
(2) Lower courts rejected Gentry's claim that the entire arbitration agreement was unconscionable, basing their decision on the fact that Gentry was given a 30-day period in which he could opt out of arbitration. The California Supreme Court held that this opt-out provision did not insulate the arbitration agreement from unconscionability analysis. The court found that there was still some procedural unconscionability because (a) the employer's explanation of the benefits of arbitration was "markedly one-sided"; and (b) it was "not clear that someone in Gentry's position would have felt free to opt out." The court remanded for further unconscionability analysis of clauses that shortened the statute of limitations, limited backpay remedies, capped punitive damages, and provided that "generally" each party is liable for their own attorney fees.
2nd - Arbitrators cannot use contingency fee agreement to cap statutory attorney fees.
Porzig
v. Dresdner, Kleinwort, Benson (2nd Cir 08/07/2007)
http://caselaw.lp.findlaw.com/data2/circs/2nd/061212p.pdf
Porzig claimed his employer discharged him in violation of the Age Discrimination in Employment Act (ADEA), and his claim went to arbitration by a National Association of Security Dealers (NASD) arbitration panel. The panel found for Porzig on the merits and awarded $220,079. The panel did not award attorney fees or costs, and assessed $13,840.75 in forum, filing, and arbitrators' fees against Porzig. The trial court vacated the award as to attorney fees and costs. Porzig's attorney represented to the panel that $82,437.81 was Porzig's obligation under the attorney fee agreement. The panel's revised award included $83,500 in attorney fees plus an order that Porzig's lawyer repay $82,437.81 to Porzig.
The 2nd Circuit held that the attorney fee award was "in manifest disregard of law" and the panel had no jurisdiction to order the attorney to return funds to Porzig. (1) As to attorney fees, the court concluded that the arbitrators had used the contingency fee agreement to set a cap, which is contrary to established precedent. In ADEA cases, a prevailing plaintiff's attorney fees are normally calculated by a lodestar analysis and should include fees for pursuing the statutory right to fees. (2) As to the panel's award directing the attorney to reimburse fees, the court held this to be a violation of the Federal Arbitration Act (FAA) because neither the attorney nor Porzig had agreed to arbitrate the attorney fee contract.
CA - Court hears case after arbitrators dismiss.
Clark v. First Union Securities
(California Ct App 08/10/2007)
http://www.courtinfo.ca.gov/opinions/documents/B189589A.PDF
Among other claims, Clark sued the employer as a representative of employees for damages on behalf those employees who executed a Securities and Exchange Commission (SEC) Form U-4. The trial court granted the employer's motion to compel arbitration. The arbitrators dismissed the Form U-4 claim. The trial court granted Clark's motion to reconsider the motion to compel arbitration and denied the motion to compel arbitration as to the Form U-4 claim. The California Court of Appeal affirmed. The court found that the arbitrators' dismissal did not dispose of the claim by ruling that the claim was ineligible for arbitration, nor foreclose the trial court from considering the claim. The court stated that the National Association of Securities Dealers Code of Arbitration Procedure Rule 10301(d)(2) permitted either the court or the arbitrators to decide if claims were encompassed by a putative or certified class action. The court concluded that the trial court had the authority to make the arbitrability decision.
*** Arbitration - Collective Bargaining Agreements ***
2nd - CBA's arbitration clause cannot waive employee's right to a judicial forum for federal statutory claims.
Pyett
v. Pennsylvania Building (2nd Cir 08/01/2007)
http://caselaw.lp.findlaw.com/data2/circs/2nd/063047p.pdf
Pyett sued the employer, asserting an age discrimination claim under the Age Discrimination in Employment Act (ADEA). The trial court denied the employer's motion to compel arbitration. The 2nd Circuit affirmed.
The employer sought to compel arbitration pursuant to an arbitration provision in a collective bargaining agreement. The court agreed with the trial court that the agreement was unenforceable under Rogers v. New York University, 220 F.3d 73 (2nd Cir 2000). The court reaffirmed its holding in Rogers, that mandatory arbitration clauses in collective bargaining agreements are unenforceable to the extent they waive employees' rights to a judicial forum for federal statutory claims. The court rejected the proposition that the Rogers decision failed to consider Gilmer v. Interstate/Johnson Lane Corp., 500 US 20 (1991) and Wright v. Universal Maritime Service Corp., 525 US 70 (1998).
MD - Employee failed to exhaust her administrative remedies when she withdrew her demand for arbitration.
Guzunis
v. Foster (Maryland 08/01/2007)
http://mdcourts.gov/opinions/coa/2007/120a06.pdf
Foster sued the employer, asserting claims for "wrongful demotion," "wrongful termination," and breach of contract. She also sued an individual defendant for defamation. Foster prevailed on her wrongful demotion and defamation claims after a jury trial. The court concluded that Foster failed to exhaust her administrative remedies under her collective bargaining agreement by withdrawing her demand for arbitration, and hence forfeited her right to pursue her wrongful demotion, wrongful termination, and breach of contract claims. The court remanded for reconsideration on other issues.
NH - Arbitrator applied traditional just cause standard (3-2).
In Re Merrimack County (New Hampshire
08/23/2007)
http://www.courts.state.nh.us/supreme/opinions/2007/merri120.pdf
The arbitrator found that the employer lacked just cause to discharge the employee. The union filed an unfair labor practice charge when the employer failed to reinstate the employee; the Public Employee Labor Relations Board (PELRB) found in favor of the union. The New Hampshire Supreme Court affirmed in part and reversed in part.
The parties stipulated to the following submission to the arbitrator: "Whether there was just cause for the county to terminate Ms. Foote under the collective bargaining agreement? If not, what shall the remedy be?" Article 24 of the collective bargaining agreement (CBA) provided that "[a]ny instance of ... verbal ... abuse ... of any resident shall be grounds for immediate termination." In looking to the parties' submission and in light of the parties' expired CBA, which did not reference "just cause," the court noted that the arbitrator determined "the traditional just cause standard" applied. The court stated that under this standard the arbitrator had the authority to consider the underlying issues and surrounding circumstances necessary to interpret and apply the express provisions of the CBA and reach a final decision. The court could not say that the arbitrator's interpretation of the CBA and the parties submission was so implausible as to require reversal.
The DISSENT argued that where a CBA listed particular types of conduct as grounds for termination, the arbitrator's inquiry ended when he found that verbal abuse had occurred.
9th - Trial court lacked personal jurisdiction over out-of-state employer sued by local union.
District Council v. B&B Glass (9th
Cir 08/16/2007)
http://caselaw.lp.findlaw.com/data2/circs/9th/0516258p.pdf
The union sought to compel the out-of-state employer to arbitrate the union's claim that another employer violated a collective bargaining agreement between the out-of-state employer and the union's out-of-state counterpart. The trial court dismissed based on lack of personal jurisdiction. The 9th Circuit affirmed, concluding that "because the plaintiff union has no agreement with the employer that it seeks to take to arbitration, and it cannot show that the employer against whom it filed its claim controls the company doing the work in California, the employer is entitled to judgment."
1st - Arbitrability was a question for the trial court - not the arbitrator.
Shank/Balfour v. Intl Brotherhood (1st
Cir 08/06/2007)
http://laws.findlaw.com/1st/062480.html
The employer sued, seeking to vacate a grievance arbitration award rendered in the union's favor. The trial court confirmed the award. The 1st Circuit affirmed, concluding that 1) arbitrability was a question for the trial court (rather than the arbitrator); and 2) the grievance was arbitrable because it was not a jurisdictional dispute. The court vacated judgment against one entity not a party to the case.
7th - Grievance arbitration award didn't violate public policy.
Local 15 v. Exelon (7th Cir 07/31/2007)
http://caselaw.lp.findlaw.com/data2/circs/7th/054175p.pdf
The union filed suit, seeking to vacate a grievance arbitration award rendered in the employer's favor. The trial court dismissed the case for "failure to state a claim" under Fed.R.Civ.P. 12(b)(6). The 7th Circuit affirmed, rejecting the union's arguments that 1) the arbitrator evidenced manifest disregard for the law; 2) the arbitrator exceeded the scope of his authority; and 3) the arbitration award violated public policy.
OH - Arbitrator did not imperfectly exercise his powers.
Ohio Patrolmen's v. Geauga Park District
(Ohio Ct App 07/26/2007)
http://www.sconet.state.oh.us/rod/newpdf/8/2007/2007-ohio-3775.pdf
The employer appealed from the trial court's decision confirming the arbitration award reinstating the employee. The Ohio Court of Appeals affirmed. The employer argued that the arbitrator exceeded his powers and imperfectly exercised them. The court stated a review of the evidence, transcripts, and arbitrator's decision supported the trial court's conclusions in confirming the award. The court found, as did the trial court, that the arbitrator clearly determined that the employee was fit for duty notwithstanding the presence of any personality disorder when he found that the employee was unjustly discharged and ordered reinstatement.
MA - Appointment of veterans' services director was subject to CBA.
City of Somerville v. Somerville
Municipal (Massachusetts Ct App 07/23/2007)
http://www.socialaw.com/slip.htm?cid=17316&sid=119
The employer petitioned to vacate the arbitrator's award finding the employer violated the collective bargaining agreement (CBA) by not appointing a union member with at least substantially equal qualifications to the position. The trial court denied the employer's motion to vacate. The Massachusetts Appeals Court affirmed. The employer argued that General Law chapter 115, section 10 granted the mayor authority for the appointment of a veterans' services director, which would be compromised by collective bargaining or arbitration. The court concluded that the bare authority of GL c 115, section 10 could not be read to prohibit or limit collective bargaining with respect to the selection process.
OH - Employer required to give preference to licensed employees for coaching positions.
Eastwood Local School v. Eastwood Assn
(Ohio Ct App 07/13/2007)
http://www.sconet.state.oh.us/rod/newpdf/6/2007/2007-ohio-3563.pdf
The employer moved to vacate an arbitration award which required payment to a bargaining unit member who was found qualified to be a head coach. The trial court vacated the arbitration award. The Ohio Court of Appeals reversed. The court stated that RC 3313.53, which required preference to qualified licensed employees for coaching, was a part of the collective bargaining agreement (CBA) by virtue of the severability provision subjecting the CBA to the law.
7th - Trivial ambiguity is not a ground for refusing to enforce arbitration award.
Brotherhood of Locomotive v. Union
Pacific (7th Cir 08/30/2007)
http://caselaw.lp.findlaw.com/data2/circs/7th/063282p.pdf
The railroad workers' union sought enforcement of an arbitration award. The trial court dismissed, on the basis that the award was ambiguous. The 7th Circuit reversed, noting "trivial ambiguities in arbitration awards are not a ground for refusing to enforce them."
10th - Employer was obligated to negotiate for renewal of expired pre-hire agreement.
Sheet Metal Workers' v. McElroy (10th
Cir 08/30/2007)
http://laws.findlaw.com/10th/063189.html
The union and employer entered into a pre-hire agreement authorized by Section 8(f) of the National Labor Relations Act (NLRA). The employer gave notice of its intent to terminate the agreement on its expiration date, but the union responded that the employer was obligated (under the terms of the agreement) to negotiate the matter. An arbitrator agreed with the union and directed the parties to enter into a new agreement. The trial court enforced the arbitration award. The 10th Circuit affirmed, concluding that the agreement did obligate the employer to negotiate for renewal of the contract.
WA - Retroactive wage increase awarded by arbitrator didn't become due on day arbitration award was rendered.
Almquist v. City of Redmond (Washington
Ct App 08/27/2007)
http://www.courts.wa.gov/opinions/pdf/58809-5.pub.doc.pdf
City employees obtained an interest arbitration award entitling them to retroactive wage increases. The employees then sued the employer under various state wage laws for late payment of wages, claiming that their retroactive pay became due as of the date of the arbitration award. The trial court rejected that argument, entering judgment in favor of the employer. The court affirmed, stating "[t]he employees have cited no authority demonstrating that the retroactive pay raises awarded by the arbitration decision were due at any time before the City paid them."
|
|
|
Editor: Ross Runkel, Professor of Law Emeritus. email Ross@LawMemo.Com, Phone 503-399-8028. Copyright LawMemo, Inc.
|
