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Arbitration Law Memo January 2008
by Ross Runkel at LawMemo
Arbitration Law Memo January 2008
by LawMemo - First in Employment Law
Also by free monthly email.
*** Arbitration -
Individual Arbitration Agreements ***
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9th - ERISA plan must arbitrate claims brought by former employees.
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MA - Expedited evidentiary hearing required on whether employee agreed to arbitrate.
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Arbitration - Collective Bargaining Agreements ***
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9th - Arbitrator required bargaining before implementing mandatory flu immunization.
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PA - Core functions exception is rejected; supplanted by public policy exception (4-2).
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AK - Two arbitration awards upheld, separate court suit denied.
*** Arbitration - Individual Arbitration Agreements ***
US - Supreme Court hears FAA preemption arguments.
Preston v. Ferrer (oral argument
01/14/2008)
Details, briefs, transcript: http://www.lawmemo.com/supreme/case/Preston/
Preston performs management services for movie and TV performers, and Ferrer performs on TV as "Judge Alex." Their contract contained a standard arbitration clause. When Preston commenced arbitration proceedings to collect fees allegedly owed, Ferrer sought relief from the California Labor Commissioner arguing that Preston was an unlicensed talent agent and that their agreement is void. Ferrer also sued in California court seeking to enjoin the arbitration, and Preston filed a motion to compel arbitration. The trial court enjoined the arbitration pending final resolution by the Labor Commissioner. The California Court of Appeal affirmed. The US Supreme Court granted certiorari to review the California court's judgment, and a decision is expected before June.
The California court (2-1) held that California's Talent Agencies Act vests exclusive original jurisdiction with the Labor Commissioner to resolve issues arising under that statute, and that the statutory administrative proceedings must be resolved before the parties may resort to another tribunal. The court rejected Preston's argument that the Federal Arbitration Act requires that the issue of the contract's validity must go to an arbitrator. The court held that Buckeye Check Cashing v. Cardegna, 126 S.Ct. 1204 (2006), did not apply because that case did not involve an administrative agency with exclusive jurisdiction over a disputed issue. The DISSENT argued that the question of the contract's validity must be decided by an arbitrator, and not by the Labor Commissioner or a court.
11th - Discharge for refusal to sign arbitration agreement covering pending EEOC charge violates Title VII.
Goldsmith v. Bagby Elevator (11th
Cir 01/17/2008)
http://caselaw.lp.findlaw.com/data2/circs/11th/0614440p.pdf
Goldsmith won a jury trial on his Title VII claim of retaliatory discharge for refusing to sign an arbitration agreement. The 11th Circuit affirmed.
Goldsmith was discharged for refusing to sign a dispute resolution agreement that would have covered a pending charge with the Equal Employment Opportunity Commission (EEOC). He offered to sign an amended agreement that wouldn't have covered the pending EEOC charge, but the employer declined. The employer argued that under Weeks v. Harden Manufacturing Corp, 291 F.3d 1307 (11th Cir 2002), its decision to discharge Goldsmith for refusing to sign the arbitration agreement was not evidence of retaliatory motive. The court disagreed.
In Weeks, the 11th Circuit held that an employee's refusal to sign an arbitration agreement did not constitute protected activity supporting a claim of retaliation. The court noted, however, that Weeks did not address an employee's refusal to sign an agreement that applied to a pending discrimination charge. The court also noted that "Goldsmith was terminated immediately after and because he refused to relinquish his right to a jury trial for his pending charge." The court thus agreed with Goldsmith's argument that "his immediate termination for his refusal to sign the agreement established a causal relation between his protected activity-the filing of his charge of discrimination-and his termination."
9th - ERISA plan must arbitrate claims brought by former employees.
United Steelworkers v. Retirement
Income Plan (9th Cir 01/07/2008)
http://caselaw.lp.findlaw.com/data2/circs/9th/0516833p.pdf
The union sued on behalf of laid-off employees to force the employer and its Retirement Income Plan to arbitrate the denial of pension benefits. As to the union's ERISA claims, the trial court granted summary judgment for the union conditioned on adding the individuals as litigants. The union added the individuals to the complaint. The employer filed for bankruptcy, resulting in an automatic stay of proceedings with respect to the employer. The trial court denied the Plan's motion to stay the entire proceedings. The 9th Circuit affirmed. (1) There appeared to be language in the Summary Plan Description requiring the claims to be resolved via an internal grievance process, and language in the Benefits Agreement requiring arbitration. The court resolved this conflict by applying the presumption of arbitrability, rejecting the Plan's argument that this presumption should not apply when the parties seeking arbitration are retired. The court also rejected the Plan's argument that arbitration was not required because the individuals were no longer "employees." (2) The trial court's refusal to stay all proceedings was not an abuse of discretion because the employer was not a necessary party.
MA - Expedited evidentiary hearing required on whether employee agreed to arbitrate.
St. Fleur v. WPI Cable
(Massachusetts 01/04/2008)
http://www.malawyersweekly.com/archives/ma/opin/sup/1000308.htm
When St. Fleur filed a discrimination complaint, the employer moved to compel arbitration, and St. Fleur responded that she was fraudulently induced to sign the arbitration agreement. The trial court denied the motion to compel arbitration without holding an evidentiary hearing. The Massachusetts Supreme Judicial Court reversed, holding that an expedited evidentiary hearing was required. The court first found that state courts are not required to follow the procedures in Federal Arbitration Act Section 4 because that section applies only to federal courts. Applying state law, which requires a court to "proceed summarily" to decide the existence of an arbitration agreement, the court held that the trial court must hold an expedited evidentiary hearing because there is a dispute as to a material fact.
PA - Employer waived right to arbitration.
Stanley-Laman v. Hyldahl
(Pennsylvania Sup 12/14/2007)
http://www.courts.state.pa.us/OpPosting/superior/out/a33005_07.pdf
Hyldahl was sued by his employer for breach of non-solicitation and confidentiality agreements. He counterclaimed against the employer and a closely related entity (the two entities shared office space and management). The defendants moved to compel arbitration of Hyldahl's counterclaims, but the motion was denied. The court affirmed, concluding that the defendants waived their right to arbitration when they sought relief through the judicial process instead of pursuing arbitration on their own claims.
*** Arbitration - Collective Bargaining Agreements ***
9th - Arbitrator required bargaining before implementing mandatory flu immunization.
Virginia Mason v. Washington State
Nurses (9th Cir 12/21/2007)
http://caselaw.lp.findlaw.com/data2/circs/9th/0635073p.pdf
The union filed a grievance with respect to the employer's unilateral implementation of a mandatory flu immunization regime as a fitness for duty requirement for all nurses and employees. The arbitrator sustained the union's grievance. The trial court denied the employer's motion to vacate the award. The 9th Circuit affirmed. The court concluded that the arbitrator was acting within his authority when he inferred the duty to bargain from the collective bargaining agreement's (CBA) preamble and the union recognition clause in light of his understanding of the fundamental labor law principle that management must bargain with recognized union representatives over the terms and conditions of employment. The court held that the arbitrator's award prohibiting the employer from implementing its mandatory flu immunization policy unilaterally was not contrary to the array of relevant public policies (favoring effective infection control and favoring bargaining), taken together, and the court therefore allowed it to stand.
PA - Core functions exception is rejected; supplanted by public policy exception (4-2).
Westmoreland v. Classroom Asst
(Pennsylvania 12/27/2007)
Majority: http://www.courts.state.pa.us/OpPosting/Supreme/out/J-106-2006mo.pdf
Concurring: http://www.courts.state.pa.us/OpPosting/Supreme/out/J-106-2006co.pdf
Dissenting: http://www.courts.state.pa.us/OpPosting/Supreme/out/J-106-2006do.pdf
Dissenting: http://www.courts.state.pa.us/OpPosting/Supreme/out/J-106-2006do2.pdf
The employer appealed the arbitrator's award finding that just cause did not exist to discharge the employee under the collective bargaining agreement (CBA). The trial court vacated the award based upon the "core functions" exception. The Pennsylvania Commonwealth Court affirmed. The Pennsylvania Supreme Court remanded.
The question presented for appeal was the proper contours of the essence test (whether the award drew its essence from the CBA) and the recognition and application of an exception to this test. The court stated the core functions exception to the essence test (whether an award impacts the core function of a public entity depriving the employer of its ability to discharge that function) had been met with uncertainty and criticism: that the core functions exception would swallow the essence test and that it was inherently incompatible with an exclusive focus on rational derivation from the CBA. The court rejected the core functions exception to the essence test and supplanted it with the public policy exception to the essence test. The court held that a court should not enforce a grievance arbitration award that contravened public policy that was well-defined, dominant, and ascertained by reference to the laws and legal precedents and not from general considerations of supposed public interests. The court remanded for the lower courts to apply the public policy exception.
The DISSENT argued that the arbitrator's award comported with the essence test and that the award was not manifestly unreasonable.
6th - Order vacating arbitration award reversed.
Truck Drivers Local v. Allied
Waste (6th Cir 01/04/2008)
http://caselaw.lp.findlaw.com/data2/circs/6th/061572p.pdf
The arbitrator set aside the employee's discharge and ordered reinstatement with back pay and benefits. The trial court granted the employer's motion to vacate. The 6th Circuit reversed.
The court applied its en banc decision in Michigan Family Resources, Inc. v. Service Employees International Union, 475 F3d 746 (2007) which held that courts were without authority to overturn an arbitrator's award which was arguably construing or applying the contract and acting within the scope of his authority. The major issue was whether the arbitrator's award violated Section 9.4(G) of the agreement stating that "the degree of discipline ... imposed for just cause shall be in the sole discretion of management and shall not be subject to modification by an arbitrator." The arbitrator, citing Section 8.1 which prohibited the employer from "discharg[ing] or otherwise disciplin[ing] an employee without just cause[.]," reasoned that the just cause-inquiry required evaluation of whether the employee violated a work rule and then to consider whether the discipline was reasonable under the circumstances. The court found that Section 9.4(G) was not clear on its face and could reasonably be interpreted as the arbitrator had done. The court found no basis upon which to vacate the arbitrator's award because the arbitrator was arguably construing and applying an unclear contractual provision.
The court awarded back pay from the date of the arbitrator's award until the date of the employee's eventual reinstatement. The court stated this was an appropriate judicial remedy reasoning that if an arbitration award was to be final and binding, the employer was required to reinstate the employee and pay him.
AK - Two arbitration awards upheld, separate court suit denied.
Baseden v. State (Alaska
01/04/2008)
http://www.state.ak.us/courts/ops/sp-6219.pdf
The state wrongfully discharged Baseden. His union took the dispute to arbitration, and the arbitrator awarded back pay and benefits but denied compensation for emotional distress and attorney fees. The state offered reinstatement, but Baseden did not show up; therefore, the state discharged him again. In a second arbitration another arbitrator upheld the second discharge. Baseden then sued to vacate both arbitration awards and sued seeking damages relating to his first discharge and later dealings with the state. The court held that the two arbitration decisions were not arbitrary or capricious, and that the merits of Baseden's court suit had been reached in arbitration or were waived.
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