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Arbitration Law Memo February 2008
by Ross Runkel at LawMemo
Arbitration Law Memo February 2008
by LawMemo - First in Employment Law
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Arbitration - Individual Arbitration Agreements ***
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US - Arbitrator, not Labor Commissioner, decides contract validity.
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5th - Arbitration agreement was unenforceable because employer could unilaterally terminate it.
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Arbitration - Collective Bargaining Agreements ***
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US - Supreme Court will hear case on union's waiver of court forum for statutory claim.
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2nd - Witness absolutely immune as to statements made during arbitration proceedings.
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8th - RLA's arbitration provision divested federal court of jurisdiction over ERISA claims.
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DC - Employer waived its argument that arbitrator lacked jurisdiction.
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CT - Employer's application to vacate arbitration award was untimely.
*** Arbitration - Individual Arbitration Agreements ***
US - Arbitrator, not Labor Commissioner, decides contract validity.
Preston
v. Ferrer (US Supreme Court 02/20/2008)
http://www.supremecourtus.gov/opinions/07pdf/06-1463.pdf
Preston alleged Ferrer owed fees earned under an entertainment industry contract. Ferrer claimed the contract was invalid under the California Talent Agencies Act. The contract contained an arbitration clause, but the California Court of Appeal had held that the issue of contract validity had to be first decided by the California Labor Commissioner.
The US Supreme Court held that the Federal Arbitration Act (FAA) supercedes state law that lodges primary jurisdiction with an administrative agency or a court, and that the question of contract validity is to be decided by an arbitrator.
4th - Arbitrator's application of AAA's "opt-out" class certification provision (rather than FLSA's "opt-in" provision) was not "manifest disregard" of the law.
Long John Silver's v. Cole (4th
Cir 01/29/2008)
http://caselaw.lp.findlaw.com/data2/circs/4th/061259p.pdf
Cole and her co-workers initiated class-wide arbitration proceedings against the employer pursuant to an arbitration agreement. The employees prevailed on their Fair Labor Standards Act (FLSA) claims, and the employer petitioned the trial court for an order vacating the arbitration award. The petition was denied, and the 4th Circuit affirmed.
The arbitration agreement provided that "[a]ny arbitration will be administered by the American Arbitration Association under its commercial arbitration rules...." The American Arbitration Association's (AAA's) Supplementary Rules for Class Arbitrations provide for "opt-out" class certification. However, the FLSA provides for "opt-in" class certification (29 USC Section 216(b)). The arbitrator applied the AAA's opt-out provision. The court concluded that the arbitrator's decision to apply that provision did not constitute a "manifest disregard" of applicable law justifying vacatur of the arbitration award. The employer argued that the FLSA's opt-in provision constitutes a substantive right not waivable under an arbitration (or any other) agreement. However, no court has held that the FLSA's opt-in provision creates a substantive, non-waivable right. The court thus concluded "[i]t is far from clear that the 'opt-in' aspect of the Section 16(b) [opt-in] provision is such a nonwaivable substantive right." Disregard of a legal principle cannot constitute "manifest disregard" unless the principle is "clearly defined and not subject to reasonable debate." Thus, the arbitrator's decision on this issue did not constitute "manifest disregard."
5th - Arbitration agreement was unenforceable because employer could unilaterally terminate it.
Morrison
v. Amway (5th Cir 02/06/2008)
http://caselaw.lp.findlaw.com/data2/circs/5th/0620138cv0p.pdf
In this non-employment case involving Amway and some of its distributors, the court addressed whether an arbitration clause allowing Amway to unilaterally modify or terminate its arbitration agreement (even as to pre-existing disputes) was illusory and unenforceable. The 5th Circuit held that the answer to that question was "yes" (applying Texas law). The court reasoned "[t]here is nothing which precludes [Amway] ... from eliminating the entire arbitration program or its applicability to certain claims or disputes so that once notice of such an amendment was published mandatory arbitration would no longer be available even as to disputes which had arisen and of which Amway had notice prior to the publication."
WA - Arbitration process was not neutral.
Rodriguez v. Windermere Real
Estate (Washington Ct App 01/28/2008)
http://www.courts.wa.gov/opinions/pdf/59526-1.pub.doc.pdf
Rodriguez sued the employer, asserting state law claims for unpaid commissions. The employer moved to compel arbitration, but the trial court denied the motion. The court affirmed, agreeing with the trial court that the arbitration agreement was inherently unfair and unenforceable. The employer wrote the arbitration agreement, designed the arbitration procedures, and selected the arbitrators. Moreover, the pool of potential arbitrators consisted of "current employees within the [employer's] franchisee family." The court concluded that "[o]n these facts, the process does not satisfy the neutrality requirements of the arbitration statute [RCW 7.04A.110(2)]."
*** Arbitration - Collective Bargaining Agreements ***
US - Supreme Court will hear case on union's waiver of court forum for statutory claim.
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Penn Plaza LLC v. Pyett (Certiorari granted February 19, 2008)
Details, briefs: http://www.lawmemo.com/supreme/case/Pyett/
When employees sued claiming age discrimination, the employer filed a motion to compel them to take the case to arbitration. The employees were covered by a collective bargaining agreement which prohibited age discrimination and also said "All such claims shall be subject to the grievance and arbitration procedure [in the collective bargaining agreement] as the sole and exclusive remedy for violations." The trial court denied the motion to compel arbitration, and the 2nd Circuit affirmed. The 2nd Circuit held that "arbitration provisions contained in a [collective bargaining agreement], which purport to waive employees' rights to a federal forum with respect to statutory claims, are unenforceable." The US Supreme Court granted certiorari to review the 2nd Circuit judgment, and will schedule oral arguments for October 2008 or later.
2nd - Witness absolutely immune as to statements made during arbitration proceedings.
Rolon
v. Henneman (2nd Cir 02/25/2008)
http://caselaw.lp.findlaw.com/data2/circs/2nd/063890p.pdf
Rolon (a police officer) sued his superior, asserting a due process claim based on testimony given during disciplinary arbitration proceedings. The trial court dismissed via judgment on the pleadings (Fed.R.Civ.P 12(c)). The 2nd Circuit affirmed.
Judges and witnesses are afforded absolute immunity from civil claims arising from statements made during judicial proceedings. In Austern v. Chicago Board of Options Exchange, Inc., 898 F.2d 882 (2nd Cir 1990), the 2nd Circuit extended such immunity to cover arbitrators serving in contractually agreed-upon arbitration proceedings. The court extended that protection again, concluding that the superior was absolutely immune from Rolon's claims. The court reasoned that "the nature of this arbitration was materially indistinguishable [from] ... that of formal judicial proceedings, and ... [the superior] performed the same function as his judicial witness counterpart .... " The court cautioned, however, that "not all arbitrations will be conducted in a manner equivalent to that of the judicial process." The court noted "[w]e need not and do not opine as to the minimum safeguards required in order for absolute immunity to attach in other arbitral settings."
8th - RLA's arbitration provision divested federal court of jurisdiction over ERISA claims.
Hastings
v. Wilson (8th Cir 02/22/2008)
http://caselaw.lp.findlaw.com/data2/circs/8th/071611p.pdf
Hastings, an airline employee, sued the employer for violation of ERISA alleging breach of fiduciary duty. The trial court granted the employer's motion to dismiss. The 8th Circuit affirmed. One issue on appeal was whether the Railway Labor Act's (RLA) mandatory arbitration provision (45 USC Section 184) divested federal courts of subject matter jurisdiction. The court found that: (1) the agreements between the employer and the union constituted collective bargaining agreements (CBA) and the pension plan was maintained pursuant to them; (2) because the breach of fiduciary duty claims involving the pension plan required an interpretation and application of the CBAs, they constituted minor disputes within the exclusive jurisdiction of the RLA adjustment board: and (3) the pamphlets distributed by the employer indicating plan participants could file suit in federal court did not circumvent the RLA's arbitration requirement.
DC - Employer waived its argument that arbitrator lacked jurisdiction.
Howard
University v. Metropolitan Campus Police (DC Cir 01/18/2008)
http://caselaw.lp.findlaw.com/data2/circs/dc/077055a.pdf
The employer appealed the trial court's order affirming a grievance arbitration award rendered in the union's favor. The DC Circuit affirmed. A primary issue on appeal was whether the employer waived its argument that the arbitrator lacked jurisdiction to hear the grievance, by not raising that argument before the arbitrator. The court held that the answer to that question is "yes." Agreeing with every other circuit to have considered the issue, the court held that "[a]bsent excusable ignorance of a predicate fact, a party that does not object to the arbitrator's jurisdiction during the arbitration may not later do so in court." The court observed that "arbitration is a matter of consent; if a party submits to arbitration without objecting to the arbitrator's jurisdiction, then it may fairly be said to have consented to the arbitration, and the other party, having gone forward with the proceeding, may fairly be said to have relied upon that consent."
CT - Employer's application to vacate arbitration award was untimely.
Bloomfield
v. United Electrical (Connecticut 01/29/2008)
http://www.jud.state.ct.us/external/supapp/Cases/AROcr/CR285/285CR29.pdf
The trial court vacated a grievance arbitration award rendered in favor of the police officers' union, agreeing with the public employer's argument that the award should be vacated on the ground that it violated public policy. The court reversed, concluding that the trial court lacked subject matter jurisdiction over the matter because the employer's application to vacate the arbitration award was not filed within the thirty day limitations period set forth in General Statutes Section 52-420(b).
WI - CBA violated by imposing discipline for disclosure of student's records to teacher's attorney in grievance process.
Madison Metropolitan v. Madison
Teachers (Wisconsin Ct App 01/31/20080
http://www.lawmemo.com/docs/wi/madison.pdf
The employer appealed from the trial court order confirming an arbitration award expunging a letter of reprimand to a teacher for disclosing an individualized education program (IEP) for a student to her attorney representing her in a previous grievance process. The Wisconsin Court of Appeals affirmed. The arbitrator concluded that the teacher was permitted to provide her union representative with the IEP during the grievance process. The court concluded that the arbitrator did not show a manifest disregard of the Wisconsin pupil records law nor the federal Family Educational Rights and Privacy Act (FERPA).
NY - Duties of interest arbitration panels clarified.
In re Arbitration of Buffalo
Firefighters (New York App Div 02/01/2008)
http://www.courts.state.ny.us/reporter/3dseries/2008/2008_00861.htm
The trial court granted the firefighters' union's petition to vacate a compulsory public interest arbitration award regarding wages and health benefits. The court reversed as to wages and affirmed as to health benefits.
Civil Service Law Section 209(4)(c)(v) provides in relevant part that a compulsory public interest arbitration panel "shall specify the basis for its findings," taking into consideration four factors set forth in that section. Section 209(4)(c)(v) has been interpreted as requiring an arbitration panel to discuss separately each of the statutory factors in order to avoid vacatur. The court had previously adopted that interpretation in Matter of Buffalo Police Benevolent Assn v. City of Buffalo (82 AD2d 635), but abandoned it here. The court concluded "[t]he statute simply requires, as it expressly states, that the panel consider the statutory factors and 'specify the basis for its findings.'" The court explained "the language of the statute is clear and unambiguous and plainly does not require discussion of each of the statutory factors or those factors put in issue by the parties." The court reasoned, "the Legislature could have chosen language that would require public arbitration panels to make express findings with respect to each of the statutory factors, or even each factor put in issue by the parties, but it did not."
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