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Arbitration Law Memo March 2008
by Ross Runkel at LawMemo
Arbitration Law Memo March 2008
by LawMemo - First in Employment Law
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Arbitration - Individual Arbitration Agreements ***
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US Supreme Court - Parties cannot expand FAA grounds for vacating award.
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US Supreme Court - Certiorari granted on issue of whether FAA suit raises a federal question.
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CA – Petition to compel arbitration denied where written agreement to arbitrate not alleged.
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Arbitration - Collective Bargaining Agreements ***
*** Arbitration - Individual Arbitration Agreements ***
US Supreme Court - Parties cannot expand FAA grounds for vacating award.
Hall Street Associates v. Mattel
(US Supreme Court 03/25/2008)
http://www.supremecourtus.gov/opinions/07pdf/06-989.pdf
Holding: When a party seeks to vacate an arbitration award by using the Federal Arbitration Act (FAA) procedure for expedited judicial review, the FAA's grounds for vacating an award are exclusive, and federal courts cannot enforce a contractual expansion of those grounds.
The parties agreed to arbitrate a portion of an ongoing lawsuit, and stipulated that the federal district court "shall vacate, modify or correct any award: (i) where the arbitrator’s findings of facts are not supported by substantial evidence, or (ii) where the arbitrator’s conclusions of law are erroneous." (This would have expanded the scope of review that the FAA provides.) The US Supreme Court held that FAA Sections 10 and 11 "provide the FAA’s exclusive grounds for expedited vacatur and modification," and refused to allow the parties to expand those grounds by contract.
Because the arbitration agreement was executed during litigation and was approved by the district court and entered as a court order, it is arguable that the award was reviewable under the District Court's authority to manage its cases under Federal Rule of Civil Procedure 16. The Supreme Court did not decide this issue, and remanded for the lower courts to consider the arguments.
US Supreme Court - Certiorari granted on issue of whether FAA suit raises a federal question.
Vaden v. Discover Bank (certiorari
granted 03/17/2008)
Details: http://www.lawmemo.com/supreme/case/Vaden/
Discover Bank sued Vaden in state court for nonpayment of her credit card balance. Vaden counterclaimed, raising state-law claims of breach of contract and violation of state statutes regulating credit card fees and charges. Discover Bank then petitioned a federal district court seeking to compel arbitration of Vaden's state-court counterclaims. The federal district court granted the motion to compel arbitration; the 4th Circuit affirmed (2-1).
The Federal Arbitration Act (FAA) itself does not create jurisdiction in the federal courts, and there must be a federal question or diversity of citizenship. The 4th Circuit held (2-1) that federal courts have jurisdiction because of the presence of a federal question in the underlying dispute. Because Discover Bank is a federally-insured bank, the Federal Deposit Insurance Act (FDIA) is implicated by Vaden's counterclaims. The court also found that Vaden's counterclaims are completely preempted by the FDIA. The DISSENT argued that the federal court should look no further than the face of the petition to compel arbitration to see whether a federal question exists; existence of a federal question does not depend on the nature of the underlying dispute to be arbitrated. The US Supreme Court granted certiorari to review the 4th Circuit judgment, and will schedule oral arguments for the Fall of 2008.
CA – Petition to compel arbitration denied where written agreement to arbitrate not alleged.
Brodke v. Alphatic Spine
(California Ct App 03/20/2008)
http://www.courtinfo.ca.gov/opinions/documents/G038591.PDF
Brodke sued the employer for breach of contract, fraud, and other claims. The trial court denied the employer’s motion to compel arbitration. The California Court of Appeal affirmed. The employer’s petition to compel arbitration relied on Brodke’s allegations of a contract containing an arbitration provision, but the employer contested the existence of any agreement. The Code of Civil Procedure section 1281.2 required the party moving to compel arbitration to “allege[] the existence of a written agreement to arbitrate….” Noting that the employer did not assert that the contract was void ab initio, the court concluded that the employer did not meet its pleading burden under section 1281.2.
MO - Trial court erred in declining to compel arbitration.
Paetzold v. American Sterling
(Missouri Ct App 03/04/2008)
http://www.lawmemo.com/docs/mo/paetzold.htm
Paetzold sued the employer, asserting claims for breach of contract and fraudulent misrepresentation. The trial court denied the employer's motion to compel arbitration. The court reversed, concluding that 1) the Federal Arbitration Act (FAA) applied to the parties' arbitration agreement; and 2) the claims fell within the scope of the arbitration agreement.
*** Arbitration - Collective Bargaining Agreements ***
IA - Deputies could challenge discharge only through appeal to civil service commissions, not through arbitration provisions of CBA.
Kucera v. Baldazo (Iowa
02/29/2008)
http://www.lawmemo.com/docs/ia/kucera.pdf
The issue on appeal was whether a deputy county sheriff holding a classified civil service position may challenge his discharge under the grievance and arbitration provisions of the collective bargaining agreement (CBA), or only through an appeal to the employer's civil service commission. The trial court found relief may be granted only by the civil service commission. The Iowa Supreme Court affirmed. The court agreed with the trial court that Iowa Code chapter 314A constituted the exclusive remedy for deputies in civil service positions and that section 341A.12 provided the civil service commissions as the exclusive remedy.
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