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Arbitration Law Memo August 2008
by Ross Runkel at LawMemo
| Arbitration Law Memo - August 2008 LawMemo First in Employment Law Arbitrator biographies and awards: National Arbitration Center |
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Arbitration - Individual Arbitration Agreements ***
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Arbitration - Collective Bargaining Agreements *** *** Arbitration - Individual Arbitration Agreements ***CA - Court allows review of arbitrator's legal reasoning.Cable
Connections, Inc. v. DirecTV, Inc.
(California 08/25/2008) The California Supreme Court has ruled that parties to an arbitration agreement may obtain court review of the arbitrators' award on the ground that they committed legal error. The arbitration agreement provided: "The arbitrator shall not have the power to commit errors of law or legal reasoning, and the award may be vacated or corrected on appeal to a court of competent jurisdiction for any such error." The California recognized that the US Supreme Court recently held that such review is not available under the Federal Arbitration Act, but held that it is available under California's Arbitration Act. California's statute allows a court to vacate an award if "the arbitrators exceeded their powers." Therefore, committing legal error was acting in excess of the arbitrator's power, and that opens up review under the California statute. 3rd - Employee's inability to understand English was immaterial as to whether he assented to arbitration agreement.Morales v. Sun Constructers (3rd
Cir 08/28/2008) Morales sued the employer, asserting various claims arising from his discharge from employment. The employer moved to compel arbitration, but the trial court denied the motion. The 3rd Circuit reversed. The trial court determined that Morales didn't assent to the written arbitration agreement and thus declined to enforce it, based on its finding that the agreement was in English and Morales (who spoke only Spanish) didn't understand it. The court concluded that the trial court erred. The court cited Upton v. Tribilcock, 91 US 45 (1875) for the proposition that "[i]t will not do for a man to enter into a contract, and, when called upon to respond to its obligations, to say that he did not read it when he signed it, or did not know what it contained." The court noted that, under the "objective theory" of contract formation, "what is essential is not assent, but rather what the person to whom a manifestation is made is justified as regarding as assent." The court concluded that, absent a showing of fraud, "the fact that an offeree cannot read, write, speak, or understand the English language is immaterial to whether an English-language agreement the offeree executes is enforceable." 6th - USERRA claims are subject to arbitration.Landis
v. Pinnacle Eye Care (6th Cir 08/11/2008) Landis
sued the employer, asserting (among other things) a claim for violation of
the Uniformed Services Employment and Reemployment Rights Act (USERRA).
The trial court granted the employer's motion to stay the case and
compel arbitration. The 6th
Circuit affirmed, holding that USERRA claims are subject to arbitration.
The court noted that the 5th Circuit has come to the same
conclusion, and cited with approval that circuit's decision in Garrett v.
Circuit City Stores, Inc., 449 F3d 672 (5th Cir 2006).
The court reasoned that 1) nothing in USERRA's statutory language
or legislative history demonstrates a Congressional intent to preclude
arbitration; and 2) there is no inherent conflict between arbitration and
USERRA's underlying structure and purpose. OH - Trial court erred in finding arbitration agreement to be unconscionable without first finding it to be substantively unconscionable.Roe v. Rent-A-Center (Ohio Ct App
08/25/2008) Roe sued the employer, asserting various state law claims. The employer moved to compel arbitration, but the trial court denied the motion on the ground that the employer's arbitration agreement was unconscionable and hence unenforceable. The court reversed, concluding that the trial court 1) failed to determine whether the arbitration agreement was substantively unconscionable; and 2) failed to adequately support its determination that the arbitration agreement was procedurally unconscionable. The court noted that Ohio law requires an arbitration agreement to be both substantively and procedurally unconscionable in order to be unconscionable as a whole. CA - One-year arbitrable limitation period upheld in FEHA claim.Pearson Dental v. Superior Court
(California Ct App 08/21/2008) Turcios sued the employer for violation of the Fair Employment and Housing Act (FEHA) alleging wrongful discharge based on age and other claims. The employer moved to compel arbitration which the trial court granted. The arbitrator granted the employer's motion for summary judgment on the ground that arbitration was not requested within one year. The trial court granted Turcios's motion to vacate the arbitration award. The California Court of Appeal reversed. The issue on appeal was whether the one year limitation period in the arbitration agreement violated Turcios's unwaivable FEHA rights to a two year statute of limitations. The court found that the FEHA did not have a true two-year limitation period, but rather a hybrid period for the right to sue letter; that state law did not hold that a shorter arbitral period was per se unenforceable; that 9th Circuit decisions finding that one-year arbitral limitation periods were unenforceable involved continuing violation cases, not discrete acts; that Turcios did not raise the arbitral limitation issue at the motion to compel arbitration stage but at the motion to vacate the arbitration award stage; and that the post-arbitration record demonstrated that the one-year arbitral limitation period was more than adequate for Turcios to vindicate his FEHA rights had he timely submitted to arbitration. In the unusual posture of this case, the court concluded that the trial court erred in finding that the arbitrator, by granting summary judgment to the employer based on the one-year limitation period, exceeded his powers. TX - Arbitrator didn't refuse to hear material evidence.Affiliated Pathologists v. McKee
(Texas Ct App 08/25/2008) The employer appealed the trial court's order confirming an arbitration award rendered in McKee's favor in 2004, and vacating an earlier arbitration award rendered in 1998. Both awards arose from the employer's claim for alleged violation of a non-compete agreement and McKee's counterclaim for alleged breach of an agreement regarding severance pay. The court affirmed, concluding that 1) a motion to vacate the 1998 arbitration award was timely submitted under Tex. Civ. Prac. & Rem. Code Section 171.088(b); and 2) the arbitrator did not refuse to hear material evidence in the 2004 arbitration proceeding. OH - Dismissal of arbitration allowed employee to file discrimination claims in court.Cercone v. Merrill Lynch (Ohio Ct
App 08/21/2008) The employer commenced arbitration before the NASD requiring Cercone to repay a promissory note for a "forgivable loan." Cercone counterclaimed contending he was not obligated to repay because he was not discharged "for cause" and alleging claims for disability discrimination, constructive discharge, retaliation, and other claims. The parties settled and informed NASD to dismiss the case, but were unable to agree on how to structure repayment without tax consequences within the time period to reopen the arbitration proceeding. Cercone sued the employer for disability discrimination, wrongful discharge in violation of public policy, and other claims. The trial court granted the employer's motion to compel arbitration. The Ohio Court of Appeals reversed. Applying a de novo standard of review to interpret the arbitration agreement, the court concluded that discrimination claims under the agreement were specifically exempt from mandatory arbitration and that Cercone did not waive his right to pursue discrimination claims in court by agreeing to an arbitration which was dismissed. The court concluded that dismissal of an arbitration left the parties as they were at the beginning of the process, and they were entitled to begin anew. TX - Trial court was without authority to modify arbitration award.Garza v. Phelps Dodge (Texas Ct
App 08/21/2008) Garza moved to confirm an arbitration award in a suit Garza filed against the employer alleging national origin discrimination. The trial court confirmed the arbitration award by awarding back pay reduced by Garza's interim earnings and dismissed the lawsuit based on res judicata. The Texas Court of Appeals reversed in part and rendered judgment confirming the arbitration award as written. The arbitration award ordered reinstatement after a 30-day leave without pay. Because neither party sought clarification of the award from the arbitrator and neither party sought adjudication of the back pay and offset questions until well after the ninety-day deadline for modification of the award, the trial court was without authority to consider the back pay and offset questions. CA - Trial court lacked discretion to deny arbitration of covered claims, but had discretion to delay its order to arbitrate.RN Solutions v. Catholic
Healthcare (California Ct App 08/15/2008) RN Solution (RNS) contracted to recruit nurses for Catholic Healthcare (CHW). RNS sued CHW alleging a series of interrelated contract, business torts, and personal injury claims. The trial court denied the motion to compel arbitration where the contract contained an arbitration provision. The California Court of Appeal reversed. The court determined that the third party provisions of the Code of Civil Procedure section 1281.2(c) did not apply where all the parties in the lawsuit were bound by the arbitration agreement, but no action or proceeding existed between a party to the arbitration agreement and a third party. Rowe v. Exline, 153 Cal App4th 1276 (2007). The court explained that the mere fact that some claims were arbitrable under the arbitration clause in the contract and the battery-related tort claims were not, did not produce third parties for the purposes of section 1281.2. The court concluded that the trial court lacked discretion under section 1280 et seq. to deny arbitration of causes of action covered by the arbitration clause. The court ordered the trial court to enter an order compelling arbitration of the arbitrable causes of action and to decide pursuant to the third paragraph of section 1281.2(c) whether a determination of the nonarbitrable issues would make the arbitration unnecessary and, if so, whether the arbitration order should be delayed. OR - Appeal of an order denying arbitration must be via interlocutory appeal of that order - not via appeal of a final judgment.Snider v. Production Chemical
(Oregon Ct App 08/13/2008) Snider sued the employer, asserting claims for breach of contract and violation of state wage and hour laws. The employer petitioned to compel arbitration, but the petition was denied by the trial court. The matter proceeded to a jury trial, where Snider prevailed. Judgment was entered in Snider's favor, and the employer appealed. The appeal was timely filed with respect to the final judgment, but not with respect to the order denying the petition to compel arbitration. The court held that pursuant to ORS 36.730 "an appeal from an order denying a petition to compel arbitration ... must be commenced within 30 days after the order is entered in the trial court register." Since the employer's appeal was untimely as to the trial court's order denying the petition to compel arbitration, the court concluded it lacked jurisdiction to consider that issue. The court rejected other issues as unpreserved. NJ - Employee was not equitably estopped to arbitrate violation of stock agreement without arbitration clause where employment agreement had arbitration clause.Angrisani v. Financial Technology
(New Jersey App Div 08/07/2008) Angrisani sued the employer for violation of the employment agreement and other claims and Financial Technology (FT) for violation of the stock agreement. The trial court granted the employer's and FT's motions to compel arbitration. The New Jersey Appellate Division affirmed in part and reversed in part. The primary issue was whether FT could compel arbitration where its agreement did not contain an arbitration clause, but the employer's employment agreement did. FT argued that Angrisani was equitably estopped from refusing to arbitrate his claims against FT, which were intertwined with and dependant upon his employment agreement. The court found that Angrisani did not engage in any course of action that could support a finding of equitable estoppel; he simply entered into two contracts, one of which did not contain an arbitration provision, and when a dispute arose, he asserted claims in a judicial forum as he was permitted to do under the stock agreement. *** Arbitration - Collective Bargaining Agreements ***OH - Arbitrator exceeded her authority when she ignored the parties' stipulation that public employee was afforded a pre-termination hearing.City of Akron v. Civil Service
Personnel Ass'n (Ohio Ct App 08/27/2008) The municipal employer appealed the trial court's judgment confirming a grievance arbitration award rendered in the union's favor. The court reversed, concluding that the arbitrator exceeded her authority when she ignored the parties' stipulation that the employee at issue was afforded a pre-termination hearing. AK - Sovereign immunity waived for prejudgment interest in suits to confirm arbitration awards under CBA.State of Alaska v. ASEA (Alaska
08/22/2008) The issue on appeal was whether the State was protected by sovereign immunity from payment of prejudgment interest on an award made by an arbitrator under a collective bargaining agreement (CBA). The arbitrator's award did not discuss nor award interest on the back pay award. The trial court awarded prejudgment interest . The Alaska Supreme Court affirmed. The State argued that confirmation of an arbitrator's award arose under the Public Employment Relations Act (PERA) for which sovereign immunity was not waived. ASEA argued that confirming an arbitration award was a contract claim where sovereign immunity was waived under Alaska Statute 09.50.250. The court found that confirmation of an arbitrator's award was properly characterized as a contract claim recognized at common law and encompassed by AS 09.50.250 which authorized prejudgment interest. OH - Arbitrator exceeded his authority when he considered untimely grievance.Fairfield
v. AFSCME (Ohio Ct Appeals 08/04/2008) The
municipal employer appealed the trial court's decision confirming a
grievance arbitration award rendered in the union's favor.
The court reversed, concluding that the grievance was untimely
filed under the terms of the collective bargaining agreement, and that the
arbitrator was not authorized to consider the grievance under the
"continuing violation" theory. PA - Arbitration award didn't fail "essence test."NW
School Dist v. Ed Association (Pennsylvania Cmwlth Ct 08/05/2008) The public employer appealed from the trial court's decision confirming a grievance arbitration award rendered in the union's favor. The court affirmed, rejecting the employer's arguments that 1) the award failed to "draw its essence" from the collective bargaining agreement (CBA); 2) the award was contrary to law; and 3) the remedy awarded improperly extended beyond the CBA's expiration date.
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Employment Law Editor: Ross Runkel,
Professor of Law Emeritus.
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