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Arbitration Law Memo December 2008
by Ross Runkel at LawMemo
| Arbitration Law Memo - December 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 ***6th – “Manifest disregard of the law” didn’t provide a basis for modification of arbitration award.Grain
v. Trinity Health (6th Cir 12/23/2008) Grain sued his former employer, asserting claims for race discrimination under 42 USC Section 1981. The trial court ordered the parties to arbitration, where Grain prevailed and was awarded substantial damages. He moved for confirmation of the award as to liability, but sought modification as to damages and attorney fees. The trial court confirmed the award in total. The 6th Circuit affirmed. 9 USC Section 11 of the Federal Arbitration Act (FAA) provides various bases for modification of arbitration awards. The court rejected Grain’s attempt to characterize the arbitrator’s damages award as “an evident material miscalculation of figures” meriting modification under Section 11. The court applied the 4th Circuit’s definition of “evident material miscalculation of figures” as a “mathematical error appear[ing] on the face of the award” and dismissed Grain’s attempt as an argument on the merits. Similarly, the court rejected Grain’s attempt to characterize purported error in the arbitrator’s attorney fee award as an ‘imperfect[ion] in matter of form not affecting the merits of the controversy” under Section 11. More significantly, the court rejected Grain’s attempt to modify the award on the basis that it arose from a “manifest disregard of the law.” The court reasoned, “[w]e have used the ‘manifest disregard’ standard only to vacate arbitration awards, not to modify them.” The court noted that it previously held, in NCR Corp. v. Sac.-Co., Inc., 43 F3d 1076 (6th Cir 1995), that “[a] court’s power to modify an arbitration award is confined to the grounds specified in [FAA] Section 11.” The court further noted that the grounds specified in Section 11 do not include “manifest disregard of the law.” The court clarified that NCR remains the law of the 6th Circuit, and rejected Grain’s argument to the contrary. AR - FAA applied rather than state arbitration law which excluded torts and employment disputes (5-3).Terminix
v. Trivitt (Arkansas Ct App 12/10/2008) Trivitt sued the employer for defamation and outrage. The trial court denied the employer's motion to compel arbitration. The Arkansas Court of Appeals reversed. Trivitt was discharged for allegedly stealing money from the employer. The employment agreement contained provisions to arbitrate any and all disputes to the fullest extent provided by law and to construe the agreement in accordance with the Federal Arbitration Act (FAA). Trivitt argued that the Arkansas Uniform Arbitration Act (AUAA) applied, which excluded tort matters and employer-employee disputes. The majority concluded that the FAA was controlling because the parties chose it and there was a connection to interstate commerce. The DISSENT argued that state law unequivocally declared that torts and employment disputes were not subject to arbitration and that publication of defamatory statements did not meet the FAA requirement for interstate commerce. 1st - Employer’s arbitration agreement was enforceable.Pelliter
v. Yellow Transportation (1st Cir 12/10/2008) Pelliter
sued the employer, asserting state and federal claims for age
discrimination, gender discrimination, and retaliation.
The trial court granted the employer’s motion to compel arbitration
(via motion for summary judgment). The
1st Circuit affirmed, concluding that the employer’s arbitration agreement
was enforceable. The court rejected Pelliter's argument that a merger clause
in his employment application excluded consideration of a separate
arbitration agreement. OH – Employer’s arbitration agreement was not unconscionable.Mattox v. Dillard's (Ohio Ct App
12/11/2008) Mattox sued the employer, asserting state law claims for wrongful discharge in violation of public policy and race discrimination. The trial court granted the employer’s motion to compel arbitration. The court affirmed, rejecting Mattox’s argument that the employer’s arbitration agreement was unconscionable. TX – Securities employee was obligated under Form U-4 to arbitrate common law claim against employer.In
re Stanford Group (Texas Ct App 12/09/2008) A financial adviser sued his employer, asserting what was purported to be a claim for violation of the Texas Labor Code. The employer moved to compel arbitration pursuant to a Uniform Application for Securities Industry Registration or Transfer (Form U-4), which is used to register securities professionals with various securities exchanges and organizations. The trial court denied the employer’s motion, so the employer (among other things) petitioned for writ of mandamus. The court granted the writ. The court concluded that the employee’s claim constituted a common law claim for wrongful discharge in violation of public policy, and was thus not exempt from the scope of Form U-4’s arbitration provision as a statutory employment claim under National Association of Securities Dealers (NASD) Rule 13201. 4th – Language of arbitration agreement was sufficient to authorize trial court to enter judgment confirming arbitration award.Qorvis
Communications v. Wilson (4th Cir 12/03/2008) Wilson appealed the trial court’s judgment confirming an arbitration award rendered in the employer’s favor on its claims for violation of Wilson’s employment agreement. The 4th Circuit affirmed. Wilson’s principal argument was that the trial court lacked authority under the Federal Arbitration Act (FAA) to confirm the award through entry of judgment. The court rejected that argument. The FAA authorizes a court to enter judgment on an arbitration award “[i]f the parties in the agreement have agreed that a judgment of the court shall be entered upon the award.” 9 USC Section 9. The court noted that no “magic language” is required to manifest such an agreement, and concluded that the language of the agreement was sufficient to satisfy Section 9. TX – Trial court should have compelled arbitration, based on application of the doctrine of equitable estoppel.In
re Polymerica (Texas Ct App 11/25/2008) Angela Soltero sued the employer, asserting state law claims for sexual harassment and retaliation. The trial court denied the employer’s motion to compel arbitration, so the employer petitioned for writ of mandamus. The court granted the writ in part, concluding that the trial court should have compelled arbitration based on the doctrine of equitable estoppel. The court noted, however, that Soltero was obligated to arbitrate only those claims that arose while the arbitration agreements at issue were in effect. 2nd - Section 7 of FAA did not authorize pre-hearing discovery from non-parties.Life
Receivables v. Syndicate (2nd Cir 11/25/2008) In a non-employment law case, the 2nd Circuit held that section 7 of the Federal Arbitration Act, 9 USC Section 7, did not authorize an arbitrator to compel pre-hearing discovery from non-parties to the arbitration. Accord, 3rd Circuit; contra, 8th Circuit and 4th Circuit. *** Arbitration - Collective Bargaining Agreements ***9th - Union had standing to arbitrate reduced retirement benefits without consent of retirees.IBEW
v. Citizens Telecommunications (9th Cir 12/05/2008) The union sought an order compelling the employer to arbitrate the union's claim that the employer unilaterally reduced retirement benefits for retired employees. The trial court granted the union's motion to compel arbitration under the terms of the collective bargaining agreement (CBA). The 9th Circuit affirmed. The employer argued that the union lacked standing to represent the interests of former employees who were no longer members of the union without the consent of the retired employees, which was the opinion of the 5th, 6th, and 7th Circuits. The court stated that the employer's argument ignored the fact that (1) reductions in retiree benefits may also affect current employees who were undisputedly still represented by the union under an extant CBA, and (2) it was based on unsound assumptions about the preclusive effect of arbitration involving retiree benefits. Noting that retirement benefits of active workers were part and parcel of their overall compensation, the court concluded that the union sought an arbitration order, at least in part, on behalf of current employees. While the court could not definitively state that there were no circumstances in which a union's arbitration would have some preclusive effect on a subsequent suit by a former member no longer represented by the union, the result in Meza v. Gen. Battery Corp., 908 F2d 1262, 1273 (5th Cir 1990) (no preclusion) suggested that such preclusion would occur rarely, if at all; the court concluded it seemed extremely unlikely that a court would apply claim preclusion against an individual retiree based on an arbitration to which the retiree was not a party, nor represented by a party. The court opined that the fact the employer may be exposed to allegedly duplicative proceedings was a result of its own bargaining. MN – Employee’s state law claims were preempted by Section 301 of the Labor Management Relations Act.Karnewie-Tuah
v. Frazier (Minnesota Ct App 12/02/2008) Karnewie-Tuah sued the employer, asserting state law claims for tortious interference with contractual relations and defamation. The trial court dismissed, based on its determination that the claims were preempted by Section 301 of the Labor Management Relations Act (LMRA). The court affirmed, concluding that 1) an employee’s state law claim for tortious interference with contractual relations against her supervisor is preempted by Section 301 when the contract at issue is a collective bargaining agreement (CBA); and 2) Section 301 preempts an employee’s state law claim for defamation against her supervisor, when the statements at issue are made in the course of a disciplinary or grievance arbitration procedure established by a CBA. 6th - Six month time limit to compel arbitration began with unequivocal refusal to arbitrate rather than rejection of formal request.Warehouse Union v. Kroger (6th Cir
12/23/2008) The union sought to compel Kroger's participation in an arbitration pursuant to an arbitration agreement with another company which leased the warehouse space from Kroger and hired former Kroger warehouse workers. The trial court granted Kroger's motion for summary judgment. The 6th Circuit affirmed. The court focused on Kroger's letter of April 24, 2006, which contained an unequivocal refusal to arbitrate, rather than a later rejection of a union's formal request. The court agreed with the trial court that the complaint was filed outside the applicable six month statute of limitations. RI – Union’s appeal of trial court’s order vacating grievance arbitration award was moot.City of Cranston v. Rhode Island
Laborers' (Rhode Island 12/08/2008) The union appealed the trial court’s order vacating a grievance arbitration award rendered in the union’s favor. The dispute arose from the public employer’s alleged violation of a job security clause in the parties’ collective bargaining agreement (CBA). The court dismissed the appeal as moot, since union members experienced no job losses during the term of the job security clause and that clause had already expired. The court reasoned that “the parties no longer have a continuing stake in the outcome. As it stands today, the case is presented to us in the form of a hypothetical question that may or may not recur.” DC - Arbitration award was unambiguous.American Postal Workers v. USPS (DC
Cir 12/23/2008) The union sued the employer, seeking to compel enforcement of an arbitrator's award. The trial court granted the employer's motion for summary judgment. The DC Circuit reversed. The court found that the arbitrator's discussion amply supported the award’s finding that the collective bargaining agreement (CBA) would be violated if the disputed work were excluded from the bargaining unit. The court remanded to the trial court, for a determination whether that finding was enforceable as to certain issues relating to the transfer of duties to the bargaining unit.
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Employment Law Editor: Ross Runkel,
Professor of Law Emeritus.
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