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Arbitration Law Memo January 2009
by Ross Runkel at LawMemo
| Arbitration Law Memo - January
2009 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” was not 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. 3rd – Plaintiffs weren’t obligated under FAA to arbitrate their claims, even though co-plaintiffs were.Mendez
v. Puerto Rican International (3rd Cir 01/26/2009) Mendez and almost fifty co-workers sued the employer, asserting what was described in the opinion as “employment discrimination and retaliation” claims. The employer moved to compel arbitration as to all employees, based on written arbitration agreements between the employer and eight of them. The trial court granted the motion with respect to those eight, but denied the motion with respect to the rest. The 3rd Circuit affirmed. The court concluded that Section 3 of the Federal Arbitration Act (FAA) “was not intended to mandate curtailment of the litigation rights of anyone who has not agreed to arbitrate any of the issues before the court.” The court observed that, under a contrary approach, Section 3 would impose “a mandatory stay on a party’s right to litigate a claim it is free to litigate depending on the fortuity of whether there happens to be other parties to the suit who have agreed to arbitrate a different claim, whether it be related or unrelated.” The court noted that support for its approach can be found in decisions rendered in the 2nd, 6th, 7th, and 10th Circuits. The court also noted that the 5th Circuit has adopted a contrary approach. DC - Employee failed to exhaust elected remedy for wrongful discharge.Johnson
v. District of Columbia (DC Cir 12/23/2008) Johnson sued the employer for wrongful discharge and denial of due process in violation of the Fifth Amendment to the United States Constitution. The trial court granted the employer's motion to dismiss. The DC Circuit affirmed. Johnson initiated a grievance under her collective bargaining agreement (CBA), but the matter was placed "on hold." Two years later Johnson filed this action, arguing it was futile to pursue arbitration or appeal to the District Public Employee Relations Board (PERB). The court rejected that argument. The court found that it was not futile to seek a remedy from the PERB, where the PERB had authority to determine whether the failure to arbitrate under a CBA was an unfair labor practice and to fashion a remedy. The court concluded that Johnson failed to exhaust the remedy she elected (the CBA grievance procedure) - which became her exclusive remedy. *** Arbitration - Collective Bargaining Agreements ***WA - Arbitrator exceeded his authority under last chance agreement.City
of Yakima v. Yakima Police Assoc (Washington Ct App 01/08/2009) The trial court vacated an arbitration award ordering reinstatement of a discharged employee. The Washington Court of Appeals affirmed. The issue on appeal was whether the arbitrator exceeded his authority under the last chance agreement (LCA), which limited the employee's right to grieve/appeal the employer's determination to the issue that he did not comply with the terms and conditions of the LCA. The court stated that the arbitrator went beyond the agreement and tried to determine whether the discharge was justified, and, in doing so, the arbitrator exceeded his authority. NY - Arbitrator exceeded his authority by finding public employee guilty of assault but reducing his penalty from discharge to reinstatement without back pay.New
York City Transit v. Transport Workers (New York App Div 12/30/2008) A transit authority employee was discharged for allegedly assaulting a customer. An arbitrator determined that the employee had committed the assault, but reduced the penalty to reinstatement without back pay. The employer commenced proceedings pursuant to CPLR article 75, seeking to vacate the arbitrator’s reduction in penalty. The trial court reinstated the original penalty of discharge. The court affirmed, concluding that the arbitrator exceeded his authority in reducing the penalty. DC - Probationary employee was not properly discharged during her probationary period.USPS v. American Postal Workers (DC
Cir 01/23/2009) The trial court vacated an arbitration award reinstating an employee. The DC Circuit reversed. The arbitrator found that the probationary employee did not receive proper notice of separation, as required by the United States Postal Service (USPS) employee and labor relations manual (ELM), during her probationary period. The court held that the arbitrator's decision drew its essence from the parties' collective bargaining agreement (CBA). The court found that the arbitrator properly determined whether the employee was discharged during her probationary period. CA - "Make whole" award remanded to arbitrator for resolution.Mossman v. City of Oakdale
(California Ct App 01/14/2009) The employer appealed the trial court's order denying the employer's motion to vacate an arbitration award favorable to the employee. The California Court of Appeal reversed. The issue on appeal was whether the arbitrator's award was enforceable where the arbitrator concluded that the employer violated its own rules regarding seniority bumping rights and awarded the employee be made whole. The court stated that the award contemplated, at the very least, reinstatement of the employee to one of the positions that had been vacant at the time she lost her position due to budget cuts and the payment of lost wages and other lost benefits attributable to the employer's conduct. The court agreed that the award as written could not be enforced and remanded to the trial court with instructions to remand to the original arbitrator for resolution of the make whole remedy. MA - Arbitrator's award of back wages stemming from concessions during financial crisis upheld.City of Lynn v. Lynn Police Assoc
(Massachusetts Ct App 01/09/2009) The trial court confirmed an arbitrator's award requiring the employer to pay certain back wages stemming from a 1985 bailout statute of the employer and a 2004 financial emergency resulting in a memorandum of understanding (MOU). The Massachusetts Court of Appeals affirmed. The court concluded that the bailout statutory language did not provide a defense to the union's claim for back wages under the MOU and that statutory prohibitions on payment were no bar to an award of damages for breach of contract. 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 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. 9th – Complete preemption doctrine doesn’t apply to Railway Labor Act.Moore-Thomas
v. Alaska Airlines (9th Cir 01/27/2009) Moore sued the employer/airline in a class action in state court, asserting a state statutory claim for failure to timely pay wages upon termination of employment. The employer removed the case to federal court, whether it was dismissed on the basis that the claim was preempted by the Railway Labor Act (RLA). The 9th Circuit reversed. The trial court determined that the RLA completely preempted Moore’s action because resolution of her claim required interpretation of the parties’ collective bargaining agreement (CBA). The court concluded that was error, and held that the complete preemption doctrine does not apply to the RLA. The court agreed with the 2nd Circuit that the United States Supreme Court’s decision in Beneficial National Bank v. Anderson, 539 US 1 (2003) clarified that complete preemption does not apply to the RLA. The court noted that there has been conflicting precedent on this issue in the 9th Circuit, and clarified “to the extent this court’s prior decision in Grote v. Trans World Airlines, Inc., 905 F.2d 1307 (9th Cir 1990), ruled that the RLA is subject to complete pre-emption, that holding is clearly irreconcilable with Beneficial National Bank, and is effectively overruled.” 5th - Trial court required to defer to SBA decision under RLA.Continental Airlines v. Air Line
Pilots Assoc (5th Cir 01/13/2009) McWhirter, a member of the Air Line Pilots Association (ALPA), refused to take a no-notice alcohol test. ALPA appealed the trial court's reversal of a reinstatement order of the System Board of Adjustment (SBA). The 5th Circuit reversed the trial court. ALPA argued that the trial court failed to defer to the SBA decision as required by the Railway Labor Act (RLA). The court found that the SBA's decision that considered McWhirter's non-medical excuse for refusing to be tested drew its essence from the parties agreement and that the SBA had authority to order reinstatement.
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Employment Law Editor: Ross Runkel,
Professor of Law Emeritus.
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