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Argument audio: Who decides unconscionability?
September 29, 2005 by Ross Runkel at LawMemo
Listen to the oral argument of the 9th Circuit (en banc) in Nagrampa v. MailCoups, Inc.
The 9th Circuit reheard en banc (11 judges!) on 09/27/2005 the issue of whether it was for an arbitrator, rather than a court, to decide whether a contact is unconscionable. Nagrampa v. MailCoups, Inc (9th Cir 03/21/2005) was the original 3-judge panel decision holding that the arbitrator decides this question.
In Nagrampa there was a francise agreement which contained an arbitration agreement within it. Nagrampa claimed that both the arbitration agreement and the whole agreement were unconscionable. The 9th Circuit panel applied Prima Paint v. Flood & Conklin, 388 US 395 (1967), and made its own decision on the unconsionability of the arbitration agreement, but held that it was for the arbitrator to decide whether the contract as a whole was unconscionable.
That decision was withdrawn pending decision of the en banc court.
Litigating waives right to arbitrate
September 26, 2005 by Ross Runkel at LawMemo
If an attorney doesn't know there was an arbitration agreement, can participating in litigation waive the right to arbitrate? Yes, says the Florida Court of Appeal. Mora v. Abraham Chevrolet (Florida Ct App 09/21/2005).
Facts: A typical employer-employee arbitration agreement. When the employer discharged the employee, he filed a whistleblower suit claiming a violation of Florida statute. The employer's attorney didn't know about the arbitration agreement. The employer filed an answer with ten affirmative defenses (not mentioning a right to arbitrate) and then engaged in discovery. Two months later the employer moved to compel arbitration.
The trial court thought that there was no intentional waiver of the right to arbitrate because the employer's counsel learned of the arbitration agreement only after serving the answer and defenses, so that court ordered arbitration.
The Florida Court of Appeal reversed. The employer signed the arbitration agreement, so it was "legally charged with knowledge of its terms." It did not matter that the employer's lawyer did not know about the agreement.
My view: Sounds right. It's the party (the employer here) that does the waiving, so if the party does not tell the lawyer about the arbitration agreement, then that's the employer's problem. You can't excuse a party's conduct simply because its lawyer wasn't told.
Cert petition: Goodrich v. Machinists
September 07, 2005 by Ross Runkel at LawMemo
A petition for certiorari was filed last week, raising two fascinating questions about (1) appealing court orders that enforce an arbitration clause in a collective bargaining agreement and (2) a union's ability to sue on behalf of non-employee retirees.
The petition states two "Questions Presented"
1. In Goodall-Sanford, Inc. v. United Textile Workers, 353 U.S. 550, 551 (1957), this Court held that, “A decree under § 301(a) ordering enforcement of an arbitration provision in a collective bargaining agreement is . . . a ‘final decision’ within the meaning of 28 U.S.C. § 1291.”The first question presented is:
In light of this Court’s decision in Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001), is appellate jurisdiction for the review of an order compelling arbitration in a § 301 action now dependent upon the existence of a “final decision” as that term has been interpreted with respect to the Federal Arbitration Act?2. Section 301(b) of the Labor Management Relations Act provides that, “Any labor organization which represents employees . . . may sue . . . as an entity [on] behalf of the employees whom it represents.”
The second question presented is:
Does a union have standing to sue a company in a § 301 action on behalf of a group made up entirely of non-employees?
The petition was filed September 2 by David Nagle of LeClair Ryan, the same lawyer that won one of the most important arbitration cases in the US Supreme Court - Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001).
My view:
These are important issues, worthy of the Supreme Court's attention.
- Historically, courts have treated collective bargaining arbitrations differently from individual contract arbitrations when deciding whether a court order compelling arbitration is a "final order." That's because collective bargaining arbitrations fall under Section 301 of the Labor Management Relations Act and individual contract arbitrations fall under the Federal Arbitration Act. The petition in Goodrich claims that the 5th Circuit has blurred that distinction. I think so too. The question, then, is whether the historical distinction should be maintained or eliminated.
- Section 301 allows unions to sue in federal court on behalf of "employees it represents." The union in the Goodrich case sued on behalf of retirees. By definition, they are not employees that the union represents for purposes of collective bargaining. However, these retirees all signed documents consenting to have the union represent them in the litigation. The 5th Circuit allowed the union to sue. The question, then, is whether to follow the text of Section 301 or to allow the documents signed by non-employees to override Section 301.
Untimely grievances not arbitrable
September 04, 2005 by Ross Runkel at LawMemo
The facts: The collective bargaining agreement expired in December 1999, the union discovered the facts giving rise to the grievances in February 2000, and the union waited until September 2001 to file the grievances.
Black letter law:
- If a company claims a union's grievance is filed too late, the court's job is to send the case to the arbitrator, and it's for the arbitrator to decide the question of untimeliness. Howsam v. Dean Witter Reynolds, 537 US 79 (2002).
- After a collective agreement expires, grievances that arose during the term of the agreement are still arbitrable. Nolde Bros v. Local No. 358, 430 US 243 (1977).
How about a giant exception? Read R.J. Corman Derailment Svcs v. Operating Engineers (7th Cir 09/02/2005).
The 7th Circuit's reasoning:
- Nolde is based on a presumption of arbitrability.
- The presumption of arbitrability does not last forever.
- The presumption lasts "a reasonable time," and 18 months is way too long.
- This is not contrary to Howsam, where the issue was untimeliness, because here the issue was "how long the expired agreement to arbitrate survived."
My view: Wrong. This is a classic situation in which it is the collective bargaining agreement that should provide the answer, and it is for an arbitrator to say what the agreement means. I assume an arbitrator would rule that an 18-month delay is too long, but that is a decision for an arbitrator rather than a court.
