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Arbitrator relied on document "extraneous" to CBA
November 28, 2005 by Ross Runkel at LawMemo
Can an arbitrator's award "draw its essence from the collective bargaining agreement" when she relies on a document that is neither contained in the collective agreement nor referred to in the collective agreement?
Yes, says the Ohio Court of Appeals. Cincinnati v. Queen City Lodge (Ohio Ct App 11/23/2005).
The City discharged a police officer, who grieved the matter to arbitration under the collective bargaining agreement. The discharge was for the cumulative effect of six charges against the officer. The arbitrator dismissed three charges and sustained three others, and issued an award reducing the discharge to a 40 hours suspension.
The City sought to have the award vacated on the ground that the arbitrator relied on "The Matrix," a table of discipline contained in the departmental Rules Manual. The trial court found for the City, but the Court of Appeals reversed - upholding the arbitrator's award.
The court held that it was proper for the arbitrator to use the disciplinary matrix in order to bring the officer's discipline into line with the discipline that the City imposed on other officers involved in the same incident.
The court noted that the "no-extraneous-source rule" would lead to ludicrous results in disciplinary-arbitration cases because an arbitrator could never compare the severity of discipline in similar offenses.
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Add to Google button
November 25, 2005 by Ross Runkel at LawMemo
OK, I'm quite a Google fan.
- Look to the left margin. See the Add to Google button.
- Click it and you're on your way to two different ways to keep up-to-date with Ross' Arbitration Blog.
- I use it to keep up-to-date with other sites, and it works quite well.
- Oh, yes, free is a very good price.
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Buckeye Check Cashing v. Cardegna: void vs. voidable contracts
November 23, 2005 by Ross Runkel at LawMemo
Feb 21, 2006 update: Case decided in favor of Buckeye.
The US Supreme Court hears oral argument on November 29 on the question of who should decide whether a contract is void under state law - an arbitrator or a court. Buckeye Check Cashing v. Cardegna.
John Cardegna borrowed money from Buckeye Check Cashing and now claims the deal was usurious under Florida law and that the whole "contract" was void from the very beginning. Cardegna sued, and Buckeye moved to send the case to arbitration as provided in the loan agreement. The trial court denied the motion, saying that the issue of whether the whole contract is void (not merely voidable) is an issue for the court to decide. The Florida Supreme Court agreed. Cardegna v. Buckeye Check Cashing (Florida 2005).
It all goes back to Prima Paint Corp v. Flood & Conklin Mfg (US Supreme Court 1967), where a contract contained an arbitration clause and one party claimed the underlying contract was voidable because it was procured by fraud. The Supreme Court said that unless there is a claim that the arbitration agreement itself was procured by fraud, a court should send to an arbitrator the question of whether the underlying contract is voidable.
- Cardegna's argument: Prima Paint applies only when the claim is that the underlying contract is voidable. Here the entire "contract" was void, so there was no valid agreement to arbitrate. Alternatively, the FAA language used in Prima Paint applies in federal courts, not state courts, so the Florida courts were free to make the decision they made.
- Buckeye's arguments: Follow the Federal Arbitration Act (FAA). Prima Paint says that the FAA requires that the issue of the validity of the underlying contract must be decided by an arbitrator.
Briefs supporting Buckeye
- Petitioner Buckeye Check Cashing
- Petitioner Buckeye Check Cashing - Reply
- Florida Bankers Assoc and American Bankers Assoc
- Chamber of Commerce et al.
- Community Financial Svcs Assoc
- Financial Service Centers et al.
Briefs supporting Cardegna
Brief supporting No Party
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Reinstatement of nurse did not violate public policy
November 22, 2005 by Ross Runkel at LawMemo
A hospital fired a nurse, charging that she diverted drugs. The union grieved. The arbitrator ruled that the nurse did not do what the hospital said, and reinstated the nurse with back pay.
The hospital did not like the decision and tried unsuccessfully to get a federal district court to overturn it. The 1st Circuit affirmed, refusing to throw out the arbitration award. The Mercy Hospital v. Massachusetts Nurses Assoc (1st Cir 11/21/2005).
The hospital's argument was that there was a violation of public policy.
The court pointed out that the arbitrator had exonerated the nurse. The arbitrator's findings of fact were that she didn't do it. Therefore, an award reinstating her to work could not violate public policy.
My view: I think the 1st Circuit was actually being kind to the hospital by devoting 18 pages to the decision, which made it appear that the hospital's arguments had some merit.
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Arbitration subpoena to non-party enforced
November 22, 2005 by Ross Runkel at LawMemo
The Second Circuit has not decided whether it will enforce an arbitration subpoena to a non-party compelling pre-hearing depositions or pre-hearing document discovery.
In Stolt-Nielsen SA v. Celanese AG (2nd Cir 11/21/2005) the arbitration panel issued subpoenas to compel attendance at a hearing that was scheduled in advance of a "merits hearing." The party opposing the subpoenas argued that this was a "thinly disguised effort to obtain pre-hearing discovery, and that Federal Arbitration Act (FAA) Section 7 does not authorize that.
Rather than decide whether FAA Section 7 authorizes non-party subpoenas for the purpose of discovery (rather than for compelling attendance at an arbitration hearing), the court decided that these subpoenas were actually not discovery subpoenas.
- There was no order to appear for a deposition.
- Testimony was taken before the arbitrators, who made rulings on admissibility and privilege.
- The testimony became part of the arbitration record.
- The fact that the hearing was preliminary to later hearings did not turn this into a discovery device.
My view: FAA Section 7 authorizes arbitrators to "summon in writing any person to attend before them ...." That's exactly what happened. The attempt to characterize the subpoenas as being for the purpose of discovery really misses the point. The point is that the facts fit what the statute says, and the statute does not focus on the purpose of the subpoenas.
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Appeal from arbitration violated rules and was frivolous.
November 22, 2005 by Ross Runkel at LawMemo
Following an arbitration award, the loser failed to get a trial court to set aside the award, and then appealed from that decision. In a blistering opinion (Evans v. Centerstone (California Ct App 11/21/2005)), the California Court of Appeal has awarded substantial financial sanctions for
- Violations of court rules of appellate procedure. "Plaintiffs' briefs are cornucopias of such violations." One example: "Plaintiffs presented 'facts' not supported by or contrary to the record and failed to include other relevant facts."
- Frivolous appeal. "Courts have repeatedly instructed litigants that challenges to the arbitrator's rulings on discovery, admission of evidence, reasoning, and conduct of the proceedings do not lie. [citations omitted.] Plaintiffs' crude attempt to characterize their claims so they would fall within acceptable bases for an appeal is an artifice we condemn. Further, most of plaintiffs' claims are patently disingenuous."
Now for the sanctions. The trial court was instructed to award attorney fees incurred in defending the appeal and in making the motion for sanctions. An equal amount must be awarded as sanctions, jointly and severally against plaintiffs and their lawyer.
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End run around state court
November 16, 2005 by Ross Runkel at LawMemo
Larry Wood sued his employer in West Virginia state court alleging state law claims of sex discrimination and wage law violations. There was an arbitration clause in his employment agreement, so you might expect the employer to file a motion to compel arbitration.
Not so.
The employer preemptively filed an action against Wood in federal district court seeking
- to compel arbitration of those claims under the Federal Arbitration Act (FAA), 9 U.S.C. § 4, and
- to enter a prohibition against Wood from prosecuting the state action against AGLA.
The district court granted that relief and entered judgment against Wood. And the 4th Circuit affirmed. American General Life v. Wood (4th Circuit 11/14/2005).
My view:
- Quite an interesting tactic.
- What? They don't trust the state courts?
- Why should federal court resources be used this way when an action is already pending in state court?
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Want to change California's arbitrator ethics rules?
November 13, 2005 by Ross Runkel at LawMemo
Now is the time to sit down and think hard about proposed changes to California's Ethics Standards for Neutral Arbitrators in Contractual Arbitration.
The California Judicial Council is soliciting comments on any and all aspects of the Standards.
The staff has recommended one change - exempting arbitrators serving in proceedings governed by rules of securities industry self-regulating bodies and approved by the Securities Exchange Commission. Recent cases in the Ninth Circuit and the California Supreme Court have held that the California Rules are preempted in such cases, so a rule change by California will simply spell out the current reality.
However, there just might be one or two other provisions that need to be addressed.
Deadline for comments: Friday, January 20, 2006.
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Arbitration competition
November 11, 2005 by Ross Runkel at LawMemo
Great idea. A national arbitration competition for law students.
This law student competition will allow students to take on the role of advocate for client - taking the case all the way through the hearing.
The finals are on November 18-20, 2005.
More details at National Arbitration Forum Blog.
Sponsors: National Arbitration Forum, American Bar Association Law Student Division, and William Mitchell College of Law.
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AAA arbitration awards will be online
November 03, 2005 by Ross Runkel at LawMemo
LexisNexis has announced that it will be providing "a new electronic collection of searchable Labor Arbitration Awards exclusively via the LexisNexis® research services."
Meanwhile, my view is that arbitration awards and arbitrator biographies should be available without charge to labor advocates and the general public.
National Arbitration Center provides the following without charge to the viewer:
- Arbitration awards - searchable.
- Arbitrator biographies - searchable
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