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#3 of 5 - Kristian v. Comcast Corp - limits on damages in arbitration
April 29, 2006 by Ross Runkel at LawMemo

Employment arbitration agreements that put a limit on awardable damages could be affected by Kristian v. Comcast Corp (1st Cir 04/20/2006). This is #3 in a series of 5 on the Kristian case.

Background: Kristian was an antitrust case brought by cable TV subscribers against their cable provider. The provider moved to compel arbitration as required in the subscriber-provider contract. The 1st Circuit held that arbitration was required.

Ban on treble damages: The contract specified that an arbitrator could not award treble damages.

Holding: The court held that the contract did not bar federal statutory treble damages, and that an arbitrator should decide the effect on state statutory treble damages.

Reasoning: The court separately analyzed the no-treble-damages clause as it applied to plaintiffs' state law claim and federal law claim. This was because the state statute said treble damages "may" be awarded, and the federal statute said treble damages "shall" be awarded.

The federal claim:

• First, the federal statute uses the word "shall." Thus there is a clear conflict between the contract's damages limitation and the statute. There is no ambiguity for an arbitrator to deal with, so this is a question of "arbitrability" for the court to decide rather than a question of "procedure" for the arbitrator to decide.
• Second, the federal statute's treble damages provision cannot be waived.
• Third, the contract's savings clause provided that claimants were entitled to seek remedies that could not be waived. Therefore, as the court interpreted the contract, the contract actually allowed treble damages. Thus, the contract's damages limitation did not apply to the federal claim.

The state claim:

• First, the state statute says treble damages "may" be awarded.
• Second, it is not clear whether waiver of treble damages is allowed under state (Massachusetts) law. In other words, the state law is "ambiguous" on this point.
• Third, because there is "an underlying legal ambiguity," the arbitrator must decide the underlying legal question.

Applied to employment cases: Treble damages are rarely available in employment cases. However, some statutes provide for punitive damages or "liquidated" damages. One would think that the court would use the same analysis for these statutes.

My view: The court seems to take the position that it is for arbitrators to interpret "ambiguous" things - both contractual and legal. And it is for courts to step in when the contract or the law is "plain" and non-ambiguous. I think this is unworkable. Every lawyer knows that "ambiguity" is in the eyes of the beholder. It will be better in the long run to have a bright-line rule that determines whether an issue is to be decided by a court or an arbitrator. "Ambiguity" is not a bright-line rule, and will only lead to more litigation.

I propose this rule: The arbitrator must have the authority to award whatever remedies a court could award.

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