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$2 million award for employee
June 24, 2006 by Ross Runkel at LawMemo
An arbitration panel awarded over two million dollars to an employee who was fired by UBS Financial Services. The case illustrates some trends, according to Professor Richard Bales.
Details at Workplace Prof Blog - Employee Wins Big in Arbitration; Court Restricts Employer's Ability to Claim Arbitral Bias.
The trends according to Bales, followed by my reactions:
- Arbitrators are not necessarily stooges, and often find in favor of employees, and award large damages.
- Reputable arbitration providers such as AAA, NASD, and JAMS/ENDISPUTE work hard to provide neutral arbitrators. As for how "often" they award in favor of employees, this is not a useful observation without looking at the merits of individual cases. (The same is true of cases that are litigated.)
- Employees are increasingly less likely to challenge the enforceability of arbitration agreements.
- Probably true. The grounds for court challenges of arbitration agreements are quite narrow, so why would an employee spend a lot of money on a sure-to-lose challenge?
- Employers are increasingly challenging awards that went in favor of the employee.
- Of course. Employers challenge court decisions in favor of employees, so why not challenge arbitration awards? (This trend should end soon, as employers learn how hard it is to overturn an arbitrator, and as courts begin awarding sanctions for non-meritorious challenges.)
- Most big-win cases are brought by employees who are highly-paid white males in the securities industry .
- Of course. The same is true in court cases. High-paid employees have more money at stake. White males, on average, are more likely to be high-paid.
- "So, even if these cases demonstrate that employees can win in arbitration, they don't necessarily demonstrate that employees who the antidsicrimination laws most seek to protect can win consistently."
- Assuming that the antidiscrimination laws were designed mostly to protect low-paid employees who are not white males, I see no reliable evidence that they do better in court than in arbitration. And, I don't think "win consistently" is a useful benchmark. The overall win-loss statistics always ignore the merits of individual cases.
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Britney Spears arbitration
June 21, 2006 by Ross Runkel at LawMemo
Three former employees of three of Britney Spears' companies will have to arbitrate their wage claims, says a California state court judge.
News reports say the employees were security guards hired to protect Spears and her home.
As is common, the former employees would rather be in court, and the defendant companies would rather be in arbitration. The guard's lawyer is quoted as saying the arbitration will take place in New York rather than California, and he thinks New York law is less favorable to the guards.
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Arbitral immunity? Not for refusing to issue award
June 21, 2006 by Ross Runkel at LawMemo
"If an arbitrator withdraws from an arbitration proceeding for no stated ethical reason following evidence and argument, and offers to continue mediation efforts but refuses to render an arbitration award, does the doctrine of arbitral immunity protect the arbitrator from suit?"
That's how the court phrased the issue in Morgan Phillips v. JAMS/ENDISPUTE (California Ct App 06/20/2006).
The answer, of course, is "No." No immunity from suit.
The claim against the arbitrator was this: An arbitrator provided by JAMS/ENDISPUTE held a hearing as an arbitrator, and then tried to mediate the case. The arbitrator refused to issue an arbitration award, and instead said he was willing to mediate, and tried to coerce one of the parties into an unfavorable settlement.
The claim against JAMS/ENDISPUTE was this: JAMS advertises that it "employs" arbitrators who make timely and cost-effective decisions, and JAMS failed to disclose that its arbitrators "secretly retain the right" to abandon the arbitration "for no lawful reason" without rendering an award.
Please be clear that these are claims made in Morgan Phillips' court complaint, and these claims have not been proved.
California common law provides arbitrators with immunity from suit as to conduct in their "quasi-judicial" capacity. However, there is no immunity for a claim of breach of contract by failing to make a decision at all. Therefore, the arbitral immunity doctrine does not protect the arbitrator from suit.
As for the claim against JAMS, it boiled down to a simple claim of a violation of a statute regulating unfair competition and misleading advertising. Therefore, the claim against JAMS/ENDISPUTE is not barred.
Thanks to Workplace Prof Blog for finding this case - Arbitrator’s Early Withdrawal Leaves Parties Unsatisfied.
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U-Haul arbitration case - its implications
June 19, 2006 by Ross Runkel at LawMemo
The NLRB held it was an unfair labor practice for a non-union employer to adopt a mandatory arbitration provision that covered "any other legal or equitable claims and causes of action recognized by local, state, or federal law or regulations."
Reason: because it would reasonably tend to inhibit employees from filing charges with the National Labor Relations Board. U-Haul Co of California (NLRB 06/08/2006) (2-1).
See discussion at Arbitration clause was unfair labor practice and NLRB takes aim at arbitration clause.
Now what?
Three things come to mind.
1. NLRB unfair labor practices
Expect unions to file a lot of unfair labor practice charges against non-union employers that have arbitration programs. Don't expect the NLRB to do anything unless the arbitration plan has language, such as that quoted above, that employees would reasonably read as cutting off their ability to file NLRB charges. Do expect employers that have such language to take immediate steps to change the language in their existing arbitration policies.
2. EEOC
It is possible that the U-Haul decision will encourage the EEOC to resume its attacks against mandatory arbitration agreements. See Policy Statement on Mandatory Binding Arbitration of Employment Discrimination Disputes as a Condition of Employment. It is not obvious to me how the EEOC can succeed in this.
3. Arbitration generally
It's important to point out that the U-Haul decision will not have any effect on the remainder of U-Haul's arbitration policy. The case does not mean U-Haul will be unable to enforce its arbitration policy as to all claims other than NLRB charges.
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Arbitration clause was unfair labor practice
June 19, 2006 by Ross Runkel at LawMemo
When a non-union employer adopted a mandatory arbitration program, that was an unfair labor practice, violating the National Labor Relations Act.
So holds the National Labor Relations Board in U-Haul Company of California (NLRB 06/08/2006) (2-1).
Why? "because the employees would reasonably construe the broad language to prohibit the filing of unfair labor practice charges with the Board."
The employer made agreement to an arbitration policy a condition of employment or continued employment. The policy states that it:
. . . applies to all ... employees, regardless of length of service or status and covers all disputes relating to or arising out of an employee’s employment with [the employer] or the termination of that employment. Examples of the type of disputes or claims covered by the [Arbitration Policy] include, but are not limited to, claims for wrongful termination of employment, breach of contract, fraud, employment discrimination, harassment or retaliation under the Americans With Disabilities Act, the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964 and its amendment, the California Fair Employment and Housing Act or any other state or local anti-discrimination laws, tort claims, wage or overtime claims or other claims under the Labor Code, or any other legal or equitable claims and causes of action recognized by local, state or federal law or regulations.
The NLRB put its focus on this language: "any other legal or equitable claims and causes of action recognized by local, state, or federal law or regulations."
The reasoning:
We recognize that the language in the arbitration policy does not explicitly restrict employees from resorting to the Board’s remedial procedures. However, the breadth of the policy language, referencing the policy’s applicability to causes of action recognized by “federal law or regulations,” would reasonably be read by employees to prohibit the filing of unfair labor practice charges with the Board. Plainly, the employees would reasonably construe the remedies for violations of the National Labor Relations Act as included among the legal claims recognized by Federal law that are covered by the policy. Thus, we find that the language of the policy is reasonably read to require employees to resort to the Respondent’s arbitration procedures instead of filing charges with the Board.
The decision was 2-1, with Member Wilma B. Liebman and Member Peter C. Schaumber in the majority, and Chairman Robert J. Battista dissenting.
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FAA does not grant federal court jurisdiction
June 12, 2006 by Ross Runkel at LawMemo
Judge Posner took up a jurisdictional question which he said was "mishandled by the parties and the district court."
As Judge Posner put it, there is federal court jurisdiction in a Federal Arbitration Act case only when the underlying dispute would have been within federal jurisdiction if it had been litigated rather than arbitrated.
The good judge figured out that there was diversity of citizenship in the immediate case, so he went on to adjudicate the merits.
Wise v. Wachovia Securities (7th Cir 06/07/2006).
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Hawaii ignores Federal Arbitration Act
June 08, 2006 by Ross Runkel at LawMemo
The Hawaii Supreme Court ignored the Federal Arbitration Act in deciding that an employer's arbitration provision could not be enforced.
I thought Hawaii was a state of the United States, bound by the law of the land. Not so, it seems, based on the decision in Douglass v. Pflueger Hawaii, Inc (Hawaii 05/25/2006). Majority opinion | Concurring opinion
Two big errors, in my opinion.
Error No. 1: Ignoring Buckeye Check Cashing v. Cardegna (US Supreme Court 02/21/2006)
In Buckeye there was a lawsuit dealing with whether a high-interest loan agreement could be enforced. The loan agreement contained an arbitration provision.
For the Florida Supreme Court, it was easy. They said the whole contract was illegal and void under Florida law (because of the high interest rate), and therefore the arbitration provision could not be enforced.
The US Supreme Court said that was wrong. It's a two-step process. First look solely at the arbitration provision. If the parties agreed to arbitrate, then send the case to an arbitrator to decide whether the whole contract was illegal and void.
The Hawaii court got it backwards. They first looked to see whether the whole contract could be avoided on the ground that the plaintiff was under age.
Turns out this error did not affect the outcome, because the Hawaii arbitration provision was unenforceable for another reason.
Error No. 2: Treating arbitration provisions in a special way.
When the Hawaii court got to the issue of whether the plaintiff had assented to the arbitration provision, it became important to the court that this provision was contained in a long employee handbook and was not "boxed off" or otherwise set apart from the other provisions of the handbook. The error here is that the court was using a special rule that applies only to arbitration provisions. I can't imagine that every other provision had to be "boxed off." Thus, the court ignored the requirement that states can refuse to enforce arbitration agreements only on the very same grounds that they refuse to enforce other agreements. In other words, no special rules for arbitration are allowed.
But it didn't matter.
In the end, all of this did not change the outcome. It turns out that the court found that there was no "consideration" for the agreement to arbitrate because the provision allowed the employer to make any changes at any time without any advance notice.
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ADR Florida style
June 07, 2006 by Ross Runkel at LawMemo
A federal District Judge in Orlando, Florida has ordered litigants to use "rock, paper, scissors" to resolve a dispute over where a deposition will be held. An ancient form of ADR - alternative dispute resolution.
Straying a bit from arbitration, the usual subject here, I offer you the full text of the judge's order, courtesy of Robert Ambrogi's Lawsites.
MIDDLE DISTRICT OF FLORIDA
ORLANDO DIVISION
AVISTA MANAGEMENT, INC., d/b/a Avista Plex, Inc.,
Plaintiff,
-vs-
WAUSAU UNDERWRITERS INSURANCE COMPANY,
Defendant.
This matter comes before the Court on Plaintiff's Motion to designate location of a Rule 30(b)(6) deposition (Doc. 105). Upon consideration of the Motion – the latest in a series of Gordian knots that the parties have been unable to untangle without enlisting the assistance of the federal courts – it is
ORDERED that said Motion is DENIED. Instead, the Court will fashion a new form of alternative dispute resolution, to wit: at 4:00 P.M. on Friday, June 30, 2006, counsel shall convene at a neutral site agreeable to both parties. If counsel cannot agree on a neutral site, they shall meet on the front steps of the Sam M. Gibbons U.S. Courthouse, 801 North Florida Ave., Tampa, Florida 33602. Each lawyer shall be entitled to be accompanied by one paralegal who shall act as an attendant and witness. At that time and location, counsel shall engage in one (1) game of "rock, paper, scissors." The winner of this engagement shall be entitled to select the location for the 30(b)(6) deposition to be held somewhere in Hillsborough County during the period July 11-12, 2006. If either party disputes the outcome of this engagement, an appeal may be filed and a hearing will be held at 8:30 A.M. on Friday, July 7, 2006 before the undersigned in Courtroom 3, George C. Young United States Courthouse and Federal Building, 80 North Hughey Avenue, Orlando, Florida 32801.
DONE and ORDERED in Chambers, Orlando, Florida on June 6, 2006.
GREGORY A. PRESNELL
UNITED STATES DISTRICT JUDGE
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Editor: Ross Runkel, Professor of Law Emeritus. email Ross@LawMemo.Com, Phone 503-399-8028. Copyright LawMemo, Inc.
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