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Spanish speaker bound by English agreement
August 29, 2008 by Ross Runkel at LawMemo
Morales sued the employer, asserting various claims arising from his discharge from employment. The employer moved to compel arbitration, but the trial court denied the motion. The 3rd Circuit reversed. Morales v. Sun Constructers (3rd Cir 08/28/2008).
The trial court determined that Morales didn't assent to the written arbitration agreement and thus declined to enforce it, based on its finding that the agreement was in English and Morales (who spoke only Spanish) didn't understand it.
The 3rd Circuit concluded that the trial court erred. The court cited Upton v. Tribilcock, 91 US 45 (1875) for the proposition that "[i]t will not do for a man to enter into a contract, and, when called upon to respond to its obligations, to say that he did not read it when he signed it, or did not know what it contained."
The court noted that, under the "objective theory" of contract formation, "what is essential is not assent, but rather what the person to whom a manifestation is made is justified as regarding as assent." The court concluded that, absent a showing of fraud, "the fact that an offeree cannot read, write, speak, or understand the English language is immaterial to whether an English-language agreement the offeree executes is enforceable."
My view: Courts are required to treat agreements to arbitrate on the same basis that they treat contracts generally. Under the almost-universal rule that a person is bound by the terms of a signed agreement (even if the signer did not understand it), the agreement can be enforced. Therefore, the decision is correct, and it's a little difficult to understand why the trial court thought the agreement should not be enforced.
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California reviews award for legal error
August 29, 2008 by Ross Runkel at LawMemo
It was no surprise when the US Supreme Court held that the Federal Arbitration Act (FAA) does not allow a court to review an arbitrator's award for legal error, even if the parties contracted to have that happen. The FAA has limited grounds for court review, and legal error is not one of them. Hall Street Associates v. Mattell, 128 S.Ct. 1396 (2008).
But the US Supreme Court was dealing only with the FAA, and that Court made it clear that there might be other legal avenues for getting a wider scope of judicial review. The Court said:
In holding that §§10 and 11 provide exclusive regimes for the review provided by the statute, we do not purport to say that they exclude more searching review based on authority outside the statute as well. The FAA is not the only way into court for parties wanting review of arbitration awards: they may contemplate enforcement understate statutory or common law, for example, where judicial review of different scope is arguable. But here we speak only to the scope of the expeditious judicial review under §§9, 10, and 11, deciding nothing about other possible avenues for judicial enforcement of arbitration awards.
So along comes the California Supreme Court in Cable Connections, Inc. v. DirecTV, Inc. (California Supreme Court 08/25/2008) and decides that an expanded scope of review can be obtained via the California Arbitration Act.
Here's the reasoning:
California's statute allows a court to vacate an award if "the arbitrators exceeded their powers."The parties agreed that "The arbitrator shall not have the power to commit errors of law or legal reasoning, and the award may be vacated or corrected on appeal to a court of competent jurisdiction for any such error."
Therefore, committing legal error was acting in excess of the arbitrator's power, and that opens up review under the California statute.
The FAA does not preempt this aspect of California law.
My view:
I agree that the FAA does not preempt here, and Hall Street specifically left open the possibility that awards could be vacated using non-FAA grounds.
I also cannot disagree with the California court's interpretation of the California statute. That's their job, not mine.
However, the California approach is a bad idea. Arbitration is supposed to get the parties to a final and binding decision. So now in California the parties are allowed to have something they will call arbitration but really isn't. I suppose the parties can also agree that an arbitrator "shall not have the power" to commit errors in admission of evidence, and in factfinding, and these also will become fully reviewable by a court.
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Appeal order denying arbitration within 30 days
August 14, 2008 by Ross Runkel at LawMemo
Garland Snider sued the employer, asserting claims for breach of contract and violation of state wage and hour laws.
The employer petitioned to compel arbitration, but the petition was denied by the trial court. The matter proceeded to a jury trial, where Snider prevailed. Judgment was entered in Snider's favor, and the employer appealed.
The appeal was timely filed with respect to the final judgment, but not with respect to the order denying the petition to compel arbitration.
The court held - Snider v. Production Chemical (Oregon Ct App 08/13/2008) - that pursuant to ORS 36.730
"an appeal from an order denying a petition to compel arbitration ... must be commenced within 30 days after the order is entered in the trial court register."
Since the employer's appeal was untimely as to the trial court's order denying the petition to compel arbitration, the court concluded it lacked jurisdiction to consider that issue. The court rejected other issues as unpreserved.
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USERRA claims are subject to arbitration
August 13, 2008 by Ross Runkel at LawMemo
The 6th Circuit has decided that claimed violations of the Uniformed Services Employment and Reemployment Rights Act (USERRA) are subject to arbitration.
Landis v. Pinnacle Eye Care (6th Cir 08/11/2008)
Timothy Landis sued the employer, asserting (among other things) a claim for violation of the Uniformed Services Employment and Reemployment Rights Act (USERRA).
The trial court granted the employer's motion to stay the case and compel arbitration.
The 6th Circuit affirmed, holding that USERRA claims are subject to arbitration.
The court noted that the 5th Circuit has come to the same conclusion, and cited with approval that circuit's decision in Garrett v. Circuit City Stores, Inc., 449 F3d 672 (5th Cir 2006).
The court reasoned that
1) nothing in USERRA's statutory language or legislative history demonstrates a Congressional intent to preclude arbitration; and2) there is no inherent conflict between arbitration and USERRA's underlying structure and purpose.
My view: Hardly a surprise. The court followed the US Supreme Court's analytical method in Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991).
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FMCS will change rules
August 13, 2008 by Ross Runkel at LawMemo
FMCS - the Federal Mediation and Conciliation Service - plans to change some of its rules relating to arbitration services, and invites public comment on or before October 6, 2008. [Federal Register Notice]
In a nutshell, here are the changes:
- Increase the listing fee FMCS charges arbitrators - from $100 to $150.
- Change procedure regarding complaints about arbitrators.
- Change procedures for arbitrators on inactive status.
- Change procedure relating to parties requesting arbitration panels. These are the lengthiest changes, and mostly deal with (a) situations where the collective bargaining agreement requires a joint request and (b) situations in which each party advises FMCS of its order of preference by numbering each name on a panel.
My view: These are incremental changes designed to improve the operations of the FMCS, an agency that already is awesomely efficient and effective.
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Late filing divested arbitrator of jurisdiction
August 12, 2008 by Ross Runkel at LawMemo
It has long been an axiom of arbitration law that it is for the arbitrator - not the court - to decide whether a union's grievance was filed on time.
However, the arbitrator's decision on that question is still subject to some limited judicial review to decide whether the arbitrator's decision "draws its essence" from the collective bargaining agreement.
In City of Fairfield v. AFSCME (Ohio Ct Appeals 08/04/2008) the Union filed a grievance claiming that the City had assigned the duties of two bargaining unit positions to non-bargaining unit employees.
The collective bargaining agreement had a three-day limit for filing grievances, and the grievance was filed more than three days after the City's decision was made and came to the Union's attention.
However, the arbitrator granted the grievance. The arbitrator held that this was a "continuing violation" and that each day the City allowed the duties to be performed by non-bargaining unit employees was a new violation. Therefore, the arbitrator decided that the grievance was timely filed.
The Ohio Court of Appeals held that the arbitrator's award departed from the essence of the collective bargaining agreement. The court said the contract was plain and unambiguous, and that the arbitrator did not have "jurisdiction" to decide the case because the grievance was untimely.
My view: Plainly wrong.
Of course, it is easy to say that the arbitrator was "wrong" or misinterpreted the collective bargaining agreement. Let's just assume that is true.
However, the court simply substituted its own interpretation of the contract. To the court, the arbitrator's continuing violation theory "did not comport with" the plain and unambiguous three-day limit. But that is not a proper judicial role. The "essence" test, applied correctly, is that the court must not re-decide the merits of the case provided that the arbitrator was even arguably interpreting the contract.
Here's what the US Supreme Court said in Paperworkers v. Misco, 484 US 29 (1987):
As the Court has said, the arbitrator's award settling a dispute with respect to the interpretation or application of a labor agreement must draw its essence from the contract and cannot simply reflect the arbitrator's own notions of industrial justice. But as long as the arbitrator is even arguably construing or applying the contract and acting within the scope of his authority, that a court is convinced he committed serious error does not suffice to overturn his decision.
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