Arbitration Blog: Arbitrable claims Archives

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July 11, 2005

Side agreement not arbitrable

The union and the employer had two agreements: (1) a collective bargaining agreement which had an arbitration clause, and (2) a side agreement which was silent as to arbitration. The union claimed breach of the side agreement and sued to compel the employer to arbitrate.

Should the court compel arbitration? Arbitration is a matter of agreement, or consent, or intent. So It all boils down to figuring out what the parties intended. Intent in this context does not mean that we ask the negotiators what was going on in their minds. It means that a court looks at the situation from an "objective" viewpoint.

It's clear that the parties agreed to arbitrate something. The question is, what is the scope of that agreement to arbitrate?

If you're in the 9th Circuit, the court does it this way: "Disputes arising under a side agreement must be arbitrated if the dispute relates to a subject that is within the scope of the CBA's arbitration clause. . . . [and] [t]he clause contains no exclusion for disputes arising under side agreements." Inlandboatmens Union of the Pacific v. Dutra Group, 279 F.3d 1075 (9th Cir 2002).

If you're in the 2nd or 8th Circuit, you get a two-step analysis:

Decide whether the arbitration clause is narrow or broad.

If narrow, then decide "whether the dispute involves an agreement collateral to the agreement containing the arbitration clause."

If broad, then decide "whether the dispute relates to the subject matter of the agreement."

In this case the arbitration clause was narrow. It defined a "grievance" as being an alleged violation of the CBA itself. (A broad clause might say something like "any dispute arising out of or relating to this agreement.")

The next question is whether the dispute is "collateral" to the CBA rather than "part and parcel of" the CBA.

In this case the side agreement dealt with retiree insurance, a topic that was not mentioned at all in the CBA. And nothing in the side agreement or the CBA indicated an intent to incorporate the side agreement into the CBA or to incorporate the arbitration clause into the side agreement.

Result: The clause is narrow, the dispute is collateral, and arbitration is not compelled. United Steelworkers v. Duluth Clinic (8th Cir 07/07/2005).

My view: Whichever circuit one is in, the message is clear. Think about arbitration when you're drafting a side agreement. If you want disputes arbitrated, then say so. If not, say not. If you say nothing, then may get to spend lots of time in court.

Posted July 11, 2005 by Ross Runkel, Editor at LawMemo, publisher of Employment Law Memo. Try it.

June 29, 2005

Bill to exclude employment contracts from FAA

House Democrats have introduced a bill to exclude all employment contracts from coverage of the Federal Arbitration Act. The bill would not apply to collective bargaining agreements, and would not apply to post-dispute agreements.

Here is the bill:

Preservation of Civil Rights Protections Act of 2005 (Introduced in House) - HR 2969 - 109th CONGRESS, 1st Session
To amend title 9 of the United States Code to exclude all employment contracts from the arbitration provisions of chapter 1 of such title; and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

June 17, 2005. Mr. KUCINICH (for himself, Mr. GEORGE MILLER of California, Mr. CONYERS, Mr. FRANK of Massachusetts, Mr. MARKEY, and Mr. ANDREWS) introduced the following bill; which was referred to the Committee on the Judiciary, and in addition to the Committee on Education and the Workforce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned

A BILL
To amend title 9 of the United States Code to exclude all employment contracts from the arbitration provisions of chapter 1 of such title; and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the 'Preservation of Civil Rights Protections Act of 2005'.

SEC. 2. AMENDMENT TO FEDERAL ARBITRATION ACT.

Section 1 of title 9, United States Code, is amended by striking `of seamen' and all that follows through `commerce'.

SEC. 3. UNENFORCEABILITY OF ARBITRATION CLAUSES IN EMPLOYMENT CONTRACTS.

(a) Protection of Employee Rights- Notwithstanding any other provision of law, any clause of any agreement between an employer and an employee that requires arbitration of a claim arising under the Constitution or laws of the United States shall not be enforceable.

(b) Exceptions-

(1) WAIVER OR CONSENT AFTER CLAIM ARISES- Subsection (a) shall not apply with respect to any claim if, after such claim arises, the parties involved voluntarily consent to submit such claim to arbitration.

(2) COLLECTIVE BARGAINING AGREEMENTS- Subsection (a) shall not preclude an employee or union from enforcing any of the rights or terms of a valid collective bargaining agreement.

SEC. 4. APPLICATION OF AMENDMENTS.

This Act and the amendment made by section 2 shall apply with respect to all employment contracts in force before, on, or after the date of the enactment of this Act.

My view: Dead on arrival. There is not now, nor will there soon be, majority support for this bill in the House or in the Senate.

Posted June 29, 2005 by Ross Runkel, Editor at LawMemo, publisher of Employment Law Memo. Try it.

June 20, 2005

Who decides legality of the contract?

The US Supreme Court has agreed to take up a Florida case to decide whether it is for an arbitrator - or for a court - to decide whether or not a contract containing an arbitration clause is illegal.

The case: Buckeye Check Cashing, Inc. v. Cardegna (Docket No. 04-1264), certiorari granted 06/20/2005.
The Florida case: Cardegna v. Buckeye Check Cashing, Inc. (Florida 01/20/2005).

Cardegna claimed that Buckeye made illegal usurious loans disguised as check cashing transactions in violation of Florida law. The agreement Cardegna signed contained an arbitration clause, so Buckeye filed a motion to compel arbitration.

Buckeye argued from Prima Paint Corp v. Flood & Conklin, 388 US 395 (1967), in which the US Supreme Court said that it was up to the arbitrator - not the court - to decide whether the underlying contract was subject to a defense of fraud in the inducement.

The Florida Supreme Court distinguished Prima Paint, saying that case dealt with whether the contract was voidable. In Cardegna's case the issue was whether the contract was void under Florida law. Therefore, said the Florida court, since a void contract would mean the arbitration clause could not be enforced, the issue was to be decided by a court.

My view: I don't see Prima Paint as being limited to voidable as opposed to void contracts. Prima Paint stands for the proposition that a court decides whether the arbitration clause is legal and, if it is, an arbitrator decides whether the contract as a whole is legal.

Resources relating to the Florida Supreme Court proceedings:

Posted June 20, 2005 by Ross Runkel, Editor at LawMemo, publisher of Employment Law Memo. Try it.

May 24, 2005

email did not create duty to arbitrate

The company president sent an email to all employees, including Roderick Campbell, and attached a new policy containing an arbitration clause. When Campbell sued under the ADA, the company moved to compel arbitration. Motion denied. Campbell v. General Dynamics Government Systems Corp (1st Cir 05/23/2005).

The company's theory was simple. They sent an email with a new policy attached, and that was an offer which Campbell (an at-will employee) accepted by continuing to work. Presto, a contract, enforceable under the Federal Arbitration Act (FAA).

The 1st Circuit said this agreement could not be enforced as to Campbell's claim arising under the Americans with Disabilities Act (ADA).

The court assumed that the agreement would be enforceable under state law.

The ADA contains a dispute resolution provision, Section 513 (42 USC 12212):

Where appropriate and to the extent authorized by law, the use of alternative means of dispute resolution, including settlement negotiations, conciliation, facilitation, mediation, factfinding, minitrials, and arbitration, is encouraged to resolve disputes arising under this Act.

The focus became the statutory word "appropriate." The court found no general problem with the use of email, and even cited the E-Sign Act (15 USC 7001-7031). The problem was that the company typically did not use email to handle personnel matters, and had never before used email as means of creating a contractual term that was to become a condition of employment. In addition, the email message did not sufficiently bring home to Campbell that the attached policy contained an arbitration clause that would bind him if he kept working. In short, the email did not provide the employee with "minimally sufficient notice by signalling to a reasonable employee that the Policy was a contractual instrument whose terms would be deemed accepted upon continued employment."

My view: The court applied federal law here, although the language is "offer-and-acceptance," suggesting state law of contract formation. The federal law is ADA Section 513.

This is an intensely fact-driven case. It does not mean employers can't use email to form contracts (including contracts to arbitrate ADA cases) that will be enforceable under the Federal Arbitration Act. It means that the email (or whatever communication method is used) must contain enough of a "red flag" to put an employee on notice that the employer intends to change the contractual relationship.

For more discussion, see Michael Fox's comments at Jottings By An Employer's Lawyer.

Posted May 24, 2005 by Ross Runkel, Editor at LawMemo, publisher of Employment Law Memo. Try it.

April 17, 2005

Can non-signatory successor union force arbitration?

At the time employee Shutt was discharged, AFSCME had a collective bargaining agreement with an arbitration clause. The next day, another union - WMEA - got certified as the collective bargaining representative. Later, WMEA grieved Shutt's discharge and took it to arbitration. Although WMEA was certified, it was not signatory to any collective agreement.

Q: Can WMEA compel arbitration?
A (by the arbitrator): No.
A (by the court): Yes.

The arbitrator's reasoning (says the court): "The arbitrator concluded that the grievance was not arbitrable because there was no statutory or contractual basis to arbitrate the grievance. In particular, the arbitrator determined that there was no evidence that the town agreed to be contractually bound to WMEA by the agreement negotiated by AFSCME."

The court then decided that the arbitrator "exceeded his powers."

The court's reasoning: Although there was a change in unions, the collective agreement continued, and so did the employer's duty to arbitrate. But with whom? Once a new union is certified, the old union has no rights, and the new union can enforce the collective agreement. Beyond that, "The arbitrator's interpretation of the agreement was not based on any specific contractual language, nor has any contractual language supporting his interpretation been brought to our attention." "Rather, his interpretation ... appears to be grounded exclusively in a misreading of labor law cases and statutes."

My view: The court has conflated two separate questions. First, is the question of whether the case should be sent to an arbitrator, and the answer is clearly yes. Second, is whether to affirm the arbitrator's decision that the case was non-arbitrable. At that point, the court seems confused, first saying that the arbitrator reasoned that there was no contractual basis to arbitrate, and then dumping on the arbitrator for not citing contractual language to support that conclusion.

But let's assume, as the court says, that the arbitrator exceeded his powers in the manner he concluded that the grievance was non-arbitrable. That should not transfer to the court the power to decide that the grievance was arbitrable. Ultimately, it should be up to an arbitrator to make that decision. The proper thing for the court to do is to remand to the arbitrator to re-decide the question of arbitrability.

Otherwise, the courts are doing arbitrators' work. If you have been following this blog, you know I think that is a bad thing.

Posted April 17, 2005 by Ross Runkel, Editor at LawMemo, publisher of Employment Law Memo. Try it.

March 17, 2005

Connecticut court supports arbitration

Kirby's Reports kindly gave permission to quote this post. The reasoning and result are mainstream, and I'm surprised that the trial judge's reasoning was so far off the mark. "Irrelevant," according to the high court.

More support for arbitration from [Connecticut] Supreme Court

In Board of Education v. Nonnewaug Teachers' Assn., SC17138 (Mar. 1, 2005), the Connecticut Supreme Court held that the proper distribution of the value of stock issued to the Board of Education (the “Board”) from the demutualization of Anthem Blue Cross and Blue Shield was an arbitrable grievance under the parties’ collective bargaining agreement. Here, the Nonnewaug Teachers’ Association (the “Association”) filed a grievance under Section V of the collective bargaining, which provided for the shares of health insurance costs paid for by the Board and the Associations’ members. When the Board denied the grievance, the Association filed for arbitration with the American Arbitration Association as called for in the arbitration clause of the agreement. The Board then filed an action in Superior Court seeking a judgment declaring that that the dispute was not arbitrable since the Board had not violated any provision in the agreement. The trial court subsequently held that the dispute was not subject to arbitration because “neither party could have anticipated” the unexpected distribution of stock and, accordingly, “the parties could not have agreed to arbitrate about it.” Id at 3. In a per curiam decision, the Supreme Court noted that the trial court’s analysis was “irrelevant” because “collective bargaining agreements typically contain provisions that are intended to have broad applicability irrespective of whether a particular occurrence specifically was contemplated by one or both of the parties.” Id. at 4 (internal quotation marks omitted). In rejecting the Board’s arguments, the court noted that the dispute in this case was indistinguishable from Board of Education v. Wallingford Education Assn., 271 Conn. 634, 635, 858 A.2d 762 (2004), an opinion that was issued after the subject appeal was filed, but before oral arguments were heard.

Posted March 17, 2005 by Ross Runkel, Editor at LawMemo, publisher of Employment Law Memo. Try it.