Topic: "Waiver of arbitration" | Main
SCOTUS case on arbitration waiver is settled
June 07, 2011 by Ross Runkel at LawMemo
Stok and Citibank had a contract governing their banking relationship, and the contract contained an agreement to arbitrate all disputes. After a dispute arose regarding Citibank's handling of a check, Stok sued in state court alleging a number of state law claims. Citibank filed an answer which made no reference to arbitration. Over the following two weeks, Stok made four filings relevant to its case (offer of judgment, request for production, reply, notice of readiness for trial) and the court set a trial date. Two weeks later Citibank filed a motion to compel arbitration in state court. Another month later Citibank filed a petition to compel arbitration in federal court, which was denied. The 11th Circuit reversed.
The 11th Circuit reasoned that Citibank's participation in litigation did not result in prejudice to Stok. Citibank delayed for only one month before invoking its right to arbitrate, and Stok could not point to any portion of the record that reveals either the amount of money it spent or the number of hours it dedicated to conducting litigation-specific discovery and preparing litigation-specific documents.
The US Supreme Court granted certiorari to review the 11th Circuit judgment. The Supreme Court dismissed the case on June 2, 2011 because the parties settled.
The terms of the settlement have not been disclosed.
SCOTUS will decide arbitration waiver issue
February 22, 2011 by Ross Runkel at LawMemo
Today the US Supreme Court granted certiorari in Stok & Associates v. Citibank.
The issue, as presented in the petition for certiorari:
Despite the prevalence of arbitration provisions, parties very frequently elect to waive their contractual right to arbitrate and instead seek to resolve their disputes in a court of law. Because this Court has yet to rule upon when such a waiver becomes binding, a broad and profound conflict has arisen in the Circuit courts as to whether a showing of prejudice is required to render such a waiver irrevocable. Therefore, it is necessary for this Court to answer the following inquiry:
Under the Federal Arbitration Act (“FAA”), should a party be required to demonstrate prejudice after the opposing party waived its contractual right to arbitrate by participating in litigation, in order for such waiver to be binding and irrevocable?
This case will be scheduled for oral argument some time in the Fall of 2011.
CBA arbitration clause can waive individual right to litigate statutory civil rights claim
April 01, 2009 by Ross Runkel at LawMemo
The US Supreme Court held today (5-4) that a provision in a collective bargaining agreement that clearly and unmistakably requires union members to arbitrate ADEA claims is enforceable as a matter of federal law.
14 Penn Plaza v. Pyett (US Supreme Court 04/01/2009)
The relevant collective bargaining agreement requires union members to submit all claims of employment discrimination to binding arbitration under the CBA’s grievance and dispute resolution procedures.
A number of employees asked the union to file grievances alleging, among other things, that the employers violated the CBA’s ban on workplace discrimination by reassigning them on the basis of their age in violation of Age Discrimination in Employment Act of 1967 (ADEA). The union requested arbitration under the CBA, but later withdrew the age-discrimination claims.
The employees then filed suit claiming a violation of the ADEA; the district court denied the employers' motion to compel arbitration; the 2nd Circuit affirmed.
The US Supreme Court reversed, holding that a provision in a collective bargaining agreement that clearly and unmistakably requires union members to arbitrate ADEA claims is enforceable as a matter of federal law.
The Court found that employment-related discrimination claims are "conditions of employment" under the National Labor Relations Act and thus subject to mandatory bargaining. The CBA's arbitration provision must be honored unless the ADEA itself removes this class of grievances from the NLRA's broad sweep. The Court has already held (Gilmer v. Interstate/Johnson Lane (1991)) that the ADEA does not preclude arbitration of ADEA claims.
The Court rejected the argument that Alexander v. Gardner-Denver (1974) held that a CBA arbitration clause cannot waive an individual employee's right to litigate.
The DISSENT relied on Alexander v. Gardner-Denver, saying that that case held that rights conferred by Title VII cannot be waived as part of the collective bargaining process. This applies equally to the ADEA, and includes the right to a judicial forum.
But wait, there's more: The employees argued that the CBA allows the union to block arbitration of these claims altogether, thus operating as an unlawful substantive waiver of federal civil rights claims. The employers countered by arguing that the union has allowed employees to continue with the arbitration even though the union declined to participate. The Court specifically avoided reaching this issue because it was not fully briefed and was not fairly within the question presented to the Court. This clearly leaves a lot to be decided.
It could be that if the union retains total control over the arbitration process (which is normal in most cases), and if the union declines to arbitrate the individuals' statutory claims, then the employees would be able to proceed in litigation.
Supreme Court: Can union waive individual's right to sue?
February 19, 2008 by Ross Runkel at LawMemo
US Supreme Court will hear case on union's waiver of court forum for statutory claim.
When employees sued claiming age discrimination, the employer filed a motion to compel them to take the case to arbitration. The employees were covered by a collective bargaining agreement which prohibited age discrimination and also said "All such claims shall be subject to the grievance and arbitration procedure [in the collective bargaining agreement] as the sole and exclusive remedy for violations." The trial court denied the motion to compel arbitration, and the 2nd Circuit affirmed. The 2nd Circuit held that "arbitration provisions contained in a [collective bargaining agreement], which purport to waive employees' rights to a federal forum with respect to statutory claims, are unenforceable."
See discussion of this case at Daily Developments in EEO Law and at ADR Prof Blog: Supreme Court hears third arbitration case this term: 14 Penn Plaza v. Pyett and at Workplace Prof Blog: Supreme Court Certs
Use it or lose it
December 06, 2005 by Ross Runkel at LawMemo
Here's an interesting legal theory for not enforcing an agreement to arbitrate: material breach of contract.
An ex-employee (who had signed an arbitration agreement) claimed she had been wrongfully terminated, she filed an arbitration demand, but the employer refused to participate in the arbitration proceedings. The employee then sued in state court, and the employer removed the case to federal court and moved to compel arbitration.
I would have thought this was a simple waiver by the employer of the right to arbitrate.
The trial court denied arbitration on the ground that the arbitration agreement was unconscionable.
The 9th Circuit affirmed on a totally different ground. The employer's refusal to participate in the arbitration proceedings was a material breach of contract. Not just the employment contract, but a breach of the arbitration agreement. Therefore, the employee was excused from arbitrating.
I'm not sure why the court relied on breach-of-contract theory, because it went on to say that the employer had waived the right to arbitrate.
Brown v. Dillard's, Inc. (9th Cir 12/06/2005).
Litigating waives right to arbitrate
September 26, 2005 by Ross Runkel at LawMemo
If an attorney doesn't know there was an arbitration agreement, can participating in litigation waive the right to arbitrate? Yes, says the Florida Court of Appeal. Mora v. Abraham Chevrolet (Florida Ct App 09/21/2005).
Facts: A typical employer-employee arbitration agreement. When the employer discharged the employee, he filed a whistleblower suit claiming a violation of Florida statute. The employer's attorney didn't know about the arbitration agreement. The employer filed an answer with ten affirmative defenses (not mentioning a right to arbitrate) and then engaged in discovery. Two months later the employer moved to compel arbitration.
The trial court thought that there was no intentional waiver of the right to arbitrate because the employer's counsel learned of the arbitration agreement only after serving the answer and defenses, so that court ordered arbitration.
The Florida Court of Appeal reversed. The employer signed the arbitration agreement, so it was "legally charged with knowledge of its terms." It did not matter that the employer's lawyer did not know about the agreement.
My view: Sounds right. It's the party (the employer here) that does the waiving, so if the party does not tell the lawyer about the arbitration agreement, then that's the employer's problem. You can't excuse a party's conduct simply because its lawyer wasn't told.
Motion to arbitrate delayed, denied
August 18, 2005 by Ross Runkel at LawMemo
I don't know why a defense lawyer would wait 10 months before filing a motion to compel arbitration. Suit filed July 11, 2004. Motion filed May 19, 2005.
After some employees (who had signed arbitration agreements) sued claiming FLSA violations, the employer
- filed answers
- attended a scheduling conference
- filed amended answers
- engaged in written discovery and depositions
- participated in mediation
- filed counterclaims against two plaintiffs
- attended a pre-trial conference
And then a motion to compel arbitration. More than 10 months after suit was filed.
The trial judge held that the employer waived its right to compel arbitration. Robinson v. Food Service of Belton (D. Kansas 07/11/2005).
The employer argued that it set up the arbitration agreement as an affirmative defense in its amended answer.
The judge said that notified the plaintiffs of the employer's right to arbitrate, but not the intent to arbitrate.
My view: Don't appeal from this one.
Court, not arbitrator, decides waiver issue
March 17, 2005 by Ross Runkel at LawMemo
Q: Is a claim that one party waived its right to arbitrate to be decided by a court or by an arbitrator?
Q: Is a claim that arbitration is barred by a contractual limitation period to be decided by a court or by an arbitrator?
In Marie v. Allied Home Mortgage Corp (1st Cir 03/16/2005), Marie sued under Title VII claiming sex discrimination, and the employer moved to compel arbitration. Conceding that the claims were arbitrable, Marie argued that (1) the employer waived its right to arbitrate by not filing for arbitration while the case was pending at the EEOC level, and (2) failed to comply with the 60-days filing period specified in the arbitration agreement.
Waiver of right to arbitrate
Who decides this issue? Court or arbitrator? It may well depend on what the conduct was that allegedly constituted the waiver. If the conduct was litigation-related and was within the same litigation in which one party attempts to compel arbitration, then the trial court has the power to control the course of proceedings before it. Also, there is the argument that judges are better able to "recognize abusive forum-shopping." Finally, there is the inefficiency argument: Let's not have the case bounce back-and-forth, as it would if the arbitrator did find there was a waiver. Bottom line here: the court should decide the waiver issue.
But wait. Let's read the arbitration agreement. It specifically said that the parties agreed to arbitrate "all disputes" regarding their agreement, "including the arbitrability of any such controversy or claim." The court interpreted the word "arbitrability" as having its focus on "substantive issues," which does not include waiver by conduct.
So the court interpreted the contract to decide that waiver was not for the arbitrator to decide, even though the contract provided that the arbitrator would interpret the contract. Go figure.
(On the merits of waiver, the court held - properly I believe - that the employer's failure to attempt to move the case to arbitration during the EEOC investigation was not a waiver of its right to compel arbitration, assuming a timely motion in the trial court.)
Contractual limitation period
In Howsam v. Dean Witter Reynolds, 537 US 79 (2002), the US Supreme Court dealt with a time limit provision contained in the arbitration rules the parties had agreed to. The Supreme Court held this to be an issue to be decided by the arbitrator rather than by the court. Here, it made no difference that the 60-filing period was included in the arbitration agreement. Same result. This is work for the arbitrator, not the court. This is what the Howsam Court called one of those "procedural questions which grow out of the dispute and bear on its final disposition."
That sounds right to me.
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