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August 18, 2005
Arbitration Blog? Try it.
This is a shamelessly self-promoting post to entice you to take a look at Arbitration Blog, which discusses developments in employment arbitration and labor arbitration. Some recent entries:
- Motion to arbitrate delayed, denied
- Arbitration Law Memo
- Manifest disregard for the law
- NASD Discovery Arbitrator Pilot
- Armendariz doesn't apply to common-law claims
- "Reverse" discrimination violates public policy
- Forum clause controls which court can order arbitration
- Arbitration Law Memo
- Side agreement not arbitrable
- Court severs anti-punitive damages clause
- Interlocutory appeal will stop lower court litigation
- En banc hearing on who decides unconsionability
- Bill to exclude employment contracts from FAA
- Anti-class-action clause was unconscionable
- Ryan's certiorari petition
Posted August 18, 2005 by Ross Runkel, Editor at LawMemo, publisher of Employment Law Memo. Try it.
August 17, 2005
EEOC-McDonald's mediation agreement
EEOC and McDonald's USA, LLC today signed a "Regional Universal Agreement to Mediate" to informally resolve workplace disputes through Alternative Dispute Resolution (ADR) prior to an EEOC investigation or potential litigation when a charge of discrimination is filed with the federal agency in McDonald’s Atlanta Region. Illinois-based McDonald’s owns and operates a number of restaurants in Alabama, Georgia, and South Carolina, which will be covered by the agreement. [EEOC Press Release]
One of the advantages of this agreement appears to be that the EEOC web site now contains the following language:
McDonald's USA, LLC is the leading foodservice provider in the United States serving a variety of wholesome foods made from quality ingredients to millions of customers every day. More than 80 percent of McDonald's 13,700 U.S. restaurants are independently owned and operated by local franchisees. For more information about McDonald's visit www.mcdonalds.com.
And now you can read about wholesome foods at Ross' Employment Law Blog.
Posted August 17, 2005 by Ross Runkel, Editor at LawMemo, publisher of Employment Law Memo. Try it.
August 14, 2005
Arbitration Law Memo
Arbitration Law Memo is a free monthly service summarizing employment arbitration and labor arbitration court cases that appeared earlier in Employment Law Memo. Not really a blog, although we use blog software.
- On the web: http://www.lawmemo.com/arb/memo/
- email subscription: http://www.lawmemo.com/signup/
- RSS feed: http://www.lawmemo.com/rss.htm
Posted August 14, 2005 by Ross Runkel, Editor at LawMemo, publisher of Employment Law Memo. Try it.
June 27, 2005
Anti-class-action clause was unconscionable
It's not clear what effect Discover Bank v. Superior Court (California 06/27/2005) will have on anti-class-action clauses in employment arbitration agreements.
For consumer-cardholders suing banks for $29 each, such clauses are unconscionable under California law.
But the decision was quite limited:
We do not hold that all class action waivers are necessarily unconscionable. But when the waiver is found in a consumer contract of adhesion in a setting in which disputes between the contracting parties predictably involve small amounts of damages, and when it is alleged that the party with the superior bargaining power has carried out a scheme to deliberately cheat large numbers of consumers out of individually small sums of money, then, at least to the extent the obligation at issue is governed by California law, the waiver becomes in practice the exemption of the party “from responsibility for [its] own fraud, or willful injury to the person or property of another.” (Civ. Code, § 1668.) Under these circumstances, such waivers are unconscionable under California law and should not be enforced.
For more details, see Arbitration Blog.
Posted June 27, 2005 by Ross Runkel, Editor at LawMemo, publisher of Employment Law Memo. Try it.
May 23, 2005
NASD rules preempt state ethics rules for arbitrators
The California Supreme Court says the National Association of Securities Dealers (NASD) rules preempt California's "Ethics Standards For Neutral Arbitrators in Contractual Arbitration," and all of the California ethics rules are preempted. Jevne v. Superior Court (California 05/23/2005).
This case was between a brokerage and a customer, and will have an impact on employee-employer arbitrations conducted by the NASD.
California and the NASD both have rules requiring disclosures by neutral arbitrators, and California's are more extensive and complex. Both California and the NASD have rules under which arbitrators can be disqualified.
The NASD rules were specifically approved by the Securities Exchange Commission, which gave them the force of federal law and ultimately the power of the federal government to preempt state law.
The court identified four types of possible preemption: (1) where the federal statute expressly preempts (not here), (2) where the federal statute occupies a whole field of law (not here), (3) where it is actually impossible to comply with both federal and state law requirements (not here), and (4) where the state law could prevent or impair accomplishment of the purposes and objectives of the federal law (Bingo, that's it).
The logic: NASD is regulated by the Securities Exchange Commission (SEC), which is created by the Securities Exchange Act (SEA). SEA's objectives: fair dealing and investor protection. All NASD rules are reviewed and approved by the SEC, so they have the force of law. SEC's opinion is that California's rules have three negative effects on NASD arbitrations: (1) increased administrative costs, (2) reduction of the number of available arbitrators (because many are unwilling to comply), and (3) reduction of nationwide uniformity of NASD arbitrations.
Other California ethics rules could not be severed, said the court, so the whole works was preempted.
My view: We got the same result from the 9th Circuit in Credit Suisse v. Grunwald (9th Cir 03/01/2005), although the reasoning was a little different. [See blog]
Now the question is whether there is any possibility that the outcome will be different for employment arbitrations conducted by NASD. It seems the outcome would be the same.
Posted May 23, 2005 by Ross Runkel, Editor at LawMemo, publisher of Employment Law Memo. Try it.
March 13, 2005
An arbitration system goes down in flames
The 6th Circuit used some interesting logic in refusing to enforce an arbitration agreement under which Employment Dispute Services, Inc. (EDSI) would be the sole source of arbitrators. Ryan's Family Steak House required job applicants to agree that their employment claims would be arbitrated by EDSI. Employees wanted to go to court instead, arguing that the arbitration system was fatally flawed.
Most of the flaws found by the court are discussed in the Arbitration Blog.
The court ruled that the plaintiffs' agreements were unenforceable under the Federal Arbitration Act (FAA) "because they do not allow for effective vindication" of their federal statutory (FLSA) claims. Walker v. Ryan's (6th Cir 03/09/2005)
This finding was based on the conclusion that EDSI's arbitral forum is not neutral. Why? Here's the interesting logic: EDSI is a for-profit company. Ryan's provided 42 percent of EDSI's gross income in 2002. This resulted in a "symbiotic relationship." "Ryan's effectively determines the ... pools of arbitrators."
There was no evidence cited by the court that indicated that Ryan's had every exerted any actual influence in the selection of arbitrators, or that any of the individual arbitrators in EDSI's pool was actually biased, or that any arbitration conducted under the EDSI system had ever been overturned on the ground of arbitrator bias.
In short, the court didn't like the system, and didn't want to wait and see whether a neutral panel of arbitrators would be selected.
My view: I would expect to see conclusions like these supported by some evidence of actual bias rather than the fear of it.
Oh, well. The court also found the agreements unenforceable as a matter of Tennesee contract law.
Posted March 13, 2005 by Ross Runkel, Editor at LawMemo, publisher of Employment Law Memo. Try it.
March 03, 2005
NASD rules preempt state ethics rules for arbitrators?
The 9th Circuit says NASD rules preempt state ethics rules for arbitrators in employment disputes. The California Supreme Court hears arguments on a similar preemption issue on March 8, 2005.
The 9th Circuit case: Credit Suisse v. Grunwald (9th Cir 03/01/2005) [pdf]. Under Credit Suisse's Employment Dispute Resolution Program, Grunwald was obligated to use arbitration to resolve his employment dispute. He wanted arbitration conducted by the American Arbitration Association (AAA), but Credit Suisse preferred arbitration conducted by the National Association of Securities Dealers (NASD).
Why would it matter? California has a statute requiring neutral arbitrators to make extensive disclosures relating to potential conflicts of interest, and these would apply in an AAA arbitration. NASD rules also require disclosures but they are partly in conflict with the California rules.
The 9th Circuit held that the California rules are preempted and do not apply to NASD arbitrations.
The theory in brief: NASD is a private organization regulated by the Securities Exchange Commission (SEC). Acts of Congress can preempt state law and so can regulations of agencies such as the SEC. The arbitration rules adopted by the NASD were approved by the SEC, and therefore have preemptive force. Some California rules are preempted because they directly conflict with NASD rules; some are preempted because they would be an obstacle to executing Congress' purposes.
The California case: Jevne v. Superior Court, to be argued in the California Supreme Court March 8. Court of Appeal decision is Jevne v. Superior Court (California Court of Appeal 11/09/2003) [pdf]. This is not an employment case, but the court similarly held that the NASD arbitration rules preempted California's rules.
Interesting that the 9th Circuit decision is not binding on California courts. Although California is geographically within the 9th Circuit, it is a separate court system. So let's wait and see whether the cases come out the same. It could be that California doesn't think that the rules of a private organization (NASD) can preempt state law.
Posted March 03, 2005 by Ross Runkel, Editor at LawMemo, publisher of Employment Law Memo. Try it.
February 08, 2005
Federal question in underlying dispute supports jurisdiction to hear petition to compel arbitration
I am grateful to David Nagle, chair of LeClair Ryan's Labor & Employment practice group, for pointing out a 4th Circuit decision dealing with the enforcement of arbitration agreements.
Discover Bank v. Vaden [full text pdf] (4th Cir 01/24/2005) is a banking case that should have an impact on employment cases. This is another reminder that the law dealing with enforcement of individual employer-employee arbitration agreements (not involving collective bargaining agreements) is often shaped by cases that have nothing at all to do with employment law.
The bank sued its customer in federal court under Federal Arbitration Act Section 4 to compel arbitration of state law claims that the customer had filed in state court.
The issue was whether the presence of a federal question in the underlying dispute is enough to support subject matter jurisdiction. The 4th Circuit held that it was.
Courts of Appeals are split on the question of whether, in a Section 4 suit, a federal district court has subject matter jurisdiction when the underlying dispute between the parties raises a federal question. One line of authority is that the basis for federal jurisdiction must appear on the face of the arbitration petition itself. That would require that there be some basis for jurisdiction other than the underlying dispute - such as diversity of citizenship or admiralty. The other line of authority (adopted by the 4th Circuit) allows the district court to look through the arbitration petition and "assess whether the overall controversy between the parties 'raises a federal question.'"
This case was included in today's monthly Arbitration Law Memo, an email service provided by LawMemo.Com. [Subscribe]
Posted February 08, 2005 by Ross Runkel, Editor at LawMemo, publisher of Employment Law Memo. Try it.
