Adjunct Law Prof Blog

Consolidation In Arbitration

Uniting Arbitration Matters Under Circuit, State Law is an interesting September 22, 2008, New York Law Journal article. (registration required). The title is a bit misleading as the article is about arbitration consolidation and how NY State and federal law differ with respect to this issue. Though not entirely clear from the article, the authors appear to be referring to consolidation of a arbitration with a pending litigation.

The article notes that there is no Supreme Court decision on this issue. Interestingly, the article cites interchangably to labor cases (governed under 301) and commercial cases (governed by the FAA). The  article concludes by advocating for consolidation. As the article states:

  It is unlikely that consolidation would be permitted if one or more of the relevant arbitration agreements expressly prohibits consolidation. Consolidation also arguably may be improper where consolidation, although not expressly prohibited by the relevant contracts, would be inconsistent with one or more of those agreements. Cullman Ventures Inc. v. Conk,¹¹ which involved a consolidation of arbitration proceedings by a New York state court, exemplifies application of this principle. In Cullman Ventures, the Appellate Division, First Department, reversed a lower court's injunction of an Indiana arbitration and effective consolidation of that matter with an arbitration simultaneously proceeding in New York. The two consolidated arbitrations arose from different arbitration agreements, which provided for different arbitration venues: Indiana and New York. The First Department held that because the arbitration agreements provided for separate arbitral venues, the lower court's consolidation of the arbitrations in New York was an improper reformation of the relevant contracts.

Consolidation of arbitration proceedings can increase the efficiency and reduce the expense of arbitrations where the proceedings involve common issues of fact or law and eliminate the risks of inconsistent or conflicting outcomes in disputes where such commonality exists. In view of the refusal of courts applying the FAA to consolidate arbitrations absent an express agreement of the parties and the discretion in the state courts to issue consolidation orders, if a party wishes to obtain the benefits of consolidated proceedings, it should consider including an express provision in arbitration clauses authorizing the consolidation of related arbitrations.

Mitchell H. Rubinstein

Employee Who Could Not Read Employment Contract Is Bound By Its Arbitration Requirement

Morales v. Sun Constructors, Inc. , No. 07-3806 , ___F.3d___(3d Cir. Aug. 28, 2008), is an interesting and important decision to be aware of. In a wrongful-termination suit, plaintiff-employee's inability to read in English the employment agreement he signed, which bound him to arbitration of his complaints, did not release him from being bound by it. As the court reasoned:

Morales, in essence, requests that this Court create an
exception to the objective theory of contract formation where a
party is ignorant of the language in which a contract is written. We
decline to do so. In the absence 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. See Paper Express, Ltd. v. Pfankuch
Maschinen, 972 F.2d 753, 757 (7th Cir. 1992) (addressing a
contract dispute between an Illinois corporation and a German
corporation and holding that parties should be held to contracts,
even if the contracts are in foreign languages or the parties cannot
read or understand the contracts due to blindness or illiteracy);
Shirazi v. Greyhound Corp., 401 P. 559, 562 (Mont. 1965) (holding
Iranian student subject to limitation contained in baggage receipt
and stating that “[i]t was incumbent upon [the plaintiff], who knew
of his own inability to read the English language, to acquaint
himself with the contents of the ticket”); Paulink v. Am. Express
Co., 163 N.E. 740, 741 (Mass. 1928) (stating that “plaintiff was
bound by the[] terms [of foreign bills of exchange], in the absence
of deceit on the part of the defendant, even though not
understanding their purport and ignorant of the English language”);
Wilkisius v. Sheehan, 156 N.E. 5, 6 (Mass. 1927) (holding that
Lithuanian husband and wife, who did not speak or understand
English and used an interpreter to contract for an exchange of real
estate, were bound by the terms of the agreement because “their
failure to understand these details was not due to fraudulent acts on
the part of the defendant but to their own inability to read, write)

Mitchell H. Rubinstein

7th Holds That Dispute Over Retiree Benefits Is Arbitrable

Exelon v. Generation Co., ___F.3d____(7th Cir. Sep't. 2, 2008), is an important decision to be aware of. The 7th held that a broad arbitration provision in a collective bargaining agreement covering "any dispute . . . as to the interpretation or application of any of the provisions of this Agreement" was sufficient to include disputes between the employer and the union over retiree medical benefits. The court applied the well known presumption in favor of arbitrability to disputes involving retirees. According to the court, not only did the bargaining agreement fail to specifically exclude retiree grievances from the arbitration agreement, but the retiree medical benefits at issue were created in memorandums that supplemented and became part of the bargaining agreement. The court also found that although the union had the consent of only seven of the more than 5,800 bargaining unit retirees, it could arbitrate the dispute on behalf of those seven. The union did not need the consent of each and every affected retiree, the court stated, in order to give effect to a single retiree's agreement to arbitrate his or her claim.

Mitchell H. Rubinstein

Narrow Arbitration Clause Precludes Arbitration of Dispute

FCI Group v. City of New York, ___A.D. 3d____(1st Dep't. July 22, 2008), is an interesting decision. Arbitration was sought over a contruction contract dispute. The court ultimately held that the dispute was not arbitrable because the arbitration clause was narrowly tailored and it did not encompass the issue. As the court stated:

Article 27 of the subject contract applies only to specified disputes; thus, it is a narrow, not a broad, ADR provision (compare Lopez, 40 AD3d at 314, with Sea Trade Mar. Corp. v Hellenic Mut. War Risks Assn. [Bermuda], 7 AD3d 289 [2004], lv dismissed 3 NY3d 766 [2004]). For example, we have held that application of this provision of the City's contract "is limited by the parties' agreement to claims arising out of disputed work, a category that does not [*4]include delay damages" (CAB Assoc. v City of New York, 32 AD3d 229, 232 [2006], citing Gemma Constr. Co. v City of New York, 246 AD2d 451, 453 [1998]). It is dispositive that the dispute at bar does not involve an item of the work performed but the interpretation of a contract provision concerning conflicts of interest that, likewise, does not fall within the purview of the limited ADR provision.

Mitchell H. Rubinstein

Manifest Disregard For The Law May No Longer Be A Basis To Vacate An Arbitration Award

Vacating Awards Under the Federal Arbitration Act is an important September 2, 2008 New York Law Journal article (registration required). It discusses  Hall St. Assoc. LLC v. Mattel, where the Supreme Court stated that FAA §§10 and 11 "provide the FAA's exclusive grounds for expedited vacatur and modification" of an arbitration award. The article then reviews  Robert Lewis Rosen Associates Ltd. [RLR] v. Webb, U.S. District Court, S.D.N.Y., #07 Civ. 11403 (July 7, 2008), which interpreted Hall Street and held that the manifest disregard standard is no longer good law. The article also reports that the same conclusion was reached in  Ramos-Santiago v. UPS, 524 F.3d 120, 124 (1st Cir. 2008).

This is a very significant development. This means that there may no longer be non-statutory grounds to vacate FAA arbitrations. Query whether this would apply to labor arbitrations and whether this would also preclude vacatur on account of public policy.

Mitchell Rubinstein

Are Arbitration Proceedings Confidential??

Arbitration Download estreicher.txt is another excellent New York Law Journal article by Professor Sam Estreicher and attorney Steven Bennett dated August 13, 2008. As the article explains the law with regard to whether arbitration proceedings is all over the map. The authors state:

The ease with which parties are able to hold closed-door arbitration proceedings may provide a false sense of security regarding the confidentiality of arbitral proceedings.

Unsuspecting parties may be lulled into believing that their closed-door proceedings are confidential, only to find later that they failed to safeguard the confidentiality of the proceedings properly and that arbitral materials from the proceedings are subject to disclosure.

There is no hard and fast legal rule regarding the confidentiality of arbitration proceedings and related materials (such as pleadings, briefs and transcripts of proceedings), and the scope of confidentiality largely depends on where the proceedings are held, which arbitral body's rules govern, and whether the parties have acted proactively to preserve confidentiality.¹

A Presumption of Confidentiality?

The various rules, statutes, and state laws governing arbitration comprise a patchwork of confidentiality protection for arbitration, making a presumption of confidentiality far from certain. Most arbitration-sponsoring organizations maintain rules that reference some element of confidentiality. .  .

The authors advise parties who desire the arbitration to be confidential to ask that the arbitrator issue a confidentiality ruling. That certainly seems like good advise.

Law review commentary is surely needed with respect to this important topic.

Mitchell H. Rubinstein

FMCS Issues Notice of Proposed Rule Making Re: Arbitration

On August 6, 2008, the FMCS has issued a Notice of Proposed Rule making with respect to arbitration and proposed several amendments to 29 CFR Part 1404. Download FMCS_proposed_rules.pdf Comments will be accepted for 60 days.

Among the highlights of these proposals are that the annual listing fee for arbitrators on the FMCS rooster from $100 to $150. Additionally, Section 1404.5(d) is added to give the Board or the Director the authority to place an arbitrator on the rooster and to give the Director the authority to remove an arbitrator for a violation of FMCS rules or the Code of Professional Responsibility. The specific Code of Professional Responsibility is not mentioned. Do they mean to refer to the NAA Code??

Under these proposed amendments, Arbitrators can voluntarily place themselves on inactive status for up to 2 years pursuant to 1404.6. 1404.9 (b) provides that OAS will abide by language in parties CBA which specify the conditions which arbitrators are to be appointed. Presumably, this is meant to refer to a specific number of arbitrators on a panel vs. a single selection. Under a proposed amendment to 1404.12, parties must inform the FMCS of an arbitrators acceptance of a case.

Mitchell H. Rubinstein

Ethics In Arbitration

Attorney Steven Bennett just published an excellent article entitled "Who Is Responsible For Ethical Behavior By Counsel In Arbitration, 63 Jul Disp. Resol. J. 38 (May-July 2008)(available via Westlaw). The answer to the questions raised by this article are not easy. This is because underlying the regulation of attorney ethical behavior lies the question whether arbitration itself is the practice of law. In fact, many arbitrators are not even lawyers, so having them involved in ethical issues seems a bit odd.

The author surveys the scant case law that is available. Not surprisingly, the case law in this area is conflicting. The author purposes a practical solution to this problem Institutional arbitration associations should start ethics panels whom arbitrators can turn to for guidance or these panels can be given the authority to sanction offenders themselves.

While I believe Attorney Bennett is on to something here, I do not agree that these arbitration panels or arbitrators should be given the responsibility to decide attorney ethical issues. Instead, this panel should be given the authority to decide ethical issues according to a code of ethics that the tribunal itself may adopt. That ethical tribunal would have the ability to debar attorneys and others from appearing before that panel for conduct it deems sanctionable. The NLRB regulates conduct of attorneys and non-attorneys that  appear before it and arbitration tribunals could do the same.

This issue is ripe for law review commentary.

Mitchell H. Rubinstein    

2d Holds Court Has Jurisdiction To Confirm Arbitration Award Involving A One Employee Bargaining Unit

Local 377 v. 1864 Tenants Association, ___F.3d___(2d Cir. July 8, 2008), is a very unusual case. It involves the confirmation of an arbitration award in a unit involving only one employee. The Court, in a rather short opinion, rejects the employer's argument that the court lacked jurisdiction to confirm this award reasoning:

Because “[t]he federal courts are under an independent
obligation to examine their own jurisdiction,” Lebron v.
Nat’l R.R. Passenger Corp. (Amtrak), 69 F.3d 650, 659 (2d
Cir. 1995), we consider the Employer’s new argument that the
enforcement of this arbitration award exceeds Congress’s
power under the Commerce Clause, U.S. Const. art. I, § 8,
cl. 3. Having considered it, we reject it. Congress could
reasonably have concluded that there would be a substantial
effect on interstate commerce if arbitration awards pursuant
to single-employee CBAs were unenforceable in the federal
courts: enforcement actions would be relegated to
enforcement under the varying contract law principles in the
several states, thereby undermining the uniform, national
approach to American labor law. See generally Local 174,
Teamsters, Chauffeurs, Warehousemen & Helpers of Am. v.
Lucas Flour Co., 369 U.S. 95, 104 (1962) (“[W]e cannot but
conclude that in enacting [§] 301 Congress intended
doctrines of federal labor law uniformly to prevail over
inconsistent local rules.”).

Mitchell H. Rubinstein

Court hold that the terms of a collective bargaining agreement permits employee organization to demand arbitration of a grievance on behalf of retiree

Court hold that the terms of a collective bargaining agreement permits employee organization to demand arbitration of a grievance on behalf of retirees
Matter of City of Niagara Falls v Niagara Falls Police Club, Inc., 2008 NY Slip Op 05459, Decided on June 13, 2008, Appellate Division, Fourth Department

The City of Niagara Falls resisted efforts by the Niagara Falls Police Club to submit a grievance concerning healthcare benefits for retired police officers to arbitration.

Supreme Court rejected the City’s application for a stay of arbitration and the Appellate Division affirmed the lower court’s ruling.

The Appellate Division said that dispute between the parties over healthcare benefits for retired police officers is properly the subject of arbitration based on the terms of the parties' collective bargaining agreement (CBA).

The court pointed out that the CBA sets out a grievance procedure to resolve disputes that arises "concerning the interpretation or application of the terms of this contract or of the rights claimed to exist, hereunder." Further, said the court, the CBA specifically provides that, in the event that there is not a satisfactory resolution of a grievance, "either party may seek resolution by arbitration."

As the CBA expressly refers to retirement benefits in defining the term grievance, and the grievance procedure set forth in the CBA is "not predicated upon the status of the affected beneficiaries" – i.e., it does not distinguish between active employees or retirees – the Appellate Division concluded that the Police Club “is entitled to pursue arbitration on behalf of the retirees.”

Reprinted with permission from New York Public Personnel Law Blog

Mitchell H. Rubinstein

Mutual Demand For Attorneys Fees Vests Arbitrator With Authority To Award Attorneys Fees

Goldberg v. Thelen Reid, ___A.D.3d___, 2008 WL 2492255 (1st Dep't. June 24, 2008), is a short, but important arbitration decision under New York law. The court confirmed an award of attorneys fees because both sides requested them. Interestly, the respondent requested them by way of a counter claim. As the court reasoned:   

The arbitration award was properly confirmed as it did not violate a strong public policy, was not irrational, and did not exceed the arbitrator's authority (see Matter of Board of Educ. of Arlington Cent. School Dist. v Arlington Teachers Assn., 78 NY2d 33, 37 [1991]; CPLR 7511[b]). Indeed, the arbitrator offered a well-reasoned justification for his interpretation of the parties' agreement, and there exists no basis for vacatur thereof (see Matter of New York State Correctional Officers & Police Benevolent Assn. v State of New York, 94 NY2d 321, 326 [1999]). As for the award of counsel fees to petitioner, it was respondents that first sought such fees in their counterclaim, and mutual demands for counsel fees in an arbitration proceeding constitute, in effect, an agreement to submit the issue to arbitration, with the resultant award being valid and enforceable (see Matter of Warner Bros. Records (PPX Enters.), 7 AD3d 330 [2004]; compare Matter of Matza v Oshman, Helfenstein & Matza, 33 AD3d 493, 494-495 [2006]). While respondents may have attempted to withdraw the request for attorneys' fees in [*2]connection with their counterclaim, there was no such attempt in connection with their defense of the arbitration proceeding.

What is most interesting about this case is that had the Respondent not asserted a counter claim seeking attorneys fees, it is likely that the court would have determined that the arbitrator was without authority to award such fees. That seems a bit odd. Query whether the same result would apply under Section 301 in a labor dispute. This issue seems ripe for law review commentary.

Mitchell H. Rubinstein

System Board of Adjustment Not A Proper Party In A RLA Minor Dispute Arbitration

Ollman v. System Board of Adjustment, ___F.3d___(2d Cir. June 3, 2008) is an interesting RLA arbitration case. As you may recall, system board's of adjustment adjudicate minor disputes under the RLA which are basically disputes under a collective bargaining agreement.

After the plaintiff was dismissed, he challenged his discharge before the applicable system board. He lost and commenced this action against both his former employer, the system board itself as well as his union for breach of the duty of fair representation. 

On the merits, the court also granted summary judgement to the employer and the case was dismissed against the union as well. The court also did a nice job summarizing applicable RLA law and concluded that a system board was not a proper party in a suit seeking to vacate a decision.

I bring this case to your attention as it is a good primer on labor arbitration under the RLA.

Mitchell H. Rubinstein

First Issues Decision Reminding Us How Difficult It Is To Vacate An Award-Particular When Procedural Arbitrability Questions Are Raised

I bring Univ. Mass. Medical Center v. United Food and Commerical Workers, __F.3d___(1st Cir. May 15, 2008), to illustrate how difficult it is to vacate a labor arbitration. The dispute hear dealt with holiday pay. Among other reasons, the employer sought to vacate the award by claiming it was not timely. The arbitrator rejected that claim and found a continuing violation. In rejecting the employer's claim the court described the applicable standard as follows:

Issues of procedural arbitrability are for the arbitrator, not the court, to decide. As we explained in Local 285, Service Employees International Union v. Nonotuck Resource Associates, Inc., 64 F.3d 735, 739 (1st Cir. 1995), "[t]hirty years of Supreme Court and federal circuit court precedent have established that issues concerning the timeliness of a filed grievance are ‘classic’ procedural questions to be decided by an arbitrator.”

The decision also cites to a significant body of law concerning the highly deferential standard of review which researchers may find helpful.

Mitchell H. Rubinstein

   

6th Holds That Labor Arbitration Decision Does Not Bar ADA Litigation

Nance v. Goodyear Tire and Rubber Co., ___F.3d___(6th Cir. May 23, 2008) is an important decision. It concerns the affect of a prior arbitration on the ability of a plaintiff to pursue an ADA case in federal court. The court holds that such employee's can pursue such a claim in federal court and therefore, in a sense the employee gets two bites at the apple. The court reasoned:

We find it difficult to distinguish this case from Alexander. In Alexander, the Court
considered whether an adverse arbitration decision finding that Alexander was fired for “just cause”had a preclusive effect, and here, we consider whether an adverse arbitration decision finding that Nance “resigned without notice” has a preclusive effect. Both cases involve the adjudication of statutorily guaranteed rights, an inquiry that Congress reposed in federal courts.
This is also not the first time this Circuit has confronted and answered this question. In
Becton v. Detroit Terminal of Consol. Freightways, 687 F.2d 140, 141-42 (6th Cir. 1982), the
plaintiff, a discharged employee, appealed the district court’s conclusion that a prior arbitration on whether the employee had been fired for “just cause” precluded a federal court from considering evidence on the underlying racial-discrimination claim. We concluded that the district court engaged in “an impractical and excessively narrow application of [Alexander],” id. at 142, because “[t]here is no realistic way to sever the discharge from the claim of discrimination,” id. “Inasmuch as ‘just cause’ or similar contract questions are an integral part of many discrimination claims, the better rule avoids judicial efforts to separate and classify evidence offered by the plaintiff under the heading of ‘discrimination’ or ‘just cause.’” Id.

The key point in this line of cases is clear: While the expertise of arbitrators lies in the
application of facts to the terms of an employee’s contract or collective bargaining agreement, the expertise of federal courts lies in the application of facts to anti-discrimination statutes. In other words, because “the specialized competence of arbitrators pertains primarily to the law of the shop, not the law of the land,” Alexander, 415 U.S. at 57, whether Nance resigned without notice might mean one thing under Goodyear’s CBA, but it might very well mean an entirely different thing for the purposes of an “adverse employment action” under the ADA. Thus, the legal and factual issues raised in Nance’s ADA claim are beyond the competence of the ordinary arbitrator whose primary expertise concerns “the demands and norms of industrial relations.” Id.

This is a critically important issue in employment discrimination that likely will be clarified by the Supreme Court in the pending Pyett case. My review of Pyett v. Penn Building, ___F.3d___ (2d Cir. Aug. 1, 2007), cert granted, is available here.

Mitchell H. Rubinstein

N.Y. Appellate Court Recognizes The Importance Of Past Practices In Public Secor Labor Law

Past practices have long been considered part of a collective bargaining agreement in the private sector. The litigation in the private sector is usually over exactly what constitutes a past practice. Until fairly recently, there has not been much litigation involving past practices in New York public sector labor law. However, several cases have now recognized the importance of past practices. Courts have upheld arbitrators reliance of past practices when collective bargaining agreement have a past practice clause as well as when the did not.

A recent case involving a past practice clause is Matter of Triborough Bridge and Tunnel Authority v. Triborough Bridge and Tunnel Officers, ___A.D. 3d___(1st Dep't May 6, 2008). The court recognized the importance of past practices in upholding the award of the arbitrator. As the court reasoned:

Nor does it appear that the power claimed by the Authority is conferred on it by any contract or rule or regulation, such as might warrant a finding that the arbitrator wrote a new contract for the parties or otherwise exceeded his authority (see Matter of Local 333, United Mar. Div., Intl. Longshoreman's Assn., AFL-CIO v New York City Dept. of Transp., 35 AD3d 211, 214 [2006], lv denied 9 NY3d 805 [2007]). Indeed, the parties' collective bargaining agreement provides that it consists not only of its express terms but also "past practices imbedded in the present understanding of the contract." Thus, the award was rationally based on a finding of a past practice requiring only a one-hour break between shifts.

In this case, however, there was a past practice clause in the CBA. However, there is other authority recognizing the importance of past practices even without such a clause.

Mitchell H. Rubinstein

Hat Tip: New York Public Personnel Blog

Arbitrators Not Bound By The Rules Of Evidence

Applying the “Rules of Evidence” in arbitration proceedings
In re Social Service Employees Union, Local 371, v The City of New York, et al., Appellate Division, First Department, 2008 NY Slip Op 02889, Decided on April 1, 2008

Local 371 filed a petition challenging an arbitrator’s award. Justice Alice Schlesinger, Supreme Court, New York County, annulled the award but the Appellate unanimously reversed Justice Schlesinger’s ruling “on the law.”

The Appellate Division, citing Matter of Silverman [Benmor Coats], 61 NY2d 299, said the arbitrator was not bound by rules of evidence that might otherwise control in a judicial proceeding nor did the arbitrator exceed her power by admitting into evidence a memorandum from the director of the facility where the grievant was employed to a fellow employee about the status of the employee's complaint about the grievant that was not relevant to the arbitration.

The Appellate Division also rejected Local 371’s argument that the arbitrator violated a provision of the collective bargaining agreement, noting that the limitation contained in the contract provision cited by the union was not specifically related to the power of the arbitrator.

In addition, the court commented that “even where an arbitrator makes errors of law or fact, ‘courts will not assume the role of overseers to conform the award to their sense of justice’” nor was the item admitted into evidence that Local 371 challenged “so prejudicial that any mistake in accepting it was ‘so gross or palpable as to establish fraud or misconduct” on the part of the arbitrator.

Unless otherwise provided by law, hearing officers and arbitrators conducting quasi-judicial administrative hearings are not required to apply the rules of evidence that a court would follow.

Source: Initially published on the Internet in New York Public Personnel Law. Reproduced with permission. Copyright© 2006, 2007, 2008, Public Employment Law Press.

Union Has Standing To Arbitrate Retirees Grievances

The status of retirees is a difficult one in labor law. This is because the Supreme Court held long ago that retirees are not employees under the NLRA. The NLRA only applies to employees and employers as those terms are defined in Section 2 of the Act.

Having said that, it is very common for unions to negotiate retirement benefits and those retirement benefits may be set forth in the collective bargaining agreement. What happens if something goes wrong? Can these disputes be arbitrated?

Yes, says the Southern District of New York in Frontier Communications v. IBEW, ___F.Supp. 2d___, NYLJ May 14, 2008 (S.D.N.Y. May 6, 2008)(registration required).  In a brilliantly reasoned decision, the court draws a distinction between the right of unions to represent retirees and the right of the union to represent itself. The court hold that a union has the right to represent itself in order to enforce the terms of a collective bargaining agreement. As the court reasoned:

  Frontier's arguments are unavailing. First, the question of whether Local 503 has standing to litigate on behalf of retirees need not be reached because Local 503 has standing to litigate on its own behalf. It is "axiomatic" that a party to an agreement has standing to sue a counter-party who breaches that agreement, even where some or all of the benefits of that contract accrue to a third party. Highland Capital Management, L.P. v. Schneider, No. 02 Civ. 8098 (PKL), 2008 WL 282769, at *19 (S.D.N.Y. Jan. 31, 2008) (party to contract has standing to sue even though third-party beneficiary also has standing to sue).³ Where an employer has agreed by contract with a union to provide benefits to retirees, "then under accepted contract principles the union has a legitimate interest in protecting the rights of the retirees and is entitled to seek enforcement of the applicable contract provisions." United Steelworkers of America, AFL CIO v. Canron, Inc., 580 F.2d 77, 80-81 (3d Cir. 1978). Courts in the Second and Ninth Circuits have reached this same conclusion. See International Brotherhood of Elec. Workers AFL-CIO v. Citizens Telecommunications Co. of California, Inc., No. Civ S-06-0677, 2006 WL 1377102, at *4 (E.D. Cal. May 18, 2006), appeal docketed, No. 06-16189 (9th Cir. Jul. 3, 2006) ("[A]ccepted principles of contract law provide further support for [union] standing" to enforce retirement benefits provision.); Textile Workers of America, AFL CIO, Local 129 v. Columbia Mills, Inc., 471 F. Supp. 527, 531 (N.D.N.Y. 1978) (same).⁴ Frontier made contractual promises to Local 503 to pay certain benefits, in exchange for contract provisions desired by Frontier, and Frontier agreed to arbitrate disputes over the meaning of those promises. As a counterparty to the contract, Local 503 has a right to enforce it, and the way to enforce it is through arbitration.

Local 503's interest in enforcement is based not merely on the formality that Local 503 is a party to the contract, but also on the "undeniable" interest unions have "in assuring that negotiated retirement benefits are in fact paid and administered in accordance with the terms and intent of their contracts." Allied Chemical and Alkali Workers of America, Local Union No. 1 v. Pittsburgh Plate Glass Co., 404 U.S. 157, 176 n.17 (1971). Unions are empowered by the LMRA to negotiate retiree benefits on behalf of their workers. "To be sure, the future retirement benefits of active workers are part and parcel of their overall compensation and hence a well-established statutory subject of bargaining." Id. at 180. To say that a union may negotiate a term but is powerless to enforce it is to severely undermine one of the core reasons workers elect to organize in the first place. A "union's efforts in ensuring employer compliance with all of the terms of a collective bargaining agreement are a significant consideration for the active employees when choosing to retain the union as their exclusive bargaining representative." UAW v. Yard-Man, Inc., 716 F.2d 1476, 1486 (6th Cir. 1983). As the party that bargained for the CBA on its members' behalf, Local 503 has significant institutional interests in seeing that the terms of that agreement are enforced.

This is a major decision in this important area of law. Given the cost of retiree benefits and health care, this issue is not going to go away soon.

Mitchell H. Rubinstein

If An Arbitrator Makes A Disclosure, Is He Then Required To Recuse Himself If A Party Objects??

Arbitrators, are of course, required to be neutral. Many correctly error on the side of caution and disclose everything. What happens if they make a disclosure and a party then objects. Must they recuse themselves. No, says an appellate court in California, Luce v. Koch, __Cal. App. 4th (4th App. Dist. April 30, 2008). As the court reasoned:

Judge Haden's candor was commendable, and arbitrators should, of course, be
encouraged to err on the side of disclosure. (See Commonwealth, supra, 393 U.S. at p.
151.) We conclude, however, that substantial evidence supports the trial court's finding
that Judge Haden was not legally required to make any disclosures pertaining to Steiner
or Hallahan. In other words, the evidence shows a reasonable person would not have an
impression of bias under the facts. There was no indication Judge Haden had a personal
relationship, or close friendship, with either Steiner or Hallahan. Further, there was no
indication of any business relationship between or among them. Rather, the contact was
limited to serving with each other on the boards of directors of two professional
organizations, and standing alone, that is insufficient. There is no disclosure requirement
when "there has been some contact between the arbitrator and counsel, particularly when
the contact is slight or attenuated. The Commonwealth case recognized that arbitrators
cannot sever all their ties with the business world" (Ceriale v. AMCO Ins. Co. (1996) 48
Cal.App.4th 500, 505), and the same is true of professional obligations involving service
to the legal community and the public, continuing education for bar members and
mentoring for new lawyers.

An interesting May 2, 2008 article about this case appears in the Recorder and is available here.

Study Shows State Courts Vacating Many Arbitration Awards for Employees, but Not for Employers

Study Shows State Courts Vacating Many Arbitration Awards for Employees, but Not for Employers is a very interesting April 21, 2008 National Law Journal article. The article basically summarizes empirical research by Univ. of Illinois Law Professor Michael LeRoy to conclude that state courts are more likely to vacate arbitration awards where employees prevail, than when employers prevail. As the article states:

LeRoy's database includes 443 federal and state court rulings on arbitration awards -- four levels of review, two in the federal court system and two in state systems -- from 1975 to 2007.

The data set is five years in the making and it is an ongoing project, he said, explaining, "It started with my interest in how employers and employees were responding to mandatory arbitration programs, implemented in the mid- to late-1990s."

His study found a "statistically significant" difference in the rates for confirmation of employer and employee victories by state appellate courts:

"Remarkably, state appellate courts confirmed only 56.4 percent of employee wins in arbitration. But when the same courts ruled on employer victories, they confirmed 86.7 percent of awards," the study found.

The lower state courts acted like the state appellate courts: 87.2 percent of employer awards confirmed; 77.6 percent of employee wins confirmed.

By comparison, federal appeals courts upheld 85.7 percent of employer wins and 85 percent of employee victories. Federal district judges enforced 92.2 percent of employer awards and 92.7 percent of employee wins.

The main reason for the difference between the state and federal court rates, said LeRoy, is that federal courts are essentially following the limited standards of judicial review established by the Federal Arbitration Act (FAA) and state courts are not.

I do not buy that the difference is due to the fact that state courts are not bound by the FAA as most states follow the Uniform Arbitration Act which contains similar standards. Perhaps, this result can be explained by the fact that arbitrators are human and they may more likely rule in favor of employees. Therefore, it stands to reason that more of their decisons would be vacated.

Mitchell H. Rubinstein

1st Holds Court Review Of Labor Arbitration Is Among Narrowest Known In The Law

Ramos-Santiago v. UPS, ___F.3d___(1st Cir. April 24, 2008) provides an excellent primer about just how difficult it is to vacate a labor arbitration decision. In fact, the court stated that a court's review of an arbitrator's decision is "among the narrowest known in the law." The court went on to apply the "manifest disreguard for the law" standard to determine if the award should be vacated. Not surprisingly, the court upheld the award.

This was an appeal of a termination where the arbitrator found that the employer had just cause to discharge. The employee claimed that the arbitrator relied on the wrong section of the CBA which justified the award being vacated.

The court also provides a nice summary of the "manifest disreguard of the law" standard utilized by many circuits.

Mitchell H. Rubinstein         

ERISA Plan Not Subject To Labor Arbitration

Steelworkers v. Rohm, ___F.3d___(3rd Cir. April 14, 2008) is an important decision. The court holds that a dispute over an ERISA disablity plan is generally not subject to labor arbitration. As the court stated:

While we recognize the strong
policy considerations favoring arbitration of labor disputes,
there is no right to arbitration of ERISA benefits under a CBA
unless the ERISA benefits sought are either: (i) derived directly
from an ERISA plan established and maintained by or
incorporated into a CBA whose grievance procedure contains an
arbitration clause, or (ii) created by a separate ERISA plan and
that plan and/or the CBA provide that adverse benefit
determinations by a plan administrator are subject to the CBA’s
grievance procedure that includes arbitration. Because we hold
that the benefits sought in this case are neither created by or
incorporated into the CBA nor made subject to the CBA’s
grievance procedure, we reverse the District Court’s order
granting summary judgment to the union and those workers
seeking disability benefits and denying summary judgment to
the employer.

This was a lengthy decision that we are likely to hear more about in the future.

Mitchell H. Rubinstein

Estreicher and Bennett on Hall Street Associates

Parties Can't Modify FAA Standards for Judicial Review  (registration required) is an interesting April 15, 2008 New York Law Journal article by NYU Law School Professor Sam Estreicher and attorney Steven Bennett. In this article, the authors review the recent Supreme Court decision in Hall Street Associates v. Mattel, Inc. which held that parties cannot expand the scope of judicial review under the FAA.

The authors noted that decision Hall Street raises many questions. As the article states:

The case thus leaves open several interesting questions:

• The first is how do parties signal that they are not proceeding under the FAA? In Hall Street Associates, although the agreement incorporated §7 of the FAA, regarding the power of the arbitrator to compel the attendance of witnesses, it did not otherwise "expressly invoke [the] FAA."
• Second, since the FAA does not itself provide for federal subject matter jurisdiction, the independent contract action suggested by the Hall Street Associates Court would require an independent basis for proceeding in federal court.
• A third question left unresolved is whether an agreement expressly providing for application of state law to the enforcement of their arbitration agreement could override or displace the FAA? The Court has previously noted, in Volt Information Sciences, Inc. v. Bd. of Trustees of Leland Stanford Junior University, that "[t]here is no federal policy favoring arbitration under a certain set of procedural rules; the federal policy is simply to ensure enforceability, according to their terms, of private agreements to arbitrate" and, further, "[t]he FAA contains no express preemptive provision, nor does it reflect a congressional intent to occupy the entire field of arbitration."

I am somewhat surprised that the authors do not address whether Hall Street Associates would apply to labor arbitration.  I discussed that issue here.

Mitchell H. Rubinstein

Arbitration Award Upheld Notwithstanding Claim Of Industrial Double Jeopardy

Zayas v. Bacardi Corp., ___F.3d___(1st Cir. April 18, 2008), is a very interesting decision. A terminated employee sought to vacate an arbitration decision sustaining his discharge on the basis of "industrial double jeopardy."  What was the double jeopardy? The employee was first suspended before he was terminated. Well, the court had little difficulty rejecting this argument because the suspension was not final. The final discipline was the termination and the employee was suspended while the investigation was ongoing.

The case is interesting for several reasons. First, the court should have never examined the concept of "industrial double jeopardy" because in doing so the court examined the merits of the case-which is exactly what reviewing courts may not do. Second, the court applied the FAA. However, this was a labor case and the matter is governed by Section 301. Third, the court relied on several labor treatises (and old editions at that) including Elkouri, Fairfeather and Brand as well as some BNA labor arbitration decisions.

In the final analysis the court upheld the award so I do not believe that any of the above was anything more than a harmless error. This case does demonstrate, however, how little some federal judges know about labor arbitration.

For those interested in arbitration, this case is worth a read.

Mitchell H. Rubinstein

Supremes Hold That Under The FAA Parties May Not Alter The Standard Of Judicial Review; But What About Labor Arbitration??

On March 25, 2008, the Supreme Court handed down Hall Street Associates v. Mattel, 552 U.S. ___(2008). The Court held that parties to an arbitration agreement governed under the FAA may not contractually alter the standard of judicial review. Why? The Court reads the provisions for vacatur and modification in Section 10 and 11 of the FAA as exclusive. It is hard to argue with the Court's reasoning on this issue, which divided the circuits, because Section 9 of the FAA provides that the court "must" confirm an award unless it is vacated or modified "as prescribed" in Section 10 and 11.

The Court holding is simply enough to understand, but the ramifications for labor law are uncertain and quite interesting. On page 13 of Justice Souter's slip opinion for the Court, he specifically stated that the holding may be different under different statutory schemes. As the Court stated:

The FAA is not the only way into court for parties wanting review of arbitration awards: they may contemplate enforcement under state 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 Section 9, 10 and 11, deciding nothing about other possible avenues for judicial enforcement of arbitration awards.

In labor law, the "avenue" under which arbitration awards are vacated or confirmed is not the FAA. Rather, jurisdiction stems from Section 301, 29 U.S.C. Sec. 1985. Unlike the FAA, Section 301 does not contain any specific criteria for judicial enforcement or vacatur of arbitration. Rather, the standards of judicial review are governed by federal common law. Support for this stems from the Steelworkers Trilogy and Lincoln Mills cases. Therefore, a strong argument can be made that Mattel is irrelevant to whether judicial review can be contractually altered under Section 301.

With respect to the merits, I believe that parties to a collective bargaining agreement can alter the standard of judicial review. This is because of the lack of mandatory language, as in the FAA, because of freedom of contract principles and most importantly, because collective bargaining agreements are different from ordinary contracts. Collective bargaining agreements concern parties who are involved in a continuing relationship. Economic pressure (such as strike or lockouts) is part and parcel of the collective bargaining process. The Supreme Court has recognized the importance of the "law of the shop" and of "past practices." Therefore, if parties to that collective agreement want to contractual alter the standard of judicial review, I believe they can.

Want to read more on this. I wrote a law review article in 2006 about this. Altering Judicial Review of Labor Arbitration Awards, 2006 Mich. St. L. Rev.  235.

Mitchell H. Rubinstein   

 

Negotiation of Arbitration Procedures As An Alternative To Statutory Procedures In The Public Sector

Initially published on the Internet in New York Public Personnel Law. Reproduced with permission. Copyright© 2006, 2007, 2008, Public Employment Law Press.Alternatives to Section 75 disciplinary procedures

Matter of Oxford Employee Support Personnel Association v Oxford Academy & Central School District, 2007 NY Slip Op 04210, Decided on May 17, 2007, Appellate Division, Third Department

Civil Service Law Section 76.4 [See NOTE 1 below] authorizes the negotiation of alternatives to the disciplinary procedures set out in Section 75 of the Civil Service Law. As the Oxford decision by the Appellate Division demonstrates, unless the collective bargaining agreement specifically set out the fact that an alternative disciplinary procedure has been agreed upon, Section 75 controls.

Oxford Academy served one of its school bus drivers, Donald Wall, with disciplinary charges pursuant to Section 75 after Wall was involved in an accident while driving his bus in the school parking lot.

The Association objected to the District’s action. It contended that if the District wished to initiate disciplinary action against Wall, the grievance/arbitration procedures set out in the collective bargaining agreement between Association and the District rather than Section 75 had to be used.

Notwithstanding the Association’s claim, a Civil Service Law Section 75 disciplinary hearing was conducted. The Hearing Officer found Wall guilty of the charges filed against him and recommended that he be dismissed from his position. The School Board accepted the Hearing Officer’s findings and recommendation and terminated Wall.

The Association then attempted to compel arbitration, only to have its Article 75 petition rejected by Supreme Court. This, in turn, prompted the Association’s appeal to the Appellate Division.

The Appellate Division said that the only issue to be resolved was whether the Association and the School District “expressly and unequivocally agreed to arbitrate the dispute in question.”

Critical to the court’s resolution of the appeal was the following language set out in the collective bargaining agreement between the parties:

A grievance shall mean a complaint by an employee in the bargaining unit (1) that there has been as to the employee a violation, misinterpretation or inequitable application of any of the provisions of this Agreement or (2) that the employee has been treated unfairly or inequitable (sic) by reason of any act or condition which is contrary to established policy or practice governing or affecting employees, except that the term grievance shall not apply to any matter as to which (1) a method of review is prescribed by law [emphasis supplied].

This language, in the opinion of the Appellate Division, precluded processing the disciplinary action initiated against Wall under to the contract grievance procedure. The court, citing Matter of South Colonie Cent. School Dist. [South Colonie Teachers Assn.], 46 NY2d 521, said:

Quite clearly, Civil Service Law Section 75 provides a method of review for alleged employee misconduct and, pursuant to the exclusionary language of the bargaining agreement, relegates the parties to such procedure rather than the grievance/arbitration procedures provided by the bargaining agreement.

Accordingly, said the court, Supreme Court quite properly dismissed the Association’s application to compel arbitration.

NOTE 1: Civil Service Law Section 76.4 provides: Nothing contained in section seventy-five or seventy-six of this chapter shall be construed to repeal or modify any general, special or local law or charter provision relating to the removal or suspension of officers or employees in the competitive class of the civil service of the state or any civil division. Such sections may be supplemented, modified or replaced by agreements negotiated between the state and an employee organization pursuant to article fourteen of this chapter. Where such sections are so supplemented, modified or replaced, any employee against whom charges have been preferred prior to the effective date of such supplementation, modification or replacement shall continue to be subject to the provisions of such sections as in effect on the date such charges were preferred.

Mitchell H. Rubinstein

Local Union Has No Right To Commence Arbitration

Roberts v. Williams, __Misc. 3d__ (N.Y. Co. Feb. 13, 2008)(registration required), is a very interesting public sector labor case. D.C. 37 in New York represents 56 different local affiliates. When a dispute about merit pay arose, one of these affiliates sought to arbitrate. The court held that since the local was not a party to the CBA, it could not commence arbitration. The interesting aspect of the this decision is that a stay was not sought by the employer; rather it was sought by the union.

Mitchell H. Rubinstein

How not to write an arbitration clause

Professor Ross Runkel over at lawmemo.com wrote an interesting story entitled How not to write an arbitration clause.

Ross quotes from Rodriguez v. Windermere Real Estate (Washington Ct App 01/28/2008) which found an arbitration clause in an employment agreement inherently unfair and unenfoceable. As the court explained:

Windermere provided the contract, wrote the arbitration procedures, and selects the arbitrators. The arbitrators must be solely from current employees within the Windermere franchisee family. The arbitrators are all brokers or agents of sister franchisees, which have a continuing, mutually beneficial relationship with the franchisor. The arbitrators are expected to reflect the “Windermere Way.” The “Windermere Way” may mean that it is in the interests of Windermere Wall Street to have the commission in dispute paid to a continuing employee rather than to someone whose employment it has terminated. We conclude the potential arbitrators have a known, existing and substantial relationship with the party-franchisee. On these facts, the process does not satisfy the neutrality requirements of the arbitration statute. We affirm the trial court’s denial of the motion to compel arbitration.

Mitchell H. Rubinstein

Supremes Decision in Preston v. Ferrer May Directly Effect Pending Pyett Case And The Continuing Viability of Alexander v. Gardner Denver

We reported on Pyett v. Pennsylvania Building Corp., ___F.3d___ (2d Cir. 2007) on August 4, 2007. As you will recall, the 2d Circuit reaffirmed its decision in Rogers v. New York University, 220 F. 3d 73 (2d. Cir. 2000), which held that mandatory arbitration clauses in a collective bargaining agreement are unenforceable to the extent they waive federal statutory causes of action in federal court. The Second Circuit rejected the argument that Supreme Court decision in Gilmer, which enforced a contractual agreement to arbitrate a discrimination claim with respect to a non-union employer, precluded plaintiff from filing an employment discrimination case in federal court.

The Supremes granted cert in Pyett on Feb. 19th 2008 in the case captioned 14 Penn Plaza v. Pyett, et al., 07-581.

The ultimate decision Pyett is likely to be influenced greatly by the Court's Feb. 20, 2008 decision in Preston v. Ferrer, ___U.S.___(Feb. 2008)(a.k.a. the Judge Alex case). In Preston, the Court held that when parties agree to arbitrate all questions arising under a contract, the Federal Arbitration Act (FAA), 9 U.S.C. Sec. 1 et. seq. supersede state laws lodging primary jurisdiction in another forum, whether judicial or administrative.

Factually, the Petitioner sought to arbitrate a dispute over certain fees. The Respondent, Ferrer (Judge Alex) petitioned the California Labor Commissioner for a determination that the contract was invalid because it violated a California state law known as the Talent Agencies Act (TAA). Ferrer filed a state court action seeking a stay of arbitration. Ferrer claimed that Preston was a talent agent who acted in violation of this statute while Preston argued that he acted as a personal manager and therefore, the contract was not governed by this statute.The courts below held that this statute vests exclusive jurisdiction over the dispute with the Labor Commissioner.

The Supremes reversed that decision. Thus, the dispute can be arbitrated. The Court reasoned:

The dispositive issue, then, contrary to Ferrer's suggestion, is not whether the FAA preempts the TAA wholesale. The FAA plainly has no such destructive aim or effect. Instead, the question is simply who decides whether Preston acted as personal manager or as talent agent.

*                *                   * 

When parties agree to arbitrate all questions arising under a contract, the FAA supersedes state laws lodging primary jurisdiction in another forum, whether judicial or administrative forum.

In Alexander v. Gardner Denver, which the 2d Circuit essentially followed in Pyett, the Court held that a labor arbitration decision would not bar Title VII litigation- though that arbitration may be admitted into evidence. Thus, a grievant essentially can get two bites at the apple.

That precedent after Preston, Gilmer is certainly questionable. My view is that Pyett is going to be reversed and Alexander v. Gardner Denver is going to be overruled.

Today arbitration is a critical part of alternative dispute resolution and I doubt very much that our current judicial system would be able to handle the case load if alternative forms of dispute resolution, such as arbitration, were not encouraged. I believe that the Pyett decision will follow the reasoning of  Preston and hold that a grievant is not giving up his statutory rights in that only the forum deciding the issue is being changed. Thus, grievants will not longer get two bites at the apple.

Note, another very significant aspect of Preston v. Ferrer is that the California Supreme Court had denied cert. Never-the-less, the Supremes granted certiorari to the Court of Appeal of California, Second Appellate District. We do not see that very often.

Pyett will be a very important case to watch.

Mitchell H. Rubinstein

   

Arbitrator's Refusal To Consider Evidence Does Not Lead To Vacatur

Howard University v. Metropolitan Campus Police Union, ____F.3d____ (D.C. Cir. Jan. 18, 2008), is an important labor arbitration decision. First, it is an excellent primer on the standards to vacate an arbitration award. Second, the court held that a party waives his right to object to the arbitrator's jurisdiction if he does not raise an objection before the arbitrator. Third, it deals with the issue specifically about when vacatur is approprriate because the arbitrator refused to consider evidence. The court described the applicable standard as follows:

Howard relies heavily upon three cases from other circuits,
Tempo Shain Corp. v. Bertek, Inc., 120 F.3d 16 (2d Cir. 1997);
Gulf Coast Industrial Workers Union v. Exxon Co., 70 F.3d 847
(5th Cir. 1995); and Hoteles Condado Beach v. Union de
Tronquistas Local 901, 763 F.2d 34 (1st Cir. 1985), in which the
courts vacated arbitration awards on the ground of misconduct
because the arbitrator failed to consider certain evidence. In
each case, however, the court found the ex