Employee Wins Big in Arbitration; Court Restricts Employer's Ability to Claim Arbitral Bias

UBS Financial Services fired Wells Van Pelt.  Van Pelt arbitrated pursuant to a predispute arbitration agreement.  He won; the panel of arbitrators awarded him nearly $2.5 million.  UBS filed suit to vacate, and sought discovery on the issue of whether the chair of the arbitral panel was biased.  No way, said the court -- if UBS thought a panel member was biased, UBS should have objected before the arbitration, not afterward.  The court therefore concluded that UBS had waived any argument as to arbitral partiality.  The case is Van Pelt v. UBS Financial Services, No. 3:05CV477, 2006 WL 1698861 (W.D. N.C. June 14, 2006) (Westlaw subscription required).

This case illustrates several trends that I have noticed in the reported cases this year.  First, employment arbitrators aren't necessarily the stooges that many critics of employment arbitration seem to expect them to be -- they often find in favor of employees, and award large -- even large punitive -- damages.  Second, employees (like Mr. Van Pelt here) seem increasingly to be foregoing pre-arbitration challenges to enforceability (perhaps because they've concluded they can get a fair deal in arbitration; perhaps because they realize that an enforceability challenge is unlikely to succeed).  Third, many employers often seem surprised that an arbitral system they have designed could possibly result in an award for employees -- leading to a recent increase in employer challenges to arbitration awards.   Fourth, however, most of these employee-wins-big cases are brought by highly-paid white males in the securities industry alleging breach of contract or occasionally age discrimination, not by low- or middle-income employees alleging race, sex, or disability discrimination.  So, even if these cases demonstrate that employees can win in arbitration, they don't necessarily domonstrate that employees who the antidsicrimination laws most seek to protect can win consistently.

For a more-detailed empirical discussion of some of these issues, see Michael H. LeRoy & Peter Feuille, Reinventing the Enterprise Wheel: Court Review of Punitive Awards in Labor and Employment Arbitrations, 11 Harv. Negot. L. Rev. 199 (2006).

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