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1st U.S. CIRCUIT COURT OF APPEAL As advocates, attorneys often are involved in arbitration as a form of alternative dispute resolution. The 1st U.S. Circuit Court of Appeal recently decided a case in which the attorneys were not just advocates, but parties. Coady v. Ashcraft & Gerel [FOOTNOTE 1]involved a dispute stemming from an attorney’s decision to part ways with his law firm. The appeals court construed an unusually limited arbitration clause that only authorized arbitration of “ambiguities or questions of interpretation” of the attorney’s employment contract. Coady, the firm’s managing partner of its Boston office, disagreed with the firm about the way it calculated his annual bonus. Deciding to compel arbitration of the dispute, the district court identified four issues for the arbitration panel, only one of which related to the bonus issue. Nevertheless, the arbitrators determined that they were required only to address one issue, namely, the amount of Coady’s bonus. Disagreeing, the 1st Circuit reasoned that the arbitration panel disregarded the limited scope of the arbitration clause, failing to confine its inquiry to “ambiguities or questions of interpretation” in the agreement. In vacating the award favorable to Coady, the 1st Circuit returned to the plain language of the arbitration clause. The circuit court reasoned that when the arbitrability of a dispute is an issue for the court, and the court determines that a matter is not arbitrable, then the court owes no deference to an arbitrator’s contrary conclusion. Moreover, even in cases in which the district court is in error, the Coadycourt concluded that the arbitrator is not in a position to second-guess the court. UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS Arbitrators should never lose sight of a collective bargaining agreement’s terms, even when an employee’s inappropriate behavior escalates to criminal conduct, according to Judge Zobel of the District Court of Massachusetts. In Keebler Co. v. Truck Drivers Union Local 170, [FOOTNOTE 2]Judge Zobel reigned in an arbitrator who exceeded the scope of the controlling collective bargaining agreement when the arbitrator imposed a higher burden of proof than the standard contained in the agreement. The underlying facts are telling. Following a botched delivery, truck driver Michael Menchin argued with his supervisor about the mix-up, and their disagreement escalated into a physical altercation. Keebler terminated Menchin’s employment for violating the company’s policy against fighting on the job and for gross insubordination. On Menchin’s behalf, the union submitted the grievance to arbitration. Menchin faced criminal charges for assault and battery in connection with the incident and, accordingly, the arbitrator required Keebler to demonstrate by clear and convincing evidence that it terminated Menchin’s employment for cause. The bargaining agreement, however, called for a preponderance of the evidence standard. Not surprisingly, Keebler could not satisfy the arbitrator’s higher standard. The district court rejected the arbitrator’s reasoning because “the Arbitrator substituted his own sense of justice rather than applying the Agreement.” The pending state court criminal prosecution, Judge Zobel wrote, has no relevance in determining the proper standard of proof in an employment arbitration. By imposing the higher standard, the arbitrator denied the parties what they had bargained for — preponderance of the evidence. In the district court’s view, the arbitrator committed an additional error by requiring the company to show that Menchin fought on the job, instigated the physical altercation, and provoked his supervisor. The court again rejected the arbitrator’s logic and directed the focus back to the agreement’s plain language. Finally, the court chastised the arbitrator for completely ignoring Keebler’s additional grounds for terminating Menchin, gross insubordination. By failing to construe crucial terms in the agreement, the court concluded, the arbitrator abdicated his ability to decide the facts. 2nd U.S. CIRCUIT COURT OF APPEAL The 2nd Circuit taught New York University (NYU) a lesson about the need for specificity in union-negotiated collective bargaining agreements when the court handed down its per curiam decision in Rogers v. New York University. [FOOTNOTE 3]Construing the U.S. Supreme Court’s Wright [FOOTNOTE 4]and Gardner-Denver [FOOTNOTE 5]decisions, the appeals court held that an agreement must do more than create rights in line with an anti-discrimination statute to compel an employee’s discrimination claims to arbitration. Rather, the appellate court held, the collective bargaining agreement must make compliance with the statute a contractual commitment specifically subject to arbitration. Rogers, a clerical employee at NYU, took a medical leave of absence under the FMLA. When her leave time expired, NYU terminated Rogers’ employment. After filing a charge of discrimination with the EEOC, Rogers sued the university in federal court, alleging violations of the ADA, FMLA, and related state and local human rights laws. Meanwhile, the university tried to compel arbitration based on the valid collective bargaining agreement. The 2nd Circuit identified several flaws in NYU’s agreement with Rogers, concluding, among other things, that the arbitration clause was fatally overbroad. The agreement mandated arbitration of any dispute concerning the interpretation, application or alleged violation of the agreement. Further, although the agreement contained an anti-discrimination provision, it did not specifically incorporate any of the statutes under which Rogers sued. The bargaining agreement created rights parallel to those granted by the FMLA, but it did not make compliance with the FMLA a contractual commitment specifically subject to arbitration. The appeals court concluded that to send Rogers’ claims to arbitration, the agreement must include either an explicit agreement by the employee to submit all federal claims to arbitration or make compliance with the FMLA and ADA a contractual commitment subject to arbitration. This NYU failed to do. 3rd U.S. CIRCUIT COURT OF APPEAL UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY When great minds think alike, they create a stipulation, according to a recent district court decision from the 3rd Circuit. In Catalyst Employees’ Association v. Air Products and Chemicals, Inc., [FOOTNOTE 6]the New Jersey district court upheld an arbitrator’s decision promoting a grievant and awarding him back pay and benefits because the parties “stipulated” to the issue addressed in the arbitration. Tyrone Hamilton filed a grievance against his employer, Air Products, alleging that he was passed over for a promotion to top operator because of his race or in retaliation for successfully prosecuting a prior grievance. After the union and Air Products failed to resolve the matter, Hamilton’s grievance proceeded to arbitration. Finding that Air Products did not promote Hamilton because of either race-based or anti-union animus, the arbitrator ordered the company to promote Hamilton retroactive to January 1996. Seeking to vacate the arbitrator’s award, Air Products complained that the issue submitted to arbitration concerned events that occurred after March 1999, and the arbitrator exceeded his authority by awarding back pay and benefits to 1996. Air Products predicated its argument on an e-mail from a union official that triggered the company’s arbitration procedure. The district court rejected Air Products’ contentions, holding that the parties “stipulated” to the issue subject to arbitration when they phrased the question almost identically in their briefs to the arbitrator. The parties’ similar language, the court held, even superceded the statement of the grievance submitted by the union representative in accordance with the company’s arbitration policy. After enforcing the arbitration award, the district court awarded attorneys’ fees to the union. Because the arbitrator decided the precise issue the company proposed, the court held that Air Products acted without justification and had no reasonable chance to prevail when it contested the award. Therefore, the district court awarded the union its attorneys’ fees related to the enforcement action. 6th U.S. CIRCUIT COURT OF APPEAL The 6th Circuit refused to bar an employee’s ADA claim based on res judicata, even though the plaintiff already had submitted his wrongful discharge and disability discrimination claims to arbitration. The circuit court’s decision in Kennedy v. Superior Printing Co. [FOOTNOTE 7]effectively bifurcates an employee’s disability discrimination claim under a collective bargaining agreement from his statutory discrimination claim under the ADA. By submitting his disability discrimination claim under the agreement to arbitration, the appeals court held, Casey Kennedy did not waive his right to a judicial forum for his ADA claim. The bargaining agreement simply provided that disability discrimination claims, and not claims specifically asserted under the ADA, are subject to arbitration. Although the agreement and the ADA prohibited similar activity, the appeals court found no evidence that Kennedy affirmatively waived his statutory rights. Therefore, the 6th Circuit concluded that the bargaining agreement did not prohibit Kennedy from seeking redress through both arbitration and the federal courts. 7th U.S. CIRCUIT COURT OF APPEAL UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS Who picks up the check when an employer and employee submit a discrimination claim to arbitration? The Northern District of Illinois decided the parties should split the bill and adhere to the arbitration clause contained in their employment agreement. The court enforced an arbitration “fee-splitting” clause that required the employee to pay half the cost of the arbitration, including one half the arbitrator’s compensation and other costs related to the proceeding’s administration. McCaskill v. SCI Management Corp. [FOOTNOTE 8]analyzed the validity of the arbitration agreement between Gloria Jean McCaskill and her employer, SCI. Distinguishing McCaskill’s case from the 10th Circuit and D.C. Circuit cases rejecting fee-splitting provisions, the district court highlighted McCaskill’s failure to present any evidence that she could not afford half the fee. Thus, the court could not conclude that the cost of the arbitration was prohibitively expensive to McCaskill and, on that basis, the court refused to invalidate the arbitration agreement. UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF INDIANA The Southern District of Indiana recently decided a trio of cases dealing with employee accession to arbitration through company policies and handbooks. Granting a motion to compel arbitration, the Jenks v. Workman [FOOTNOTE 9]court bound an employee to an arbitration policy she never explicitly accepted. In the court’s view, once Polly Jenks received a copy of the policy, she had notice that her continued employment with the company evidenced her agreement with the policy’s terms. Under Indiana law, the employer did not need Jenks to sign an acceptance of the agreement’s terms to bind the parties to the arbitration agreement. Compelling arbitration in Flynn v. AerChem, Inc., [FOOTNOTE 10]Judge Barker discounted the employee’s arguments that she did not sign the employment arbitration agreement and, even if she had, she did so under economic duress. The arbitration agreement bore Paulette Flynn’s signature, allowing the court to conclude that Flynn’s signature acted as an acceptance even without Flynn’s full knowledge of the agreement’s terms. Moreover, by agreeing to be bound by the arbitrator’s decision, AerChem gave sufficient consideration for Flynn’s agreement to arbitrate. The acceptance and consideration combined for an enforceable arbitration agreement. Judge Barker also dismissed Flynn’s arguments that she signed the contract under duress and that the agreement was unconscionable. The court concluded that Flynn was not under duress when she entered into the agreement even though AerChem may have known about her financial situation and exploited that fact to its advantage. Ultimately, the court reasoned, “no act or omission by AerChem was the source of her financial troubles” and, therefore, the court could not hold the company responsible for any “duress” Flynn may have felt. Flynn also urged the court to find that AerChem used unconscionable tactics to obtain her signature. The district court again denied Flynn relief, determining that the disparity between the parties did not support a finding of unconscionability. Although AerChem could terminate Flynn’s employment, Flynn had the corresponding power to refuse to sign the document and withhold her services from the company. Moreover, the agreement’s terms were very common in the employment context and, thus, the court could not conclude that the terms were unconscionable. On the same day, Judge Barker released Aynes v. Space Guard Products, [FOOTNOTE 11]allowing an employee’s ADA claims to proceed in federal court and denying the employer’s motion to compel arbitration. Space Guard hired Aynes before it developed an employee manual containing an arbitration clause. New hires received the arbitration agreement, but Space Guard never gave Aynes a copy. Given these facts, the court held that Space Guard and Aynes could not possibly have conducted a bargained-for exchange or reached a meeting of the minds. Therefore, Judge Barker refused to hold Aynes responsible for an agreement she never knew about or received. 8th U.S. CIRCUIT COURT OF APPEAL UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF MISSOURI Circuit City kept busy enough this summer, convincing the Supreme Court to grant certiorari in Circuit City Stores Inc. v. Adams, [FOOTNOTE 12]after the 9th Circuit held the Federal Arbitration Act did not apply to employment contracts. In July 2000, an Eastern District of Missouri court dealt the company another harmful blow when it rendered Circuit City’s standard dispute resolution agreement unenforceable. Gannon v. Circuit City Stores Inc. [FOOTNOTE 13]invalidated the agreement Marken Gannon signed when she applied for a job with the company. The district court focused on the agreement’s limit on punitive damages and held that this “cap” prevented Gannon from effectively vindicating her Title VII and Missouri Human Rights Act rights. Gannon, who later alleged that she was sexually harassed in the workplace, signed the agreement as part of the application process. Circuit City’s dispute resolution agreement limited an employee’s punitive damage award to “the greater of the amount of awarded back pay plus front pay or $5,000.” In contrast, Title VII affords successful plaintiffs up to $300,000 in punitive damages, and the MHRA has no punitive damages cap. Moreover, the court refused Circuit City’s request to amend the agreement “in an effort to render it legal.” Judge Hamilton also rejected Gannon’s plea to stay the court’s ruling until the Supreme Court decides the Adamsappeal. 10th U.S. CIRCUIT COURT OF APPEAL In Mitchell v. City of Moore, Okla., [FOOTNOTE 14]the 10th Circuit addressed claim preclusion in the arbitration context. Captain Lyndell Mitchell, an officer of the Moore, Okla., police department, commenced an action in federal court claiming discrimination based on several adverse employment actions. The court granted the defendants, including the city, summary judgment on all of Mitchell’s claims. Meanwhile, the police department terminated Mitchell’s employment. The 10th Circuit held that the summary judgment did not preclude arbitration of Mitchell’s wrongful termination claim. Because the events giving rise to the arbitration occurred after Mitchell filed his judicial claim, the appeals court determined that the claims did not arise out of the same transaction. Further, the appeals court recognized that the union’s interest in prosecuting Mitchell’s grievance might not coincide with what is best for the officer. Hence, Mitchell’s federal suit could not preclude him from arbitrating his later termination claim. The 10th Circuit also affirmed an employee’s arbitration award that included $2.3 million for the increased value in company stock options. In Brown v. The Coleman Co., [FOOTNOTE 15]the appeals court affirmed the award because even if the arbitration panel drew incorrect conclusions, the panel based its decision on the employment contract. According to the appeals court, the parties “contracted for the arbitrator’s construction of the contract not a judge’s construction.” Thus, the circuit court enforced the arbitration award. Additionally, the appeals court upheld the arbitration panel’s broad power to grant equitable relief to Brown. The AAA Employment Dispute Rules that governed the Brown arbitration permit an arbitrator to craft “any remedy and relief that the arbitrator deems just and equitable.” The 10th Circuit determined that the $2.3 million award for increased value of stock options was just and equitable relief in the eyes of the arbitration panel. UNITED STATES CIRCUIT COURT OF APPEAL FOR THE D.C. CIRCUIT UNITED STATES DISTRICT COURT FOR WASHINGTON D.C. A whistleblower’s claim that his employer conspired to harass, terminate and blacklist him is more closely related to obstruction of justice than employment discrimination, a Washington, D.C., district court held. In Brown v. Wheat First Securities, Inc., [FOOTNOTE 16]the federal court compelled Ronald Brown to arbitrate his Civil Rights Act of 1871, Section 2 claims. All claims arising out of termination of employment, except employment discrimination claims, are arbitrable, according to National Association of Securities Dealers Rule 10201(a) that governed the dispute. Construing the rule, the district court reasoned that Brown’s claims were “not strictly” employment discrimination claims. Therefore, the court held that Brown must arbitrate the claims related to his termination from employment. This article is excerpted with permission from CCH’s Journal of Alternate Dispute Resolution, Winter 2000 Edition. Dean J. Schaner is the managing partner of Haynes and Boon LLP’s Houston employment law section and represents employers in all aspects of employment, labor, and employee benefits litigation. He is certified by the Texas Board of Legal specialization as a labor and employment law specialist. He would like to acknowledge the contribution of summer associate Maura Brady to this article. ::::FOOTNOTES:::: FN1No. 99-2165, 2000 WL 1072386 (1st Cir. Aug. 8, 2000). FN2No. 99-12516 RWZ, 2000 WL 977299 (D. Mass. June 29, 2000). FN3No. 99-9172, 2000 WL 986402 (2nd Cir. July 17, 2000). FN4 Wright v Universal Maritime Service Corp., 525 U.S.__, 119 S. Ct. 391, 142 L.Ed.2d. 361 (1998). FN5 Alexander v. Gardner-Denver Co., 415 U.S. 36 (1974). FN6No. CA00-2161 JEI, 2000 WL 1093614 (D. N.J. Aug. 4, 2000). FN7215 F.3d 650 (6th Cir. 2000). FN8No. 00 C 1543, 2000 WL 875396 (N.D. Ill. June 22, 2000). FN9No. IP99-1389-C-T/G, 2000 WL 962821 (S.D. Ind. June 22, 2000). FN10102 F. Supp. 2d 1055 (S.D. Ind. 2000). FN11No. IP99-1299-C-B/S, 2000 WL 962826 (S.D. Ind. July 3, 2000). FN12194 F.3d 1070 (9th Cir. 2000). FN13No. 4:00CV330 JCH (E.D. Mo. July 10, 2000). FN14Nos. 98-6446, 99-6101, 99-6121 and 99-6177, 2000 WL 954930 (10th Cir. July 11, 2000). FN15No. 99-3181 (10th Cir. July 20, 2000). FN16101 F. Supp. 2d 1 (D. D.C. 2000). � 2000, CCH INCORPORATED. All Rights Reserved.

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