Federal Case Update| Mail and Carrier

Richard Birke

Richard Birke

By Richard Birke

Court Dashes Postmaster General’s Hopes That New Argument to Avoid Administrative Arbitration, Not Raised Below, Is Unwaivable Because It Goes to Subject-Matter Jurisdiction
Ruiz v. Donahoe
2015 WL 1811810
United States Court of Appeals, Fifth Circuit

Blanca Ruiz worked for the post office. She sued Postmaster General Donahoe in a putative class action. The district court dismissed the case for lack of subject matter jurisdiction, but the United States Court of Appeals for the Fifth Circuit reversed and remanded the case for a determination regarding an administrative class action.

Donahue petitioned for rehearing, arguing that the CBA covering Ruiz’ employment bars litigation of her claims. He argued that despite the fact that he is raising this matter for the first time on the petition, he did not waive the argument because the matter goes to subject-matter jurisdiction.

The Court disagreed. It wrote “[M]andatory grievance and arbitration procedures in contracts, such as the CBA [in prior cases] are waivable and do not affect this court’s subject-matter jurisdiction. If a dispute is subject to mandatory grievance and arbitration procedures, then the proper course of action is usually to stay the proceedings pending arbitration. However, a dismissal may be appropriate ‘when all of the issues raised in the district court must be submitted to arbitration.’ In any event, agreements to arbitrate implicate forum selection and claims-processing rules not subject-matter jurisdiction….Donahoe has waived his argument regarding the CBA’s mandatory grievance and arbitration procedures by failing to raise it before the district court or this court prior to the present petition for rehearing.”

Public Policy Defense Fails to Overturn Foreign Arbitral Award
Asignacion v. Rickmers Genoa Schiffahrtsgesellschaft MBH
2015 WL 1840880
United States Court of Appeals, Fifth Circuit

Lito Asignacion sustained injuries while working aboard a vessel operated by Rickmers Genoa Schiffahrtsgesellschaft MBH (Rickmers). The injury occurred in Louisiana and he filed suit in court there. Rickmers moved to compel arbitration.

Asignacion’s employment was governed by terms and conditions, which included the following:

“In cases of claims and disputes arising from this employment, the parties covered by a collective bargaining agreement shall submit the claim or dispute to the original and exclusive jurisdiction of the voluntary arbitrator or panel of arbitrators. If the parties are not covered by a collective bargaining agreement, the parties may at their option submit the claim or dispute to either the original and exclusive jurisdiction of the National Labor Relations Commission (NLRC), pursuant to Republic Act of 1995 or to the original and exclusive jurisdiction of the voluntary arbitrator or panel of arbitrators….Any unresolved dispute, claim or grievance arising out of or in connection with this Contract, including the annexes thereof, shall be governed by the laws of the Republic of the Philippines, international conventions, treaties and covenants where the Philippines is a signatory.”

The state court stayed the matter and ordered arbitration in the Phillipines. The panel determined that it could use only Phillipine law to determine the dispute, and it awarded the lowest grade of compensable disability, entitling Asignacion to $1,870.

Asignacion filed a motion to set the award aside as a violation of United States public policy.  Asignacion pointed to Article V(2)(b) of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which “allows a signatory country to refuse enforcement if recognition or enforcement of the award would be contrary to the public policy of that country.” The district court refused to enforce the award and Rickmers appealed.

The United States Court of Appeals for the Fifth Circuit noted that the burden of proof was on Asignacion. The Court rehearsed his main argument. “Asignacion’s counsel also urged that United States public policy requires that foreign arbitral panels give seamen an adequate choice-of-law determination; he argued that the arbitrators’ exclusive reliance on the choice-of-law provision in Asignacion’s contract did not constitute a choice-of-law determination, let alone a fair one.”

The Court was unpersuaded, and it reversed. Noting that the law does not require that U.S. courts apply U.S. standards to all foreign awards, it found that the court below had gone a step too far. “[T]he district court only determined that the arbitration and award ‘effective[ly] deni[ed]’ Asignacion the right to pursue his general maritime remedies. But that finding is insufficient to support the conclusion that the public policy of the United States requires refusing to enforce the award.”

ADR is on the Rise in Employment Cases

Jeffrey Grubman, Esq.

Jeffrey Grubman, Esq.

By Jeffrey Grubman, Esq.

While there is a long history of utilizing arbitration in the labor union context, the majority of employment disputes have historically been litigated in federal court. Federal courts tend to be more formal than state courts, requiring full legal briefing on all motions and involving judges appointed by the President of the United States with tenure for life and extraordinarily bright law clerks to assist them. As a general rule, it is more expensive to litigate cases in federal court than state court, and the most expensive cases to litigate are class actions. The employment law area has long been fertile ground for class actions. Also, in recent years, collective Fair Labor Standards Act overtime cases have been quite active in federal courts throughout the country.

Large employers apparently have tired of the expense and perhaps the dissatisfying results arising from court actions. Accordingly, many have started including binding arbitration clauses as well as class action waivers in their employment agreements. In fact, the percentage of companies using arbitration clauses to preclude class action claims soared to 43 percent in 2014 from 16 percent in 2012, according to a survey of nearly 350 companies conducted by management-side law firm Carlton Fields Jorden Burt LLP. That same survey found that the percentage of class action lawsuits that address employment issues slipped to 23 percent in 2014 from 28 percent in 2011 and that class action suits from workers cost employers $462.8 million in 2014, down from $598.9 million in 2011.

Courts historically have been supportive of binding arbitration clauses. Legal claims in certain industries, such as securities claims by investors against broker dealers, have been resolved through binding arbitration for decades. It now appears that employment disputes are moving in that direction. In 2011, in the case of AT&T Mobility LLC v. Concepcion, the U.S. Supreme Court upheld class action waivers entered by customers of AT&T. The U.S. Supreme Court has not yet agreed to hear cases applying the logic of the Concepcion case to class action waivers in the employment context. Nevertheless, while the National Labor Relations Board has ruled that class action waivers violate the National Labor Relations Act, the trend among the lower courts is to uphold class-action waivers and to uphold traditional arbitration clauses. (See, e.g., Jasso v. Money Mart Express Inc. (N.D. Cal. 2012) and Morvant v. P.F. Chang’s China Bistro, Inc. (N.D. Cal. 2012).)

For more on Mr. Grubman’s discussion, please read the full article, “ADR is on the Rise in Employment Cases,” from Law.com.

Federal Court Case Update | Filings and Firings

Richard Birke

Richard Birke

By Richard Birke

Following is the start of a new series on the JAMS ADR Blog, featuring short synopses of recent case rulings related to arbitration or ADR. We’re excited to share this information as we know this is an area that will be of interest to our readers and those in the legal industry.

Mailing Equals Filing for Purposes of Determining Whether Arbitration Initiated in Timely Fashion
Garcia v. Dept. of Homeland Security
United States Court of Appeals, Federal Circuit

Alberto Garcia was dismissed from his job with Homeland Security for alleged misconduct. 28 days later, his union mailed a letter to the agency requesting arbitration. The agency received the letter seven days later.  The agency moved to dismiss the dispute for failure to follow the requirements of the collective bargaining agreement, which stated that requests for arbitration “must be filed … not later than 30 calendar days after the effective date of the action.” The arbitrator sided with the agency and Garcia appealed.

The United States Court of Appeal for the Federal Circuit analyzed the meaning of the word “filed” and found that in this context,  “the definition of ‘filed’ should be construed [to mean that] a document is filed at the time of mailing.” The Court concluded that “the requirement in Article 34, Section A that a request for arbitration must be filed … not later than thirty (30) calendar days after the effective date of [the Agency’s] action is satisfied when the request is mailed before the thirty-day deadline…Accordingly, we reverse the Arbitrator’s dismissal for failure to timely file a request for arbitration and remand for further proceedings.”

Subsequent Firing Does Not Conflict with Arbitral Award Requiring Reinstatement
Fraternal Order of Police (Metro Transit Police Labor Committee) v. Washington Metro Area Transit Authority
United States Court of Appeals, Fourth Circuit

The Fraternal Order of Police signed a collective bargaining agreement with a compact of jurisdictions associated with the metro D.C. transit system.  Two of the officers were terminated (for punching a passenger, lying under oath, sexually harassing a colleague and more).  After arbitration, they were reinstated.

The transit system rehired them and put them on paid leave while they applied for reinstatement as police officers. When the Maryland police authorities declined to reinstate the two, the transit system fired them because, without certification, they were ineligible to continue as transit officers.

FOP sued, arguing that transit failed to follow the arbitrator’s award. The trial judge agreed and ordered the pair reinstated. The judge denied transit’s motion for reconsideration and transit appealed.

The United States Court of Appeals for the Fourth Circuit reversed. It agreed with transit that the proper course of action for the aggrieved officers was to grieve and then arbitrate the second termination, not to file the instant action. Because transit rehired the pair until they were fired for an independent (if not unrelated) reason, transit had complied with the award.

 

First Things First: Design the Arbitration Process You Want

Richard Chernick, Esq.

Richard Chernick, Esq.

By Richard Chernick, Esq.

The principles for drafting a pre-dispute arbitration clause are straightforward.  They do require an understanding of the legal relationship, which will be the subject of the clause, some sense of the nature of disputes that are likely to arise and a basic understanding of arbitration process.

Following are the top 10 rules:

  1. Identify the scope of arbitration with precision.  The gold standard is “all disputes arising out of or relating to this Agreement . . .” This is a “broad form” clause that is invariably interpreted by courts to encompass related tort and statutory claims.  Anything less may limit the arbitrators’ power to determining only contractual disputes.
  2. Decide whether determining arbitrability shall be delegated to the arbitrators or left with the court.  Typical delegation language:  “any controversy, claim or dispute arising out of or relating to this Agreement or the breach, termination, enforcement, interpretation or validity thereof, including the determination of the scope or applicability of this agreement to arbitrate…”  Courts will enforce such delegations.
  3. State who will administer the arbitration.  “The arbitration shall be administered by JAMS pursuant to its Comprehensive Arbitration Rules and Procedures.”   If neither an institution nor institutional rules are mentioned, the arbitration will be non-administered (ad hoc).
  4.  Choose rules to govern the arbitration in the case of a non-administered clause:  “The arbitration shall be governed by the UNCITRAL Rules.”
  5.  Decide between a sole arbitrator and a tripartite panel and specify the method of selection of the arbitrator(s), mindful of the default process contained in the designated rules in the event of a failure to agree: “Each party shall select an arbitrator (who shall serve as a neutral arbitrator as that term is used in the Revised Code of Ethics for Arbitrators in Commercial Disputes); the party-appointed arbitrators shall jointly select the presiding arbitrator.”
  6.  Specify the governing (substantive) law: “shall be determined by arbitration in Los Angeles, California, in accordance with the laws of the State of California for agreements made in and to be performed in California.”
  7.  Address the scope of discovery unless the (default) rules are acceptable to the parties.
  8.  Choose a venue for the arbitration:  “shall be determined by arbitration in Los Angeles, California…”

For more on Mr. Chernick’s discussion on designing the arbitration process, please read the full article from Law.com.