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ARBITRATION
A. Introduction
B. The Past Attitude of the Courts Towards Arbitration
Kulukundis Shipping v. Amtorg Trading
Rollings v. Thermodyne
Holder of patent on industrial water heater brought suit seeking declaratory judgment that
license agreement to manufacture heaters was terminated, and seeking to prohibit
manufacturer from making any more water heaters using patented design. SC HELD
THAT PRIVATE AGREEMENT TO SUBMIT THE FUTURE DISPUTES TO
STATUTORY ARBITRATION UNDER THE UAA DOES NOT VIOLATE SECTION
OF THE CONSTITUTION GRANTING RIGHT OF ACCESS TO COURTS, AND IS
ENFORCEABLE.
o Arbitration provision in patent license agreement to submit future disputes to statutory
arbitration under the OK UAA did not violate sections of the OK Constitution
guaranteeing access to courts, and prohibiting contractual waiver of constitutional rights;
statutory judicial review, thought limited, provides court access assuring that the contract
dispute will not be resolved in arbitrary unfair manner.
Note: arbitration clause did not violate constitution. Rationale - OK Art 2(6) courts shall
be open to every person. SC - Art 2(6) is not violated by the Arb. Act.
C. State versus Federal Law
Bernhardt v. Polygraph
Action for breach of employment contract. Contract was in N.Y., but employee moved to
Vermont. Does NY law apply because that is where contract was formed? Or Vermont,
or the Federal Courts because of diversity? It is a state issue because there is no
commerce. The SC never said whether it was NY or Vermont, just said that it was state.
Southland v. Keating
Litigation and arbitration can go on together.
(1) Does State law violate Federal law? (Ex. No FAA) - If State law does not violate
Federal law, then do state.
(2) Does it involve interstate commerce? If yes, then federal law b/c Commerce clause. -
FAA
Allied-Bruce Terminix v. Dobson
Homeowners brought action against termite control company under termite bond. The
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company moved to compel arbitration. SC HELD THAT FAA SECTION MAKING
ENFORCEABLE A WRITTEN ARBITRATION PROVISION IN A CONTRACT
EVIDENCING A TRANSACTION INVOLVING COMMERCE IS WRITTEN
BROADLY, EXTENDING ACTS REACH TO LIMITS OF CONGRESS
COMMERCE CLAUSE POWER.
o For purposes of FAA section making enforceable a written arbitration provision in a
contract evidencing a transaction involving commerce, the words involving commerce
are broader that the often-found words of art in commerce; therefore, they cover more
than only persons or activities within the flow of interstate commerce.
Note: Even though the customers not think it is commerce - it still is.
Lincoln Mills
Federal cts can fashion their own substantive law
Lucas Flour
D. Division of Authority Between Courts and Arbitrators
Ericksen v. 100 Oak Street
o Where leasess claim of substantive breach, that a/c did not perform properly, was
totally embraced within claim of fraud, that lessor knew, at time of lease, that a/c would
not perform, and parties agreed to arbitrate any dispute with respect to provision of lease
exclusive of those provisions relating to payment of rent, arbitration clause was broad
enough to include claim of fraud in inducement.
Note: The arbitration clause is severable from the underlying agreement.
o Doubts concerning scope of arbitrable issues are to be resolved in favor of arbitration.
County Mutual Insurance v. Kosmos
Under automobile liability policy providing for arbitration but only where parties disagree
over whether insured is legally entitled to recover damages from owner of uninsured
motor vehicle or amount of damages, only question of negligence and damages can be
submitted to arbitrator; questions of law or fact concerning coverage cannot, under that
clause, be submitted or arbitration.
There is no duty to arbitrate an uninsured motorist claim where it is clear as a matter of
law from the pleadings that there is no coverage.
E. Presumptions About Arbitrability
United Steelworkers v. American Manufacturing
Where collective bargaining agreement provided that employer would employ and
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promote employees on principle of seniority where ability and efficiency were equal, and
also provided a detailed grievance procedure including arbitration of all disputes as to
meaning, interpretation and application of agreement, and injured employee settled
workers compensation claim on basis of 25% permanent partial disability after which
employer refused to rehire employee, employer was required to arbitrate grievance filed by
union claiming employees right to re-employment on basis of seniority regardless of
whether court felt there was equity in claim.
Where collective bargaining agreement called for submission of all grievances to
arbitration, with no exception, then no exception should be read into the grievance clause.
Note: It was arbitrable - it has therapeutic values.
United Steelworkers v. Warrior & Gulf Navigation
Where collective bargaining agreement provided for a detailed grievance procedure and
stated that if differences arose or if any local trouble of any kind arose grievance
procedure including arbitration as ultimate step should be applicable, notwithstanding
inclusion of statement that matters which were strictly a function of management should
not be subject to arbitration, grievance arising because of employers action in contracting
out work previously done by employees was subject to arbitration, since phrase strictly a
function of management must be interpreted as referring only to that over which contract
gave management complete control and unfettered discretion.
Note: 1 pg 398.
Bowmer v. Bowmer
Husband sought downward modification of alimony he was required to pay under
separation agreement.
Separation agreement, incorporated but not merged in judgment of divorce, which
provided for arbitration of any claim, dispute or misunderstanding arising out of or in
connection with this Agreement or any matter herein made the subject matter of
arbitration,: did not confer authority upon the arbitrator to pass on husbands claim that
changed circumstances warranted a downward modification of agreements support
provision.
Note: give more - arbitration; give less - possibly review by courts.
F. Have the Parties Entered Into a Valid Agreement, and Are They Now Bound By It?
1. Does the Agreement Violate Public Policy?
Wilko v. Swan
Dean Witter Reynolds v. Byrd
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Arbitration Act requires district courts to compel arbitration of pendent arbitrable
claims when one party files motion to compel, even where result would be possibly
inefficient maintenance of separate proceedings in different forums.
You arbitrate the arbitrable claims, and litigate the non-arbitrable claims.
Sherk v. Alberto-Culver
Where American company purchased from German citizen European business
entities under contract which was negotiated in Europe and US, which was signed
and closed in Europe, and which provided that any controversy arising out of
agreement or breach thereof would be referred to arbitration before the
International Chamber of Commerce in Paris, the arbitration clause would be
enforced with respect to claims in suit by American company for damages and
other relief contending that sellers alleged fraudulent representations concerning
transferred trademarks violated antifraud provisions of 34 Act.
Refusal of arbitration in international setting would cause damage to international
commerce.
Mitsubishi v. Soler Chrysler-Plymouth
Antitrust dispute was subject to arbitration.
(1) Did parties agree to arbitrate this dispute?
(2) If yes, consider whether legal constraints external to the parties agreement
foreclosed the arbitration of those claims.
Shearson/Amex v. McMahon
Customers brought tort, securities fraud, and RICO claims against broker. SC
Hell that claims under 10(b) were arbitrable under predispute arbitration
agreements.
Rodriguez v Shearson/Amex (overruled Wilko)
Securities investors brought actions against brokerage firm and others for
violations of 33 Act and 34 Act. SC Held: that predispute agreement to
arbitrate claims under the Securities Act was enforceable.
Doctors Associates v. Casarotto
Dispute under standard form franchise agreement. Montana law - 1st page; FAA -
any page.
Montana statute which conditioned enforceability of arbitration agreements on
compliance with special notice requirement that was not applicable to contracts
generally was preempted by FAA with respect to arbitration agreements covered
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by FAA; state statute required that arbitration clause be printed on first page in
underlined capital letters.
Fahert v. Faherty
Same as Bowmer.
SC Held: (1) parties may bind themselves in separation agreements to arbitrate
disputes over alimony; (2) better practice is for arbitrator in domestic dispute
arbitration to make reasonably detailed findings of fact upon which he bases
arbitration award; (3) child support portion of arbitrators award was not
subject to heightened scrutiny, beyond that provided by statute, in order to
protect interests of children, as award enforced their fathers claim of
changed circumstances; and (4) there was no reason to vacate or modify award
on ground that arbitrator so exceeded or so imperfectively executed his powers
that a mutual, final and definite award upon subject matter submitted was not
made.
2. Adhesion Contracts and Unconscionability
Graham v. Scissor Tail
If K is unconscionable, then NOT severable - throw it out. (No arbitration).
3. Waiver
United Nuclear v. General Atomic
For purposes of determining whether there was waiver of arbitration, it must
appear that delay in requesting arbitration was an intentional relinquishment of
right to arbitrate; such action inconsistent with its right to demand arbitration, and
for such purposes, it is the objective manifestation of intent upon which the
opposing party may rely.
Party to lawsuit who claims a right to arbitrate must take some action to enforce
such right, and such action must be taken within a reasonable time after suit is
filed.
In order to assert any right to arbitration under FAA, it was mandatory that party
make demand for arbitration and make application to TC for stay in proceedings at
which time court would have been obligated under federal law to determine
whether party was in default of demanding arbitration.
SC Held: Evidence was sufficient to support finding that purchasers default in
demanding arbitration caused material prejudice to supplier. (They didnt even ask
for it.) - Look at intentions of parties.
G. The Arbitration Agreements Effect on Third Parties (skip)
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H. The Arbitration Proceeding
1. Selection of the Arbitrator
Board of County Commissioners v. Central A/C
Two neutral arbitrators, remaining after the third neutral arbitrator died before
closing arguments and deliberations in the arbitration proceeding, had power to
continue the arbitration proceeding and determine the controversy, where contract
between the parties incorporated an arbitration rule providing that the remaining
arbitrators may continue the hearing and determine the controversy unless the
parties agree otherwise, and the parties had not agreed otherwise.
Amalgamated Meat Cutters v. Penobscott Poultry
Employer did not select an arbitrator as provided in contract, or even show up.
Too bad for him.
SC Held: the fact that employer did not participate in arbitration did not render
award unenforceable, where arbitration provision stated that disputes should be
submitted to third party, or to State Board of Arbitration, and union followed this
contract procedure.
2. Provisional Remedies in Aid of Arbitration
a. Attachment
Cooper v. Ateliers
Ex parte order of attachment of debt owed by New York corporation to
defendant French corporation, obtained by plaintiff when he commenced an
action against defendant for money judgment, WAS IMPROPER, SINCE
UNDERLYING DISPUTE BETWEEN PARTIES INVOLVED THEIR
OBLIGATIONS UNDER CONTRACT WHICH PROVIDED THAT
DISPUTES WERE TO BE RESOLVED BY ARBITRATION.
SC - first go to arbitration and get award, THEN come to us.
b. Injunctions
Boys Markets v. Retail Clerks Union
UPS v. Intl Teamsters
3. Subpoena and Discovery
Wilkes-Barre Publishing v. Newspaper
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Plaintiffs grievance dispute against defendant union was being carried out
smoothly until the arbitrator issued 6 subpoenas duces tecum to plaintiff to
produce various documents at next hearing. Plaintiff refused, and union brought
motion to enforce the subpoenas in court.
Issue: Are the subpopenas enforceable in an arbitration proceeding? YES.
Held: Section 301 of the Labor Management Relations Act gives authority to
arbitrators to issue subpoenas in appropriate circumstances. The parties are not,
however, entitled to unlimited discovery - only those materials the arbitrator feels
he must consider in resolving the issues presented to him.
Chesapeake and Potomac Telephone v. NLRB
o Employers duty to produce information relating to grievance survived union
arbitration demand.
o Unions right to request information prior to arbitration of grievance can be
waived; however, national labor policy disfavors waivers of statutory rights by
unions, and thus unions intention to waive right must be clear before claim of
waiver may succeed.
4. The Hearing
a. In General
Mikel v. Scharf
o In an arbitration proceeding by a religious tribunal, the tribunal could not
preclude the respondents from bringing their attorney or deny respondents
the right to present evidence and the right to cross-examine, and that
failure to observe statutory procedure was prejudicial, precluding
confirmation of the award.
b. Adjournment
Tube & Steel Corp v. Chicago Carbon Steel Products
o Where respondent advised arbitration association that date of Aug 17
was acceptable for hearing on commercial claim and advised association
that he could not appear before week of Aug 17, but association set
hearing for Aug 10, arbitrators, in ignoring communications of respondent
and agreeableness of petitioner to week of Aug 17 for arbitration and
insisting on proceeding on Aug 10 with respondent absent were guilty of
behavior which unfairly and unnecessarily prejudiced rights of the
respondent.
c. Notice
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Casualty Indemnity Exchange v. Yother
o An appraisal is distinguishable from arbitration and is not subject to
various procedural requirements imposed upon the arbitration process.
o Whether procedures required are those of arbitration or of an appraisal
must be determined from intent of the disputants or from the character of
the questions and issues to be answered, or both.
o The trial court did not err is setting aside appraisal award made by
umpire in dispute between truck insurer and insured concerning loss of
truck tractor, since insured was denied opportunity to offer testimony or
other evidence of condition and value of his tractor at time of loss, and no
hearing was conducted in violation of policy provision providing for
arbitration, the umpire alone making the award without notice to the
insured, without a hearing, and without any evidence, notwithstanding the
fact that neither policy provision nor agreement to submit appraisal issue to
umpire expressly provided for notice to the parties.
P.J. ONeill v. Public Law Board
o Right of individual grievants to be present for prosecution of their
grievances was a basic, fundamental right secured by national labor law
(statutory law, not due process).
d. Presence
United Mine Workers v. Consolidated Coal
Union sought to have employer coal company temporarily restrained from
excluding individual grievant from being present for prosecution of their
grievances involving vacation scheduling.
o Right of individual grievant to be present for prosecution of their
grievances as a basic, fundamental right secured by national labor law.
Demings v. City of Escorse
Police/Detective promotion.
o Public employees union is granted same power of exclusive
representation by Public Employment Relations Act as is granted unions in
private sector by National Labor Relations Act.
o Power of exclusive representation implies duty to represent fairly.
o Where duty of public employees union of fair representation is breached,
the aggrieved party has a cause of action.
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o Where police officer was claiming that city breached its contract with
him, his claim of union[s bad faith representation precluded city from
barring his claim by relying on officers failure to pursue exclusive
grievance procedures under collective bargaining contract.
e. Counsel
1) Presence of Counsel
Seymour v. Olin Corp.
o Evidence that, after employee was discharged, he retained
counsel and that, when the union learned that he had hired an
attorney, the officials made no inquiry as to how he intended to use
the attorney but instead insisted that the union would not represent
him in grievance procedures unless he fired his attorney, sustained
finding that union breached its duty of fair representation.
2) Effective Assistance of Counsel
Hines v. Anchor Motor Freight
f. Evidence
Hall v. Eastern Airlines
Emporium Department Store
Karppinen v. Karl Kiefer Machine
5. The Arbitrator
a. Conflict of Interest
Commonwealth Coatings Corp. v. Continental Casualty Co
Merit Ins v. Leatherby Ins.
Morris v Metriyakool
6. Judicial Review of Arbitration Awards
United Steelworkers v. Enterprise Wheel
United Paperworkers Union v. Misco
Connecticut Light & Power v. Union
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Sobel