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Showing 17 posts in Arbitration.
Texas Strictly Construes Application of Mandatory Arbitration Clause Despite Superseding Agreement With No Such Clause
We’ve written frequently about the long-standing practice in the corporate world of including mandatory arbitration clauses in employment contracts. Specifically, we’ve pointed out that although the practice may make sense for the employer when it comes to deterring potentially costly lawsuits brought by employees, those equities can shift when it concerns upper-level executives who generally have more means and wherewithal to fight a prolonged legal battle, be it in court or in front of an arbitrator.
In those cases – what we here at Suits by Suits consider our bread-and-butter cases – the employer may want to think twice about binding arbitration due principally to the risks of being stuck with an almost entirely unappealable adverse ruling; we’ve previously discussed how this has turned out poorly for employers such as Merrill Lynch and BDO.
Today, we continue to beat the drums of caution for both sides in our examination of a recent Texas appellate decision that makes it clear that many courts are looking for any way to kick a case out of the legal system in favor of arbitration. Read More ›
There’s a famous aphorism in journalism: “When a dog bites a man, that is not news, because it happens so often. But if a man bites a dog, that is news.”
The same is true of arbitration awards. When a federal court confirms an arbitration award, it isn’t newsworthy, because that’s what everyone expects will happen. But when a court tosses an arbitrator’s decision, it creates headlines.
On October 28, the Fourth Circuit made news by vacating an arbitration award issued to a former employee of an accounting firm. Kiran M. Dewan, C.P.A., P.A. v. Walia, No. 12-2175 (4th Cir. 2013). The former employee (Walia) was a native of Canada on a work visa who joined the Dewan firm as an accountant. When he was terminated, he signed a release in which he gave up any tort or contract claims he had against the company in exchange for a payment of $7,000. Three months later, the firm filed an arbitration against Walia, alleging that he had violated noncompete and nonsolicitation provisions in his employment agreement. Walia filed counterclaims alleging that the firm underpaid him in violation of visa regulations, breached his employment agreement, and fraudulently sought to withdraw its sponsorship of his visa. The arbitrator found that Walia’s release was legally enforceable, but also found that Dewan (the president of the firm) brought baseless claims and purposely sought to injure Walia’s immigration interests. As a result, the arbitrator awarded Walia over $450,000.
In the build-up to its decision, the Fourth Circuit recognized the dog-bites-man principles of confirming arbitration awards. It wrote that under the Federal Arbitration Act, “the scope of judicial review for an arbitrator’s decision is among the narrowest known at law because to allow full scrutiny of such awards would frustrate the purpose of having arbitration at all—the quick resolution of disputes and the avoidance of the expense and delay associated with litigation.” The Federal Arbitration Act and the common law only allow an arbitration award to be vacated when
- the award was “procured by corruption, fraud, or undue means”;
- there was “evident partiality or corruption” in the arbitrators, or either of them;
- the arbitrators “were guilty of misconduct”;
- the arbitrators “exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made”; or
- “an award fails to draw its essence from the contract, or the award evidences a manifest disregard of the law.”
In other words, to vacate an arbitration award, a party must show that the winning party bought the award; the arbitrators were crooked or obviously biased; the arbitrators botched the arbitration to such a degree that a final and definite award wasn’t even made; or the arbitrators didn’t follow the contract at issue and/or disregarded binding law. Read More ›
That’s a straightforward question, and the Virginia Supreme Court has given a rather straightforward answer: yes.
The question came up in Schuiling v. Harris, which we noted as coming over the transom but bears a little more scrutiny. Initially, let’s set aside some of the curious facts about this case. It’s not too curious that the plaintiff, William Schuiling -- owner of a collection of car dealerships in Virginia -- hired a housekeeper, Samantha Harris. It is a bit unusual, however, that Schuiling had his housekeeper sign an arbitration agreement as part of her employment – and that the agreement only addressed arbitration, and no other conditions of employment, such as how socks were to be folded or dusting the ceiling fans. It’s also odd that whatever happened in the employment relationship between Schuiling and Harris was pretty serious: it led Ms. Harris to file a “10-count complaint against Schuiling alleging multiple torts, statutory violations, and breach of contract,” as the Virginia Supreme Court explained – giving no details of the underlying allegations. Read More ›
Former CEO of BDO Is Stuck with Arbitrator's Decision That BDO Does Not Have to Indemnify Him in Criminal Case
Earlier this week, a New York state court declined to second-guess an arbitrator’s decision that BDO, USA does not have to indemnify or pay the legal bills of its former CEO, Denis M. Field, in his criminal case.
As we have noted here before, the first battle in a legal dispute between a company and its former executive is often over whether the dispute will be decided by a judge (and, ultimately, a jury) or a private arbitrator. Field v. BDO underscores why the stakes for that battle are so high: if you don’t like the arbitrator’s decision, you almost certainly will be stuck with it. That’s because the standard that courts apply in reviewing arbitrators’ decisions – even decisions about what the law requires – is a very forgiving standard. By contrast, the standard that appellate courts apply in reviewing trial judges’ decisions is less forgiving, which means that losers in the courts have a better shot at reversing decisions they don’t like than losers in arbitration. Read More ›
Arbitration Clauses, State Law and Choice of Law: What May Fly for Halliburton in Texas Does Not Fly in New Mexico
We have had an ongoing conversation at Suits by Suits about the rapid proliferation of mandatory arbitration clauses in employment contracts, from the top of the company on down. In April, we noted that one of employees’ chief strategies in trying to defeat a mandatory arbitration clause is to argue that the clause is unfair or, in legalese, “unconscionable.” If an arbitration provision is drastically unfair to the employee, a court can strike it down under the doctrine of “unconscionability,” which permits a court to throw out a contractual provision that is so one-sided as to be “shocking to the conscience.”
The thing is, what is palatable under state law in one place may shock the conscience under state law in a different state. Read More ›
California Strikes Down An Employee’s Agreement to Arbitrate on Substantive Unconscionability Grounds (As “One-Sided”)
One of the most important trends in the relationship between employers and employees is the proliferation of mandatory arbitration clauses in the employment contract. In particular, we’ve noted that once an employment contract contains an agreement to arbitrate, courts frequently send non-contractual claims to the arbitration forum as well under the theory that such claims “arise out of” the employment agreement.
Because arbitration is generally perceived as being employer-friendly – although we’ve cautioned employers that isn’t always the case – employee plaintiffs are on the lookout for ways to convince a court that their arbitration clauses should not apply.
One approach is for the employee to argue that the employer has waived his or her right to arbitrate because the employer has “acted inconsistently” with the right to arbitrate claims. We looked at the legal basis for this argument (as well as indulged in some trash TV) in a two-part series just a few months ago. (Part one, Part two)
Another approach is for plaintiffs to challenge the clause as unfair. The argument goes something like this: for many employees – although typically not executives – the employment contract is presented on a “take it or leave it” basis; that is, it is a contract of adhesion over which the employee has little to no ability to negotiate particular provisions. Accordingly, if an arbitration provision is drastically unfair to the employee, the court can strike it down under the doctrine of “unconscionability,” which permits a court to throw out a contractual provision that is so one-sided as to be “unusually harsh and shocking to the conscience.”
Dig down and find the employee handbook that’s likely buried in there. There’s a good chance you got this on your first day of work, put in in the drawer, and haven’t looked at it since. But move those ketchup packets aside and pull it out, because the question for today is: does that book form a contract between you and your employer (or you and your employees, if you’re the owner of the business)? Read More ›
Sometimes, It Pays To Be A Bad Sport: California Court Finds That Employee Who Deceived Her Employer About Having Signed An Arbitration Agreement Cannot Be Compelled To Arbitrate
We have written previously about litigants’ attempts to compel arbitration under a theory of “equitable estoppel.” For example, last July we discussed the move by Silicon Valley venture capital firm Kleiner Perkins to force its former partner, Ellen Pao, to arbitrate their sexual harassment dispute on the theory that, despite the absence of an agreement to arbitrate between the parties, it would be inequitable to allow Pao to avoid arbitration. Although the trial court rejected this argument, Kleiner Perkins appealed and is awaiting a decision.
Since then, the issue of equitable estoppel has cropped up again in the California courts. Just last week, in a decision that may have ramifications for Pao and Kleiner Perkins, the California Supreme Court declined to review (subscription required) a decision by a California appeals court affirming the denial of The Sports Club Company’s motion to compel arbitration against its former employee, Susan Gorlach. Read More ›
This week, our search for intriguing precedent has taken us all the way to the County of Lewis and Clark, Montana, and the case of Shannon Marsden.
Marsden, an employee of Blue Cross Blue Shield Montana (“BCBSMT”), had an employment agreement with a clause that required arbitration of any dispute arising under it. The agreement was for a two-year term, but provided that Marsden could be fired if the president of the company “believed that it would be in the best interest of BCBSMT.”
After BCBSMT terminated Marsden’s employment, she brought a claim under Montana’s Wrongful Discharge from Employment Act (“WDEA”), alleging that she was fired because she reported illegal rebates of insurance commissions.
However, Marsden’s claim came with a catch. Read More ›
Legal Lessons From the World of Reality TV: Waiving A Contractual Right To Arbitrate An Employment Dispute (Part 2 Of 2)
In our last installment, we described a dispute between CBS, on the one hand, and three former producers of the CBS show Big Brother, on the other, in which the former producers argued that CBS had waived its contractual right to arbitrate by spending months pursuing litigation against the former producers before demanding arbitration. Because many employment contracts have mandatory arbitration clauses, the possibility of waiver must be on the radar screens of parties to an employment dispute. We discussed the flipside of this issue, arbitration by estoppel, in July.
The threshold question is whether the party seeking arbitration acted inconsistently with the right to arbitrate. Read More ›