Source: https://www.zuckerman.com/news/blog?tags=327
Timestamp: 2019-04-19 06:26:16+00:00

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Companies and individuals frequently enter into arbitration agreements requiring that claims be brought before a private arbitrator, rather than a judge and jury. Arbitration has various benefits: it can provide quicker resolutions, reduced costs, the right to participate in the selection of the arbitrator, and arbitral expertise. In addition, some parties prefer arbitration because it offers a cloak of confidentiality that does not exist in the state and federal courts.
A fundamental principle of contract law is that a written contract is an agreement in writing that serves as proof of the parties’ obligations. What happens, however, when the parties forget some of the niceties of formalizing a written contract?
For one answer, consider the recent decision in the case of Shank v. Fiserv, Inc., in which the Eastern District of Pennsylvania addressed Fiserv’s motion to dismiss and compel arbitration at the outset of the case.
Last summer, we covered in depth the resounding repercussions from American Apparel’s decision to terminate its CEO and founder, Dov Charney. Now, the sequel has arrived – and it promises lots of action.
Matt Townsend of Bloomberg Business reports that Charney has resumed his arbitration against his former employer, in which he is seeking $40 million from the clothing company. Charney previously agreed to put his claims on hold while American Apparel made its final decision about whether to terminate him. After an investigation, the board decided in December to cut Charney loose.
Silicon Valley is buzzing about the trial in Ellen Pao v. Kleiner Perkins Caufield and Byers LLP, which got underway on Tuesday. According to USA Today, a UC-Berkeley professor says that you “can’t be within a stone’s throw of the Valley without hearing” about the case.
Pao’s allegations are explosive. She contends that she had a brief affair with a married junior partner who continued to harass her after she broke off their relationship. Her claims about the firm go deeper than just this harassment; she contends that the firm had an overarching culture of discrimination against women, culminating in her dismissal in October 2012.
A-Rod, Part III: What About 60 Minutes?
If you’re following our coverage of the Alex Rodriguez story at all (See our Part 1, a general primer; and Part 2 on the specifics of the 162-game suspension), you probably watched last night’s 60 Minutes, which contained interviews with Tony Bosch of Biogenesis, who claims that he personally administered banned Performance Enhancing Substances to Alex Rodriguez; MLB executive Rob Manfred; and one of Alex Rodriguez’s attorneys, Joseph Tacopina, Esq.
MLB's post-decision rush to the media is inconsistent with our collectively-bargained arbitration process, in general, as well as the confidentiality and credibility of the Joint Drug Agreement, in particular. After learning of tonight's "60 Minutes" segment, Players have expressed anger over, among other things, MLB's inability to let the result of yesterday's decision speak for itself. As a result, the Players Association is considering all legal options available to remedy any breaches committed by MLB.
Let’s evaluate those two arguments.
Via a statement released earlier today, A-Rod says that he and his lawyers are headed to federal court. What awaits him there? To understand that, we need to understand the legal landscape that applies to major league baseball players.
The relationship between Alex Rodriguez, the New York Yankees, and MLB is governed by the Basic Agreement, a contract that was negotiated in 2012 between the existing MLB teams and the players’ union, called the Major League Baseball Players Association (“MLBPA”). The current Basic Agreement runs until 2016, at which point the union and MLB will sit down and collectively bargain for a new one.
Under the Basic Agreement, disputes between a player and his team are governed by Article XI (the “Grievance Procedure”). Id. at 38. Those disputes, in turn, are ultimately settled by arbitration pursuant to XI.B. Id. at 44. The Basic Agreement provides that the “decision of the Arbitration Panel shall constitute full, final and complete disposition of the Grievance appealed to it.” Id.
That’s where we are now; A-Rod has followed the Grievance procedures and has now obtained a “full, final and complete disposition” of his Grievance, reducing his suspension from 211 to 162 games. How does he get from there into federal court?
The answers are two-fold: first, because the Basic Agreement is a product of private collective bargaining, it is subject to the federal Labor-Management Relations Act, which in turn provides for federal jurisdiction over disputes regarding rights created by or substantially dependent upon a collective bargaining agreement (such as the Basic Agreement). 29 U.S.C. § 185(a); see also Caterpillar, Inc. v. Williams, 482 U.S. 386 (1987). So that means A-Rod can file suit in federal court based on federal law, regardless of what the Basic Agreement or any state laws happen to say.
9 U.S.C. § 10(a). If you want to skip to the punch line, our own Jason Knott summarized it perfectly a few months ago: “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.” So why exactly does A-Rod face such an uphill scenario?
The biggest reason isn't what the FAA says; it's what it doesn't say. Note that those four statutory grounds for reversing an arbitration award do not include “mistake of law” or even “gross mistake of law.” They don’t include incompetence, stupidity, or carelessness. As the U.S. Supreme Court has noted, when a collective bargaining agreement specifies that an arbitrator’s award is “final,” a court may not evaluate whether the arbitrator applied “correct principles of law” or not. United Steelworkers of America v. Enterprise Wheel & Car Corp., 363 U.S. 593, 598-99 (1960). Thus, even if the arbitrator had no basis for imposing a 162-game suspension on A-Rod, that fact standing alone would not be sufficient to permit a federal court to overturn the arbitration award under the FAA.
We do not yet know what transpired during A-Rod’s arbitration. But what we do know is that, if Rodriguez is going to prevail in federal court, he’s almost certainly going to need to show that the process itself was unfair in some way. Maybe he can do this; perhaps there were key pieces of evidence that the arbitrator refused to admit (9 U.S.C. § 10(a)(3)). So far, however, A-Rod’s allegation is that the arbitrator “blatantly disregarded the law and the facts.” That allegation – even if true – is probably not enough for him to succeed in overturning the arbitration award.
As more details are forthcoming – and if Alex Rodriguez and/or his lawyers detail allegations that fit more closely within the four grounds set forth for vacatur under the FAA – we’ll continue to update and evaluate.
More on A-Rod: How Did The Arbitrator Pick 162, Anyway?
Q: How does the arbitrator have the authority to impose a 162-game suspension on A-Rod? Doesn’t the Joint Drug Agreement (titled “Major League Baseball’s Joint Drug Prevention and Treatment Program” and referred to as the “JDA”) specify that the punishment is a 50-day suspension for a first offense and 100 days for the second?
A: Sort of. Section 7.A. of the JDA provides that a player who “tests positive for a Performance Enhancing Substance, or otherwise violates the Program through the use or possession of a Performance Enhancing Substance, will be subject to the discipline set forth below,” and those punishments are the ones you see quoted in popular sports media; i.e., 50 days for a first offense, 100 for a second, and a “permanent suspension” from MLB subject to the right to apply for reinstatement for a third. Id. at 22 (emphasis added). There’s also a catch-all provision, Section 7.G.2, which provides that any player “may be subjected to disciplinary action for just cause by the Commissioner for any Player violation of Section 2 not referenced in Section 7.A through 7.F above,” and Section 2 in turn covers all Prohibited Substances. Id. at 25.
But let’s assume A-Rod made that argument to the arbitrator and lost. Now the question is: what must the arbitrator do with it? The arbitrator’s authority to address grievances comes from Article XI of the Basic Agreement, as previously discussed. Subsection B, in turn, provides that the arbitrator, after hearing all evidence and argument relating to any grievance, “may affirm, modify, or reverse the decision from which the appeal is taken.” Id. at 44. MLB’s decision was to suspend A-Rod for 211 games, and the arbitrator thus modified it downward to 162 games. A-Rod is free to argue that the arbitrator’s decision to do so was erroneous (or even arbitrary); I’ve already explained why that’s not likely to be a winning argument.
Could A-Rod characterize an argument that the arbitrator “exceeded [his] powers” in imposing a 162-game suspension in light of Section 7.A of the JDA? He could, but in my experience, courts have generally not been receptive to such an argument. See, e.g., Certain Underwriters at Lloyd’s, London v. Ashland, Inc., 967 A.2d 166 (D.C. 2009). The bottom line is that even if the arbitrator disregarded the 50/100/lifetime structure set out in the JDA, that fact standing alone is unlikely to provide grounds for reversal of the award by a federal court.
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.
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 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.
October 2, 2013 | William A. Schreiner, Jr.
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.
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.
The thing is, what is palatable under state law in one place may shock the conscience under state law in a different state.
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.
The latter approach is vividly illustrated by a recent California appellate decision, Compton v. American Management Services.
Take A Close Look At That Employee Handbook...At Least In D.C.
February 5, 2013 | William A. Schreiner, Jr.
Before you read this, go ahead and open your desk drawer. Look beyond what may be some rather odd contents, and the fact that those contents may speak volumes about you.
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)?
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.
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.
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.
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.

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