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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 ISENFORCEABLE.

oArbitration 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 CONGRESSCOMMERCE CLAUSE POWER.

oFor 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

oWhere 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.

oDoubts 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 whichemployer 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 andstated 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. BowmerHusband 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. CasarottoDispute 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. FahertySame 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 notmade.

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, andfor 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/CTwo 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 anaction 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.

oUnions 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

oIn an arbitration proceeding by a religious tribunal, the tribunal could notpreclude the respondents from bringing their attorney or deny respondents

the right to present evidence and the right to cross-examine, and that

failure to observestatutoryprocedure 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.

oWhether 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.

oThe 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 thefact 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

oRight 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 fromexcluding individual grievant from being present for prosecution of their

grievances involving vacation scheduling.

oRight 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.

oPower 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 exclusivegrievance 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, sustainedfinding 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