When I wrote Friday’s “Highlights,” I forgot that courts were closed on Monday for Presidents’ Day. As a result, there were not enough decisions to make a Monday posting worth your reading. So, a little catchup today
Arbitration as res judicata
Two cases reach different results on the preclusive effect of a prior arbitration.
In Bell v. SL Green Realty Corp., 2021 U.S. Dist. LEXIS 26570 (S.D. N.Y. Feb 11, 2021), a pro se plaintiff sued alleging violations of Title VII arising out alleged discrimination and termination based upon her national origin. She had previously filed a charge with the NLRB alleging essentially the same acts, but characterizing them as violations of the National Labor Relations Act. The arbitrator found no NLRA violation and specifically held that the Plaintiff’s discharge was for ‘just cause.” While plaintiff pursued a separate National Labor Relations Board claim up to the Second Circuit, neither party took any judicial action regarding the arbitrator’s award. In support of its motion to dismiss, SL Green argued that the court should give res judicata effect to the “just cause” holding of the arbitration. The court, Schofield, J., holds that the arbitrator’s decision is not entitled to preclusive effect, as it was “not appealed and confirmed by any court.” She relies upon McDonald v. City of West Branch, 466 U.S. 284 (1984), which held that an arbitral decision under a collective bargaining agreement did not bar a subsequent civil rights action under 42 U.S.C. §1983. SCOTUS based its decision on two principal grounds. First, reliance on the results of a grievance under a collective bargaining agreement interferes with the legislation’s intent to provide a judicial remedy unimpacted by the quality of union representation. Second, an arbitrator may lack abilities necessary to resolve statutory issues. As Justice Brennan opined in McDonald, “an arbitrator’s expertise ‘pertains primarily to the law of the shop, not the law of the land.’ [citation omitted] An arbitrator may not, therefore, have the expertise required to resolve the complex legal questions that arise in §1983 actions.” (As an arbitrator, I respectfully dissent).
Spivak v. Alphabet, Inc., 2021 U.S. Dist. LEXIS 27468 (W.D. Wash. Feb. 12, 2021) reaches the opposite result on preclusion. There the plaintiff alleged that she had been discriminated against in her employment because of pregnancy and gender. Acting pro se, she commenced an EEOC proceeding and, after receiving a Notice of Right to Sue, an arbitration. At the Plaintiff’s request, the Arbitration was dismissed with prejudice. During the arbitration, she made claims that Google was engaging in misconduct in the proceedings and she sought sanctions, which the arbitrator denied. The arbitrator, in fact, imposed $12,500 in sanctions against Spivak, which Google waived when the case was dismissed. In this case, Spivak asserts claims similar to those which were arbitrated, claiming Google’s alleged intimidation of witnesses, submission of false evidence, and misrepresentations of fact. The court, Pechman, J., holds that Plaintiff’s claims are precluded by the arbitrator’s findings that Spivak’s claims of misconduct by Google lacked merit. The court opines that, since the parties to the arbitration and the litigation are the same and the dismissal with prejudice constituted a final judgment, the only issue for her consideration is whether the issues are identical. After a recitation of Spivak’s unusual claims against Google, the court holds that “Spivak raised or could have raised these issues or complaints during the arbitration. Indeed, the Arbitrator considered and rejected all of the claims she did raise and sanctioned her for making many of the same assertions she makes here.” In addition, the court holds that, to the extent that the litigation might be interpreted as an action to vacate the award, it is barred by the three-month time limit in Section 12 of the Federal Arbitration Act. The court dismisses Plaintiff’s claims as related to arbitration misconduct.
The two cases may be harmonized based upon the source of the arbitrators’ authority. In Spivak, the arbitrator apparently acted pursuant to Spivak’s employment agreement with Google/Alphabet; in Bell, the arbitration grew out of a collective bargaining agreement. Thus, if McDonald is limited to collective bargaining cases, the two cases do not conflict. However, the cases are irreconcilable to the extent that Bell holds that court confirmation is always necessary to establish preclusive effect.
“Your flight has been cancelled”
In the age of COVID 19, many, if not most, of us have been faced with cancelled flights. Rudolph v. United Airlines Holdings, Inc. 2021 U.S. Dist. LEXIS 27795 (N.D. Ill. Feb. 12, 2021) raises an interesting issue related to the applicability of arbitration clauses to the resolution of those disputes. Mark Hansen, a plaintiff in the action, had booked tickets from Vancouver to Costa Rica via Houston through the Expedia travel site. Ultimately, United cancelled the flights. Hansen sought a refund, but, relying on its Conditions of Carriage (“COC”), which govern the parties’ contractual relationship, United offered only a travel credit. Hansen sued and United sought to compel arbitration. The parties agreed that the United Airlines COC did not contain an arbitration clause. However, since Hansen had booked his flight through Expedia, United maintained that it could rely upon an arbitration clause in Hansen’s agreement with Expedia which purported to cover disputes between Hansen and “[Expedia], [its] subsidiaries, travel suppliers, or other companies offering products or services through us (which are beneficiaries of this agreement).” (Emphasis added).
What might otherwise be simple case of a third-party’s right to enforce an arbitration clause becomes complicated because of federal regulations covering commercial air travel. DOT regulations provide:
No carrier may impose any contract of carriage provision containing a choice-of-forum clause which attempts to preclude a passenger. . . from bring a claim against a carrier in any court of competent jurisdiction. . . .
14 C.F.R. § 253.10.
United conceded that the regulation prohibits an airline from including an arbitration clause in its COC, but relied upon rights as a beneficiary of Hansen’s Expedia contract. The court , Durkin, J., rejects this “attempted end-run around the regulation.” Distinguishing Ward v. American Airlines, Inc. 2020 U.S. Dist. LEXIS 249511 (N.D. Tex. Nov. 2, 2020) (ordering arbitration of a similar claim), the court opines that “the court agrees with Mr. Hansen that United should not be permitted to do indirectly that which federal regulations prohibit it from doing directly, particularly given the regulation’s purpose to provide protections to consumers.” The court dismisses United’s motion to stay the litigation pending arbitration. Hansen’s win on the arbitration issue is somewhat Pyrrhic, though, as the court dismisses those portions of his claims which relate to flights in and out of Costa Rica, as its borders were closed and “no reasonable air carrier would agree to transport an American citizen and resident under those circumstances, where he would not be permitted entry on arrival.” Accordingly, the COC’s provisions requiring only a flight credit where a flight is cancelled because of a “Force Majeure Event” authorized United’s denial of a refund for the cost of that portion of Hansen’s flight.
Railway Labor Act disputes
Under the Railway Labor Act, “minor” claims are subject to arbitration between the parties, while a Union may bring litigation upon “major” claims. As BLET GCA UP, Central Region v. Union Pacific Railroad Company, 2021 U.S. App. LEXIS 4089 (7th Cir. Feb. 12, 2021) points out, that distinction has nothing to do with the size of the dispute, but rather whether it relates to contract interpretation or application, a “minor” dispute, or contract formation, a “major” dispute. The court, Scudder, C.J., writing for himself, Chief Judge Sykes, and Judge Brennan, holds that a dispute between the railway and the Brotherhood regarding changes in attendance policy is a minor issue and affirms the District Court’s dismissal of the Union’s action. In fact, the court is so sure that the litigation is foreclosed by SCOTUS precedent, see Consolidated Rail Corp. v. Railway Labor Executives’ Association, 491 U.S. 299 (1989), that it imposes sanctions on the Brotherhood under Fed. R. App. P. 38 for a frivolous appeal.
Exhaustion of remedies
In another labor case, this one related to an individual’s rights under a collective bargaining agreement, Trinidad v. School City of East Chicago, 2021 U.S. Dist. LEXIS 27759 (N.D. Ind. Feb. 12, 2021), the court dismisses a teacher’s breach of contract claim, alleging that the East Chicago School System fired her in retribution for her complaints about her school’s environmental conditions. Since Plaintiff did not file a grievance under the CBA, the court, Moody, J., dismisses her claim for failure to exhaust administrative remedies. The case is also interesting for its discussion of whether failing to exhaust is a jurisdictional defect under federal law and what constitutes a waiver of such a defense.
Dismissal for failure to pursue arbitration
On June 6, 2018, the court in Smith v. RGIS, Inc., 2021 U.S. Dist. LEXIS 27336 (W.D. Pa. Feb. 11, 2021) granted Defendant’s motion to compel arbitration under RGIS’s “Dispute Resolution Program.” Plaintiff did not commence arbitration, and, on January 15, 2021, Defendant moved to dismiss this case for lack of prosecution. On February 10, 2021, Plaintiff filed a notice that “Plaintiff’s counsel will not be filing a response in opposition to the Motion to Dismiss.” Magistrate Judge Lenihan goes through the six factors to be considered in evaluating a motion to dismiss set forth by the Third Circuit in Poulis v. States Farm Fire & Casualty Co., 747 F.2d 863 (3rd Cir. 1984) – the party’s personal responsibility, prejudice to moving party from the delay, any history of delay, willfulness, the effectiveness of other sanctions, and the merit of the non-moving party’s claims. Evaluating each of those to favor in dismissal, she recommends that the court grant the motion to dismiss.
To those of you hit by the ice storms across the country, be careful and safe. The Northeast may be spared from this one.
See you Friday.
David A. Reif