The Northern District of Texas has held the mandatory arbitration mechanism of the Railway Labor Act (RLA) preempted a grievance which required interpretation of a collective bargaining agreement (CBA), but did not preclude claims which were independent of the CBA. In CareFlite v. AFL-CIO, No. 4:07-CV-334-Y, (N.D. Tex., February 11, 2011), CareFlite, a medical transportation company, sought summary judgment on two counts of the Office and Professional Employees International Union, AFL-CIO (“the Union”) and Craig Hilton’s Amended Counterclaim. The dispute arose out of CareFlite’s discharge of Hilton, a pilot represented by the Union. In 2006, Hilton was discharged by CareFlite and filed a grievance with the Union. Although Hilton was reinstated, he was again discharged in 2007 for failing to complete a required training certification within one year as required by a CBA between CareFlite and the Union. Hilton then filed another grievance with the Union. Previously, the United States Court of Appeals for the Fifth Circuit held that the grievance concerning Hilton’s discharge was not subject to the RLA’s mandatory arbitration mechanism because the CBA explicitly excluded the claim. More information on the history of the case is available here. Because Count I was previously resolved by the Fifth Circuit, the Northern District of Texas only addressed Counts II and III of Hilton and the Union’s Amended Counterclaim. In the relevant portion of Count II, the Union alleged “that CareFlite breached the CBA when it discharged Hilton.” According to the court, the question of Hilton’s discharge was, preempted by the RLA because it grows out of an interpretation of the CBA and centers over the meaning of the CBA. Indeed, without the CBA, Count II would not exist. Nevertheless, Hilton and the Union argue that the Court should hear the merits of Count II because, in light of the Fifth Circuit’s determination that the ATPC-related discharge question is nonarbitrable, Hilton will have a right without a remedy if the Court now determines that Count II is preempted. This argument is unavailing, however, given that the language in the CBA excluding ATPC-related discharges from arbitration is the product of negotiations in which Hilton and the Union were involved. As the Fifth Circuit noted, “unions and employees can contract to exempt certain claims from arbitration through their bargained-for CBAs.” CareFlite, 612 F.3d at 322 (citations omitted). Thus, to the extent that Hilton lacks a remedy, it is partially of his own making–or at the very least, his union’s making. Next, the court addressed Count III which alleged, that CareFlite’s “treatment of Hilton since his reinstatement, including, but not limited to, CareFlite’s refusal to provide Hilton with additional time to obtain an ATPC Certification and CareFlite’s discharge of Hilton, constitute illegal discrimination and retaliation under [45 U.S.C.A. § 152, Third and Fourth (West 2010), of] the RLA.” According to the court, “[t]he assertion of any right that is not created by a CBA is . . . not subject to binding arbitration under the statute.” CareFlite, 612 F.3d at 320-21. That is, claims that are independent of the CBA are not “minor disputes,” and the RLA’s mandatory arbitration mechanism does not preclude or preempt their being brought in federal court. See id. The allegation in Count III was, independent of the CBA and, thus, is not precluded by the RLA’s mandatory arbitration mechanism. The CBA is not the “only source” of Hilton’s right “not to be discharged wrongfully” in this case. Hawaiian Airlines, 512 U.S. at 258. Rather, Count III arises out of Section 2, Third and Fourth, of the RLA, which “protects the rights of employees to engage in organized union activities without interference from their employer.” Silva, 2008 WL 4552779, at *6 (citing Trans World Airlines, Inc. v. Indep. Fed’n of Flight Attendants, 489 U.S. 426, 440 (1989); Johnson v. Express One Int’l, 944 F.2d 247, 252 (5th Cir. 1991)). Finally, the Northern District refused to grant CareFlite’s Motion for Summary Judgment on Count III. According to the court, CareFlite offered little analysis on its claim and the court was “not prepared to say that there are no genuinely disputed material facts with regard to Count III.” The Northern District of Texas held the mandatory arbitration mechanism of the RLA preempted Count II, but did not preclude Count III of Hilton and the Union’s Amended Counterclaim. The court granted CareFlite’s Motion for Summary Judgment as to Count II and denied it as to Count III. Technorati Tags: ADR, law, arbitration

The Supreme Court of Texas has held “parties to an arbitration agreement may grant non-signatories the right to compel arbitration.” In In re Rubiola, No. 09-0309, (Tex., March 11, 2011), Brian and Christina Salmon agreed to purchase a home from Greg and Catherine Rubiola with J.C. Rubiola acting as listing broker for the transaction. Brothers Greg and J.C. Rubiola jointly operate a number of real estate and mortgage companies in San Antonio, including Rubiola Management, L.L.C. and Rubiola Mortgage Company. The Rubiola’s various business entities operate at the same location under the name Rubiola Mortgage and Realty. The parties’ purchase agreement was a standard Texas real estate sales contract and did not contain an arbitration clause. The Salmons obtained mortgage financing from Rubiola Mortgage Company and signed an arbitration agreement as part of the mortgage process. Although the only signatories to the arbitration agreement were the Salmons and J.C. Rubiola, in dual capacity as real estate agent and mortgage broker representing Rubiola Mortgage Company, the agreement defined parties as, Rubiola Mortgage Company, and each and all persons and entities signing this agreement or any other agreements between or among any of the parties as part of this transaction. “The parties” shall also include individual partners, affiliates, officers, directors, employees, agents, and/or representatives of any party to such documents, and shall include any other owner and holder of this agreement. Several months later, the Salmons sued the Rubiolas along with other business entities involved in repairing the home. The Salmons alleged that a series of misrepresentations were made to induce them to purchase the home. They also alleged violations of the Texas Deceptive Trade Practices Act and negligent supervision of repairs made to the home. The Salmons sought to rescind the sale or collect damages. The Rubiolas moved to compel arbitration pursuant to the mortgage finance agreement. The trial court denied the Rubiolas’ motion and the court of appeals likewise refused to compel arbitration during a mandamus proceeding. The Rubiolas then sought mandamus review before the Supreme Court of Texas. First, the Texas Supreme Court noted that, in general, only signatories to an arbitration agreement are bound by its terms. The Court continued by stating although non-signatories are typically bound by arbitration agreements only in rare circumstances, “[w]ho is actually bound by an arbitration agreement is [ultimately] a function of the intent of the parties, as expressed in the terms of the agreement.” According to the Court, this case was different in that a non-signatory was seeking to compel arbitration against a signatory. The Court agreed with the Rubiolas that the definition of “parties” provided by the arbitration agreement was broad and both J.C. and Greg Rubiola were parties to the agreement. The Court then concluded, Because the arbitration agreement expressly provides that certain nonsignatories are considered parties, we conclude that such parties may compel arbitration under the agreement. Next, the Court stated the claims brought by the Salmons fell under the terms of the arbitration agreement. The underlying arbitration agreement defines arbitrable disputes to include “any and all controversies between the parties of whatever type or manner, including without limitation, all past, present and/or future credit facilities and/or agreements involving the parties.” The Rubiola brothers were, as we have already concluded, non-signatory parties to the arbitration agreement, which broadly covers all controversies between the parties and all past, present or future agreements involving the parties. This language indicates that the arbitration agreement was not limited to the financing part of the transaction but rather extended to the real estate sales contract and the Salmons’ complaints regarding that sale. According to the Court, We conclude that signatories to an arbitration agreement may identify other parties in their agreement who may enforce arbitration as though they signed the agreement themselves. The Supreme Court of Texas held the Rubiolas had the right to compel the parties’ dispute to arbitration and conditionally granted their request for mandamus relief. Technorati Tags: ADR, law, arbitration, Texas Supreme Court

Mark your calendars! The American College of Healthcare Executives (ACHE) will host the 2011 Congress on Healthcare Leadership March 21-24, 2011 in Chicago, IL at the Hilton Chicago and Palmer House Hilton. The 2011 Congress will offer “more than 100 educational seminars, special programs, networking events and professional development possibilities.” According to the event brochure, the Congress, will be filled with opportunities to explore the latest developments in healthcare leadership, discuss today’s top healthcare issues with colleagues and expert faculty, and further refine your leadership skills. More than 4,500 healthcare executives will attend Congress this year, making it an unparalleled opportunity to reconnect with your peers and expand your professional network. As many of you know, Disputing’s own Karl Bayer and Holly Hayes will present “Introducing Conflict Resolution Strategies in Health Care” at the Congress on Thursday, March 24th at 9 am in the State Ballroom of the Palmer House Hilton. More information on the 2011 ACHE Congress is available here. You may register by mail, fax or online here. You can also follow the ACHE Congress on Twitter @ACHECongress. Technorati Tags: Healthcare, Mediation

Should the Second Circuit Reverse the District Court’s Judgment in Scandinavian Reinsurance Co. v. Saint Paul Fire & Marine Ins. Co.? by Philip J. Loree Jr. I. Introduction Parts. I and II of this three-part post discussed Chief Judge Frank H. Easterbrook’s decision in Trustmark Ins. Co. v. John Hancock Life Ins. Co. (U.S.A.), No. 09-3682, 2011 WL 285156 (7th Cir. Jan. 31, 2011), and said that Trustmark, in conjunction with Sphere Drake Ins. Co. v. All American Life Ins. Co., 307 F.3d 617, 622 (7th Cir. 2002) (Easterbrook, J.), demonstrates that the district court should not have vacated on evident partiality grounds the arbitration award in Scandinavian Reinsurance Co. v. Saint Paul Fire & Marine Ins. Co, No. 09 Civ. 9531(SAS), 2010 WL 653481 (S.D.N.Y. Feb. 23, 2010). This Part III.A explains some of the reasons why that is so. II. Background: Scandinavian Re In Scandinavian Re the district court vacated the award on alleged Federal Arbitration Act Section 10(a)(2) “evident partiality” grounds on the theory that two arbitrators (one neutral, one party-appointed) did not disclose their temporally-overlapping service on another arbitration panel hearing a dispute that the district court characterized as involving: (a) a common witness; (b) one or two “similar” issues; (c) “similar” contract terms; (d) “the same type of reinsurance business”; and (e) a party that had succeeded to reinsurance business assumed by the party in whose favor the award was made. The parties dispute whether the two arbitrations involved “similar” issues and contract terms, or even the “same type of reinsurance business,” but irrespective of how the Second Circuit ultimately resolves those disputes, it will not change the outcome warranted by Trustmark and Sphere Drake. This post therefore assumes — and for the sake of argument only — that the district court accurately portrayed the facts. According to the district court, the arbitrators’ overlapping service in the other arbitration created “a material conflict of interest:” [T]he Scandinavian Re Arbitration and the [other] arbitration were presided over by two common arbitrators, overlapped in time, shared similar issues, involved related parties, included. . . a common witness that supported interpreting [the agreement in the other arbitration] as written but interpreting the Scandinavian Re Agreement in light of Scandinavian Re’s intent at the time it entered into the agreement. Additionally, [another witness] was employed by [the party in the other arbitration that had succeeded to business assumed by the prevailing party in the Scandinavian Re Arbitration] at the time she appeared as a witness in the Scandinavian Re Arbitration. By participating in both the Scandinavian Re Arbitration and [the other arbitration], [the two arbitrators] placed themselves in a position where they could receive ex parte information about the kind of reinsurance business at issue in the Scandinavian Re Arbitration, be influenced by recent credibility determinations they made as a result of [the common witness’] testimony in [the other arbitration], and influence each other’s thinking on issues relevant to the Scandinavian Re Arbitration. By failing to disclose their participation in the [other arbitration], [the two arbitrators] deprived Scandinavian Re of an opportunity to object to their service on both arbitration panels and/or adjust their arbitration strategy. . . . 2010 WL 653481 at *8. III. Applying Trustmark/Sphere Drake to the Scandinavian Re Facts Scandinavian Re turns on whether the arbitrators displayed “evident partiality” within the meaning of Federal Arbitration Act Section 10(a)(2). 9 U.S.C. § 10(a)(2). Section 10(a)(2) does not define “evident partiality,” but both the Second and Seventh Circuits have declared that “arbitrators are not subject to the same standards of impartiality as [federal] judges.” Applied Indus. Materials Corp. v. Ovalar, 492 F. 3d 132, 137 (2d Cir. 2007); see also Morelite Constr. Corp. v. New York City Dist. Council Carpenters Benefit Fund, 748 F.2d 79, 83-84 (2d Cir. 1984)); Sphere Drake, 307 F.3d at 621. A. The Trustmark/Sphere Drake Analytical Framework Trustmark and Sphere Drake demonstrate that evident-partiality cases like Scandinavian Re can frequently be disposed of by assessing whether the asserted basis for evident partiality would, under the strict standards of impartiality applicable to federal judges (the “Judicial Impartiality Standards”), disqualify a judge from hearing the matter were it pending in federal court. If the answer is “no,” then the evident partiality challenge must fail. Trustmark’s analytical framework is based on Sphere Drake. There the Court rejected an evident partiality challenge based on a non-neutral, party-appointed arbitrator’s alleged failure to disclose (or fully disclose) his prior legal representation of one of the parties in a four-year-old, unrelated matter. The Court said that the non-neutral arbitrator satisfied Judicial Impartiality Standards, and, even assuming he were a neutral, his award could not be vacated for evident partiality. See 307 F.3d at 621-22. The arbitrator’s failure to disclose was irrelevant, because not even a federal judge would have been required to disclose anything under Judicial Impartiality Standards. See 307 F.3d at 622. B. Did the Scandinavian Re Arbitrators Meet Judicial Impartiality Standards? 1. What Are those Standards? 28 U.S.C. Section 455 sets forth the Judicial Impartiality Standards, which federal judges must meet in each case over which they preside. Section 455(a) describes a “catchall” impartiality standard: “(a) Any justice, judge, or magistrate judge of the United States shall disqualify himself in any proceeding in which his impartiality might reasonably be questioned.” Section 455(b) sets out specific circumstances under which a judge is disqualified from hearing a case because of actual bias or prejudice or certain interests or relationships: (1) Where he has a personal bias or prejudice concerning a party, or personal knowledge of disputed evidentiary facts concerning the proceeding; (2) Where in private practice he served as lawyer in the matter in controversy, or a lawyer with whom he previously practiced law served during such association as a lawyer concerning the matter, or the judge or such lawyer has been a material witness concerning it; (3) Where he has served in governmental employment and in such capacity participated as counsel, adviser or material witness concerning the proceeding or […]