In an unpublished opinion, the U.S. Court of Appeals for the Fifth Circuit held that a company did not waive its right to arbitration by participating in administrative proceedings initiated by employee and affirmed the District Court’s confirmation of an arbitration award. In Green v. Service Corporation International, No. 08-20607 (5th Cir. June 2, 2009), Phillip Green was hired by SCI Management, a subsidiary of Service Corporation International (SCI) to provide funeral, crematory, and cemetery services. Green’s employment agreement with SCI Management contains the following arbitration clause: 1. Matters Subject to Arbitration. Employee and the Company agree that . . . all disputes related to any aspect of Employee’s employment with the Company shall be resolved by binding arbitration. This includes, but is not limited to, any claims against the Company, its affiliates or their respective officers, directors, employees, or agents for breach of contract, wrongful discharge, discrimination, harassment, defamation, misrepresentation, and emotional distress, as well as any disputes pertaining to the meaning or effect of this Agreement. . . . Green was terminated by SCI in 2005. Thereafter, he filed a whistleblower complaint under the Sarbanes-Oxley Act (SOX) with the Occupational Safety and Health Administration (OSHA). After OSHA dismissed Green’s complaint, he sued SCI in District Court. SCI filed a motion to compel arbitration and the District Court granted it. The arbitrators determined that SCI did not violate SOX and Green filed a motion to vacate the award, claiming that he did not agree to arbitration. SCI filed a motion to confirm the award and the District Court granted it. Green appealed. The Fifth Circuit first decided whether Green’s employment agreement with SCI Management binds Green. The Court agreed with the District Court and concluded that SCI (a nonsignatory party) can require Green to arbitrate because the agreement explicitly includes claims against affiliates. Next, the Court answered whether the dispute falls within the scope of the agreement. The Court stated that “[e]ven if the scope of the arbitration clause is susceptible to more than one interpretation, the clause must be interpreted in favor of arbitration.” Accordingly, the Court found that the dispute was within the scope of the arbitration agreement. Then, the Fifth Circuit considered whether SCI waived its right to arbitrate by defending itself in administrative proceedings. The Court applied a two prong-test: (1) Whether SCI substantially invoked the judicial process. The Court noted that the administrative proceedings before the Department of Labor were not judicial in nature and SCI did not waive its right to arbitrate. (2) Whether Green was prejudiced. The Court concluded that Green failed to show he was prejudiced by the delay. Finally, The Fifth Circuit affirmed, holding that SCI did not waive its right to arbitration by participating in the administrative proceedings at OSHA. Technorati Tags: arbitration, ADR, law, Fifth Circuit

[update: the judgment confirming the award in Chester v. iFreedom is here; from Settle It Now] In case you have not heard, a California court has confirmed recently a $4.1 billion award for an employment-related dispute. Following is an AP article from Yahoo Technology News discussing the case. We welcome your commentary! LA judge OKs $4.1 billion award in pay dispute Posted on – Fri Jun 5, 2009 LOS ANGELES – A judge approved a $4.1 billion arbitration award against an Internet communications company accused of firing its chief operating officer in a dispute over commissions he said he was owed. The award confirmed last week in Los Angeles Superior Court includes commissions, along with back wages, interest and other payments for Paul Chester, who was fired four years ago by iFreedom Communications Inc. Arbitrator William F. McDonald wrote in his decision that the award is “appropriate to punish and make an example of defendants.” Although Judge Teresa Sanchez-Gordon agreed with the award, Chester’s attorney conceded it may be difficult to collect the entire amount. “There are very few entities that could pay such an award or such a judgment, but we certainly expect that our client will want us to explore all the possibilities,” Scot Bernstein said Friday. McDonald, a retired judge, wrote in the award filing that privately held iFreedom and its founder Timothy Ringgenberg were liable for breach of contract, failure to pay wages and other claims. He found that Chester did not receive the commissions of 5 percent on iFreedom’s gross revenue when he came to work for the company in June 2004. He was fired without cause in September 2005 after he confronted iFreedom about the commissions, the filing said. A phone number for Ringgenberg in Fountain Valley was disconnected. A call placed to an iFreedom office in Laguna Hills was not picked up. Micheal LaRoy, a University of Illinois law professor who focuses on arbitration law, said he has never encountered an arbitration award that approached that amount, and he predicted it would likely be reduced or vacated on appeal. He said courts rarely allow punitive damages to stand in arbitration awards, even when they are less generous. Related Posts: Court Issues $4.1 Billion Judgment to Employee Confirming Arbitration Award for Unpaid Commissions, Securities, and Punitive Damages for Fraud, Triangle Business Journal, June 2, 2009. $4.1 Billion JAMS Arbitration Award, Settle It Now, June 3, 2009. Two Arbitration Decisions, Workplace Prof Blog, June 4, 2009. Technorati Tags: law, ADR, arbitration, employment arbitration

As previously blogged, the 81st Regular Session of the Texas Legislature adjourned on June 1st. Following is a summary of some bills related to alternative dispute resolution filed during the session. Bills that passed: S.B. 1650, authored by Senator Duncan (R-Lubbock), would grant Texas appellate courts jurisdiction over certain interlocutory appeals arising under the FAA. Here are the bill’s history and analysis. H.B. 1083. The bill, authored by Rep. Gary Elkins, states that “Except as provided by agreement of the parties, a court may not order mediation in an action that is subject to the Federal Arbitration Act (9 U.S.C. Sections 1-16).” Here are the bill’s history and analysis. H.B. 2256. The bill relates to mediation of out-of-network health benefit claim disputes concerning enrollees, facility-based physicians, and certain health benefit plans. Here are the bill’s history and analysis. Bills that did not pass: S.B. 222, authored by Senator Royce West, would amend the Texas Arbitration Act to ban pre-dispute arbitration in employment, consumer, and franchise contracts. In addition, it would prohibit arbitration of civil right claims. The bill’s history is here. H.B. 2139. Authored by Rep. McClendon, the bill establishes a victim-offender pretrial mediation program for first-time offenders. The bill’s history is here. H.B. 2095. Filed by Rep. Farrar, relating to the regulation of claims against residential home builders. This bill would prohibit charging homeowners with fees in connection with a state-sponsored inspection or dispute resolution process and arbitration required under the same title. The bills’ history is here. H.B. 2896. Filed by Rep. Leibowitz, relating to forms to be used by builders in contracts for the sale or construction of a new home. This bill provides that a contract form requiring the parties to agree to binding arbitration can not be adopted. The bill’s history is here. H.B. 3426. Filed by Rep. Hernandez, relating to the notice required by certain mortgage servicers before foreclosing on real property. This bill provides mediation rules for foreclosure disputes. The bill’s history is here. H.B. 3482. Filed by Rep. Coleman, relating to the notice required by mortgage servicers before foreclosing on real property. This bill is similar to H.B. 3426. The bill’s history is here. S.B. 1475. Filed by Senators Ellis, Van de Putte, and Watson, relating to the notice required by mortgage servicers before foreclosing on real property. This bill is identical to H.B. 3426 and similar to H.B. 3482. The bill’s history is here. H.B. 2696 would prohibit one contracting party from requiring the other party to agree to arbitration as a condition of the contract. It also provides that an agreement is unconscionable if its enforceability would violate a right protected by either the U.S. or Texas Constitutions. In addition, an agreement to arbitrate must be displayed prominently in 12-point bold type. The bill’s history is here. S.B. 556 would amend the Insurance Code by adding a clause to provide for binding arbitration agreements within the context of health care contracts with physicians and health care providers. The bill’s history is here. H.B. 1635 would abolish the Texas Residential Construction Commission and provides for the phasing out of arbitration claims. The bill’s history is here. H.B. 2539 relates to a disaster recovery insurance claims mediation program. The bill’s history is here. It is worth noting that the Governor has until June 21st to either sign or veto the bills that passed. Also, if not vetoed, the bills that passed will become effective on September 1st, unless the bill states a different date. We will discuss some of these bills in detail in future posts. Technorati Tags: law, ADR, arbitration, mediation, Texas, legislation

Although the 81st Texas Legislature adjourned Monday night, some speculate that the Governor will call a special session to address legislation to keep five state agencies from shutting down: the Texas Department of Transportation, the Texas Department of Insurance, the Texas Racing Commission, the Texas State Affordable Housing Corp., and the Office of Public Insurance Counsel. As the dust settles, we will comment on the dispute resolution bills that passed and the ones that didn’t this legislative session. Stay tuned. Technorati Tags: arbitration, ADR, law, mediation, Texas Legislation