We have not been as diligent as we like to be recently with respect to this blog, due to, well, the practice of law. Anyhoo, as luck would have it, way back on May 24, when we ought to have been blogging but weren’t, the Third Court of Appeals issued a opinion denying a petition for writ of mandamus in an arbitration case. The issue is one that comes up a lot, and it’s an important one. We are just sorry we did not discuss it sooner. The case involved a former Wendy’s employee’s personal injury suit against Wendy’s (Ms. Jimenez was injured when a drawer fell on her, apparently). Wendy’s moved to compel arbitration, based on its dispute resolution program which it required all employees, including Ms. Jimenez, to adhere to as a condition of their continuing at-will employment. The program consisted of four distinct steps an aggrieved employee and Wendy’s must undertake in the event of a potential dispute: 1) a one-on-one conversation between the employee and a store manager; 2) formal review by human resources; 3) mediation; and 4) arbitration. In this case, all parties agreed that no mediation occurred. The program description, however, explicitly stated that “Each Step must be followed in sequence so that we have every opportunity to work together toward an aggreable resolution of the issue” and then “if you have a work-related problem that involves a legally protected right that could not be settled through Steps 1, 2 or 3 of the Program, you may request arbitration.” In other words, the Program clearly intended to require mediation as a pre-requisite to arbitration. The trial court, therefore, refused to grant Wendy’s Motion to Compel Arbitration, and the Third Court of Appeals agreed with the decision, on the basis that since no mediation had occurred, Wendy’s right to arbitration had not accrued. The Court here conducts a thorough discussion of the seminal case in this area, John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543 (1964). In that case, the U.S. Supreme Court held that normally the question of whether or not a condition precedent to arbitration had been satisfied, and what to do if it has not been, ought to be up to the arbitrator. Here, however, the Third Court laid out an exception to that general rule: The FAA’s policy in favor of arbitration does not operate without regard to the wishes of the contracting parties. Here, the parties agreed to conditions precedent before arbitration can take place and, by placing those conditions in the contract, the parties clearly intended to make arbitration a dispute resolution mechanism of last resort. (quoting the 11th Circuit). According to the Court, since the condition precedent has not been satisfied, the arbitration clause itself “has not been triggered.” The Court ends its opinion with a foreshadowing of the problem this raises: “[we do not express any opinion] regarding whether this lawsuit should continue in the trial court despite the fact that an alternative dispute resolution and arbitration agreement exists (whether enforceable or not).” In other words, what now? Presumably, Wendy’s will attempt to set up a mediation with Ms. Jiminez. What if, however, Steps 1 and 2 never took place either? Since she is a former employee, what if she has no manager with whom to discuss the situation? At any rate, we appreciate the Third Court’s willingness to address the John Wiley & Sons case, since we’ve never been fully comfortable with the notion that an arbitrator has the authority to arbitrate whether or not a condition precedent to his or her contractual mandate has yet been met, when the facts unequivocally demonstrate that it has not. In re: Pisces Foods d/b/a Weny’s Restaurants, ___ S.W.3d ___ (Tex. App. – Austin 2007) (Cause No. 03-06-00274-CV) Technorati Tags: arbitration, ADR, Third Court of Appeals, law

Karl and I have written about arbitral awards and their potential appealability, and we’ve blogged on the subject several times (most recently here). Here in the Fifth Circuit, it is permissible to write a provision for appeal into an arbitration clause, allowing for judicial review of an arbitral award on a basis other than the extremely limited basis provided by the Federal Arbitration Act or the Texas Arbitration Act. However, not all jurisdictions allow parties to draft judicial review of arbitral awards into their contracts. This morning, the U.S. Supreme Court granted cert in a case which should settle this issue. For more on the case itself, see the always thorough Supreme Court Blog. In the meantime, we will be following this case (Hall Street Associates vs. Mattel) with baited breath. Technorati Tags: arbitration, ADR, law

On Wednesday, the Fifth Circuit released an opinion confirming an arbitral award (link is to .pdf file) in a dispute between two companies who had contracted to share in the duties of performing corrective laser eye surgery. The party that lost the arbitration sought vacatur on two grounds allowed in FAA jurisprudence: on the statutory ground that the arbitrator exceeded his authority, and on the non-statutory ground that the arbitrator manifestly disregarded the law. The Fifth Circuit, like the District Court before it, confirmed the award. While the opinion is certainly consistent with Fifth Circuit jurisprudence in this area, it is still helpful as a recent and cogent explanation of the analysis on these two fairly common grounds parties assert when attempting to appeal arbitral awards. Interestingly, the arbitral award being challenged was apparently a non-reasoned award, something to which both parties agreed at the outset of the case. Subsequently, one party apparently changed its mind, but the arbitrator still refused to issue a reasoned award. Despite the apparent brevity of the award itself, the Fifth Circuit reviewed the record in the case and noted that “the arbitrator was quite aware of the factual nuances of the case, the identities of the parties, and the flow of money.” The arbitral hearing, after all, lasted three days. All that being the case: We will not second-guess multiple, implicit findings and conclusions underpinning the award. We do not decide if the award was free from error. We decide only that it is not the kind of extraordinary award that ineluctably leads to the conclusion that the arbitrator was ‘dispensing his own brand of industrial justice.’ There are advantages and disadvantages in contracting for private resolution of a dispute announced without explanation of reason. When a party does so and loses, federal courts cannot rewrite the contract and offer review the party contracted away. In other words, it remains clear that some sort of affirmative showing that an arbitrator refused to consider evidence seems to be required to prevail on a “manifest disregard” challenge to an arbitral award in the Fifth Circuit. American Laser Vision v. The Laser Vision Institute, ___ F3d. ___ (5th Cir. 2007) (Cause No. 06-10260) Technorati Tags: arbitration, ADR, Fifth Circuit, law

The Eastern District of Texas blog is one of our favorites. Today, Michael Smith posted about a district judge’s decision to refuse to compel arbitration on the basis that the party seeking to arbitrate had waived that right by participation in the underlying litigation. We’ve discussed waiver as a defense to arbitration before. It will be interesting to see what, if anything, comes of this. Technorati Tags: arbitration, ADR, law