2002 SIA COMPLIANCE & LEGAL DIVISION ANNUAL SEMINAR Marriott Desert Springs Resort & Spa March 7-15, 2002 ARBITRATION v. LITIGATION Mark S. Dichter Ian Matheson Ballard Morgan, Lewis & Bockius LLP 1701 Market Street Philadelphia, PA 19103 ©Morgan, Lewis & Bockius 2001 TABLE OF CONTENTS I. INTRODUCTION ............................................................................................................. 1 II. FACTORS AFFECTING ENFORCEABILITY................................................................ 2 A. What Claims Can Be Subjected to Mandatory Arbitration? Did Congress Intend to Preclude Compulsory Arbitration of Title VII Claims?.......................... 2 B. Knowing and Voluntary Agreement. Is There an Actual Agreement to Arbitrate and What Claims Are Covered?............................................................. 3 1. Cases considering whether there was an agreement to arbitrate................ 4 2. Cases considering what claims the parties agreed to arbitrate................... 8 C. Enforceability of Handbook Provisions ............................................................... 11 1. Handbook cases involving dissemination of policy and employee receipt and acknowledgement .................................................................. 11 2. Handbook cases focusing on whether arbitration provision separate and distinct ............................................................................................... 14 3. Handbook cases involving employer’s mutual agreement to abide by terms.................................................................................................... 14 4. Effect of employer contractual disclaimer............................................... 15 a. Contractual disclaimer cases enforcing arbitration agreements:................................................................................... 15 b. Contractual disclaimer cases not enforcing arbitration agreements:................................................................................... 16 D. Consideration....................................................................................................... 17 1. New Employees........................................................................................ 17 2. Incumbent Employees: Continued Employment...................................... 18 3. Impact on At-Will Employment Status.................................................... 18 4. Incumbent Employees: Mutual Agreement to Arbitrate.......................... 19 5. Practical Issues......................................................................................... 21 a. Incumbent Employees: Tie Agreement to Specific Payment or Benefit...................................................................................... 21 b. Be Aware of Consideration Issues If Modifying Policy.............. 21 c. Clearly Identify the Consideration............................................... 21 d. What if the employee refuses to sign? ......................................... 21 E. Sharing of Arbitration Fees................................................................................. 22 1. Cases involving arbitration fees............................................................... 24 F. Limitations on Remedies...................................................................................... 25 i TABLE OF CONTENTS (continued) 1. Cases involving complete bar on punitive damages ................................ 25 2. Cases involving limitations on punitive damages.................................... 26 3. Excluding certain damages may affect overall arbitrability..................... 27 G. Limitations on Discovery..................................................................................... 27 1. Other cases involving discovery limitations:........................................... 28 H. Time Limits for Submitting Claims..................................................................... 28 I. Arbitration Agreement Limiting Right to Initiate or Participate in a Class Action................................................................................................................... 29 1. Effect of arbitration agreement that expressly prohibits arbitration of class claims .......................................................................................... 29 2. Effect of arbitration agreement that is silent as to treatment of class claims ....................................................................................................... 30 3. Effect of arbitration agreement that expressly prohibits class actions – in court and in arbitration.......................................................... 31 J. Fairness of Process............................................................................................... 33 1. Mutual Selection of Arbitrator................................................................. 33 2. Written opinion........................................................................................ 33 3. Location of hearing.................................................................................. 34 4. Representation by counsel or a spokesperson.......................................... 34 K. Other Drafting Considerations............................................................................. 34 1. FAA drafting requirements ...................................................................... 34 2. At-will disclaimer..................................................................................... 34 3. Limitations on types of claims................................................................. 34 4. Issue of arbitrability is arbitrable ............................................................. 35 5. Choice of law........................................................................................... 35 6. Notice requirements ................................................................................. 35 7. Scope of arbitrator’s authority.................................................................. 35 8. Severability............................................................................................... 35 9. Preclusive effect of arbitration award ...................................................... 36 III. ENFORCEABILITY PURSUANT TO COLLECTIVE BARGAINING AGREEMENTS............................................................................................................... 36 A. The Supreme Court Has Not Resolved the Issues................................................ 36 B. Lower Court Cases Involving Collective Bargaining Agreements...................... 37 ii TABLE OF CONTENTS (continued) IV. IMPACT ON ABILITY OF EEOC TO BRING LAWSUITS ........................................ 41 V. NLRB POSITION ON MANDATORY ARBITRATION AGREEMENTS .................. 44 VI. POTENTIAL ADVANTAGES AND DISADVANTAGES OF ARBITRATION FROM AN EMPLOYER PERSPECTIVE...................................................................... 46 A. Potential advantages............................................................................................. 46 B. Potential Disadvantages ....................................................................................... 46 VII. INTERNET RESOURCES FOR ADR ISSUES.............................................................. 47 iii Morgan, Lewis & Bockius LLP 2002 SIA Compliance & Legal Division Annual Seminar March 7-15, 2001 TABLE OF AUTHORITIES CASES Ackerman v. The Money Store, 728 A.2d 873 (N.J. Super. 1998) ...................................................................................................22 Alcaraz v. Avnet, Inc., 933 F. Supp. 1025 (D.N.M. 1996) ..........................................................................................11, 27 Alexander v. Gardner-Denver Co., 415 U.S. 36 (1974) ..................................................................................................................36, 37 Alford v. Dean Witter Reynolds, Inc., 939 F.2d 229 (5th Cir. 1991) ...........................................................................................................3 Araiza v. Natl Steel & Shipbuilding Co., 973 F. Supp. 963 (S.D. Cal. 1997) ................................................................................................40 Arakawa v. Japan Network Group, 56 F. Supp. 2d 349 (S.D.N.Y. 1999) .............................................................................................25 Austin v. Owens-Brockway Glass Container, Inc., 78 F.3d 875 (4th Cir.), cert. denied, 519 U.S. 980 (1996) ......................................................37, 38 Bailey v. Fed. Natl Mortgage Assn, 209 F.3d 740 (D.C. Cir. 2000) ........................................................................................................8 Ball v. SFX Broad., Inc., Civ. A. No. 00-CV-1090 ...............................................................................................................24 Battle v. Prudential Ins. Co. of Am., 973 F. Supp. 861 (D. Minn. 1997) ..................................................................................................7 Bauer v. Morton’s of Chicago, No. 99 C 5996, 2000 WL 149287 (N.D. Ill. Feb 9, 2000) ................................... 13, 19, 25, 28, 29 Beasley v. Brookwood Med. Ctr., 712 So. 2d 338 (Ala. 1998) ...........................................................................................................17 Beauchamp v. Great W. Life Assurance Co., 918 F. Supp. 1091 (E.D. Mich.