JAMS ADR Insights
Federal Employment Case Update | Pizza and Beer
Published April 15, 2015
Members of Certified Class Lack Standing to Challenge Class Arbitration Ban Conners v. Gusano’s Chicago Style Pizzeria United States Court of Appeals, Eighth Circuit
When Jacqueline Conners brought a class action lawsuit against her employer Gusano’s (alleging unlawful tip pooling practices), Gusano’s instituted an arbitration policy that required individual arbitration of any disputes. Conners filed a motion seeking to have the court declare the new policy invalid because it interfered with the right of class members to communicate with other potential class members. The trial court found this persuasive and granted the motion. Gusano’s appealed.
The United States Court of Appeals for the Eighth Circuit vacated the lower court’s order, finding that Conners and the other members of the class lacked standing to contest a work requirement that did not apply to them. The Court wrote that “the former employees cannot gain standing here by defending the rights of current employees, not yet joined in the action.”
District Court Unjustified in Vacating Award Raymond James Financial v. Fenyk United States Court of Appeals, First Circuit
Robert Fenyk worked as a broker for Raymond James Financial (RJF) until he was terminated for alleged problems with alcohol. Fenyk filed a complaint in Vermont state court alleging he was fired because of his sexual orientation and his status as a recovering alcoholic. The complaint sought $665,000 in back pay, $588,000 in front pay, and $250,000 in punitive damages, with attorney’s fees and costs. RJF argued that Fenyk was not an employee (but rather, an independent contractor) and therefore the Vermont employment laws didn’t apply to the case. They also moved to compel arbitration of all the remaining claims.
On the first day of arbitration, Fenyk moved to add a complaint under Florida law. The panel denied the motion as untimely. The panel issued an award of $600,000 for back pay based on discrimination and about $55,000 in fees.
RJF moved to vacate the award, arguing that the panel awarded damages under Florida law even though Fenyk brought no claims under Florida law, and even if he would have brought claims under Florida law, those claims would be time-barred. The district court granted the motion to vacate.
On appeal, Fenyk argued “that the district court erred in construing the Florida statute of limitations to bar his claim and improperly failed to defer to the arbitrators’ good faith effort to resolve the dispute.” The United States Court of Appeals for the First Circuit held that the Florida statute of limitations should apply, but the Florida law did not apply the civil statute to arbitration until several weeks after the award and there was an open question about whether the statute applied to this kind of case. The Court concluded “any error by the panel in refusing to dismiss Fenyk’s claims as untimely does not rise to the level necessary to justify vacatur.”
The Court dealt with the claim that it was a mistake to apply Florida law in a similar way. They wrote “In the final analysis, the panel apparently decided that Fenyk’s mistake in labeling his claims did not justify denying him relief. Where the arbitrators applied the substantive law that RJFS agreed would govern its conduct, that choice to apply Florida law falls within the category of judgments—even if erroneous—that we may not disturb.”
The Court found that the award drew its essence from the contract and was therefore valid. The Court concluded by writing “Accordingly, we reverse the decision of the district court and remand the case for entry of an order confirming the arbitration award.”
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