SOUTH-WESTERN LEGAL STUDIES IN BUSINESS CASE UPDATES—ALTERNATE DISPUTE RESOLUTION

SW Legal's Case Updates is a SW Legal Studies service to provide briefs of the latest state and federal court cases. Review the summaries and, for cases of interest, select the case brief. If you cannot find a case of interest, return to Topic Index .

Title	Summary
Arbitrators May Award Punitive Damages and Attorney Fees Briefed Case	Appeals court held that the decision of an arbitration panel in awarding $20 million in punitive damages was not in manifest disregard of California law, so it would be allowed to stand. (Updated January 2010)
Class Action Waiver in Arbitration Clause Violates New Jersey Public Policy Briefed Case	Appeals court held that a credit card company cannot enforce an arbitration clause in its credit card contract that prohibits class action suits against the card company in case of dispute. The court held that the clause violated New Jersey public policy, so was unconscionable. (Updated June 2009)
Whistleblower Claims under Federal Law May Be Subject to Arbitration Briefed Case	Appeals court held that a claim by an employee that she was fired due to herconcern about SOX compliance by the employer would be subject to confidential arbitration, as provided by her employment contract. The fact that she claims whistleblower status does not affect the binding nature of arbitration. (Updated May 2009)
Courts May Review Major Mistakes by Arbitrator Briefed Case	Appeals court held that courts have authority to review evident material mistakes made by an arbitrator, but may not modify errors in awards due to mistakes made by the complaining party about the evidence it presented to the arbitrators. (Updated June 2007)
Class Action Prohibition in Arbitration Program Held Unconscionable Briefed Case	Appeals court held that a clause in an employment arbitration program that prohibited class actions was invalid as unconscionable because it was vague, imposed without warning, and falsely stated that it did not limit the rights of employees. (Updated May 2007)
Clock Begins to Run When Notice of Arbitration Award Mailed Briefed Case	Appeals court held that the right of a party to move to vacate an award must be filed within 90 days of when the award is mailed to the parties. That means the day it is placed in the mail, and e-mail, not the day the mail is received or read. (Updated April 2007)
Employer Imposed Arbitration Program Agreed to by Continuing Employment Briefed Case	Appeals court held that an employer that announced an arbitration program to cover employment disputes could enforce the program. Employees were free to quit if they did not want to be subject to the program, so continuing employment was consideration. (Updated April 2007)
Decedents Not Bound by Arbitration Agreement Briefed Case	Ohio high court held that the decedents of a worker killed on the job were not bound by an alternate dispute resolution agreement the worker had signed. That agreement bound him, but not his heirs. They may sue for wrongful death in court. (Updated March 2007)
Arbitrator Has Discretion Regarding Awarding of Attorney Fees Briefed Case	Indiana high court held that an arbitrator did not exceed his authority by not awarding attorney fees, even though the arbitration agreement called for reasonable attorney fees to be awarded to the winner, because the arbitrator could determine that no fee was most reasonable given the nature of the dispute. (Updated March 2007)
Organization Membership Terms Requiring Arbitration of Disputes Binding on Members Briefed Case	Colorado high court held that members of a professional real estate membership organization were bound to follow the rules of the organization that all fee disputes among members would be governed by arbitration. (Updated January 2007)
Common-Law Arbitration Differs from Arbitration Created Under Statutory Procedures Briefed Case	Michigan high court held that the state arbitration statute specified language to make arbitration agreements binding. Arbitration agreements under common-law may be revoked unless the parties later commit to binding arbitration. (Updated January 2007)
Federal Employment Rights Do Not Preclude Arbitration of Dispute Briefed Case	Appeals court held that an employee covered by the Uniformed Services Employment and Reemployment Act has the protections offered by that statute, but since it does not preclude arbitration, the employment dispute will go to arbitration as required by the employment agreement. (Updated December 2006)
Arbitration Association, Not Court, Determines How Many Arbitrators Briefed Case	Appeals court held that the courts do not decide whether one arbitrator or a panel of arbitrators should be used to settle a matter subject to arbitration. That is an issue determined by the rules of an arbitration association. Courts decide if a matter is subject to arbitration if that issue is raised. (Updated August 2006)
Arbitration Panel Could Refuse Request to Delay Hearing Briefed Case	Appeals court held that an arbitration panel did not engage in misconduct by refusing to delay a hearing at the request of one party. That party had not been diligent in requesting documents in the years before the hearing, so had no grounds for insisting on last minute consideration. (Updated July 2006)
Excessive Cost of Arbitration Makes Requirement Unconscionable Briefed Case	Appeals court held that an arbitration clause in a consumer contract was unconscionable as the cost of arbitration was far higher than the value of the contract in question and the cost left the consumer unable to afford the arbitration process. (Updated July 2006)
Legality of a Contract under State Law to Be Determined by Arbitration Briefed Case	U.S. Supreme Court held that the only part of a contract that may be considered by a court for review is whether the arbitration clause itself is valid. If the remainder of the contract is invalid, that can be determined by the arbitrator, not court. (Updated May 2006)
Cell Phone Company Arbitration Requirement Unconscionable Briefed Case	Federal court held that the arbitration clause of a cell phone company was unenforceable as it was unconscionable. The clause made it unlikely that any consumer with a complaint would undertake the costly procedure required. (Updated April 2006)
Arbitration Agreement for All Employment Disputes Does Not Violate Public Policy Briefed Case	Illinois high court held that an employment arbitration agreement was valid and did not violate public policy. Since the agreement did not limit the remedies available to employees, it did not reduce their statutory rights to remedies that could be available by litigation. (Updated April 2006)
If Arbitration Agreement Precludes Appeal, No Appeal Is Allowed Briefed Case	Appeals court held that an arbitration agreement clearly stated that no appeal from the award by the arbitrator would be allowed. That contractual agreement will be enforced, so the courts have no jurisdiction over the matter. (Updated March 2006)
Arbitration Agreement That Precludes Appeal Will Be Enforced Briefed Case	Appeals court upheld the decision of the district court to not review a decision by an arbitrator. The arbitration agreement held that the decision of the arbitrator was final and could not be appealed, and so there was no right to appeal. (Updated February 2006)
Mediator May Not Testify in Criminal Cases Except in Unusual Situations Briefed Case	New Jersey high court held that the rule of confidentiality in mediation could not be violated in a criminal assault case where the defendant wanted the mediator to reveal what the victim of the crime had said during mediation. Only if there is no other source of information may that happen. (Updated February 2006)
Arbitration Clause Binding in McDonald’s “Who Wants to be a Millionaire” Game Briefed Case	Appeals court affirmed that when one participates in a game, such as McDonald’s “Who Wants to be a Millionaire” game that the arbitration clause in the rules is binding even if the participant claims fraud and even if the participant did not read the rules. (Updated February 2006)
Punitive Damage Award Not Restricted by Due Process Considerations Briefed Case	Connecticut high court held that it would not intervene in a claim that an arbitration award improperly awarded excessive punitive damages. There was no clear violation of public policy and since arbitration is not a state action, due process is not involved. (Updated November 2005)
Complicated Arbitration Agreement Does Not Affect Validity Briefed Case	Appeals court upheld an arbitration agreement that required all employment disputes to be subject to arbitration. Plaintiff's claim that a sexual harassment case should be litigated, and that the arbitration clause was difficult to comprehend, did not affect the validity of the arbitration requirement. (Updated April 2005)
Arbitrator Will Decide if Each Party Must Bear Costs of Arbitration Briefed Case	Appeals court held that a mandatory arbitration clause in a consumer form contract was enforceable. If the provision that each party must bear their own costs of arbitration is contrary to the federal law that applies to the case, the arbitrator will resolve the matter. (Updated December 2004)
Third-Party Beneficiaries of Contract Bound by Arbitration Provisions Briefed Case	Tennessee high court held that the third-party beneficiary of a health-insurance contract that contained an arbitration provision to control disputes between the primary parties also applies to the third-party when that party attempts to enforce the contract. (Updated October 2004)
You Snooze, You Lose the Right to Arbitration, Especially in Malpractice Cases Briefed Case	An attorney moved to enforce an arbitration agreement in her retainer agreement with a client who was suing her for malpractice. The appeals court held that the agreement was unenforceable because of the need for the client to have independent representation in a case of malpractice and because the attorney waited until litigation had been pending for months before insisting on arbitration. (Updated February 2004)
Judicial Immunity Extends to Arbitrators Briefed Case	Texas appeals court held that a party to arbitration proceedings could not sue the arbitrator for failing to reveal a prior connection to the other party to the litigation. Arbitrators, like judges, are immune from personal liability for judicial acts. (Updated January 2004)
Mediation Agreements Covered by Federal Arbitration Act Briefed Case	Court held that employees must submit their complaints about possible violations of federal labor law by their employer to mediation. The employment handbook stated that complaints not resolved in the company had to go to mediation. Mediation is covered by the Federal Arbitration Act. (Updated October 2003)
Supreme Court Holds that RICO Claims Are Subject to Arbitration Briefed Case	Supreme Court, reversing lower courts, held that the RICO claims that are made as part of litigation between physicians and health-care organizations would be subject to arbitration just as all other aspects of their relationship are. Whether an arbitrator could award treble damages was not clear in the arbitration agreement. (Updated July 2003)
Class Action Not Allowed Against Retailer Who Had Valid Arbitration Clause Briefed Case	Plaintiff asserted that a retailer charged numerous consumers $45 more in fees than allowed by state law and sought class action status to sue the retailer. Appeals court held that since the sales contract contained a valid arbitration clause, the complaints must go to arbitration and the class certification was not proper. (Updated June 2003)
Punitive Damage Award Vacated by Court as Grossly Excessive Briefed Case	New York appeals court reversed an arbitration award of $25 million in punitive damages as grossly excessive in violation of the Constitution. Such manifest disregard for the law is a basis on which arbitration awards may be vacated. (Updated April 2003)
Decision of Architect to Resolve Construction Dispute Stands But Is Not Arbitration Briefed Case	Idaho high court held that because the parties to a contract followed the provisions of the contract to resolve a dispute between the contractor and a homebuilder, by which the architect settled the dispute, the decision would stand. While the procedure followed the terms of the contract, it was not arbitration, which requires a neutral third party. (Updated April 2003)
Arbitration Award Vacated When Arbitrator Fails to Follow Terms of Contract Briefed Case	Appeals court held that when an arbitrator fails to constrain the basis for an award to the terms of the agreement between the parties to arbitration, then the award may be vacated as the arbitrator has exceeded the scope of authority. (Updated March 2003)
Arbitration Clause Only Covers Matters Mentioned in Agreement, Not All Disputes Briefed Case	Delaware high court held that a claim by minority shareholders for breach of fiduciary duty could be litigated despite an arbitration clause in the initial financing agreement because that clause did not encompass such a claim. (Updated March 2003)
Attorney Fee Overturned As Irrational Briefed Case	Court overturned a $1.25 billion attorney fee approved by an arbitrator in the national class action suit against the tobacco companies by the states. Courts may overturn the decisions of arbitrators when they are irrational or violate public policy. This award had no justification. (Updated February 2003)
Arbitration Clause in One Part of Agreement Extends to Other Parts of Agreement Briefed Case	Appeals court held that when two contracts were signed at the same time as a package, although one did not have an arbitration clause in it, arbitration would be required to resolve all issues related to the contracts. (Updated December 2002)
Arbitrator Could Award Treble Damages for Antitrust Violation Briefed Case	Appeals court held that an arbitration clause would be enforced where a franchisee sued a franchiser for antitrust violation. The arbitrator could award treble damages, as allowed by antitrust law, which would not be the punitive damages disallowed by the arbitration clause. (Updated December 2002)
Injury Claim Alleged Due to Failure to Perform Contract Properly Must Go to Arbitration Briefed Case	Florida high court held that a claim against a pest control service for negligence for failure to kill spiders, which caused injury to plaintiff, must go to arbitration as the arbitration clause was written to include personal injury claims. (Updated July 2002)
Parties to Arbitration May Not Agree to Judicial Review of Arbitration Award Briefed Case	California appeals court held that a clause in an arbitration agreement that allowed judicial review of an award was contrary to the state's arbitration law and consequently made the entire arbitration agreement void and unenforceable. (Updated April 2002)
Federal Agencies Not Bound By Arbitration Agreements Between Other Parties Briefed Case	Supreme Court held that an arbitration agreement between an employer and an employee did not bind a federal agency from seeking judicial relief on behalf of an employee. The agency was not a party to the arbitration agreement, so was free to litigate matters under its law enforcement authority. (Updated March 2002)
Arbitrator Has Discretion to Award Attorney Fees Briefed Case	Nevada high court held that an arbitrator did not manifestly disregard the law by including attorney fees to the prevailing party in a construction contract dispute. While such awards are not common in litigation, the arbitrator acted within the guidelines of the arbitration association. (Updated January 1, 2002)
Errors by Arbitrators Not Grounds for Review by Courts Briefed Case	Appeals court upheld the refusal of a district court to review an arbitration panel award that did not specifically address all issues submitted and was "incomprehensible." Since the arbitrators stated that they had reviewed all issues, there was no basis for review in court. (Updated November 1, 2001)
Pressure by Mediator Is Improper and Can Justify Setting Aside Settlement Briefed Case	Appeals court held that if the complaints by a party to a mediated settlement were true–that the mediator used coercion to get her to agree to a settlement she did not want to make–then the agreement would be set aside since a mediator, in court-ordered mediation, is an officer of the court and may not use improper tactics. (Updated November 1, 2001)
Submission of Issues to Arbitration Is Binding on All Participating Parties Briefed Case	Appeals court affirmed that an arbitration award was final and enforceable in a case where a party participated in arbitration but had not signed an arbitration agreement with one of the parties in arbitration. Arbitration is binding on all participants regardless of such agreements. (Updated November 1, 2001)
Use of Deposition Does Not Violate Right to Arbitrate Dispute Briefed Case	An Appeals court held that in a dispute that was required to go to arbitration, the complaining party did not lose the right to arbitrate by engaging in formal discovery, including taking depositions, which would be normal in litigation but not in arbitration. The discovery was not improper, so arbitration could proceed. (Updated September 1, 2001)
Partial Award May Be Reviewed by Courts Under Federal Arbitration Act Briefed Case	Appeals court held that when an arbitration proceeding has been split into two parts, for separate awards on the issues of liability and damages, the award on liability may be reviewed by the courts before the damage issue is resolved by arbitration because the first award is a final award. (Updated July 1, 2001)
Arbitration Clause Covering Employment Discrimination Must be Clear and Unambiguous Briefed Case	The New Jersey high court held that a general arbitration clause in an employment contract that required all employment disputes to go to arbitration was not effective as to the rights of employees to file employment discrimination suits. Waivers that affect statutory rights must be clear and unmistakable to the employee as to their consequence. (Updated July 1, 2001)
Cost-Sharing Provision of Arbitration Clause Illegal and Unenforceable Briefed Case	Appeals court held that a provision in an employment arbitration clause requiring parties to share the costs of arbitration equally is illegal since Title VII allows a prevailing party to be awarded costs and fees. An arbitration clause may not be contrary to the rights provided in federal law. (Updated July 1, 2001)
Court System May Impose Fee to Support Mandatory Arbitration Briefed Case	Appeals court affirmed that it was constitutional for a county court system to impose a $10 fee on all civil cases filed to help support a court-annexed mandatory arbitration program to reduce the number of cases tried. The fee could be applied to cases that were not eligible for participation in the arbitration program. (Updated June 1, 2001)
Federal Arbitration Act Applies to All Employment Contracts Except for Transportation Workers Briefed Case	The Supreme Court reversed a court of appeals decision that held that the Federal Arbitration Act did not apply to employment contracts. The Court held that the Act applies to all employment contracts except those involving transportation workers, which Congress excluded, and that the statute overrides state law to the contrary. (Updated May 1, 2001)
Agreeing to Mediation Does Not Affect Time Limits on Pursuit of Trial Option Briefed Case	Plaintiff filed suit in 1991, but then agreed to mediation. After years of no mediation or anything happening, the case was deemed by the court to have been abandoned. Having agreed to mediation did not stop the running of the clock on the need to pursue the case or drop it within three years. (Updated May 1, 2001)
Contract That Violated State Law Could Not Be Enforced by Arbitration Briefed Case	Appeals court held that for a contract that contains an arbitration clause to be required to go to arbitration it must be a legal contract. A contract that called for interest payments that violated state usury laws is illegal and therefore could not be enforced by an arbitrator. (Updated March 1, 2001)
Class Action Not a Way Around Arbitration Requirement in Homeowner Warranty Agreement Briefed Case	Appeals court held that a homeowner warranty agreement that required arbitration of all disputes is a binding contract. The fact that plaintiff asserts that he wishes to bring a class action suit against the home builder, and would be prevented from doing so by going to arbitration, is not relevant. (Updated March 1, 2001)
Employer Can't Force Arbitration When It Does Not Meet Arbitration Requirements Briefed Case	An Appeals court upheld the right of dismissed employees to sue their employer in court and refuse arbitration. The employer required the employees to belong to an organization that mandates arbitration of employment disputes, but the employer did not belong to the organization so it could not enforce its rules. (Updated February 1, 2001)
Arbitration Decision Contrary to Public Policy Is Not Necessarily Void Briefed Case	Supreme Court held that the refusal of an arbitrator to allow an employer to fire an employee for repeat drug use was not in violation of public policy; so the courts could not overturn the decision. While public policy opposes drug use, the procedure used in this employment situation followed proper procedure. (Updated February 1, 2001)
Arbitrator Did Not Exceed Authority By Ordering Worker Reinstated After His Resignation Briefed Case	Court held that in a labor arbitration case, an arbitrator did not exceed his authority by ordering a worker to be reinstated after the worker had signed a letter of resignation that was handed to him by his employer. Since the union argued that the resignation was really a wrongful discharge, there was an issue that fell under the scope of arbitration and the award would be enforced. (Updated January 1, 2001)
Employment Arbitration Form Binding Even if Employee Failed to Read Referenced Materials Briefed Case	Appeals court held that the trial court should have required an employee go to arbitration against his former employer for settlement of his race and age discrimination claims. The employee signed a form that said that all employment disputes would go to arbitration and referenced detailed rules that the employee could have read had he so desired. (Updated January 1, 2001)
Television Court Judges Entitled to Arbitral Immunity Briefed Case	Ed Koch, who served as judge on a television court show, was entitled to absolute immunity from suit by a party to a dispute resolved on the program. As an arbitrator, Koch was entitled to immunity from suit, as are the producers of the program, for statements he made on the air about the parties. (Updated November 1, 2000)
Employment Arbitration Must Track State Law Procedures and Rights in California Briefed Case	California's high court held an employment arbitration agreement to be unenforceable because it limited the remedies available to less than what were available to employees under state law. Further, arbitration cannot provide fewer rights for employees in terms of fairness and cost allocation than if they were in court proceedings. (Updated October 1, 2000)
Arbitration Clause Valid Despite Employer's Voiding Employment Agreement Briefed Case	Trial court ordered arbitration of a dispute between employer and employee who had an arbitration clause. When the employer fired the employee, it stated that the employment contract was void. That statement did not eliminate the requirement to go to arbitration for disputes relating to employment. (Updated September 1, 2000)
Former Employee Who Won Arbitration Against Former Employer May Sue for Malicious Prosecution Briefed Case	An employee who went to work for a competitor was sued by their former employer on numerous counts. Matter was settled in arbitration in favor of employee. The fact that arbitration was used to help resolve the prior litigation does not preclude the employee from now suing the former employer for malicious prosecution. (Updated June 1, 2000)
Arbitrators Decision Reversed Where It Violated Public Policy Briefed Case	Federal court refused to modify the award of an arbitration panel that refused the request that they hold a hearing by one of the parties to arbitration. The decision of the panel to base the award on the written submissions was within its authority and the court will not intervene. (Updated May 1, 2000)
Arbitrators Not Required to Hold Hearings Briefed Case	Federal court refused to modify the award of an arbitration panel that refused the request that they hold a hearing by one of the parties to arbitration. The decision of the panel to base the award on the written submissions was within its authority and the court will not intervene. (Updated February 1, 2000)
Statutory Rights Cannot Be Forced Into Arbitration Unless Contract Clear and Unmistakable Briefed Case	Appeals court held that a collective-bargaining agreement, which held that "all grievances" would go to arbitration, is not clear and unmistakable to include all employee rights created by federal statute, such as disability discrimination. The employee could sue in court rather than go to arbitration. (Updated November 1, 1999)
Common Law Rules Apply to Arbitration Agreement Not Tied to Arbitration Statute Briefed Case	The New Jersey high court held that challenges to the result of an arbitration proceeding are subject to common law rules of appeal if the arbitration agreement did not specify that the proceedings would follow the rules of the New Jersey Arbitration Act. (Updated October 1, 1999)
Arbitration Clause That Includes Employment Discrimination Claims Is Valid Briefed Case	A fired employee sued his former employer for violation of Minnesota's employment discrimination statute. Court of appeals held that the comprehensive arbitration clause in the employment contract meant that the employment discrimination claim had to go to arbitration, not court, for resolution. (Updated September 1, 1999)
Mandatory Arbitration Clause Requiring Employees to Pay Arbitrator Not Enforceable Briefed Case	Arbitration requirement that employees had to pay half of arbitration fees when discrimination claims filed stricken as unenforceable. Cost would deprive employees of forum to resolve disputes. (Updated April 1, 1999)
General Arbitration Clause Does Not Waive Litigation Rights in Discrimination Cases Briefed Case	Supreme Court held that a general arbitration clause in a collective-bargaining agreement was not enforceable as to federal antidiscrimination rights. Employee could litigate the matter. Waivers of litigation rights must be "clear and unmistakable." (Updated March 1, 1999)
Remedy Limits in Employee Arbitration Clause is Contract of Adhesion Briefed Case	Arbitration requirement agreed to by employees who later sued for wrongful termination is held to be an unconscionable contract of adhesion as to its provision that severely limited the damages that could be requested, regardless of reason for termination. (Updated March 1, 1999)
Arbitration Clause Survives Termination of Contract Briefed Case	When litigation was threatened after ending a contract, parties signed a new agreement to continue working. The new contract replaced most of the old one. When another dispute arose, appeals court held that since the second contract did not expressly end the arbitration clause, it still applied to matters that carried back to the original contract. (Updated October 19, 1998)
Arbitrator Cannot Expand Scope of Union Representation Briefed Case	Appeals court reversed decision in favor of union, requiring company that fell under national collective bargaining agreement to turn non-union work over to union workers. Arbitrator does not have authority to expand the scope of the labor agreement, hence decision can be reviewed by the courts for legality. (Updated October 5, 1998)
Federal Courts Have No Jurisdiction Over Many Arbitration Suits Briefed Case	Federal court properly dismissed appeal from an arbitration decision because the parties were bound by the arbitration clause and forum selection clause. The Federal Arbitration Act does not confer subject matter jurisdiction on federal courts. Jurisdiction must arise from another basis not existing in this case. (Updated February 3, 1998)
Judicial Review of Arbitration Allowed When Contract Permits Review for Errors of Law Briefed Case	Appeals court allowed judicial review in case in which contract required arbitration but specified that review of award was allowed for errors of fact or law. (Updated 1-16-98)
An Agreement to Arbitrate May Materially Alter a Contract About Material Briefed Case	Seller unilaterally inserted arbitration clause in contract for sale of textile that the buyer claims was defective. Circuit court held that state law interpretation of whether the insertion of such clause materially altered the contract governs resolution of whether the case goes to trial or to arbitration. (Updated 11-14-97)
Employment Contract Arbitration Clause Precludes Litigation of Disability Discrimination Claim Briefed Case	Fifth Circuit upholds the enforceability of a binding arbitration clause signed by an employee in an employment contract. Her claim of discrimination on the basis of disability must be arbitrated, not litigated. (Updated 11-14-97)
Super Motels or Super Fraud? Briefed Case	Investors signed a contract to become a Motel 8 franchisee and paid a fee. Later, wanting out, they asserted Motel 8 told them they could have their money back. Motel 8 asserts no such statement. The court held the contract required arbitration, so it would not hear the matter. The contract appears to be complete, and there is no evidence of fraud in arbitration, so the matter must go to arbitration. (Updated 10-15-97)
Senior Citizens Must Arbitrate Before They Litigate Briefed Case	Class action suit by senior citizens who claimed Truth in Lending Act violations in reverse mortgage arrangements they entered into. Circuit court agreed that Federal Arbitration Act requires each plaintiff to go to arbitration before there is any possibility of litigation. (Updated 10-3-97)

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