Arbitration--Enforceability of Arbitration Clause in Collective Bargaining Agreement in Discrimination Suit. In Wright v. Universal Maritime Service Corp., 525 U.S. 70 (1998), the Supreme Court held that an arbitration clause in a collective bargaining agreement (CBA) did not waive a covered employee's federal statutory right to a judicial forum when there was no "clear and unmistakable" waiver of that right. The Court noted, but did not resolve, an apparent tension between two lines of decisions. The first line, represented by Alexander v. Gardner-Denver Co., 415 U.S. 36 (1974), held unenforceable a CBA arbitration clause waiving the covered employee's federal statutory right to a judicial forum. The second line, represented by Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991), held that an employee could validly waive his or her own right to judicial resolution of federal claims by entering into an independent arbitration agreement. The Court granted certiorari in 14 Penn Plaza LLC v. Pyett, No. 07-581, to resolve that tension. The question presented in Pyett is whether an arbitration clause in a CBA that clearly and unmistakably waives the covered employees' right to judicial resolution of their federal antidiscrimination claim is enforceable.
The Court's grant of certiorari in this case is important to all employers whose employees are covered by a CBA. The Court's resolution of the issue will affect the ability of employers to negotiate with unions for mandatory arbitration of federal statutory discrimination claims. Because arbitration tends to be significantly cheaper and quicker than litigation, the effect of the Court's decision is likely to be significant.
The plaintiffs in Pyett are members of the Local 32BJ of the Service Employees International Union who worked as night security guards for 14 Penn Plaza. In August 2003, 14 Penn Plaza contracted with Spartan Security to provide security personnel for the building. The plaintiffs, having been displaced from their positions, initiated a suit against 14 Penn Plaza under the Age Discrimination in Employment Act of 1967, 29 U.S.C. § 621 et seq., claiming that they were the building's only employees older than 50. The defendant sought to compel arbitration under a provision of the plaintiffs' CBA that had been negotiated for them by their union and clearly required all discrimination claims to be resolved through arbitration. The district court denied the defendant's motion to compel arbitration, and the Second Circuit affirmed, holding that "a union-negotiated mandatory arbitration agreement purporting to waive a covered worker's right to a federal forum with respect to statutory rights is unenforceable." 498 F.3d at 92.
Amicus briefs in support of the petitioners will be due on April 11, 2008; amicus briefs in support of the respondents will be due on May 12, 2008. Any questions about the case should be directed to Dan Himmelfarb (202-263-3035) in our Washington, D.C. office.
ERISA--Divorce and Change in Beneficiaries--Qualified Domestic Relations Orders. When a beneficiary of an Employee Retirement Income Security Act (ERISA) pension benefit plan dies, plan administrators must decide who collects the money. The federal courts of appeals are sharply divided over the method of determining who should be paid when the plan documents designate a former spouse as the alternative beneficiary. In one recurring scenario, the former spouse waives all rights to the benefits as part of a divorce settlement but remains designated as the alternative beneficiary; the employee does not file a Qualified Domestic Relations Order (QDRO) to designate a new alternative beneficiary; the employee dies; and the plan documents say the former spouse is the beneficiary. Who should the administrator pay-the former spouse or the estate? The Supreme Court granted certiorari to decide that question in Kennedy v. Plan Administrator for Dupont Savings and Investment Plan, No. 07-636.
This case is important to any employer who sponsors an ERISA pension benefit plan and any administrator of such a plan, because it will affect the costs of plan administration. If, for example, the Court holds that the filing of a QDRO is the only way in which a divorcing spouse can be found to have waived an interest in the employee's pension benefit plan, then plan administrators, not needing to look beyond the plan documents and QDROs, will have lower costs of investigation and will be less likely to face competing claims from a former spouse on the one hand and an estate or subsequent spouse on the other.
In Kennedy, an employee of Dupont designated his wife as the alternative beneficiary for his pension benefit plan. In 1994 the employee and his wife divorced; as part of the divorce settlement, the wife waived her right to the employee's pension benefits. In 1998 the employee retired, and in 2001 he died. The executor of the employee's estate asked Dupont to pay the employee's pension benefits to the estate. Dupont declined and, pursuant to the employee's designation of his former spouse as the beneficiary, instead paid the former spouse about $402,000. The employee's estate sued Dupont, and Dupont sued the former spouse to recover the money. The district court awarded the pension benefits to the employee's estate. The Fifth Circuit reversed, holding that the filing of a QDRO-which designates a beneficiary to receive all or part of the benefits under an ERISA plan-is the only way a divorcing spouse may be deemed to have waived the right to the employee spouse's pension benefits. The executor of the employee's estate filed a petition for a writ of certiorari on four questions. The Court granted certiorari on only the third question: "Was the Fifth Circuit correct in concluding that ERISA's Qualified Domestic Relations Order provision, 29 U.S.C. § 1056(d)(3)(B)(i), is the only valid way a divorcing spouse can waive her right to receive her ex-husband's pension benefits under ERISA?"
Amicus briefs in support of the petitioners will be due on April 11, 2008; amicus briefs in support of the respondent will be due on May 12, 2008. Any questions about the case should be directed to Dan Himmelfarb (202-263-3035) in our Washington, D.C. office.
First Amendment--Nonmember Payment of Union Service Fees. The Supreme Court has repeatedly addressed the First Amendment implications of "union shops" or "agency shops," where union membership, or a service fee payment, is required as a condition of employment. The Supreme Court has held that unions can charge nonmembers a service fee to cover expenses related to collective bargaining and contract administration, but cannot charge nonmembers to support political or ideological expression. In Locke v. Karass, No. 07-610, the Supreme Court granted certiorari to resolve a circuit split on whether a union that functions as the exclusive bargaining agent for certain state employees can charge nonmembers for litigation expenses incurred by its national affiliate.
The Supreme Court's opinion in Locke will likely clarify the test for determining which costs a union may charge nonmembers, and in particular will likely determine whether a local union may charge nonmembers a portion of pooled litigation expenses borne by the union's national affiliate even though such expenses may arise from litigation not involving the local union. The Locke decision will be of interest to unionized employers with union or agency shops.
In Locke, the Maine State Employees Association (MSEA), the exclusive bargaining agent for certain state employees, charged nonmember state employees whom it represents a service fee equal to union dues minus expenses not related to collective bargaining and contract administration services. The fee includes a portion of the affiliation fee MSEA pays to its national affiliate, the Service Employees International Union (SEIU). The portion of the affiliation fee passed on to nonmembers covers only those SEIU activities that MSEA deems would be chargeable to nonmembers if conducted by MSEA itself, including bargaining support and litigation activities undertaken by SEIU throughout the country. The petitioners, nonmembers covered by the MSEA, challenge on First Amendment grounds the portion of the service fee attributable to SEIU's litigation costs.
The lower courts have been divided on which costs a union may charge nonmembers; the lower court division reflects a degree of tension in prior Supreme Court decisions. On the one hand, in Ellis v. Brotherhood of Railway Clerks, 466 U.S. 435, 453 (1984), the Supreme Court (in a case that did not involve "pooled expenses" collected for a national affiliate) held that a union may charge nonmembers for litigation expenses incurred in connection with contract negotiation and administration, or the settlement of disputes and grievances arising under a negotiated contract, but indicated that litigation expenses not connected with the bargaining unit may not be charged to nonmembers. On the other hand, in Lehnert v. Ferris Faculty Ass'n, 500 U.S. 507, 524 (1991), the Supreme Court (in a case that did involve "pooled expenses") held that a local union may charge nonmembers for a national affiliate's otherwise chargeable activities "even if those activities were not performed for the direct benefit of the objecting employees' bargaining unit."
Amicus briefs in support of the petitioners will be due on April 11, 2008; amicus briefs in support of the respondents will be due on May 12, 2008. Any questions about the case should be directed to Andrew Tauber (202-263-3324) in our Washington, D.C. office.
Today the Supreme Court also invited the Solicitor General to file a brief expressing the views of the United States in Goss Internat'l Corp. v. Tokyo Kikai Seisakusho, No 07-618, which presents the question whether a US court can enter an injunction preventing the losing party in a case before it from initiating an action in a foreign jurisdiction to undo the US judgment. Petitioner's position is that, if losing parties are allowed to "claw back" US judgments through foreign suits, then foreign companies can obtain de facto exemption from US antitrust and antidumping laws -- and thereby gain an unfair competitive advantage over US firms -- even though they have entered the US market and competed with US firms. Mayer Brown represents the petitioner in Goss.
Last month, the Supreme Court invited the Solicitor General to file a brief expressing the views of the United States in Pacific Bell Telephone Co. v. LinkLine Communications, Inc.,, No. 07-512. The question presented is whether a plaintiff states a claim under Section 2 of the Sherman Act by alleging that the defendant -- a vertically integrated retail competitor with an alleged monopoly at the wholesale level but no antitrust duty to provide the wholesale input to competitors -- engaged in a "price squeeze" by leaving insufficient margin between wholesale and retail prices to allow the plaintiff to compete.