ADR Currents

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DEVELOPMENTS IN ENVIRONMENTAL LAW AND PUBLIC POLICY ISSUES

Supreme Court Sets Jurisdictional Parameters Between EPA and Army Corps of Engineers. On June 22, 2009, the Supreme Court issued its much anticipated decision addressing the jurisdictional boundaries between the U.S. Army Corps of Engineers ("Corps") and U.S. Environmental Protection Agency ("EPA") in permitting activities that may constitute both a wetlands fill and a pollution discharge under the Clean Water Act ("CWA").  In Coeur Alaska, Inc. v. Southeast Alaska Conservation Council, the Court held that the Corps properly exercised its wetlands permitting jurisdiction where the relevant activity - here, a mine slurry discharge to a navigable lake - met the Corps' regulatory definition of wetlands fill material and was therefore exempt from regulation by EPA under the National Pollution Discharge Elimination System ("NPDES") program.  Essentially, the Court held that under the facts of this case, the Corps’ permitting regime trumped a different mechanism set out in the EPA regulations.

This decision provides greater clarity for entities engaged in potentially "mixed" discharge activities, but may foreshadow greater EPA involvement in reviewing Corps wetland permitting decisions.

Supreme Court Narrows CERCLA Superfund Liability. On May 4, 2009, in Burlington Northern & Santa Fe Railway v. United States, the U.S. Supreme Court significantly limited the concept of “arranger” liability under CERCLA, and also broadened the defense of apportionment in CERCLA cases. Essentially, the Court held that a company which transports product to a facility is not an “arranger” for purposes of Superfund liability unless the government can prove that the company intended to dispose of its product at the facility. In this case, the Court rejected the government’s argument that since the company knew there would be minor spillage at the facility during the off-loading process, the company was liable under CERCLA. Additionally, contrary to previous rulings which required a company to affirmatively establish separate and distinct harm in order to limit its liability for site cleanup, this case relaxed that standard and now allows limitation of a company’s liability on a “reasonable basis” other than through specific and detailed records.
From a practical standpoint, this decision has the effect of limiting the liability of those entities that transport hazardous materials to superfund sites, which is likely to have an important impact in the negotiation of cleanup costs at those sites.

Supreme Court Denies Relief to Environmentalists Seeking Public Participation. In March, in Summers v. Earth Island Institute, the U.S. Supreme Court held that environmentalists lacked sufficient constitutional standing to challenge a U.S. Forest Service regulation limiting public involvement in timber sales decisions.  In a narrow decision, the Court ruled that the environmental group’s argument that their intention to visit the national forests in question did not amount to the type of “concrete” injury which is required to give the group standing to provide public comment on the regulations.
Certainly not a victory for collaborative processes in environmental law and policy.

TRENDS IN WORKPLACE LAW

Employee’s Statements During Internal Investigation Provides Protection from Retaliation.  On January 26, 2009, in Crawford v. Metropolitan Government of Nashville, the U.S. Supreme Court refused to limit retaliation protections against employees who report illegal conduct. The case arose when an employer, investigating rumors of sexual harassment by a supervisor, asked the employee whether she’d witnessed any inappropriate behavior. She proceeded to tell the employer about a series of harassing acts by the supervisor toward herself. The employer did nothing to discipline the supervisor and, instead, fired the reporting employee. The employee filed suit under Title VII’s anti-retaliation provision, which prohibits an employer from terminating a worker because she “opposed any … unlawful employment practice”.
The Court concluded that the ordinary meaning of “oppose” includes giving a “disapproving account” of unlawful behavior, even if the employee takes no further action on her own to seek to stop or remedy the conduct. Accepting the rule set forth in the EEOC’s Compliance Manual, the Court concluded that “when an employee communicates to her employer a belief that the employer has engaged in . . . a form of employment discrimination, that communication virtually always constitutes the employee’s opposition to the activity.”
This case signals a continuing recognition of employee protection from employer retaliation. A collateral impact of the decision is its effect on employee investigations, and the care employers should take in performing those investigations, and any remedial action implemented as a result.

Supreme Court Ruling Makes Proving Age Discrimination More Difficult. On June 18, 2009, in Gross v. FBL Financial Services, the U.S. Supreme Court held that employees who sue their employers for age discrimination must prove that age was the cause of an employment decision, even if they have some evidence that age was a factor in the decision. This decision makes it harder for employees to prove age discrimination under the Age Discrimination in Employment Act (“ADEA”).
In the case, Gross sued his employer, claiming he was demoted in violation of the ADEA. At the trial, the district court instructed the jury to return a verdict for Gross if he proved that his age was a "motivating factor" in the decision to demote. The court further told the jury that age was a "motivating factor" if it played a part in his demotion. It also instructed the jury to enter a verdict in favor of Gross' employer if it proved that it would have demoted him regardless of his age.  The jury returned a verdict in favor of Gross. However, the Eighth Circuit Court of Appeals reversed the jury's decision, holding that the jury had been improperly instructed.   The Supreme Court held that an employee who files an ADEA disparate treatment claim must prove that age was the "but for" cause of an adverse employment action (i.e., "but for" the employee's age, he wouldn't have been demoted). The Court also ruled that the employer doesn't have to show that it would have had taken the same action regardless of age, whether or not the employee produces evidence that age was a motivating factor in the employment decision.
Make no mistake about it – this decision makes it more difficult for employees to prove age discrimination. However, as with most decisions from the Supreme Court which displease the congressional majority, don’t be surprised if this standard is reversed by congressional and presidential action.

Supreme Court Finds Reverse Discrimination in Firefighter Case. In another close ruling which has been widely discussed in the media, the U.S. Supreme Court reversed a lower court’s decision which had upheld the City of New Haven, Connecticut’s decision to throw out promotion examinations which would have created a racial disparity in the fire department. On June 29, 2009, in Ricci v. DeStefano, the City disregarded and failed to grant promotions based on the results of the examinations, as to do so would have created a racial disparity.  The applicants who were denied promotions based on the City’s action sued, essentially claiming reverse discrimination.  The Supreme Court held that although implementation of the promotions would have created an adverse impact on blacks, the City’s fear of legal action did not justify its discrimination in reverse, as the tests were in fact job-related.
This case certainly puts a pale on “traditional” discrimination claims, and will likely cause employers to consider more carefully any decision which might create an adverse impact, and more closely evaluate whether employment tests are indeed “job-related”.

Sixth Circuit Allows Retaliation Case to Proceed Based on Proof of “Increased Scrutiny”.  In February, the Sixth Circuit Court of Appeals reversed the decision of a Kentucky U.S. District Court, allowing a case to proceed to trial based on the plaintiff’s claim that he was retaliated against based on “increased scrutiny” of his work. In this case, after being twice terminated by the employer, General Electric, the plaintiff, Mr. Harrison, filed a charge of age discrimination with the EEOC. Both terminations had been revised based upon an agreement with Harrison’s union and GE. Within about a month after Harrison’s return to work, company representatives had a meeting with Harrison to discuss deficiencies in his work, and within another month thereafter, Harrison was terminated after an altercation with his supervisor regarding a request to work during an unscheduled lunch break. The Court held that Harrison’s testimony of increased scrutiny by management and the short time between the filing of the charge and the termination were sufficient to reverse the trial court’s dismissal and allow the case to proceed.
Again, this case represents continued expansion of anti-retaliation rights of employees.

 RECENT ISSUES IN ALTERNATIVE DISPUTE RESOLUTION

Supreme Court Affirms Arbitration for Union Member Discrimination Claims. On April 1, 2009,  a sharply divided U.S. Supreme Court ruled that provisions of a collective bargaining agreement (“CBA”) that clearly and unmistakably require union members to arbitrate age discrimination claims are enforceable. In 14 Penn Plaza v. Pyett, Pyett and two other men worked as night watchmen at 14 Penn Plaza.  The three individuals also were members of the Service Employees International Union (“SEIU”) covered by a CBA between the SEIU and the Realty Advisory Board, a multiemployer bargaining association in which 14 Penn Plaza was a member. Under the CBA, union members were required to submit all employment claims — specifically including discrimination claims under the Age Discrimination in Employment Act (“ADEA”) and other federal and state antidiscrimination statutes — to binding arbitration. The agreement added that arbitration would be the "sole and exclusive remedy for violations" of federal and state antidiscrimination laws. Later, 14 Penn Plaza entered into an agreement with a security contractor to provide licensed security guards for the office building. As a result, Pyett and his co-workers were reassigned to jobs as porters and cleaners.
The SEIU filed grievances on behalf of Pyett and his coworkers.  The watchmen then filed discrimination charges with the Equal Employment Opportunity Commission (“EEOC”). After receiving their right-to-sue letter from the EEOC, they filed a lawsuit against 14 Penn Plaza alleging their reassignment amounted to age discrimination under the ADEA. 
The Supreme Court found that the arbitration provision was enforceable. Writing for the majority, Justice Thomas stated that an agreement between an employer and a union to arbitrate discrimination claims is "no different from the many other decisions made by parties in designing grievance machinery" and is a "condition of employment" subject to mandatory arbitration under the National Labor Relations Act (“NLRA”). Because a union will agree to the inclusion of an arbitration provision in a CBA in exchange for other concessions from the employer, the Court held that courts aren't free to interfere with this bargained-for exchange, and the arbitration provision applicable to age discrimination claims must be honored unless the ADEA itself removes this particular class of grievances from the NLRA.
According to Justice Thomas, because "nothing in the law suggests a distinction between the status of arbitration agreements signed by an individual employee and those agreed to by a union representative," he concluded that there is no legal basis for failing to enforce a CBA arbitration provision that was freely negotiated by the union and the employer and clearly and unmistakably requires union members to arbitrate their age discrimination claims.
This decision represents a sea change at the intersection of the law of arbitration, employment discrimination, and labor relations. It is likely to complicate collective bargaining and contract administration in myriad ways. As above, don’t be surprised if Congress takes action under the proposed Arbitration Fairness Act in order to overturn this ruling.

Non-Signatory to Arbitration Agreement Can Enforce the Agreement.  In Arthur Anderson, LLP v. Carlisle, decided by the U.S. Supreme Court on May 4, 2009, Wayne Carlisle and others had entered into an investment-management agreement with Bricolage Capital, LLC in order to establish a tax shelter.  Carlisle also acquired the services of Arthur Andersen LLP, an accounting firm who was not party to the agreement.  After the IRS ruled the tax shelter illegal, Carlisle brought suit against Andersen, Bricolage, and others.   Andersen attempted to enforce arbitration in the case, according to the agreement between Carlisle and Bricolage.  The Court held that a nonsignatory to an arbitration agreement may obtain a stay under the Federal Arbitration Act, and could enforce arbitration if state law allowed it.

Sixth Circuit Upholds Arbitration Agreement in Employee Handbook. On May 19, 2009, in Mazera v. Varsity Ford Management Services, the Sixth Circuit Court of Appeals enforced an employment arbitration agreement contained in the employee handbook. In this case, Mazera brought a race and disability discrimination action against Varsity Ford Management Services, his former employer. Varsity Ford moved for arbitration based on an arbitration provision in its employee handbook. The Court held that Mazera's assertions that he lacked bargaining power and did not understand English well were insufficient to place the making of the arbitration agreement unenforceable. The Court also ruled that the arbitration provision was supported by consideration and was a condition of Mazera's employment. The Court agreed with the district court's holding that the provision in the arbitration agreement requiring the parties to split the costs of the arbitration was unenforceable, but remanded the case for the lower court to determine whether Varsity would waive the $500 deposit requirement, thus curing any issue with respect to that requirement.
While an employee handbook is certainly not the most advisable method of implementing an employment arbitration system, this case provides some support for that procedure. In any event, this case demonstrates the advisability of avoiding cost-sharing arrangements, and suggests that employers should consider bearing the entire cost of the arbitration process.

“Bad Faith” Sanction Available to Arbitrators Unless Otherwise Contemplated in Agreement.  On April 9, 2009, the Second Circuit Court of Appeals held that an arbitration agreement presumptively preserves the power of an arbitrator to impose “bad faith” sanctions of fees and costs, even if the agreement simply recites the “American Rule” that parties pay their own fees and costs in arbitration. In ReliaStar Life Insurance Co. v. EMC National Life Insurance Co., the arbitration panel granted ReliaStar attorney’s fees of over $3.1 million and arbitrator costs of over $691,000, explaining that it found EMC’s conduct during the proceeding to be "lacking good faith." Specifically, the Court found that arbitrators had "inherent authority" to sanction bad faith through assessment of fees, noting that fee and cost sanctions that are compensatory, not penal, is an appropriate form of damages granted to an aggrieved party. The Court found nothing in the parties’ agreement that would limit this presumption that fees and costs sanctions were within the panel’s remedial power.

Wrongful Death Claims Arbitrable Under Texas and Federal Law, Says Fifth Circuit.  On  May 6, 2009, the Fifth Circuit Court of Appeals has held that wrongful death claims are derivative and therefore arbitrable under both Texas law and the federal common law of contracts.  In Graves v. BP America Inc., an employee of JV Piping, Graves, died in an occupational accident while working on-site at BP. Graves’ survivors brought survival and wrongful death claims against JV and BP. JV and BP moved to arbitrate the claims under an employment-related arbitration agreement with Graves. The Court found both Texas and federal law dictated the same result; the survivors were required to arbitrate their claims. Under federal law, the Court found the survivors would be precluded from resisting arbitration under a "direct benefits estoppel" theory, if they were seeking to enforce terms of the decedent’s employment contract.  Because the survivors were statutory beneficiaries of the decedent’s estate, their recovery was premised on the employment contract in the same manner as if the decedent was seeking relief. Accordingly, the federal common law of contracts required arbitration of the derivative wrongful death claims.

Third Circuit Holds Arbitration Agreement in Law Firm Corporate Bylaws Fails to Bind Directors Through Constructive Knowledge.  The Third Circuit Court of Appeals has held that a corporate director’s constructive knowledge of his or her entity’s bylaws is not sufficient to bind that director to an arbitration agreement contained within those bylaws. In Kirleis v. Dickie, McCamey & Chilcote, P.C., attorney Kirleis was hired by law firm Dickie as an associate. Kirelis was later promoted to shareholder, and then director. As a director, Kirleis’s relationship with the Dickie firm was governed by the professional corporation’s bylaws.  The bylaws also contained a broadly-worded agreement to arbitrate all disputes between directors and the firm. Kirleis later sued Dickie for gender discrimination and retaliation. Dickie moved to compel arbitration, arguing that Kirleis had constructive knowledge of the bylaws as a director and was therefore bound to the arbitration agreement within. Dickie maintained that Kirkeis had accepted the benefits of other terms within the bylaws and therefore could not resist the arbitration term.  The Court held that constructive knowledge of the bylaws was not sufficient to bind Kirleis here; rather, it required an actual agreement between the parties to compel arbitration under Pennsylvania contract law.

CURRENT NEGOTIATION STRATEGIES, TOOLS AND TIPS

The President as Mediator-Negotiator: Lessons Learned from the Chrysler Crisis. The recent developments which landed the Chrysler Corporation in bankruptcy provide important lessons for parties and neutrals negotiating multi-party disputes. In order to secure its $12 billion dollars in loan guarantees from the federal government, Chrysler was required to reorganize and pay down its debt. The administration required sacrifices from Chrysler’s management, unions, and creditors. As part of the reorganization process, the White House required Chrysler to enter into a joint venture with Italian automaker Fiat, under which Fiat would provide new models and technology in exchange for 20% ownership and management position with Chrysler. Additionally, Chrysler was successful in renegotiating its contracts with both the United Auto Workers and the Canadian Auto Workers. The problem was with the creditors – the Treasury Department required Chrysler to accept $2 billion in cash to eliminate about $6.9 million in secured debt, or Chrysler would be forced into bankruptcy. The demand worked – in part. The four largest banks, holding about 70% of the debt – agreed. However, some of the smaller banks and hedge funds balked, calling Treasury’s terms “legally questionable”. Now, the negotiations will take a decidedly different procedure in the bankruptcy court.
The lesson: Remember that when you need to complete a series of negotiations with different parties in order to close a bigger deal, a single holdout or a minority of the affected parties can spoil what otherwise appears to be a logical and successful resolution.

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