Originally from: Employment Arbitration - 2nd Edition - Hardcover
Employment Arbitration - 2nd Edition - Electronic
Employment Arbitration Agreements and Third-Party Beneficiaries
Thomas E. Carbonneau
(i) An Introduction to the Issue and the Case
The U.S. Court of Appeals for the Seventh Circuit has ruled that an
arbitration agreement entered into by an employee (at the behest of his
employer) with an arbitration service provider is unenforceable because
it contains an illusory promise under state contract law. In the court’s
assessment, “[t]he contract [was]…hopelessly vague and uncertain as to
the [service’s] obligation.…For all practical purposes, [the service’s]
promise under this contract ‘makes performance entirely optional with
the promisor.’” The contract also lacked consideration and mutuality of
obligation and was, therefore, unenforceable.
The facts of the case are an eloquent statement of the extraordinary
lengths to which some business entities will go to deprive their lowerlevel
employees of their basic legal rights. Ryan’s apparently had not
been sufficiently reassured by the fact that it could lawfully impose an
obligation to arbitrate unilaterally upon its employees either as a
mandatory condition of employment or of continued employment.
Perhaps fearing that courts would eventually reverse the legality of that
practice, Ryan’s entered into an agreement with Employment Dispute
Services (EDS), a specialized arbitration service-provider. The purpose
of the contract was “to have EDS provide an arbitration forum for all
employment-related disputes between Ryan’s and its employees.”
Ryan’s then required its prospective employees to enter into a contract
with EDS to use its services exclusively to resolve any employment
disputes that arose with Ryan’s. The contract language emphasized that
the contracting parties were the employee and EDS; Ryan’s was
described as “a third-party beneficiary of the contract.”
Full Table of Contents from "Employment Arbitration - 2nd Edition"
Section I. An Introduction to the Process and the Issues
Section II. Arbitration: A Definition
(i) Its Appeal to the Commercial Community
(ii) The Reality of Its Operation
(iii) The Actual Operation
1. "Basic Organization"
2. "Arbitrators and Disclosure Requirements"
3. "Establishing the Scope of the Arbitration"
4. "The Basic Hearing"
5. "Third-Party Intervention"
6. "Awards and Judicial Scrutiny"
7. "Arbitral Costs"
8. "A Final Evaluation"
(iv) Arbitration and Lawyers
Section III. The Law of Arbitration: Basic Concepts
(i) Party Autonomy
(ii) Arbitration Agreements
(iv) The Separability and Kompetenz-Kompetenz
(v) Amiable Composition
(vi) Duty to Arbitrate in Good Faith
(vii) Consolidation and Class Action in Arbitration
(viii) Selecting Arbitrators
(ix) Adjudicatory Powers of the Arbitrators
(x) Review and Enforcement of Awards
(xi) The Contribution of Practice: Fast-Track Arbitration
(xii) The "Modern" Arbitration Statute
Section IV. A Critical Political Assessment
(i) The Civil Rights Procedures Protection Act
(ii) EEOC Notice
(iii) U.S. Labor Department Position
Section V. The Fountainhead Cases
(i) The Ruling in Gardner-Denver
(ii) The Ruling in Gilmer
Section VI. The Employment Contract Exclusion (FAA §1)
(i) Circuit City Stores, Inc. v. Adams
(ii) The Aftermath of Adams
(iii) The Law Before Adams
Section VII. Fairness in the Employment Arbitration Contract
(i) The Ruling in Armendariz
(ii) Other Rulings
Section VIII. The Allocation of Costs in Employment Arbitration Agreements
(i) The Ruling in Green Tree and Other Cases
(ii) The Green Tree Progeny
Section IX. The Defense of Unconscionability
(i) Tarulli v. Circuit City Stores, Inc.
(ii) Martinez v. Master Protection Corp
(iii) Fitz v. NCR Corp
(iv) Washington Mutual Fin. Grp., LLC v. Curry
(v) Hightower v. GMRI, Inc.
Section X. The Effect of an Employment Arbitration Agreement on EEOC Jurisdiction
(i) The Prior Cases
(ii) EEOC v. Waffle House, Inc.
(iii) Subsequent Cases
Section XI. Employment Arbitration Agreements and Third-Party Beneficiaries
(i) An Introduction to the Issue and the Case
(ii) Penn v. Ryan's Family Steak Houses, Inc.
Section XII. The Basic Judicial Position
(i) The Standard Policy
Metz v. Merrill Lynch, Pierce, Fenner & Smith, Inc.
(ii) The Standard Construction
Great Western Mortgage Corp. v. Peacock
A Note on the Arbitrability of Title VII Claims
(iii) Maintaining the Effectiveness of Adjudication
Maye v. Smith Barney, Inc.
(iv) Distinguishing Between Gilmer and Gardner-Denver
Pryner v. Tractor Supply Co.and Sobierajski v. Theosen Tractor & Equipment Co
A Note on the Judicial Assessment of the Opposing Doctrine
Nieves v. Individualized Shirts
Section XIII. Minority Judicial Positions
(i) An Aggressive Interpretation of Gilmer
Austin v. Owens-Brockway Glass Containers, Inc.
(ii) Seeking Fairness in Employment Arbitration Agreements
Cole v. Burns International Security Services
(iii) The Arbitrability of Civil Rights Claims
Prudential Insurance Co. of America v. Lai
A Note on the Progeny
Willis v. Dean Witter Reynolds, Inc.
(iv) The Exception of Unconscionability
Stirlen v. Supercuts, Inc.
Section XIV. Aspects of the Continuing Debate on the Arbitrability of Title VII Claims
(i) Desiderio v. National Association of Securities Dealers (NASD), 2 F. Supp. 2d 516 (S.D.N.Y. 1998)
(ii) The Decision in Rosenberg v. Merrill Lynch
(iii) (a) Hooters of America v. Phillips, 39 F. Supp. 2d 582 (D.S.C. 1998)
(b) Hooters and the U.S. Fourth Circuit Court of Appeals
(iv) Seus v. John Nuveen & Co., 146 F.3d 175 (3d Cir. 1998), cert. denied, 525 U.S. 1139 (1999)
(v) Title VII and the Award of Attorney's Fees in Employment Arbitration
(vi) State Courts Uphold the Arbitrability of Title VII Claims
(vii) The Seventh Circuit Adopts Arbitrability
Section XV. The Settlements in the Smith Barney and Merrill Lynch Class Action Lawsuits
(i) Smith Barney, An Update
(ii) Merrill Lynch
Section XVI. The U.S. Supreme Court Decision in Wright
(i) The Ruling in Wright
Wright v. Universal Maritime Service Corp.
(ii) Subsequent Cases
Section XVII. "Makeshift" Employment Arbitration Agreements
(i) Employee Handbooks
(ii) E-mail Agreements
(iii) Agreements by Implication
(iv) Agreements by Conduct
Section XVIII. The Institutional Position: Integrating the Legal Doctrine into Corporate Policy
(i) The AAA's Resolving Employment Disputes: A Practical Guide
(ii) The AAA's National Rules for The Resolution of Employment Disputes (Including Mediation and Arbitration Rules)
Section XIX. A Model Agreement and Arbitral Process
(i) Basic Considerations
(ii) Provisions of a Model Agreement
Index and Table of Cases
Thomas Carbonneau is the Samuel P. Orlando Distinguished Professor of Law at Penn State's Dickinson School of Law. Professor Carbonneau is commonly regarded as one of the world's leading experts on domestic and international arbitration. He serves on the editorial board of La Revue de L'Arbitrage and is the author of ten highly acclaimed books and 75 scholarly and professional articles on arbitration.