Local’s Employment Contract with its Organizer Held Inherently Unfair and One-Sided

U.S. Court of Appeals for the Fourth Circuit held May 10 that United Food & Commercial Workers Int’l Union Local 400’s arbitration agreement in an employment contract between the local and its organizer was  “unconscionable” and unenforceable because it permitted the local to select a single arbitrator and to overturn the arbitrator’s ruling. “[W]e again refuse to enforce an agreement so ‘utterly lacking in the rudiments of even-handedness,’ ” U.S. Cir. Judge William B. Traxler, Jr. (4th Cir., Clinton), wrote for the court. “By agreeing to arbitration in lieu of litigation, the parties agree to ‘trade the procedures and opportunity for review of the courtroom for the simplicity, informality, and expedition of arbitration.’ They do not agree to forgo their right to have their dispute fairly resolved by an impartial third party.”

Daniel C. Murray took a leave of absence from his job as produce clerk at Giant Food, Inc. in 1997 to become a union organizer for Local 400, which is headquartered in Washington, D.C. The local required him to sign an arbitration agreement providing that discrimination claims were subject to binding arbitration, with a single arbitrator to be chosen from a list provided by the local’s president. The agreement also stated that the arbitrator had no power to “change or diminish” the president’s authority under the local’s bylaws.

Murray, who is white, was fired in 1998. He sued in the U.S. Dist. Court for the Dist. of Md. under Title VII of the 1964 Civil Rights Act and the Civil Rights Act of 1866. He claimed that Donald Cash, a union manager who is black, fired him on the basis of his race and retained similarly situated black employees.  Local 400 filed a motion to dismiss the discrimination claim and to compel Murray to arbitrate his claim. The local also asked for dismissal of Murray’s defamation claim. U.S. Dist. Judge J. Frederick Motz (D. Md., Reagan) granted the local’s motions, and the parties proceeded to arbitration.  A single arbitrator ruled for the union, and the district court confirmed the award. Murray appealed Motz’s dismissal of his claims and its order to compel arbitration.

On appeal, Murray argued that the terms of the arbitration agreement were “grossly unfair and one-sided by placing choice of the arbitrator exclusively in the hands of Local 400 and providing that, in any event, Local 400 can disregard the arbitration result because the arbitrator cannot alter the president’s authority.”  The appeals court attacked the agreement: “In the unlikely event the hand-picked arbitrator rules against Local 400,” the agreement, in conjunction with the local’s bylaws, could permit the union president to fire the employee anyway. The appeals court also reversed Motz’s dismissal of Murray’s defamation claim. Under Md. tort law, his claim that a union manager said he was “not a good organizer” was actionable, the court found.

U.S. Cir. Judge Karen J. Williams (4th Cir., G.H.W. Bush) joined in the opinion.  U.S. Dist. Judge Malcolm J. Howard (E.D.N.C., Reagan), sitting by designation, concurred in the judgment on defamation, but dissented on the arbitration issue.  Paul F. Evelius of Wright, Constable & Skeen in Baltimore represented Murray. Francine K. Weiss of Kalijarvi, Chuzi and Newman in Washington, D.C., represented the local. [BNA 5/13/02]