Montes v. Shearson Lehman Bros., Inc.

• Decision Date: 24 November 1997
• Docket Number: No. 96-5124,96-5124
• Citation: 128 F.3d 1456
• Parties: 134 Lab.Cas. P 33,638, 4 Wage & Hour Cas.2d (BNA) 385, 11 Fla. L. Weekly Fed. C 817 Delfina MONTES, a Florida Resident, Plaintiff-Appellant, v. SHEARSON LEHMAN BROTHERS, INC., a Delaware Corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1456

128 F.3d 1456

134 Lab.Cas. P 33,638, 4 Wage & Hour Cas.2d

(BNA) 385,

11 Fla. L. Weekly Fed. C 817

Delfina MONTES, a Florida Resident, Plaintiff-Appellant, v. SHEARSON LEHMAN BROTHERS, INC., a Delaware Corporation Defendant-Appellee.

No. 96-5124.

United States Court of Appeals Eleventh Circuit.

Nov. 24, 1997.

Jeffrey B. Crockett, Daniel F. Blonsky, Aragon, Burlington, Weil & Crockett, P.A., Miami, FL, for Plaintiff-Appellant.

Peter W. Homer, Homer and Bonner, Miami, FL, for Defendant-Appellee.

Appeal from the United States District Court for the Southern District of Florida.

Before CARNES and BARKETT, Circuit Judges, and REAVLEY ^*, Senior Circuit Judge.

BARKETT, Circuit Judge:

Delfina Montes appeals from the district court's denial of her petition to vacate an arbitration board's decision denying her claim for over-time pay from her former employer, Shearson Lehman Brothers, Inc., pursuant to the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq. ¹ Shearson asserts that, although Montes worked more than the 40 hours weekly that she recorded on her time-cards, she was exempt from the FLSA's overtime payment requirements because she held either an "administrative" or "executive" position. After she stopped working for Shearson, Montes sued for overtime pay pursuant to the FLSA. The federal district court to which Shearson removed the lawsuit referred the case to arbitration, and the arbitration board ruled that Shearson did not owe Montes overtime pay. The district court denied Montes's petition to vacate the arbitration board's decision, and Montes appeals.

Discussion

On appeal, Montes asserts that the district court erred in referring the case to arbitration, and that the arbitration board's decision was arbitrary, capricious, and violative of public policy. Her primary argument is that Shearson's attorney improperly urged the arbitration board specifically to disregard the FLSA to find in Shearson's favor and that the board apparently did so.

Initially, we reject Montes's claim that the district court improperly referred the case to arbitration. ² We note that, in Benoay v. Prudential-Bache Sec., Inc., 805 F.2d 1437 (11th Cir.1986), this court stated "[a] court may not order arbitration unless and until it is satisfied that a valid arbitration agreement exists," id. at 1440 (internal quotes and citation omitted). There is no question in this case that Montes signed a valid arbitration agreement when she first worked for Shearson, and most recently at Shearson's branch office in New Jersey in 1991. She argues, however, that the agreement should not be enforced because she did not sign it again when she moved to Shearson's Hallandale branch office. We see nothing in the agreement so limiting it. We do not find that simply moving between branch offices while the employer/employee relationship continues uninterrupted terminates the existing arbitration agreement between the parties. However, under the facts of this case, we do vacate the arbitration award and remand for referral to a new arbitration panel.

Brown v. Rauscher Pierce Refsnes, Inc., 994 F.2d 775 (11th Cir.1993), delineates the general circumstances in which arbitration awards can be vacated:

Our review of commercial arbitration awards is controlled by the Federal Arbitration Act ("FAA"). See 9 U.S.C.A. §§ 1-16. Judicial review of arbitration awards under the FAA is very limited. Booth v. Hume Publishing, Inc., 902 F.2d 925, 932 (11th Cir.1990). The FAA presumes that arbitration awards will be confirmed, 9 U.S.C.A. § 9, and enumerates only four narrow bases for vacatur, none of which are applicable in this case. In addition to these four statutory grounds for vacatur, we have recognized two additional non-statutory bases upon which an arbitration award may be vacated. First, an arbitration award may be vacated if it is arbitrary and capricious. Ainsworth v. Skurnick, 960 F.2d 939, 941 (11th Cir.1992), cert. denied, 507 U.S. 915, 113 S.Ct. 1269, 122 L.Ed.2d 665 (1993); Raiford v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 903 F.2d 1410, 1413 (11th Cir.1990); United States Postal Serv. v. National Ass'n of Letter Carriers, 847 F.2d 775, 778 (11th Cir.1988). Second, an arbitration award may be vacated if enforcement of the award is contrary to public policy. Delta Air Lines, Inc. v. Air Line Pilots Ass'n, 861 F.2d 665, 671 (11th Cir.1988) cert. denied, 493 U.S. 871, 110 S.Ct. 201, 107 L.Ed.2d 154 (1989); U.S. Postal Service, 847 F.2d at 777.

Id. at 778-79. ³

Montes does not argue in this case that any of the statutory reasons for reversal of the arbitration board's decision are applicable. ⁴ She argues that the award should be vacated because the arbitrators were explicitly urged to disregard the law and, in light of the nature of the evidence presented, there is nothing in the record to show that they did not do so. To enforce the arbitration decision under these circumstances, Montes argues, is violative of public policy. ⁵ Shearson's counsel, ⁶ in his opening statement to the arbitration board, set the stage for the arguments to follow:

I know, as I have served many times as an arbitrator, that you as an arbitrator are not guided strictly to follow case law precedent. That you can also do what's fair and just and equitable and that is what Shearson is asking you to do in this case.

(Arbit.Tr. at 22). Later, during his closing argument, Shearson's attorney again stated:

You have to decide whether you're going to follow the statutes that have been presented to you, or whether you will do or want to do or should do what is right and just and equitable in this case. I know it's hard to have to say this and it's probably even harder to hear it but in this case this law is not right. Know that there is a difference between law and equity and I think, in my opinion, that difference is crystallized in this case. The law says one thing. What equity demands and requires and is saying is another. What is right and fair and proper in this? You know as arbitrators you have the ability, you're not strictly bound by case law and precedent. You have the ability to do what is right, what is fair and what is proper, and that's what Shearson is asking you to do.

(Arbit.Tr. at 435-36) (emphasis added). The lawyer continued, and reiterated the argument he had been making throughout the case, "[t]hus, as I said in my Answer, as I said before in my Opening, and I now ask you in my Closing, not to follow the FLSA if you determine she's not an exempt employee." (Arbit.Tr. at 438).

It is certainly true that parties can establish the parameters of the arbitration explicitly in their agreement. ⁷ When a claim arises under specific laws, however, the arbitrators are bound to follow those laws in the absence of a valid and legal agreement not to do so. As the Supreme Court has stated, "[b]y agreeing to arbitrate a statutory claim, a party does not forego the substantive rights afforded by the statute; it only submits to their resolution in an arbitral, rather than a judicial, forum." Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26, 111 S.Ct. 1647, 1652, 114 L.Ed.2d 26 (1991)(quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628, 105 S.Ct. 3346, 3354-55, 87 L.Ed.2d 444 (1985)). Similarly, in Shearson/American Exp., Inc. v. McMahon, 482 U.S. 220, 107 S.Ct. 2332, 96 L.Ed.2d 185 (1987), the Court stated "we have indicated that there is no reason to assume at the outset that arbitrators will not follow the law; although judicial scrutiny of arbitration awards necessarily is limited, such review is sufficient to ensure that arbitrators comply with the requirements of the statute," id. at 232, 107 S.Ct. at 2340 (citing to and summarizing Mitsubishi Motors).

This does not mean that arbitrators can be reversed for errors or misinterpretations of law. In Wilko v. Swan, 346 U.S. 427, 436-37, 74 S.Ct. 182, 187-88, 98 L.Ed. 168 (1953), overruled on other grounds, Rodriguez de Quijas v. Shearson/American Exp., Inc., 490 U.S. 477, 109 S.Ct. 1917, 104 L.Ed.2d 526 (1989), the Supreme Court indicated that although an erroneous interpretation of the law would not subject an arbitration award to reversal, a clear disregard for the law would. As the Wilko court stated, "[i]n unrestricted submission, ... the interpretations of the law by the arbitrators in contrast to manifest disregard are not subject, in the federal courts, to judicial review for error in interpretation." Wilko, 346 U.S. at 436-37, 74 S.Ct. at 187-88 (citation omitted). The Supreme Court has recently reiterated that a party that submits to arbitration may obtain relief from a federal court "only in very unusual circumstances," but that a party to arbitration can obtain relief from a federal court where the arbitration award was made in manifest disregard of the law. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 942, 115 S.Ct. 1920, 1923, 131 L.Ed.2d 985 (1995) (citing to Wilko).

Thus, every other circuit except the Fifth (which has declined to adopt any non-statutory grounds for vacating arbitration awards), has expressly recognized that "manifest disregard of the law" is an appropriate reason to review and vacate an arbitration panel's decision. See Prudential-Bache Sec., Inc. v. Tanner, 72 F.3d 234 (1st Cir.1995); Willemijn Houdstermaatschappij, BV v. Standard Microsystems Corp., 103 F.3d 9 (2d Cir.1997); United Transp. Union Local 1589 v. Suburban Transit Corp., 51 F.3d 376 (3d Cir.1995); Upshur Coals Corp. v. United Mine Workers of America, Dist. 31, 933 F.2d 225 (4th Cir.1991); M & C Corp. v. Erwin Behr GmbH & Co., KG, 87 F.3d 844 (6th Cir.1996); National Wrecking Co. v. International Broth. of Teamsters, Local 731, 990 F.2d 957 (7th Cir.1993); Lee v. Chica, 983 F.2d 883 (8th Cir.), cert. denied, 510 U.S. 906, 114 S.Ct. 287, 126 L.Ed.2d 237 (1993); Barnes v. Logan, 122 F.3d 820 (9th Cir.1997); Jenkins v. Prudential-Bache Sec., Inc., ...