Dispute About Arbitration for Terminated Cops

As former Minneapolis mayor, R. T. Rybak, persuasively has argued, police unions frequently undermine efforts to reform policing here and elsewhere.[1]

Now a dispute has emerged about arbitrators decisions about police officers who had been terminated for misconduct.

A StarTribune journalist examined the record of terminated Minnesota police officers getting their jobs back in arbitration.[2] “More than 80 po­lice of­fic­ers across Min­ne­so­ta were fired and fought their dis­charge in ar­bi­tra­tion over the past 20 years. A­bout half got their jobs back,” and “the true figure could be slightly higher” because “Min­ne­so­ta’s pub­lic re­cords laws pro­hib­it re­leas­ing any in­for­ma­tion at all when ar­bi­tra­tors o­ver­turn a de­ci­sion to fire a cop with­out im­pos­ing any type of dis­ci­pline. Such total ex­on­era­tions, while un­com­mon, are erased from pub­lic re­cord.”

The current Minneapolis Police Chief, Medaria Arradondo, shares this view of arbitration. He said, ““There is noth­ing more de­bili­tat­ing to a chief from an em­ploy­ment mat­ter per­spec­tive, than when you have grounds to ter­mi­nate an of­fi­cer for mis­con­duct, and you’re deal­ing with a third-par­ty mech­a­nism that al­lows for that em­ploy­ee to not only be back on your de­part­ment, but to be pa­trol­ling in your com­mu­ni­ties.” This is why he has withdrawn from further contract negotiations with the union and why he wants the Minnesota Legislature to pass legislation to reduce the scope for arbitration of terminated officers.

This harsh judgment of such arbitrations needs qualification, said the StarTribune journalist. “Some [termination] cases nev­er go to ar­bi­tra­tion, and some are ne­go­ti­ated and clas­si­fied as res­ig­na­tions or re­tire­ments.”

A stronger defense of labor arbitration was provided by Stephen F. Befort, a professor at the University of Minnesota Law School and a part-time labor arbitrator. He starts by explaining that labor arbitration is “a due process review of discipline and discharge decisions. The process entails an informal evidentiary hearing before a neutral decision maker. Minnesota law currently requires that all public sector collective bargaining agreements provide for the binding arbitration of disciplinary disputes. The arbitrator’s task is to determine whether the employer had just cause to support the discipline or discharge decision.”[3]

In this process arbitrators “are individuals who have developed expertise in labor relations and personnel matters. Federal and state agencies maintain rosters of arbitrators who meet certain qualifications. Arbitrators are not appointed by these agencies, but instead the parties to the dispute (i.e. municipalities and unions) mutually select one or three arbitrators from a roster to hear and resolve the dispute.”

Befort then reports that Minnesota arbitrators upheld discharge decisions by all kinds of employers (not just police) in 52 percent of over 2,000 such cases over 20 years while employees won reinstatement and full back pay in only 20 percent of the cases. The other 28 percent of the cases were “’split’ decisions in which discharges were reduced to some lesser form of discipline such as suspension without pay.” These statistics came from a 2015 book by Befort and two faculty colleagues which was “the largest empirical study of arbitration outcomes ever undertaken.”

Moreover, Befort claims that the above statistics are similar to those for police arbitration over a four-year period according to an article by one of his University of Minnesota Law School students that was published in an American Bar Association journal. These statistics were upholding police officers terminations, 53%; overturning such terminations, 23%; and split outcomes, 24%.

Finally Befort points out that if there were no labor arbitrations, the alternatives are leaving the employers’ decisions unreviewable or the more expensive and slower court litigation, neither of which is desirable.

Conclusion

As a retired attorney who specialized in business litigation, I was intimately familiar with the costs (beneficial to law firms and lawyers) and delays in resolution in such court litigation. Moreover, I became aware of the frequent adverse psychological impact of such litigation on the parties to the disputes. Therefore, I became an advocate for alternative dispute resolution (ADR), especially mediation but also arbitration, and served as Chair of the Minnesota State Bar Association’s Alternative Dispute Resolution Section.[4]

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[1] See Former Minneapolis Mayor Discusses Police Reform Problems, dwkcommentaries.com (June 21, 2020).

[2] Bjorhus, Fired Minnesota officers have a proven career saver: arbitration, StarTribune (June 21, 2020).

[3] Befort, Counterpoint: In defense of arbitration, StarTribune (June 19, 2020).

[4] See these posts to dwkcommentaries.com: Ruminations on Lawyering (April 20, 2011)(interest in ADR and chairing ADR Section); My First Ten Years of Retirement (April 23, 2011)(service as arbitrator); International Commercial Dispute Resolution (Aug. 11, 2011)(arbitration); Intraocular Lenses Litigation (Aug. 18, 2011) (litigation against ex-employees); Employers’’ Lawsuits Against Former Employees (Aug. 25, 2011); List of Posts to dwkcommentaries—Topical: LAWYERING.

 

Gratitude II

A prior post expressed my gratitude for teachers, professors and professional colleagues who have helped me. But that hardly exhausts my reasons for gratitude.

I was blessed for having met and married Mary Alyce. An intelligent, attractive woman, she gave birth to our two sons, Alan and Brian, and bore the major responsibility for raising them to adulthood. All of us have been healthy without major accidents, another blessing. There have been problems along the way, of course, but we have managed to confront and surmount them. I am grateful.

For 24 years, 1957 through early 1981, I had no religious or spiritual life. I clearly suffered from the sin of pride. Yet I give thanks for those years. They gave me a strong sense of what it is like to be without a spiritual grounding as well as an understanding and appreciation for intellect, logic and reason. I am grateful.

In May 1981 I had a major turning when I could admit to myself and others that I did not have all the answers to life and when I joined Minneapolis’ Westminster Presbyterian Church. I am now in my 31st year of active membership at this church, and it has been and continues to be a major blessing in my life. I lament the way that Christianity is often presented to the rest of the world today, especially in my home state of Iowa over their recent Republican caucuses. I, therefore, strive to present in my own way an intelligent person’s understanding of the faith. I am grateful.

I now have four grandchildren. They are wonderful, intelligent, curious, polite and healthy human beings. I am now concerned to do what I can to help them go to college and achieve all that they can be. I am grateful.

My practice of law provided an excellent income, and my wife and I were able to save for our retirement, making it possible for me to retire at age 62. As I read the many stories in the press about so many people today unexpectedly not being able to retire for financial reasons, I know that I am privileged. I am grateful.

I am also glad that I decided to retire from lawyering early at age 62 in order to have time, energy and good health to do things I wanted to do. Similarly I am glad I retired at the end of 2010 from my part-time job of law school teaching and from volunteering as an arbitrator for the Financial Institutions Regulatory Authority in order to create time for writing and doing things I wanted to do. I am grateful.

For all these blessings, I give thanks to God and to those named and unnamed individuals who helped me along the way.

International Commercial Dispute Resolution

As previously noted, I have a strong professional preference for mediation and arbitration as methods for resolving disputes between manufacturers and distributors or dealers.[1] This assumes that the parties have tried and failed to resolve their disputes through direct negotiation, which is the least expensive and least time-consuming method and which enhances the possibility of amiable future relationships.

The reasons for preferring negotiation, mediation and arbitration hold as well for commercial disputes between entities in different countries.

  • Mediation (or conciliation as it is called in the international arena) where a neutral third-party assists the disputants in trying to settle their disputes is the first option after negotiation. This was my preferred dispute resolution method because it empowered the parties themselves to settle their disputes, because it opened the way for creative solutions that were not possible in court or in arbitration and because it was the least expensive option.[2]
  • Only if mediation (or conciliation) failed, would such a contractual provision call for submitting the dispute to arbitration under one of several general sets of arbitration rules where the arbitrator resolves the dispute. Arbitration was preferred to court litigation because the former eliminated the expensive pre-trial discovery and other processes of the court and because the parties participated in selecting the arbitrator who was seen as a safer decider than an unknown judge or jury. On the other hand, the costs of international arbitration are significant, especially with three arbitrators from different countries and international travel.[3]

Moreover, there are additional reasons why arbitration is a preferred method for international commercial dispute resolution. First, there is fear of prejudice against the foreigner by a court or jury of another country.  But such fear is less with an arbitrator or arbitrators that the sides help to choose. Second, there is a multilateral treaty that makes arbitration awards (the final decision in an arbitration) easier to enforce in other countries.[4] In contrast, it is more difficult to enforce one country’s courts’ final judgments in other countries. This is very important. For example, an arbitration award or a court judgment might hold the defending corporation (the respondent or defendant) liable to the complaining corporation (claimant or plaintiff) for $1 million for breach of contract, and most of the respondent or defendant’s assets might be in a different country than where the arbitration or litigation took place.

At Faegre & Benson, I frequently drafted dispute resolution provisions for international contracts prepared by other lawyers in the firm. In addition, I was counsel for two foreign companies in international arbitration proceedings under the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL).[5] Each of these cases illustrated interesting facets of such proceedings.

Turkish distributor vs. U.S. (Minnesota) manufacturer.

In the first case, I represented the Turkish terminated distributor of medical devices that were manufactured by a Minnesota company. Their written agreement, written by Minnesota lawyers, called for Minnesota law as the governing law and arbitration in Minnesota under the UNCITRAL Arbitration Rules with three arbitrators and with English as the language of the arbitration.

Under Article 5 of the UNCITRAL Rules there are three arbitrators unless the parties agree to have only one arbitrator. When there are three arbitrators, the claimant (here, the Turkish company) selects the first arbitrator; the respondent (here, the Minnesota company) picks the second; and then these two arbitrators select the third and presiding arbitrator. Although the first two arbitrators are selected by the two parties, the arbitrators are to be independent, not representatives or advocates for the parties that selected them.

My Turkish client and I thus had to go first in selecting an arbitrator. My ideal candidate was a Minnesota lawyer from Turkey who was bilingual in English and Turkish and who knew Turkish business customs and circumstances, but not surprisingly I could not find such a person. I then called the Turkish consulate in Chicago and Embassy in Washington, D.C. for recommendations for such an arbitrator. I eventually found a U.S. (and Turkish) lawyer in New York City who was born in Turkey, who was bilingual and who knew its business customs and circumstances, and the Turkish company appointed him as arbitrator. The Minnesota company then appointed a professor from a Minnesota law school as the second arbitrator. The two of them then appointed a retired chief justice of the Minnesota Supreme Court as the third and presiding arbitrator.

IDS Center, Minneapolis

The hearings were held in a conference room of the Minneapolis office of the presiding arbitrator in the IDS Tower and lasted several days. The Minnesota company was represented by its in-house lawyer and two lawyers from its outside law firm while I was by myself for the Turkish company. (This was a role reversal for me.) The atmosphere was tense in the conference room. The husband of the couple who owned the Turkish company had been an arbitrator in his own country where things were handled much differently, and yet he enjoyed the battle in the Minneapolis conference room. His wife who was also involved in the business and was a witness, however, was appalled by the hostile questioning of the other side’s lawyer.

Several weeks after the hearing, I received in the mail the two-page award of the arbitrators requiring the manufacturer to pay a sum of money to the Turkish company. Thereafter the money was paid, and the case was over. My client and I were very pleased.

Under Article 32(3) of the UNCITRAL Arbitration Rules, the arbitrators are required to provide a statement of the reasons for their award unless the parties waive this requirement. In this case, the requirement was waived because a relatively small amount money was claimed and because both sides wanted to avoid the expense of paying for the time of the arbitrators to prepare such a statement of reasons.

U.S. (Minnesota) Buyer vs. Asian manufacturer

In the second case, I was counsel for an Asian manufacturer responding to an arbitration claim for over $26 million for breach of contract and other alleged wrongs. The contract at issue had been prepared by a non-lawyer employee of a Minneapolis foreign-trade consulting firm. It had what I regarded as a very inartful arbitration provision. It called for arbitration under the rules of “the United Nations Uniform Commercial Codes,” which do not exist. Nor did it specify where the arbitration should be held or the number of arbitrators or the language of the arbitration.

The Minnesota company first suggested there be only one arbitrator and that a specified retired Minnesota state trial court judge be that sole arbitrator. Although I had experience before that individual when he was a judge and had full confidence in his ability to be a fair arbitrator in this case, my Asian client did not want to have the case decided by one person from Minnesota. Therefore, I told opposing counsel that we did not agree to only one arbitrator.

Nothing more was heard from opposing counsel, and I thought the case had died on the vine. I was greatly surprised, therefore, when I received a letter from the Permanent Court of Arbitration at The Hague, Netherlands. The letter said that under Article 7 (2)(b) of the UNCITRAL Arbitration Rules, it was the designating authority for appointment of arbitrators when a party defaults in so doing and that the Asian company had defaulted in appointing the second arbitrator. In response, I recited the above history and stated that the Minnesota company had never appointed the first arbitrator and that, therefore, the Asian company had not defaulted. An official at the Permanent Court said I should tell that to the person it was designating as the appointing authority, a barrister in Melbourne, Australia. I reiterated my argument to the barrister to no avail when he appointed the head of an Asian international arbitration center and a former attorney general of that country as the second arbitrator.

Thereafter, these two arbitrators appointed a Danish lawyer from Copenhagen with extensive experience in international commercial arbitration as the third and presiding arbitrator.

On behalf of the Asian company, I filed a motion to dismiss the arbitration as it had never agreed to arbitration under the UNCITRAL Arbitration Rules, and the panel set a hearing in Minneapolis on this motion. Several weeks before the hearing, I was startled to receive a letter announcing the resignation of the second arbitrator (the Asian lawyer). My Asian co-counsel and I then immediately appointed a Queen’s Counsel barrister from London as the second arbitrator. (Later I found out that the Asian arbitrator had resigned because his fellow arbitrators refused to authorize him to fly first class (at substantial expense) to Minneapolis for the hearing.)

The hearing on the dismissal motion was held in Minneapolis, and the panel denied the motion. They did so even though their decision recognized that the “United Nations Uniform Commercial Codes” did not exist and under a strict interpretation, the arbitration clause had no effect. Nevertheless, the order concluded that the clause must be understood as referring to the UNCITRAL Arbitration Rules.

At the same time we also had a dispute as to the venue (or “seat”) of the arbitration due to the inartful arbitration clause’s not specifying such; my side argued for Hong Kong; the other side, London; and the arbitrators decided on London. The arbitrators also decided that the language of the arbitration would be English, which was not specified in the clause, but all agreed to English.)

In U.S. trials and arbitrations, witnesses are cross-examined on inconsistencies, real or apparent, between their testimony at the trial or hearing and prior testimony or statements. However, in this arbitration, the panel told the attorneys it was “not necessary during examination or cross-examination of witnesses for them to examine the witnesses on matters already in the written materials.” This was a surprise for me and a problem in preparing good cross-examination questions.

In the Fall of 1997, the hearings on the merits (or the trial) were held in three different cities. Minneapolis was first for the testimony of certain witnesses. I then flew to the Asian city where my client was located for hearings for the testimony of other witnesses. I then returned to Minneapolis for a brief stay, and then it was on to London.

Law Courts, London
St. Paul's Cathedral, London

London was the city for closing arguments. They were held in a conference room of an arbitration center in “legal London,” on the Strand near the Law Courts and the Inns of Court. The attorneys for the Minnesota company went first. Then my Asian co-counsel and I made our arguments.

I prepared for the closing arguments in Faegre & Benson’s London office, which is just several blocks from St. Paul’s Cathedral. Working on a Sunday morning, I could hear the pealing of the Cathedral’s bells and wished that I were in the church, rather than in the office.

Approximately four months later I received the 27-page Award that dismissed all of Claimant’s claims and all of my client’s counterclaims.  One of the key points was the conclusion that the Claimant’s predecessor-in-interest and assignor had waived all claims for breach of contract and that its conduct did not fall within the wording of a non-waiver clause in the contract.

Thereafter Claimant submitted a motion for correction and interpretation of that key point, which my client resisted. On the basis of the papers the panel decided, 2 to 1, that there was no need for any interpretation or correction of the Award. At last, the case was over.

Not surprisingly this was not an inexpensive arbitration. In addition to the fees and expenses of each side’s attorneys, the bill of the three arbitrators for their fees and expenses was $302,000 to be split equally by the two parties.


[1] Post: Resolving Disputes between Manufacturers and Distributors/Dealers (Aug. 9, 2011).

[2] One example of rules for this method of dispute resolution is the UNCITRAL Conciliation Rules, which cover all aspects of the conciliation process, providing a model conciliation clause, defining when conciliation is deemed to have commenced and terminated and addressing procedural aspects relating to the appointment and role of conciliators and the general conduct of proceedings. The Rules also address issues such as confidentiality, admissibility of evidence in other proceedings and limits to the right of parties to undertake judicial or arbitral proceedings while the conciliation is in progress. (UNCITRAL, 1980–UNCITRAL Conciliation Rules, http://www.uncitral.org.)

[3] Post: Resolving Disputes between Manufacturers and Distributors/Dealers (Aug. 9, 2011).

[4] The Convention on the Recognition and Enforcement of Foreign Arbitral Awards (also called “the New York Convention” or treaty) now has 146 of the 192 U.N. member states as parties, including China, Korea, Japan, India, Indonesia and other major trading partners of the U.S. The treaty requires courts of contracting States to give effect to an agreement to arbitrate when seized of an action in a matter covered by an arbitration agreement and also to recognize and enforce arbitration awards made in other States, subject to specific limited exceptions. (UNCITRAL, 1958–Convention on the Recognition and Enforcement of Foreign Arbitral Awards, http://www.uncitral.org.)

[5] The UNCITRAL Arbitration Rules cover all aspects of the arbitral process, providing a model arbitration clause, setting out procedural rules regarding the appointment of arbitrators and the conduct of arbitral proceedings and establishing rules in relation to the form, effect and interpretation of the award. (UNCITRAL, 1976–UNCITRAL Arbitration Rules, http://www.uncitral.org.)

Resolving Disputes between Manufacturers and Distributors/Dealers

Since at least the last half of the 20th century, manufacturers of consumer goods typically have gotten their products to the end user in the U.S. via independent distributors and dealers or franchisees. Usually the manufacturers are larger companies while the others are smaller entities. They all have a community of interest in promoting the sales of the products at the highest prices with the greatest profits. But there also is a constant tension and friction between them and the potential for disputes. This is at its worst when the manufacturer terminates the distributor or dealer or franchisee.

I frequently was the attorney for the manufacturer in such termination cases. I successfully represented Chrysler Motors Corporation against a terminated Duluth dealer and Benjamin Moore & Company against a terminated St. Paul distributor.[1] I also was able to obtain judicial reduction of adverse results against a manufacturer and a franchisor that had been represented by other counsel.[2] Three of these four cases started in Minnesota’s federal court (Post: Minnesota’s Federal Court (June 28, 2011).

In addition, I helped to settle other such cases. One was for a Canadian manufacturer of snowmobiles. Another, for a U.S. manufacturer of farm equipment. Both of these cases were in Minnesota’s federal court.

Another type of dispute erupted between Chrysler and its Dodge dealer in St. Paul over the planned relocation of another Dodge dealer from East Lake Street in Minneapolis (the automobile row of the early 20th century) to Roseville, a suburb between the Twin Cities. Under a Minnesota statute that sought to protect existing dealers, the St. Paul dealer sued to block the relocation. The trial court, however, decided in favor of Chrysler, and the appellate court affirmed that result.[3]

Because of the costs and risks of such litigation and because of my interest in Alternative Dispute Resolution, I helped other lawyers in the firm draft dispute resolution provisions for various agreements, including distribution agreements.

Often such provisions would first call for mediation where a neutral third-party assists the disputants in trying to settle their disputes. This was my preferred dispute resolution method because it empowered the parties themselves to settle their disputes, because it opened the way for creative solutions that were not possible in court or in arbitration and because it was the least expensive option. Only if mediation failed, would such a contractual provision call for submitting the dispute to arbitration under one of several general sets of arbitration rules where the arbitrator resolves the dispute. Arbitration was preferred to court litigation because the former eliminated the expensive pre-trial discovery and other processes of the latter and because the parties participated in selecting the arbitrator who was seen as a safer decider than an unknown judge or jury.

From the outside these disputes took the form of a large corporation versus a small corporation. But human beings were involved on both sides. The executives of the manufacturer had made decisions they thought were fully justified, and their careers and compensation conceivably could be affected by the resolution of the conflict. The same was true of those on the other side. Moreover, emotions often were intense in such quasi-divorce situations. In one case, the owner of the dealership sued his own lawyer over the settlement of his case against the manufacturer. Later that owner killed his girl friend and was acquitted on the grounds of insanity. I was worried because he might view me as part of the conspiracy against him.


[1] Piccard Motor Co. v. Chrysler Motors Corp., 940 F.2d 1163 (8th Cir. 1991)(held Minnesota statute requiring manufacturer to pay terminated dealer one-year’s fair rental value of facilities did not apply to dealer that owned the facilities); Elvgren Paint Supply Co. v. Benjamin Moore & Co., 948 F.2d 1082 (8th Cir. 1991)(affirmance of summary judgment for manufacturer’s termination of an at-will distributor).

[2] W.K.T. Distributing Co. v. Sharp Electronics Corp., 746 F.2d 1333 (8th Cir. 1984)(remand to trial court to reconsider award of $300,000 damages); W.K.T. Distributing Co. v. Sharp Electronics Corp., 786 F.2d 898 (8th Cir. 1986)(noting trial court’s reduction of damages from $300,000 to $85,000 after remand, but refusing to make further reduction); Team Central, Inc. v. Teamco, Inc., 271 N.W.2d 914 (Iowa Sup. Ct. 1978)(en banc reduction of adverse judgment from $2,550,000 to $1,500,000).

[3] Wilkins Dodge, Inc. v. Chrysler Corp., 426 N.W.2d 903 (Minn. Ct. App.), pet. for review denied (Minn. Sup. Ct. 1988).