Employer Cannot Compel Former Employee to Arbitrate Claims After Failing to Follow Preliminary Steps of the Contractual Arbitration Procedure

The issue before the Court of Appeal for the Second Appellate District was whether KTLA, LLC, a Los Angeles based broadcaster, could compel a former employee, Kurt Knutsson, to arbitrate his claims against KTLA.  (Knutsson v. KTLA, LLC (--- Cal.Rptr.3d ---, 2014 WL 3919581, Ct. App., Aug. 12, 2014)).  The Court of Appeal held that KTLA could not compel arbitration, in part, because it had failed to follow the first steps in the agreed upon arbitration procedure.  The Court of Appeal also found that based on the language of the collective bargaining agreement, KTLA could not compel an individual to arbitrate, and that questions of substantive arbitrability remain an issue for the court to decide, not an arbitrator. 

Background

Kurt Knutsson is a technology reporter who produced syndicated technology reports, promoting himself as "Kurt the CyberGuy" for technical and broadcast shows.  In 1996, Knutsson began appearing on KTLA in his "Kurt the CyberGuy" persona and reported on consumer technology.  By 2008, Knutsson was featured three, sometimes more, times per week on two dozen television channels.  His segments were also included on station websites.  In 2008, KTLA and Knutsson, through his corporation Woojivas, Inc., entered into an employment agreement for a five year term at a specified salary.  The 2008 agreement was subject to the terms of the collective bargaining agreement with Knutsson's union, the American Federation of Television and Radio Artists.

In December 2010, KTLA notified Knutsson that it intended to terminate the 2008 agreement at the end of March 2011.  Following termination of the 2008 agreement, Knutsson brought suit for breach of contract, misappropriation of name and likeness, unfair business practices, common law misappropriation, and age discrimination.  The union was not a party to the suit.  In response, KTLA filed a motion to compel arbitration relying on the terms of the 2008 agreement and the collective bargaining agreement.  The trial court denied KTLA's motion. 

Decision

The Court of Appeal upheld the trial court's denial of KTLA's motion.  Upon examination of the terms of the collective bargaining agreement, the Court of Appeal noted that three steps were necessary to initiate arbitration.  The first step required an attempt to resolve a grievance by a discussion between the employee and the supervisor.  The second step allows the union to formally present a grievance to the department manager if it is dissatisfied with the supervisor's resolution.  Only in the third step can the grievance proceed to arbitration.

The Court of Appeal agreed with the trial court that KTLA had not initiated the first two steps of arbitration procedure and had jumped to the third step prematurely by filing its Motion to Compel Arbitration.  The Court of Appeal examined KTLA's motion, noting that nowhere in the motion did KTLA argue that the first and second steps should be compelled.  Upon finding this, the Court of Appeal held that KTLA had forfeited its right to compel compliance with the first step. 

The Court of Appeal also reasoned that under the terms of the collective bargaining agreement, KTLA could not compel Knutsson to comply with the second or third steps.  Under these steps, the collective bargaining agreement required the union to act on behalf of the employee.   The collective bargaining agreement, then, placed obligations on KTLA and the union, not an individual.  Knutsson, therefore, could not be compelled to comply with the second and third steps.  By failing to compel the union to comply with these steps, KTLA forfeited the ability to do so. 

The Court of Appeal also dismissed KTLA's argument that it is an arbitrator's role to decide whether a dispute is arbitral.  KTLA relied on the U.S. Supreme Court's decision in John Wiley & Sons, Inc. v. Livingston (1986) 376 U.S. 543.  The Court of Appeal rejected KTLA's reliance on John Wiley, finding that the U.S. Supreme Court considered issues of procedural arbitrability in John Wiley.  The Court of Appeal noted that in some circumstances procedural issues are matters for an arbitrator, but substantive matters of arbitrability are matters for the courts, not an arbitrator. 

In this circumstance, there was no enforceable arbitration agreement between Knutsson and KTLA.  The collective bargaining agreement bound the union and KTLA, not Knutsson as an individual.  Therefore, there were no procedural questions for an arbitrator to consider, and it remained for the court to decide the substantive question of the arbitrability of Knutsson's claims.  

Topics:  Arbitration, Arbitration Agreements, Mandatory Arbitration Clauses

Published In: Alternative Dispute Resolution (ADR) Updates, Civil Procedure Updates, General Business Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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