Robert Kay filed an age discrimination suit against his former employer, The Minacs Group. Minacs responded with a motion to compel arbitration. In support of its motion, the employer tendered a "Receipt of Policies and Procedures" signed previously by Kay for a previous employer that had been acquired by Minacs, which by its terms applied only to claims "arising out of or relating to these Policies and Procedures." The district court ordered Kay to arbitrate his age discrimination claim. But the Sixth Circuit reversed in Kay v. The Minacs Group, No 13-1974 (September 5, 2014).
The Sixth Circuit was critical of the employer's litigation tactics:
This appeal exists largely because of troubling litigation behavior by Minacs. Minacs provided the court with the [previous employer's] Receipt but not [the previous employer's] Policies and Procedures handbook even though the Receipt's arbitration provision applies only to claims "arising out of or relating to these policies and procedures." Due to Minacs's omission, we have no idea what the [previous employer's] handbook covers and so have no idea what kind of claims the arbitration clause covers. Minacs, moreover, must have had copies of its own receipt and handbook, which suggests that Minacs would have known that the [previous employer's] receipt had been superseded by its own and that Kay's claims were not subject to arbitration. This crucial information should have been a part of the record.
This omission – an omission that included the actual language defining the scope of the alleged arbitration agreement – doomed the employer's effort to compel arbitration, as the Sixth Circuit explained:
On its face, then, the scope of the arbitration provision is easy to discern: Kay and [the previous employer] agreed to arbitrate only those disputes that arise from or relate to whatever is in the Policies and Procedures handbook. Minacs did not put the rest of the handbook into the record, so we have no way of knowing whether civil rights claims are covered by the handbook. Arbitration provisions, like any other provision, must be interpreted in the context of the whole contract.
Given Minacs's omission, we construe the provision literally and conclude that the arbitration provision does not cover Kay's civil rights claims because there is no contract language indicating that his claims arise from or relate to the employee handbook. Further, Kay's complaint does not allege a "policy or procedure," it alleges age discrimination on the part of Kay's immediate supervisor.
The Sixth Circuit pointedly rejected the employer's argument that the record's ambiguity regarding the scope of the arbitration agreement weighed in favor of arbitration:
Remarkably, Minacs argues that the presumption of arbitrability compels the court to resolve this "ambiguity" in favor of arbitration. Presumptions and canons of construction do not relieve a party of its responsibility to provide the court with the entire contract at issue and do not supplant a lawyer's duty of candor to the court.
The Sixth Circuit reversed the district court's order compelling arbitration and remanded "the case for further proceedings on Kay's civil rights claims." One wonders whether the terms of this remand precludes Minacs from again moving to compel arbitration and submitting on this second g0-round the handbook that it previously failed to file in the record. Kay would appear to have an argument that Minacs has forfeited its right to do so. Or it may be, as the Sixth Circuit suspected, that the actual handbook does not support the employer's motion to compel arbitration. We'll see.
An employer entered into identical employment agreements with two employees. Both employment agreements stated that they would establish "the terms and conditions of the employee's employment and further committed to arbitrate "any dispute, which arises under the terms of this agreement." After taking many actions in making many efforts to stem what they believe to be fraudulent activities, the employees were terminated. They filed suit under the anti-retaliation provisions of the False Claims Act, 31 USC 3730. The employer, BAE Systems Technology Solutions & Services, sought to compel arbitration, a motion the district court granted. The Sixth Circuit reversed in U.S. ex rel. Paige v. BAE Systems, No 13-2237 (May 22, 2014).
The employment agreement committed the employees to arbitrate "any dispute, which arises under the terms of this agreement." The Sixth Circuit ruled that the agreement did not reach the relator's retaliation claims under the False Claims Act for three reasons:
(1) the "claim is purely statutory and exist independent of" the employment agreement;
(2) "the employment agreement nowhere refers to the False Claims Act, retaliation or statutory claims; and,
(3) the arbitration provision in the employment agreement is narrower than those in cases where broadly-worded arbitration clauses applied to claims "related" to the agreement or that arise out of the employment relationship between the parties.
Does an arbitration agreement that covers "all employment-related disputes" entered into between an employer and an employee apply to an already pending class action lawsuitby the employee against the employer? The Sixth Circuit recently answered this question "no" in Russell v. Citigroup, Inc, No 13-5994 (April 4, 2014).
Keith Russell worked from 2004 to 2009 for Citicorp at a call center. In January 2012, Russell filed a class action against the company seeking unpaid wages and overtime relating to time employees "spent logging into and out of their computers at the beginning and end of each work day." There existed, at the time, an arbitration agreement between Russell and Citicorp, but it did not apply to a class action lawsuit. Later in 2012, Russell applied to work again at Citicorp's call center. He was hired and signed an updated arbitration agreement that covered class claims as well as individual ones. When the lawyers representing Citicorp in the class action discovered the newly-entered arbitration agreement with Russell, they moved to compel arbitration of the pending class-action. The district court denied the motion for arbitration, and Citicorp took an interlocutory appeal authorized by 9 U.S.C. 16(a).
The Sixth Circuit affirmed denial of the motion to compel arbitration. First, the court noted that the agreement applied to employment claims that "arise", a present-tense usage suggesting "that the contract governs only dispute that began – that arise – in the present or future. The present tense usually does not refer to the past." Second, the "common expectations of the parties reinforced the point" that the agreement applied only prospectively, the court explaining that "Russell's behavior – signing the contract without consulting counsel and carrying on with the lawsuit as before – would make little sense of Russell understood the contract to cover the case at hand." Also, the court observed that the retroactive application of the arbitration agreement would raise ethical issues for Citicorp's counsel as it had presented Russell with the new arbitration agreement without going through Russell's counsel in the class action case. As the court put it: "Did Citicorp expect the contract to bear a meaning that would even raise these [ethical] issues? Again, not likely."
Third, the Sixth Circuit discussed how the expectations of parties to a contract determine its meaning:
... Citicorp offers no evidence that it did expect the contract to govern pending lawsuits. In the final analysis, that leaves a situation in which one party (Russell) certainly and the other party (Citicorp) likely expected the contract to govern only lawsuits still become. This common understanding fixes the meaning of the contract. See Restatement (Second) of Contracts sec. 201(1).
Finally, the court disposed of Citicorp's reliance on the axiom that "any doubts concerning the scope of arbitrable issues must be resolved in favor of arbitration":
In arbitration contracts, "as with any other contract, the parties' intentions control."
A court must interpret a provision in a contract not in isolation, but against the backdrop of "the contract as a whole, ... the situation of the parties and the conditions under which the contract was written." The Federal Arbitration Act's presumption of arbitrability does not cut this process short. It is a presumption, not a clear-statement rule. That is why one of two things – either "an express provision excluding a specific dispute" or "forceful evidence of a purpose to exclude the claim" – may take a case beyond the domain of an arbitration clause. "Forceful evidence" describes just what we have here.
Is an employee barred from bringing claims in a lawsuit under anti-discrimination statutes because of an adverse ruling by an arbitrator under a union contract? "No," the Sixth Circuit ruled and reiterated recently in Nance v. Goodyear Tire & Rubber Company (decided May 23, 2008).
The employee, Nance, suffered from a variety of medical problems following a work-related injury. She attempted and failed to return to work due to these problems. The company fired her and asserted that she violated a "no call, no show" rule and had "resigned without notice" under a union contract. She filed a grievance, it went to arbitration and the arbitrator ruled that her firing did not violate the union contract. Nance then filed suit, claiming, among other things, that her firing violated the Americans With Disabilities Act and other laws. The trial court dismissed the case, ruling that her claims were barred by the arbitrator's adverse decision. This was error, according to the Sixth Circuit.
The court first noted that Nance's rights under the union contract were of a "distinctly different nature" than the "independent statutory rights" accorded by the anti-discrimination statutes. Second, an arbitrator is not competent to adjudicate claims under anti-discrimination laws: "the expertise of arbitrators lies in the application of facts to the terms of an employee's contract or collective bargaining agreement [and] the expertise of federal courts lies in the application of facts to anti-discrimination statutes." Furthermore, the court added, the irregular procedures used in arbitration -- the absence of the right to trial by jury, the usual absence for an arbitrator to explain their decision, the truncated and incomplete records usually generated in arbitration proceedings, the limited judicial review and the spotty application of evidence and other rules -- were generally inadequate to assure protection of the important rights guaranteed under anti-discrimination statutes. However, the court did allow that evidence of an arbitrator's decision could be considered depending on the degree of procedural fairness, the adequacy of the record and the particular expertise of the arbitrator.