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.
The Sixth Circuit's well-written and reasoned opinion was written by Circuit Judge Jeffrey Sutton joined by Senior Circuit Judge Gilbert Merritt and Circuit Judge Richard Griffin.
Robert L. Abell
www.RobertAbellLaw.com
