Arbitration Agreement Could Not Compel Arbitration of Pending Class Action: Sixth Circuit | Practical Law

Arbitration Agreement Could Not Compel Arbitration of Pending Class Action: Sixth Circuit | Practical Law

In Russell v. Citigroup, Inc., the US Court of Appeals for the Sixth Circuit affirmed the district court, holding that the plaintiff's arbitration agreement, which covered individual and class action disputes, did not require the plaintiff to arbitrate the class action he had pending against the company before he signed the agreement. The Sixth Circuit found that the language of the agreement and the intentions of the parties indicated that the agreement was meant only to apply to future disputes, and the record's evidence was strong enough to rebut the Federal Arbitration Act's (FAA) presumption of arbitrability.

Arbitration Agreement Could Not Compel Arbitration of Pending Class Action: Sixth Circuit

by Practical Law Labor & Employment
Published on 08 Apr 2014 • USA (National/Federal)
In Russell v. Citigroup, Inc., the US Court of Appeals for the Sixth Circuit affirmed the district court, holding that the plaintiff's arbitration agreement, which covered individual and class action disputes, did not require the plaintiff to arbitrate the class action he had pending against the company before he signed the agreement. The Sixth Circuit found that the language of the agreement and the intentions of the parties indicated that the agreement was meant only to apply to future disputes, and the record's evidence was strong enough to rebut the Federal Arbitration Act's (FAA) presumption of arbitrability.
On April 4, 2014, in Russell v. Citigroup, Inc., the US Court of Appeals for the Sixth Circuit affirmed the district court, holding that the plaintiff's arbitration agreement, which covered individual and class action disputes, did not require the plaintiff to arbitrate the class action he had pending against the company before he signed the agreement. The Sixth Circuit found that the language of the agreement and the intentions of the parties indicated that the agreement was meant only to apply to future disputes, and the record's evidence was strong enough to rebut the Federal Arbitration Act's (FAA) presumption of arbitrability. (Russell v. Citigroup, Inc, No. 13–5994, (6th Cir. Apr. 4, 2014).)

Background

The plaintiff worked at a Citicorp call center in Kentucky from 2004 to 2009. As a condition of his employment, he signed a contract agreeing to arbitrate his individual disputes with the company, but the agreement did not reference class action disputes. In January 2012, the plaintiff filed a class action against Citicorp alleging that it improperly failed to pay employees for time spent logging into and out of their computers at the beginning and end of the workday.
In late January 2012, while the class action against Citicorp was pending, Citicorp hired the plaintiff for another position. As a condition of his new employment, Citicorp had the plaintiff sign an updated arbitration agreement, which now covered class action claims as well as individual claims.
Relying on the second arbitration agreement, Citicorp sought to compel the plaintiff to arbitrate his pending class action. The US District Court for the Eastern District of Kentucky denied Citicorp's motion, holding that the second arbitration agreement did not apply to lawsuits commenced before the parties executed the agreement.
Citicorp filed an interlocutory appeal to the Sixth Circuit.

Outcome

The Sixth Circuit affirmed the district court's decision, holding that the second arbitration agreement did not apply to compel arbitration of the plaintiff's pending class action, which was commenced before he signed the agreement.
When evaluating the language of the second arbitration agreement, the Sixth Circuit highlighted certain provisions but read them in the context of the entire clause.
The agreement's arbitration provision stated:
This Policy applies to both you and to Citi, and makes arbitration the required and exclusive forum for the resolution of all employment-related disputes (other than disputes which by statute are not subject to arbitration) which are based on legally protected rights (i.e., statutory, regulatory, contractual, or common-law rights) and arise between you and Citi, its predecessors, successors, and assigns, its current and former parents, subsidiaries, and affiliates, and its and their current and former officers, directors, employees, and agents....
The agreement's "Statement of Intent," stated:
Citi values each of its employees and looks forward to good relations with, and among, all of its employees. Occasionally, however, disagreements may arise between an individual employee and Citi.... Citi believes that the resolution of such disagreements will be best accomplished ...by external arbitration.
The Sixth Circuit concluded that:
  • The agreement only covers disputes that begin in the present or the future, since:
    • the agreement uses the present tense when referencing which disputes it covers, specifically those that "arise between [the plaintiff] and Citi"; and
    • the present tense does not typically refer to the past (Carr v. United States, 560 U.S. 438 (2010)).
  • The Statement of Intent supported that conclusion, because it includes the phrase:
    • "looks forward to," which signals prospective disagreements, not past disagreements;
    • "may arise" instead of "may have arisen," which reference disputes that have not yet occurred; and
    • "will be best accomplished," which suggests future disputes instead of past or pending disputes.
The Sixth Circuit found that, based on the record, it is likely that both parties expected the second agreement only to apply to future disputes, specifically the court noted evidence that:
  • The plaintiff:
    • stated that he thought the contract only applied to future disputes; and
    • signed the second agreement without first consulting with counsel while still proceeding with his class action;
  • Citicorp:
    • also entered into the second agreement without first consulting counsel. Citicorp would likely have consulted an attorney before entering into an agreement with the plaintiff had it thought that he would be signing away his rights to the pending class action;
    • sent the second agreement directly to the plaintiff instead of his counsel. Had Citicorp's in-house counsel expected the agreement to cover the plaintiff's pending dispute, they likely would have sent it to his attorney to comply with the professional rule of conduct prohibiting attorneys from communicating about a pending case with an opposing litigant whom they know has representation; and
    • provided no evidence that it expected the contract to govern pending lawsuits.
The Sixth Circuit rejected Citicorp's assertions that:
  • The use of the word "all" in the provision stating "This Policy [covers] all employment-related disputes..." indicates that it covers all lawsuits, whether pending or not. The text of the provision, the Statement of Intent and the parties' expectations support the contrary conclusion that "all" refers to all lawsuits in the future, not all lawsuits commenced at anytime.
  • Interpreting the agreement only to refer to future lawsuits nullifies the language extending the contract to disputes between the plaintiff and the company's "predecessors, successors and assigns, its current and former parents, subsidiaries, and affiliates, and its and their current and former officers..." That language operates to extend the contract to cover situations where a supervisor is involved in a future dispute, but no longer works for the company.
  • The FAA's presumption of arbitrability required the court to resolve any doubts about the scope in favor of arbitration, because:
    • there was no doubt about the scope of the agreement. The court presumed, based on their conduct, that the parties intended the agreement to cover future lawsuits, not pending lawsuits; and
    • the FAA's presumption of arbitrability can be rebutted by an express provision excluding the specific dispute or forceful evidence of a purpose to exclude the claim. The context of the agreement and the actions of the parties were forceful evidence rebutting the presumption of arbitrability.

Practical Implications

This case provides a rare instance where a circuit court interpreted common terms in a contractual provision for the arbitration of employment disputes. The Sixth Circuit relied heavily on the text of the agreement and the conduct of the parties to find that the agreement does not apply to the plaintiff's pending dispute against Citicorp. In light of this decision, employers should carefully review their arbitration agreements and policies to ensure that the scope of the covered disputes is clearly defined, and that their actions support their intentions.
This case also highlights that employers might consider developing protocols for reviewing whether job applicants have existing agreements and pending litigation with the employers to prevent, among other things:
  • Entering new and contradictory contracts with an applicant.
  • Inadvertently violating a professional rule of conduct by asking a represented litigant to sign an employment agreement that might affect the litigant's rights in the pending litigation rather than contacting the litigant's counsel.