Brubaker v. Barrett et al
Filing
12
ORDER granting in part and denying in part 3 the Motion to Compel Arbitration and Dismiss, whereby Plaintiff and Combined Insurance are COMPELLED TO ARBITRATE any "employment-related disagreements or problems" that form the basis of this lawsuit. The parties must comply with the procedures set forth in the Arbitration Agreement. Plaintiff's claims against Combined Insurance are STAYED pending completion of arbitration. To the extent that Combined Insurance argu es that the case should be dismissed - rather than stayed - that request is DENIED. The parties are ORDERED to brief the Court on whether AON is a subsidiary or affiliate of ACE. If AON is a subsidiary or affiliate, then Plaintiff's "employ ment-related" claims against AON are also subject to arbitration. At this time, however, the Court has insufficient information regarding AON's status. Whether Mr. Barrett should receive legal representation is REFERRED to the Honorable C. Clifford Shirley, United States Magistrate. Mr. Barrett is currently incarcerated in a federal prison located in Edgefield, South Carolina. Judge Shirley shall determine whether appointment of counsel is appropriate under 28 U.S.C. § 1915(e)(1). Signed by District Judge Thomas W Phillips on July 15, 2011. (mailed to Mr. Barrett) (AYB)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TENNESSEE
AT KNOXVILLE
JAMIE BRUBAKER,
)
)
)
)
)
)
)
)
)
)
)
Plaintiff,
v.
MICHAEL BARRETT,
COMBINED INS. CO. OF AM., and
AON INS. MGMT. SERVS., INC.,
Defendants.
No. 3:10-CV-477
(Phillips)
MEMORANDUM AND ORDER
This matter is before the Court on the Motion to Compel Arbitration and Dismiss [Doc. 3]
filed by defendants Combined Insurance Company of America (“Combined Insurance”) and AON
Insurance Management Services, Inc. (“AON”) (collectively, “Defendants” for purposes of this
Memorandum and Order). Plaintiff has filed this lawsuit against her former employer, Combined
Insurance, and immediate supervisor, Michael Barrett (“Mr. Barrett”). In particular, Plaintiff has
filed claims of sexual harassment, intentional infliction of emotional distress, negligent infliction
of emotional distress, negligence, constructive discharge, outrageous conduct, invasion of privacy,
and recklessness. All of these claims have been brought under state law.
As a basis for this lawsuit, Plaintiff alleges that Mr. Barrett recorded a video of her
undressing in a hotel room. This allegedly occurred during a work conference for Combined
Insurance. After learning about the video, Plaintiff argues that she was forced to resign from her
1
position.1 Plaintiff wants to hold Combined Insurance and AON liable for Mr. Barrett’s actions.
In response, Combined Insurance and AON argue that Plaintiff’s claims should be dismissed,
or at least stayed pending arbitration. In May 2008, Plaintiff signed an employment contract with
ACE Group of Companies (“ACE”), in which she agreed to submit all “employment related legal
claims” to mandatory arbitration. Plaintiff also agreed to submit any claims against ACE’s
subsidiaries and affiliates, including Combined Insurance.2 The arbitration agreement does not
affect Plaintiff’s claims against Mr. Barrett.
The following issues are before the Court. First, is the arbitration agreement an enforceable
contract? In particular, was the agreement supported by consideration and mutual assent? Second,
assuming that there was an enforceable agreement, are Plaintiff’s claims against Combined
Insurance and AON subject to arbitration? In other words, are Plaintiff’s claims within the scope
of the arbitration agreement?
Based upon the following, the Motion to Compel Arbitration and Dismiss [Doc. 3] is
GRANTED IN PART AND DENIED IN PART.
I.
BACKGROUND
On November 12, 2010, Plaintiff filed this action against her former employer, Combined
Insurance, and immediate supervisor, Mr. Barrett.3 [Plaintiff’s Complaint, Doc. 1]. Combined
1
Technically, Plaintiff was an employee at ACE Group of Companies when she resigned from
her position. As the Court will explain in more detail, ACE Group of Companies purchased Combined
Insurance in 2008. [Defendants’ Memorandum in Support of their Motion to Compel Arbitration, Doc. 5,
at 2]. By the time Plaintiff resigned from her position, Combined Insurance was a subsidiary of Ace
Group of Companies. [Id., at 1 n.1].
2
See n.1.
3
While Plaintiff also filed this lawsuit against AON, its status is unclear If AON is an affiliate
or subsidiary of ACE, then Plaintiff’s “employment-related” claims against AON are also subject to
arbitration. At the moment, however, neither party has provided sufficient information about AON. It is
2
Insurance is an insurance company that provides “short term disability, accidents and sickness,
health, life and medicare supplemental insurance.” [Defendants’ Memorandum in Support of their
Motion to Compel Arbitration, Doc. 5, at 2] [citation omitted]. In 2008, ACE acquired Combined
Insurance. [Id., at 3]. Prior to the acquisition, Combined Insurance was a wholly-owned subsidiary
of AON. [Id.]. Combined Insurance is now a subsidiary of ACE. [Id., at 1 n1.].
Following this acquisition, ACE mailed a welcome package to its commissioned employees.
[Id.]. Plaintiff received a package in April 2008, which included the “ACE Policy Supplement to
Commissioned Employee Handbook” (“Employee Handbook Supplement,” Doc. 4-1). Notably, the
Employee Handbook Supplement included two sections on arbitration. The first section was titled
“Employment Dispute Arbitration Policy” (“Arbitration Policy”), which explained the types of
claims subject to arbitration. The other section was titled “Employment Dispute Arbitration Rules
and Procedures” (“Arbitration Procedures”).
The Employee Handbook Supplement also included a page titled “Arbitration Agreement
Form” (“Arbitration Form” or “Form”).4 [Signed Form, Doc. 4-4]. On this page, the employee was
directed to sign the Form (which included a signature block at the bottom) and mail it to ACE. [Id.].
The Form provided, in its entirety:
I agree that, in the event I have any employment related legal
claims, I will submit them to final and binding neutral third-party
arbitration, in accordance with the ACE Employment Dispute
Arbitration Policy recited above, which is made a part of this
agreement. I understand that this agreement means that I cannot
bring any employment related claim in court and that I waive my
right to a jury trial for such claims.
unclear whether AON is owned by ACE, or whether it was ever affiliated with ACE. As the Court will
instruct later in this Memorandum and Order, the parties are ordered to brief this issue. See Part III.B.
4
Collectively, the Court shall refer to the Arbitration Policy, Arbitration Procedures, and Form,
as the “Arbitration Agreement.”
3
[Id.] [emphasis added]. The Form also expressly incorporated the Arbitration Policy,5 whereby
Plaintiff agreed to submit the following claims to arbitration:
This policy covers all employment-related disagreements and
problems that concern a right, privilege or interest recognized by
applicable law. Such disputes include claims, demands, disputes,
controversies under Title VII of the Civil Rights Act of 1964, the
Civil Rights Act of 1866, the Civil Rights Act of 1991, the Equal Pay
Act, the Age Discrimination in Employment Act, the Employee
Retirement Income Security Act of 1974, the Fair Labor Standards
Act, the Rehabilitation Act of 1973, the Americans with Disabilities
Act, the Family and Medical Leave Act, and any other federal, state,
or local statute, regulation, ordinance or common law doctrine,
regarding unfair competition, employment discrimination or
termination of employment. This policy is intended to substitute
final and binding arbitration for court action, and its related
delays and inefficiencies. This policy also applies to claims that
arose prior to the adoption of this policy, pending at the time this
policy is distributed, and future claims. This policy will apply to
any successors or assigns of ACE. Further, ACE reaffirms its intent
that there will be no right or authority for any dispute to be brought,
heard or arbitrated as a class action or private attorney general.
If ACE has a legal claim against an employee, ACE must utilize the
Employment Dispute Arbitration Rules and Procedure that are a part
of this policy, rather than go to court. This policy is a term and
condition of the employment relationship between employees and
ACE. It is not, however, a guarantee that employment will continue
for any specified period of time or end only under certain conditions.
[Arbitration Policy, Doc. 4-2] [emphasis added]. Plaintiff signed the Form–which was a condition
of continued employment–dated May 2, 2008. [Signed Form, Doc. 4-4]. Pursuant to the Arbitration
Agreement, Plaintiff agreed to submit all “employment-related disagreements and problems” against
5
The Tennessee Supreme Court has held that “a writing may be incorporated by reference into a
written contract, thereby requiring both writings to be construed together.” Staubach Retail Servs.Southeast, LLC v. H.G. Hill Reality Co., 160 S.W.3d 521, 525 (citation omitted). Because the terms of
the Arbitration Form (the paragraph that Plaintiff signed) expressly incorporated the Arbitration Policy,
the language of the Arbitration Policy became part of the overall agreement.
4
ACE (along with any of ACE’s subsidiaries or affiliates6) to arbitration.
On November 12, 2010, Plaintiff filed this lawsuit against Combined Insurance, AON, and
her previous supervisor, Mr. Barrett. Plaintiff has filed claims of: (1) sexual harassment; (2)
intentional infliction of emotional distress; (3) negligent infliction of emotional distress; (4)
negligence; (5) constructive discharge; (6) outrageous conduct; (7) invasion of privacy (including
three separate types); and (8) recklessness. Plaintiff’s claims–all of which arise under state law–are
based upon incidents that allegedly occurred before and after Plaintiff signed the Form. The
following is a summary of Plaintiff’s allegations.
In February 2002, Plaintiff began working for Combined Insurance. [Plaintiff’s Complaint,
Doc. 1, at 2, ¶¶ 6-7]. Plaintiff remained employed by Combined Insurance until she resigned in June
2005. [Id.]. In July 2006, Plaintiff was re-hired by Combined Insurance. [Id., at 2, ¶ 8]. In
December 2006, Plaintiff was promoted to Branch Manager of Wyoming and Montana. [Id.].
During this time, Mr. Barrett was employed as the Executive Administrator of the Life
Health Division. [Id., at 2, ¶ 9]. As part of his duties, Mr. Barrett oversaw the administrative
assistants in the Life Health Division. [Id., at 3, ¶ 10]. Plaintiff claims that Mr. Barrett was her
immediate supervisor. [Id., at 5, ¶ 22].
During January, April, and August of 2007, Plaintiff traveled to Chicago, Illinois for work
conferences. [Id., at 3, ¶¶ 11-14]. Mr. Barrett also attended these trips, which were conducted for
6
As the Arbitration Policy makes clear, Plaintiff’s “employment-related” claims against ACE’s
subsidiaries and affiliates are also subject to arbitration. [Arbitration Policy, Doc. 4-2, at 2 n.1]. The
Policy provides: “As issued herein, ‘ACE’ means ACE US Holdings, Inc., its subsidiaries and affiliates,
and ACE INA holdings, Inc., its subsidiaries and affiliates, ACE Insurance Company, ACE Financial
Services Inc., and its subsidiaries, and ACE Capital Re USA Holdings Incorporated and its subsidiaries.”
[Id.]. Combined Insurance is a subsidiary of ACE. [Defendants’ Memorandum in Support of their
Motion to Compel Arbitration, Doc. 5, at 1 n.1].
5
job training. [Id.]. Plaintiff–along with other Combined Insurance employees–stayed in hotels
during these trips. [Id.]. Plaintiff alleges that during one of these trips (or a later trip to Nashville,
Tennessee in March 20097), Mr. Barrett secretly filmed her while she undressed in a hotel room.
[Id.]. Plaintiff claims that Mr. Barrett recorded the video by aiming a cell phone through the “peep
hole” of her hotel room door. [Id., at 5, ¶ 22].
This is not the first time that Mr. Barrett has been accused of this conduct. In October 2009,
Mr. Barrett was arrested for recording a “peeping tom” video of Erin Andrews, a reporter for the
popular sports network, “ESPN.” [Id., at 4, ¶ 17]. In December 2009, Mr. Barrett pled guilty to
recording the video of Erin Andrews, and was sentenced to thirty months imprisonment.8 In April
2010, the Federal Bureau of Investigation (“FBI”) informed Plaintiff that they had a possible match
on a video recorded by Mr. Barrett. [Id., at 4, ¶ 20]. Plaintiff watched the video and confirmed that
it was her undressing in a hotel room. [Id., at 4, ¶ 21]. Plaintiff alleges that Mr. Barrett released the
video (or at least images of it) onto the Internet, [id., at 5, ¶ 23], and that Combined Insurance “knew
or had reasonable grounds to know that Barrett was making these videos . . .” [Id., at 5, ¶ 21].
On November 12, 2010, Plaintiff filed suit against Mr. Barrett, Combined Insurance, and
AON. [Plaintiff’s Complaint, Doc. 1]. On December 17, 2010, Combined Insurance and AON filed
a Motion to Compel Arbitration [Doc. 3]. The Arbitration Agreement does not affect Plaintiff’s
claims against Mr. Barrett.
7
Plaintiff alleges that during March 2009, she “stayed at the Holiday Inn hotel in Nashville,
Tennessee (2200 Elm Hill Pike) and Barrett stayed on the same floor . . .” [Plaintiff’s Complaint, Doc. 1,
at 4, ¶ 16].
8
Erin Andrews Stalker Gets 30 Months in Prison, N.Y. Post, Mar. 16, 2010, available at
http://www.nypost.com/p/news/national/erin_andrews_peeper_faces_sentencing_p0SCSVbbZIP1UayQO
felpN
6
In addition to the Motion to Compel Arbitration [Doc. 3], the Court must resolve another
matter. On February 3, 2011, Mr. Barrett filed a letter with the Court requesting that he receive legal
representation. [Doc. 11]. Mr. Barrett is currently incarcerated9 in a federal prison located in
Edgefield, South Carolina, serving his sentence for recording the video of Erin Andrews. [Id.]. Mr.
Barrett, who has appeared pro se in this matter, states that he is “innocent of the allegations made
against [him] in this lawsuit,” and that “[t]his is clearly a case of someone trying to get something
for nothing through the use of the court system.” [Id.]. In addition, Mr. Barrett states that he is not
“in a position to afford an attorney to defend [him] in this case,” and that he is “hoping the Court
can point me in the right direction, as to the names of Attornies or Legal aide in the Knoxville area
who can assist me with my defense.” [Id.].
II.
ANALYSIS
A.
The Arbitration Agreement
1.
Introduction
On December 17, 2010, Defendants petitioned the Court to compel arbitration pursuant to
the Federal Arbitration Act (“FAA”), 9 U.S.C. § 4. [Defendants’ Motion to Compel Arbitration,
Doc. 3]. That statute provides, in relevant part:
A party aggrieved by the . . . refusal of another to arbitrate under a
written agreement for arbitration may petition any United States
district court . . . for an order directing that such arbitration proceed
in the manner provided for in such agreement. . . . The court shall
hear the parties, and upon being satisfied that the making of the
agreement for arbitration or the failure to comply therewith is not in
issue, the court shall make an order directing the parties to proceed
to arbitration in accordance with the terms of the agreement.
9
As the Court will explain in Part II.C., this issue–whether Mr. Barrett should receive legal
representation–is referred to the Honorable C. Clifford Shirley, United States Magistrate Judge.
7
9 U.S.C. § 4. In order for the FAA to apply, two conditions must be satisfied: (1) the arbitration
agreement must be in writing; and (2) the agreement must be part of “a contract evidencing a
transaction involving commerce.” 9 U.S.C. § 2. The FAA applies in this case because the
Arbitration Agreement–which was part of a supplement to the employee handbook–was in writing
and “involves” (or affects10) interstate commerce. Notably, the Arbitration Agreement was a
“condition of employment” to work at ACE–a company that provides insurance coverage throughout
North America. The Supreme Court has clearly held that the FAA applies to arbitration clauses
contained in employment contracts, such as in the present case. See Circuit City Stores, Inc. v.
Adams, 532 U.S. 105, 132-33 (2001).
Having found that the FAA applies, the Court must apply a two-part test to determine
whether arbitration should be compelled. First, the Court must determine whether the Arbitration
Agreement is enforceable–that is, not “in issue.” Second, the Court must determine whether
Plaintiff’s claims against Combined Insurance fall within the scope of the Arbitration Agreement.
2.
The Arbitration Agreement is Enforceable
Section 2 of the FAA provides that a written agreement to arbitrate “shall be valid,
irrevocable, save upon such grounds as exist at law or in equity for the revocation of any contract.”
9 U.S.C. § 2 (emphasis added). When a party moves to compel arbitration, the court must first
decide whether the arbitration provision is “in issue”– that is, whether it is enforceable as a contract
under state law. See Great Earth Cos., Inc. v. Simmons, 288 F.3d 878, 889 (6th Cir. 2002) (“If the
10
In Allied-Bruce Terminix Cos., Inc. v. Dobson, the Supreme Court held that for purposes of
Section 2 of the FAA, the word “involving” is “broad and is indeed the functional equivalent of
‘affecting.’” 513 U.S. 265, 273-74 (1995). This was partly based upon the fact that Congress enacted the
FAA pursuant to its Commerce Clause power, U.S. CONST. art. I, § 8, cl. 3. Id. at 274-75 (citations
omitted). Consequently, the word “involving commerce” is to be given a “broad interpretation.” Id. at
275.
8
district court is satisfied that the agreement to arbitrate is not ‘in issue,’ it must compel arbitration.
If the validity of the agreement to arbitrate is ‘in issue,’ the court must proceed to a trial to resolve
the question.”); Seawright v. Am. Gen. Fin. Servs., Inc., 507 F.3d 967, 974 (6th Cir. 2007)
(recognizing that “[b]ecause arbitration agreements are fundamentally contracts, we review the
enforceability of an arbitration agreement according to the applicable state law of contract
formation”) (emphasis added) (citing First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943-44
(1995)); Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681, 686-87 (1996) (recognizing that state law
governs “generally applicable contract defenses [to an arbitration clause], such as fraud, duress, or
unconscionability”). To establish that the validity of an agreement is “in issue,” the party opposing
arbitration “must show a genuine issue of material fact as to the validity of the agreement to
arbitrate.” Great Earth Cos., 288 F.3d at 889. This is similar to the burden imposed on a party
opposing a motion for summary judgment. Id.
To determine whether the Arbitration Agreement is enforceable under Tennessee law11, the
Court must address each of the following issues. First, the Court must decide whether there was
sufficient consideration to support the Arbitration Agreement. Second, the Court must decide
whether there was mutual assent between the parties at the time of contract formation.
a.
The Arbitration Agreement Was Supported By Consideration
A fundamental principle of contract law is that contracts “must result from a meeting of the
11
The Court has jurisdiction under 28 U.S.C. § 1332 (“diversity jurisdiction”), and therefore
must apply the law of the forum state (Tennessee) in deciding whether the Arbitration Agreement is
enforceable. See, e.g., Uhl v. Komatsu Forklift Co., Ltd., 512 F.3d 294, 302 (6th Cir. 2008) (“When
considering [the defendant’s] contract-law argument, because we are sitting in diversity, we apply the
law, including the choice of law rules, of the forum state. In this case, the forum state is Michigan, so we
must apply the law that Michigan would apply when interpreting the arbitration agreement.”) (internal
quotations and citation omitted).
9
minds of the parties in mutual assent to the terms, must be based upon a sufficient consideration, free
from fraud or undue influence, not against public policy and sufficiently definite to be enforced.”
Doe v. HCA Health Servs. of Tenn., Inc., 46 S.W.3d 191, 196 (Tenn. 2001) (citations omitted).
Plaintiff argues that the arbitration clause is not enforceable because there was no “meeting of the
minds.” [Plaintiff’s Response in Opposition to the Motion to Compel, Doc. 8]. This, of course, is
rebutted by the fact that Plaintiff signed the Arbitration Agreement. [Signed Arbitration Form, Doc.
4-4]. In Tennessee, there is a rebuttable presumption that “[a]ll contracts in writing signed by the
party to be bound, or the party’s authorized agent and attorney, are prima facie evidence of a
consideration.” T.C.A. § 47-50-103. The Arbitration Form–which was located on a separate page
from the rest of the Arbitration Agreement–stated the following:
I agree that, in the event that I have any employment related legal
claims, I will submit them to final and binding neutral third-party
arbitration, in accordance with the ACE Employment Dispute
Arbitration Policy recited above, which is made a part of this
agreement. I understand that this agreement means that I cannot
bring any employment related claim in court and that I waive my
right to a jury trial for such claims.
[Signed Arbitration Form, Doc. 4-4] [emphasis added]. Plaintiff’s signature is more than sufficient
to raise a presumption of consideration. Not surprisingly, when one signs a contract, that person is
presumed to have knowledge of its contents. See, e.g., Giles v. Allstate Ins. Co., 871 S.W.2d 154,
156 (Tenn. Ct. App. 1993) (“[T]hat if, without being the victim of fraud [the person] fails to read
the contract or otherwise learn its contents, he signs the same at his peril and is estopped to deny his
obligation, will be conclusively presumed to know the contents of the contract, and must suffer the
consequences of his own negligence.”) (quoting Beasley v. Metro. Life Ins. Co., 229 S.W.2d 146,
148 (Tenn. 1950)).
To rebut this presumption, Plaintiff argues that the Arbitration Agreement was illusory (and
10
therefore lacks consideration). As the Court of Appeals for the Sixth Circuit has stated, a “promise
is legally enforceable “only if the promisor receives in exchange for that promise some act or
forbearance, or the promise thereof.” Floss v. Ryan’s Family Steak Houses, Inc., 211 F.3d 306, 315
(6th Cir. 2000) (applying Tennessee law) (citation omitted), cert. denied, 531 U.S. 1072 (2001). See
also Kozy v. Werle, 902 S.W.2d 404, 411 (Tenn. Ct. App. 1995) (“Consideration consists when the
promisee does something that he is under no legal obligation to do or refrains from doing [that]
which he has a legal right to do.”); Sutton v. First Nat’l Bank of Crossville, 620 S.W.2d 526, 531
(Tenn. Ct. App. 1981) (“It is, invariably held that the promise of one party is a valid consideration
for the promise of the other party.”) (quotation and citation omitted).
A promise is illusory when it “essentially promises nothing at all, or allow[s] the promisor
to decide whether or not to perform the promised act.” Walker v. Ryan’s Family Steak House, 289
F. Supp. 2d 916, 929 (M.D. Tenn. 2003). See also Floss, 211 F.3d at 315 (recognizing that under
Tennessee law, “a promise constitutes consideration for another promise only when it creates a
binding obligation”) (citation omitted). A contract is also illusory if it is indefinite in nature. See
Jamestowne On Signal, Inc. v. First Fed. Sav. & Loan Ass’n, 807 S.W.2d 559, 564 (Tenn. Ct. App.
1990) (“Courts will not uphold agreements which are indefinite and uncertain as to the obligations
imposed on the parties thereto.”) (quotations and citation omitted).
Plaintiff argues that the Arbitration Agreement is illusory based upon a clause that allows
ACE to unilaterally amend the Agreement. That clause provides:
This policy cannot be changed except in writing by the vice
president, ACE Employee Relations. No change to the policy will
affect a pending claim unless the employee agrees to the change in
writing with the employee’s signature.
[Arbitration Policy, Doc. 4-2, at 2]. In support, Plaintiff relies mostly upon the Sixth Circuit’s
11
decision in Floss, 211 F.3d at 310. While Floss also involved a unilateral amendment clause–and
Tennessee law–it is distinguishable for a number of important reasons.
In Floss, the plaintiffs (who were former employees of Ryan’s Family Steak Houses, Inc.)
agreed to arbitrate all employment-related disputes with their employer. Id. Unlike the present case,
however, the arbitration agreement in Floss was not between a plaintiff and her former employer.
Id. Rather, the arbitration agreement in Floss was between the plaintiffs and a third-party arbitration
service. Id. The arbitration service promised an arbitral forum, and the plaintiffs waived their right
to sue their employer in court. Id. The arbitration agreement also allowed the arbitration service
to unilaterally amend the agreement without notifying the plaintiffs. Id. The district court held–and
the Court of Appeals agreed–that the plaintiffs did not receive adequate consideration from the
arbitration service. Id. Consequently, the clause was found unenforceable under Tennessee law.
Id. As the court explained:
[The third-party arbitration service’s] promise to provide an arbitral
forum is fatally indefinite. Though obligated to provide some type
of arbitral forum, [the third-party arbitration service] has unfettered
discretion in choosing the nature of that forum. Specifically, [the
third-party arbitration service] has reserved the right to alter the
applicable rules and procedures without any obligation to notify,
much less receive consent from, [the plaintiffs]. [The third-party
arbitration service’s] right to choose the nature of its performance
renders its promise illusory.
Id. at 315-16.
In an attempt to compare the two cases, Plaintiff argues that the Arbitration Agreement is
illusory because–like Floss–it allows one party to unilaterally amend the agreement. That, however,
is not the reason why the arbitration agreement was found unenforceable in Floss. The Sixth Circuit
in a recent decision made this abundantly clear.
In Howell v. Rivergate Toyota, Inc., the Court of Appeals considered whether there was
12
sufficient consideration (under Tennessee law) to support an employment contract that provided an
arbitration clause similar to the present case. 144 F. App’x 475, 480 (6th Cir. 2005). In Howell, the
plaintiff (a former employee of Rivergate Toyota, Inc.) signed an agreement with his employer to
arbitrate any “employment-related” disputes. Id. at 477. Like the present case, the employer in
Howell had the right to unilaterally amend the arbitration agreement. Id. Specifically, the clause
allowed the employer to make any changes “necessary or appropriate to give effect to the intent”
of the arbitration agreement. Id. at 479 (internal quotations omitted). Even though the plaintiff
signed the arbitration agreement, he still filed employment-related claims against his employer in
federal court. Id. at 477. The plaintiff argued that the agreement lacked consideration based upon
the unilateral amendment clause. Id.
The defendant employer moved to compel arbitration, and the district court granted the
motion. Id. On review, the Court of Appeals had to decide whether the unilateral amendment clause
was supported by sufficient consideration–that is, whether it was an illusory clause. To address this
issue, the Court of Appeals had to decide whether Floss was controlling. It was not.
First, the Court of Appeals emphasized that the arbitration agreement in Floss was between
an employee and a third-party arbitration service, not between an employee and an employer. Id.
Notably, the employer in Floss did not agree to submit its own claims to arbitration. Id. As the
Court of Appeals explained:
The arbitration agreement at issue in Floss was between an
employee and a provider of dispute resolution services, not
between an employee and his employer. The dispute resolution
firm [in Floss] obligated itself only to provide an arbitral forum,
not to submit its own disputes to arbitration. It was that obligation
that was rendered illusory by the firm’s unfettered right to choose the
nature of the forum. Floss, in our view, is not controlling here.
13
Howell, 144 F. App’x at 480 (internal citations omitted) (emphasis added). Like the employer in
Howell, ACE agreed to submit its own claims to arbitration:
Both ACE and the employee will be bound by any decision made by
a neutral arbitrator. If the employee or ACE does not abide by the
arbitrator’s decision, either party may go to court to enforce the
arbitrator’s decision, but arbitration must be used before going to
court. This policy prevents both ACE and the employee from
going to court over employment-related disputes. However, this
policy does not prevent, prohibit or discourage an employee from
filing a charge with, or participating in an investigation by, the
National Labor Relations Board (NLRB); the Equal Employment
Opportunity Commission (EEOC); or any state or federal
administrative agency.
[Arbitration Policy, Doc. 4-2, at 1] [emphasis added]. In contrast to the third-party arbitration
service in Floss, ACE has done more than just promise an arbitral forum for Plaintiff’s claims.
Notably, ACE promised to submit its own claims against Plaintiff to arbitration. As the Court of
Appeals recognized in Howell, this promise–that both parties agree to submit their claims to
arbitration–provides a basis for consideration. Regardless of whether the Arbitration Agreement
allows ACE to unilaterally amend it, the fact that ACE has agreed to submit its own claims to
arbitration distinguishes it from Floss. As the court stated in Howell, the “reciprocal obligation to
arbitrate satisfies the mutuality obligation.” Id. at 480 (citing Cooper v. MRM Inv. Co., 367 F.3d
493, 505 (6th Cir. 2004) (“Even if [the plaintiff] had far less bargaining power, that would not detract
from bilaterality, because [the defendant] has the same duty to arbitrate as [the plaintiff].”) (applying
Tennessee law)). See also Wilks v. Pep Boys, 241 F. Supp. 2d 860, 863 (M.D. Tenn. 2003) (“[T]he
plaintiffs’ claims that the Agreement is invalid for lack of consideration and because it constitutes
an ‘illusory promise’ are without merit. Both parties are bound to arbitrate claims arising in their
relationship.”); High v. Capital Senior Living Props. 2- Heatherwood, Inc., 594 F. Supp. 2d 789,
14
798-99 (E.D. Mich. 2008) (“Floss does not provide much guidance here, however, because it dealt
with a stand-alone arbitration agreement between the defendant’s employees and a third-party
provider of dispute resolution services. The only consideration for the employees’ promise to
submit their dispute to arbitration was the provider’s return promise to furnish an acceptable
forum.”); Crowe v. BE & K, Inc., No. 2:09-CV-873, 2010 WL 1640884, at *4 (S.D. Ohio Apr. 22,
2010) (holding that a clause in an arbitration agreement allowing an employer to unilaterally amend
the agreement was not illusory because the employer was obligated “to submit disputes they may
have against employees to binding arbitration”); Seawright, 507 F.3d at 974 (“In the agreement at
issue, the arbitration process was binding on both employer and employee, regardless of who
requested arbitration. Thus, employer and employee were equably obligated to arbitrate those
disputes falling within the coverage of the plan. This is enough to ensure mutuality of obligation
and thus constitute consideration.”).
Second, the Court of Appeals in Howell emphasized that the amendment clause only allowed
the employer to make limited changes to the arbitration agreement. 144 F. App’x at 480. In Howell,
the employer had the right to make changes that were “necessary or appropriate to give effect to the
intent” of the arbitration agreement. Id. at 47 (internal quotations omitted). The court held that
because any changes would be limited to promoting the purpose of the arbitration agreement, the
amendment clause was not indefinite (and therefore not illusory). As the court explained:
[The plaintiff] contends that [the defendant employer’s] authority to
amend the Procedure vitiates the company’s obligation. But as we
have said, the unilateral amendment provision authorizes only
procedural changes that promote the agreement’s purpose– i.e.,
resolution of disputes through arbitration. It does not allow [the
defendant employer] to avoid its obligation to arbitrate.
Id. at 480.
15
While the amendment clause in the present case does not contain the same “limiting”
language as in Howell, this distinction is not important. In Howell, the Court of Appeals held that
regardless of the language used in the amendment clause, the employer was under a duty of good
faith and fair dealing to only makes changes consistent with the purpose of the arbitration
agreement. Id. at 479. As the court stated:
Further, [the defendant employer’s] duty of good faith and fair
dealing prohibits it from amending the Procedure for an improper or
oppressive purpose. Cf. Elliott v. Elliott, 149 S.W.3d 77, 84-85
(Tenn. Ct. App. 2004) (stating that every party to a contract is bound
by an implied duty of good faith and fair dealing).
Id.
While the amendment clause in the present case did not contain the same language as in
Howell, ACE was still under the implied duty of good faith and fair dealing to only make changes
consistent with the purpose of the agreement. Id. That purpose was listed as follows:
ACE believes it is important to provide employees with an
opportunity to resolve employment-related disagreements and
problems fairly and quickly. Therefore, it is the policy of the ACE
Companies (‘ACE’) that arbitration by a neutral third party is the
required and final means for the resolution of any employmentrelated legal claim not resolved by the internal dispute resolution
processes.
[Arbitration Policy, Doc. 4-2, at 1]. Because ACE was under the implied duty of good faith and fair
dealing, ACE was limited in the types of changes it could make. Consequently, the unilateral
amendment clause is not an illusory promise.
One more point about Howell. In that decision, the court held that the amendment clause
only allowed for “procedural” changes to the arbitration agreement. 144 F. App’x at 479. As the
court stated, “[t]he provision does not, in our view, authorize changes to the parties’ substantive
16
rights and obligations.” Id. Under the amendment clause, the employer could only make changes
that were “necessary or appropriate to give effect to the intent” of the arbitration agreement. Id. at
479 (internal quotations omitted). While the clause did not expressly limit any amendments to
“procedural” changes, the court held as much. Id. at 480. As the court explained, “the fact that the
terms of the Procedure may be changed [does not] render the agreement too indefinite to be
enforced, given the limited nature of the changes that are permissible.” Id. (emphasis added).
In the present case, the amendment clause provided that only the Vice President of ACE
Employee Relations could make changes to the Arbitration Agreement. [Arbitration Policy, Doc.
4-2, at 2]. The clause did not specify whether only “procedural” changes could be made, or whether
the Vice President could make “substantive” changes.12 But then again, neither did the amendment
clause in Howell. Moreover, the clause in the present case is just as broad as the clause in Howell,
and the Court of Appeals interpreted that clause as only allowing for “procedural” changes.
Assuming, however, that the amendment clause in the present case is illusory–because it
allows ACE to unilaterally make “substantive” changes to the Arbitration Agreement, and the Court
of Appeals would regard this as an important fact13–the Court would still enforce the Arbitration
Agreement. In Taylor v. Butler, the Tennessee Supreme Court held that a void arbitration clause
did not render the rest of an employment contract unenforceable. 142 S.W.3d 277, 287 (Tenn.
12
“Substantive” changes would include enlarging or limiting the scope of claims subject to
arbitration. “Procedural” changes would include amending the arbitration procedures (changing the
location of the arbitration proceeding, or the process in selecting an arbitrator).
13
It is unclear how important this fact–standing alone–would be. In Howell, the Court of
Appeals relied on multiple facts in finding that the amendment clause was not an illusory promise. 144 F.
App’x at 479-80. For example, the court emphasized that: (1) the defendant employer also agreed to
submit its own claims to arbitration; and (2) the defendant employer was under the implied duty of good
faith and fair dealing to only make amendments consistent with the purpose of the arbitration agreement.
Id.
17
2004). As the court stated, “[i]f a contract or term thereof is unconscionable at the time the contract
is made, a court may refuse to enforce the contract, or may enforce the remainder of the contract
without the unconscionable term.” Id. at 285 (citing Restatement (Second) of Contracts § 208
(1981)). More recently–and directly on point– the Tennessee Court of Appeals held that a void
arbitration clause could be severed from the rest of the arbitration agreement. Chapman v. H&R
Block Mort. Corp., No. E2005-00082-COA-R3-CV, 2005 WL 3159774, at * 8 (Tenn. Ct. App. Nov.
28, 2005) (“In the event that a provision of an arbitration agreement is found to be invalid, that
provision may be deleted from the agreement, and otherwise the agreement may be given full effect
consistent with the general policy of favoring the enforcement of arbitration agreements.”) (citation
omitted). See also Brooks v. The Finish Line, Inc., No. 3:05-0715, 2006 WL 1129376, at *7 (M.D.
Tenn. Apr. 26, 2006) (excising an invalid arbitration clause from the remainder of the arbitration
agreement based upon the agreement’s severability clause and the federal policy favoring the
enforcement of arbitration agreements) (citing Chapman, 2005 WL 3159774, at *4).
Whether a clause should be severed is based upon the intent of the parties. Bratton v.
Bratton, 136 S.W.3d 595, 602 (Tenn. 2004) (“An agreement may be either entire or severable
according to the intention of the parties. The intention of the parties is to be determined by a fair
construction of the terms and provisions of the contract, by the subject matter to which it has
reference, by the circumstances of the particular transaction giving rise to the question, and by the
construction placed on the agreement by the parties in carrying out its terms.”) (internal citations
omitted). Even if the amendment clause in the present case was void, the Court would still sever
that clause from the rest of the Arbitration Agreement. Like Chapman, the arbitration agreement
in the present case contains a severability clause:
18
The terms of these rules and Procedures are severable. The invalidity
or unenforceability of any provision herein shall not affect the
application of any other provision. Where possible, consistent with
the purpose of the Rules and Procedures, a court of competent
jurisdiction may reform any otherwise invalid provision of these
Rules and Procedures and enforce such provision as reformed.
[Arbitration Rules and Procedures, Doc. 4-2, at 20-21]. This clause–which clearly indicates the
parties’ intent–would allow the Court to sever the unilateral amendment clause from the Arbitration
Agreement, and therefore make the rest of it enforceable.
b.
There Was Mutual Assent Between the Parties
Plaintiff also argues that the Arbitration Agreement was not “fully executed” because ACE
representatives did not sign the Arbitration Form (only Plaintiff did). [Plaintiff’s Memorandum in
Support of her Response to Defendants’ Motion to Compel, Doc. 8, at 3]. Under Tennessee law,
however, it is not necessary that both parties sign a contract to establish mutual assent. Staubach
Retail Servs.-Southeast LLC v. H.G. Hill Realty Co., 160 S.W.3d 521, 524 (Tenn. 2005) (“[A]
written contract is not required to be signed to be binding on the parties.”). Nor is it necessary for
arbitration agreements. T.R. Mills Contractors, Inc. v. WRH Enter., LLC, 93 S.W.3d 861, 870
(Tenn. Ct. App. 2002) (“[O]therwise binding written contracts need not be signed in order for an
arbitration clause contained therein to be enforceable.”); Seawright, 507 F.3d at 978 (“[A]rbitration
agreements under the FAA need to be written, but not necessarily signed.”) (citation omitted).
While ACE representatives did not sign the Arbitration Form, it manifested assent in a
different way. Notably, assent can be shown by “the course of dealing of the parties,” and “whether
the parties performed under its terms.” T.R. Mills Contractors, 93 S.W.3d at 866 (citations omitted).
For example, when a party “who has not signed a contract has nonetheless manifested consent by
performing under it and making payments conforming to its terms, that party is estopped from
19
denying that the parties had a meeting of the minds sufficient to bind them to the contract.” Id.
(citation omitted) (emphasis added). In T.R. Mills Contractors, the Tennessee Court of Appeals held
that an arbitration agreement was enforceable, even though one of the parties did not sign the
agreement. Id. This is because the non-signing party manifested assent by performing the contract.
Id. As the court explained, “when an agreement is reduced to writing but is signed by only one of
the parties, it is binding on the non-signing party if that party has manifested consent to its terms.”
Id. (citations omitted).
Plaintiff signed the Arbitration Agreement–which was a condition of continued
employment–dated May 2, 2008. [Signed Arbitration Form, Doc. 4-4]. ACE continued to employ
(and pay) Plaintiff for another two years following this event. As long as ACE demonstrated mutual
assent in this manner–by continuing to fulfill its obligations as Plaintiff’s employer–it was not
necessary that ACE representatives sign the Agreement. See Staubach, 160 S.W.3d at 525 (“When
a party who has not signed a contract demonstrates its assent by performing pursuant to the contract
and making payments conforming to the contract’s terms, that party is estopped from denying the
binding effect of the contract.”) (citing T.R. Mills Contractors, 93 S.W.3d at 866) (emphasis added).
Accordingly, the Court finds that both parties assented to the terms of the Arbitration Agreement.
3.
Plaintiff’s Claims Against Combined Insurance Fall Within the Scope
of the Arbitration Agreement
Having decided that the Arbitration Agreement is enforceable, the Court must now determine
whether Plaintiff’s claims against Combined Insurance fall within the scope of it. As an initial
matter, the Court must decide whether the Arbitration Agreement is “broad” or “narrow” in scope.
This will determine what test the Court must apply in deciding whether Plaintiffs’ claims are subject
to arbitration. Pursuant to the Arbitration Agreement, Plaintiff and ACE (along with its subsidiaries
20
and affiliates) agreed to submit the following claims to arbitration:
This policy covers all employment-related disagreements and
problems that concern a right, privilege or interest recognized by
applicable law. Such disputes include claims, demands, disputes,
controversies under Title VII of the Civil Rights Act of 1964, the
Civil Rights Act of 1866, the Civil Rights Act of 1991, the Equal Pay
Act, the Age Discrimination in Employment Act, the Employee
Retirement Income Security Act of 1974, the Fair Labor Standards
Act, the Rehabilitation Act of 1973, the Americans with Disabilities
Act, the Family and Medical Leave Act, and any other federal, state,
or local statute, regulation, ordinance or common law doctrine,
regarding unfair competition, employment discrimination or
termination of employment. This policy is intended to substitute
final and binding arbitration for court action, and its related
delays and inefficiencies. This policy also applies to claims that
arose prior to the adoption of this policy, pending at the time this
policy is distributed, and future claims. This policy will apply to
any successors or assigns of ACE. Further, ACE reaffirms its intent
that there will be no right or authority for any dispute to be brought,
heard or arbitrated as a class action or private attorney general.
[Arbitration Policy, Doc. 4-2, at 1] [emphasis added]. This is obviously a broad provision, as it
compels arbitration of “all employment-related disagreements and problems.” See Mouton v. Metro.
Life Ins. Co., 147 F.3d 453, 456 (5th Cir. 1998) (finding that an arbitration clause stating that the
plaintiff employee agreed to arbitrate “any dispute, claim or controversy that may arise between
[himself] and the employer” was “broad” enough to encompass Title VII discrimination claims, even
though the arbitration agreement did not explicitly mention “employment-related” disputes). While
the Arbitration Agreement explicitly listed claims subject to arbitration (such as Title VII claims),
its scope was not limited to only those claims. In fact, the claims listed in the Arbitration Agreement
were just examples of claims subject to arbitration. See Forbes v. A.G. Edwards & Sons, Inc., No.
08-CV-552, 2009 WL 424146, at *8 (S.D.N.Y. Feb. 18, 2009) (“Nothing in the language indicates
that the parties intended to limit the scope of arbitration. Even where the arbitration clauses set forth
21
examples of the types of claims that should fall within the scope of the agreement, this is preceded
by the language ‘including, but not limited to.’”).
Having found that this case involves a broad arbitration clause, there is a presumption that
Plaintiff’s claims fall within its scope. See United Steelworkers of Am. v. Mead Corp., 21 F.3d 128,
131 (6th Cir. 1994) (“Moreover, in cases involving broad arbitration clauses the Court has found the
presumption of arbitrability ‘particularly applicable,’ and only an express provision excluding a
particular grievance from arbitration or ‘the most forceful evidence of a purpose to exclude the claim
from arbitration can prevail.’”) (quoting At&T Techs. v. Comms. Workers of Am., 475 U.S. 643,
650 (1986)). In the Sixth Circuit, the test for determining whether a dispute falls within the scope
of a broad arbitration clause is if “an action can be maintained without reference to the contract or
relationship at issue, the action is likely outside the scope of the arbitration agreement–along with
the presumption in favor of arbitrability and the intent of the parties.” NCRS Corp. v. Korala
Assocs., Ltd., 512 F.3d 807, 814 (6th Cir. 2008) (quoting Nestle Waters N. Am., Inc. v. Bollman, 505
F.3d 498, 505 (6th Cir. 2007)).
Many of Plaintiff’s claims are explicitly barred by the Arbitration Agreement. Notably,
Plaintiff agreed to submit to arbitration “all employment-related disagreements and problems that
concern . . . employment discrimination . . . conditions of employment or termination of
employment.” In her complaint, Plaintiff has filed claims of sexual harassment (Count I), negligent
supervision (Count IV), and constructive discharge (Count V). The sexual harassment claim is
clearly an action based upon “employment discrimination,” and therefore is subject to arbitration.
The constructive discharge claim–that Plaintiff resigned from ACE because of Mr. Barrett’s alleged
actions–is related to “termination of employment,” and therefore is also subject to arbitration. The
“negligent supervision” claim also is subject to arbitration, as it relates to both “employment
22
discrimination” and “conditions of employment” (whether Combined Insurance or ACE should have
fired Mr. Barrett). See Lambert v. Austin Indus., 544 F.3d 1192, 1199 (11th Cir. 2008) (“A plain
meaning interpretation of either the ‘all workplace disputes’ or ‘disputes arising from or related to
employment’ language suggests that employment-termination disputes do indeed fall under the
scope of the . . . arbitration agreement. It is axiomatic that a termination from a job ‘arises from or
relates’ to employment.”).
Plaintiff has also filed claims of intentional infliction of emotional distress (Count II),
negligent infliction of emotional distress (Count III), outrageous conduct (Count VI), invasion of
privacy (Count VII), and recklessness (Count VIII). These claims–which are all based upon the
alleged actions of Mr. Barrett14–are also subject to arbitration. See Electrolux Home Prods., Inc. v.
Mid-South Elecs., Inc., No. 6:07-CV-016-KKC, 2008 WL 3493466, at *3 (E.D. Ky. Aug. 11, 2008)
(“A claim, regardless of the legal label assigned to it, falls within the scope of a clause requiring
arbitration of ‘any dispute’ if the allegations underlying the claim or its defenses involve matter
covered by the agreement.”) (citing First Union Real Estate Equity & Mortg. Inv. v. Crown Am.
Corp., 23 F.3d 406, at *3 (6th Cir. 1994) (unpublished table decision)). The following case–which
also involves alleged actions by a co-worker during a work conference–is particularly instructive..
In Forbes v. A.G. Edwards & Sons, Inc., the plaintiff filed suit against her former employer,
A.G. Edwards & Sons, Inc. (“Edwards”) and former co-worker, Douglas Pearl (“Mr. Peal.”). No.
14
Plaintiff has attempted to hold Combined Insurance liable under a theory of “respondeat
superior” (or “vicarious liability”). In Tennessee, an employer is vicariously liable for torts committed by
employees done within the course and scope of employment. See, e.g., Tenn. Farmers Mut. Ins. Co. v.
Am. Mut. Liab. Ins. Co., 840 S.W.2d 933, 937-38 (Tenn. Ct. App. 1992). An employee’s conduct is
within the scope of employment if: “(1) it is of the kind she is employed to perform; (2) it occurs within
the authorized time and space limit; and (3) it is actuated, at least in part, by a purpose to serve the
master.” Borg v. J.P. Morgan Chase & Co., No. 04-2874 M1/V, 2006 WL 2052856, at *10 (W.D. Tenn.
July 21, 2006) (citing Tenn. Farmers Mut. Ins., 840 S.W.2d at 938).
23
08-CV-552, 2009 WL 424146 (S.D.N.Y. Feb. 18, 2009). The plaintiff filed claims of: (1) sexual
harassment, sexual discrimination, and retaliation in violation of New York law; and (2) intentional
infliction of emotional distress, battery, and assault in violation of New York common law. Id., at
*1. In support, the plaintiff alleged that Mr. Pearl sexually assaulted her during a work conference:
From January 21 through January 23, 2007, plaintiff attended
a Retail Conference in Miami, Florida, as part of her work
responsibilities with Edwards. Defendant Pearl, an Institutional Sales
Manager at Edwards, also attended.
The following is a summary of plaintiff’s allegations in
connection with that event. Following the conference presentations
on January 22, 2007, a group of Edwards employees attended a group
dinner, followed by socializing. During that time, Pearl began
sexually harassing plaintiff through the use of profane and sexually
inappropriate language, the use of obscenities, and physically abusive
and sexually assaultive conduct. Pearl told plaintiff that he could hire
and fire anyone at Edwards, which he followed with a request that
plaintiff come work for him as his assistant. Pearl stated that he was
her bosses’ boss, and could therefore move her from the current
position at Edwards if he wanted.
Ultimately, in the early morning hours of January 23, 2007,
Pearl subjected plaintiff to unwelcome physical advances, including
kissing. Pearl then fraudulently lured plaintiff to his hotel room
under the pretense of work-related matters, at which point Pearl
physically attacked her by attempting to kiss her. Shortly thereafter,
Pearl completely undressed, and physically grabbed plaintiff, forcing
his hand up her skirt, while continuing to subject her to unwanted
touching elsewhere. Pearl then forced plaintiff’s hand onto his naked
body, while using explicitly profane and vulgar language toward her.
Finally, plaintiff was able to break free, and flee from Pearl’s hotel
room.
Upon returning to work following the conference, Pearl
continued to harass plaintiff with e-mails and phone calls, and when
she did speak to him, he continued to use inappropriate language
towards her. Plaintiff asserts that Pearl has engaged in sexually
harassing and discriminatory conduct towards other female
employees of Edwards predating his conduct towards plaintiff.
Ultimately, based on the above mentioned conduct, plaintiff contends
that she was forced to resign from her position with Edwards in
24
August 2007.
Id., at *2-3. After the lawsuit was filed, the defendants moved to stay the action and compel
arbitration pursuant to the FAA. Id., at *1. The arbitration clause (which the plaintiff signed as part
of an employment contract) provided the following:
I am agreeing to arbitrate any dispute, claim or controversy that may
arise between myself and Edwards, or a customer or any other
person. This means that I am giving up the right to sue in court
Edwards, its subsidiaries or employees or any customer or any other
person concerning matters related to or arising from my employment.
This includes giving up the right to trial by jury.
Id. The plaintiff argued, inter alia, that her assault, battery, and intentional infliction of emotional
distress claims fell outside the mandatory arbitration clause. Id., at *8.
As an initial matter, the court held that the FAA applied, and that the arbitration clause was
“broad” in scope. Id. at *7-8. The court then held that the plaintiff’s intentional tort claims fell
within the scope of the arbitration clause. Id.., at *8. Even though one of the sexual assaults
allegedly occurred during after-hours (and not during the actual work conference or work-sponsored
social event), the court held that the plaintiff’s claims involved a matter “related to or arising from”
the plaintiff’s employment. Id. In support, the court emphasized that the plaintiff’s claims were
based upon an incident that “involved plaintiff’s co-worker, occurred during a work conference, and
contributed to what plaintiff alleges as a continued course of harassing conduct at work.” Id.
Like Forbes, the present case involves a co-worker who allegedly committed torts during a
work conference. Plaintiff alleges that her supervisor, Mr. Barrett, recorded a video of her
undressing in a hotel room. Like Forbes, this case involves: (1) a co-worker; (2) an incident that
allegedly occurred during a work conference; and (3) allegations of a harassing workplace. Given
25
the broad scope15 of the Arbitration Agreement, and the persuasive reasoning of Forbes, the Court
finds that all of Plaintiff’s claims against Combined Insurance are subject to arbitration.
Moreover, even if there was doubt regarding whether Plaintiff’s claims fell within the scope
of the Arbitration Agreement, the Court would resolve any doubt in favor of arbitration. See
Teamsters Local Union No. 783 v. Anheuser-Busch, Inc., 626 F.3d 256, 261 (6th Cir. 2010) (“The
presumption of arbitrability is particularly applicable in cases involving broad arbitration clauses.”)
(citation omitted). Once a court determines that an arbitration clause is broad in scope (and
enforceable), the parties should be compelled to arbitration unless it can be said with “positive
assurance” that the party’s claims do not fall within the scope of the Arbitration Agreement. See
AT&T Techs., 475 U.S. at 650 (holding that once a court determines that an arbitration agreement
is broad in scope, an order to arbitrate should not be denied “unless it can be said with positive
assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted
dispute”); Solvay Pharms., Inc. v. Duramed Pharms., Inc., 442 F.3d 471, 482 n. 10 (6th Cir. 2006)
(“When faced with a broad arbitration clause, such as one covering any dispute arising out of an
agreement, a court should follow the presumption of arbitration and resolve doubts in favor of
arbitration. Indeed, in such a case, only an express provision excluding a specific dispute, or the
most forceful evidence of a purpose to exclude the claim from arbitration, will remove the dispute
from consideration by the arbitrators.”) (internal punctuation and citations omitted) (emphasis
15
Notably, the Arbitration Agreement provided for arbitration of all “employment-related
disagreements and problems.” It did not state that only those claims falling within the “scope of
employment” would be subject to arbitration. That concept (which explains when an employer may be
held vicariously liable for an employee’s conduct) is more limited than the scope of the Arbitration
Agreement. The phrase “employment-related disagreements and problems” means that Plaintiff’s claims
must relate to employment, but that does not mean that Plaintiff’s claims must be based upon incidents
that allegedly occurred within the scope of employment. Consequently, the fact that Plaintiff’s claims are
based upon an incident that did not occur within the actual work conference does not mean that her claims
are beyond the Arbitration Agreement.
26
added). As the Court of Appeals recently stated (in construing broad arbitration clauses):
This Court has drawn a clear line between the extensive applicability
of general arbitration provisions and the more narrow applicability of
arbitration clauses tied to specific disputes. When faced with a broad
arbitration clause, such as one covering any dispute arising out of an
agreement, a court show follow the presumption of arbitration and
resolve doubts in favor of arbitration. Indeed, in such a case, only an
express provision excluding a specific dispute, or the most forceful
evidence of a purpose to exclude the claim from arbitration, will
remove the dispute from consideration by the arbitrators.
Simon v. Pfizer, Inc., 398 F.3d 765, 775 (6th Cir. 2005) (internal quotations and citations omitted).
Having reviewed the scope of the Arbitration Agreement, and the nature of Plaintiff’s claims
against Combined Insurance, the Court cannot say with “positive assurance” that those claims are
not subject to arbitration. In addition, there is not an express provision in the Arbitration Agreement
excluding Plaintiff’s claims from arbitration. See Pace Int’l Union, AFL-CIO, CLC v. Vacumet
Paper Metalizing Corp, F. App’x 380, 384 (6th Cir. 2004) (“Finally because the presumption of
arbitrability is not overcome by an express provision, [the plaintiff opposing arbitration] had the
burden to produce ‘forceful evidence’ of an intention to exclude [the plaintiff’s] claim from
arbitration.”) (citing AT&T Techs., 475 U.S. at 650). Given the broad scope of the arbitration
clause–and the presumption that comes with it–it is Plaintiff’s burden to establish that her claims
are not subject to arbitration. Id. Plaintiff has said nothing on this issue.
Pursuant to Section Three of the FAA, 9 U.S.C. § 3, Plaintiff and Combined Insurance are
COMPELLED to enter arbitration to resolve any “employment-related disagreements or problems”
that form the basis of this lawsuit. The parties must comply with the terms of the Arbitration
Agreement. Accordingly, Plaintiff’s claims against Combined Insurance are STAYED16 pending
16
In Ozormoor v. T-Mobile USA, Inc., the Court of Appeals for the Sixth Circuit reaffirmed that
district courts are not required to stay lawsuits when all claims against a party have been referred to
arbitration. 354 F. App’x 972, 975 (6th Cir. 2009) (citing Arnold v. Arnold Corp., 920 F.2d 1269, 1275
27
completion of arbitration. To the extent that Combined Insurance argues that the case should be
dismissed–rather than stayed–that request is DENIED. The STAY only applies to Plaintiff’s claims
against Combined Insurance. It does not affect Plaintiff’s claims against AON or Mr. Barrett.
B.
The Parties are Ordered to Brief the Court on Whether AON is a Subsidiary or
Affiliate of ACE
Under the Arbitration Agreement, Plaintiff agreed to submit all of her “employment-related”
claims against ACE and its subsidiaries and affiliates.17 [Arbitration Policy, Doc. 4-2, at 2 n.1]. As
background, ACE purchased Combined Insurance in 2008. [Defendants’ Memorandum in Support
of their Motion to Compel Arbitration, Doc. 5, at 2] [citation omitted]. Prior to this acquisition,
Combined Insurance was a wholly-owned subsidiary of AON. [Id.]. It is unclear whether AON
is a “subsidiary” or “affiliate” of ACE.
(6th Cir. 1990) (stating that it was not “error for the district court to dismiss the complaint” after ordering
arbitration)); Hensel v. Carquill, Inc., 198 F.3d 245, at *4 (6th Cir. 1999) (unpublished table decision)
(upholding dismissal of “litigation in which all claims are referred to arbitration”).
That being said, the Court of Appeals has encouraged district courts to stay actions as a general
policy under these circumstances. See ATAC Corp. v. Arthur Teacher’s, Inc., 280 F.3d 1091, 1101 (6th
Cir. 2002) (“However, under the Arnold rule, in cases where there is a genuine legal question concerning
arbitrability, a dismissal rather than a stay allows that question to be determined promptly on appeal. On
the other hand, in the large majority of cases, the district court can speed along an arbitration about whose
validity it thinks there is little legal dispute by staying the action rather than dismissing it. The statute
appears to contemplate this case-management advantage, and the courts of appeals should enforce that
statutory scheme rather than create another test for appealability not grounded in the language of the
statute.”) (emphasis added). As the Court of Appeals recognized in ATAC, this approach recognizes the
clear mandate of the FAA, 9 U.S.C. § 3, which provides: “If any suit or proceeding be brought in any of
the courts of the United States upon any issue referable to arbitration under an agreement in writing for
such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in
such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of
the parties stay the trial of the action until such arbitration has been had in accordance with the terms of
the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.”
9 U.S.C. § 3. To keep in line with the general policy–and the clear mandate of the FAA–the Court will
stay Plaintiff’s claims against Combined Insurance, rather than dismiss them.
17
The Arbitration Agreement provided: “As issued herein, ‘ACE’ means ACE US Holdings,
Inc., its subsidiaries and affiliates, and ACE INA holdings, Inc., its subsidiaries and affiliates, ACE
Insurance Company, ACE Financial Services Inc., and its subsidiaries, and ACE Capital Re USA
Holdings Incorporated and its subsidiaries.” [Arbitration Policy, Doc. 4-2, at 2 n.1].
28
If AON is an affiliate or subsidiary of ACE, then Plaintiff’s “employment-related” claims
against AON are also subject to arbitration. At the moment, however, neither party has provided
sufficient information about AON. Accordingly, the parties are ORDERED to brief the Court on
whether AON is a subsidiary or affiliate of ACE. The briefs are due within fourteen days of
entry of this Memorandum and Order.
C.
Whether Mr. Barrett Should Receive Legal Representation is Referred to the
Magistrate Judge
On February 3, 2011, Mr. Barrett filed a letter with the Court requesting that he receive legal
representation. [Doc. 11]. Mr. Barrett is currently incarcerated in a federal prison located in
Edgefield, South Carolina, serving his sentence for recording the video of Erin Andrews. [Id.]. Mr.
Barrett, who has appeared pro se in this matter, states that he is not “in a position to afford an
attorney to defend [him] in this case,” and that he is “hoping the Court can point me in the right
direction, as to the names of Attornies or Legal aide in the Knoxville area who can assist me with
my defense.” [Id.].
Although there is no constitutional right to counsel in civil actions, Shepherd v. Wellman,
313 F.3d 963, 970 (6th Cir. 2002), the Court may choose–in its discretion–to appoint counsel under
certain circumstances. Pursuant to the in forma pauperis statute, 28 U.S.C. § 1915(e)(1), the Court
“may request an attorney to represent any person unable to afford counsel” in a civil case. 28 U.S.C.
§ 1915(e)(1) (emphasis added). As the statute makes clear, courts may appoint counsel for any
person; this includes both plaintiffs and defendants. 28 U.S.C. § 1915(e)(1). See also Johnson v.
Doughty, 433 F.3d 1001, 1022 n.22 (7th Cir. 2006) (recognizing that 28 U.S.C. § 1915(e)(1) allows
courts to appoint counsel for indigent defendants in civil cases) (citations omitted); Montag v.
United States, No. CRIM.0079(1)(JRT/FLN, Civ. 02-4723(JRT), 2003 WL 22075759, at *1 (D.
29
Minn. Aug. 5, 2003) (“The Court also has the power to appoint counsel for defendants under 28
U.S.C. § 1915, which provides that a court may request an attorney to represent any person unable
to afford counsel.”) (emphasis added).
First, Mr. Barrett must show that he does not have the financial means to afford an attorney.
28 U.S.C. § 1915(e)(1). Second, because appointment of counsel in civil cases is not a constitutional
right, “[i]t is a privilege that is justified only by exceptional circumstances.” Lavado v. Keohane,
992 F.2d 601, 606 (6th Cir. 1993) (citations omitted). In determining whether “exceptional
circumstances” exist, courts have “examined the type of case and the abilities of the plaintiff to
represent himself.” Id. (citations and internal quotations omitted). As the Court of Appeals for the
Sixth Circuit has stated, “[t]his generally involves a determination of the complexity of the factual
and legal issues involved.” Id. (citation and internal quotations omitted). See also Lince v.
Youngert, 136 F. App’x 779, at *2-3 (6th Cir. 2005) (holding that the district court did not abuse its
discretion in denying the plaintiff’s request for appointment of counsel under 28 U.S.C. §
1915(e)(1)). It is Mr. Barrett’s burden to show that “exceptional circumstances” exist.
Keeping in mind these basic tenets, this matter is REFERRED to the Honorable C. Clifford
Shirley, United States Magistrate Judge, pursuant to 28 U.S.C. § 636(b) and the Rules of this Court,
for disposition or for a report and recommendation as may be appropriate.
III.
CONCLUSION
Based upon the foregoing, the Motion to Compel Arbitration and Dismiss [Doc. 3] is
GRANTED IN PART AND DENIED IN PART, whereby the Court makes the following rulings:
#
Plaintiff and Combined Insurance are COMPELLED TO ARBITRATE any
“employment-related disagreements or problems” that form the basis of this lawsuit.
The parties must comply with the procedures set forth in the Arbitration Agreement.
30
Plaintiff’s claims against Combined Insurance are STAYED pending completion of
arbitration. To the extent that Combined Insurance argues that the case should be
dismissed–rather than stayed–that request is DENIED.
#
The parties are ORDERED to brief the Court on whether AON is a subsidiary or
affiliate of ACE. If AON is a subsidiary or affiliate, then Plaintiff’s “employmentrelated” claims against AON are also subject to arbitration. At this time, however, the
Court has insufficient information regarding AON’s status.
#
Whether Mr. Barrett should receive legal representation is REFERRED to the
Honorable C. Clifford Shirley, United States Magistrate. Mr. Barrett is currently
incarcerated in a federal prison located in Edgefield, South Carolina. Judge Shirley
shall determine whether appointment of counsel is appropriate under 28 U.S.C. §
1915(e)(1).
IT IS SO ORDERED.
ENTER:
s/ Thomas W. Phillips
United States District Judge
31
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?