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Monday, April 28, 2014

No Retroactive Application to Arbitration Agreement Says Sixth Circuit

6th CirThe Sixth Circuit held that an employee does not have to arbitrate a claim that was already pending in court when he entered into an arbitration agreement with his employer.  The facts of the case, Russell v. Citigroup, Inc.,  are as follows:

Keith Russell was employed at a Citicorp call center from 2004 to 2009.  In 2012, he brought a class action lawsuit against the bank, alleging that he and other employees were not paid for time spent logging in and out of the Citicorp computer system.  While there was an arbitration agreement in place covering this first period of employment, it did not reach class action claims, and so Russell was permitted to proceed in court.

Then, rather bizarrely, Russell applied to be rehired at the same call center and, more bizarrely still, Citicorp rehired him.  He began work again in 2013.  He signed a new arbitration agreement that does cover class claims.  Citicorp thus sought to compel arbitration in the suit, which had by then proceeded to discovery.

The District Court denied Citicorp's motion to compel.  The Sixth Circuit reviewed the language of the new arbitration agreement and found that it clearly applied only prospectively.  Russell clearly did not intend for the new arbitration agreement to apply to his old claim, and Citicorp also seemed to have no such intention.  If its legal department did intend to bind Russell through the second arbitration agreement to drop his class action claim, then it would have violated ethical rules by sending the second agreement to Russell rather than to his attorney.  The Sixth Circuit found that Citicorp had no such intention, and so neither party intended for the second arbitration agreement to apply to Russell's class action claim.  As the Federal Arbitration Act requires courts to enforce the intent of the parties, the Sixth Circuit affirmed the District Court's denial of Citicorp's motion to compel arbitration. 

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