Two Courts Refuse to Enforce Arbitration Agreements

The Fifth Circuit has become the third federal circuit court (after the Sixth and Seventh) to refuse to enforce an employmnt arbiration agreement that Ryan's Family Steakhouse sought to impose on employees through the third-party for-profit arbitral service provider EDSI.  In a decision released yesterday, the court said:

The Ryan's/EDSI contract does not contain any requirement that Ryan's submit to arbitration . . . .  In fact, Ryan's ability to withdraw from its contract with EDSI after ten days' written notice suggests it retains the ability to avoid arbitration of any claim.  The language in the employee/EDSI agreement that suggests that Ryan's would be bound to submit to the EDSI forum is, therefore, a misrepresentation.  Because Ryan's has not yet cured this defect, EDSI canot guarantee that Ryan's will submit to arbitration, so its promise to supply a neutral arbitral forum to Ryan's employees is illusory, and the contract canot be enforced.

The case is Goins v. Ryan's Family Steakhouses, Inc., 2006 WL 1440687 (5th Cir. May 18, 2006) (Westlaw password required).

Separately, a U.S. District Court for the District of Massachusetts held that an employment arbiration agreemen containing a "no class actions" clause was unconscionable and therefore unenfoceable.  That case is Skirchak v. Dynamics Research Corp., Inc., 2006 WL 1460266 (D. Mass. Apr. 6, 2006) (Westlaw password required).

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