Arbitration Clauses Survive Their Contracts 99% Of The Time

Silver box with survival items isolated on whiteThe Sixth Circuit recently answered a question I get asked regularly: does an arbitration clause survive the termination of the contract containing it?  I usually say yes, and thankfully the Sixth Circuit backed me up.

In Huffman v. The Hilltop Cos., LLC, __ F.3d __, 2014 WL 1243795 (6th Cir. March 27, 2014), a class of employees alleged FLSA violations by their employer.  Each of their employment agreements had an arbitration clause and a “survival clause” which listed a few of the contractual clauses that survive termination of the agreement.  But the survival clause did not mention the arbitration clause.  The employees attacked the enforceability of the arbitration clauses with an onslaught of latin phrases (“expressio unius est exclusion alterius!” and “contra proferentem!”) intended to convey the idea that if the employer had wanted the arbitration clause to survive, it would have listed it in the survival clause.  The district court agreed and denied the employer’s motion to compel arbitration.

The Sixth Circuit reversed.  It reached way back to a 1991 SCOTUS decision, Litton v. NLRB, 501 U.S. 190 (1991), which “recognized a ‘presumption in favor of postexpiration arbitration of matters unless negated expressly or by clear implication [for] matters and disputes arising out of the …contract.’”  In this case, because the survival clause was silent about arbitration as well as about other clauses that would logically survive the contract’s termination (like the severability clause and integration clause), the court found that silence was not enough to expressly negate the survival of the arbitration clause.

After finding the dispute was arbitrable, the Sixth Circuit applied its recent precedent allocating decisions about whether to allow classwide arbitration to courts.  The court found class arbitration was not authorized because the arbitration agreement did not say anything about classwide arbitration, and it ordered plaintiffs to proceed individually in arbitration.

Topics:  Arbitration, Arbitration Agreements, Employment Contract, FLSA, Mandatory Arbitration Clauses, Motion to Compel

Published In: Alternative Dispute Resolution (ADR) Updates, Civil Procedure Updates, General Business Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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