To Compel Under the FAA or the MAA? That Is The Question

Often, when a plaintiff files a lawsuit, there’s an arbitration agreement somewhere in his or her personnel file. And, unbeknownst to the plaintiff’s counsel, the claims brought actually should be arbitrated—not litigated. But how can an employer compel arbitration?

As an initial matter, this article will not discuss the pros and cons of arbitration or whether class arbitration exists after Concepcion. It will instead focus on Minnesota law with regard to bringing a motion to compel arbitration. In Minnesota, an employer may bring a motion to compel arbitration under either the Federal Arbitration Act (FAA) or the Minnesota Arbitration Act (MAA). So, you might ask, what’s the difference and does it really matter which I use to compel? The answer is yes, it may matter.

Here’s the long and short of it: the FAA, which is a federal law preempts the Minnesota Human Rights Act (MHRA), which is a state law with an exclusivity provision voiding agreements that attempt to waive the right to a judicial forum. What that means is if the employer has an arbitration agreement that requires the arbitration of state discrimination claims, the claims must be litigated under the MHRA. However, if the employer can bring a motion to compel under the FAA, the court must order arbitration of that same MHRA claim.

In order to preempt the MHRA’s exclusivity provision, you have to compel under the FAA. To do so, however, an employer first must prove that the agreement affects interstate commerce. Once that is accomplished, the court will look at the validity and then the scope of the agreement.

Minnesota courts have recognized that a plaintiff’s state law claims are subject to arbitration when the FAA applies. Moreover, the Minnesota Supreme Court, in Johnson v. Piper Jaffray (1995), held that while the MHRA’s exclusivity provision voids agreements that attempt to waive the right to a judicial forum, the FAA preempts it, thereby allowing for arbitration of MHRA claims.

Here’s the tricky part: Plaintiff’s counsel may try to rely on a more recent Minnesota Supreme Court decision in an attempt to avoid arbitration. In Correll, D.D.S. v. Distinctive Dental Services, P.A. (2000), the plaintiff had one state MHRA claim, and a motion to compel arbitration was brought under the MAA, not the FAA. The distinguishing factor was that the defendant never raised the applicability of the FAA, and thus, the court never considered whether arbitration could be compelled under the FAA. Instead, the court held that the MHRA claim must be litigated.

Importantly, the Correll court also left employers with one other possible way to compel the arbitration of MHRA claims. The Correll court posed this question: “The crux of this issue is whether such practical considerations outweigh the legislature’s intent to preclude arbitration of pending human rights act claims.” The answer to this inquiry, from the employer’s standpoint, is that yes, in your case, the practical considerations do outweigh the legislature’s intent to preclude arbitration, and thus arbitration should be compelled. Then, make your list of the practical considerations.

Practical Pointer

Do your best to show that you fall within the FAA. Then argue Piper Jaffray applies. Hope that the court agrees and compels the arbitration of all claims. If you do not fall within the FAA, then argue that the practical considerations outweigh the legislature’s intent to preclude arbitration of the MHRA claims. Finally, of course, cross your fingers.

Jaime N. Cole is an associate in the Minneapolis office of Ogletree Deakins.

 

Topics:  Arbitration, Arbitration Agreements, Federal Arbitration Act, Motion to Compel, Preemption

Published In: Alternative Dispute Resolution (ADR) 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.

© Ogletree, Deakins, Nash, Smoak & Stewart, P.C. | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »