Russell v. Citigroup Inc. – Language in Revised Arbitration Agreement Torpedoes its Application to Pending Class Action

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A Sixth Circuit panel found the text of an updated arbitration agreement indicated it did not apply to a wage and hour class action already pending when the agreement was signed. Russell v. Citigroup, Inc., Case No. 13-5994 (6th Cir. April 4, 2014).

Keith Russell had worked at a Citicorp call center in Florence, Kentucky from 2004 to 2009. In January 2012, he filed a class action against the company alleging that it did not pay its employees for time spent logging on and out of their phone system each workday. He alleged that he was forced to work “off the clock” twenty to twenty-five minutes per day. Russell reapplied to work at the Citicorp Florence call center in late 2012 while the lawsuit was still pending. After Citicorp rehired him, Russell signed a revised arbitration contract that covered both individual and class claims. In January 2013, he started work at the call center.

Based on the new agreement Citicorp moved to arbitrate the class action, which was then in the discovery stage. The U.S. District Court for the Eastern District of Kentucky (Case No. 2:12-cv-00016, July 10, 2013) denied the motion to compel and to dismiss the complaint, finding the action was not within the scope of the arbitration policy.

Judge Jeffrey Sutton, writing for Sixth Circuit panel, affirmed. In so doing, he analyzed the text of the revised arbitration agreement. The “Scope of Policy” section of the agreement, stated:

This Policy applies to both you and to Citi, and makes arbitration the required and exclusive forum for the resolution of all employment-related disputes. . . which are based on legally protected rights. . . and arise between you and Citi, its predecessors, successors and assigns, its current and former parents, subsidiaries, and affiliates, and its and their current and former officers, directors, employees, and agents. . . (Emphasis added).

Judge Sutton felt the use of present-tense “arise” suggested that the agreement only covers disputes that arise “in the present or future”. The opinion concluded that the portion of the agreement entitled “Statement of Intent” added force to this analysis.  The agreement stated that the Company “looks forward” to a good relationship with Russell but that disagreements “may arise”, concluding that their resolution “will be best accomplished” through arbitration. Thus, the opinion reasoned that the text of the agreement and its preamble demonstrate that the agreement was “to head off future lawsuits, not to cut off existing ones.”

The opinion then considered the expectations of the parties. Russell said he expected the contract to cover only future litigation. And, the court thought it unlikely Citicorp expected the agreement to cover pending litigation. Indeed, the Company apparently had entered into a contract with Russell without consulting its attorneys or Russell’s lawyers. If Citicorp’s in-house counsel prepared the revised agreement thinking that it would govern pending cases, doing so could have created potential ethical issues. So, Citicorp offered no evidence that it expected the agreement to cover pending litigation and Russell certainly did not. Yet, Citicorp asserted that under the agreement, the arbitrator was to decide all cases – pending or not. But, from the context (the use of the word “arise”) and the parties’ “probable expectations”, the panel doubted it.

The contract language extending the agreement to the Company’s “predecessors” and “former officers” didn’t change the Court’s analysis. Finally, the Court considered Citicorp’s contention that the Federal Arbitration Act (“FAA”) requires a court to resolve “any doubts concerning the scope of arbitrable issues. . . in favor of arbitration,” citing Moses H. Cone Mem’l Hospital v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983). Here, the parties’ intentions controlled. Because, in the end arbitration is a matter of consent and the context of the agreement controlled, not any presumption of arbitrability.

Recently, we considered another decision in this blog, Billingsley v. Citi Trends, Inc., Case No. 13-15261 (11th Cir. March 25, 2014), which involved an arbitration agreement and pending litigation. Read together, these two decisions reflect the appellate courts’ concerns with the language of the post-suit agreements and the manner in which they were communicated to employees.

The Bottom Line: The language of a revised arbitration agreement determines whether it will be applicable to class actions pending when signed. Here, the text of the agreement established that it did not apply to a pending wage and hour class action.

Topics:  Arbitration Agreements, Citigroup, Class Action, Employer Liability Issues, Wage and Hour

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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