PLAN’S ADVISORY BOARD MEMBERS ARE NOT SUBJECT TO ARBITRATION CLAUSE
Dooley disputed the calculation of certain benefits under an incentive plan incorporated into her employment agreement with her former employer. The incentive plan contained an arbitration clause requiring mediation to settle a dispute and, if unsuccessful, then binding arbitration. In accordance with the arbitration clause, Dooley filed a request for mediation naming only her former employer as the responding party. When the mediation failed, Dooley demanded arbitration against her former employer and three of the plan’s Advisory Board members asserting claims against them personally and individually for breach of fiduciary duty in relation to their administration of the plan. Two of the board members moved to stay arbitration in the Supreme Court of the State of New York. Dooley then removed to US District Court and moved to compel arbitration.
The district court first considered whether the court or an arbitrator decides the issue of arbitrability and concluded that courts decide in instances where the dispute concerns whether a certain party is subject to an arbitration clause. The court next considered whether the claims against the board members were arbitrable. Despite a factual dispute existing as to whether the Advisory Board members were parties to the plan, the court found as a matter of law the board members were not bound by the plan’s arbitration clause because neither Dooley nor the board members could have reasonably expected that the board members would be subject to arbitration for claims against them personally and individually for their administration of the plan. The court thus granted the board members’ motion to stay and denied Dooley’s motion to compel arbitration. Di Martino v. Dooley, Case No. 08-4606 (USDC S.D.N.Y. Jan. 6, 2009).
This post written by Dan Crisp.
