ARBITRATION CLAUSE IN EMPLOYMENT AGREEMENT FOUND ENFORCEABLE NOTWITHSTANDING THE INVALIDITY OF A “NO APPEAL” CLAUSE
The plaintiff sued the successor corporation of his former employer in state court alleging claims arising from the termination of his employment. The plaintiff asserted a claim for breach of contract and a tort “whistleblower” claim for wrongful discharge in violation of public policy. The defendant removed the action to federal court and filed a motion to stay proceedings and compel arbitration. The plaintiff opposed the motion, contending the arbitration provision in his employment agreement was invalid and unenforceable because it eliminated a right of judicial appeal, which provision was not severable from the agreement. The plaintiff also argued that even if the arbitration provision is enforceable, his whistleblower/public policy tort claim was not subject to mandatory arbitration.
The court found that the “no appeal” clause in the arbitration provision, to the extent it attempts to preclude any court access, was invalid. Parties seeking judicial enforcement of an arbitration provision or to enforce arbitration awards through confirmation judgments may not divest the courts of their statutory and common law authority to review both the substance of the awards and the arbitral process for compliance with the Federal Arbitration Act. However, the court concluded the “no appeal” clause could be severed, leaving intact the provision’s other portions. The court also found that the arbitration provision was broad, and covered the tort claim. The tort claim “touches the contract,” since it raised the issue of whether the plaintiff was terminated because, as asserted by the defendant, he violated the employment agreement or because, as asserted by the plaintiff, he was retaliated against for whistleblowing. As the court found the arbitration provision enforceable and that all the plaintiff’s claims were arbitrable, the defendant’s motion was granted. Strom v. First American Professional Real Estate Services, Inc., Case No. CIV-09-0504-HE (USDC W.D. Okla. July 24, 2009).
This post written by Brian Perryman.
