United States: Eleventh Circuit Doesn't Waffle On Enforceability Of Arbitration Agreement

Last Updated: August 21 2017
Article by David E. Cannella and Gary M. Pappas

The Eleventh Circuit Court of Appeal found that an arbitration agreement entered into by a putative class representative and his eventual employer was enforceable even though the agreement was signed after the plaintiff filed his class action suit. The court found that the arbitration agreement included a valid delegation provision that evidenced the parties' intent to arbitrate all gateway issues of arbitrability. Accordingly, the court vacated the district court's denial of a motion to compel arbitration and remanded the case with instructions to compel arbitration.

Plaintiff, William Jones, applied for a job at a Waffle House in Florida in December 2014. As part of his application, he provided information that Waffle House used to conduct a background check. His application was rejected. In October 2015, he sued Waffle House in the U.S. District Court for the Middle District of Florida for violating the Fair Credit Report Act (FCRA) by failing to provide him with a copy of the background check and the opportunity to dispute its results. Plaintiff sought to represent a class of U.S. residents who applied for employment with Waffle House, or were employed by Waffle House, and who were subject to adverse employment actions by Waffle House based on a background check.

Unknown to his own lawyers, or Waffle House's counsel, after he filed suit, plaintiff continued to seek employment with Waffle House. In fact, he obtained employment with a Waffle House in Missouri in February 2016. At that time, plaintiff signed an arbitration agreement in which he agreed that Waffle House and he would resolve by arbitration all claims, "past, present, or future" arising "out of any aspect or pertaining in any way to my employment." The agreement also contained a delegation provision in which the parties agreed that the arbitrator, and not the court, would have the authority to resolve any dispute regarding the arbitration agreement's applicability and enforcement.

While conducting an internal review of the plaintiff's file, Waffle House learned that he was a current Waffle House employee. That meant he must have signed an arbitration agreement. In April 2016, Waffle House moved to compel arbitration pursuant to the arbitration agreement.

Plaintiff opposed the motion to compel arguing that the district court should not delegate questions implicating its managerial discretion regarding the conduct of class actions, that the arbitration agreement did not encompass the claims in the lawsuit, that the arbitration agreement "as a whole" was an unauthorized ex parte communication between counsel and an unrepresented party, and that the arbitration agreement was unconscionable.

The district court denied the motion to compel arbitration, alluding to its authority to control class action communications.

On appeal, the Eleventh Circuit first noted that "it is now basic hornbook law" that the Federal Arbitration Act reflects "both a liberal federal policy favoring arbitration and the fundamental principle that arbitration is a matter of contract."

The court found that the arbitration agreement contained a broad, valid, and enforceable delegation provision that expressed the parties' clear intent to arbitrate gateway issues of arbitrability, including questions regarding the agreement's interpretation, applicability and enforceability. Where, as here, the arbitration agreement contains a valid delegation provision, i.e. an agreement that the arbitrator will determine the threshold question of whether the agreement to arbitrate is enforceable, the courts only retain jurisdiction to review a challenge to the specific delegation provision. In reviewing the delegation provision here, the court found that the delegation provision contained clear and unmistakable language delegating the determination of arbitrability to the arbitrator.

The court rejected the district court's reasoning that the arbitration agreement constituted a "unilateral, unsupervised communication with prospective class members." Unlike other cases, in which defendants or their lawyers deliberately engaged in behavior aimed at convincing putative class members to give up their right to participate in a pending class action, the plaintiff himself initiated the communications with the defendant. He voluntarily agreed to arbitrate all claims, "past, present or future" arising from his employment with Waffle House.

Similarly, the court rejected the argument that the arbitration agreement, which was pre-signed by Waffle House's vice president and general counsel, amounted to an ex parte communication between a lawyer and represented party in contravention of Florida Bar Rule 4-4.2. Here, the arbitration agreement did not mention the plaintiff's lawsuit or claims. There was no evidence that the general counsel knew the communication was made to a party represented by counsel in an ongoing lawsuit. Moreover, general counsel pre-signed the arbitration agreement in his capacity as vice president.

The court rejected plaintiff's argument that the delegation provision was unconscionable. Plaintiff knew, and in fact was the only person who knew, when he signed the agreement that he had a pending lawsuit against Waffle House. He did not tell the Missouri Waffle House of his pending litigation or even his own lawyers that he sought and obtained employment at a Waffle House.

In short, the determination as to whether plaintiff's FCRA claims are arbitrable will be made, as plaintiff agreed, by the arbitrator and not the court.

William Jones v. Waffle House, Inc., el. al, (11th Cir. August 7, 2017) Case No. 16-15574.

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