Opinion by Judge Catherine C. Blake
Held: Agreement
requiring at-will employee to arbitrate disputes with employer, which recited
only hiring and continued employment as consideration, which did not require
employer to arbitrate, and which gave employer unilateral control over pool of
potential arbitrators, was held unenforceable because it lacked mutuality of
consideration and denied the employee access to a neutral arbitral forum.
Facts: Plaintiff was an
employee at the Defendant company who was terminated in 2011. Plaintiff alleged that she was discriminated
against and terminated because of her gender and filed suit under Title VII of
the Civil Rights Act of 1964 and Maryland state law.
When
Plaintiff commenced employment with the Defendant company, she signed a Problem
Support Policy that included “a valid and binding” arbitration agreement under
which employees of the Defendant company promised to arbitrate disputes in
consideration of only the employees’ hiring and continued employment. Defendant had exclusive control over the list
of potential arbitrators. When an
employee of Defendant elected to arbitrate a dispute, Defendant was to provide
the employee with its list of qualified arbitrators from which the employee
could choose. The agreement required employees
of the Defendant company to arbitrate but did not require the Defendant company
to follow similar procedures or submit to arbitration.
Defendant
filed a motion to dismiss or to stay and compel arbitration pursuant to the arbitration
agreement signed by Plaintiff.
Analysis: Although the
court acknowledged the Fourth Circuit’s liberal policy toward arbitration
agreements, it emphasized it still must evaluate arbitration agreements as
contracts. The court therefore first analyzed
whether the arbitration agreement was valid and enforceable. The court found two independent reasons the
arbitration agreement was unenforceable: (1) the agreement lacked consideration
and (2) the agreement denied employees access to a neutral forum. Because the arbitration agreement was unenforceable
the court denied Defendant’s motion to dismiss the case or to stay and compel
arbitration.
First,
like all contracts, arbitration agreements must contain adequate consideration. Cheek v. United Healthcare of Mid-Atlantic, Inc., 835 A.2d 656,
661 (Md. 2003);
Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395
(1967);
Noohi v. Toll Bros., Inc., 708 F.3d 599,
609 (4th Cir. 2013);
Hill v. Peoplesoft USA, Inc., 412 F.3d 540,
543-44 (4th Cir. 2005). The court
followed the logic laid out in Cheek, supra, to conclude that employment or continued
employment is not alone adequate consideration for an employee’s promise to
arbitrate. Cheek, 835 A.2d at 666. Because it did not require Defendant to
submit to arbitration, the arbitration agreement was entirely “one-directional”
and therefore lacked mutuality of consideration.
Second,
even if the arbitration agreement did have adequate consideration, it denied
employees access to a neutral forum. Although
there is uncertainty as to whether an arbitration agreement that denies one
party access to a neutral forum results in unconscionability, a material
breach, or simply unenforceability of the agreement, courts agree that denial
of access to a neutral forum in an arbitration agreement may make the agreement
unenforceable. Muriithi v. Shuttle Exp., Inc., 712 F.3d 173,
176 (4th Cir. 2013);
Hooters of America, Inc. v. Phillips, 173 F.3d 933,
938-39 (4th Cir. 1999); Murray v. United Food & Commercial Workers Int’l
Union,
289 F.3d 297, 302 (4th Cir. 2002).
Here
the arbitration agreement denied Plaintiff access to a neutral forum because
Defendant had exclusive control over the list of arbitrators from which
employees were required to select. In
the Fourth Circuit an employer may not retain this exclusive right. Murray, 289 F.3d at 303. Defendant’s promise in the agreement to
provide a list of impartial arbitrators was not deemed sufficient to overcome
the lack of mutuality in the arbitration selection process. In addition the arbitration agreement was
vague with respect to the rules to be followed, thereby providing a further
reason to challenge the neutrality of the forum.
Post written by Maria A. Stubbings
