Summary
In Frank, the court addressed the same question: "The contested issue here is whether the arbitration agreement from 1999 can be applied to claims arising under the second firing when there was no separate arbitration agreement for Frank's second period of employment."
Summary of this case from Varma v. TCC Wireless, LCCOpinion
Cause No. NA02-0014-C-H/H
June 18, 2002
ENTRY ON MOTION FOR STAY PENDING ARBITRATION
Plaintiff Kimberly M. Frank has sued her former employer, defendant 84 Components Company (known as "84 Lumber") for firing her on December 5, 2000 because of her sex in violation of Title VII of the Civil Rights Act of 1964. 84 Lumber has moved to stay proceedings pending arbitration, arguing that Frank agreed to arbitrate any such claims rather than take them to court. The court denies the motion for a stay because 84 Lumber and Frank did not agree to arbitrate disputes arising during her second period of employment, which ended in the termination challenged in this case.
Facts
84 Lumber initially hired Frank on July 16, 1999. When she was hired, Frank signed an application that included the following arbitration agreement:
Any and all statutory or common law disputes, claims or controversies, including interpretation of the terms and conditions of this paragraph (the "grievance") (excluding those under workers' compensation, unemployment compensation or employee benefit plans covered by the Employee Retirement Income Security Act of 1967 "ERISA") by myself against the Company made or which arise both during and following my voluntary or involuntary termination of employment shall be subject to final and binding arbitration in accordance with the Federal Arbitration Act, or, where applicable, the Pennsylvania Arbitration Act or the American Arbitration Association, and shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania. Judgement may be entered on the arbitration award in any court having jurisdiction over the party against whom the award is rendered and shall be a complete defense to any suit, action or proceeding instituted in any federal, state or local court. Arbitration shall be my sole and exclusive remedy to redress any grievance and my right to assert a grievance against the Company will be lost if an arbitration demand is not made with the Company's Legal Department within 180 days of the date that the grievance occurred.
That agreement was dated July 16, 1999. At or shortly after the time of her hire, she also signed a form acknowledging that she had received and read the employee handbook and signed a Form W-4 for tax withholding.
84 Lumber terminated Frank's employment on May 2, 2000. The termination notice indicated that she was eligible for rehire. 84 Lumber then rehired Frank on August 27, 2000. At that time, Frank did not execute another application or arbitration agreement. Frank signed another form acknowledging that she had received and read the employee handbook, and she signed another Form W-4, as well as other routine forms for new hires.
Between the two periods of employment, Frank was not an employee of 84 Lumber. She did not receive wages or benefits from 84 Lumber, and she instead worked for two other employers.
84 Lumber then fired Frank for a second time on December 6, 2000. Frank's lawsuit is based on this second firing.
Discussion
The parties agree that the original arbitration agreement from 84 Lumber's July 1999 hiring of Frank is valid and enforceable according to its terms under the Federal Arbitration Act. See 9 U.S.C. § 1 et seq.; Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 121 (2001) (FAA applies to arbitration clauses in employment agreements not specifically excluded by statute). The parties also appear to agree that the issue of arbitrability is for the court to decide. See First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995) (court decides arbitrability unless there is "clear and unmistakable" evidence of intent to let arbitrator decide arbitrability).
The contested issue here is whether the arbitration agreement from 1999 can be applied to claims arising under the second firing when there was no separate arbitration agreement for Frank's second period of employment.
At bottom, the question is one of contract interpretation. Parties who once agreed to arbitrate all of their future disputes can later agree not to do so. In Matterhorn, Inc. v. NCR Corp., 763 F.2d 866, 871-74 (7th Cir. 1985), the Seventh Circuit affirmed a district court decision refusing to order arbitration where the documents from the parties' later transaction — the one actually in dispute — lacked any arbitration agreement, despite the presence of a broad arbitration agreement in earlier transaction documents.
The Seventh Circuit treated the issue as one of contract interpretation based on the parties' course of dealings: "The question of arbitrability ought to turn not on what the method of supersession is called, but on whether the court can infer from the whole course of dealings between the parties that they intended the arbitration clause in their initial contract to govern disputes arising out of the alleged attempt to supersede that contract." 763 F.2d at 873.
The Seventh Circuit reasoned that when the plaintiff "signed a contract that seemed not to incorporate any set of terms that contained an arbitration clause, it may have intended and reasonably believed that it would not be forced to arbitrate disputes arising under the contract." Id. As the Seventh Circuit observed, the parties' "Universal Agreement" containing the arbitration clause "may have been universal, but it was not eternal." Id. at 871; accord, WFC Commodities Corp. v. Linnco Futures Group, Inc., 1998 WL 834374 (N.D.Ill. Nov. 25, 1998) (denying motion to compel arbitration where earlier contracts required arbitration but later contracts sued upon did not).
84 Lumber seeks to avoid a similar result by relying on the affidavit of Steve Cherry, its director of human resources, submitted with 84 Lumber's reply brief. Cherry asserts that the company's "policy provides that a former employee is not required to complete a new Application for Employment unless the employee has not been employed by 84 Components for more than two (2) years." He adds: "It is the intention and policy of 84 Components that the original Application for Employment apply to all subsequent periods of employment by the applicant."
This evidence is not sufficient to hold Frank to the original arbitration agreement. The basis of contract law is not the parties' subjective intentions but the objective indications of their intentions — in words or deeds. See Central Illinois Public Service Co. v. Atlas Minerals, Inc., 146 F.3d 448, 450 (7th Cir. 1998) (party's subjective understanding of a communication was irrelevant); Klos v. Polskie Linie Lotnicze, 133 F.3d 164, 168 (7th Cir. 1997) (objective intent of the parties that controls, and secret or subjective intent of the parties is irrelevant); Ingrassia Constr. Co. v. Walsh, 486 A.2d 478, 483 (Pa.Super. 1984) ("In ascertaining the intent of the parties to a contract, it is their outward and objective manifestations of assent, as opposed to their undisclosed and subjective intentions, that matter."), citing 1 A. Corbin, Corbin on Contracts, § 107 (1963).
84 Lumber has not come forward with any evidence of words or actions that Frank should have interpreted as meaning that she was agreeing to arbitration when 84 Lumber hired her for the second time. In fact, in response to Cherry's affidavit, Frank has filed her own affidavit making the same point — the 84 Lumber policies and intentions described in Cherry's affidavit were never communicated to her.
84 Lumber also relies on two Pennsylvania court cases (recall that Pennsylvania law governs here) applying the terms of a prior written employment contract to future periods of employment, but both cases involve employees who simply continue working past the end of the original term, without interruption. See Smith v. Shallcross, 69 A.2d 156, 158 (Pa.Super. 1949); Burge v. Western Pennsylvania Higher Education Council, Inc., 570 A.2d 536, 538 (Pa.Super. 1990). The Burge court emphasized the absence of any interruption, and the absence of any termination of the contract. In this case, by contrast, there is ample evidence that 84 Lumber terminated Frank's employment in May 2000.
84 Lumber also cites a Fourth Circuit decision, International Paper Co. v. Schwabedissen Maschinen Anlagen GmbH, 206 F.3d 411, 417-18 (4th Cir. 2000), for the proposition that a person may be bound by equitable estoppel to comply with an arbitration agreement to which she was not even a party when she has received a benefit under the agreement. The point is obviously correct in general. See also Cardiac Pacemakers, Inc. v. St. Jude Medical, Inc., 149 F. Supp.2d 610, 614 (S.D.Ind. 2001) (result of arbitration was binding on defendant that was not party to arbitration but in privity with party to arbitration, especially where defendant had relied upon contract providing for arbitration and had argued successfully that arbitration was proper forum for resolving issue).
But 84 Lumber's point begs the question here, which is whether the original arbitration agreement applies to later periods of employment after the initial employment contract was terminated. 84 Lumber seems to be saying that it would not have rehired Frank unless the arbitration agreement applied to the second period of employment, but 84 Lumber has provided no evidence of any objective statements or conduct from which Frank should have inferred that 84 Lumber had that intention or that she was agreeing to that term.
On the present record, 84 Lumber has not shown that Frank's claims fall within the scope of an applicable agreement to arbitrate the dispute. The motion for stay pending arbitration is hereby denied.