In Huffman v. The Hilltop Companies, No. 13-3938 (6th Cir. Mar. 27, 2014) (click here for a copy of the decision), the Sixth Circuit discussed an issue which it described as one of “first impression” among the federal appellate courts: whether the strong presumption in favor of arbitration under the FAA applies where a survival clause in a contract fails to mention the contract’s arbitration clause.
The case involved employment disputes regarding the Fair Labor Standards Act, and the employment contract at issue contained several paragraphs, including an arbitration clause and a survival clause. The survival clause specifically listed twelve paragraphs that would survive the termination of the agreement, such as a paragraph about confidentiality. However, the survival clause did not list the arbitration paragraph as surviving the termination of the agreement.
The district court denied the defendant employer’s motion to compel arbitration. Relying on the doctrine of expressio unius est exclusio alterius, the district court found that the arbitration clause had no post-expiration effect because the survival clause failed to specifically mention the arbitration clause.
The Sixth Circuit reversed and found the arbitration agreement to be enforceable. The Sixth Circuit explained that arbitration agreements generally should have post-termination effect because otherwise, a party could avoid arbitration simply by terminating a contract. The Sixth Circuit found that the strong presumption in favor of arbitration should apply in this post-termination context, and the plaintiff here was not able to rebut this strong presumption. Turning to the case at hand, the Sixth Circuit pointed out that the non-compete paragraph in the contract applied for twelve months after expiration of the agreement, and the survival clause did not specifically list this non-compete paragraph as surviving the termination of the agreement. Thus, the survival clause did not contain an exhaustive list of all clauses that would survive termination of the agreement, and hence, ambiguity existed whether the arbitration clause would have post-termination effect. The plaintiff could not produce “forceful evidence” to clear up this ambiguity and rebut the strong presumption in favor of arbitration.
Also, the Sixth Circuit, following its earlier Reed Elsevier case (click here for a prior post regarding the Reed Elsevier case), recognized that courts should decide the gateway issue of whether an arbitration agreement provides for class arbitration. Finding that the arbitration agreement nowhere mentioned class arbitration, the court ordered the plaintiffs to proceed individually in arbitration.