Arbitration and Discrimination Claims: Say What You Really Mean to Say

In Hall v. Reagan Stark, -Mich App-, Case No. 294647, (9/1/3/11), a court of appeals panel held in a 2-1 opinion that a law firm's shareholder agreement did not  preclude litigation over claims of age discrimination.  Two shareholders had filed suit in circuit court alleging that they had been dismissed because of their age.  The circuit court judge granted summary disposition to the law firm.  The court found that the dispute was covered under the miscellaneous provision of the shareholder agreement providing for arbitration.

The provision stated:  Any dispute regarding interpretation or enforcement of any of the parties' rights or obligations hereunder shall be resolved by binding arbitration according to the rules of the American Arbitration Association.....

The majority stated that the provision by its terms, limited its scope to disputes relating to the interpretation or enforcement of rights and obligations described within the agreement.  The agreement made no mention of any other relationships between the parties other than those created or impacted by the disposition of stock.  As a result, the rights or obligation referenced only involve various forms of entitlement to stock ownership and restrictions attending stock transfer.

In reviewing the complaint, the panel found no allegations of violations of the shareholder agreement nor any assertions concerning the price of plaintiffs' stock; the manner of stock disposition; or any other right in the agreement.  The panel concluded that to expand the clause's reach to cover a discrimination claim would be to expand the scope beyond what the parties intended.  The panel stated that its conclusion was buttressed by the fact that the parties were employment lawyers and as a result, would be aware of the court's prior decisions concerning notice to employees when attempting to waive statutory claims.

In addressing the presumption of arbitrability, the panel rejected the attempt to "stretch"  language to encompass statutory claims. The panel stated that the unambiguous language "plainly limits" its application to to actions arising out of the duties and privileges attending stock ownership.  There was no factual support for any intention to arbitrate age discrimination claims.  The panel also rejected the argument that the law firm's employee handbook should be read into the agreement.

The panel also addressed the issue of the plaintiffs' standing to sue.  It stated that even if plaintiffs were not considered to be "employees," the defendants' actions affected or controlled a term or condition of their employment, citing McClements v. Ford Motor Company, 473 Mich 373 (2005) [an enhanced version of this opinion is available to lexis.com subscribers / unenhanced version available from lexisONE Free Case Law]

The decision is a reminder to employers to state clearly that discrimination claims are covered when that is the desire and the intent.  While broad language will provide for expansive interpretation by the courts, the decision shows that it is no guarantee that that statutory claims will also be presumed to be covered.  The best practice is to say what you mean to say--claims of statutory discrimination are covered.

An application for leave to appeal has been filed with the Michigan Supreme Court.

For additional Labor and Employment law insights from John Holmquist , visit the Michigan Employment Law Connection.

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