Quantcast
Home / News / 1st Circuit kicks ex-employee’s race-bias claim to arbitration

1st Circuit kicks ex-employee’s race-bias claim to arbitration

‘Delegation’ clause governs disputes over applicability of ADR provision

It is up to an arbitrator to determine arbitrability of a discrimination claim that a onetime employee brought against a company based on mistreatment he allegedly encountered as a contractor years after his period of employment ended, the 1st U.S. Circuit Court of Appeals has decided.

Plaintiff Ketler Bossé, an insurance agent, started working as an independent contractor for defendant New York Life in New Hampshire in 2001. In 2004, he became an employee, executing a partner’s employment agreement with a provision stating that “any dispute, claim or controversy, including those alleging employment discrimination” arising between him and the company was subject to arbitration. It also contained a “delegation” clause making the arbitrability of any “such Claim” a subject of arbitration.

A year later, Bossé went back to working as a contractor until New York Life fired him in 2016.

In 2019, Bossé, who is Black, sued the defendant in U.S. District Court in New Hampshire, alleging race-based sabotage by New York Life associates and retaliation for complaining about it.

Judge Steven J. McAuliffe denied the defendant’s motion to compel arbitration, finding that the arbitration agreement could not apply to a dispute that was unrelated to the employment agreement and arose after it terminated.

But the 1st Circuit reversed.

“‘We hold that the text of the parties’ agreement clearly, unmistakably, and unambiguously delegates the arbitrability dispute at issue here to the arbitrator,’” Judge Sandra L. Lynch wrote for the majority. “The district court erred in not enforcing that agreement according to its own language and in not referring the dispute about whether Bossé’s claims are arbitrable to the arbitrator.”

The 48-page decision is Bossé v. New York Life Insurance Co., et al.

‘Erroneous’?

Plaintiff’s counsel Robert M. Fojo of Manchester, New Hampshire, called the court’s reasoning “obviously erroneous.”

robert-fojo“To suggest that an employment agreement that was in place for about a year — a decade earlier — applies here is incredulous.”

— Robert M. Fojo, Manchester, New Hampshire

“The agreement at the end of the day needs to apply to the facts that gave rise to the dispute,” he said. “Not only did this dispute arise after the employment agreement ended, it arose at a time under which he was an independent contractor pursuant to two different agreements in place at the time, with an entirely different set of duties and responsibilities and an entirely different compensation scheme. To suggest that an employment agreement that was in place for about a year — a decade earlier — applies here is incredulous.”

Noting that his client would likely file a motion for reconsideration, Fojo added that the decision creates the classic slippery slope.

“The District Court had a good analogy,” he said. “It analogized that danger to a situation where Mr. Bossé walks into the New York Life office 20 years from now and slips and falls and files a personal injury claim. Under the [1st Circuit’s] reasoning, you’d have to bring that claim to arbitration. That can’t possibly be the result we all want to have here.”

The defendants’ Philadelphia-based attorneys, Michael L Banks and David C. Dziengowski, did not respond to requests for comment.

But Christina L. Lewis, a management-side employment attorney in Boston, said the case shows how important it is for employers to include delegation clauses.

“Following the [U.S.] Supreme Court’s [2020] ruling in Henry Schein, Inc. v. Archer & White Sales, Inc., employers who include delegation clauses in their arbitration provisions can compel arbitration on the very question of arbitrability itself,” Lewis said. “This is true even if the court believes the underlying issue is clearly not arbitrable.”

Regardless of the Supreme Court’s teaching that the Federal Arbitration Act reflects a policy favoring arbitration, Boston lawyer Daniel J. Blake said courts will carefully analyze arbitration agreements using traditional principles of contract formation.

That means clear and concise drafting is critical, including the drafting of the delegation clause, he said.

“As with all contracts, unclear drafting makes enforceability less than certain,” Blake said.

Matthew H. Parker of Providence, Rhode Island, said the employer here helped itself by specifically stating that the arbitration agreement applied to discrimination claims. Agreements that fail to do so leave employers vulnerable to arguments that the employee did not agree to arbitrate such claims, he said.

“Nine times out of 10, when an employee sues a company, it’s for discrimination,” Parker said. “So pick the lowest common denominator and make sure you have it in your arbitration clause.”

David E. Belfort of Cambridge criticized the majority for discounting the fact that Bossé was not employed as a partner with New York Life when his claim arose.

“To compel arbitration of such remote claims denies victims of civil rights violations their day in court,” he said. “Instead, distinct post-employment disputes are relegated to a private arbiter to determine arbitrability in a confidential process, without precedent and the checks and balances of courts that are well positioned to handle contract defenses typically applied to arbitration agreements.”

muller-chip“The idea that one could enter into an arbitration clause in one agreement, have the subject of that engagement conclude, and then years later engage in another contractual relationship without an arbitration clause and be subject to arbitration is a disturbing concept.”

— Chip Muller, Barrington, Rhode Island

Chip Muller, an attorney in Barrington, Rhode Island, said the ruling could potentially apply to any kind of commercial or consumer transaction.

“The idea that one could enter into an arbitration clause in one agreement, have the subject of that engagement conclude, and then years — maybe decades — later engage in another contractual relationship [with the same party] without an arbitration clause and be subject to arbitration because of a contract you signed decades ago is a disturbing concept,” he added.

Alleged discrimination

Bossé signed an agent agreement with New York Life in 2001. An independent contractor, he apparently was the first Black New York Life agent in New Hampshire and the only one a decade later.

The company promoted him in 2004, and he signed a partner’s employment agreement containing the arbitration provision in question, as well as the delegation clause.

In 2005, Bossé began working as a contractor again under his original agent’s contract.

He became a district agent in 2013, signing an agreement that allowed him to establish his own firm at his own expense and hire his own agents. That agreement, like the agent contract, had no arbitration clause.

In 2016, New York Life terminated Bossé, accusing him of providing false information while processing a life insurance application for his ex-wife.

Bossé contended that that was a pretext for race discrimination, alleging that New York Life employees had engaged in racially motivated conduct to undermine his customer and agent relationships. He said he complained about the conduct on several occasions but that the company failed to investigate.

In 2019, Bossé filed suit in federal court, alleging race discrimination and retaliation. New York Life moved to compel arbitration.

McAuliffe denied the motion, finding that the question of arbitrability was for the court, not the arbitrator, to resolve, and that the claims here were not arbitrable because they had no relationship with the employment agreement containing the arbitration clause.

New York Life appealed.

Up to the arbitrator

The 1st Circuit found that the parties agreed by “clear and unmistakable evidence” to delegate issues of arbitrability to the arbitrator.

Specifically, the court pointed to language in the provision that made “any dispute, claim or controversy arising between them” arbitrable and the delegation clause making “any dispute as to whether such Claim is arbitrable” a subject of arbitration as well.

Meanwhile, the court rejected Bossé’s argument that the scope of the delegation clause itself was distinct from the arbitration agreement and up to a court to interpret.

“His attempted atomization of the arbitrability question is prohibited by the Supreme Court’s reasoning in Henry Schein,” Lynch said. “The question of the scope of the delegation clause cannot be separated from the question of the scope of the arbitration agreement as a whole.”

Judge David J. Barron dissented, calling the majority’s analysis a “superficially plausible but … textually untenable” interpretation of the delegation clause.

“I quite agree that it is sensible to presume that the parties who draft contracts do so more after the fashion of Bob Ross than M.C. Escher,” Barron wrote. “There is nothing circular, however, about a delegation clause that requires a court to first determine the scope of ‘the Claim’ in the arbitration agreement before enforcing the putative delegation clause.”

Leave a Reply

Your email address will not be published. Required fields are marked *

*