Jun 18

ABA Litigation News quotes Neal Eiseman on survival of arbitration clause

Litigation News, one of the flagship publications of the American Bar Association’s Section of Litigation, quoted Neal M. Eiseman for his views on a recent federal arbitration decision.

The case involved a matter of first impression for a federal appellate court: whether an employment agreement’s arbitration clause still applies after the agreement expires and where the agreement’s survival clause does not specifically list the arbitration provision. In Huffman, et al. v. Hilltop Companies, LLC, the U.S. Court of Appeals for the Sixth Circuit held that the strong federal policy endorsing arbitration requires that the clause does indeed survive.

In commenting further on the decision, Eiseman noted: “First, the decision is not surprising. Ever since the passage of the Federal Arbitration Act in 1925, there has been a strong federal public policy favoring arbitraiton provisions in private contracts. Simply put, in Huffman the employees failed to demonstrate to the court’s satisfaction that there it was clear and unequivocal that the parties intended, upon expiration of the employment contract, to cancel the broad arbitration provision contained therein. This has been black letter law in New York since the state’s highest court issued its 1997 decision in Primex International Corp. v. Wal-Mart Stores, Inc. The practice point here is that if parties have previously agreed to arbitrate disputes, thereafter they must expxressly indicate that not only has the underlying agreement terminated, but the arbitration provision as well. Therefore, if a client wants to terminate a contract, the contract itself should state that, upon termination, the agreement to arbitrate also expires. Or if parties settle a dispute where the underlying written contract has an arbitration provision, the release(s) should reference the arbitration provision and affirmatively state that it has been cancelled.”

Eiseman observed, “My sense is that those who take issue with the holding are unhappy with the fact that the initial employment agreement contained an arbitration provision in the first place. They may genuinely believe that the clause was inserted by the employer as a “take it or leave it” proposition where the employees did not truly agree to it. Whether or not that was the case, once parties sign an contract with a broad arbitration provision, they are stuck with it unless its inclusion violates public policy. For years, certain members of Congress have sponsored proposed legislation entitled the “Fairness in Arbitration Act” which would, among other things, prohibit employers from compelling employees to arbitrate disputes. However, the legislation has never made it past the committee phase and therefore never has been put to the floor of the Senate or House for a vote.”

Eiseman, who is Cochair of the Arbitration Subcommittee of the Section of Litigation’s Alternative Dispute Resolution Committee, is a also an arbitrator and mediator for the American Arbitration Association (AAA) and a Fellow of the College of Commercial Arbitrators (CCA).

Read the full article here.

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