Citigroup Arbitration Agreement Didn't Cover Pending Wage Action, Sixth Circuit Decides

Daily Labor Report® is the objective resource the nation’s foremost labor and employment professionals read and rely on, providing reliable, analytical coverage of top labor and employment...

April 4 --A Citigroup Inc. subsidiary can't compel a Kentucky call center employee to arbitrate a state wage and hour class action already pending in court at the time he signed an updated arbitration agreement, the U.S. Court of Appeals for the Sixth Circuit ruled April 4 .  

The Sixth Circuit agreed with a district court that the preamble and text of the new arbitration contract signed by Keith Russell when he was re-hired by Citicorp Credit Services Inc. demonstrated that it didn't cover previously commenced suits.

Both Russell and Citicorp also had a “common expectation” that the arbitration agreement applied only to future employment disputes, the appeals court said. Such evidence, it ruled, sufficiently overcomes the presumption of arbitrability under the Federal Arbitration Act.

Judge Jeffrey S. Sutton wrote the opinion, joined by Judges Gilbert S. Merritt and Richard A. Griffin.

Old Pact Didn't Cover Class Actions

According to the court, Russell in 2004 signed a “standard contract” to arbitrate employment-related disputes when he first started working at a Citicorp call center in Florence, Ky. That agreement didn't cover class actions.

In 2009, he took a disability leave of absence. In January 2012, he initiated a class action against Citicorp, alleging that the company violated Kentucky law by failing to pay workers for the time they spent logging in and off their computers at the start and end of each workday.

While the suit remained pending, Russell reapplied for a position at the Florence call center and Citicorp rehired him. By that time, however, the company had updated its arbitration agreements to cover class claims. Russell signed the new contract and began working in January 2013.

About a month later, Citicorp moved to compel Russell to arbitrate his earlier, and still pending, class suit. The U.S. District Court for the Eastern District of Kentucky denied the motion, and Citicorp appealed.

New Contract Applies to Future Suits

Affirming, the Sixth Circuit pointed out that the text of the arbitration agreement's “scope of policy” provision states that it covers only disputes that “arise” between employees and Citicorp.

The use of the present tense for that verb “suggests that the contract governs only disputes that begin--that arise--in the present or future,” the court said. “The present tense usually does not refer to the past.”

The agreement's “statement of intent” preamble also makes reference to disagreements that “may arise,” and provides that dispute resolution “will be best accomplished … by external arbitration,” the court said.

That language “exudes prospectivity,” it said.


“We know from context--from the use of 'arise,' from the preamble and from the parties' probable expectations--that the contract refers to all future lawsuits, not all lawsuits from the beginning of time to the end,” the Sixth Circuit said.  

The “common expectations of the parties reinforce the point,” the court said, noting Russell testified he expected the contract to apply only to future litigation, and Citicorp “offered no evidence that it did expect the contract to govern pending lawsuits.”

The court further rejected Citicorp's reliance on language in the agreement stating that it covers “all employment-related disputes,” observing that the reach of the word, “all,” is limited.

“If the poissonier tells the chef, 'I have marinated all the salmon,' we know from context that he means all the salmon on the kitchen counter, not all the salmon in the universe,” the court said. “We know from context--from the use of 'arise,' from the preamble and from the parties' probable expectations--that the contract refers to all future lawsuits, not all lawsuits from the beginning of time to the end.”

FAA's Presumption of Arbitrability Overcome

Moreover, the Sixth Circuit disagreed that the FAA's presumption of arbitrability should remove Russell's class action from the court.

“Either 'an express provision excluding a specific dispute' or 'forceful evidence of a purpose to exclude the claim' … may take a case beyond the domain of an arbitration clause,” the court said.

Here, the text of the agreement and the parties' expectations “leave[] no doubt” that the arbitration pact covers only future lawsuits, the court said. “ 'Forceful evidence' describes just what we have here.”

Franklin D. Azar & Associates and William H. Wilhoit represented Russell. Morgan, Lewis & Bockius represented Citigroup.


Text of the opinion is available at http://www.bloomberglaw.com/public/document/Keith_Russell_v_Citigroup_Inc_et_al_Docket_No_1305994_6th_Cir_Jul.