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Aug. 11 — An executive who claims Opus Bank breached his employment agreement and discharged him must pursue his claims before an arbitrator rather than a court, the U.S. Court of Appeals for the Ninth Circuit decided Aug. 11.
Writing for the court, Judge J. Clifford Wallace said the arbitrability of Carey M. Brennan's dispute with his former employer was governed by the Federal Arbitration Act. An arbitrator would have to consider Brennan's argument that the arbitration provision in his employment was unconscionable, the court held.
Wallace also agreed with a lower court that the parties' incorporation of American Arbitration Association Rules into Brennan's agreement was strong evidence that the employer and employee intended to allow an arbitrator, rather than a court, to resolve the question of arbitrability.
According to the decision, Brennan signed an employment agreement when he was hired in December 2010 as the multistate bank's vice president and director for strategy and corporate development. Brennan's agreement provided that employment-related disputes were to be resolved by binding arbitration in accordance with AAA rules.
By late 2011, the executive believed he was being excluded from many of the duties he was hired to perform. In March 2012, Brennan gave the bank a notice of termination, claiming a “material change” of his duties breached his employment agreement and gave him the right to terminate his employment and claim severance benefits.
Opus denied it had breached the agreement and took the position that Brennan had voluntarily resigned without a good reason and without any entitlement to severance pay.
Brennan filed a lawsuit against the California corporation in the U.S. District Court for the Western District of Washington, alleging a breach of contract and wrongful discharge in violation of both California and Washington law. The district court dismissed the civil action in favor of arbitration, and the Ninth Circuit affirmed the ruling.
Wallace said the arbitration agreement of the bank and its former executive was governed by the Federal Arbitration Act, 9 U.S.C. § 1. Brennan argued that his employment agreement referred to California law and that the trial court should have applied California's law of arbitrability. The appeals court said Brennan's argument failed in the absence of clear and unmistakable evidence that the parties intended to apply state law principles of arbitrability rather than the FAA's.
Brennan's agreement with the California corporation clearly provided that the parties would apply California procedural rules, rights and remedies during arbitrations. “It says nothing about whether California's law governs the question whether certain disputes are to be submitted to arbitration in the first place,” Wallace said.
Brennan argued on appeal that even if the FAA applied to his case, the trial court erred in finding that incorporation of AAA rules into the private employment agreement showed the parties intended to delegate the question of arbitrability to an arbitrator.
The court was not persuaded by Brennan's argument. It said Brennan was a sophisticated businessman and former partner at a large law firm, and the appeals court was not deciding whether incorporating AAA rules into an agreement between “unsophisticated” parties would signify their intent to resolve arbitrability issues in arbitration.
However, Wallace said the Ninth Circuit was satisfied on the record before the court that the parties' adoption of the AAA rules constituted “clear and unmistakable evidence” that Brennan and Opus “agreed to arbitrate arbitrability.”
Rejecting Brennan's remaining objections, the Ninth Circuit affirmed the trial court's dismissal of Brennan's lawsuit.
Judges Andrew J. Kleinfeld and Ronald M. Gould joined in the opinion.
The Hunsinger Law Firm represented Brennan. Littler Mendelson P.C. represented Opus Bank.
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Text of the opinion is available at http://www.bloomberglaw.com/public/document/ CAREY_M_BRENNAN_Plaintiff_Appellant_ v_OPUS_BANK_a_California_RSM_.
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