Fifth Circuit Confirms Arbitration Award in Employment Case

In an unpublished opinion, the U.S. Court of Appeals for the Fifth Circuit held that a company did not waive its right to arbitration by participating in administrative proceedings initiated by employee and affirmed the District Court’s confirmation of an arbitration award.

In Green v. Service Corporation International, No. 08-20607 (5th Cir. June 2, 2009), Phillip Green was hired by SCI Management, a subsidiary of Service Corporation International (SCI) to provide funeral, crematory, and cemetery services. Green’s employment agreement with SCI Management contains the following arbitration clause:

1. Matters Subject to Arbitration. Employee and the Company agree that . . . all disputes related to any aspect of Employee’s employment with the Company shall be resolved by binding arbitration. This includes, but is not limited to, any claims against the Company, its affiliates or their respective officers, directors, employees, or agents for breach of contract, wrongful discharge, discrimination, harassment, defamation, misrepresentation, and emotional distress, as well as any disputes pertaining to the meaning or effect of this Agreement. . . .

Green was terminated by SCI in 2005. Thereafter, he filed a whistleblower complaint under the Sarbanes-Oxley Act (SOX) with the Occupational Safety and Health Administration (OSHA). After OSHA dismissed Green’s complaint, he sued SCI in District Court. SCI filed a motion to compel arbitration and the District Court granted it. The arbitrators determined that SCI did not violate SOX and Green filed a motion to vacate the award, claiming that he did not agree to arbitration. SCI filed a motion to confirm the award and the District Court granted it. Green appealed.

The Fifth Circuit first decided whether Green’s employment agreement with SCI Management binds Green. The Court agreed with the District Court and concluded that SCI (a nonsignatory party) can require Green to arbitrate because the agreement explicitly includes claims against affiliates.

Next, the Court answered whether the dispute falls within the scope of the agreement. The Court stated that “[e]ven if the scope of the arbitration clause is susceptible to more than one interpretation, the clause must be interpreted in favor of arbitration.” Accordingly, the Court found that the dispute was within the scope of the arbitration agreement.

Then, the Fifth Circuit considered whether SCI waived its right to arbitrate by defending itself in administrative proceedings. The Court applied a two prong-test: (1) Whether SCI substantially invoked the judicial process. The Court noted that the administrative proceedings before the Department of Labor were not judicial in nature and SCI did not waive its right to arbitrate. (2) Whether Green was prejudiced. The Court concluded that Green failed to show he was prejudiced by the delay.

Finally, The Fifth Circuit affirmed, holding that SCI did not waive its right to arbitration by participating in the administrative proceedings at OSHA.

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