Cover Two?

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Arbitration clauses are common in corporate agreements, but can an employee invoke her company's arbitration clause in a contract with a plaintiff to compel arbitration? In a recent decision, the First Circuit held a defendant employee could do just, calling the plaintiff's arguments to the contrary "illogical and impractical." Grand Wireless, Inc. v. Verizon Wireless, Inc., No. 13-1149, 2014 WL 1054418 at *9 (1st Cir., Mar. 19, 2014).

The plaintiff-corporation, a former authorized sales agent for the defendant-corporation ("Corporation"), sued the Corporation and the defendant employee of the Corporation ("Employee") in Massachusetts superior court, alleging civil RICO violations, unfair business practices, and tort claims relating to an allegedly premature mailer that Corporation - upon Employee's authorization - sent to plaintiff's customers announcing the end of Corporation's business relationship with plaintiff and providing the address to the nearest of Corporation's stores. The Corporation and Employee removed the suit to federal court, where they filed a motion to compel arbitration, based on an arbitration clause in Corporation's agreement with the plaintiff. The District Court summarily denied the motion to compel arbitration, and Corporation and Employee appealed.

Upon finding that the arbitration clause covered plaintiff's suit against the Corporation, the First Circuit turned its attention to whether Employee could compel arbitration, too, even though she was not a party to Corporation's contract with plaintiff. In holding Employee could invoke the arbitration clause, the First Circuit cited both the federal policy favoring arbitration and general state law principles of agency. "[Corporation] and [the plaintiff] certainly wished to have their disputes settled by arbitration," the panel reasoned. "Since [Corporation] could operate only through the actions of its employees, it would have made little sense to agree to arbitrate if the employees could be sued separately without regard to the arbitration clause." Grand Wireless, 2014 WL 1054418 at *7. Moreover, the plaintiff's complaint alleged misconduct by the Employee solely in her capacity as such. Id. at *6. In the absence of relevant state law arguing otherwise, the text of the agreement itself "does not support the illogical and impractical vision that an employee who acts solely within the scope of her employment is not protected by her employer's arbitration clause." Id. at *9.

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