Sixth Circuit Provides Guidance on “Gateway” Arbitration Issues
Boykin v Family Dollar Stores of Michigan, LLC, ___ F. 3d ___ (CA 6, 2021) gave the Sixth Circuit an opportunity to provide the bar with a short seminar on the “gateway” issues that may arise when one party seeks to enforce and the other seeks to defend against an arbitration agreement under the Federal Arbitration Act (FAA). In Boykin, according to the employer, the employee had taken a virtual seminar on the employer’s standard employment arbitration agreement and then “e-signed” it. Years later, the employee filed a lawsuit against the employer after he was terminated. The employer moved to dismiss for improper venue, under F.R.C.P. 12(b)(3). The employee responded with two affidavits. The first stating he did not remember e-signing the arbitration agreement and the second asserting he definitely did not e-sign the arbitration agreement. The trail court disregarded the employee’s second affidavit as “self-serving,” dismissed the complaint and entered an order compelling arbitration. The employee appealed.
The Sixth Circuit noted that two different provisions of the FAA, sections 3 and 4, might have been invoked by the employer or any party, for that matter, faced with a lawsuit arguably subject to an arbitration agreement. Section 3 provides that the court “shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement[.]” The Sixth Circuit noted, in passing, that if the employer had moved to stay the employee’s lawsuit under section 3, rather than moving to dismiss, the arbitration would have proceeded and the employee would not have the right to take an appeal because a stay is not a final, appealable order. Section 4 of the FAA, on the other hand, permits a “party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate” under a written arbitration agreement may “petition” the trial court for an “order directing that such arbitration proceed in the manner provided in such agreement.”
Given the text of sections 3 and 4, the employer choice to move to dismiss for improper venue, under F.R.C.P. 12(b)(3), was simply wrong from a procedural point of view. The issue was not the proper judicial venue but whether the case should be arbitrated. Regardless, having bypassed the opportunity to move for a stay under section 3, the employer should have moved to dismiss and compel arbitration under section 4. The employer’s procedural misstep was compound by trial court’s decision to treat the motion as a motion to dismiss under F.R.C.P. 12(b)(6). A motion to dismiss under F.R.C.P. 12(b)(6) is generally confined to the pleadings. In this case, however, the trial court considered substantial evidence outside the pleadings, including the employer’s evidence the employee had e-signed the arbitration agreement and the employee’s affidavits at first not remembering then flatly denying that fact. Thus, the trial court should have considered the employer’s motion as a motion for summary judgment, under F.R.C.P. 56. Additionally, the trial court should have permitted discovery on the disputed facts about arbitration.
The Sixth Circuit’s discussion noted, again in passing, that discovery as a prelude to a decision on arbitrability sounded worse than it is. Section 4 of the FAA provides the only thing at issue is the “making and performance of the agreement to arbitrate.” Presumably, discovery would be confined to this narrow issue. Moreover, once whatever necessary discovery is completed, section 4 enjoins the trial court to “proceed summarily to trial” on the arbitration-related issues “as quickly as and easily as possible.” Citing Moses H. Cone Mem’l Hosp. V Mercury Constr. Corp., 460 U. S. 1, at 22 (1983).
Moving to the facts of the case, the Sixth Circuit held the employee’s second affidavit had created a material issue of fact. An employee who, under oath, flatly denies e-signing (or, presumably, actually signing) an arbitration agreement has created a genuine issue of material fact precluding a trial court from dismissing his or her lawsuit and compelling arbitration. True, the first affidavit, merely “not remembering” whether an arbitration agreement had been signed, would not create a genuine issue of material fact. And, though the Sixth Circuit did not say as much, the first affidavit may ultimately reflect poorly on the credibility of the employee’s later, more emphatic, denial. However, the trial court erred by simply refusing to give any weight to the employee’s second affidavit on the grounds it was “self-serving.” Indeed, almost all evidence introduced by a party is self-serving.
In summary, the Boykin decision addresses several issues that may arise while attempting to enforce or defend against the enforcement of an arbitration agreement under the FAA. Practitioners on both sides of the “v” will do well to give Boykin some attention the next time they confront gateway issues impacting the enforcement of an arbitration agreement.