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Musse v. MV Transportation, Inc.: US District Court : CONTRACT | EMPLOYMENT | ARBITRATION - some emplyees must arbitrate, others notUNITED STATES DISTRICT COURTDISTRICT OF MINNESOTA SEHAM NABRY, HASSAN MUSSE, ABDIRAHMAN DALEL, ABDISALAN ALI MOHAMED, MOHAMED ALI, ASLI AWAD, ADMASSIE GUANJE, and ALI ISMAIL, Plaintiffs, v. MV TRANSPORTATION, INC., Defendant. Case No. 07-CV-0124 (PJS/JJG) ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS AND COMPEL ARBITRATION Kelly A. Jeanetta, MILLER O’BRIEN, for plaintiffs. Andrew J. Voss, Marko J. Mrkonich, and Reagan Wilkins Oden, LITTLER MENDELSON, P.C., for defendant. Plaintiffs, who are employees or former employees of defendant MV Transportation, Inc. (“MV”), bring claims of employment discrimination and retaliation under Title VII of the Civil Rights Act of 1964, 42 U.S.C. §§ 2000e et seq., and the Minnesota Human Rights Act (“MHRA”), Minn. Stat. §§ 363A.001 et seq. This matter is before the Court on MV’s motion to dismiss and compel arbitration. For the reasons set forth below, the motion is granted with respect to some plaintiffs and denied with respect to others. MV contends that all of the plaintiffs agreed to arbitrate the claims that they now assert in this litigation. Under the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1 et seq., written agreements to arbitrate are generally “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. When a party brings a motion to compel arbitration, the Court’s role is limited to determining “whether -2- the parties have entered a valid agreement to arbitrate, and if so, whether the existing dispute falls under the coverage of the agreement.” Gannon v. Circuit City Stores, Inc., 262 F.3d 677, 680 (8th Cir. 2001). In conducting that inquiry, the Court applies ordinary state-law contract principles. Keymer v. Mgmt. Recruiters Int’l, Inc., 169 F.3d 501, 504 (8th Cir. 1999). The parties agree that, in this case, Minnesota law controls. MV’s motion is based on arbitration clauses found in some of the plaintiffs’ employment applications and on other arbitration clauses found in some versions of MV’s employee handbook. The Court will therefore address the applications and the handbooks separately. I. Employment Applications Four plaintiffs — Abdisalan Mohamed, Mohamed Ali, Asli Awad, and Ali Ismail — signed employment applications containing an arbitration clause. Donoho Decl. Exs. A-D, May 15, 2007. Three other plaintiffs — Seham Nabry, Hassan Musse, and Admassie Guanje — signed applications that did not contain an arbitration clause. Jeanetta Aff. Exs. E-J, June 11, 2007. The parties have been unable to locate an employment application for the remaining plaintiff, Abdirahman Dalel. MV notes that, as a result, plaintiffs “cannot possibly know which version of the employment application Plaintiff Dalel would have signed.” Def.’s Reply 3 n.1. Of course, the same is true for MV — and it is MV, not Dalel, who bears the burden of proof on this issue. State ex rel. Anderson v. Bellows, 179 N.W.2d 307, 314 (Minn. 1970) (proponent of contract bears burden of proof of existence of contract). Because MV cannot prove that Nabry, Musse, Guanje, or Dalel signed an employment application that contained an arbitration clause, only Mohamed, Ali, Awad, and Ismail could be bound by an arbitration clause found in an employment application. -3- The arbitration clause in the application filled out by these four plaintiffs provides the following: I agree that, except for workers’ compensation claims, I will settle any and all previously unasserted claims, disputes or controversies arising out of, or relating to my application or candidacy for employment, employment and/or cessation of employment with [MV], exclusively by final and binding arbitration before a neutral single Arbitrator . . . . The location/venue for any arbitration will take place in the greater San Francisco Bay Area, and will be governed by California case and statutory law. The prevailing party in any arbitration will be entitled to reasonable attorneys’ fees and costs. Donoho Decl. Exs. A-D. The application also contains the following disclaimer: . . . I understand that nothing contained in this employment application or in the granting of an interview is intended to create a contract between me and this company for either employment or the provision of any benefits; and further understand that if an employment relationship subsequently is established, I will have the right to terminate my employment at any time and the company will have a similar right. Id. Before addressing plaintiffs’ arguments about the enforceability of this arbitration clause, it is important to clarify what is not in dispute. Plaintiffs do not deny that their employment applications “evidenc[e] a transaction involving commerce” within the meaning of the Federal Arbitration Act. See 9 U.S.C. § 2. Plaintiffs also do not argue that their Title VII and MHRA claims are outside the scope of the arbitration clause. Finally, plaintiffs do not claim that the fact that the arbitration clause appears in an employment application makes it unenforceable as a contract. Instead, plaintiffs raise only two narrow challenges to the enforceability of the arbitration clause. First, they contend that the clause is not binding because MV disclaimed any 1Plaintiffs also contend that the arbitration clauses in both the employment applications and the handbooks are unconscionable and unreasonable because (1) the clauses could be construed to waive their substantive rights under Title VII, and (2) the clauses would require plaintiffs to arbitrate their claims in California. Plaintiffs are incorrect as to the first point — and, to remove any doubt, MV has conceded that plaintiffs have not waived any substantive rights under Title VII. As to the second point, MV has agreed to arbitrate in Minnesota and has further agreed that, to the extent that state law governs any question raised in that arbitration, the law of Minnesota, and not California, should apply. Plaintiffs’ challenges to the conscionability and reasonableness of the arbitration clauses are therefore moot. -4- intent to form a contract. Second, they argue that the clause was superseded by a later handbook that does not contain an arbitration clause.1 The Court considers each argument in turn. On its face, the arbitration clause plainly obligates the applicant to arbitrate certain claims. When the applicant signs the application, he or she explicitly “agree[s] that . . . I will settle any and all previously unasserted claims . . . exclusively by final and binding arbitration . . . .” Plaintiffs do not dispute that, when viewed in isolation, the arbitration clause requires them to arbitrate the claims that they pursue in this action. They argue, however, that when MV included a disclaimer in the same employment application, MV disavowed the intent to form a contract. Employers often include language in employee handbooks disclaiming any intent to form a contract. Courts applying Minnesota law have repeatedly held that the inclusion of such a disclaimer precludes a handbook from creating contractual obligations, even when the handbook contains specific provisions that would otherwise be considered contractual. Ewald v. Wal-Mart Stores, Inc., 139 F.3d 619, 622 (8th Cir. 1998); Miller v. Citizens Sec. Group, Inc., 116 F.3d 343, 348-49 (8th Cir. 1997); Morrow v. Air Methods, Inc., 897 F. Supp. 418, 422 (D. Minn. 1995); Michaelson v. Minn. Mining & Mfg. Co., 474 N.W.2d 174, 180 (Minn. Ct. App. 1991), aff’d mem., 479 N.W.2d 58 (Minn. 1992); Audette v. Ne. State Bank of Mpls., 436 N.W.2d 125, 127 -5- (Minn. Ct. App. 1989). Plaintiffs apply this principle to the application to argue that the disclaimer prevents the arbitration clause from creating contractual rights. Whether plaintiffs are correct depends, of course, on the language of the disclaimer, and that language is not as broad as plaintiffs would have it. Plaintiffs contend that, through the disclaimer, MV disavowed the intent to form a contractual commitment of any kind. But MV disclaimed only the intent to form a contract with respect to “employment or the provision of any benefits . . . .” In other words, the disclaimer makes clear that MV has not bound itself to offer the applicant a job or any benefits, and that the applicant has not bound himself or herself to accept any job or benefits offered by MV. The disclaimer says nothing about how the parties will settle disputes that arise between them, and thus the disclaimer does not render the arbitration clause unenforceable. Plaintiffs seem to assume that because some kinds of disputes (such as disputes about whether MV acted illegally in firing an employee) cannot arise in the absence of an employment relationship, when MV disclaimed an intent to create an employment relationship it necessarily disclaimed an intent to arbitrate. But the arbitration clause is not, in fact, limited to disputes that can arise only in the context of an employment relationship. Rather, the arbitration clause covers disputes that can arise even if the applicant is never employed by MV, such as disputes over the application itself or over MV’s decision not to offer a job to a candidate. Further, even if the arbitration clause was limited to disputes arising out of an employment relationship, plaintiffs cite no reason why parties could not simultaneously agree on two things: (1) the mere act of the candidate applying, and MV accepting the application, does not commit either to enter an employment relationship, and (2) if an employment relationship does result from the application, -6- the parties will arbitrate any disputes that arise out of that relationship. This is, in fact, the agreement created by the application. Plaintiffs next argue that the arbitration clause in the application was supplanted by the 2006 version of the employee handbook — a version that, unlike previous versions, does not contain an arbitration clause. But plaintiffs cite no evidence that they ever received the 2006 handbook. Under Minnesota law, an employee handbook can indeed create a contract, but only if it is communicated to the employee. Feges v. Perkins Rests., Inc., 483 N.W.2d 701, 707 (Minn. 1992). In this respect, an offer in an employee handbook does not differ from any other kind of offer: It cannot create a contract if the offeree never hears of it. With no evidence that MV distributed the 2006 handbook to these plaintiffs, the Court cannot find that, in 2006, MV offered to revoke the arbitration clause in the application, or that these plaintiffs accepted such an offer. The Court is not being hypertechnical. As will be described below, plaintiffs argue vigorously — and correctly — that they cannot be affected by the presence of an arbitration clause in a particular version of the handbook without proof that they received that version. So, too, plaintiffs cannot be affected by the absence of an arbitration clause in the 2006 version of the handbook without proof that they received that version. Plaintiffs have submitted no such proof. An additional problem with plaintiffs’ argument is that, even if plaintiffs could prove that they received the 2006 version of the employee handbook, nothing in that handbook purports to revoke the arbitration clause in the employment application. Parties are free, of course, to amend their contracts. But an agreement to amend a contract, like an agreement to form a contract, -7- requires a meeting of the minds. Warrick v. Graffiti, Inc., 550 N.W.2d 303, 309 (Minn. Ct. App. 1996) (amendments require mutual assent). The fact that an employee handbook says nothing — one way or the other — about an arbitration commitment made in an employment application hardly supports the inference that the employer, through its silence, intended to vitiate that commitment. To the contrary, it supports the inference that, by not disturbing the commitment, the employer intended not to disturb the commitment. See Feges, 483 N.W.2d at 708 (previous handbook remained in effect because later handbook did not include any express revocation of it). For these reasons, the Court holds that plaintiffs Mohamed, Ali, Awad, and Ismail — all of whom signed employment applications containing an arbitration clause — must submit their claims to arbitration. MV’s motion to compel arbitration and dismiss claims is granted with respect to these four plaintiffs. II. Employee Handbooks Four plaintiffs remain: Nabry, Musse, Guanje, and Dalel. As will be recalled, the applications signed by Nabry, Musse, and Guanje did not contain an arbitration clause, and, because no one can find a copy of the application signed by Dalel, MV cannot meet its burden of proving that Dalel agreed to arbitrate when he applied for a job. MV argues, though, that Nabry, Musse, Guanje, and Dalel are all nevertheless bound to arbitrate by a clause found in the 2003 and 2004 versions of MV’s employee handbook. The arbitration clause in the 2003 and 2004 handbooks provides, in relevant part: By accepting this Employee Handbook an employee of this company agrees that, except for workers’ compensation claims, they will settle any and all previously unasserted claims, disputes or controversies arising out of, or relating to their application or -8- candidacy for employment, employment and/or cessation of employment with [MV], exclusively by final and binding arbitration before a neutral single Arbitrator . . . . Kimble Aff. Ex. E at 4, May 14, 2007 (2003 version); Id. Ex. F at 4 (2004 version). Like the employment applications, these handbooks also contain a disclaimer: NATURE OF EMPLOYMENT [T]his handbook cannot anticipate every situation or answer every question about employment. It is not an employment contract and it is not intended to create contractual obligations of any kind. Neither the employee nor the company is bound to continue the employment relationship if either chooses, at its will, to end the relationship at any time. Kimble Aff. Ex. E at 4 (2003 version); Id. Ex. F at 4 (2004 version). Nabry, Musse, and Guanje each signed identical forms acknowledging that they received a handbook. See Jeanetta Aff. Exs. O, R-V. (Dalel signed no such form.) These forms also state: Since the information, policies, and benefits described here are necessarily subject to change, I acknowledge that revisions to the handbook may occur. All such changes will be communicated through official notices . . . . . . . . Furthermore, I acknowledge that this handbook is neither a contract of employment nor a legal document. Id. Under Minnesota law, an employee handbook may create a binding contract if (1) the terms are definite in form; (2) the terms are communicated to the employee; (3) the employee accepts the offer; and (4) the employee supplies the necessary consideration (by, for example, remaining on the job). Feges, 483 N.W.2d at 707; Pine River State Bank v. Mettille, 333 N.W.2d -9- 622, 626-27 (Minn. 1983). As mentioned above, if the terms are not communicated to the employee, no contract can be formed. Pine River, 333 N.W.2d at 627 n.4. “[F]or a unilateral contract to be formed the offer must be communicated to the offeree. If the offer does not exhibit the objective intent to apply to a particular employee, then a contract cannot be formed with that individual, regardless of the definite form of the offer itself. In such a case the employee is not the offeree to whom the offer must be communicated for formation of a contract. Whether the proposal is meant to be an offer for a unilateral contract with a particular person is determined by the outward manifestations of the parties and not their subjective intentions.” Feges, 483 N.W.2d at 707 (quoting Herron v. Green Tree Acceptance, Inc., 411 N.W.2d 192, 195 (Minn. Ct. App. 1987)) (alterations and emphasis in original). In short, the Court cannot find that Nabry, Musse, Guanje, and Dalel are bound by the arbitration clause in the 2003 or 2004 handbooks unless there is evidence that Nabry, Musse, Guanje, and Dalel received a copy of one or the other of those handbooks. The record contains virtually no such evidence. True, Nabry, Musse, and Guanje (but not Dalel) each signed forms acknowledging that they received an employee handbook. Significantly, though, those forms refer to the receipt of the 2000 version of the handbook, and there is no copy of that version in the record. Jeanetta Aff. Exs. O-T, V. At the time that Nabry (February 2, 2004), Musse (August 26, 2003), and Guanje (June 4, 2003) signed acknowledgment forms, MV had already issued the 2003 handbook, but that handbook was apparently not given to them — or at least they were not asked to acknowledge receipt of it. Id.; Kimble Aff. Ex. E (handbook issued April 1, 2003). In addition, although the acknowledgment forms promised that any revisions to the handbook “will be communicated through official notices,” there is no evidence that MV fulfilled that promise — i.e., that MV issued such -10- “official notices.” No such notices appear in the record, and Nabry testified that “they don’t write down a notice or something and say there’s a new version two.” Nabry Dep. 270. MV has submitted an affidavit from Scott Kimble, an MV vice president, who asserts that it is the corporation’s regular practice to distribute revised handbooks to all employees at the time the revisions are issued. But MV is a nationwide company with thousands of employees. Kimble works in the corporate offices in California; he has no personal knowledge about whether MV’s corporate practice was followed at the Burnsville facility, and thus he has no personal knowledge about whether Nabry, Musse, Guanje, or Dalel received a copy of either the 2003 or 2004 handbook. More importantly, the evidence in the record is that the Burnsville facility was lax about following corporate policies, especially when it came to paperwork. As noted, the evidence is that the Burnsville facility gave Nabry, Musse, and Guanje outdated versions of the handbook, and there is no evidence that the Burnsville facility gave any version of the handbook to Dalel. Under these circumstances, the Court cannot rely on an affidavit from a corporate executive about the general practice of a nationwide company to find that these four plaintiffs received copies of the 2003 or 2004 handbooks. MV also points to the fact that, in the course of discovery, plaintiffs produced a copy of the 2004 handbook, thus proving that they must have received it. But there were originally nine plaintiffs in this action (one plaintiff has been dismissed), and the record does not reflect which of those nine plaintiffs possessed a copy of 2004 handbook. The fact that at least one of nine plaintiffs possessed a copy of the 2004 handbook does not establish, by a preponderance of the evidence, that Nabry, Musse, Guanje, or Dalel ever received a copy. -11- Finally, according to MV, Nabry testified that MV maintained a copy of the current version of the employee handbook in the employee break room. There are two problems with MV’s argument. The first is that Nabry merely testified that there was sometimes a copy of a handbook in the break room; she did not testify that there was always a copy of the current handbook in the break room. Nabry Dep. 269-70. The second is that the periodic presence of a handbook in the employee break room provides little evidence that MV communicated a contractual offer found in a particular version of the handbook to these four plaintiffs — or that these four plaintiffs accepted that offer. There is no evidence about the extent to which any of these four plaintiffs used the break room, nor is there any evidence that any of these four plaintiffs ever saw a 2003 or 2004 handbook in the break room. It also should be noted that the acknowledgment form signed by every plaintiff save Dalel promised that MV would communicate all changes to the handbook “through official notices.” Thus, even if a plaintiff had spotted a copy of the 2003 or 2004 handbook in the break room — and even if he or she realized that what he or she had spotted was a copy of the 2003 or 2004 handbook — he or she would have no reason to believe, in the absence of “official notices,” that the new handbook differed in any respect from the 2000 handbook that he or she had been supplied. As noted above, Nabry testified that MV did not alert employees of new versions of the handbook, and her testimony is corroborated by the fact that there is no evidence of any official notice alerting plaintiffs to revised versions of the handbook. Under these circumstances, even if this Court could find that MV placed a copy of the 2003 or 2004 handbook in the break room, the Court could not find that, in doing so, MV communicated a contractual offer to these four plaintiffs. -12- Normally, “[t]he decisive question of whether handbook or manual provisions were communicated to the employee in a way that objectively manifests an offer to contract for employment is a question of fact for the jury.” Rybus v. ADC Telecomms., Inc., No. C5-96-512, 1996 WL 689764, at *2 (Minn. Ct. App. Dec. 3, 1996). As with any issue of fact, however, the Court is not obligated to present the issue to a jury unless a reasonable jury could find for either side. Here, no reasonable jury could conclude, on the basis of the evidence presented, that MV gave Nabry, Musse, Guanje, or Dalel a copy of a handbook containing an arbitration clause, or that MV otherwise communicated to any of them an offer to arbitrate employment-related disputes. Without an offer, there can be no acceptance, and without acceptance, there can be no contract to arbitrate. Cf. Fleet Boston Robertson Stephens, Inc. v. Innovex, Inc., 264 F.3d 770, 773 (8th Cir. 2001) (a party who has not agreed to arbitrate a dispute cannot be compelled to do so). MV’s motion to compel arbitration with respect to Nabry, Musse, Guanje, and Dalel is therefore denied. Even if the evidence established that MV’s offer to arbitrate was communicated to these four plaintiffs and accepted by them, the Court would nevertheless deny MV’s motion to compel arbitration because of the disclaimers found in the 2003 and 2004 handbooks. MV relies heavily on cases holding that, under the FAA, any ambiguity about whether a particular dispute falls within an agreement to arbitrate should be construed in favor of arbitration. See, e.g., Berkley v. Dillard’s Inc., 450 F.3d 775, 777-78 (8th Cir. 2006). But these cases address the question of what an agreement to arbitrate means; they do not address the question of whether an agreement to arbitrate exists. That is a question of contract formation, not contract interpretation, and whether a contract was formed in the first place is a question governed by state law. Keymer, -13- 169 F.3d at 504. As noted above, Minnesota law is clear that, when an employee handbook disclaims the intent to create a contract, the handbook does not create a contract. Ewald, 139 F.3d at 622; Miller, 116 F.3d at 348-49; Morrow, 897 F. Supp. at 422; Michaelson, 474 N.W.2d at 180; Audette, 436 N.W.2d at 127. There is nothing ambiguous about the disclaimer in the MV handbooks. MV tries to argue that the disclaimer in the handbook, like the disclaimer in the employment application, disclaims only the intent to alter the at-will nature of the employment relationship. But that is not what the handbook disclaimer says. The disclaimer informs employees that the handbook “is not intended to create contractual obligations of any kind.” (Emphasis added.) “Any kind” obviously is broad enough to cover contractual obligations to arbitrate. The fact that the disclaimer appears under the heading “Nature of Employment” — and in proximity to other language discussing the parties’ right to terminate the employment relationship at any time — does not change the fact that the disclaimer unambiguously states that the handbook does not create any kind of contractual obligation. In Patterson v. Tenet Healthcare, Inc., 113 F.3d 832 (8th Cir. 1997), the Eighth Circuit held that a similarly broad disclaimer in a handbook did not preclude the creation of an agreement to arbitrate. Id. at 834-35. But Patterson is both legally and factually distinguishable. In Patterson, the arbitration clause appeared on the last page of the handbook under the heading: “IMPORTANT! Acknowledgment Form.” Id. at 835. After the employee signed the form, the employer removed the form from the handbook and kept it in a separate file. Id. The Eighth Circuit, applying Missouri law, concluded that the arbitration clause was not really a part of the -14- handbook, but instead was a separate contract to which the disclaimer clause in the handbook did not apply. Patterson, 113 F.3d at 835. Unlike the arbitration clause in Patterson, the arbitration clause in MV’s handbook does not appear on a separate form; it is as much a part of the handbook as the disclaimer. And unlike the employer in Patterson, MV in no way suggested that the arbitration clause was distinct from the handbook, such as by physically removing the clause from the handbook and keeping it in a separate file. Moreover, unlike the plaintiffs in Patterson, plaintiffs here were never asked to sign an acknowledgment containing an arbitration clause. To the contrary, the acknowledgment signed by plaintiffs emphasized that the handbook did not create legal rights: “[T]his handbook is neither a contract of employment nor a legal document.” (Emphasis added.) It is true that the arbitration clause in the MV handbook, like the arbitration clause in the Patterson acknowledgment, contains language suggesting the creation of contractual obligations. But Patterson did not rely solely on such language; it also relied on the contextual factors described above — factors that are not present here. More importantly, Patterson relied on Missouri law, not Minnesota law. Under Minnesota law, a general disclaimer in a handbook precludes the formation of a contract, even if other provisions of the handbook can be read to create a contract. See Miller, 116 F.3d at 349 & n.5 (distinguishing Patterson and explaining that, under Minnesota law, a disclaimer prevents an employee from claiming contractual rights even when other provisions of the handbook are specific and unequivocal). For all of these reasons, the Court concludes that Nabry, Musse, Guanje, and Dalel are not bound by the arbitration clause found in the 2003 and 2004 MV employee handbooks. MV’s -15- motion to compel arbitration and dismiss claims is therefore denied with respect to Nabry, Musse, Guanje, and Dalel. ORDER Based on the foregoing, and on all of the files, records, and proceedings herein, IT IS HEREBY ORDERED THAT: 1. Defendant’s motion to compel arbitration and dismiss claims [Docket No. 13] is GRANTED IN PART and DENIED IN PART. 2. Defendant’s motion is GRANTED with respect to plaintiffs Abdisalan Mohamed, Mohamed Ali, Asli Awad, and Ali Ismail. The claims of those plaintiffs are DISMISSED WITHOUT PREJUDICE. Those plaintiffs are ORDERED to submit their claims to arbitration in accordance with the arbitration clauses found in their employment applications, except that the arbitration shall take place in Minnesota and, to the extent that state law applies, that law shall be the law of the State of Minnesota. 3. Defendant’s motion is DENIED in all other respects. Dated: December 13 , 2007 s/Patrick J. Schiltz Patrick J. Schiltz United States District Judge |
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