USERRA and the effect of arbitration agreements

THIS INFORMATION SHOULD NOT BE CONSTRUED AS LEGAL ADVICE. YOU SHOULD STRONGLY CONSIDER THE BENEFITS OF CONSULTING WITH A TRAINED LEGAL PROFESSIONAL

Early decision on the effect of arbitration seemed to indicate that USERRA section 4302(b) overrides agreements to submit future claims to arbitration, however the 5th and 6th Circuit court of appeals have ruled otherwise.

USERRA overrides arbitration agreements

Garret v. Circuit City Stores Inc., 338 F.Supp. 2d 717 (N.D. Tex 2004)

Breletic v. CACI Inc., 2006 U.S. Dist. Lexis 4916 (N.D. Ga. January 24, 2006)

• “[a]n express waiver of future statutory rights, such as one that an employer might wish to require as a condition of employment, would be contrary to the public policy embodied in the Committee bill and would be void” in order to conclude that Congress intended that a waiver of a judicial forum would not be enforceable.“

Lopez v. Dilliard’s Inc., 382 F.Supp. 2d 1245 (D.Kansas 2005)

USERRA does not override arbitration agreements

Garrett v. Circuit City Stores Inc.,449 F.3d 672 (5th Cir. 2006) – on appeal from N.D. Texas

Landis v. Pinnacle Eye Care LLC, 537 F.3d 559 (6th Cir. 2008) – RESULT: stay pending arbitration

Will v. Parsons Evergreene, LLC, 2008 U.S. Dist. LEXIS 105131, (D. Colo. December 19, 2008) – RESULT: Motion for dismissal denied, motion for stay pending arbitration granted

• Said Lopez erred as arbitration was not a prerequisite for arbitration rights, it serves as a waiver of a judicial forum for resolution of rights under USERRA

• Said the House Committee Report relied on in Breletic was ambiguous as to whether “future statutory rights” includes only substantive rights under USERRA or also includes the procedural right to a judicial forum. Nothing in the Report showed an intent to repeal the FAA for USERRA claims. Given this ambiguity, to interpret the Report’s reference to “future statutory rights” as relating to a right to a judicial forum, as the Breletic court did, “would run afoul of the presumption that arbitration provides a fair and adequate mechanism for enforcing statutory rights.” Rosenberg v. Merrill Lynch, Pierce, Fenner & Smith, 170 F.3d 1, 13 (1st Cir. 1999)

• Ultimately, the Court found Garrett persuasive

Ohlfs v. Charles Schwab & Co., 2008 U.S. Dist. LEXIS 82943 (W.D. Colo. September 25, 2008) – stay granting pending arbitration

• “My research confirms that cases that have reviewed the issue after the ruling in Garrett v. Circuit City, have followed its rationale and have ruled that USERRA does not preempt arbitration agreements. See e.g. Kitts v. Menards, Inc., 519 F.Supp.2d 837 (N.D. Ind. 2007); Ernest v. Lockheed Martin Corp., 2008 U.S. Dist. LEXIS 59985, 2008 WL 2958964 (D.Colo. Jul 29, 2008); Klein v. City of Lansing, 2007 U.S. Dist. LEXIS 36825, 2007 WL 1521187 (W.D.Mich. May 21, 2007). Just over a month ago, the Sixth Circuit, in Landis v. Pinnacle Eye Care, LLC, 537 F.3d 559 (6th Cir. Aug.11, 2008) — after a detailed and extensive review of Garrett v. Circuit City — ruled that USERRA claims are arbitrable.”

• “In addition, to the extent that Ohlfs relies ondistrict court cases that have held that 4302(b) superseded an arbitration agreement between an employee and employer as to USERRA claims — see e.g. Lopez v. Dillard’s, supra, and Breletic v. CACI, Inc.-Federal, supra — this is no longer the current state of the law as discussed above.”

If another Court of Appeals in another part of the country reaches a result on this issue that is contrary to the result reached by the Fifth Circuit and now the Sixth Circuit, the Supreme Court likely will grant certiorari (discretionary review) in order to resolve the conflict among the circuits.