Cynthia Huffman v. The Hilltop Companies ( 2014 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 14a0056p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
CYNTHIA HUFFMAN, et al., ┐
Plaintiffs-Appellees, │
│
│ No. 13-3938
v. │
>
│
THE HILLTOP COMPANIES, LLC, │
Defendant-Appellant. │
┘
Appeal from the United States District Court
for the Southern District of Ohio at Cincinnati
No. 1:13-cv-00219—S. Arthur Spiegel, District Judge.
Argued: March 19, 2014
Decided and Filed: March 27, 2014
Before: GILMAN, COOK, and McKEAGUE, Circuit Judges.
_________________
COUNSEL
ARGUED: Matthew C. Blickensderfer, FROST BROWN TODD LLC, Cincinnati, Ohio, for
Appellant. Adam W. Hansen, NICHOLS KASTER, LLP, San Francisco, California, for
Appellees. ON BRIEF: Matthew C. Blickensderfer, Eugene Droder III, FROST BROWN
TODD LLC, Cincinnati, Ohio, for Appellant. Adam W. Hansen, NICHOLS KASTER, LLP,
San Francisco, California, Rachhana T. Srey, NICHOLS KASTER, PLLP, Minneapolis,
Minnesota, for Appellees.
_________________
OPINION
_________________
McKEAGUE, Circuit Judge. This case involves multiple individuals who were once
employed by The Hilltop Companies. Each individual executed an employment agreement with
1
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Hilltop that contained both an arbitration clause and a survival clause, but the survival clause did
not list the arbitration clause. At the heart of this dispute is whether the strong presumption in
favor of arbitration controls, or whether the omission of the arbitration clause from the survival
clause in the agreement constitutes a “clear implication” that the parties intended the arbitration
clause to expire with the agreement. The district court denied Hilltop’s Motion to Dismiss and
Compel Arbitration on the basis that the strong presumption in favor of arbitration was rebutted.
For the reasons that follow, we reverse.
I.
In October 2011, Hilltop hired Cynthia Huffman as well as the other plaintiffs in this
action to review the files of mortgage loans originated by PNC Bank. In this position, the
plaintiffs reviewed the loan files to determine whether lawful procedures were followed during
foreclosure and other proceedings. Until the end of their employment in January 2013, the
plaintiffs regularly worked in excess of forty hours per week, but were not compensated at the
overtime rate because Hilltop classified them as independent contractors. The plaintiffs assert
that Hilltop’s classification was in error, and that in not compensating them at the applicable
overtime rate, Hilltop violated the Fair Labor Standards Act and the Ohio Minimum Fair Wage
Standards Act.
The manner in which the plaintiffs may pursue their claims against Hilltop turns on an
issue of contract interpretation. Each employment relationship was governed by a now-expired
Professional Services Contract Agreement. The agreement contained twenty-four clauses,
including an arbitration clause and a survival clause. The arbitration clause read in relevant part
as follows:
21. ARBITRATION. Any Claim arising out of or relating to this Agreement, or
the breach thereof, shall be settled by binding arbitration administered by the
American Arbitration Association (“AAA”) in accordance with its Commercial
Arbitration Rules and its Optional Procedures for Large, Complex Commercial
Disputes. The . . . arbitration and all related proceedings and discovery shall take
place pursuant to a protective order entered by the arbitrators that adequately
protects the confidential nature of the parties’ proprietary and confidential
information.
13-3938 Huffman, et al. v. Hilltop Companies Page 3
R.10-1, Agreement at 11. The survival clause read as follows:
22. SURVIVAL. Paragraphs 4, 5, 6, 7, 8, 9, 10. 11, 12, 14, 17, and 22 shall
survive the expiration or earlier termination of this Agreement.
Id. at 12 (emphasis added). The clauses listed in the survival clause correspond to ones detailing
services essential to the job, the term of employment, compensation, termination, and client
confidentiality. Importantly, while the survival clause listed half of the agreement’s twenty-four
clauses, it did not list the arbitration clause. Other noteworthy unlisted clauses included the non-
compete clause—which provided that the contractors would not provide their services to select
clients for twelve months after termination of the agreement, the severability clause—which
provided that in the event any provision was held to be invalid, the remainder of the agreement
would still be enforceable, and the integration clause—which provided that the agreement
superseded the parties’ prior communications and constituted their entire understanding.
The plaintiffs’ work-related grievances led them to file a class action in federal court.
Hilltop filed a Motion to Dismiss and Compel Arbitration, arguing that the agreement provided
for the arbitration of all disputes. Hilltop also argued that the plaintiffs must arbitrate their
claims individually rather than as a class because the agreement did not permit classwide
arbitration. The district court denied Hilltop’s motion, stating that the arbitration clause had no
post-expiration effect because the “more specific survival clause that excludes arbitration from
survival trumps the more general arbitration clause in the contract,” and because the plaintiffs
did not agree “that the arbitration provision would survive termination of the contract.” R. 16,
Dist. Ct. Opn. at 2–3. The doctrines of expressio unius est exclusion alterius, which provides
that the express mention of certain contractual provisions is tantamount to intentional exclusion
of the others, and contra proferentem, which provides that ambiguous terms should be
interpreted against the drafter’s (Hilltop’s) interests, influenced the district court’s decision. The
district court did not reach the second issue of whether the agreement permitted classwide
arbitration. This appeal followed.
13-3938 Huffman, et al. v. Hilltop Companies Page 4
II.
We first determine whether the agreement’s arbitration clause had post-expiration effect.
“A district court’s decision whether to compel arbitration under the Federal Arbitration Act
(FAA), 9 U.S.C. § 1 et seq., is reviewed de novo. Similarly, the district court’s decisions
regarding the arbitrability of a particular dispute are reviewed de novo.” Nestle Waters N. Am.,
Inc. v. Bollman, 505 F.3d 498, 501–02 (6th Cir. 2007) (internal citation omitted).
Central to the resolution of this issue is the strong federal policy in favor of arbitration.
In Litton Financial Printing Division, Litton Business Systems, Inc. v. NLRB, the Supreme Court
recognized a “presumption in favor of postexpiration arbitration of matters unless negated
expressly or by clear implication [for] matters and disputes arising out of the relation governed
by contract.” 501 U.S. 190, 204 (1991) (emphasis added) (internal quotation marks and citation
omitted). This court has since observed that the need for an arbitration provision to have post-
expiration effect is intuitive, because if “the duty to arbitrate automatically terminated upon
expiration of the contract, a party could avoid his contractual duty to arbitrate by simply waiting
until the day after the contract expired to bring an action regarding a dispute that arose while the
contract was in effect.” Zucker v. After Six, Inc., 174 F. App’x 944, 947–48 (6th Cir. 2006).
The Supreme Court in Litton went on to note that, with respect to agreements containing
broadly-worded arbitration clauses, “there is a presumption of arbitrability in the sense that an
order to arbitrate the particular grievance should not be denied unless it may be said with positive
assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted
dispute.” 501 U.S. at 209 (internal quotation marks and brackets omitted). Under this circuit’s
precedent, the arbitration clause in this case is fairly described as being broadly-worded because
its language indicating that “[a]ny Claim arising out of or relating to this Agreement, or the
breach thereof” will be submitted to arbitration is not only far-reaching but also very similar to
other arbitration clauses that this court has described as “broad.” See, e.g., Masco Corp. v.
Zurich Am. Ins. Co., 382 F.3d 624, 625 (6th Cir. 2004) (describing as “broad” a provision
providing that “[a]ny dispute arising out of the interpretation, performance or alleged breach of
this agreement, shall be submitted to arbitration”).
13-3938 Huffman, et al. v. Hilltop Companies Page 5
The fact that the plaintiffs face a difficult task in rebutting the strong presumption in
favor of arbitration “by clear implication” and with “positive assurance” is further confirmed by
controlling precedent. See Litton, 501 U.S. at 204, 209. This court examines “arbitration
language in a contract in light of the strong federal policy in favor of arbitration, resolving any
doubts as to the parties’ intentions in favor of arbitration.” Nestle, 505 F.3d at 503 (emphasis
added); see also Stout v. J.D. Byrider, 228 F.3d 709, 715 (6th Cir. 2000) (“It is settled authority
that doubt regarding the applicability of an arbitration clause should be resolved in favor of
arbitration.”). “Likewise, any ambiguities in the contract . . . should be resolved in favor of
arbitration.” Id. at 714 (internal citations omitted). “Moreover, ‘[i]n the absence of any express
provision excluding a particular grievance from arbitration . . . only the most forceful evidence of
a purpose to exclude the claim from arbitration can prevail.’” Nestle, 505 F.3d at 503 (emphasis
added) (quoting AT&T Techs., Inc. v. Commc’ns Workers of Am., 475 U.S. 643, 650 (1986)).
For example, this court has found that a party’s explicit rejection of a contract-extension
agreement that contained an arbitration clause did “not constitute an express or clearly implied
rejection of the presumption in favor of arbitration” where the original agreement included an
arbitration clause. S. Cent. Power Co. v. Int’l Bhd. of Elec. Workers, Local Union 2359, 186
F.3d 733, 742 (6th Cir. 1999); see also Nestle, 505 F.3d at 500 (applying the presumption in
favor of arbitration where the parties’ original agreement included an arbitration clause and their
subsequent agreement was silent as to arbitration).
Although the plaintiffs’ task is difficult, it is not impossible. By acknowledging that
parties may rebut the presumption by “clear implication,” the Supreme Court has acknowledged
that the parties need not expressly provide that the arbitration provision will expire. See Litton,
501 U.S. at 204. “While ambiguities in the language of the agreement should be resolved in
favor of arbitration, we do not override the clear intent of the parties, or reach a result
inconsistent with the plain text of the contract, simply because the policy favoring arbitration is
implicated.” Nestle, 505 F.3d at 504 (quoting EEOC v. Waffle House, Inc., 534 U.S. 279, 294
(2002)); Masco Corp., 382 F.3d at 627 (same). Moreover, because “arbitration is a creature of
contract[,] . . . a party may not be compelled to arbitrate any dispute he has not agreed to
arbitrate.” Zucker, 174 F. App’x at 947.
13-3938 Huffman, et al. v. Hilltop Companies Page 6
The issue of whether the strong presumption in favor of arbitration applies post-
expiration when an arbitration clause is not listed in a survival clause appears to be one of first
impression among the circuit courts. Notably, the plaintiffs point to essentially no authority to
support their claim that the strong presumption is rebutted simply because the arbitration clause
was not listed in the survival clause.1 The plaintiffs advance their case based on two arguments.
First, plaintiffs argue that because Hilltop drafted the agreement, the doctrine of contra
proferentum should apply, meaning any ambiguity concerning whether the arbitration clause
survives is resolved in favor of the plaintiffs. Second, plaintiffs argue that the omission from the
survival clause is tantamount to a clear implication that the parties did not intend the arbitration
clause to have post-expiration effect in light of the doctrine of expressio unius.2
The plaintiffs’ first argument fails. It is true that courts generally rely on the contra
proferentum doctrine to resolve ambiguities against the drafter of the agreement. But where
ambiguity in agreements involving arbitration exists, such as here, the strong presumption in
favor of arbitration applies instead. See Litton, 501 U.S. at 209. Therefore, all doubts are
resolved in favor of arbitration, and the plaintiffs must present “the most forceful evidence of a
purpose to exclude the claim from arbitration [in order to] prevail.” Nestle, 505 F.3d at 503.
The plaintiffs’ second argument, however, presents a trickier question. Hilltop counters
that district courts in other circuits have rejected similar expressio unius arguments made in the
1
The plaintiffs rely on Virginia Carolina Tools, Inc. v. International Tool Supply, Inc., a Fourth Circuit
case finding that the parties did not intend for post-expiration arbitration despite the agreement’s arbitration clause
because the agreement included an express, specific termination date. 984 F.2d 113, 115, 118 (4th Cir. 1993). The
Fourth Circuit has since limited Virginia Carolina Tools to its facts, explaining that Virginia Carolina Tools turned
on the contract’s express termination-date provision: “Our decision to accord . . . less force to the presumption [in
favor of arbitration] in Virginia Carolina Tools was grounded in the agreement’s express termination-date provision,
the presence of which foreclosed any incipient issue of contract duration in the parties’ memorialized agreement.
Here . . . [the agreement lacks an] express termination-date provision.” Peabody Holding Co., LLC v. United Mine
Workers of Am., Int’l Union, 665 F.3d 96, 106 (4th Cir. 2012) (internal quotation marks and citation omitted)
(applying the presumption in favor of arbitration). Virginia Carolina Tools is not helpful to the plaintiffs because
the agreement at issue in this case did not specify a termination date.
2
The plaintiffs also cite Walker v. Ryan’s Family Steak Houses, Inc. for the proposition that they did not
“knowingly and voluntarily consent to arbitration” because the arbitration clause did not expressly indicate that they
were waiving their right to a jury trial. 400 F.3d 370, 381 (6th Cir. 2005). What the plaintiffs fail to address is this
court’s decision in Cooper v. MRM Investment Co., which notes that this court has “flatly rejected” the contention
that an arbitration clause “must contain a provision expressly waiving the employee’s right to a jury trial” because
the fairly obvious consequence of an agreement to arbitrate is straightforward. 367 F.3d 493, 506 & n.4 (6th Cir.
2004). In this circuit, an unequivocal waiver of the right to a jury trial is not required outside of the collective-
bargaining context. Id. Furthermore, Walker is distinguishable because the employees in that case lacked high-
school educations and their employer appeared to have provided them false information. Neither of these facts is at
issue here. See Walker, 400 F.3d at 382.
13-3938 Huffman, et al. v. Hilltop Companies Page 7
context of a broad arbitration clause that is not listed in a survival clause. See W. Liberty Foods,
L.L.C. v. Moroni Feed Co., 753 F. Supp. 2d 881, 885 (S.D. Iowa 2010) (holding that an
arbitration clause did not expire despite it not being listed in the contract’s survival clause);
Shipp v. XA, Inc., No. 06 C 1193, 2006 WL 2583720 at *7 (N.D. Ill. Aug. 31, 2006) (same). For
example, in West Liberty Foods, a district court considered a marketing agreement that included
both an arbitration clause and a survival clause, but the arbitration clause was not among the
eight provisions listed in the survival clause. 753 F. Supp. 2d at 885. The district court found
that the doctrine of expressio unius did not rebut the strong presumption in favor of arbitration,
noting that “focusing on only one maxim of contract interpretation and construction is
inadequate in determining the intent of the parties relative to the survival of the arbitration
clause.” Id at 888. The district court was careful not to “render[] any provision meaningless” in
its interpretation of the contract as a whole, and noted that the contract’s remaining provisions
could not “be easily harmonized without rendering meaningless other statements in the
marketing agreement.” Id. The district court thus found that the agreement was ambiguous on
the issue of whether the arbitration clause survived, and applied the strong presumption in favor
of arbitration. Id. at 888–89.
We believe that considering the contract as a whole—the survival clause and its
relationship to the other clauses in the agreement—is the correct way to determine whether the
parties unambiguously intended for the arbitration clause to expire with the contract. We
observe that the parties did not clearly intend for the survival clause to serve as an exhaustive list
of the provisions that would survive expiration of the agreement. Indeed, the non-compete
clause remains in effect for twelve months after expiration, yet it is not listed in the survival
clause. Although it is true that the non-compete clause’s twelve-month window is very specific,
and the arbitration clause does not contain a similarly specific time window, the omission of the
non-compete clause from the survival clause invites ambiguity as to which additional provisions
the parties believed should survive expiration.
The fact that ambiguity exists as to which other provisions, besides those listed in the
survival clause, the parties intended to survive expiration of the agreement is made even clearer
when considering other unlisted provisions. Notably, neither the agreement’s severability clause
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nor its integration clause is listed in the survival clause. However, it is illogical to conclude that
upon expiration of the contract, the parties no longer intended the agreement to be severable. It
is similarly illogical to conclude that the parties intended the ban on extrinsic evidence to be in
effect only prior to the agreement’s expiration. The difficulty in the plaintiffs’ position is that it
is just as plausible that the parties also intended the arbitration clause to survive. That
possibility, coupled with the strong presumption in favor of arbitration, counsels in favor of
Hilltop’s position.
This same consideration led a district court in this circuit to apply the strong presumption
in favor of arbitration where an agreement’s survival clause did not list the agreement’s broad
arbitration clause. Symyx Technologies, Inc. v. Stargate Mobile L.L.C., No. 06-12632, 2006 WL
2943301 at *2–3 (E.D. Mich. Oct. 13, 2006). The district court considered the contract “as a
whole,” and noted that “it does not make sense that the arbitration clause does not survive
termination simply because it was not expressly designated as surviving. Several provisions of
the agreement that one would expect to survive termination were not designated as such[,]”
including the contract’s integration clause and severability clause. Id. at *2. The district court
noted that it “would be a strained reading of the agreement to suggest that these provisions do
not survive termination merely because the agreement did not specifically designate them as
surviving.” Id. The plaintiffs’ interpretation of the contract depends on a similarly strained
reading. This strained reading is not the only reading, let alone the most plausible. The plaintiffs
have failed to produce forceful evidence to successfully rebut the strong presumption in favor of
arbitration.
This is not to say, however, that an omission of an arbitration clause from a survival
clause could never satisfy the “clear implication” standard outlined in Litton. For example, if the
survival clause listed twenty-three of the agreement’s twenty-four clauses—all but the arbitration
clause—that might constitute a clear implication, and yield a different result. However, that is
not the situation that we face today. Reading the contract as a whole, we cannot say with
certainty that the parties did not intend for the arbitration clause to survive expiration of the
contract. We therefore hold that the parties’ omission of the arbitration clause in the survival
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clause did not clearly imply that the arbitration clause had no post-expiration effect, and that the
strong presumption in favor of arbitration controls.
III.
We next examine whether the agreement permits classwide arbitration, which in turn
determines whether plaintiffs may proceed as a class or must proceed individually. This court
recently held in Reed Elsevier, Inc. ex rel. LexisNexis Div. v. Crockett that the “question [of]
whether an arbitration agreement permits classwide arbitration is a gateway matter, which is
reserved ‘for judicial determination unless the parties clearly and unmistakably provide
otherwise.’” 734 F.3d 594, 599 (6th Cir. 2013) (quoting Howsam v. Dean Witter Reynolds, Inc.,
537 U.S. 79, 83 (2002)). This court found that the agreement at issue in Reed Elsevier was at
best “silent or ambiguous as to whether an arbitrator should determine the question of classwide
arbitrability; and that is not enough to wrest that decision from the courts.” Id. This court
further found that the “principal reason to conclude that this arbitration clause does not authorize
classwide arbitration is that the clause nowhere mentions it.” Id.The plaintiffs concede that Reed Elsevier is controlling authority. As was the case in
Reed Elsevier, here the parties’ agreement is silent as to whether an arbitrator or a court should
determine the question of classwide arbitrability, meaning the determination lies with this court.
See id. As was also the case in Reed Elsevier, here the parties’ arbitration clause nowhere
mentions classwide arbitration. See id. We therefore conclude that the arbitration clause does
not authorize classwide arbitration, and hold that the plaintiffs must proceed individually.
IV.
The omission of the arbitration clause from the survival clause in this case did not clearly
imply that the parties did not intend for the arbitration clause to have post-expiration effect, and
this court’s precedent indicates that the parties must proceed in arbitration on an individual basis.
Therefore, the district court’s denial of Hilltop’s Motion to Dismiss and Compel Arbitration is
REVERSED.