In a high-profile gender discrimination case filed in the Richmond federal court against a law firm, Judge Robert E. Payne sent the dispute to arbitration despite that the plaintiff had not signed the firm’s Shareholder Agreement that included the required arbitration clause. In Michelle Burke Craddock v. LeClairRyan, 3:16-cv-11 (E.D. Va. Apr. 12, 2016), the Court concluded that “a written but unsigned contract, otherwise accepted, is sufficient to invoke the Federal Arbitration Act.” With this, the Court denied Ms. Craddock’s motion to stay arbitration and granted LeClairRyan’s motion to compel arbitration.
The four-count Complaint alleges in Count 1 a violation of the Lilly Ledbetter Fair Pay Act of 2009, the first bill signed into law by President Obama. This law overturned the Supreme Court’s decision in Ledbetter v. Goodyear Tire & Rubber Co., Inc., 550 U.S. 618 (2007), which restricted the time period for filing complaints of employment discrimination concerning compensation. Ms. Craddock’s Complaint continued with alleged violations of the Equal Pay Act, retaliation, and constructive discharge. The case was first assigned to Judge Hudson, who recused himself because of a conflict.
District Court’s Order and Opinion
In its April 12, 2016 Memorandum Opinion, the Court determined that Ms. Craddock had accepted the terms of the law firm’s Shareholder Agreement by her conduct. LeClairRyan conceded that Ms. Craddock never signed the unaltered agreement, but argued that after the firm invited her to become a shareholder her conduct over nearly two years evidenced acceptance. Judge Payne, ruling without a hearing, found that the conduct was sufficient to support a contract and to enforce the arbitration clause in the agreement.
The Court’s ruling, at least for now, moves the case out of the headlines and away from a jury. Plaintiff wasted no time in noticing her appeal to the Fourth Circuit—she filed her Notice the day after Judge Payne’s ruling. The FAA authorizes an immediate appeal if a motion to compel arbitration is denied; an appeal when arbitration is ordered, as in this case, is perhaps blocked by the FAA except as an appeal of an interlocutory order pursuant to 28 USC § 1292(b). Courts, including the Fourth Circuit, have recognized, however, that an order compelling arbitration might in certain circumstances be appealable as a final order pursuant to 9 USC § 16(a)(3).
Central Facts and Finding of Contract by Conduct
Ms. Craddock’s professional accomplishments alone make the case news-worthy. She was part of LeClairRyan’s litigation team that procured a $77 million settlement in 2013; the firm collected a $20+ million contingency fee in the case, the firm’s largest fee ever. For her part in the successful representation, LeClairRyan paid (according to the law firm’s pleadings) Ms. Craddock a $1.1 million bonus. Claiming discrimination in subsequent compensation and promotion decisions, Ms. Craddock pursued her dispute to the EEOC, which provided a “right to sue” letter. She filed her $1.2 million lawsuit in January 2016.
The central fact here is that even though Ms. Craddock eventually signed the LeClairRyan Shareholder Agreement she crossed-out at the time the arbitration clause. There is no version of the agreement signed by Ms. Craddock that includes the clause. The Court observed that the firm’s shareholder invitation came in January 2013; while Ms. Craddock did not sign the document, she did accept the benefits and responsibilities of being a LeClairRyan shareholder. It was nearly two years later, in December 2014, when she signed the written agreement with the crossed-out arbitration clause. Applying Virginia contract law, the Court determined that a contract between Ms. Craddock and LeClairRyan had been formed as early as January 2013, and that she could not later reject the contract.
An “unsigned written agreement”
The crux of the Court’s ruling is that while the FAA requires a written arbitration agreement, it does “not require an arbitration agreement be signed by the parties entering into the agreement.” Memorandum Opinion at 25. The FAA, 9 USC § 2, provides that “an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable . . .” The Court is correct that the FAA does not specify a signed written agreement. But an “unsigned written agreement” sounds like an oxymoron.
District Court Bypassed the Statutory Jury Provision
The Court side-stepped having a jury determine whether Plaintiff had in fact accepted the arbitration clause—in a footnote the Court concluded, “there do not appear to be any disputes of material fact in the arbitration issue.” Section 4 of the FAA provides for a special jury trial to resolve this issue when it arises. Ms. Craddock not only demanded a jury in her Complaint, but in a separate pleading specifically demanded a jury “on the issue of whether the parties have entered into a written agreement to arbitrate.” Even though the Complaint allegations support a compelling argument that Ms. Craddock never agreed to the arbitration clause, the Court breezed past the issue.
Interlocutory Appeal — 28 USC § 1292(b)?
Ms. Craddock has appealed Judge Payne’s ruling. But the statutory avenue to an appeal at this juncture is 28 USC § 1292(b) (see acknowledgment above that 9 USC § 16(a)(3) offers a possible, alternate appellate route). The section allows for the interlocutory appeal of an otherwise unappealable order when a district court certifies that the order “involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation.” As of this writing, no certification has been filed by the district court.
In its three-month lifespan in the federal courts, Craddock v. LeClairRyan delivered full-semester coverage of federal civil procedure, contracts, and employment law. If Judge Payne’s ruling moves the dispute behind an arbitration veil, then the continuing CLE contributions of the case likely will come to an end. But the Fourth Circuit still must rule, and we probably have at least one more round of legal education ahead from this case.