The Tenth Circuit (which covers Colorado, New Mexico, Wyoming, Utah, Kansas, and Oklahoma) has issued an important arbitration decision that creates a split in the circuits and could, in some situations, jeopardize an employer's ability to compel arbitration.
The Tenth Circuit (which covers Colorado, New Mexico, Wyoming, Utah, Kansas, and Oklahoma) has issued an important arbitration decision that creates a split in the circuits and could, in some situations, jeopardize an employer's ability to compel arbitration. See Ansari v. Qwest Communications, Inc., (Tenth Circuit July 12, 2005). In this case, the Tenth Circuit held that arbitration can be compelled only in the jurisdiction outlined in an arbitration agreement, rejecting other interpretations of the Federal Arbitration Act (FAA) that would allow courts to compel arbitration outside their realm.
The plaintiffs in Ansari (a non-employment case) filed an action in the Colorado federal court even though they were a party to an agreement with an arbitration provision specifying arbitration in Washington, D.C. The Tenth Circuit held that Section Four of the FAA (the provision that addresses compelling arbitration) requires motions to compel to be brought in the district specified in the arbitration agreement. The court found that the Colorado district court lacked jurisdiction to compel arbitration in its own jurisdiction or the district specified in the arbitration agreement. According to the court, under Section Four, a geographical relationship must exist between the site of arbitration specified in the arbitration agreement and a district court for the court to have jurisdiction to order arbitration.
The Tenth Circuit noted that courts have taken three different approaches when determining whether a district court may compel arbitration: (1) the Fifth Circuit has held that the district court has jurisdiction to compel arbitration in the district specified in the arbitration agreement, even though that district is outside its own district; (2) the Ninth Circuit has held that Section Four venue provisions are discretionary, not mandatory, and that the district court can compel arbitration in its own district and ignore the forum specified in the arbitration clause; and (3) the Third, Sixth, and Seventh Circuits have held that where the parties agree to arbitrate in a particular forum, only a district court in that forum has the authority to compel arbitration. The Tenth Circuit agreed with these courts in holding that Section Four is mandatory and limits efforts to compel arbitration to a district court within the jurisdiction of the agreement.
Employers' Bottom Line:
The Tenth Circuit's decision puts employers who file motions to compel arbitration in a district other than the one identified in the arbitration agreement at risk of being precluded from arbitrating an employment-related dispute if they do not also include an alternative motion to stay the proceeding pending arbitration. Without such an alternative, the employer is subject to an argument that it is in default in proceeding with such arbitration. This ruling could impact businesses with employees in multiple states who use arbitration agreements that identify a district other than the one in which the employee works as the forum for arbitration.
If you have any questions regarding this decision, employment-related arbitration or other labor or employment related issues, please contact the author of this Alert, John Lowrie 303-592-8866, or the Ford & Harrison attorney with whom you usually work.