New England Biz Law Update
A Rhode Island-based employee who brought whistleblower, contract and fraud claims against her Texas employer following her termination will have to arbitrate her claims in Texas, a U.S. District Court judge has decided.
Plaintiff Linda Kenerson, who claims her Dallas-based employer fired her after she refused to be “more lax” on compliance with business regulations, sued the company in Rhode Island.
The employer, defendant Elemetal Direct USA, moved to compel arbitration in Texas based on arbitration agreements signed by the plaintiff that stated they were governed by “the Federal Arbitration Act and the laws of the State of Texas” and that any arbitration would be held in Dallas.
Kenerson argued that the provision requiring arbitration in Dallas was invalid because it imposed “substantial, punitive, inequitable barriers” between her and her rights.
But Judge Mary S. McElroy did not agree.
“The Court recognizes the real challenges that arbitration may impose on her, but there are two problems with her theory,” McElroy wrote. “First, the Agreements and their circumstances would put a reasonable person on notice about the possibility of arbitration in Dallas. … The second and more fundamental issue is that she could have opted out of the arbitration requirement … but she did not. Though arbitration imposes some challenges on her now, she never had to accept these terms in the first place.”
Additionally, addressing an issue of first impression in the 1st U.S. Circuit Court of Appeals, for which courts in other jurisdictions are split, McElroy found that if an arbitration agreement contains a forum selection clause, only the District Court in that forum can issue an order compelling arbitration under §4 of the FAA.
Accordingly, she granted Elemetal’s motion to transfer the case to the Northern District of Texas for further proceedings.
The 15-page decision is Kenerson v. Elemetal Direct USA, Inc.
