In Russell v. Citigroup, Inc. the Sixth Circuit held that an agreement to arbitrate “all employment-related disputes” with the company does not include cases already pending in court when the employee signed the arbitration agreement.

Background

From 2004 to 2009, Keith Russell worked at Citicorp’s call center in Florence, Kentucky. As a condition of employment, he signed an arbitration agreement, which covered individual claims but not class actions. In January 2012, Russell filed a class action against the company claiming wage/hour violations. Because the arbitration agreement did not extend to class actions, Citicorp did not seek to arbitrate the class matter.

To complicate an otherwise uncomplicated case, in late 2012, with the lawsuit still in progress, Russell applied to work once more at Citicorp’s call center in Florence, Kentucky. The call center agreed to rehire him. By this time, Citicorp had updated its standard arbitration contract to cover class claims as well as individual ones. Russell signed the new contract, and in January 2013 began working in the call center. Relying on the new contract, Citicorp sought to compel Russell to arbitrate the class action, which was in the discovery stage. The district court concluded that the new arbitration agreement did not cover lawsuits commenced before the agreement was signed.  Citicorp appealed.

The Sixth Circuit’s Opinion

A section of the arbitration agreement, captioned “Scope of Policy,” provided:

This Policy applies to both you and to Citi, and makes arbitration the required and exclusive forum for the resolution of all employment-related disputes (other than disputes which by statute are not subject to arbitration) which are based on legally protected rights (i.e., statutory, regulatory, contractual, or common-law rights) and arise between you and Citi, its predecessors, successors and assigns, its current and former parents, subsidiaries, and affiliates, and its and their current and former officers, directors, employees, and agents . . . .

The question before the Court was whether this language applied to the pending class action, and it held that it did not for two main reasons. First, the present tense text of the policy suggested the agreement does not displace pending lawsuits as it used “arise,” as opposed to the past-tense “arose” or present-perfect tense “have arisen.” This language suggested the contract was only intended to govern disputes that occurred in the present or future, not past.

Second, the preamble of the agreement labeled “Statement of Intent” provided “Citi values each of its employees and looks forward to good relations with, and among, all of its employees. Occasionally, however, disagreements may arise between an individual employee and Citi . . . Citi believes that the resolution of such disagreements will be best accomplished . . . by external arbitration.” Since the language of the preamble looks forward, not backward, the Court found “the text of the agreement and its preamble show the parties signed this agreement to head off future lawsuits, not to cut off existing ones.”

Takeaways

While courts favor arbitration, as the Sixth Circuit made clear, “arbitration is a matter of consent, not coercion,” and a provision in a contract must be interpreted against the backdrop of “the contract as a whole, . . . the situation of the parties and the conditions under which the contract was written,” not in isolation. In contract interpretation, the words the parties use matter, and as this case demonstrates, the tense of those words also matters. The decision makes sense, both grammatically and logically, and highlights the importance of the words, and word tense, contracting parties choose to use.