The United States District Court for the Northern District of Ohio recently ordered a False Claims Act (FCA) retaliation claim to arbitration pursuant to a pre-dispute arbitration agreement, rejecting the former employee’s argument that the arbitration agreement unfairly limited the remedies available for such statutory claims. Gilchrist v. Inpatient Medical Services, Inc., No. 5:09CV02345 (N.D. Ohio Aug. 23, 2010).
The plaintiff, a former chief operating officer of a provider of specialty physician staffing services for hospital and in-patient medical facilities, had entered into an employment agreement containing an arbitration clause requiring disputes arising out of or relating to his employment to be resolved exclusively by arbitration. Following his termination, the plaintiff asserted a claim under the whistleblower provisions of the FCA (31 U.S.C. § 3730(h)). The defendant moved to compel arbitration, and the plaintiff asserted that his retaliation claim was not subject to arbitration because the arbitration agreement did not specifically empower the arbitrator to award the full range of statutory remedies.
The court noted that “[f]ederal statutory causes of action like [an] FCA retaliation claim ‘may be the subject of an arbitration agreement enforceable pursuant to the FAA’” (Gilchrist, at 4 (quoting Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26 (1991))). However, “by agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute; it only submits to their resolution in an arbitral, rather than a judicial, forum” (Mistubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628 (1985)).
The FCA retaliation statute “permits courts to award successful plaintiffs ‘reinstatement with the same seniority status that employee, contractor, or agent would have had but for the discrimination, two times the amount of back pay, and compensation for any special damages sustained as a result of the discrimination, including litigation costs and reasonable attorneys’ fees’” (Gilchrist, at 8 (quoting 31 U.S.C. § 3730(h)(2))). The arbitration clause empowered the arbitrator “to order backpay, severance compensation, reimbursement of costs, including those incurred to enforce this Agreement, and interest thereon,” but precluded the arbitrator from awarding punitive damages (Id. at 7-8). The plaintiff argued that the arbitration agreement “preclude[d] the arbitrator from awarding him double backpay; reinstatement; or compensation for ‘special damages’” (Id. at 8).
The court noted that punitive damages are not available in FCA retaliation cases. Therefore, the prohibition against punitive damages in the arbitration clause did not inhibit the plaintiff’s ability to obtain relief provided by the statute. The arbitration agreement did “not affirmatively restrict [the plaintiff’s] access to any relief other than punitive damages; regarding the availability of double backpay, reinstatement, and special damages, the Arbitration Provision is silent” (Gilchrist, at 10). “[T]he Arbitration Provision does not expressly bar the arbitrator from awarding any of the relief set forth in 31 U.S.C. § 3730(h)(2), and thus [the plaintiff’s] contention that the arbitrator will construe the agreement in the restrictive manner he suggests amounts to sheer speculation” (Id.).
Arbitration has long been recognized as a fair and cost-effective method of resolving disputes, including those arising under federal statute. Where, as in this case, the arbitration agreement merely requires resolution in an arbitral, rather than judicial forum, and does not preclude or limit the arbitrator’s powers to award statutorily-available remedies, the arbitration agreement generally will be enforced by courts.