Legal Trickery – Eric A. Parzianello

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Law Firm’s Arbitration Clause Not Broad Enough to Include Age Discrimination Claim

Posted by Eric Parzianello on November 20, 2011

A recent Michigan Court of Appeals decision shows that even lawyers’ own arbitration clauses may not be as broad as they intended.

In Hall v. Stark Reagan, former shareholders of the law firm alleged that their shareholder status in the firm was terminated by the remaining attorneys based on their age. The attorneys filed suit in Oakland County Circuit Court based on age discrimination.

The law firm claimed that the parties’ shareholder agreement required the parties to arbitrate any age discrimination claims. The Circuit Court agreed and dismissed the complaint.

The Court of Appeals reversed that decision. It found that the arbitration clause in the shareholder agreement was limited in its scope to disputes relating to the “interpretation or enforcement” of the “rights or obligations” described in the agreement. Since those “rights or obligations” only involved various forms of entitlement to stock ownership, a dispute involving age discrimination was not contemplated by the shareholder agreement.

Because the complaint did not contain any allegation that defendants violated the shareholder agreement, the court concluded that including an age discrimination case “within the scope of an arbitration provision expressly limited to the ‘interpretation or enforcement’ of ‘rights or obligations’ concerning corporate stock would expand the clause’s reach beyond that intended by the parties.”

In many cases, arbitration is preferable to litigation. If you currently have arbitration clauses in your agreements with your employees, make sure they cover all of the potential disputes that can arise.

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