Chapter 32 - § 32.4 • TERMS OF ARBITRATION AGREEMENTS

• Jurisdiction: Colorado

§ 32.4 • TERMS OF ARBITRATION AGREEMENTS

§ 32.4.1—Scope Of Claims

Employers and employees may agree to limit the scope of claims subject to an arbitration agreement. Volt Info. Sciences, Inc. v. Bd. of Trustees, 489 U.S. 468, 479 (1989) (parties may contractually limit issues subject to arbitration). An arbitration agreement should clearly identify the disputes subject to arbitration. Any ambiguity in the agreement will be resolved in favor of arbitration. Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 62 (1995); see also Wales v. State Farm Mut. Auto, Ins. Co., 559 P.2d 255 (Colo. App. 1976).

Courts have looked to the language of the arbitration provision to determine whether a particular dispute is encompassed by the agreement. Arbitration provisions encompassing "all disputes," or all claims that "arise in connection with" employment or termination of employment, usually are held to require arbitration of both statutory and tort claims arising during and after the termination of the employment relationship.²⁵ See, e.g., Digital Landscape Inc. v. Media Kings LLC, 440 P.3d 1200, 1210-11 (Colo. App. 2018) (the phrase "any disputes arising under this agreement will be resolved by binding arbitration" was sufficiently broad to include a counterclaim for the breach of the duty of loyalty; the court looked beyond the nomenclature of the claim and examined the underlying allegations to determine arbitrability). Language limiting the scope of the arbitration provision contained in a broader agreement, such as an employment agreement, to disputes or claims "arising under this agreement," however, may be interpreted to preclude arbitration of statutory, tort, or pre- and post-employment claims.²⁶ Similarly, arbitration language limited to "claims concerning the termination of employment" probably will be interpreted to not encompass wage or benefit claims, promotion or transfer claims, failure to accommodate during employment, or workplace harassment claims.²⁷ Compare Vulcan Power Co. v. Munson, 252 P.3d 511, 515-16 (Colo. App. 2011) (determining that counterclaims raised by an employee in response to a complaint attempting to remove the defendant employee from his employment as president and CEO were not subject to mandatory arbitration, on the ground that the counterclaim, which attempted to remove directors, was not based on a dispute regarding the employee's termination, as provided in the agreement).

The language of the arbitration agreement will also determine whether it may be given retroactive effect, covering claims arising before the arbitration agreement was signed. In Kristian v. Comcast Corp., 446 F.3d 25 (1st Cir. 2006), for example, a group of cable subscribers brought suit for alleged anticompetitive conduct. Although no arbitration agreement existed at the time the defendant began providing service to the subscribers, the defendant had subsequently amended the subscription agreement to include an arbitration clause and had provided notice to the subscribers as part of a billing "stuffer." The First Circuit reversed the district court's denial of the defendant's motion to compel arbitration, finding that the language of the arbitration clause, which provided for arbitration of claims arising from "services" provided by the defendant, was not limited to services provided after the arbitration agreement was made and, thus, it could be applied retroactively. In reaching this conclusion, the court differentiated between arbitration agreements that provided for arbitration of claims arising from "this agreement," or similar language, which are not susceptible to retroactive application. A similar analysis may be applied to arbitration agreements relating to claims arising out of the "employment" relationship as opposed to claims related to a specific "agreement." But see Kinkel v. Cingular Wireless LLC, 857 N.E.2d 250, 258 (Ill. 2006) (distinguishing Kristian and holding that arbitration agreement in subscription agreement amendment did not apply retroactively where customer was not using service on date of amendment).

Although the scope of claims subject to arbitration will generally be construed broadly, particularly where the agreement provides for arbitration of all claims "relating to" the agreement, courts will nevertheless look to the parties' intent to determine whether a particular claim is subject to arbitration. In Breaker v. Corrosion Control Corp., for example, the Colorado Court of Appeals held that claims arising under an employment agreement were not subject to mandatory arbitration, even though the employment agreement was executed in connection with the purchase of the employee's company (in which he was the principal stockholder), and the purchase agreement provided for mandatory arbitration of all claims "arising out of or related to" the purchase agreement. 23 P.3d 1278 (Colo. App. 2001), abrogated on other grounds, 159 P.3d 116 (Colo. 2007). In reaching this conclusion, the court noted that the employment agreement "spoke only to the future relationship" between the company and the employee, and thus involved a different subject matter than the purchase agreement. The court further noted that the employment agreement, which was fully integrated, did not include an arbitration clause or incorporate any terms of the purchase agreement. Thus, the court concluded that, although the purchase agreement included a broad form arbitration clause, the parties did not intend that it would extend to claims under the related employment agreement. 23 P.3d at 1283-84. But see Smith v. Multi-Fin. Sec. Corp., 171 P.3d 1267, 1270 (Colo. App. 2007) ("When an arbitration clause uses the phrase 'arising out of' or 'relating to,' it is broad in scope. Any doubts regarding the scope of an arbitration clause must be resolved in favor of arbitration.").

In Ragab v. Howard, the Tenth Circuit held that a "meeting of the minds" is essential for an agreement to arbitrate. 841 F.3d 1134, 1137-38 (10th Cir. 2016). In that case, the six agreements between the parties, including a consulting agreement, an employment agreement, and an operating agreement, contained conflicting arbitration provisions. The provisions included conflicts about which rules would govern, the applicable notice period, the method for selecting the arbitrator, and entitlement to attorney's fees. The court decided that the conflicts meant that there was no meeting of the minds and thus affirmed the district's court denial of a motion to compel arbitration.

Practice Pointer
Ensure that arbitration provisions contained in various agreements (such as employment, stock option, purchase, etc.) are cross-referenced so that it is clear which will prevail in any given circumstance, or synchronized so there can be no dispute about what procedures apply to a particular dispute.

Practice Pointer
Ensure that your arbitration agreement is clear as to the scope of claims subject to arbitration. With respect to ancillary agreements, such as stock option grants or purchase agreements, clearly indicate whether the arbitration provision applies to all disputes between the parties or only those disputes related to the subject matter of the ancillary agreement. For arbitration agreements entered into during the course of the employment relationship (rather than at the inception), ensure that the agreement specifies whether it has retroactive effect.

Arbitration will not be precluded if arbitrable claims are intertwined with non-arbitrable claims. See Ingold v. AIMCO/Bluffs Apartments, LLC, 159 P.3d 116, 123-24 (Colo. 2007). Colorado courts had previously recognized the "intertwining" doctrine: when arbitrable and non-arbitrable claims are inextricably intertwined, the court will deny arbitration. See Sandefer v. District Court, 635 P.2d 547 (Colo. 1981), overruled in part on other grounds by Sager v. District Court, 698 P.2d 250 (Colo. 1985). However, the U.S. Supreme Court rejected this doctrine under the FAA in Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213 (1985). Following the Supreme Court's reasoning in Byrd, the Colorado Supreme Court held in Ingold that:

The intertwining doctrine unreasonably interferes with the parties' decision to arbitrate their disputes, because it allows the trial court to negate the effect of an arbitration clause without a statutory basis for doing so. Indeed, the intertwining doctrine allows a plaintiff or counterclaimant to avoid its agreement to arbitrate simply by bringing a single non-arbitrable claim. We agree with the Court's analysis in Dean Witter that arbitration agreements are not that mutable.

159 P.3d at 125. The court also cited the Colorado Uniform Arbitration Act, which provided that if the trial court finds the parties have agreed to arbitrate, "the court shall order the parties to proceed with arbitration. . . ." Id. at 124 (citing then C.R.S. § 13-22-204(1)). Based on this language, the court concluded that the "trial court's role is limited: it is to decide whether an agreement to arbitrate exists, and if it does, it must order the arbitration of all claims that fall within the scope of that agreement." Id.; see also Adams v. ModernAd Media, LLC, 2013 U.S. Dist. LEXIS 25263, at *21-22 (D. Colo. Feb. 25, 2013) ("Accordingly, the Court concludes that, because the arbitrable claims are intertwined and predominate over the non-arbitrable claims, it is appropriate to stay this entire case pending arbitration pursuant to 9 U.S.C. § 3") (citing Riley Mfg. Co. v. Anchor Glass Container Corp., 157 F.3d 775, 785 (10th Cir. 1998)).

§ 32.4.2—Limitations On Remedies

In Gilmer, the U.S. Supreme Court addressed the narrow issue of whether the ADEA prohibits enforcement of a pre-dispute arbitration agreement that substitutes an arbitral forum for a judicial forum. A recurring question after Gilmer is whether a pre-dispute arbitration agreement may prohibit the arbitrator from awarding the employee all of the...