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Choose Your Words Carefully When Drafting Arbitration Provisions, According to The Sixth CircuitBryce LenoxBy Bryce A. Lenox, Esq. on Tuesday, January 13, 2015While the phrases “arising under” or “related to” may seem interchangeable, in United States ex rel. Paige v. BAE Sys. Tech., the Sixth Circuit recently distinguished them for purposes of determining whether the claims at issue required mandatory arbitration.  The Sixth Circuit held that an arbitration clause requiring arbitration of “any dispute arising from this Agreement” did not cover the statutory retaliation claim of an employee under the False Claims Act.

In BAE, the appellants filed a qui tam action alleging, among other things, that appellee BAE Systems Technology Solutions & Services, Inc. (“BAE”) violated § 3730(h) of the False Claims Act by retaliating against them for cooperating with investigation authorities and “whistleblowing” under the FCA.  Appellants’ contract with BAE stated that “any dispute arising from this Agreement, which cannot be resolved through normal practices and procedures of the Company, shall be resolved through a mediation/arbitration approach,” and if the mediation is unsuccessful, “the dispute shall be decided by binding arbitration…”  The district court dismissed the claim on the basis that the employment agreement required mandatory arbitration.

On appeal, the Sixth Circuit reversed, holding that the mandatory arbitration clause found in the employment agreement does not cover Appellants’ FCA retaliation claim because that claim does not arise under the terms of the employment agreement. The court noted that Appellants’ FCA retaliation claim is purely statutory and exists independent of the employment agreement, and because the employment agreement does not reference the FCA, retaliation or statutory claims anywhere, such claims cannot be brought within the purview of the arbitration provision.  The Court distinguished the “arising out of” language in the employment agreement from other cases where the agreement mandated arbitration of claims “related to” the contract, the latter being broad enough to encompass claims falling outside the contract.    

The takeaway from this case is that companies should check their contracts to confirm that their mandatory arbitration and mediation provisions are broadly drafted so as to encompass all claims, whether or not those claims “arise out of” the contract.
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