Justia U.S. 6th Circuit Court of Appeals Opinion Summaries

The founder and former CEO of a national pizza company brought suit against a public relations firm that had previously provided services to the company. The dispute arose after the plaintiff alleged that the firm leaked confidential and damaging information about him to the press, in violation of a nondisclosure agreement (NDA) that included an arbitration clause. The NDA was executed after the company requested the firm sign it, anticipating close work with the plaintiff during a period of reputational crisis. The relationship between the parties deteriorated following a conference call in which the plaintiff made controversial remarks, which were later reported in the media, leading to his resignation from the company’s board.The case was initially filed in state court and then removed to the United States District Court for the Western District of Kentucky. Over several years, the litigation involved multiple amended complaints, extensive discovery, and dispositive motions. The defendant did not move to compel arbitration until after the district court denied summary judgment on the NDA claim. The district court held a bench trial and found that the NDA was enforceable and contained a binding arbitration provision. However, the court concluded that the defendant had defaulted on its right to arbitrate by actively litigating the case for years before seeking arbitration, and thus denied the motion to compel arbitration.On appeal, the United States Court of Appeals for the Sixth Circuit determined it lacked jurisdiction to review the district court’s contract formation ruling but had jurisdiction to review the default determination. The Sixth Circuit affirmed the district court’s finding that the defendant defaulted on its arbitration rights by seeking a merits resolution in court before moving to compel arbitration. The court dismissed the appeal in part for lack of jurisdiction, otherwise affirmed the district court’s judgment, and denied the plaintiff’s request for sanctions. View "Schnatter v. 247 Group, LLC" on Justia Law

A physician assistant employed by a Michigan hospital, later affiliated with the University of Michigan Health System, was terminated after she refused, on religious and medical grounds, to use gender identity-based pronouns or refer patients for gender reassignment procedures. The hospital had required her to complete training on serving LGBTQ+ patients, which she believed conflicted with her Christian faith and medical judgment. After seeking a religious accommodation and participating in meetings with hospital administrators, she was fired for her refusal to comply with the hospital’s requirements.She filed suit in the United States District Court for the Western District of Michigan against the hospital and several administrators, alleging violations of federal constitutional rights under 42 U.S.C. § 1983, Title VII, and Michigan law. The hospital and its administrators moved to dismiss all claims on the merits, and the district court granted the motion in part and denied it in part, allowing several of her claims to proceed. Only after this partial denial, and more than a year into the litigation, did the hospital invoke an arbitration clause from her employment agreement and move to compel arbitration. The district court granted this motion, found the arbitration clause enforceable, and dismissed the case in favor of arbitration.On appeal, the United States Court of Appeals for the Sixth Circuit reviewed whether the hospital had forfeited its right to arbitrate by substantially litigating the case before seeking arbitration. The Sixth Circuit held that the hospital’s conduct—seeking a complete judicial victory on the merits before invoking arbitration—was inconsistent with the right to arbitrate and constituted “default” under the Federal Arbitration Act. The court reversed the district court’s order compelling arbitration and remanded the case for further proceedings. View "Kloosterman v. Metropolitan Hospital" on Justia Law

In the 1950s, Goodrich Corporation built a vinyl-manufacturing complex in Calvert City, Kentucky, and used unlined ponds for hazardous waste disposal. In 1988, the EPA declared the site a Superfund site. Goodrich sold the complex to Westlake Vinyls, Inc. in the 1990s, agreeing to cover future cleanup costs. In 2000, PolyOne Corporation (now Avient Corporation) assumed Goodrich’s responsibilities. Disputes arose over cleanup costs, leading to a 2007 settlement agreement that included arbitration provisions for future cost allocations.The United States District Court for the Western District of Kentucky previously reviewed the case. Avient had twice sought arbitration under the agreement, first in 2010 and again in 2017. In 2018, Avient challenged the arbitration provisions' validity, but the district court held that Avient had waived this argument by initiating arbitration. The court enforced the arbitration award, and Avient did not challenge this decision. In 2022, Westlake demanded arbitration, and Avient again claimed the arbitration provisions were invalid. The district court granted summary judgment to Westlake, holding that Avient’s challenge was waived and barred by res judicata and judicial estoppel.The United States Court of Appeals for the Sixth Circuit reviewed the case. The court affirmed the district court’s judgment but on different grounds. The court held that the settlement agreement’s provision for de novo judicial review of arbitration awards was invalid under the Federal Arbitration Act, as established in Hall Street Associates, L.L.C. v. Mattel, Inc. However, the court found that this invalid provision could be severed from the agreement without affecting the economic and legal substance of the transactions contemplated by the parties. Therefore, the arbitration provisions remained valid and enforceable. The court affirmed the district court’s judgment. View "Avient Corp. v. Westlake Vinyls, Inc." on Justia Law

Plaintiffs in this multi-district products liability suit allege that they purchased defective Chrysler Pacifica minivans from FCA, which were recalled due to a risk of battery explosions. After the recall, plaintiffs filed seven putative class action suits, which were consolidated in the Eastern District of Michigan. During discovery, FCA discovered that some plaintiffs had agreed to arbitration clauses when purchasing their minivans and moved to compel arbitration for those plaintiffs. The district court denied FCA’s motion, finding that FCA had waived its right to arbitrate by moving to dismiss the entire complaint.The United States District Court for the Eastern District of Michigan denied FCA’s motion to compel arbitration, concluding that FCA had waived its right to arbitrate by engaging in litigation conduct inconsistent with that right, specifically by moving to dismiss the plaintiffs’ claims. The district court made this finding sua sponte, without the plaintiffs raising the issue of waiver.The United States Court of Appeals for the Sixth Circuit reviewed the case and reversed the district court’s decision. The appellate court held that a party cannot waive its right to arbitration without knowledge of that right. The court found that FCA did not know about the arbitration clauses until it obtained the relevant purchase agreements through discovery. Additionally, the appellate court determined that the district court erred by raising the issue of waiver on its own, violating the principle of party presentation. The Sixth Circuit concluded that the district court’s decision was clearly erroneous and remanded the case for further proceedings consistent with its opinion. View "Berzanskis v. FCA US, LLC" on Justia Law

Jessica Hines, a dancer, sued National Entertainment Group, LLC (NEG), an adult entertainment club, for failing to properly compensate its employees under various federal and state laws, including the Fair Labor Standards Act and Ohio wage laws. Hines had signed three separate Lease Agreement Waivers with NEG, each containing an arbitration provision. NEG moved to dismiss the suit or stay the proceedings pending arbitration, arguing that Hines had agreed to arbitrate any disputes.The United States District Court for the Southern District of Ohio denied NEG’s motion to dismiss, finding that Hines had plausibly alleged sufficient facts to support standing. The court also denied NEG’s motion to stay the proceedings pending arbitration, concluding that the arbitration provision was both procedurally and substantively unconscionable, and thus unenforceable.The United States Court of Appeals for the Sixth Circuit reviewed the case and vacated the district court’s denial of NEG’s motion to stay. The appellate court held that the arbitration provision was neither procedurally nor substantively unconscionable. The court found that Hines had reasonable opportunity to understand the plain terms of the arbitration clause, which were not hidden in fine print. The court also determined that the arbitration agreement was supported by adequate consideration and that any inconvenience or potential inconsistency caused by separate actions was not a legitimate basis for overriding the arbitration agreement.The Sixth Circuit remanded the case for the district court to consider the remaining factors under Stout v. J.D. Byrider, which include whether the claims fall within the scope of the arbitration agreement, whether Congress intended the federal claims to be arbitrable, and whether to stay the case pending arbitration if some but not all claims are subject to arbitration. View "Hines v. National Entertainment Group" on Justia Law

Several hair stylists filed a lawsuit against their employer, Lady Jane’s Haircuts for Men, alleging that they were underpaid due to being misclassified as independent contractors instead of employees. This misclassification, they argued, allowed the employer to avoid the Fair Labor Standards Act’s minimum-wage and overtime-pay requirements. The employer moved to dismiss the lawsuit, citing an arbitration agreement in the Independent Contractor Agreement, which required disputes to be resolved through the American Arbitration Association (AAA) under its Commercial Arbitration Rules.The United States District Court for the Eastern District of Michigan reviewed the case and found the arbitration agreement enforceable but severed the cost-shifting provision, which required the stylists to pay arbitration costs exceeding their yearly income. The court ruled that the arbitration would proceed under the less costly AAA employment rules and dismissed the lawsuit in favor of arbitration.The United States Court of Appeals for the Sixth Circuit reviewed the case and affirmed the district court’s decision. The appellate court held that the severability clause in the contract allowed the court to remove the cost-shifting provision while enforcing the rest of the arbitration agreement. The court found that the term “provision” in the severability clause referred to individual clauses within the contract, not entire sections. The court also rejected the stylists’ arguments that the district court had impermissibly reformed the contract and that the arbitration agreement should be unenforceable for equitable reasons. The court concluded that the district court correctly severed the cost-shifting provision and enforced the arbitration agreement under the AAA’s employment rules. View "Gavin v. Lady Jane's Haircuts for Men" on Justia Law

Kassandra Memmer sued her former employer, United Wholesale Mortgage (UWM), alleging discrimination and sexual harassment during her employment. UWM moved to dismiss the lawsuit and compel arbitration based on the employment agreement. Memmer argued that the arbitration agreement was invalid and that she had the right to go to court under the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (EFAA).The United States District Court for the Eastern District of Michigan granted UWM's motion to dismiss and compel arbitration, concluding that the parties had a valid arbitration agreement. The court did not address Memmer's argument regarding the applicability of EFAA. Memmer appealed the decision, asserting that EFAA should apply to her case.The United States Court of Appeals for the Sixth Circuit reviewed the case and concluded that EFAA applies to claims that accrue after its enactment date and to disputes that arise after that date. The court determined that the district court had not applied the correct interpretation of EFAA. The Sixth Circuit reversed the district court's decision and remanded the case for further proceedings to determine when the dispute between Memmer and UWM arose and whether EFAA applies to her claims. View "Memmer v. United Wholesale Mortgage, LLC" on Justia Law

Nicholas and Stacy Boerson, owners of New Heights Farm I and II in Michigan, faced a disappointing corn and soybean harvest in 2019. They submitted crop insurance claims to Great American Insurance Company, which were delayed due to an ongoing federal fraud investigation. The Boersons sued Great American, the Federal Crop Insurance Corporation, and the U.S. Department of Agriculture for breach of contract, bad faith adjustment, and violations of insurance laws.The United States District Court for the Western District of Michigan dismissed the Boersons' claims. It ruled that claims related to Great American's nonpayment were unripe due to the ongoing investigation, while claims alleging false measurements and statements by Great American were ripe but subject to arbitration. The court also dismissed claims against the federal defendants on sovereign immunity grounds.The United States Court of Appeals for the Sixth Circuit affirmed the district court's dismissal. It held that the claims related to nonpayment were unripe because the insurance policy barred payment until the investigation concluded. The court also found that the arbitration agreement in the insurance policy covered the ripe claims against Great American, requiring those disputes to be resolved through arbitration. Additionally, the court ruled that sovereign immunity barred the claims against the federal defendants, as there was no clear waiver of immunity for constructive denial claims under the Federal Crop Insurance Act. View "New Heights Farm I, LLC v. Great American Insurance Co." on Justia Law

Two employees, Tanika Parker and Andrew Farrier, participated in 401(k) plans managed by subsidiaries of Tenneco Inc. The plans were amended to include mandatory individual arbitration provisions, which required participants to arbitrate disputes individually and barred representative, class, or collective actions. Parker and Farrier alleged that the fiduciaries of their plans breached their fiduciary duties under ERISA by failing to prudently manage the plans, resulting in higher costs and reduced retirement savings. They sought plan-wide remedies, including restitution of losses and disgorgement of profits.The United States District Court for the Eastern District of Michigan denied the fiduciaries' motion to compel individual arbitration. The court found that the arbitration provisions limited participants' substantive rights under ERISA by eliminating their ability to bring representative actions and seek plan-wide remedies, which are guaranteed by ERISA.The United States Court of Appeals for the Sixth Circuit reviewed the case and affirmed the district court's decision. The Sixth Circuit held that the individual arbitration provisions were unenforceable because they acted as a prospective waiver of the participants' statutory rights and remedies under ERISA. The court emphasized that ERISA allows participants to sue on behalf of a plan and obtain plan-wide relief, and the arbitration provisions' restrictions on representative actions and plan-wide remedies violated these statutory rights. Consequently, the arbitration provisions were invalid, and the district court's judgment was affirmed. View "Parker v. Tenneco, Inc." on Justia Law

During the COVID-19 pandemic, Kalitta Air, LLC implemented a vaccine mandate for all its employees. Employees who could not receive a vaccination due to a disability or a sincerely held religious belief could request an accommodation and would be placed on unpaid leave. If they remained unvaccinated after the leave period, they could either voluntarily resign or be terminated. Eleven employees, including five pilots, sued Kalitta under Title VII of the Civil Rights Act of 1964 and the Americans with Disabilities Act, claiming that the mandate discriminated against them based on their religious beliefs and/or disabled status.The district court found that the Railway Labor Act precluded it from hearing certain claims by the pilots, who were subject to a collective bargaining agreement. These claims had to first go through arbitration as minor disputes. The pilots appealed this decision.The United States Court of Appeals for the Sixth Circuit affirmed the district court's decision. The court found that the pilots' claims under Title VII and the Americans with Disabilities Act required interpretation of the collective bargaining agreement, and thus were minor disputes that had to be resolved through arbitration. The court also held that the pilots' claim of discrimination based on perceived disability would require interpretation of the collective bargaining agreement, and was therefore also precluded by the Railway Labor Act. View "Odell v. Kalitta Air, LLC" on Justia Law