Jones v. Waffle House, Inc., No. 16-15574 (11th Cir. Aug. 7, 2017) [click for opinion]

In this case, Plaintiff William Jones (“Jones”) applied for employment with a Waffle House restaurant in Orlando, Florida. Waffle House denied his application after it conducted a background check on him. Jones then sued Waffle House in the Middle District of Florida, asserting that Waffle House violated the Fair Credit Reporting Act because it failed to give him a copy of the background check and permit him to dispute the assertions in that report.

Jones brought his claim as a putative class action. While his action was pending, Jones applied for and gained employment at a different Waffle House restaurant in Kansas City. Jones did not inform any Waffle House personnel that he was currently suing the company in Florida; nor did he inform his counsel that he had accepted employment with Waffle House. Consistent with Waffle House policy, Jones signed an employment agreement that contained an arbitration provision, including a “delegation” provision under which the parties agreed that the arbitrator would determine threshold questions relating to the enforceability of the agreement.

Approximately one month after Jones accepted employment with Waffle House, the company’s in-house legal counsel that was managing Jones’s lawsuit discovered that the Kansas City location had hired Jones. Waffle House then immediately moved to compel arbitration of Jones’s claims pursuant to the arbitration provision in his employment agreement.

The district court denied Waffle House’s motion, but the Eleventh Circuit reversed that decision. First, the Eleventh Circuit noted that the delegation provision in the arbitration agreement unambiguously provided that the arbitrator would decide any threshold issues relating to the applicability and enforcement of the arbitration agreement. Jones attempted to argue that the delegation provision was unenforceable, but the court rejected his arguments because they all related to the enforceability of the entire employment agreement, and did not specifically relate to the enforceability of the delegation provision. Nor was the delegation provision “unconscionable,” as Jones argued, because Jones was the only party who knew that he had a pending lawsuit against Waffle House when he signed the employment agreement.

Second, the Eleventh Circuit rejected Jones’s argument that the district court should have decided the threshold issue of arbitrability, despite the presence of a delegation provision, because Waffle House’s arguments regarding arbitrability of the dispute were “wholly groundless.” Specifically, Jones contended that the arbitration agreement was an improper ex parte communication that interfered with the district court’s managerial authority over class actions, and that the arbitration agreement was not broad enough to cover claims that preceded the agreement.

The Eleventh Circuit noted that several courts of appeals had applied a “wholly groundless” exception to the rule that an arbitrator must decide threshold issues of arbitrability when the parties have agreed to delegate such issues to the arbitrator. However, citing analogous Supreme Court precedent, the Eleventh Circuit adopted the minority position that courts must not rule on the merits of a party’s attempt to compel arbitration, no matter how misguided that attempt may be, when the parties have agreed to delegate that issue to the arbitrator. The Eleventh Circuit also noted that, even were it to have applied the wholly groundless exception, it would not have been met in this case, as the arbitration agreement was not an improper ex parte communication with a putative class member, and the arbitration agreement was broad enough that it could conceivably be read to include Jones’s previous attempt at employment.

The Eleventh Circuit therefore vacated the district court’s denial of the motion to compel and remanded the case to the district court with instructions to compel arbitration.

A version of this post originally appeared in the November 2017 edition of Baker McKenzie’s International Litigation & Arbitration Newsletter, which is edited by David Zaslowsky and Grant Hanessian.

Previous articleFailure to take into account evidence: a serious irregularity?
Next articleArbitrability of Venue Questions