By Lori Phillips
Modern Space, located in Shanghai, China, extended to Plaintiff a written offer of employment setting out basic terms, including the requirement that the parties enter a separate, written employment contract (“Labor Contract”). The Labor Contract included an arbitration provision requiring any dispute arising under the contract to be submitted to arbitration within 60 days. Fast-forward a year. Modern Space terminated Plaintiff’s employment. Later, it brought a trade secret misappropriation claim against Plaintiff in Illinois district court. Plaintiff then filed a counterclaim against Modern Space and a third party complaint against two of its affiliates for breach of the employment agreement. Modern Space and its affiliates moved to compel arbitration of Plaintiff’s claims.
Plaintiff opposed arbitration on several grounds, all of which the court rejected. First, he argued the Labor Contract was executed under false pretenses because it was written in Chinese. Because Plaintiff’s challenge was to the Contract as a whole, and not the arbitration provision specifically, the Court held his argument must be referred to the arbitrator. Plaintiff then argued the Labor Contract was substantively unconscionable because it gave him only 60 days to bring a claim to arbitration. Because Modern Space stipulated that it would not challenge as untimely any of Plaintiff’s contractual claims, the Court found no basis for invalidating the arbitration provision for the restrictive time limit. The Court also rejected Plaintiff’s argument that the affiliates, as non-signatories, could not compel arbitration, holding that the claims against them are intertwined with claims against Modern Space brought under the Agreement. Finally, the Court rejected Plaintiff’s argument that Modern Space waived its right to invoke arbitration as to his claims by bringing the initial suit against Plaintiff in district court. The Court differentiated between Modern Space’s misappropriation claim, which arose from activity after Plaintiff’s employment, from Plaintiff’s counterclaim, which rests entirely on the employment agreement. The district court dismissed Plaintiff’s claims in their entirety, citing the Court’s lack of authority to alternatively compel arbitration in a foreign forum.
Lessons? (1) The federal policy in favor of arbitration reaches well beyond the limits of the United States. (2) An employer can help itself by relenting on unconscionable terms such as restrictive time limits. (3) Non-signatories can compel arbitration of claims brought against them—under certain circumstances. (4) Finally, an employer can have its cake and eat it, too, by litigating its own claims in court while forcing plaintiff to litigate his in arbitration, as long as the employer’s claims do not arise under the employment agreement.