ARBITRATION: UM women’s head basketball coach did not knowingly waive right to bring Title VII sex discrimination claim in Federal Court, arbitration clauses at most gave notice that she was agreeing to arbitrate contractual disputes regarding employment agreement… Christensen.
In 7/16, Robin Selvig, UM head women’s basketball coach for 38 years, announced his retirement. UM hired Shannon Schweyen a month later to be the new head coach. They executed an employment agreement making her head coach 9/1/16 to 6/30/19 and providing:
12. DISPUTE RESOLUTION
a. If any dispute arises under this Agreement, the parties agree to attempt to resolve the dispute in good faith as follows:
1. First, by informal negotiation.
2. If informal negotiations fail to resolve the dispute, the parties agree to seek mediation using a mediator acceptable to both parties.
3. If mediation fails to resolve the dispute within 30 days of initial mediation session, the parties agree to submit to binding arbitration under the provisions of the Montana Uniform Arbitration Act, Title 27, chapter 5, MCA.
Schweyen admits that she read this language but states that UM never explained it to her and she did not understand what it meant or the effect it would have on a future sex discrimination claim. She also asserts that she had never negotiated an employment agreement before and did not feel comfortable negotiating with UM to get “more favorable terms in the agreement.” She did not consult an attorney and alleges that when she told the Athletic Director this he stated, “Good. I’m not going to give you more money anyway.”
Schweyen served as head women’s basketball coach through expiration of her agreement in 6/19. She and UM executed a 2nd agreement keeping her on until 6/20. This agreement contained an identical version of the dispute resolution clause. Once it expired it was not renewed. She sued UM in 11/21 alleging sex discrimination in violation of Title VII of the Civil Rights Act of 1964 by more harshly evaluating her performance compared to that of her male counterparts, targeting her for criticism because of her sex, and not renewing her contract because of her sex. UM moved to compel arbitration based on the dispute resolution clauses in the employment agreements. Schweyen argues that they are unenforceable for a variety of reasons.
The FAA’s “primary substantive provision,” AT&T Mobility (US 2011), provides at 9 USC 2:
A written provision in a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.
To avail itself of this provision, UM must demonstrate that: (1) there is “a valid, written agreement to arbitrate;” and (2) “the agreement to arbitrate encompasses the dispute at issue.” Ashbey (9th Cir. 2015).
Nobody disputes that the employment agreements have dispute resolution clauses outlining a grievance process that culminates in arbitration. Instead, Schweyen argues that these provisions are unenforceable because (1) the Franken Amendment in the 2010 Defense Appropriations Act bars UM from requiring mandatory arbitration of her Title VII claim, (2) UM cannot demonstrate that she knowingly or voluntarily waived her rights under Montana law in agreeing to the clauses, and (3) UM cannot demonstrate a knowing & explicit waiver of her rights to bring her Title VII claims in Federal Court.
The Franken Amendment provides:
SEC. 8116. (a) None of the funds appropriated or otherwise made available by this Act may be expended for any Federal contract for an amount in excess of $1,000,000 that is awarded more than 60 days after the effective date of this Act, unless the contractor agrees not to:
(1) enter into any agreement with any of its employees or independent contractors that requires, as a condition of employment, that the employee or independent contractor agree to resolve through arbitration any claim under title VIII of the Civil Rights Act of 1964; or
(2) take any action to enforce any provision of an existing agreement with an employee or independent contractor that mandates that the employee or independent contractor resolve through arbitration any claim under title VII of the Civil Rights Act of 1964.
This has remained in subsequent defense appropriations.
In Schweyen’s view, the Franken Amendment forbids UM from compelling arbitration of her Title VII claim because it has “been a federal contractor subject to the appropriations act restrictions since at least May 2019.” She points to a 5/19 cooperative agreement with DOD, a 9/19 contract with DOD, and a series of DOD contracts in 2020.
UM contends that even if the Franken Amendment applies to Schweyen’s claim it does not invalidate the dispute resolution provisions or otherwise relieve her from her contractual duty to arbitrate. It further argues that the amendment is inapplicable because none of its DOD contracts falls within its scope or otherwise incorporates the prohibition on inclusion or enforcement of Title VII arbitration claims. And it argues that the amendment is inapplicable because the arbitration clause at issue was not a condition of Schweyen’s employment but a negotiated term. The Court agrees with UM.
The Franken Amendment forbids executive disbursement of appropriated funds for defense contracts “in excess of $1,000,000” unless the contractor agrees not to compel an employee to arbitrate a Title VII employment discrimination claim. It is a restraint on the executive’s ability to disburse appropriations through defense contracts. This is confirmed by the implementing regulations which limit themselves to dictating inclusion of certain contractual language in DOD contracts. A contractor’s refusal to honor this language, when it has been included in a defense appropriation contract, may very well amount to a breach for contract law purposes but neither the amendment nor the implementing regulations provides Schweyen enforcement rights when UM flouts such contractual obligations. The only contrary authority appears to be Ashford (4th Cir. 2020) (describing the Franken Amendment as a “legal prohibition” that “bars defense contractors from mandating arbitration of Title VII employment claims”). But Ashford is non-binding on this Court and conflicts with the amendment’s plain text which limits its reach to actions of the executive in brokering defense appropriation contracts.
Schweyen’s argument that the arbitration clauses cannot be enforced because she did not knowingly or voluntarily waive her rights under Montana law is specifically foreclosed by 9th Circuit precedent. Because this is a federal question case, federal substantive law — the FAA — governs whether this suit is arbitrable. Mortensen (9th Cir. 2013). Because of this “the FAA” generally “preempts contrary state law” such as the rule invoked by Schweyen. Id.
Without question, under Montana law, because “arbitration agreements constitute a waiver of a party’s fundamental constitutional rights to trial by jury and access to courts,” they are only valid where the agreement is “‘voluntarily, knowingly, and intelligently’ made.” Id. But because this rule “runs contrary to the FAA” it is preempted and becomes inapplicable. Id. Because this Court must apply the FAA to UM’s motion to compel arbitration, Montana’s “fundamental rights rule” cannot be used to defeat UM’s motion. Id. All that remains is Schweyen’s argument that under federal law she did not knowingly waive her right to advance a Title VII employment discrimination claim in this federal forum.
Schweyen argues that the arbitration clauses did not sufficiently inform her that she was forfeiting her right to bring Title VII employment discrimination claims in a judicial forum, such that there was a knowing waiver as required by 9th Circuit precedent. UM responds with divergent interpretations of the cases.
Having reviewed the authority, the question becomes, under the Lai (9th Cir. 1994) to Zoller (9th Cir. 2021) line of cases, did Schweyen knowingly enter into an agreement to arbitrate her Title VII claim advanced in this case? The Court concludes that she did not. The Court excises from its analysis her subjective testimony regarding her understanding of the arbitration clause. Zoller (“Zoller’s alleged subjective misunderstanding of the documents is not dispositive because our analysis rests on the explicit terms of the agreement.”); Renteria (9th Cir. 1997) (finding “Renteria’s subjective knowledge” irrelevant because the analysis “turns instead on the language of the arbitration clauses”). Instead, the Court focuses on the language of the employment agreements.
The only language that could possibly have notified Schweyen that she was agreeing to arbitrate a Title VII employment claim is that extending the dispute resolution language to “any dispute aris[ing] under this Agreement.” This language is insufficient to accomplish a knowing waiver of Schweyen’s ability to advance her claim in this Court.
Nelson (9th Cir. 1997) makes the standard clear: “Any bargain to waive the right to a judicial forum for civil rights claims in exchange for employment or continued employment must at the least be express: the choice must be explicitly presented to the employee and the employee must explicitly agree to waive the specific right in question.” The language in Schweyen’s agreements at most notified her that she was agreeing to arbitrate contractual disputes regarding her agreement to be UM’s head women’s basketball coach. Nothing in the agreement explicitly notified her that non-contractual employment disputes such as a Title VII claim would have to be arbitrated.
If the Lai line of cases requires anything, it requires precision by the employer in occasioning a contractual waiver from employees as to their ability to advance employment discrimination claims in a judicial forum. Schweyen’s agreements lacked this requisite precision. Nothing in them put her “on notice that she was somehow entering into an agreement to waive a specific statutory remedy afforded her by a civil rights statute.” Id. Because of this, UM’s motion must be denied.
Schweyen v. UM, 44 MFR 276, 5/5/22.
Linda Correia & Lauren Khouri (Correia & Puth), DC (Pro Hac Vice) and Devlan Geddes & Katherine DeLong (Goetz, Geddes & Gardner), Bozeman, for Schweyen; Paul Lannon & Andrew Silvia (Holland & Knight), Boston (Pro Hac Vice) and Elizabeth Kaleva & Kevin Twidwell (Kaleva Law Office), Missoula, for UM.