Eighth Circuit Affirms Denial of Motion to Compel Arbitration Under the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021

08.27.2024

Summary:

The United States Court of Appeals for the Eighth Circuit has upheld a ruling from the District Court for the District of Minnesota, holding that the District Court properly denied Defendant’s motion to compel arbitration because the “dispute” in the case arose after the date that the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (“Act”) went into effect. Famuyide v. Chipotle Mexican Grill, Inc., No. 23-3201, 2024 WL 3643637 (8th Cir. Aug. 5, 2024). The Act provides certain limitations on arbitration in the employment context. This case appears to be the Eighth Circuit’s first formal discussion of the Act.

Facts:

Eniola Famuyide alleged that a co-worker began sexually harassing her soon after she began working at Chipotle Mexican Grill, Inc. (“Chipotle”) in May of 2021. She further alleged that the harassment escalated into an incident of sexual assault in the restroom of the Chipotle where she worked in November of 2021. Famuyide reported the assault to her manager, and she took a leave of absence from work to emotionally recover. While on her leave of absence, Famuyide alleged that she was unable to access the company’s online employee portal and thought she had been terminated on February 15, 2022. On March 1, 2022, Chipotle notified Famuyide that her termination was rescinded and that she had only been terminated due to an error in how her leave of absence was entered into the data management system.

Procedural History:

Famuyide initially filed a complaint in state court on July 26, 2022. The complaint alleged that Chipotle engaged in unfair employment practices under Minnesota law, including having a hostile work environment, reprisal, and retaliation. It also alleged that Chipotle was vicariously liable for the assault, battery, and intentional infliction of emotional distress that the co-worker allegedly inflicted on Famuyide. Further, the complaint alleged that Chipotle negligently hired, retained, and supervised the co-worker and that Chipotle failed to provide a safe work environment. After an unsuccessful mediation, Famuyide voluntarily dismissed her state-court action and filed a claim in federal court with the same allegations on April 20, 2023.

Based on an employment agreement between Chipotle and Famuyide, Chipotle moved to compel arbitration. The District Court denied that motion, finding that the “dispute” in the case arose after the date that the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 went into effect. As a result, any arbitration between Chipotle and Famuyide was not valid or enforceable against Famuyide. Chipotle appealed.

Analysis:

The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 is a federal law that allows a person who alleges to have suffered from conduct constituting sexual assault or sexual harassment to avoid enforcement of a predispute arbitration agreement. The Act applies to cases where the “dispute” or claim arises or accrues on or after March 3, 2022.

The Eighth Circuit concluded that the conduct involved did constitute “disputes” of sexual assault and sexual harassment. Thus, Famuyide was entitled to avoid forced arbitration if the “dispute” in this case arose on or after March 3, 2022. While “dispute” is not defined in the Act, the Eighth Circuit applied the ordinary legal meaning of the term: “conflict or controversy, esp. one that has given rise to a particular lawsuit.”

Chipotle first argued that a “dispute” arises when the underlying conduct of the case occurs, which was when Famuyide’s co-worker sexually assaulted her in the Chipotle restroom on November 23, 2021. The Eighth Circuit rejected that argument by finding that no conflict or controversy existed between Chipotle and Famuyide on November 23, 2021 because Famuyide had not asserted any right, claim, or demand against Chipotle, nor had Chipotle registered any disagreement with Famuyide’s position. Thus, no “dispute” existed at that time to be submitted to arbitration.

Next, Chipotle argued that a “dispute” arose in February of 2022 when Famuyide’s counsel sent two letters to Chipotle. The first letter, sent February 2nd, requested a copy of Famuyide’s personnel record and asked Chipotle to preserve all information that was potentially relevant to the matter because Famuyide’s counsel was “investigating potential claims.” The second letter, sent February 21st, asked Chipotle to respond by March 1st with answers to several questions regarding the sexual assault and for the company’s response to the incident because Famuyide’s counsel was “considering pursuing a civil action against Chipotle.” That letter also inquired about Chipotle’s willingness to discuss “an out-of-court resolution with Ms. Famuyide of her claims.” The Eighth Circuit held that “[t]his sort of exploratory letter from counsel does not establish a dispute or inevitably lead to one.” Although a “dispute” sometimes follows from this sort of correspondence, other times it does not because the client either decides not to pursue a claim after further investigation or because the parties reach a resolution. In this case, Famuyide’s counsel indicated that in February of 2022, they were still “investigating potential claims” and “considering pursuing a civil action.” Such language does not assert that Chipotle violated Famuyide’s rights or demand compensation from Chipotle. Thus, no conflict or controversy existed between Chipotle and Famuyide in February of 2022, so there was no “dispute” that could be submitted to arbitration.

Finally, Chipotle argued that a “dispute” arose on March 1, 2022 when Chipotle’s counsel sent a letter to Famuyide’s counsel. However, Chipotle did not submit that letter into evidence before the District Court entered its order, so it was not part of the record on appeal. Chipotle asked the Eighth Circuit to nonetheless include the letter in the record on appeal by arguing that the Due Process Clause required consideration of the letter. The Eighth Circuit rejected that argument by stating that considering evidence not presented to the District Court is not allowed absent the applicability of a “narrow, rarely exercised exception,” which was not applicable in this case. Rather, “Chipotle had ample opportunity” to submit the letter into evidence before the District Court ruled, including in supplemental briefing after a hearing on this same issue.

For practitioners, this case clarifies when a “dispute” arises for purposes of determining whether the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 applies to the case. Specifically, a “dispute” does not arise when the underlying conduct occurred nor when counsel sends “exploratory” communications to opposing counsel. Rather, a “dispute” arises when a conflict or controversy exists that can be submitted to arbitration.

for more information

Contact John F. Fatino for more information about arbitration matters at (515) 288-6041. Shay A. Slifka, J.D. Candidate, University of Iowa College of Law, assisted in the preparation of this article.

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