Submit responses to the fact pattern attached, answering the given questions that ask you to identify,
discuss, and analyze the contract law concepts illustrated therein. Be sure to
include relevant facts from the narrative in your answer. Be sure to use the
contract terminology presented in your readings.
1. In the federal court in
Denver, The Parke-Gunders Group files a motion to dismiss the lawsuit, to “stay
the litigation” and for an order to compel Clarice to arbitrate in Chicago. Do
you think the company’s motions will be granted? Why or why not? What portion
or portions of the Federal Arbitration Act (in the appendix, below) would
apply, and how?
2. Assuming that she arbitrates
in Chicago, should the arbitrator enforce the covenant not to compete, given
that Clarice made a good faith offer to the company to give back two clients
that had wandered away from The Parke-Gunders Group, and that Colorado law
limits the scope and length of such covenants not to compete? Assuming she
arbitrates in Chicago, would the arbitrator be in accord with the law to
enforce the covenant not to compete? What about the liquidated damages clause?
What would you do as arbitrator, and why?
3. Assume she arbitrates in Chicago
and that her attorney asks the arbitrator to rule on the voluntariness and
legality of (a) the covenant not to compete and (b) the waiver of her rights
under a federal statute, Title VII of the Civil Rights Act of 1964. Her
attorney argues that the covenant not to compete is “null and void” as contrary
to public policy, and that she did not knowingly and voluntarily agree to waive
her right to sue under for sex discrimination.
Even before the arbitration,
Parke-Gunders argues that the only question for arbitration is the one they
posed, but eventually agrees to expedite matters by allowing Clarice’s
attorneys questions to be arbitrated. They are confident that Clarice has
little legal basis for her to argue these questions. At the arbitration, Parke-Gunders’
law firm insists that she has waived her right to sue (a) in the document she
signed on day one authorizing arbitration as the only means of settling
disputes arising out of the employment relationship, and (b) in accepting the
$75,000.00 as a “full release and settlement” of all claims arising out of the
employment relationship.
How do you think the arbitrator
would rule as to the company’s claims in this regard? How do you think an
arbitrator should rule? Does the choice of Illinois law make any difference
here? Why or why not?
4. Suppose that Fiona McClellan
(a well-known Chicago attorney) is chosen to be the arbitrator under the AAA
rules: both parties to the arbitration had her resume, which includes extensive
experience as an arbitrator as well as in matters affecting corporate
governance, discrimination law, and the technology sector. Both parties had
agreed on McClellan as an arbitrator. During the arbitration, McClellan asked
for some background on the employment history between Clarice and Parke-Gunders,
at which time Clarice and her attorneys disclosed to the arbitrator all that
had transpired between Clarice and Mark Blodgett. Attorneys for The
Parke-Gunders Group strenuously objected, claiming that (a) any such
allegations were unproven, and (b) any such allegations and conversations were
expressly prohibited by the non-disclosure agreement, which by its terms
applied to all conversations, public and private, to prevent any disclosures.
Unbeknownst to the company or
Clarice, McClellan had her own experiences with sexual harassment back in the
early 2000s, and it left an impression on her that she would never entirely
get over. Because of this,
McClellan did develop a sympathetic attitude toward Clarice during the
arbitration.
4A. At the arbitration hearing,
which took place about a year after Clarice left Parke-Gunders, evidence was
offered by the company that their gross income during that time had actually
declined only slightly; Blodgett, freed from his fixation on Clarice, and
chastened by Gunders’ warnings, was able to land some very lucrative clients
for the firm. While they had lost two clients to Clarice, Blodgett had picked
up four more, though neither client was quite as lucrative as the two the firm
had (temporarily) lost to Clarice.
Question 4.A.1: Suppose the firm
could not show any damages (loss of annual gross revenues) after Clarice began
competing with them, do you think most arbitrators would award any damages
other than the liquidated damages? Should they?
Question 4.A.2: Should McClellan
award Parke-Gunders the liquidated damages of $250,000 against Clarice? Explain
why or why not. If she does, could Clarice appeal somehow?
Question 4.A.3: Would it be legal
for McClellan to award a lesser amount? Suppose she awards Parke-Gunders
$50,000 of the $250,000. Could Parke-Gunders appeal somehow?
Question 4A.4: With arbitration
awards being (almost always) final and binding, could Parke-Gunders get a court
to compel a new arbitration if they don’t like the award? Should public policy
allow for an appeal from an arbitrator’s decision that one party doesn’t like?
Explain. Could a court take their claim for the breach of a covenant not to
compete, hear the case, and decide the case? Why or why not? Would it be good
or bad public policy if the legal system allowed for that?
4.B At the hearing, McClellan
gets the entire background story on Blodgett’s harassment, and the amount paid
to Clarice in the “release and settlement.” McClellan has done a number of
arbitrations around sexual harassment, and has often spoken with other
arbitrators about such cases. In her opinion, the amount offered ($75,000) as a
settlement was far too low. Something like $200,000 would by more in line with
a typical award for a hostile work environment claim. Suppose McClellan has
already awarded Parke-Gunders $50,000 on the breach of the covenant not to
compete, but in her award, she writes that the company has violated Clarice’s
Title VII rights to be free from sex discrimination, and awards $200,000 to
Clarice, less the $75,000 already paid her. Clarice would then be awarded
$125,000 but only owe Parke-Gunders $50,000.
Question 4.B.1: Do you think that
Parke-Gunders might have any way to get a court to strike the $200,000
(-$75,000) award on the basis of the arbitrator’s bias? How about on the basis
that Clarice had signed a binding non-disclosure agreement (NDA) on her first
day of work, and that the arbitral proceeding was fatally flawed because she
revealed events that had taken place at Parke-Gunders with Blodgett? Or maybe
on the basis that the arbitrator went beyond the specific scope of the issue to
be arbitrated? Which is the best argument for Parke-Gunders, and what would you
as arbitrator do, and why?
5. During the hearing, Clarice
wanted to testify that Alyssa Scofield had told her that the company would not
enforce the covenant not to compete. Attorneys for the company objected
that the parol evidence rule
should be adhered to, and that any oral statements beyond the actual written
documents agreed to must not be considered. Illinois had a fairly strict rule
following the common law: that parol evidence will not be allowed to in any way
modify a written contract. But Clarice had obtained a written “affidavit” from
Alyssa Scofield that she had indeed “promised” that the firm would not pursue a
claim for breach of the covenant not to compete. (As a manager of the firm,
Scofield would have “agency” to give Clarice those assurances.)
Question 5.1. Is the arbitrator
free to ignore the Illinois rules of evidence and consider both Clarice’s oral
testimony and the Scofield affidavit? Should she be free to do so as a matter
of policy?
Question 5.2. If McClellan does
consider it, and takes it to be true, do you think she would make an award of
any amount in favor of the company? If you were the arbitrator, what would your
decision be, and your reasons.
Question 5.3. If she does
consider it, and awards the company nothing, despite the clear rule in Illinois
that parol evidence should not be considered, could the company get the award
overturned on the basis that McClellan manifestly disregarded the Illinois law
in making her award? Explain.
6. In 1925, it was assumed by
most lawyers, judges, and business people that the Federal Arbitration Act
(FAA) section 2 only covered employees actually engaged in interstate commerce,
such as railroad employees. Nothing in the Congressional Record or the FAA
itself gave any indication that all employers could require arbitration of any
employment dispute
That changed in 1992 with the
Supreme Court’s decision in Gilmer v. Interstate Johnson-Lane, which directed
that a pre-dispute arbitration agreement signed on Gilmer’s first day of work
did cover age-discrimination claims, and he was compelled to arbitrate pursuant
to the FAA.
Question 6.1: Could Congress pass
new legislation making it clear that all Title VII claims must be heard in
courts, not by arbitrators? Suppose the Congress amends section 2 of the FAA,
and also specifies in Title VII that all discrimination disputes must be heard in
courts, not before an arbitrator or an arbitral panel. As a matter of public
policy, should they be able to? Is there some benefit in having discrimination
contested in a more public forum?
Question 6.2: If John
Hickenlooper proposed such legislation in Congress, who would be for it, and
who would be against it? (Use the Wilson-Lowi matrix to consider what
individuals, firms, trade associations, or others might lobby Congress on such
an issue.)
