Court Upholds Arbitration Clause that Requires Adjudication in Texas :

In Morrison v Ericsson Canada ( 2016 ONSC 3908 Madame Justice Darla Wilson was faced with a dispute over a sales plan that contained the  following clause:

H. Arbitration. Should the participant be dissatisfied with the final outcome of the Dispute Resolution procedure, the participant and Ericsson agree that any dispute or controversy arising under or concerning this Plan (including the payment and amounts of commissions and bonuses) shall be settled by final and binding arbitration in the City of Dallas, Texas in accordance with the Commercial Arbitration Rules of the American Arbitration Association…. The participant’s and Ericsson’s signature upon the participant’s Goal Sheet reflects the parties’ agreement to be bound by this arbitration provision.

As the employee was not paid what he felt he was owed, he claimed that he was constructively dismissed and sued both for the commission owing as well as damages for wrongful dismissal.

The Court found that they were obligated to enforce the choice of arbitration and dismissed the lawsuit.

The final paragraphs of the judgement says it all :

23 In my opinion, the matters at issue fall directly within the terms of the SIP agreement, which requires that if a dispute arising out of the agreement cannot be resolved, the parties must arbitrate the dispute in Texas. The Plaintiff cannot avail himself of the appeal procedures specified in the agreement and when he does not like the decisions rendered, choose to abandon the final dispute mechanism that is set out and which he agreed to. The arbitration has not taken place because the Plaintiff has refused to participate. The fact that it might be inconvenient or expensive for Morrison to arbitrate in Texas is not a compelling reason to find that he ought to be permitted to pursue the Ontario action. Even if there were an issue of whether the dispute was properly sent to the arbitrator, which was not an argument advanced before me, the matter must be referred to the arbitrator for that determination. In my view, the issues Morrison complains of arise from his employment and in particular arise from the administration of the SIP program and as such, he must proceed to arbitration in accordance with the agreement.
24 The motion of the Defendant is granted. The Ontario action is stayed and the Plaintiff is directed to proceed with arbitration of his dispute in accordance with the terms of the agreement he signed.

As the judge noted, this was not a case involving the issue of forum conveniens or choice of law. Once Section 7 of the  Arbitration Act, 1991 is invoked, there is no discretion in the Court to allow a lawsuit to continue. That section reads as follows:

If a party to an arbitration agreement commences a proceeding in respect of a matter to be submitted to arbitration under the agreement, the court in which the proceeding is commenced shall, on the motion of another party to the arbitration agreement, stay the proceeding.

Therefore it is incumbent on lawyers for both parties to closely examine these types of agreements to see whether an arbitration clause is applicable. Arbitration clauses are quite common in US based employment agreements, where they are used primarily to avoid crazy jury verdicts.

145 thoughts on “Court Upholds Arbitration Clause that Requires Adjudication in Texas :”

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