Bass, Berry & Sims attorney Chris Lazarini analyzes whether a stay is appropriate in a case involving both arbitrable and nonarbitrable claims. Chris provided the analysis for Securities Litigation Commentator. The full text of the analysis is below and used with permission from the publication. If you would like to receive additional content from the Securities Litigation Commentator, please click here to sign up for the newsletter.
Harajli vs. Bank of America, N.A. & Merrill Lynch No. 14-CV-12173 (E. D. Mich., 10/2/14)
In a dispute involving both arbitrable and nonarbitrable claims, the trial of the nonarbitrable claims may be stayed upon a showing that the nonarbitrable claims depend upon the same facts and are inherently inseparable from the arbitrable claims such that the arbitration might resolve the issues or where staying the litigation promotes the federal policy in favor of arbitration.
Plaintiff alleged that, while he was employed by Defendants for six months in 2013, other employees made discriminatory remarks to him, verbally harassed him, subjected him to unwanted touching and made false accusations about him. Plaintiffs U-5 stated that he was discharged for engaging in conduct inconsistent with firm standards. Shortly after his termination, Plaintiff filed this action, alleging statutory discrimination and retaliation claims and a common law defamation claim. Defendants moved to compel arbitration of the common law defamation claim and a stay of the statutory claims pending the arbitration. Plaintiff conceded that the defamation claim was subject to mandatory arbitration and opposed Defendants’ motion to stay the statutory claims (see FINRA Rule 13201, stating that a “claim alleging employment discrimination … in violation of a statute, is not required to be arbitrated under the Code.”).
The Court grants the unopposed motion to compel arbitration of the defamation claim and considers whether the nonarbitrable statutory claims should be stayed. A stay is appropriate where the nonarbitrable claims depend upon the same facts and are inherently inseparable from the arbitrable claims, such that the arbitration might resolve the issues or where staying the litigation promotes the federal policy in favor of arbitration. The Court concludes that, while there is some overlap in the issues to be considered by the arbitration panel, a stay is not warranted because the panel’s determination on Plaintiffs defamation claim, even if favorable to Defendants, would not resolve the statutory employment discrimination claims. Those claims require a broader analysis than the one the panel will make on the defamation claim.
The Court notes that, in presenting his employment discrimination claims, Plaintiff may proceed under either a burden-shifting framework or mixed-motive theory. The burden-shifting framework requires Plaintiff to establish that he was a member of a protected class, was qualified for the job, suffered an adverse employment decision and was treated differently than similarly situated non-protected employees. If Plaintiff makes this prima facie showing, the burden then shifts to Defendants to offer a legitimate non-discriminatory reason for the adverse employment action. If Defendants meet this burden, the burden shifts back to Plaintiff to show that Defendants’ stated reason was only a pretext for discrimination. The Court concludes that the panel’s decision on the defamation claim will not address whether there was a legitimate basis for Plaintiffs termination.
The Court reaches the same conclusion analyzing the mixed-motive theory for proving discrimination. Under that theory, which has lesser remedies, Plaintiff need prove only that his national origin and religion were motivating factors in his termination. Again, the Court notes, even if the panel determines that Plaintiff was, in fact, discharged for conduct Inconsistent with firm standards, Plaintiff might still recover on his mixed-motive theory. The Court does not address the issue of whether a stay would promote the federal policy in favor of arbitration.