Arbitration Clauses Survive Termination of Contract
Wednesday, April, 23, 2014
A U.S. Court of Appeals in Cincinnati, Ohio has ruled that arbitration clauses in contracts survive the termination of that contract even if they are not specifically included in the so-called “survival clause” written into the agreement.
The arbitration clause in question was entered into between Hilltop Companies, LLC, and freelance mortgage reviewer Cynthia Huffman in 2011. Huffman was employed in a freelance capacity by Hilltop until 2013. After being terminated, Huffman filed a lawsuit claiming that Hilltop had improperly classified her and other workers as freelance contractors instead of full-time workers, and sought back pay and overtime. When Hilltop attempted to force the issue into arbitration, Huffman’s attorneys claimed that since the contract had been terminated, the arbitration clause no longer applied. A district court denied Hilltop’s request for arbitration, citing the fact that the arbitration clause was not specifically mentioned in the “survival clause” of the contract, but the Court of Appeals disagreed.
The Federal Government and U.S. Supreme Court have been consistently supportive of arbitration clauses in general in recent years, and it’s not surprising that Appeals and Circuit Courts will follow that lead when rendering decisions involving them. Despite the appeal victory, the case is thought likely to prompt companies to specifically list their arbitration language in the survival clauses of their contracts.