The federal government and most states favor employee arbitration agreements. That favoritism means courts typically enforce these agreements, and will dismiss employee lawsuits and send them packing off to arbitration. A recent case from South Carolina shows just how far a court will go to enforce one such agreement.
Christopher Landers was a founding shareholder of Atlantic Bank and Trust in 2005. Atlantic contracted with Landers to be its executive vice president and chief mortgage officer. The contract included the following employee arbitration agreement: “[A]ny controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by binding arbitration.”
In 2008, the board was spurred by the then financial collapse to hire an outsider to take over as CEO. The new CEO successfully sought new shareholders to recapitalize the bank. The new shareholders changed the balance of power among voting owners. Subsequently, there were plans to reorganize the bank, terminate Landers, and exclude him from the board of directors.
Landers sued Atlantic in a court of law for breach of his employment contract, slander, intentional infliction of emotional distress, improperly describing the issue of his ouster when put to a vote of the shareholders, and improperly removing him from the board of directors. Atlantic asked the court to throw out Landers’ lawsuit and send him packing to arbitration. Landers replied that, at the very least, his slander, emotional distress, and corporate law matters did not “arise out of or relate to” his employment contract. The trial court agreed, sent only his breach of contract claim to arbitration, and kept the rest of his claims in litigation.
Atlantic appealed this decision and the case wound up in the South Carolina Supreme Court. The SCSC looked at all the facts of the case and found that the trial court should have sent all of Landers’ claims to arbitration, and left nothing in litigation.
In short, the SCSC found that Landers himself had connected each of his claims to his employment. Landers alleged that each claims occurred “because” of something that happened in the course of his employment. Consequently, because the contract covered the whole of Landers’ employment, his own allegations admitted that each of his claims had to be arbitrated instead of litigated.
Although Atlantic prevailed, it may have avoided fighting all the way to the State’s Supreme Court had it arbitration agreement been broader and clearer.