Enforcing Agreements To Mediate And To Arbitrate (Garcia v. ISS Facility)

Rules for overlapping activity (photo by Marilyn Swanson)

By: Donald L Swanson

Agreements to mediate and agreements to arbitrate are both enforceable and effective. 

But how they are used together, when they overlap, can get tricky.  That’s illustrated by the case of Garcia v. ISS Facility Services, Inc., et al.  The case begins with a U.S. District Court opinion [fn. 1] and ends with an affirming opinion from the Ninth Circuit Court of Appeals [fn. 2].

In this case, Plaintiff Garcia brings a class action lawsuit against her former employer in a California state court.  Defendant employer removes the class action to a federal District Court (Doc. 1) (note: all docket references are to the federal court proceedings).

Motion to Compel Arbitration

Defendant employer moves the federal District Court to enforce the Arbitration Agreement between the parties, dated May 23, 2018, by compelling arbitration of the disputes identified in Plaintiff Garcia’s lawsuit (see Doc. 7).

Plaintiff Garcia opposes the arbitration enforcement motion, arguing (in Doc. 10):

  • The 2018 Arbitration Agreement between the parties purportedly requires that all disputes arising out of Garcia’s employment be submitted to arbitration;
  • But Defendant changed its dispute resolution policy in 2019, by substituting mandatory non-binding mediation for arbitration—Defendant employer presented Garcia with a Mediation Agreement, which the parties signed on June 13, 2019;
  • Defendant employer drafted the Mediation Agreement, which explicitly provides that it “is the full and complete agreement relating to the resolution of disputes covered by this Agreement”; and
  • The Mediation Agreement supersedes the Arbitration Agreement, so that arbitration cannot be enforced in this context—at all.

Defendant employer replies (Doc. 11):

  • The Mediation Agreement does not supersede the Arbitration Agreement;
  • The integration language in the Mediation Agreement is only partial—it has no force or effect on, and does not supersede, the Arbitration Agreement;
  • The scope of the integration clause in the Mediation Agreement is a mere supplement to—and does not contradict—the express terms of the Arbitration Agreement; and
  • The result is that Plaintiff’s claims must be compelled to arbitration.

Denial of Motion to Compel Arbitration

The U.S. District Court denies Plaintiff’s motion to compel arbitration, finding that the 2019 Mediation Agreement, (i) supersedes the 2018 Arbitration Agreement, and (ii) abandons any and all requirements for Plaintiff Garcia to arbitrate her employment disputes with Defendant employer (Doc. 20).

What follows is the District Court’s rationale.

As part of the initial hiring process in 2018, Garcia signed an Arbitration Agreement with her employer, which applied by its terms to “any claims arising out of or related to Employee’s employment or separation of employment.”  Additionally, the Arbitration Agreement provides a long, illustrative list of the types of claims it covers.

A year later, in 2019, employer presents to Garcia a new set of employment documents, which Garcia signs as requested.  Such documents include a Mediation Agreement that:

  • contains a description of its applicability that is word-for-word identical to the language in the prior Arbitration Agreement; and
  • includes an integration clause stating, “This Agreement is the full and complete agreement relating to the resolution of disputes covered by this Agreement.”

Since the Mediation Agreement tracks the Arbitration Agreement very closely, a reasonable inference is that the latter document was prepared by revising the former.

If not superseded by the Mediation Agreement, the prior Arbitration Agreement would be valid, enforceable, and applicable to Plaintiff Garcia’s claims.

Defendant contends the Arbitration Agreement remains in force because the Mediation Agreement effects only a “partial” integration, leaving the earlier Arbitration Agreement in effect if/when a mediation fails to resolve disputes between the parties.  The Court rejects this contention because:

  • The Mediation Agreement clearly and repeatedly provides that “any dispute, controversy or claim . . . pertaining to any aspect of Employee’s employment” must be mediated;
  • The integration clause means the Mediation Agreement became the “full and complete agreement” of the parties relating to the resolution of all disputes;
  • The scope of the Mediation Agreement is virtually identical to the scope the prior Arbitration Agreement—is not limited to a different or narrower topic, such as the employee’s resignation;
  • The Mediation Agreement expressly provides that it is the parties’ “full and complete agreement” relating to dispute resolution between them—accordingly, the prior Arbitration Agreement no longer has any effect; and
  • The Arbitration Agreement and Mediation Agreement cannot be interpreted as consistent and applying to separate stages (i.e., that disputes are first to be mediated and then arbitrated if/when mediation fails) because the Mediation Agreement is drafted to be a “full and complete” agreement relating to the resolution of disputes.

Ninth Circuit Affirms

The Ninth Circuit Court of Appeal affirms with the following rationale:

  • The language of both the Mediation Agreement and the prior Arbitration Agreement demonstrate that the parties intended the Mediation Agreement to be their exclusive agreement regarding dispute resolution;
  • The integration clause provides that the Mediation Agreement is “the full and complete agreement relating to the resolution of disputes covered by this Agreement”;
  • The “disputes covered” by the Mediation Agreement are “any dispute, past, present or future, that Employer may have against Employee or that Employee may have against Employer” for “any claims arising out of or related to Employee’s employment or separation of employment”; and
  • Nothing in the language of either the Mediation Agreement or the prior Arbitration Agreement requires the conclusion that the Arbitration Agreement was intended to survive the Mediation Agreement’s effective date.

Conclusion

Agreements to mediate and agreements to arbitrate are both enforceable and effective. 

How they are used together, however, can get tricky—and the language is important.  That’s the lesson of Garcia v. ISS Facility Services, Inc.

—————————–

Footnote 1: Garcia v. ISS Facility Services, Inc., et al., Case No. 19-cv-07807 in the U.S. District Court for Northern California (decided March 20, 2020, Doc. 20).

Footnote 2: Garcia v. ISS Facility Services, Inc., et al., Ninth Circuit Court of Appeals, Case No. 20-15633 (decided March 30, 2021—Not for Publication).

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