Huffman, et al. v. The Hilltop Companies, LLC, 747 F.3d 391 (6th Cir. 2014).
An Arbitration Clause Will Survive Expiration of a Contract Even if the Arbitration Agreement is Not Listed in the Survival Clause
Does the duty to arbitrate survive the expiration of a contract? The U.S. Court of Appeals for the Sixth Circuit, in a case of first impression, said “yes.” The court held there is a rebuttable presumption that an arbitration clause survives the expiration of a contract, even if the arbitration clause is not included in the survival clause. Huffman, et al. v. The Hilltop Companies, LLC, 747 F.3d 391 (6th Cir. 2014).
In Huffman, persons claiming to be former employees sought additional compensation for overtime. The employer refused, asserting that the individuals were independent contractors, not employees. The employment agreements, which had expired, contained 24 clauses, including a broad arbitration clause and a survival clause. The survival clause listed half of the 24 contract clauses, but not the arbitration clause.
When Hilltop moved to compel arbitration, the plaintiffs resisted on two grounds; (1) because Hilltop drafted the agreement, any ambiguity concerning survival of the arbitration clause should be resolved in favor of the plaintiffs; and (2) the omission of the arbitration clause from the survival clause meant that the arbitration clause would expire along with the contract.
As to the first argument, the Sixth Circuit held that the presumption in favor of arbitration should be given effect despite ambiguity in the contract. Next, the court held the contract should be read as a whole to “determine whether the parties unambiguously intended for the arbitration clause to expire with the contract.” Here, the court found that the parties did not clearly intend for the arbitration clause to expire with the contract, citing other provisions of the employment agreement that lasted beyond expiration but were not listed in the survival clause. For example, the survival clause did not include the severability clause, but the court noted it would be “illogical to conclude that upon expiration of the contract, the parties no longer intended the agreement to be severable.”
The court said it could envision an extreme situation where the omission of an arbitration clause from a survival clause could demonstrate intent sufficient to overcome the presumption in favor of arbitration. According to the court, this might happen in a hypothetical case where a survival clause lists 23 of 24 contract clauses as surviving, omitting only the arbitration clause.
Thus, Huffman teaches that an arbitration clause is likely to survive termination of a contract unless the parties expressly provide otherwise. Nevertheless, parties who intend to require arbitration after the expiration of a contract can make their intent clear and minimize unnecessary litigation by listing the arbitration clause in the survival provision.