Oldroyd v. Elmira Sav. Bank, FSB

• Citation: 134 F.3d 72
• Decision Date: 14 January 1998
• Docket Number: No. 315,D,315
• Parties: 13 IER Cases 1025 Richard OLDROYD, Plaintiff-Appellee, v. ELMIRA SAVINGS BANK, FSB, Defendant-Appellant. ocket 97-7249.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Page 72

134 F.3d 72

13 IER Cases 1025

Richard OLDROYD, Plaintiff-Appellee, v. ELMIRA SAVINGS BANK, FSB, Defendant-Appellant.

No. 315, Docket 97-7249.

United States Court of Appeals Second Circuit.

Submitted Oct. 7, 1997.

Decided Jan. 14, 1998.

Peter H. Bouman, Coughlin & Gerhart, L.L.P., Binghamton, NY, for Plaintiff-Appellee.

Edward B. Hoffman, Sayles, Evans, Brayton, Palmer & Tifft, Elmira, NY (James D. Young, Sayles, Evans, Brayton, Palmer & Tifft, Elmira, NY, of counsel), for Defendant-Appellant.

Before: KEARSE, MINER and CABRANES, Circuit Judges.

MINER, Circuit Judge:

Defendant-appellant Elmira Savings Bank, FSB appeals from so much of an order of the United States District Court for the Western District of New York (Larimer, C.J.) as denies a motion to stay proceedings pending arbitration of plaintiff-appellee Richard Oldroyd's retaliatory discharge claim brought pursuant to 12 U.S.C. § 1831j, the whistleblower protection provision of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), Pub.L. No. 101-73, 103 Stat. 183 (1989), and directs that such claim be prosecuted in the district court because it was not within the scope of the arbitration clause contained in Oldroyd's employment contract.

For the reasons that follow, we vacate the portion of the order of the district court subject of this appeal, with instructions that Oldroyd's retaliatory discharge claim promptly proceed to arbitration.

BACKGROUND

Plaintiff-appellee Richard Oldroyd was hired by defendant-appellant Elmira Savings Bank ("ESB") in 1985. By 1994, Oldroyd had been promoted to the position of vice-president and director of Management Information Systems at ESB. In January of 1994, Oldroyd claims to have informed senior bank officials that Robert Gamer, head of ESB's Consumer Loan Department, had been making a series of illegal loans. Oldroyd claims that he was told to "keep quiet" about this criminal activity. In February of 1994, ESB renewed Oldroyd's written employment contract, which contained the following arbitration clause:

Any dispute, controversy or claim arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a Panel of three (3) arbitrators in Elmira, New York, in accordance with the rules of the American Arbitration Association then in effect.

Oldroyd alleges that, in April of 1994, he informed the United States Treasury Department's Office of Thrift Supervision ("OTS") about the illegal activities at ESB and that, thereafter, he told ESB's president, Robert Carges, of his contact with OTS. OTS subsequently commenced an investigation that led to Gamer's prosecution and conviction on bank fraud charges.

Oldroyd claims that, because he provided information to OTS, ESB senior management subjected him to a course of discriminatory treatment, including what amounted to a demotion and unreasonable job demands. For example, on June 21, 1995, Michael Hosey, then-Executive Vice-President of ESB, ordered Oldroyd to vacate his office and move to what is alleged to have been a storage area in the building's basement, affording Oldroyd no access to ESB's computer system. Additionally, Oldroyd alleges that Hosey stripped him of his supervisory status and staff. As a result of such treatment by ESB claims that Oldroyd had failed for nearly two years to develop and implement an important Disaster Relief Plan (the "Plan") required by OTS. The Plan was necessary to enable ESB to function in the event that a natural disaster disabled ESB's facilities. ESB further asserts that, because of the potentially serious consequences of its failure to comply with this OTS requirement, it relieved Oldroyd on Wednesday, June 21, 1995, of all of his duties except those relating to the Plan. It is undisputed that Oldroyd did not arrive at work on Monday, June 26, 1995, and that he informed ESB the following day that he was ill and would not be returning to work in the near future. Oldroyd did not return to work at all. ESB alleges, however, that (1) Oldroyd failed to provide any specific information concerning his illness, despite ESB's repeated requests for documentation; (2) ESB informed Oldroyd by letter dated October 10, 1995 that his salary would be discontinued due to the lack of medical documentation corroborating his illness; and (3) Oldroyd's employment accordingly was terminated on or about October 20, 1995 for abandonment of his job.

his superiors, Oldroyd claims that he suffered a nervous breakdown on June 21, 1995, which left him unable to return to work. Oldroyd does not dispute the fact that he did not provide ESB with information concerning his illness, but he alleges that ESB had access to such information through its insurance carrier once Oldroyd filed a worker's compensation claim.

In May of 1996, Oldroyd brought an action in the United States District Court for the Western District of New York, alleging retaliatory discharge under 12 U.S.C. § 1831j, the whistleblower protection provision of FIRREA. Section 1831j provides, in pertinent part, as follows:

No insured depository institution may discharge or otherwise discriminate against any employee with respect to compensation, terms, conditions, or privileges of employment because the employee ... provided information to any Federal Banking agency or to the Attorney General regarding--(A) a possible violation of any law or regulation; or (B) gross mismanagement, a gross waste of funds, an abuse of authority ... by the depository institution or any director, officer, or employee of the institution.

12 U.S.C. § 1831j. In addition to his claim of retaliatory discharge, Oldroyd also asserted a claim for breach of his employment contract. In August of 1996, ESB moved to stay the federal action pending arbitration of both claims, and for other relief.

In January of 1997, the district court found that the breach of contract claim was both arbitrable and within the scope of the employment contract's arbitration clause. The court also found that, although the retaliatory discharge claim under 12 U.S.C. § 1831j was arbitrable, it was not within the scope of the employment contract's arbitration clause. Accordingly, the district court ordered that the breach of contract claim be arbitrated and that the retaliatory discharge claim proceed in the district court. ESB now appeals from so much of the order as denies arbitration of the retaliatory discharge claim.

DISCUSSION

The sole issue on appeal is whether the district court erred in refusing to stay the district court proceedings on Oldroyd's retaliatory discharge claim pending arbitration.

The Federal Arbitration Act (the "FAA") creates a "body of federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the [FAA]." Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 941, 74 L.Ed.2d 765 (1983). Any arbitration agreement affecting interstate commerce, such as the one at issue, is subject to the FAA. Id.; see 9 U.S.C. §§ 1 & 2. Section 3 of the FAA provides for stays of federal proceedings pending arbitration under appropriate circumstances. See generally 9 U.S.C. § 3.

A court asked to stay proceedings pending arbitration must resolve four issues: first, it must determine whether the parties agreed to arbitrate; second, it must determine the scope of that agreement; third, if federal statutory claims are asserted, it must consider whether Congress intended those In this case, we need only address the second and third elements. We see no reason to disturb the determination of the district court that there was an agreement by the parties to arbitrate. Indeed, neither party contests the district court's finding that an agreement to arbitrate is contained in Oldroyd's employment contract. Additionally, since the arbitrability of the retaliatory discharge claim is the only claim before us, the fourth element is inapplicable to the instant case.

claims to be nonarbitrable; and fourth, if the court concludes that some, but not all, of the claims in the case are arbitrable, it must then decide whether to stay the balance of the proceedings pending arbitration. See Genesco, Inc. v. T. Kakiuchi & Co., 815 F.2d 840, 844 (2d Cir.1987) (citation omitted). We review a district court's determinations on these issues de novo. Id. at 846; see also Leadertex, Inc. v. Morganton Dyeing & Finishing Corp., 67 F.3d 20, 27 (2d Cir.1995)(De novo standard of review is used when reviewing district court's determination of the scope of an arbitration clause); New York v. Oneida Indian Nation, 90 F.3d 58, 60 (2d Cir.1996)("[w]e review de novo a district court's determination of the arbitrability of a claim.").

I. The Scope of the Agreement to Arbitrate

ESB argues that the district court erred in finding that Oldroyd's retaliatory discharge claim was outside the scope of the arbitration clause contained in his employment contract. We agree.

Where the parties to an arbitration agreement specifically have excepted a certain type of claim from mandatory arbitration, it is the duty of federal courts to enforce such limitations. Oneida Indian Nation, 90 F.3d at 62. As the Supreme Court has instructed,

the FAA does not require parties to arbitrate when they have not agreed to do so, ... nor does it prevent parties who do agree to arbitrate from excluding certain claims from the scope of their arbitration agreement.... It simply requires courts to enforce privately negotiated agreements to arbitrate, like other contracts, in accordance with their terms.

Volt Info. Sciences v. Board of Trustees of Leland Stanford Jr. Univ., 489 U.S. 468, 478, 109 S.Ct. 1248, 1255, 103 L.Ed.2d 488 (1989) (citation omitted).

There is a strong federal policy favoring arbitration as an alternative means of dispute resolution. See David L. Threlkeld & Co. v. Metallgesellschaft Ltd., 923 F.2d 245, 248 (2d Cir.199...