Hill v. Ricoh Americas Corp.

• Decision Date: 19 April 2010
• Docket Number: No. 09-3182.,09-3182.
• Citation: 603 F.3d 766
• Parties: Phillip HILL, Plaintiff-Appellee, v. RICOH AMERICAS CORPORATION, Defendant-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

603 F.3d 766

Phillip HILL, Plaintiff-Appellee, v. RICOH AMERICAS CORPORATION, Defendant-Appellant.

No. 09-3182.

United States Court of Appeals, Tenth Circuit.

April 19, 2010.

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Kimberly S. King (Jeffrey D. Hanslick, with her on the briefs), Husch Blackwell Sanders LLP, Kansas City, MO, for Defendant-Appellant.

Robert J. Wonnell (Carl A. Gallagher, with him on the brief), McAnany, Van Cleave & Phillips, P.A., Kansas City, KS, for Plaintiff-Appellee.

Before HENRY, Chief Circuit Judge, BRISCOE, and HARTZ, Circuit Judges.

HARTZ, Circuit Judge.

Phillip Hill sued Ricoh Americas Corporation in the United States District Court for the District of Kansas, alleging that he was terminated from his position at Ricoh in violation of the Sarbanes-Oxley Act (SOX), see 18 U.S.C. § 1514A, and Kansas common law prohibiting retaliatory discharge.¹ Five months after suit was filed, Ricoh moved to stay the case and compel arbitration under the arbitration clause in its employment agreement with Mr. Hill. The district court denied the motion on the ground that Ricoh's delay in demanding arbitration after engaging in the judicial proceedings had constituted a waiver of its right to arbitrate. Ricoh appeals. We have jurisdiction under 9 U.S.C. § 16(a)(1) (permitting immediate appeal of denial of motions to compel arbitration and to stay proceedings pending arbitration). We reverse the district court's order, and remand with instructions to grant Ricoh's motion to compel arbitration.

I. BACKGROUND

On September 18, 2000, Mr. Hill and Lanier Worldwide, Inc. (which later merged into Ricoh) executed an employment agreement (the Employment Agreement). An arbitration clause in the agreement was separately initialed by both parties.² There is no dispute that Ricoh assumed Lanier's rights and duties under the Employment Agreement. When Lanier merged into Ricoh, Mr. Hill and Ricoh entered into a Retention Bonus Agreement on March 20, 2007. Under that agreement, which contained no arbitration provision, Mr. Hill was to be paid a $20,000 bonus if he maintained his employment with Ricoh through September 30, 2007, and satisfied other specified conditions.

Ricoh terminated Mr. Hill on October 16, 2007. On December 31 he filed a complaint with the Occupational Safety and Health Administration (OSHA), alleging that he had been fired in retaliation for reporting evidence of fraud. OSHA dismissed the action. Although ruling that Mr. Hill had engaged in activities that were protected under SOX and that Ricoh had known of the activities, it found that the activities had not been a factor in his termination.

On November 3, 2008, Mr. Hill filed suit alleging that his termination violated SOX and Kansas common law. Ricoh answered on December 4. The court set trial for March 1, 2010, and set summer 2009 deadlines for completion of alternate dispute resolution (ADR) and completion of discovery. On April 3, 2009, a week after Mr. Hill had provided Ricoh with his initial disclosures under Fed.R.Civ.P. 26(a)(1) and had served Ricoh with his first request for production, Ricoh moved to stay the case and compel arbitration.

Mr. Hill responded that arbitration was inappropriate on several grounds, including (1) the Employment Agreement had been superseded by the Retention Bonus Agreement, (2) the arbitration clause did not guarantee that his rights under SOX would be vindicated in arbitration, and (3) Ricoh had waived its right to arbitrate by its conduct in the dispute, including its failure to raise arbitration as an affirmative defense in its answer. The district court rejected Mr. Hill's supersession argument but ruled that Ricoh had waived its right to arbitration. It did not address Mr. Hill's SOX argument.

On appeal Ricoh argues that the district court erred in holding that it had waived its right to arbitrate. Mr. Hill contends that the district court's waiver decision was correct; and alternatively he argues that the court's decision can be affirmed on the following grounds: (1) that Ricoh waived its right to arbitration by failing to raise the issue as an affirmative defense, as required by Fed.R.Civ.P. 8(c)(1); (2) that the Employment Agreement was superseded by the Retention Bonus Agreement; and (3) that arbitration may not vindicate his rights under SOX. After some preliminary remarks on the Federal Arbitration Act, we address waiver and then turn to Mr. Hill's supersession and SOX arguments.

II. DISCUSSION

A. The Federal Arbitration Act (FAA)

The FAA provides that contractual agreements to arbitrate disputes "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. The purpose of the Act is "to place an arbitration agreement upon the same footing as other contracts and to overturn the judiciary's longstanding refusal to enforce agreements to arbitrate." Glass v. Kidder Peabody & Co., Inc., 114 F.3d 446, 451 (4th Cir.1997) (internal quotation marks omitted). The FAA is a "congressional declaration of a liberal federal policy favoring arbitration agreements." Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). Section 3 of the Act, 9 U.S.C. § 3, obliges courts to stay litigation on matters that the parties have agreed to arbitrate; and Section 4, 9 U.S.C. § 4, authorizes a federal district court to compel arbitration when it would have jurisdiction over a suit on the underlying dispute. See generally Moses H. Cone, 460 U.S. at 24-27, 103 S.Ct. 927 (discussing scope and operation of FAA).

B. Waiver

The district court ruled that Ricoh had waived its right to arbitration by its delay in demanding arbitration until after it had participated in the court litigation for several months. Mr. Hill argues that we should affirm this ruling, and alternatively he argues that Ricoh waived its right to arbitration by not raising that claimed right in its answer to the complaint. We quickly dispose of this alternative argument and then address the district court's ruling.

1. Failure to Raise Arbitration in Answer

Mr. Hill contends that Ricoh forfeited its right to demand arbitration by not asserting that right as an affirmative defense in its answer to his complaint. He relies on Fed.R.Civ.P. 8(c)(1), which states: "In responding to a pleading, a party must affirmatively state any avoidance or affirmative defense, including ... arbitration and award."

Mr. Hill's argument is based on a misunderstanding of the term arbitration and award. The defense set forth in Rule 8(c)(1) is not that the claim should be arbitrated rather than adjudicated in court; it is that the claim has already been resolved by an award in arbitration. See Forms, Inc. v. Am. Standard, Inc., 550 F.Supp. 556, 557 (E.D.Pa.1982) (party seeking arbitration did not waive its right to arbitrate by not raising it as a defense in its answer), aff'd, 725 F.2d 667 (3d Cir.1983) (unpublished table decision); Mapes v. Chevron USA Prods. Co. a Div. of Chevron U.S.A., Inc., 237 F.Supp.2d 739, 745 (S.D.Tex.2002) (same); Lee v. Grandcor Med. Sys., Inc., 702 F.Supp. 252, 254 (D.Colo.1988) (same); 5 Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 1270 at 562 (3d ed.2004) (arbitration-and-award provision in Rule 8(c)(1) applies only if "the dispute has already been resolved by an arbitration and award."). Thus, Ricoh was not required by Rule 8(c)(1) to demand arbitration in its answer.

2. Waiver by Delay in Demanding Arbitration

We now address the ground on which the district court denied Ricoh's motion to compel arbitration. Mr. Hill argues that Ricoh waived its right to arbitration by participating in the court litigation for several months after answering the complaint. The historical facts are not disputed. Therefore we review de novo the district court's denial of Ricoh's motion, applying the same legal standard that the district court should apply. See MidAmerica Fed. Sav. & Loan Ass'n v. Shearson/Am. Express, Inc., 886 F.2d 1249, 1259-60 & n. 5 (10th Cir.1989). We summarize the events in the litigation, then turn to the governing law, and conclude with our application of the law to the facts before us.

a. Court Proceedings

Mr. Hill filed suit on November 3, 2008. Ricoh answered on December 4. On January 27, 2009, a magistrate judge set a scheduling conference for March 18, 2009, and ordered the following:

Pursuant to Fed.R.Civ.P. 26(f), no later than March 4, 2009, the parties, in person and/or through counsel, shall confer to discuss the nature and basis of their claims and defenses, to discuss the use of mediation or other methods of alternative dispute resolution (ADR), to develop a proposed discovery plan, and to make or arrange for the disclosures required by Fed.R.Civ.P. 26(a)(1).

Aplee. Supp.App. at 7 (Initial Order Regarding Planning and Scheduling at 1, Hill v. Ricoh, No. 08-2548-KHV-DJW (D.Kan. Jan. 27, 2009)). On March 19 the court issued a scheduling order setting the deadline for completion of ADR at June 10, 2009; the deadline for completion of discovery at September 18, 2009; and the trial for March 1, 2010. The order also instructed each party to make a good-faith effort to settle and to provide the court by April 10, 2009, with a report summarizing the party's settlement efforts.

On March 27, 2009, Mr. Hill served a request for production of documents and both parties served their initial disclosures under Fed.R.Civ.P. 26(a)(1). A week later, on April 3, 2009, Ricoh moved to stay the case and compel arbitration. The district court denied the motions.

b. Waiver of Arbitration in General

This circuit's leading opinion on waiver of the right to arbitrate is Reid Burton Construction, Inc. v. Carpenters District Council of Southern Colorado, 614 F.2d 698 (10th Cir.1980). On a prior appeal in that case, we had held that a party, "because of conduct...