Federal Arbitration Act Requires an Immediate Trial to Resolve Genuine Disputes of Material Fact About Arbitrability, Says D.C. Circuit

A district court erred by not holding an immediate trial to resolve a factual dispute about whether the parties agreed to arbitrate an employment discrimination claim. (Jin v. Parsons Corp., No. 19-7019 (D.C. Cir. July 24, 2020).)

The Federal Arbitration Act (FAA) spells out a procedure in 9 U.S.C. § 4 for when there is a factual disagreement about the formation of an arbitration agreement: where “the making of the arbitration agreement or the failure, neglect, or refusal to perform the same be in issue, the court shall proceed summarily to the trial thereof.”

In this case, a claim under the Age Discrimination in Employment Act, the employer-defendant moved to compel arbitration under a putative pre-dispute agreement. The parties submitted competing affidavits about whether the employee-plaintiff ratified the arbitration agreement by continuing to work after receiving notice of it. The district court held that there was a fact dispute about the formation of the contract, then ordered the defendant to answer the complaint and appear at a Fed. R. Civ. P 26(f) discovery conference.  The defendant took an interlocutory appeal of the denial of its motion to compel under 9 U.S.C. § 16(a).

The D.C. Circuit vacates the district court’s pre-trial orders and remands for a trial. After determining that it has appellate jurisdiction over the appeal (concluding, upon review of the record, that the district court made a conclusive determination that denied the motion to compel), it holds that a district court does not have the option under the FAA to disregard a dispute of fact about the formation of an arbitration agreement. “The district court cannot simply deny the motion and continue on with a proceeding on the merits, because if the parties did in fact agree to arbitrate, the party seeking to compel arbitration is entitled to have the case arbitrated.” The panel notes that while the issue of arbitrability can often be resolved as a matter of law, and trials are thus not routinely required, a trial is still mandatory where there is an unresolved factual dispute. The panel also issues a precautionary note to the district courts “that we will not review in futuro denials of motions to compel arbitration based on the existence of genuine disputes of material fact.”

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