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Sadler v. General Electric Co.

United States District Court, W.D. Kentucky, Louisville Division

September 30, 2019



          Rebecca Grady Jennings, District Judge.

         Defendant, General Electric Company (“GE” or the “Company”) moves to compel arbitration (“Motion”) [DE 24]. Plaintiffs, Kevin Sadler (“Sadler”), Jude Edelen (“Edelen”), and Michael Krimm (“Krimm”)(collectively “Plaintiffs”) responded [DE 30] and GE replied [DE 34]. The matter is ripe for adjudication. For the reasons below, the Court will DENY the Motion as to Krimm and Sadler, GRANT the Motion as to Edelen [DE 24], and GRANT Plaintiffs’ request for an evidentiary hearing [DE 30].


         Plaintiffs worked GE’s appliance division before GE’s sale of that division to Haier U.S. Appliance Solutions, Inc. [DE 30 at 169; DE 24-1 at 103]. Plaintiffs allege that when GE sold the division, they were told that they were not within the class of employees permitted to transfer to another division of GE. [DE 24-1 at 103–04]. However, Plaintiffs allege that they were later told that they were eligible to transfer to another division. [Id. at 104]. Plaintiffs filed a Complaint claiming promissory estoppel and fraudulent misrepresentations. [Id. at 103–04]. Defendant now moves to compel arbitration pursuant to an arbitration clause that Defendant alleges each plaintiff agreed to. [Id. at 104]. The arbitration clause is contained in a policy known as Solutions, An Alternative Dispute Resolution Procedure (“Solutions” or the “Agreement”) and applied to both GE and all employees not represented by a labor union (“covered employees”). [Id. at 104]. The arbitration clause contains a provision stating that “Covered Employees and the Company are not allowed to litigate a Covered Claim in any court, ” except for preliminary injunctions or temporary restraining orders. [Id. at 105]. Under the agreement, parties must follow the procedure laid out in Solutions, which includes arbitration, and mutually binds both GE and the covered employees. [DE 24-2 at 150].

         Plaintiffs argue that the arbitration agreement is invalid because there is insufficient consideration to support the agreement. [DE 30 at 198–201]. Plaintiffs also claim that “Plaintiff Sadler and Plaintiff Krimm unequivocally deny signing or being advised about the Solutions policy and the record does not sufficiently evidence facts to the contrary.” [Id. at 202]. GE’s motion only included an executed Solutions Acknowledgement signature page from Edelen. [DE 24-3 at 175]. GE asserts that Sadler and Krimm continued to work at GE after Solutions was implemented in 2009, which “served as their acknowledgement of Solutions.” [DE 24-1 at 1–5].


         Congress enacted the United States Arbitration Act of 1925 (“Federal Arbitration Act” or “FAA”), 9 U.S.C. §§ 1–16, and federal and Kentucky law favors enforcing arbitration agreements. See Whalen v. Lord & Moses, LLC, No. 09-CV-0192-JBC, 2009 WL 3766327, at *1 (E.D. Ky. Nov. 10, 2009). The FAA’s purpose was to put arbitration agreements “upon the same footing as other contracts.” Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24 (1991).

         Section 4 of the FAA provides that a party may petition a court to compel arbitration. FAA § 4. Upon such a petition, the Court “shall hear the parties, and upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement.” Id. Yet “[i]f the making of the arbitration agreement . . . be in issue, the court shall proceed summarily to the trial thereof.” Id. Thus, the Court first “must engage in a limited review to determine whether the dispute is arbitrable.” Masco Corp. v. Zurich Am. Ins. Co., 382 F.3d 624, 627 (6th Cir. 2004) (quoting Javitch v. First Union Sec., Inc., 315 F.3d 619, 624 (6th Cir. 2003)).

         In determining whether the dispute is arbitrable, the Court first looks to whether the parties formed a valid arbitration agreement. See Braxton v. O’Charleys Rest. Properties, LLC, 1 F.Supp.3d 722, 725 (W.D. Ky. 2014) (“Such review, the Sixth Circuit advises, requires the Court to determine first whether a valid agreement to arbitrate exists between the parties, and second whether the specific dispute falls within the substantive scope of the agreement.) (internal citations and quotations omitted). “In order to show that the validity of the agreement is ‘in issue, ’ the party opposing arbitration must show a genuine issue of material fact as to the validity of the agreement to arbitrate, ” and the necessary showing “mirrors that required to withstand summary judgment in a civil suit.” Great Earth Companies, Inc. v. Simons, 288 F.3d 878, 889 (6th Cir. 2002) (quoting Doctor’s Assocs., Inc. v. Distajo, 107 F.3d 126, 129–30 (2d Cir.), cert. denied, 522 U.S. 948, 118 S.Ct. 365, 139 L.Ed.2d 284 (1997)).


         GE moves to compel arbitration and stay this lawsuit pending arbitration. [DE 24-1 at 103]. Neither party disputes that Plaintiffs’ claims fall within the substantive scope of the arbitration agreement. Thus, to enforce the arbitration agreement, the Court need only determine whether a valid agreement exists. Kentucky law applies to interpreting the formation of an arbitration agreement. See Seawright v. Am. Gen. Fin. Servs., Inc., 507 F.3d 967, 972 (6th Cir. 2007) (“Because arbitration agreements are fundamentally contracts, we review the enforceability of an arbitration agreement according to the applicable state law of contract formation.”); see also Gray v. Midland Funding, LLC, No. 5:16-CV-00036-TBR, 2017 WL 1293995, at *5 n.3 (W.D. Ky. Apr. 4, 2017).

         A. The Arbitration Agreement is Supported by Sufficient Consideration.

         First, Plaintiffs argue that the arbitration agreement is not valid because it was not supported by consideration. [DE 30 at 198–202]. Plaintiffs claim that under Kentucky law their continued employment is not adequate consideration, and there was no other consideration to support the arbitration agreement. [Id. at 198–99 citing Charles T. Creech, Inc. v. Brown, 433 S.W.3d 345 (Ky. 2014)]. GE urges the Court to follow an unpublished Western District of Kentucky opinion, which held that continued employment be can adequate consideration in arbitration agreements, and Creech’s holding was limited to non-competition agreements. [DE 34 at 210 citing Aldrich v. University of Phoenix, Inc., 3:15-CV-00578-JHM, 2016 U.S. Dist. LEXIS 27591, *24-26 (W.D. Ky. Mar. 4, 2016) (finding that continued employment was adequate consideration to support arbitration provision)].

         The Court, however, need not decide whether continued employment constitutes adequate consideration in this case because the arbitration agreement binds both parties. The Supreme Court of Kentucky has found that “that an exchange of promises ‘to submit equally to arbitration’ constitutes adequate consideration to sustain an arbitration clause.” Grimes v. GHSW Enterprises, LLC, 556 S.W.3d 576, 581 (Ky. 2018) (citing Energy Home v. Peay,406 S.W.3d 828, 835 (Ky. 2013)). Solutions binds both covered employees and GE and requires both parties to submit to arbitration. [DE 24-2 at 150 (“Covered Employees and the Company are not allowed to litigate a Covered Claim in any court.”) (emphasis added)]. As a ...

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