Court Rejects Arbitration Clause in Gang-Rape Case

Jamie Leigh Jones' claim that she was gang-raped by co-workers in Iraq four years ago has become a rallying cry for congressional efforts to ban the mandatory binding arbitration clauses that thousands of companies insert into their employment contracts.

Jones is part of a growing political lobby spearheaded by the plaintiffs' bar and consumer advocates against pre-dispute mandatory arbitration. Their cause got a legal boost recently when the 5th Circuit affirmed that Jones may sue her ex-employer, Halliburton Co./KBR Kellogg Brown & Root, even though she signed an employment contract with wholly owned subsidiary Overseas Administrative Services Ltd. that requires virtually all disputes to be privately arbitrated.

In a decision for which Halliburton has requested en banc review, the 5th Circuit split 2-1 Sept. 15 to allow Jones to sue the U.S. defense contractor for assault and battery, intentional infliction of emotional distress, forcible confinement, and negligently hiring, retaining and supervising the men she alleges raped her. The alleged incident took place in 2005 when Jones was a 19-year-old clerical worker in Baghdad's Green Zone.

Jones' lawyer, Houston attorney Todd Kelly of The Kelly Law Firm, says he believes Jones' case is the first time Halliburton's sweeping arbitration clause has been defeated in court.

Kelly argues mandatory binding arbitration can work for parties with equal bargaining power but not when an employer imposes private arbitration on individuals as a condition of their employment. "Employers sell it as quicker, cheaper and confidential," Kelly says, "but if it were fair it wouldn't have to be forced."

Many employers embrace mandatory binding arbitration as a fast and effective way to handle disputes with their employees. According to testimony at a recent Senate hearing, 15 to 25 percent of employers nationally have adopted mandatory employment arbitration procedures, and arbitration is used to resolve disputes involving at least one-third of the nation's non-union employees.

"Courts across the country broadly favor arbitration, and it would take a case like [Jones] with some unusual twist to allow an employee to get out of an arbitration agreement," says Reggie Belcher, a shareholder at Turner Padget Graham Laney.

Outer Limits

Jones alleged that she was drugged at an after-hours party and then, while unconscious in her barracks bedroom, repeatedly sexually assaulted by several Halliburton workers. That was enough of a departure from ordinary workplace misconduct to convince the 5th Circuit's majority to uphold the U.S. District Court for the Southern District of Texas' refusal last year to compel Jones's claims into private arbitration.

Halliburton's broadly worded arbitration clause stipulated that "any and all claims that you might have against employer related to your employment" and "any and all personal injury claim[s] arising in the workplace" must go to binding arbitration rather than court.

The 5th Circuit found the claim exceeded the "outer limits" of even that expansive wording because the alleged torts occurred while Jones was off duty and, moreover, they didn't "arise in the workplace."

If the decision stands, it may embolden plaintiffs attorneys who find themselves on the losing end of employers' motions to compel arbitration.

"Certainly if you are a lawyer and you represent employees and you are trying to wriggle out of an arbitration agreement, this is a case that you would cite," Belcher says.

PR Boost

Halliburton's failed motion to compel arbitration was a public relations boost for the proposed Arbitration Fairness Act (AFA), which would prohibit pre-dispute mandatory arbitration clauses in employment and consumer contracts.

"Pre-dispute, mandatory, confidential, binding arbitration has made corporate entities above the law," Jones testified Oct. 7 at a Senate hearing.

In other testimony, Jackson Lewis Partner Mark de Bernardo warned on behalf of a group of large employers that if the AFA passes, "it would in effect spell the end of all employment arbitration in America. The cost to employees and employers and to the interests of justice and sound employee relations would be enormous and extremely destructive."

That view cut little ice in Congress the day before when Sen. Al Franken, D-Minn., pushed through, with bipartisan support, the "Jones amendment" to the 2010 Defense Appropriations Bill. The amendment would bar federal funds to defense contractors that use mandatory arbitration for claims of workplace discrimination, sexual assault and other torts.

Because the House did not include similar arbitration language in its version of the defense spending bill, it will be up to a House-Senate conference committee to decide whether Franken's amendment will remain in the legislation.

Join the Conversation

Advertisement. Closing in 15 seconds.