In Dewan, et al. v. Walia, the U.S. Court of Appeals for the Fourth Circuit reversed a trial court's refusal to set aside an arbitration award because the arbitrator demonstrated a "manifest disregard" for the law. How so?
The plaintiff had signed a release of all claims against his employer, which barred any subsequent claim by the employee and in which he promised never to file a "lawsuit" against the employer. The release also included a noncompetition provision. Any disputes were to be resolved through arbitration.
Later the employer filed a claim with the American Arbitration Association, claiming the employee violated the noncompete provision. The employee counterclaimed, and the arbitrator ruled in his favor.
What about the release? The arbitrator ruled that the release only extinguished the employee's common law and state and federal claims if the employee brought them in state or federal court—but not if the employee brought them in an arbitral forum.
This was too much for the Fourth Circuit. On Oct. 28, the judges essentially said the employee made a deal with the release and must be held to it. So, the appeals court, by a 2-1 vote, held that the release was valid and the counterclaims could therefore not support an award on behalf of the employee, and it vacated the award.
The dissent is what interests me. Here is the crux of its reasoning: "Further, I cannot agree with the majority's statement that the release agreement ‘could not be more expansive, clear, or unambiguous.’ … Indeed, the release agreement could have ‘release[d]’ and ‘discharge[d]’ all claims and disputes not just in the form of ‘lawsuit[s]’ or ‘action[s]’ but ‘in any and all forms and in any and all fora.’ … Or it could have made clear that Walia [the employee] ‘promised never to file a lawsuit ... or arbitration or any other form of dispute for adjudication in any forum whatsoever.’ But it did not.”
The lesson: Employers should expand their releases in conformity with the dissent’s point. There is no such thing as being too careful.