Friday, January 8, 2016

Meet the New Boss—Same Arbitration Clause as the Old Boss

Jenks v. DLA Piper Rudnik Gray Cary US LLP, No. A143990 (D1d1 Dec. 16, 2015)

Plaintiff was an associate at an estimable SF Bay Area law firm at the time it got absorbed into a firm that was in the process of merging its way to being one of the world’s largest law firms by headcount. Plaintiffs offer letter from the old firm had an arbitration clause. About a year after the merger, Plaintiff left the firm. His termination agreement, which didn’t have an arb clause, extended his benefits for about six months. Plaintiff subsequently sued the firm over a benefits issue. The firm successfully compelled an arbitration, in which Plaintiff won, but not as much as he would have liked.

Plaintiff challenged the original decision compelling arbitration, both in motion to vacate and then on appeal. For the first time on appeal, he argued that the successor firm wasn’t a party to the contract with the arbitration clause. Even if he didn’t forfeit the argument—which he did—as the surviving entity after a merger of partnerships, and in the absence of a novation, the successor firm accedes to the rights under any ongoing contracts with the prior firm. So it could enforce the arbitration clause.

Nor, as plaintiff argued, did the termination agreement novate the original employment contract. Although it had a merger clause disclaiming prior agreements, the clause was limited to agreements “with respect to the subject matter hereof.” Because that subject matter did not include a forum for the resolution of disputes, it did not work a novation on the arbitration obligations of the former employment contract, which remained in effect.


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