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Eighth Circuit Tells Employer It Can’t Change Rules of the Game Halfway Through

Eighth Circuit Tells Employer It Can’t Change Rules of the Game Halfway Through

By Karla Gilbride
Cartwright-Baron Staff Attorney

Have you ever played cards or a board game with a kid—or maybe even an adult—who hates losing so much that they start making up creative new rules when the game isn’t going their way? These sore loser tactics can be annoying, or maybe even endearing, when you’re playing checkers with your eight-year-old nephew, but when corporate defendants use them in legal conflicts with employees or consumers to try to get the cases thrown out of court, it’s not a laughing matter .

That’s what happened to Richard Messina, who signed a contract to work for two years as Vice President of Sales for North Central Distributing, a company that sells home décor and furniture under the name Yosemite Home Decor. Mr. Messina lives in Minnesota and worked out of his home there. When Yosemite fired him after six months, Mr. Messina filed a lawsuit for wrongful termination in Minnesota state court.

After Mr. Messina sued Yosemite in July of 2014, Yosemite spent eight months litigating the case—first removing it to federal court in Minnesota and then attending a case management conference and submitting a scheduling report that said the case would be ready for trial by August of 2015. Yosemite also filed a motion to move the case to a federal court in Fresno, where Yosemite has its corporate headquarters, arguing that it would be a hardship “to litigate this matter in Minnesota” as opposed to “litigating in the Eastern District of California.”

But when the district court in Minnesota denied its transfer motion—voila! New rule! Yosemite announced for the first time that Mr. Messina had also signed an arbitration agreement and that the case actually could not continue in court at all and had to be decided by a private arbitrator instead. And guess what? According to the terms of the newly introduced arbitration agreement, that arbitration would have to take place in California.

The district court called foul on this strategy, pointing out that Yosemite had plenty of opportunities to mention the arbitration agreement earlier, and that by waiting to do so until after it lost the transfer motion, Yosemite had waived its right to arbitration by acting inconsistently with that right. Yosemite appealed that decision, and in a strongly worded opinion published this week, the Eighth Circuit agreed, ruling that “the timing of Yosemite’s actions demonstrates that it wanted to play ‘heads I win, tails you lose’, which is the worst possible reason for failing to move for arbitration sooner than it did.”

The Eighth Circuit went on to point out that Yosemite’s actions prejudiced, or harmed, Mr. Messina in several ways. During the eight months when Yosemite failed to mention its arbitration agreement, Mr. Messina spent time and money litigating the case in court and defending against the motion to transfer it to California. He would have had to duplicate many of those efforts, including arguing the Minnesota vs. California issue, if the case had to start all over again in arbitration.

This is a victory not only for Mr. Messina, whose case can now go forward in court, but for workers and consumers everywhere. Decisions like this one mean that companies may think twice before trying to change the rules of the legal game when they don’t like the way it’s going.

In addition to arguing this case to the Eighth Circuit on behalf of Mr. Messina, Public Justice has taken on the issue of waiver in numerous other cases where companies have tried to move from court to arbitration to gain a tactical edge, from a Florida case against an investment broker to an Alaska case against Citibank and a New Jersey case against debt buyer Midland Funding. In all of these cases, Public Justice has stood up for the interests of individuals and for the court system, which has enough problems handling crowded dockets and complex cases without fairweather corporate litigants who are happy to play in court when things are going well—only to decide they’d rather take their marbles to arbitration if the tide turns against them.

Karla Gilbride of Public Justice was lead counsel on appeal for Mr. Messina and argued the case to the Eighth Circuit. Co-counsel are Clayton D. Halunen and Ross Stadheim of Halunen Law in Minneapolis, who represent Mr. Messina before the Minnesota district court.