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In Shipp v. XA, Inc., No. 06 C 1193, 2006 WL 2583720 (N.D. Ill., Aug. 31, 2006), the United States District Court for the Northern District of Illinois applied a broad arbitration clause to compel arbitration of an employee’s claims even though she had recently been terminated.
Employee Shipp asserted violations of the Family and Medical Leave Act (FMLA), 29 U.S.C. §2601, as well as claims for breach of contract and promissory estoppel, among others. Wishing to pursue her claims through the judicial system, Shipp opposed her employer’s motion to compel arbitration pursuant to her employment agreement.
The Court granted the employer’s motion to compel arbitration, finding that all of Shipp’s claims were within the scope of the arbitration agreement. Her FMLA claims directly implicated the agreement, and it would have been impossible to establish a factual basis for such claims with invoking provisions of the agreement. See Genesco, Inc. v. T. Kakiuchi & Co., 815 F.2d 840, 846 (2d Cir. 1987).
Shipp’s assertion that arbitration would be prohibitively expensive was rejected by the Court. While the initial fees of arbitration were more than mere pocket change, Shipp had already demonstrated a willingness to pursue costly claims through litigation. Arbitration agreements may be unenforceable if a party would “be saddled with prohibitive [arbitration] costs.” Green Tree Financial Corp.-Alabama v. Randolph, 531 U.S. 79, 90-92 (2000). However, even if Shipp could have demonstrated financial difficulties at the time of litigation, courts have held that unconscionability is determined solely by the parties’ financial situation at the time the agreement was made. Am. Heritage Life Ins. Co. v. Lang, 321 F.3d 533, 539 (5th Cir. 2003).
Finally, Shipp argued that the arbitration clause was inoperable because her employment had been terminated. However, her argument was rejected because federal arbitration law presumes that an arbitration provision survives termination of a contract, unless there is clear evidence of intent to override this presumption. See Nolde Bros., Inc. v. Local No. 358, Bakery and Confectionery Workers Union, 430 U.S. 243, 255 (1977).
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