J&J Can’t Arbitrate Applicant’s Background Check Claims

By Shayna Posses, Law360– A Pennsylvania federal judge held Friday that a would-be employee’s arbitration agreement with a staffing firm can’t be used to force him to arbitrate claims that a Johnson & Johnson subsidiary unfairly revoked his job offer because of a background check, saying his allegations against J&J stem from the Fair Credit Reporting Act, not the contract.

U.S. District Judge Yvette Kane rejected Johnson & Johnson Services Inc.’s renewed bid to compel arbitration of T. Jason Noye’s claims, concluding his allegations against the company aren’t “intimately found in and intertwined with the underlying contract obligations” in the agreements he signed with staffing firm Kelly Services Inc. during the job application process.

“Because plaintiff seeks relief against J&J under the FCRA, which requires a party using a consumer report for employment purposes to provide the report ‘to the consumer to whom the report relates’ prior to taking any adverse action based on the report, plaintiff’s claim against J&J does not rely on any underlying contractual agreement with Kelly as a basis for asserting its claim against J&J,” the judge said.

The decision comes after the judge granted Kelly’s renewed bid to compel arbitration of Noye’s claims against it in early November. The judge had previously denied each company’s respective motion to arbitrate and stay the case in September 2016, but ultimately reversed course with regard to Kelly, noting that Noye had electronically signed an enforceable arbitration agreement during the application process.

J&J subsequently tried to invoke the arbitration provision, too — even though it hadn’t signed the
pact — based on the theory of equitable estoppel, which allows a nonsignatory to an arbitration
agreement to bind a signatory to that agreement under certain circumstances.

In the Third Circuit, those circumstances are limited to situations wherein there’s a close relationship between the entities involved and a connection between the wrongs allegedly committed by the nonsignatory and the nonsignatory’s obligations under the contract in question. However, the latter element is missing here, the judge held, concluding that Noye’s claim against J&J isn’t “sufficiently intertwined with any contractual obligation on the part of J&J.”

Noye filed a proposed class action against J&J and Kelly in December 2015, alleging they violated the FCRA’s disclosure requirements, as well as a requirement to provide applicants with a copy of background check reports and a description of
consumer rights under the statute.

The suit asserted that Noye accepted a job as an operations supervisor at J&J through Kelly, but upon filling out the online application, the recruiter asked about a criminal conviction he had mentioned. He provided more information, but J&J ultimately decided not to hire him based on a background report Kelly had purchased that Noye said misreported four summary offenses as misdemeanors.

The recruiter and J&J filed separate motions to compel arbitration and stay the case in February 2016, arguing the claims were subject to a binding and valid arbitration agreement, and ought to be dismissed.

But Judge Kane issued a pair of orders denying the requests in September 2016, holding that the submitted evidence showed Noye didn’t intend to be bound by an arbitration agreement signed with Kelly.

However, the companies renewed their motions in January and Judge Kane sided with Kelly in November. J&J’s motion was a different story, though, with the court asking for additional briefing regarding whether it could compel arbitration even though the company wasn’t mentioned in the arbitration agreement under the theory of equitable estoppel.

J&J answered in the affirmative, arguing in late November that it is closely related to Kelly, which helps the company recruit and hire employees for its many brands, and that the wrongdoing alleged by Noye is clearly tied to J&J’s contractual obligations because he entered into the arbitration agreement as part of the overall employment application process.

Plus, J&J asserted, Noye repeatedly accuses the companies of concerted misconduct, bringing suit against the pair jointly and describing nearly every factual allegation as an act committed by both. Judge Kane, however, wasn’t swayed Friday, saying that even if she were to find that the companies have a close relationship, equitable estoppel wouldn’t apply because the claims aren’t intertwined with the contract obligations, but rather, seek relief under the FCRA, which provides a separate means of relief against J&J.

The judge also rejected J&J’s alternative ask for a stay on Noye’s claims against it while his arbitration with Kelly is pending, finding the allegations against each respective company too removed to warrant granting the request.

James A. Francis, who represents Noye, told Law360 on Monday that they applaud the court for its thorough analysis.

“I think it should serve as some guidance, hopefully, for other courts that are looking at the issue of when a nonsignatory can bind a litigant to an arbitration clause,” he said.

A representative for Kelly declined to comment Monday, and representatives for J&J didn’t immediately return a request for comment.

Noye is represented by James A. Francis and David A. Searles of Francis Mailman Soumilas PC and Marielle Macher of Community Justice Project.

J&J is represented by Carolyn P. Short, Shannon E. McClure and Michael O’Neil of Reed Smith LLP.

Kelly is represented by Joseph W. Gibley of Gibley & McWilliams PC and Gerald L. Maatman Jr., David J. Rowland, Pamela Q. Devata, Laura J. Maechtlen, Michael W. Stevens and Shireen Y. Wetmore of Seyfarth Shaw LLP.

The case is Noye v. Johnson & Johnson et al., case number 1:15-cv-02382, in the U.S. District Court for the Middle District of Pennsylvania.

–Additional reporting by Nicole Narea. Editing by Alyssa Miller.

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