Opinion
Civil Action No. 22-1322 (JEB)
2022-08-22
Amy FREESTONE, Petitioner/Plaintiff, v. CACI, INC.-FEDERAL, Respondent/Defendant.
Timothy Marshall Belknap, Washington, DC, for Petitioner/Plaintiff. Henry Adam Platt, Matthew J. Antonelli, Saul Ewing Arnstein & Lehr LLP, Washington, DC, for Respondent/Defendant.
Timothy Marshall Belknap, Washington, DC, for Petitioner/Plaintiff. Henry Adam Platt, Matthew J. Antonelli, Saul Ewing Arnstein & Lehr LLP, Washington, DC, for Respondent/Defendant. MEMORANDUM OPINION JAMES E. BOASBERG, United States District Judge
Splitting the check can be a messy affair. Petitioner Amy Freestone and her former employer, Respondent CACI, Inc.-Federal, are finding as much here. After Freestone and CACI parted ways — they dispute whether she was fired or quit — they commenced mandatory arbitration. When the arbitration stalled, the parties agreed to hold their case in abeyance pending outside discovery. But when the second annual $300 abeyance fee came due, neither side touched the bill, and the arbitration association closed the case. Freestone then brought this action, seeking an order compelling arbitration; in the alternative, she wishes to sue CACI based on the same claims she had brought in arbitration. CACI opposes the Petition to Compel Arbitration and also moves to dismiss Freestone's alternative Complaint. The Court holds that Freestone has waived her right to compel arbitration and accordingly will deny her Petition. Rather than rule now on the alternative Motion to Dismiss, the Court will allow Petitioner to amend her Complaint to more cleanly tee up what remains of this dispute.
I. Background
A. Factual Background
The Court sets forth the largely agreed-upon facts, noting disputes where they arise. Freestone worked for federal contractor CACI, most recently on a project supporting the Department of Justice's IT systems. See ECF No. 1 (Petition), ¶¶ 2, 21. During the summer and fall of 2017, she alleges that her DOJ supervisor began sweeping system vulnerabilities under the rug. Id., ¶¶ 3, 24-27. Petitioner raised concerns in a meeting with DOJ and CACI officials on October 31, 2017. Id., ¶¶ 29-30. She alleges that she was fired the very next day — and to boot, that CACI requested she work for one more week but never paid her for it. Id., ¶¶ 4, 33-38. CACI, conversely, contends that she quit. See ECF No. 4 (CACI Response) at 2-3.
Under the mandatory terms of her employment contract, Freestone pursued arbitration against CACI with the American Arbitration Association (AAA). See Pet., ¶¶ 7, 44. She initiated arbitration on March 30, 2018, and timely filed her detailed Demand for Arbitration on June 8 of that year. Id., ¶ 44. Her Demand contained two counts: in Count I she alleged violations of federal-contractor whistleblower protections contained in the National Defense Authorization Act, 41 U.S.C. § 4712 (NDAA), and in Count II she alleged violations of the D.C. Wage Payment and Collection Act, D.C. Code § 32-1301 (DCWPCA). See Resp., Exh. 2 (Arbitral Order dated Aug. 30, 2018) at 2.
At first, things proceeded smoothly enough. On July 8, 2018, Freestone filed a complaint with DOJ's Office of the Inspector General. See Pet., ¶ 45. CACI then moved to dismiss Count I, arguing that Freestone had not exhausted her administrative remedies by waiting the requisite 210 days after filing an OIG complaint. See Resp., Exh. 1 (CACI Arbitral Motion to Dismiss) at 4 (citing 41 U.S.C. § 4712(c)). The Arbitrator granted CACI's motion and dismissed Count I without prejudice, holding that Freestone must wait 210 days — here, until February 3, 2019 — before seeking redress outside the agency. See Aug. 30, 2018, Arbitral Order at 7-8. The parties then agreed to stay the proceedings for at least 210 days, so that Freestone's two claims could proceed together. See Resp., Attach. 1 (Declaration of Henry Platt), ¶ 5. After 210 days passed without word from OIG, on March 29, 2019, Freestone served a renewed arbitration demand reasserting her previously dismissed NDAA claim. See Platt Decl., ¶ 7. So far, so good.
But the parties' productive communication began to ebb. On August 13, 2019, Freestone's counsel informed CACI's counsel that OIG had asked Petitioner whether she still wanted the investigation completed; Freestone's counsel stated that he was not sure whether his client still did. See Platt Decl., ¶ 8. On August 27, September 4, and September 12, CACI's counsel reached out to Freestone's to ask whether she planned to have OIG complete its investigation. See Resp., Exh. 5 (Aug./Sept. 2019 Email Thread). Freestone's counsel replied that she did. Id. On November 1, 2019, the parties thus agreed to stay the arbitration pending the outcome of the OIG investigation. See Resp., Exh. 7 (Arbitral Order dated Nov. 1, 2019); Pet., ¶ 50.
At that point, activity largely stalled. An AAA case administrator reached out to the parties on March 13, April 2, and September 3, 2020, asking for any updates; the parties replied that they continued to wait for the conclusion of the OIG investigation. See Resp., Exhs. 8 (Mar. 2020 Email), 9 (Apr.-Sept. 2020 Email Thread). Then the first abeyance bill arrived. On October 2, 2020, AAA informed the parties that its policy was to hold cases in abeyance for one year, but that "[t]he parties may continue to hold the matter in abeyance beyond that period provided they remit a payment of $300.00 to the AAA." Resp., Exh. 10 (Letter dated Oct. 2, 2020); see also Resp., Exhs. 11 (2019 Fee Schedule), 12 (2020 Fee Schedule) (both stating same). Freestone's counsel asked if CACI had paid the fee, and CACI confirmed that it had. See Resp., Exh. 13 (Oct.-Nov. 2020 Email Thread).
The next year began with a similar pattern: AAA requested status updates from the parties (on February 11 & 19 and May 27, 2021), and the parties remained in their holding pattern with little to report. See Resp., Exhs. 15 (Letter dated Feb. 11, 2021), 16 (Letter dated Feb. 19, 2021), 17 (Feb. 19-26 Email Thread), 18 (May 27-June 2 Email Thread). But then on October 1, 2021, AAA sent a letter to the parties informing them that the second abeyance bill was due shortly. See Resp., Exh. 19 (Letter dated Oct. 1, 2021). CACI was less eager to reach for it this time around. As Freestone tells it, CACI's counsel scheduled a call for October 14, on which the parties discussed the by-then-complete OIG investigation. See ECF No. 8 (Freestone Reply), Attach. 1 (Declaration of Jack Jarrett), ¶ 5. CACI adds that this was the first it learned that the OIG investigation was complete, and given that fact, CACI expressed that it did not want to continue holding the matter in abeyance. See Platt Decl., ¶ 22. The parties dispute whether they discussed the abeyance fee: Freestone claims that they did not, while CACI asserts that it was clear that it would no longer pay. Compare Pet., ¶¶ 55, 59; Jarrett Decl., ¶ 6; with Resp., Exh. 22 (Email dated Mar. 15, 2022).
Bill unpaid, on November 16, 2021, AAA sent the parties a letter informing them that it had closed the case. See Resp., Exh. 21 (Closure Letter dated Nov. 16, 2021). The letter was sent from a case administrator to counsel for both parties, including two of Freestone's attorneys. Id. That seemed to wind up the matter. Yet four months later, on March 15, 2022, Petitioner's new counsel contacted AAA and asked to reopen the case. See Email dated Mar. 15, 2022. Counsel stated that Freestone had "inadvertently allowed the case to be administratively closed when it should not have been." Id. CACI's counsel objected, contending that he had conveyed on the October call that CACI would no longer pay the fee and that "Claimant deliberately chose to abandon her case a very long time ago." Id. On March 17, 2022, AAA informed the parties that the matter would remain closed unless both agreed to reopen it, to which CACI would not assent. See Resp., Exh. 23 (Letter dated Mar. 17, 2022).
B. Procedural History
On May 13, 2022, Freestone filed here a dual-hatted "Petition to Compel Arbitration, or in the Alternative, Complaint." Her Petition contained a single count for violation of the Federal Arbitration Act, 9 U.S.C. §§ 4, 206, and sought an order compelling arbitration. See Pet., ¶¶ 61-67. In the alternative, Freestone alleged four "Alternative Counts" under the NDAA and the DCWPCA, tracking the issues that she had raised in her Demand for Arbitration. Id., ¶¶ 68-85; see Aug. 30, 2018, Arbitral Order at 2.
CACI responded in kind with a "Response in Opposition to Petition to Compel Arbitration and, in the Alternative, Motion to Dismiss." Following the two-layered structure of Freestone's pleading, CACI's served both as an Opposition to the Petition to Compel and also as a Motion to Dismiss the alternative Complaint.
II. Legal Standard
As the Court considers only the Petition to Compel Arbitration and does not reach the Motion to Dismiss, it sets forth only the former standard. Whether to compel arbitration involves a two-step inquiry. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985). First, a court must decide "whether the parties agreed to arbitrate that dispute." Id. at 626, 105 S.Ct. 3346. And second, it must determine whether any external "legal constraints" preclude a party from compelling arbitration. Id. at 628, 105 S.Ct. 3346. While most petitions to compel arbitration turn on the first question, this one focuses on the second: whether Freestone has waived her right to compel arbitration.
When considering a petition to compel arbitration, "the appropriate standard of review for the district court is the same standard used in resolving summary judgment motions pursuant to Fed. R. Civ. P. 56(c)." Brown v. Dorsey & Whitney, LLP, 267 F. Supp. 2d 61, 67 (D.D.C. 2003) (internal quotation marks and citation omitted); see Aliron Int'l, Inc. v. Cherokee Nation Indus., Inc., 531 F.3d 863, 865 (D.C. Cir. 2008). Summary judgment must be granted if "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a); see also Anderson v. Liberty Lobby, 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Holcomb v. Powell, 433 F.3d 889, 895 (D.C. Cir. 2006).
The posture of this case is quite unusual. In the typical Federal Arbitration Act case, the movant is a defendant in a civil suit petitioning to compel arbitration and thus take a plaintiff from court to arbitration. Here, however, Freestone brings a freestanding Petition to Compel Arbitration; it is Defendant who resists with an affirmative defense of waiver. So which party should have all inferences drawn in its favor? In a sense, Freestone is the movant because she seeks to compel arbitration. But in another, CACI is really moving against Freestone based on an affirmative defense — contending that Petitioner has waived her right to compel arbitration, and so cannot compel it here. See Tech 7 Sys., Inc. v. Vacation Acquisition, LLC, 594 F. Supp. 2d 76, 80 (D.D.C. 2009) (citing Gull Airborne Instruments, Inc. v. Weinberger, 694 F.2d 838, 843 (D.C. Cir. 1982)).
Happily, the Court need not wade into these swirling waters. However the issue is conceptualized, the Court concludes that it can be resolved as a matter of law based on the undisputed material facts, even drawing all available inferences against CACI, which ultimately prevails.
III. Analysis
In asking the Court to deny Freestone's Petition to Compel Arbitration, CACI first contends that the Petition falters at the gate because it is really an untimely motion to vacate an arbitral award under 9 U.S.C. § 12. It next asserts that, in any event, Petitioner has waived her right to compel arbitration. The Court considers each in turn.
A. Untimely Motion to Vacate
Under 9 U.S.C. § 12, a party has three months to move to vacate a final arbitral award. The question, therefore, is whether AAA's letter closing the case constituted such an award for purposes of the statute. If it does, then there is no dispute that Freestone is out of luck since she did not file in this Court until nearly six months later, on May 13, 2022.
The Court ultimately concludes to the contrary. First and foremost, an "award" must be issued and signed by an arbitrator, while the letter here came from an AAA administrative case manager. See Freestone Reply, Exh. C (AAA Rules), Rules 39(a), (c); Closure Letter. The letter also did not carry any of the trappings of an arbitral award: it did not come after briefing, and the parties never held (or waived rights to) a hearing. See AAA Rule 39(a). The parties here can also reopen their proceedings on mutual consent, while AAA awards are "final and binding." AAA Rule 39(g); see also Rule 40 (allowing for alteration of only "clerical, typographical, technical, or computational errors in the award"). And AAA's applicable fee schedules say that if neither party pays abeyance fees, "the matter will be administratively closed" — with no mention of any "award." 2019 Fee Schedule at 3; 2020 Fee Schedule at 3. As the November 16 letter does not look, swim, or quack like an award, the Court will not take it to be one.
CACI's counters are unavailing. It suggests in its Response that because the AAA letter "finally resolv[ed] the dispute," this somehow constituted an award. See Resp. at 13. But CACI offers no reason to think that AAA actually did any such thing; after all, the matter could be reopened with the parties' consent. CACI fails to explain, moreover, why all final resolutions necessarily must be "awards." Perhaps recognizing these weaknesses, Respondent does not really press the point in its Reply. See ECF No. 9 (CACI Reply) at 6.
The Court accordingly holds Freestone's Petition timely.
B. Waiver of Arbitration
It is well established in our Circuit that "a party may waive its right to arbitration by acting inconsistently with that arbitration right." Khan v. Parsons Global Services, Ltd., 521 F.3d 421, 425 (D.C. Cir. 2008) (internal quotation marks omitted); accord Zuckerman Spaeder, LLP v. Auffenberg, 646 F.3d 919, 922 (D.C. Cir. 2011). That analysis is "inherently fact-bound" and rests on an assessment of the "totality of the circumstances." Zuckerman Spaeder, 646 F.3d at 922. While the D.C. Circuit has distilled more specific rules regarding what types of litigation activity constitute acting inconsistently with the arbitration right, id. at 922-24, those rules offer little guidance here. That is because this unusual case instead concerns the effects of a petitioner's conduct during and after the preliminary stages of arbitration on her right to later compel it.
The Court ultimately determines that two actions Freestone took together demonstrate that she has waived her right to arbitration by acting inconsistently with that right: failing to make any effort to ensure that the parties paid their joint abeyance fee and waiting too long to act after the AAA closed the case. The details follow.
1. Abeyance-Fee Payment
The AAA places responsibility for paying abeyance fees jointly on the parties, and neither picked up the tab here. That fact is inconsistent with either party's subsequently seeking to compel arbitration.
To start, the AAA's fee schedules for both applicable years are identical, and they include quite specific language on this point:
Parties on cases held in abeyance for one year will be assessed an annual abeyance fee of $300. A case may only be held in abeyance after the initial filing fees have been paid. If a party refuses to pay the assessed fee, the other party or parties may pay the entire fee on behalf of all parties, otherwise the matter will be administratively closed.2019 Fee Schedule at 3; 2020 Fee Schedule at 3. It thus seems clear that each party has the opportunity to pay the abeyance fee, but that a party who neglects to do so must live with the consequences.
Freestone's failure to pay the fee here — or to confirm that CACI would — constitutes behavior inconsistent with the arbitration right. Recall that AAA sent the parties a request for payment on October 1, 2021. See Oct. 1, 2021, Letter. Freestone could have paid the fee. Or she could have asked CACI on their October 14 call whether it intended to pay the fee and covered it if CACI had refused. Even Petitioner acknowledges that she did not so inquire. See Pet., ¶¶ 55, 59; Jarrett Decl., ¶ 6. Freestone may not sit on the sidelines and then jump back in months after the case was closed.
This view of her actions squares with a body of sister-circuit authority holding that a party's failure to pay arbitration fees precludes it from later attempting to compel arbitration. Pre-Paid Legal Servs., Inc. v. Cahill, 786 F.3d 1287, 1294 (10th Cir. 2015); accord Brown v. Dillard's, Inc., 430 F.3d 1004, 1010 (9th Cir. 2005); Bruzda v. Sonic Auto., No. 16-2413, 2017 WL 5178967, at *5 (D. Colo. Jan. 23, 2017) ("Defendant forfeited its ability to enforce the arbitration agreement when AAA administratively closed the parties' case because of Defendant's failure to pay fees despite multiple payment notices.").
Petitioner rejoins that she was not on the hook for the fee because her arbitral fees are capped at $300 in total. See Freestone Reply at 9-10. But AAA caps only individuals' filing fees at $300, with no reference to any other fees that may accrue in a matter; indeed, the language Freestone quotes says as much. Id. at 10 (noting that "filing fee capped at $300" (quoting 2019 Fee Schedule; 2020 Fee Schedule) (emphasis removed)). Freestone also argues that CACI's prior payment of the 2020 abeyance fee meant that it would presumptively also cover the 2021 fee. Id. at 6; Jarrett Decl., ¶ 6 ("I had every reason to believe that CACI would pay the fee consistent with its prior conduct in 2020."). While that may not be an unreasonable assumption, Petitioner's failure to confirm that understanding with CACI on their phone call shortly before the deadline, or to check the fee schedule and see that the parties jointly bore the obligation, is no excuse now. Freestone was represented by multiple counsel who could and should have considered these matters months earlier.
The Court thus views her failure to pay or confirm payment of the abeyance fee as behavior inconsistent with later seeking to compel arbitration.
2. Months-Long Delay
Petitioner's months-long wait after the AAA case-closure letter before taking any action is likewise inconsistent with a right to later compel arbitration. To review, the parties agree that the AAA case manager sent a letter to both sides' counsel — including Freestone's two attorneys — closing the case. Her counsel, furthermore, never claim that they did not actually receive the letter. Instead, in Freestone's only submitted declaration, her then-counsel avers simply that he was "unaware" of it until later. See Jarrett Decl., ¶ 8.
Petitioner offers no reason for not immediately seeking to reopen the arbitration upon receiving the November 16 letter. Recall again that 9 U.S.C. § 12 gives parties three months to seek to modify or vacate arbitral awards. While that timeline does not bar Freestone's Petition here, the Court finds it instructive in considering an appropriate timeline on which to correct a perceived administrative error. If anything, parties should be able to respond more quickly to such an action than to a substantive judgment requiring briefing and analysis. With their only explanation apparently being an unawareness of their own making, Freestone's counsel make it difficult to see how their actions are consistent with now seeking to compel CACI to arbitrate.
Freestone argues that this delay did not prejudice CACI, and that she would now voluntarily cover the abeyance fee. See Freestone Reply at 7. This ignores the legal question at issue, which is whether Petitioner has acted in a manner inconsistent with asserting her right to arbitrate. Such a lengthy delay between the case's closure and the Petition, along with the fact that Freestone's failure to pay administrative fees caused that case closure, is enough for the Court to decline to compel arbitration.
* * *
Given its decision here, the Court would normally proceed to consider CACI's Motion to Dismiss the alternative Complaint. Because such Complaint can be more cleanly pled now that it is not part of a Petition to Compel Arbitration, and because the parties can tee up the issues more properly, the Court will order Freestone to file an Amended Complaint, which CACI can then move to dismiss. In moving to dismiss, however, CACI will have a hard time arguing that the case should be dismissed on arbitrability grounds because it, too, has acted inconsistently with a right to arbitrate.
IV. Conclusion
The Court, accordingly, will deny Freestone's Petition to Compel Arbitration, and it will permit her to file an Amended Complaint. An Order so stating will issue this day.