Jones v. Halliburton: Fifth Circuit Rules on Arbitration of Tort Claims by an Employee

[Ed. note: see our previous posts about this case here and here.]

The United States Court of Appeals for the Fifth Circuit held that claims for (1) assault and battery; (2) intentional infliction of emotional distress; (3) negligent hiring, retention and supervision of employees involved in a sexual assault; and (4) false imprisonment are not related to the plaintiff’s employment contract and refused to compel arbitration.

I. Background

In Jones v. Halliburton Co., No. 08-20380 (5th Cir. Sept. 15, 2009), in 2004, at the age of 19, Jamie Leigh Jones began working as an administrative assistant for Halliburton Company/Kellogg Brown & Root (Halliburton/KBR) in Houston, Texas. On July 21 2005, Jones signed an employment contract with a subsidiary of Halliburton/KBR to work in Baghdad, Iraq that included the following clause:

You . . . agree that you will be bound by and accept as a condition of your employment the terms of the Halliburton Dispute Resolution Program which are herein incorporated by reference. You understand that the Dispute Resolution Program requires, as its last step, that any and all claims that you might have against Employer related to your employment, including your termination, and any and all personal injury claim[s] arising in the workplace, you have against other parent or affiliate of Employer, must be submitted to binding arbitration instead of to the court system.

(Emphasis added.)

The incorporated Dispute Resolution Program, provides:

“Dispute” means all legal and equitable claims, demands, and controversies, of whatever nature or kind, whether in contract, tort, under statute or regulation, or some other law, between persons bound by the Plan or by an agreement to resolve Disputes under the Plan . . . including, but not limited to, any matters with respect to . . . any personal injury allegedly incurred in or about a Company workplace.

(Emphasis added.)

Jones arrived in Baghdad on July 25 2005. Halliburton/KBR provided Jones with housing in a barracks (where the ratio of men to women was 20 to one) as a term of her employment contract. On July 27, 2005 Jones complained of sexual harassment by co-workers and requested to be moved to a different housing location. Jones alleges that no action was taken, and instead, her managers told her to “go to the spa.”

Jones alleges that on July 28 2005, she was drugged, beaten, and gang-raped in her barracks bedroom by several Halliburton/KBR employees after a social function. Jones reported the incident promptly. After her rape-kit was administered, Jones alleges that she was placed under armed guard in a container and not permitted to leave or call her family. She further alleges that Halliburton/KBR human resources interrogated her for several hours and gave her two options: to stay and “get over it”, or to return to the U.S. without “guarantee” of a job. At the end, Jone’s father was able to get the help of a Congressman to secure his daughter’s return to the United States. As a result of the alleged incident, Jones received several serious injuries, which would later require reconstructive surgery.

Shortly thereafter, Jones filed a complaint with the Equal Employment Opportunity Commission. The agency conducted an investigation and concluded that: Jones “had been sexually assaulted by one or more employees; physical trauma was apparent; and that Halliburton/KBR’s investigation had been inadequate.”

II. District Court Decision

In February 2006, Jones filed a request for arbitration against Halliburton/KBR. While the arbitration was pending, Jones obtained new counsel and filed this lawsuit claiming negligence, negligent undertaking, sexual harassment and hostile environment under Title VII, retaliation, false imprisonment, breach of contract, fraud in the inducement to enter the employment contract, fraud in the inducement to enter the arbitration agreement, assault and battery, and intentional infliction of emotional distress.

In November, 2007, Halliburton/KBR moved to compel arbitration pursuant to the employment contract. On May 9, 2008, the district court refused to compel arbitration of Jones’ claims for: (1) assault and battery; (2) intentional infliction of emotional distress arising out of an alleged assault; (3) negligent hiring, retention and supervision of employees involved in the assault; and (4) false imprisonment.

The district court concluded that those claims feel outside of the scope of the arbitration provision because they were not related to Jone’s employment and were beyond the outer limits of even a broad arbitration provision. The court, however, stayed litigation of those claims until the parties complete arbitration of the rest of the claims found arbitrable by the court. (see Jones v. Halliburton Co., 625 F.Supp. 2d 339 (S.D. Tex. 2008). In June 2008, Halliburton/KBR appealed.

III. Fifth Circuit Decision

The Fifth Circuit stated that the issue before the court was whether the alleged rape fell within the scope of the arbitration agreement. First, the court rejected Jones’ argument that the public policy of the Texas Arbitration Act (TAA) governed the scope of the arbitration provision. Under the TAA, agreements to arbitrate personal injury claims must be signed by each party’s lawyer. The court concluded that to the extent that the TAA affects the enforceability of the agreement, the Federal Arbitration Act preempts.

Next, the court reviewed the case law split about similar arbitration clauses and claims premised on sexual assault. The court explained that a liberal construction of “scope of employment” for purposes of workers’ compensation was not necessarily the same standard to be applied when construing a similar arbitration provision.

Finally, the Fifth Circuit agreed with the district court and concluded although the arbitration provision extended to personal-injury claims “arising in the workplace,” the court “d[id] not believe [Jones’] bedroom should be considered the workplace, even though her housing was provided by her employer”. The court, however, noted that its holding was fact-specific.

Judge DeMoss filed a dissenting opinion. He concluded that “the issue before this court is debatable and therefore should be resolved in favor of arbitration.” Judge DeMoss added that Jones was required to live in the barracks as a condition of her employment and cited case law stating that “oversees employees do not have bright lines between their working time and their leisure time.” Judge DeMoss also said that “[a]lthough vicarious liability is based on agency law and the interpretation of an arbitration agreement is based on contract law, I cannot see how Jones can successfully distinguish the district court’s holding that the incident was not related to Jones’s employment but, under the same circumstances, was within the scope of the individual defendants’ employment.”

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