Falls v. 1CI, Inc.
57 A.3d 521
Md. Ct. Spec. App.2012Background
- Falls, then CEO of 1CI, signed an employment agreement with 1CI for $120,000/year and a 40% profit-based incentive bonus.
- The agreement required arbitration for any dispute arising under it, with Seattle, Washington as the default hearing location if unsettled.
- The governing law clause selects Alaska law; arbitration provisions specify Judge/JAMS process, fee-sharing, and a final, non-appealable award.
- Falls’s 2010 Md. circuit court action alleged unpaid MWPCL wages, including the 40% bonus, potentially in excess of $400,000.
- Cape Fox (a parent Alaska Native Corporation) and Cape Fox’s subsidiary 1CI were named as employers; Falls sought treble damages and fees under the MWPCL.
- The circuit court compelled arbitration and dismissed the complaint; Falls appealed challenging the scope of arbitration, location, fee-splitting, and non-appealability provisions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the MWPCL claim is arbitrable under the FAA/MUAA. | Falls argues the MWPCL claim is statutory, not contract-based, so arbitration should not apply. | 1CI/Cape Fox rely on a broad arbitration clause to compel arbitration of all disputes related to the agreement. | Arbitration compelled; broad clause covers statutory MWPCL claim. |
| Whether Seattle is an improper forum given no connection to parties. | Falls contends Seattle lacks connection and is inconvenient for him. | Seattle is nearest major city to Alaska-based employer; forum selection is reasonable. | Forum in Seattle not unconscionable; falls lacks basis to void agreed location. |
| Whether fee-splitting (50/50 arbitrator fees) renders arbitration unconscionable. | Fee-splitting is per se unconscionable under some federal cases. | Case-by-case analysis; Green Tree requires individualized showing of prohibitive costs. | Not per se unconscionable; requires case-specific showing of prohibitive costs. |
| Whether the nonappealable/arbitral-finality clause is unconscionable or void. | Nonappealability could violate Alaska or FAA rights to vacatur. | Finality clauses do not bar statutorily allowed vacatur under FAA/Alaska law. | Clause not unconscionable; vacatur rights remain available under governing law. |
Key Cases Cited
- Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (U.S. 1991) (statutory claims may be arbitrated; arbitration does not waive statute rights)
- Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1 (U.S. 1983) (healthy regard for federal policy favors arbitration; doubts resolved in favor of arbitration)
- Green Tree Financial Corp.-Alabama v. Randolph, 531 U.S. 79 (U.S. 2000) (case-by-case approach; costs must be shown individualized to deter arbitration)