Title: Paul Leodori v. CIGNA Corporation, et als.
Citation: N/A
Docket Number: a-120-01
State: new-jersey
Issuer: new-jersey Supreme Court
Date: February 13, 2003

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized). In this appeal, the Court considers the enforceability of a waiver-of-rights provision contained in an employee handbook distributed by defendant, CIGNA, which provision requires all employees to resolve employment-related claims by submitting them to an arbitrator, rather than to a jury. Plaintiff, Paul Leodori, began working for Insurance Company of North America (INA), CIGNA s sister company, in June 1995. During the course of his employment, Leodori served as an in-house attorney at INA s Division of Legal and Public Affairs (L&amp;PA). About one year before Leodori began his employment, L&amp;PA had adopted an arbitration policy that required arbitration as a final means for resolving employment-related disputes between INA and its employees. About a year after Leodori began his employment with the company, in August 1996, INA sent a revised policy via inter-office mail and U.S. mail to all L&amp;PA employees, including Leodori. That revised policy also identified arbitration as the final method by which the company and its employees would resolve their disagreements. A subsequent L&amp;PA handbook, which contained a similar arbitration clause, was distributed in June 1998 to all employees, including Leodori. That handbook was distributed with an acknowledgement form, which did not contain any language specifically referring to arbitration. Rather, the form, which Leodori signed, merely contained an acknowledgement of receipt of the handbook and a recitation that the recipient understood that the handbook included information on division policies. One month later, in July 1998, the company distributed another handbook to Leodori and other employees, entitled You and CIGNA. That handbook also contained a purported agreement to arbitrate all employment disputes. The opening page to the handbook signaled the importance of two terms of employment addressed in the handbook, one of which was the agreement to arbitrate employment-related claims. An acknowledgement form also accompanied the You and CIGNA handbook, similar to the one that accompanied the L&amp;PA handbook. Leodori signed that acknowledgment. He did not sign a separate Employee Handbook Receipt and Agreement form that accompanied the handbook, which described the arbitration agreement as a term of employment. Leodori alleges that during the course of his employment, he became aware of actions by certain officers or employees of the company that he believed were illegal or improper. He alleges that after he reported those actions to the general counsel, as well as to others within the company, INA suspended him with pay and transferred him to CIGNA s payroll. The company hired a retired appellate judge to investigate Leodori s claims. In May 1999, after receiving a report from the former judge concluding that neither the facts nor the law supported his claims, Leodori was terminated. Following his termination, in February 2000, Leodori filed a complaint in the Law Division, alleging that the company had violated CEPA by firing him because of what he had discovered and reported. The trial court dismissed that complaint, finding that the parties had entered into a binding agreement to arbitrate their dispute. Leodori filed a similar action in the Law Division in June 2000, which also was dismissed. Leodori appealed. In an unreported decision, the Appellate Division reversed the trial court s dismissal of Leodori s first complaint. As a result, the panel concluded that the second complaint was moot. The Supreme Court granted CIGNA s petition for certification. HELD : The unambiguous waiver-of-rights provision set forth in defendant CIGNA Corporation s employee handbook, requiring all of its employees to resolve employment-related disputes through arbitration, is not enforceable against Leodori, the plaintiff-employee, where that employee did not sign a form agreeing to the provision and where the record contains no other clear evidence of his agreement to that waiver-of-rights provision. 1. Recent Court decisions have recognized that parties to an agreement may waive statutory remedies in favor of arbitration. However, to enforce a waiver-of-rights provision in this setting, some concrete manifestation of the employee s intent, as reflected in the text of the agreement itself, is required. In addition, to pass muster, a waiver-of-rights provision should at least provide that the employee agrees to arbitrate all statutory claims arising out the employment relationship or its termination, and should also reflect the employee s general understanding of the type of claims included in the waiver. (pp. 10-12) 2. Consistent with federal law, a state cannot subject an arbitration agreement to more burdensome requirements than those governing the formation of other contracts. In addition, to be enforceable in New Jersey, a waiver-of-rights provision must reflect that an employee has agreed clearly and unambiguously to arbitrate the disputed claim. Generally, a written agreement s validity is determined by considering the intentions of the parties as reflected in the four corners of the written instrument. (pp. 12-14) 3. The arbitration clause in the You and CIGNA handbook unambiguously sets forth the drafter s intention to arbitrate all employment-related claims, including those that might be asserted under CEPA. (pp. 14-15) 4. A valid waiver of statutory rights results only from an explicit, affirmative agreement that unmistakably reflects the employee s assent, and an implied agreement to arbitrate is not necessarily created by mere receipt of a handbook containing an arbitration clause. (pp. 15-17) 5. Although contracts generally do not need to be in writing to be enforceable, when one party presents a contract for signature to another party, the omission of that other party s signature is a significant factor in determining whether the two parties mutually have reached an agreement. (pp. 17-18) 6. Without Leodori s signature on the Agreement that accompanied the You and CIGNA handbook, the arbitration provision cannot be enforced unless there exists some other explicit indication that the employee intended to abide by that provision. The record as a whole does not demonstrate that Leodori had surrendered his statutory rights knowingly and voluntarily, which remains the critical inquiry. (pp. 18-19) 7. The Court s unremarkable conclusion that an arbitration provision cannot be enforced against an employee who does not sign or otherwise explicitly indicate his or her agreement to it does not offend the Federal Arbitration Act. (p. 19) 8. Although the record clearly establishes that Leodori knew of the company s arbitration policy based on its publication in numerous documents he had received during the course of his employment, the record contains no one document or other piece of evidence that unmistakably reflects his agreement to that policy. (p. 20) 9. The implied-contract doctrine of Woolley v. Hoffmann-LaRoche, Inc., 99 N.J. 284 (1985), does not extend to a waiver-of-rights agreement. Although not strictly required, a party s signature to an agreement is the customary and perhaps surest indication of assent. Absent Leodori s signature here or some other clear indication that he affirmatively had agreed to arbitrate his claims, the waiver provision cannot be enforced. (p. 21) 10. The Court s holding should not be construed to require employers to negotiate individual agreements with their entire workforce to implement a company-wide arbitration policy. The parties would have effectuated such a policy in this case had the company obtained Leodori s signature on the pre-printed Agreement that it attached to the You and CIGNA handbook, or if the acknowledgment form Leodori signed had stated that the employee had agreed to the more detailed arbitration provision contained in the handbook, as opposed to stating merely that the employee had received the handbook. (pp. 21-22) 11. An employer and its employee may agree to arbitrate their disputes by referring generally to an arbitration policy contained in a separate writing, provided that the policy itself clearly reflects the employee s knowing and voluntary waiver of rights. (pp. 22-23) Judgment of the Appellate Division is AFFIRMED. CHIEF JUSTICE PORITZ and JUSTICES COLEMAN, LONG, LaVECCHIA, ZAZZALI, and ALBIN join in JUSTICE VERNIERO s opinion. PAUL LEODORI, Plaintiff-Respondent, v. CIGNA CORPORATION, CIGNA INSURANCE COMPANY, INSURANCE COMPANY OF NORTH AMERICA, WILSON TAYLOR, THOMAS WAGNER, GERALD ISOM, JAMES ENGEL, JOHN MURPHY, DAVID GOLD, BEVERLY SHERBONDY, STEPHANIE MIDDLETON, ANTHONY SMITH, ALFRED DECRANE, JAMES J. RITCHIE and ROBERT CAMPBELL, Defendants-Appellants, and JOHN DOES 1-5, and ABC CORPORATIONS 1-5, said individuals and corporations being fictitious, Defendants. PAUL LEODORI, Plaintiff-Respondent, v. CIGNA CORPORATION, CIGNA INSURANCE COMPANY and INSURANCE COMPANY OF NORTH AMERICA, Defendants-Appellants, and SCHNADER HARRISON SEGAL &amp; LEWIS, LLP, ARLIN ADAMS, LISA DETWEILER, WILSON TAYLOR, THOMAS WAGNER, GERALD ISOM, JAMES ENGEL, JOHN MURPHY, DAVID GOLD, BEVERLY SHERBONDY, STEPHANIE MIDDLETON, ANTHONY SMITH, JAMES J. RITCHIE, ROBERT CAMPBELL, DENNIS KANE, ALFRED DECRANE, PETER LARSON, JOSEPH NEUBAUER, HAROLD WAGNER, CAROL COX WAIT, JOHN DOES 1-10 and ABC CORPORATIONS 1-10, said individuals and corporations being fictitious, Defendants. Argued December 2, 2002 Decided February 13, 2003 On certification to the Superior Court, Appellate Division. Edward T. Ellis and Michael K. Furey argued the cause for appellants (Riker, Danzig, Scherer, Hyland &amp; Perretti, attorneys for CIGNA Corporation, Wilson Taylor, Thomas Wagner, Gerald Isom, John Murphy, Beverly Sherbondy, Stephanie Middleton, Anthony Smith, Alfred Decrane, James J. Ritchie and Robert Campbell and Montgomery, McCracken, Walker &amp; Rhoads, attorneys for CIGNA Insurance Company, Insurance Company of North America, James Engel and David Gold, attorneys; Mr. Ellis, Mr. Furey, Janice Greenberg Dubler and Michael H. Wilck, on the briefs). Paul Leodori argued the cause pro se. The opinion of the Court was delivered by VERNIERO, J. This is an employment action. Plaintiff alleges that his employer fired him in violation of the New Jersey Conscientious Employee Protection Act, N.J.S.A. 34:19-1 to 8 (CEPA). The merit of that allegation is not before us. We are called on solely to evaluate the enforceability of a waiver-of-rights provision contained in an employee handbook distributed by defendant. That provision requires employees to resolve employment-related claims by submitting them to an arbitrator rather than to a jury, which is otherwise their right. Although the provision is unambiguous, we are unable to conclude that plaintiff clearly had agreed to it. We thus hold that the waiver is invalid as applied to this plaintiff. The L &amp; PA handbook also contains the following arbitration provision: In the interest of fairly and quickly resolving employment-related disagreements and problems, CIGNA s policy is that arbitration by a neutral third-party is the required and final means for the resolution of any serious disagreements and problems not resolved by the company s internal dispute resolution process. Both CIGNA and the employee will be bound by any decision made by a neutral arbitrator. If the employee or CIGNA do not abide by the arbitrator s decision, either party may go to court to enforce the arbitrator s decision, but arbitration must be used before going to court. This policy is intended to prevent an employee from going to court over employment-related disputes; it is not intended to take away any other rights. Along with the L &amp; PA handbook, the company distributed an acknowledgment form that states: I hereby acknowledge that I have received a copy of the 1998/99 Legal &amp; Public Affairs employee handbook. I understand this handbook includes information on division policies and programs and that I am responsible for knowing the policies and information. I further understand any of the policies and programs are subject to change at the discretion of senior management and that the handbook and its contents are not a contract of employment. As is evident, that language does not refer specifically to arbitration. Plaintiff signed the acknowledgment form in June 1998. In July 1998 defendant distributed to plaintiff and other employees another handbook. That handbook, entitled You and CIGNA, also contains a purported agreement to arbitrate all employment disputes. It provides, in part: The agreement to arbitrate applies to serious employment-related disagreements and problems, which are those that concern a right, privilege, or interest recognized by applicable law. Such serious disputes include claims, demands, or actions under Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1866, the Civil Rights Act of 1991, the Equal Pay Act, the Age Discrimination in Employment Act, the Employee Retirement Security Act of 1974, the Fair Labor Standards Act, the Rehabilitation Act of 1973, the Americans with Disabilities Act, the Family and Medical Leave Act, and any other federal, state, or local statute, regulation, or common law doctrine, regarding employment discrimination, conditions of employment, or termination of employment. An acknowledgment form accompanied the You and CIGNA handbook, similar to the one that had accompanied the L &amp; PA handbook. It provides: This is to acknowledge that I have received my copy of the July 1998 employee handbook, You and CIGNA. I have reviewed the material which includes information on policies, programs and services for employees of the CIGNA companies. Plaintiff signed that form in September 1998. A separate form, entitled Employee Handbook Receipt and Agreement (Agreement), also contains a place for an employee to sign. (We cannot discern from the record whether that form is contained on an actual page of the You and CIGNA handbook or whether it was distributed or made available to plaintiff separately. Our analysis would be the same under any of those circumstances.) The Agreement states: This is to acknowledge that I have received my copy of the July 1998 employee handbook, You and CIGNA. I understand that by accepting employment and being eligible to receive increases in compensation and benefits, I am agreeing to the following two important terms of my employment described in You and CIGNA: (1) my employment can be terminated by me or my employer at any time for any reason therefore, my employment is at the will of either party, and (2) I will use the Company s internal and external employment dispute resolution processes to resolve legal claims against the Company therefore rather than go to court or to a government agency for a hearing to decide my legal claim, I will submit my employment related legal claims except workers compensation and unemployment compensation to final and binding neutral third party arbitration. I understand further that these two terms of my employment replace and supersede any prior agreement concerning these terms and cannot be changed except in writing signed by me and the president of the Company. For those of you who have not yet acknowledged receipt of the Handbook, a simplified form similar to those we have used in prior years is available from your supervisor. For those who already have signed the original receipt, you need take no further action; however, if you would like, you can request and sign the revised form. Plaintiff alleges that during the course of his employment he became aware of actions by certain officers or employees of defendant that he believed were improper or illegal. According to plaintiff, he reported those allegations to the general counsel as well as to others within the company. Thereafter, INA suspended plaintiff with pay and then transferred him to CIGNA s payroll. Defendant hired a retired federal appellate judge to investigate the asserted improprieties. After receiving the former judge s report concluding that neither the facts nor law supported plaintiff s allegations, defendant terminated plaintiff s employment in May 1999. Plaintiff filed a complaint in the Law Division in February 2000. He alleged, among other things, that defendant had violated CEPA by firing him because of what he had uncovered and reported. The trial court dismissed that complaint, finding that the parties had entered into a binding agreement to arbitrate their dispute. Plaintiff filed a second Law Division complaint in June 2000, asserting virtually the same claims as those alleged in his earlier action. The trial court dismissed that complaint as well. Plaintiff appealed. In an unreported decision, the Appellate Division reversed the trial court s dismissal of plaintiff s first complaint. As a result, the panel concluded that the second complaint was moot. We granted defendant s petition for certification, 172 N.J. 357 (2002), and now affirm. [Id. at 135.] We also reviewed a waiver-of-rights agreement in Martindale v. Sandvik, Inc., 173 N.J. 76 (2002). The agreement in that case was contained in an application for employment that the plaintiff had completed and signed prior to being hired by the defendant corporation. The relevant provision indicated that the plaintiff had agreed that all disputes relating to my employment with [the corporation] or termination thereof shall be decided by an arbitrator[.] Id. at 81-82. The provision also stated, As a condition of my employment, I agree to waive my right to a jury trial in any action or proceeding related to my employment with [the corporation]. Id. at 81. The threshold issue in Martindale was whether an arbitration agreement contained in an employment application was enforceable as a matter of law. To answer that question, the Court turned first to the Federal Arbitration Act (FAA) through which Congress has sought to place arbitration agreements upon the same footing as other contracts. Id. at 84 (internal citation and quotation marks omitted). We then reviewed contract principles from this and other jurisdictions, concluding that an agreement to arbitrate contained in an application for employment is binding, as would be any other contractual term not contrary to public policy contained in a signed employment application that led . . . to employment. Id. at 89. We also observed that the FAA specifically permits states to regulate contracts, including contracts containing arbitration agreements under general contract principles; therefore, an arbitration clause may be invalidated upon such grounds as exist at law or in equity for the revocation of any contract. Id. at 85 (quoting 9 U.S.C. 2). As for the actual agreement in Martindale, we concluded that its waiver-of-rights provision not only was clear and unambiguous, it was also sufficiently broad to encompass reasonably [the] plaintiff s statutory causes of action. Id. at 96. In sum, Garfinkel and Martindale together set forth two overarching tenets. First, consistent with federal law, a state cannot subject an arbitration agreement to more burdensome requirements than those governing the formation of other contracts. Within that framework, a state is permitted to regulate agreements, including those that relate to arbitration, by applying its contract-law principles that are relevant in a given case. Second, to be enforceable under those principles in New Jersey, a waiver-of-rights provision must reflect that an employee has agreed clearly and unambiguously to arbitrate the disputed claim. Generally, we determine a written agreement s validity by considering the intentions of the parties as reflected in the four corners of the written instrument. NO. A-120 SEPTEMBER TERM 2001 ON CERTIFICATION TO Appellate Division, Superior Court PAUL LEODORI, Plaintiff-Respondent, v. CIGNA CORPORATION, CIGNA INSURANCE COMPANY, INSURANCE COMPANY OF NORTH AMERICA, WILSON TAYLOR, THOMAS WAGNER, GERALD ISOM, JAMES ENGEL, JOHN MURPHY, DAVID GOLD, BEVERLY SHERBONDY, STEPHANIE MIDDLETON, ANTHONY SMITH, ALFRED DECRANE, JAMES J. RITCHIE and ROBERT CAMPBELL, Defendants-Appellants. DECIDED February 13, 2003 Chief Justice Poritz PRESIDING OPINION BY Justice Verniero CONCURRING OPINION BY DISSENTING OPINION BY