$800K Arbitration Win Upheld in Court of Appeals in Employment Case

Arbitration Provisions and Timely Objections

A former shareholder of Branscomb P.C., Kenton McDonald, sued the firm and its shareholders for alleged wrongful termination, slander, and breach of fiduciary duty claims. The firm and its shareholders moved to compel arbitration based on an arbitration provision in the shareholder and employment agreement. After the trial court ordered the parties to arbitration, an arbitrator ordered that the former shareholder take nothing on his claims and awarded the firm and its shareholders more than $780,000 in attorney’s fees.

The appeal presented whether McDonald waived his challenge to the alleged illusory nature of the arbitration provision by failing to bring forward a record of the arbitration provision showing that he raised that objection in the arbitration. Assuming no waiver, the appeal also presented the question of whether the arbitration provision is illusory.

To preserve error for appeal, a party to an arbitration provision must raise an objection or complaint before the arbitrator in a timely manner and then bring forward a sufficient record on appeal to show that the objection or complaint was preserved. It is not enough that the party raises the objection or complaint before the trial court before or after arbitration.

The Court of Appeals held that McDonald failed to meet his burden on appeal of showing that he preserved his objection to the alleged illusory nature of the arbitration agreement in the arbitration proceeding.