Steele v. Fannie Mae

• Court: District Court, District of Columbia
• Decided: September 16, 2013
• Docket: Civil Action No. 2013-1089
• Status: Published

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

) CHRISTOPHER STEELE, ) ) Plaintiff, ) ) v. ) Civil No. 13-01089 (RCL) ) FANNIE MAE, ) ) Defendant. ) )

MEMORANDUM OPINION

Now before the Court is the Defendant’s Motion to Compel Arbitration [4]. Upon

consideration of Defendant’s Memorandum in Support of its Motion to Compel Arbitration [4-

1], Plaintiff’s Opposition Motion [5], and Defendant’s Reply Memorandum [7], the Court will

DENY Plaintiff’s motion.

I. BACKGROUND

On April 16, Plaintiff Steele received a letter from Fannie Mae offering employment. That

letter included several terms and conditions of employment, including an acknowledgement that

by accepting employment, Mr. Steele was agreeing to be bound by Fannie Mae’s Dispute

Resolution Policy. Among other things, the Policy requires that Fannie Mae and its employees

submit certain employment disputes to mandatory pre-litigation arbitration. Due to a strange

course of events not relevant to the question currently before the court, Mr. Steele worked at the

Fannie Mae facilities for 22.5 hours beginning on May 6—primarily engaged in orientation and

training activities—before being placed on administrative leave during which Fannie Mae was reportedly completing its pre-hiring procedures. Over the next few days, Mr. Steele continued

to be reassured that he would, indeed, be employed with the company. Fannie Mae paid him for

the hours he worked. On May 17, however, Mr. Steele received a letter from Fannie Mae

notifying him that the company had decided to “rescind his conditional offer of employment and

not employ [him].” Pl.’s Opp. Mot. To Compel Arbitration. 6, ECF No. 5. Initially, on May 21,

Mr. Steele filed a Demand for Arbitration, alleging many of the same substantive claims (e.g.

fraudulent misrepresentation and promissory estoppel) that underlie this civil action. Def.’s Mot.

To Compel Arbitration. 1, ECF No. 4-4. The record is clear that when he initially demanded

arbitration proceedings, he implicitly and explicitly asserted his belief that he was a bona fide

Fannie Mae employee. Id.at 5. Approximately one month later, Mr. Steele filed suit in the

Superior Court of the District of Columbia. The case was removed to the U.S. District Court,

and the Defendant, Fannie Mae, filed its Motion to Compel Arbitration on August 2.

II. LEGAL STANDARD

A district court must grant a Motion to Compel Arbitration when (1) it finds that the

arbitration agreement is valid and enforceable and (2) where the claims raised in the complaint

fall within the scope of the arbitration agreement. Nelson v. Workers’ Int’l Ass’n, 767 F.Supp.

2d 143, 149-50 (2002). Congress has, with the aid of the Supreme Court, created a liberal

federal policy that favors arbitration over litigation when arbitral agreements exist. Gilmer v.

Interstate/Johnson Lane Corp., 500 U.S. 20, 25 (1991) (asserting that once parties reach a

bargain to arbitrate, a party seeking to avoid pre-litigation arbitration bears the substantial burden

of showing that Congress never intended its policy of favoring arbitration to apply in such

circumstances).

2 III. ANALYSIS

The determinative question in this Motion is whether Mr. Steele was ever, in fact, an

employee of Fannie Mae. Mr. Steele could only be bound under the otherwise valid Dispute

Resolution Policy if he accepted Fannie Mae’s offer of employment. But Fannie Mae’s explicit

communication with Mr. Steele on May 17 is clear: there was no offer to accept. It decided not

to employ Mr. Steele. The letter mentions nothing of terminating his employment but rather

states that the company had reached the decision to rescind his offer of employment. That

rescission released Mr. Steele of any obligations under the Dispute Resolution Policy. The court

disagrees with the unsupported proposition by Fannie Mae that the language of its May 17 letter

is nothing more than an arbitrary choice of words. They clearly demonstrate Fannie Mae’s intent

to rescind their offer of employment. If Mr. Steele was in fact an employee, he should have had

his employment terminated. That is not what Fannie Mae did.

Fannie Mae argues that under common law, Mr. Steele is clearly an employee. The court is

unconvinced. The authorities cited consist primarily of cases arising in the context of respondeat

superior and employer liability for tortious employee actions. See Safeway Stores, Inc. v. Kelly,

448 A.2d 856 (D.C. 1982); see also Schecter v. Merchs. Home Delivery, Inc., 892 A.2d 415

(D.C. 2006). In this case, the May 17 letter leaves no doubt that Mr. Steele was not an

employee, and Mr. Steele’s attestations to the contrary in his Demand for Arbitration does not

overcome that fact. Is it conceivable, after all, that when the secure rug of promised employment

is suddenly pulled out from under an unsuspecting individual, he might feel as if something

rightfully his was improperly taken away.

Fannie Mae also argues that if the contract was, in fact, rescinded, that Mr. Steele’s

underlying claims in the case cannot possibly succeed. The court welcomes such argumentation

3 at the motion to dismiss for failure to state a claim at the summary judgment stage, but not here.

Here, the issue is simply whether there is a valid and enforceable arbitration agreement, and

whether the complaint’s claims fall within the arbitration agreement’s scope. The court does not

reach the second step, because Fannie Mae has failed to show that there was a valid and

enforceable agreement at all. It did not treat Plaintiff as an employee.

IV. CONCLUSION

The Court will DENY the motion. An Order shall issue with this opinion.

Signed by Royce C. Lamberth, U.S. District Judge, on September 13, 2013.