Moving to Compel Arbitration Out of Order Waives Employer’s Right to Grievance Process under Employment Agreement

The defendant employer in Knutsson v. KTLA, LLC (228 Cal.App.4th 1118) incorrectly moved to compel arbitration under the employment agreement it had with the plaintiff employee.  Although the provisions provided for arbitration, conditions precedent to arbitration had not been met. The Plaintiff, Knutsson, established himself as a technology reporter under the persona “Kurt the CyberGuy.” In 1996, Knutsson entered into an agreement with KTLA to create a TV show based on his persona.  The parties continued their relationship similarly through 2008, expanding the show onto numerous TV stations and establishing a popular website.  In 2008, the parties entered into an agreement to continue the relationship for another 5 years.  The agreement also stated that the Defendant did not own the rights to Knutsson's persona.  Three years later Knutsson was terminated, replaced with another reporter, and the show continued in the same.

Knutsson filed suit, alleging breach of contract, misappropriation, unfair business practices, and age discrimination. The Defendant moved to compel arbitration. The provision at dispute provided a mandatory procedure for resolving disputes with arbitration as the final step. The first two steps involved internal dispute resolution that would be followed by arbitration if the first two steps failed. KTLA contended the provision bound Knutsson to arbitration.  The trial court denied the motion, finding the conditions precedent to arbitration had not been fulfilled.

On appeal the Second Circuit examined the denial under section 301(a) of the Labor Management Relations Act (29 U.S.C. 185(a)) because the provision was under a collective bargaining agreement.  The Court affirmed the district court’s holding. The Court also held KTLA forfeited the right to compel compliance with the dispute procedure by moving to compel arbitration out of order.  Next the Court found that the arbitration clause did not apply to Knutsson; the agreement required arbitration only between the defendant and the union, not the employee.  KTLA’s final argument also failed; because the arbitration clause did not apply to Knutsson, questions of arbitrability were irrelevant.

The Court affirmed the order denying the motion to compel and awarded appeal costs to Knutsson.