Background
Gregory McCray served as manager and CEO of FDH Infrastructure Services, LLC from 2018 until his March 2024 resignation. His 2021 amended employment agreement required arbitration of disputes arising under or connected with the agreement or his employment, except claims for injunctive relief, under American Arbitration Association employment rules. The agreement selected Illinois law.
After McCray brought direct and derivative claims in this action, FDH Holdings asserted a counterclaim assigned from the operating subsidiary. The counterclaim alleges that McCray breached fiduciary duties by obtaining nearly $300,000 in unauthorized or nonbusiness reimbursements and by approving similar reimbursements for two executives. McCray promptly moved to dismiss or stay that counterclaim in favor of arbitration.
The Court’s Holding
Magistrate in Chancery Christian Douglas Wright granted the motion in part and stayed litigation of the counterclaim pending an arbitrators’ determination whether the counterclaim is arbitrable. Applying the Federal Arbitration Act, the court held that the agreement’s incorporation of AAA employment rules clearly and unmistakably delegated substantive arbitrability to the arbitrators. Those rules authorize an arbitrator to decide jurisdiction and the arbitrability of a claim or counterclaim.
The court therefore did not decide whether the fiduciary-duty counterclaim falls within the agreement’s arbitration clause. It also rejected FDH Holdings’ argument that McCray waived arbitration. His earlier opposition to a Rule 12(b)(7) motion was not a waiver because the arbitration clause was then inapplicable, and a purported 2022 revocation agreement was ambiguous as to whether it superseded the 2021 arbitration provision. McCray’s prompt arbitration motion and later discovery motion likewise did not clearly establish an implied waiver.
Key Takeaways
- Incorporating AAA employment arbitration rules can clearly delegate arbitrability to arbitrators.
- A court may stay, rather than adjudicate, a claim while arbitrators determine whether it must be arbitrated.
- Waiver of arbitration requires clear evidence of an intentional relinquishment; prompt invocation of arbitration weighs strongly against waiver.
Why It Matters
The order reinforces that a broad arbitration clause incorporating AAA rules can shift the threshold coverage question from the court to an arbitral panel, even where the pleaded claim is for breach of fiduciary duty rather than breach of the employment agreement.
It also illustrates the high bar for proving waiver in Delaware: ambiguous revocation language and litigation activity concerning claims asserted to be outside arbitration did not defeat the contractual arbitration right.