Sloan v. Verily Life Sciences LLC

Background

Ryan Sloan, a former employee of Verily Life Sciences LLC, alleged that Verily retaliated against him after he raised internal concerns about alleged violations of the Health Insurance Portability and Accountability Act and alleged concealment of those violations from Verily’s clients. He alleged that Verily’s actions, including terminating him, breached his employment contract. He also brought claims under Title VII of the Civil Rights Act and the Americans with Disabilities Act.

Sloan’s employment documents included an offer letter, an at-will employment and confidentiality agreement, and an arbitration agreement. The arbitration agreement covered disputes arising from or related to the employment relationship or its termination, but excluded claims for harassment, discrimination, and retaliation. The at-will agreement also said that the policies in Verily’s Employee Handbook and Code of Conduct applied to Sloan and that he agreed to read, understand, and comply with them. Verily’s Code of Conduct prohibited retaliation against people who reported concerns in good faith.

Verily moved to dismiss only Count I, Sloan’s claim for retaliation in breach of contract, or alternatively to compel arbitration of that claim.

Motion to Compel Arbitration

The court first considered arbitration. It explained that courts generally decide whether an arbitration agreement exists and whether it covers the dispute. An agreement may delegate those questions to an arbitrator, but only if there is clear and unmistakable evidence that the parties intended to do so.

The court found that the arbitration agreement’s delegation clause was qualified by the words “[e]xcept as otherwise stated in this Agreement.” Because another provision expressly excluded retaliation claims, the agreement did not clearly and unmistakably show that the parties intended to delegate to an arbitrator the question whether an excluded retaliation claim was arbitrable. The court therefore decided that question itself.

The court rejected Verily’s arguments that the exclusion did not apply because retaliation was not a standalone legal cause of action, was not an element of breach of contract, or covered only statutory retaliation claims. The court held that the exclusion described the nature of the claim rather than limiting the exclusion to a particular legal theory. It concluded that Sloan’s retaliation-in-breach-of-contract claim fell within the arbitration exclusion and denied Verily’s motion to compel arbitration.

Motion to Dismiss

Under Federal Rule of Civil Procedure 12(b)(6), a claim may be dismissed if the complaint does not allege enough facts to make relief reasonably plausible. The court accepted the complaint’s factual allegations as true for purposes of the motion.

The court held that Sloan plausibly alleged a contractual promise against retaliation. It found that the Code of Conduct was expressly incorporated into the employment agreement because the agreement specifically referred to the Code, required Sloan to read, understand, and comply with its policies, and made the Code available through a hyperlink. The court also concluded that the Code’s anti-retaliation provision could support an implied contractual term because Verily described the Code as a legal agreement and stated that employees were bound by it.

The court distinguished the Employee Handbook’s disclaimer that its employment policies did not form part of the employment contract. It noted that the Code of Conduct did not contain the same explicit disclaimer. Verily also did not dispute that, if the contract included a non-retaliation term, Sloan had alleged enough facts to show that Verily violated it. The court therefore found that Sloan stated a breach-of-contract claim and denied Verily’s motion to dismiss.

Disposition

The court denied Defendant’s motion to dismiss or compel arbitration.