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United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued January 17, 2008 Decided April 11, 2008
No. 07-7059
AZHAR ALI KHAN AND
ASMA AZHAR KHAN,
APPELLANTS
v.
PARSONS GLOBAL SERVICES, LTD., ET AL.,
APPELLEES
Appeal from the United States District Court
for the District of Columbia
(No. 03cv01574)
Cyril V. Smith argued the cause for appellants. With him on
the briefs was Elaine Charlson Bredehoft.
Matthew D. McGill argued the cause for appellees. With
him on the brief was Eugene Scalia.
Before: GINSBURG, ROGERS and GRIFFITH, Circuit Judges.
2
Opinion for the Court by Circuit Judge ROGERS.
ROGERS, Circuit Judge: This is the second appeal by Azhar
Ali Khan and his wife, Asma Azhar Khan, from a judgment on
their claims against his employer and its agents (collectively
“Parsons”) to recover for injuries sustained as a result of
Parsons’ alleged mishandling of ransom demands by Mr. Khan’s
kidnappers. In the first appeal, the court reversed the grant of
summary judgment for Parsons, holding that the Khans’
recovery on their tort claims was not limited by Mr. Khan’s
employment contract to workers’ compensation insurance.
Khan v. Parsons Global Servs., Ltd., 428 F.3d 1079 (D.C. Cir.
2005) (“Khan I”). In this appeal, the Khans contend that the
district court erred in granting Parsons’ motion to compel
arbitration, denying their discovery requests for lack of
jurisdiction, and dismissing Mrs. Khan’s claim for intentional
infliction of emotional distress. We hold that Parsons waived its
right to enforce the arbitration clause in Mr. Khan’s employment
contract. We further hold that the complaint stated a cause of
action for Mrs. Khan’s claim of intentional infliction of
emotional distress. Accordingly, we reverse.
I.
The events underlying the Khans’ complaint arose during
Mr. Khan’s employment by Parsons in the Philippines. On one
of his days off, when Parsons’ offices were closed, he was
kidnaped and subsequently tortured. Parsons allegedly delayed
paying the ransom that was demanded until after Mr. Khan’s
kidnapers carried out their threat to cut off part of his ear. The
allegations in the complaint are set forth in Khan I, 428 F.3d at
1081-82. At the time of his kidnapping, the terms of Mr. Khan’s
employment contract (“the Agreement”) included a broadly
worded arbitration clause, applicable to “any controversy or
claim [arising] out of [the Agreement,] the breach hereof or in
3
any other way related hereto or otherwise related to or arising
out of employment by [Parsons].” Agreement at A-3. The
Agreement also included a separate clause specifying that the
“worker’s compensation insurance” carried by Parsons should
serve as “full and exclusive compensation for any compensable
bodily injury . . . arising out of and in the course of Employee’s
employment hereunder.” Id. at A-2.
In May 2003, the Khans filed negligence and intentional
infliction of emotional distress claims against Parsons in the
D.C. Superior Court. Parsons removed the case to the federal
district court pursuant to the New York Convention on the
Recognition and Enforcement of Foreign Arbitral Awards
(“New York Convention”), opened for signature June 10, 1958,
21 U.S.T. 2517, 330 U.N.T.S. 38. See also 9 U.S.C. §§ 202-03;
205. On July 29, 2003 Parsons filed a single motion to dismiss
or, alternatively, for summary judgment or to compel arbitration.
Specifically, Parsons argued in its motion that all of the Khans’
claims were addressed by the workers’ compensation clause. In
support of its motion, Parsons submitted testimony on its behalf,
including two declarations by its employees, one of which stated
that workers compensation had covered part of Mr. Khan’s lost
wages, and an email from Parsons to Mrs. Khan on the
applicability of workers’ compensation, asserting that Parsons’
insurer agreed with its position that Mr. Khan’s injuries were
work related. The motion independently sought dismissal of the
complaint against four Parsons entities for alleged pleading
defects. The Khans filed an opposition, set forth material issues
of disputed fact, and submitted two declarations, one of which
outlined potential discovery pursuant to FED. R. CIV. P. 56(f).
Parsons filed a reply reiterating its argument regarding workers’
compensation. On March 22, 2004, the district court granted
summary judgment to Parsons on the ground that workers’
compensation was the Khans’ exclusive remedy; it denied
Parsons’ motion to compel arbitration as moot. The district
4
court denied the Khans’ motion for reconsideration, which was
opposed by Parsons, on September 2, 2004.
This court, over Parsons’ objections, reversed the grant of
summary judgment. Khan I, 428 F.3d at 1081. Parsons then
filed with the district court a motion to compel arbitration with
a supporting memorandum on April 17, 2006. Over the Khans’
opposition, including their argument that Parsons had waived its
right to arbitrate by having engaged in litigation on the merits of
their claims, the district court granted the motion to compel,
ruling that all but one of the Khans’ claims were subject to
arbitration. Parsons Global Servs., Ltd., 480 F. Supp. 2d 327,
332-43 (D.D.C. 2007) (“Khan II”). The district court rejected
the Khans’ arguments that the arbitration clause was waived or
unenforceable or could not be invoked by defendants that had
not signed the Agreement. It also ruled that Mrs. Khan’s
negligence claim was subject to the arbitration clause and, sua
sponte, dismissed with prejudice her claim for intentional
infliction of emotional distress. The district court then denied
the Khans’ motion for discovery for lack of jurisdiction. The
Khans appeal, and our review is de novo. See Stewart v. Nat’l
Educ. Ass’n, 471 F.3d 169, 173 (D.C. Cir. 2006); Colbert v.
Potter, 471 F.3d 158, 164 (D.C. Cir. 2006).
II.
The Supreme Court has held that “questions of arbitrability
must be addressed with a healthy regard for the federal policy
favoring arbitration . . . . whether the problem at hand is the
construction of the contract language itself or an allegation of
waiver, delay, or a like defense to arbitrability.” Moses H. Cone
Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25
(1983). However, consistent with arbitration’s contractual basis,
a party may waive its right to arbitration by acting
“inconsistently with the arbitration right.” National Foundation
5
for Cancer Research v. A.G. Edwards & Sons, Inc., 821 F.2d
772, 774 (D.C. Cir. 1987).1 The Khans contend that because
Parsons actively participated in their lawsuit by seeking judicial
resolution of the substance of the arbitrable claims, it acted
inconsistently with its right to compel arbitration and thus
waived that right. In particular, they maintain that, by
definition, Parsons’ motion for summary judgment should
constitute a waiver. The Khans also contend that they suffered
delay and prejudice as a result of Parsons’ litigation activities,
and given that the gravamen of their claims concern Parsons’
conduct in responding to Mr. Khan’s kidnapping, imprisonment,
and torture, Parsons’ non-pursuit of discovery should not figure
in any waiver analysis because “discovery will likely focus
almost entirely on documents and testimony in the possession
and control of [Parsons].” Appellants’ Br. at 20.
In this circuit, the court views “the totality of the
circumstances [in deciding whether] the defaulting party has
acted inconsistently with the arbitration right. . . . [O]ne example
of [such] conduct . . . is active participation in a lawsuit.”
National Foundation, 821 F.2d at 774-75 (citing Cornell & Co.
v. Barber & Ross Co., 360 F.2d 512, 513 (D.C. Cir. 1966)). A
finding of prejudice is not necessary in order to conclude that a
right to compel arbitration has been waived, although “a court
may consider prejudice to the objecting party as a relevant
factor” in its waiver analysis. Id. at 777. The facts of Parsons’
pretrial participation in the litigation of the Khans’ claims are
undisputed; the only question is whether that participation
waived its right to compel arbitration. “The question of waiver
1
While Moses H. Cone Memorial Hospital and National
Foundation for Cancer Research arose out of Chapter 1 of the Federal
Arbitration Act, and our case arises under the New York Convention,
Chapter 1 applies whenever not inconsistent with the New York
Convention. 9 U.S.C. § 208.
6
is one of law, which we review de novo.” Id. at 774.
A.
As an initial matter, Parsons’ contention that its right to
compel arbitration was originally “unknown or inchoate” and
thus could not be waived until this court’s decision in Khan I
clarified that the Khans’ claims were arbitrable because
workers’ compensation did not apply, Appellees’ Br. at 18, is
not credible. Parsons understood that it possessed a potential
right to arbitration prior to Khan I. Its removal of the Khans’
lawsuit to federal court was based on the New York Convention
addressing foreign arbitration, and its motion in the district court
included arbitration as an alternative to summary judgment and
dismissal. In addition, before the district court ruled on its
motion, Parsons’ counsel proposed that the Khans submit to
arbitration, advising that the Agreement specified “arbitration of
disputes related to [Mr. Khan’s] employment.” Letter from
Eugene Scalia, Esq., to Cyril V. Smith, Esq. (July 21, 2003).
These actions do not suggest any confusion over the right to
compel arbitration.
The court has not previously held that a motion for
summary judgment, standing alone, suffices to constitute a
waiver of colorably arbitrable claims. In National Foundation
the court held that a motion for summary judgment, pursued
until denied by the district court despite intervening legal
decisions clarifying that arbitration was possible, 821 F.2d at
776-77, constituted a demand for “resolution on the merits” and
was the final indicator of “a conscious decision to exploit the
benefits of pretrial discovery and motion practice, . . . [an]
election [] wholly inconsistent with an intent to arbitrate and
constitut[ing] an abandonment of the right to seek arbitration,”
id. at 776. However, this holding arose in a context of long
delay before invocation of the right to arbitration, extensive
pretrial discovery, and both economic and tactical prejudice to
7
the non-moving party. Id. at 775-78. Other circuit courts of
appeals have been more direct in assessing the relationship
between summary judgment and waiver of the right to compel
arbitration. The Second Circuit has stated that any motion for
summary judgment would constitute waiver of the right to
compel arbitration. Sweater Bee by Banff, Ltd. v. Manhattan
Indus., Inc., 754 F.2d 457, 465 (2d Cir. 1985) (dictum). The
Seventh Circuit has similarly stated that a motion to dismiss or
in the alternative for summary judgment is an “[e]specially
telling” factor in assessing whether a party waived a right to
arbitration. St. Mary’s Med. Ctr. of Evansville, Inc. v. Disco
Aluminum Prods. Co., 969 F.2d 585, 589 (7th Cir. 1992) (citing
Sweater Bee by Banff, Ltd., 754 F.2d at 465). Even circuits
requiring evidence of prejudice before finding waiver of a right
to compel arbitration have observed that a motion for summary
judgment, in view of the time and expense associated with such
litigation activity, “could not have caused anything but
substantial prejudice to the [plaintiffs].” Price v. Drexel
Burnham Lambert, Inc., 791 F.2d 1156, 1162 (5th Cir. 1986)
(citation omitted); accord Ehleiter v. Grapetree Shores, Inc.,
482 F.3d 207, 224 (3d Cir. 2007).
Parsons maintains that it “sought dismissal of the Khans’
claims not because [they] were meritless but rather because . . .
workers’ compensation provided the exclusive relief.”
Appellees’ Br. at 18. Further, Parsons maintains, under the
standard in National Foundation, its involvement in litigation of
the Khans’ claims was too limited in scope to constitute waiver.
Noting that it did not move for discovery, nor file an answer
asserting affirmative defenses, Parsons contends that “at most
. . . [only] a motion for summary judgment on the merits of an
arbitrable claim, filed after substantial discovery, can waive the
movant’s right to arbitrate that claim.” Id. at 19 (emphasis
omitted).
8
Parsons’ position that its motion did not address the merits
of the Khans’ claims is unpersuasive. The motion sought not
just dismissal, but also summary judgment; the district court
granted summary judgment; Parsons opposed the Khans’ motion
for reconsideration; and Parsons reaffirmed its desire that
summary judgment be upheld as late as the oral argument before
the court in Khan I, see Oral Arg. Transcript (No. 04-7162, Oct.
6, 2005) at 25. This record allows no ambiguity concerning
Parsons’ involvement in litigation on the merits. A summary
judgment motion by definition “goes to the merits of the case.”
10A CHARLES A. WRIGHT, ARTHUR R. MILLER & MARY K.
KANE, FEDERAL PRACTICE AND PROCEDURE § 2712 (3d ed.
2007); accord Prakash v. Am. Univ., 727 F.2d 1174, 1181-82
(D.C. Cir. 1984) (citations omitted).
Parsons’ suggestion that the merits of its workers’
compensation argument are completely separated from the
merits of the Khans’ claims is also unconvincing. Parsons
insisted on reserving the right to present its workers’
compensation argument to any future arbitration panel
considering the Khans’ claims — suggesting a close relationship
between the merits issues it asserts are independent of each
other. See Memorandum in Support of Defendants’ Motion to
Compel Arbitration at 5 n.2, Khan II, 480 F. Supp. 2d. 327
(D.D.C. 2007) (No. 03-1574) (“2006 Motion to Compel”);
Defendants’ Statement Regarding Proposed Scheduling Order
at 3 n.1, Khan II, 480 F. Supp. 2d. 327 (D.D.C. 2007) (No. 03-
1574) (“2006 Proposal”). More fundamentally, Parsons’ claim
that the Agreement mandated coverage under workers’
compensation was, in fact, an affirmative defense, and by
arguing that the Khans’ claims were of a type addressed by a
particular category of compensation, Parsons’ motion
necessarily addressed these claims’ merits. Had Parsons
succeeded on appeal in Khan I in obtaining affirmance of
summary judgment, then the Khans’ remedies would have been
9
limited to the workers’ compensation insurance carried by
Parsons. Cf. Howard Delivery Serv., Inc. v. Zurich Am. Ins. Co.,
547 U.S. 651, 663 (2006); WMATA v. Johnson, 467 U.S. 925,
931-32 (1984).
B.
It is true that Parsons submitted its motion for summary
judgment as an alternative to dismissal or compelled arbitration.
In addition, unlike the brokerage firm seeking arbitration in
National Foundation, 821 F.2d at 773, 775, Parsons did not
undertake discovery from the Khans, and more broadly, its
engagement with the litigation process was limited apart from its
motion and its subsequent appellate argument. Nonetheless,
Parsons’ pursuit of summary judgment was the signifier of “a
conscious decision . . . to have the substance of [the Khans’] . .
. claims decided by a court.” Id. at 776.
Firstly, we do not find probative Parsons’ characterization
of its motion as one for dismissal of the complaint, or, in the
alternative, for summary judgment. Admittedly a motion to
dismiss may not be inconsistent with the intent to arbitrate, as
where a party seeks the dismissal of a frivolous claim. See St.
Mary’s Med. Ctr. of Evansville, Inc., 969 F.2d at 589; Sweater
Bee by Banff, Ltd., 754 F.2d at 465. But where, as here, a party
moves for summary judgment through a motion including or
referring to “matters outside the pleading[],” see FED. R. CIV. P.
12(d) (2008); see also FED. R. CIV. P. 12(b)(6) (2008), that party
has made a decision to take advantage of the judicial system and
should not be able thereafter to seek compelled arbitration. A
less rigorous approach to summary judgment based on materials
outside the pleadings would encourage parties to attempt repeat
litigation of merits issues not resolved to their satisfaction,
undermining the “policy that arbitration may not be used as a
strategy to manipulate the legal process.” National Foundation,
821 F.2d at 776. Parsons’ conduct well illustrates this point.
10
After failing to persuade this court in Khan I that workers’
compensation insurance was the Khans’ exclusive remedy,
Parsons on remand to the district court reserved the right to raise
the issue of workers’ compensation insurance again at
arbitration, see 2006 Motion to Compel at 5 n.2; 2006 Proposal
at 3 n.1, thus indulging in “a second bite at the very questions
presented to the court for disposition,” National Foundation, 821
F.2d at 776.
Secondly, Parsons cannot salvage its right to seek
arbitration, upon prevailing on its motion for summary judgment
but losing on appeal, solely because it sought arbitration in the
alternative to summary judgment. Parsons’ motion effectively
requested that the district court decide either to retain the case or
to send the dispute to another forum. The first alternative
presupposed that the district court was the appropriate forum for
the adjudication of the Khans’ claims, whereas the second
proceeded from the opposite premise. Having ceded the choice
of forum to the district court, Parsons cannot avoid the
consequences of that court’s decision to rule on its motion for
summary judgment, which relied on sources outside of the
pleadings in engaging the merits of the Khans’ claims. Just as
“[t]he defendant who files [a Rule] 12(b)(6) motion takes the
risk” that the court will dispose of the motion under Rule 56,
Sweater Bee by Banff, Ltd., 754 F.2d at 465, so too a defendant
who seeks arbitration only as an alternative to summary
judgment “takes the risk” that the court will rule on the merits of
the plaintiff’s claims, thereby precluding the defendant from
seeking arbitration subsequently.
Consequently, the limited extent of Parsons’ litigation
activity is of no moment. Had Parsons prevailed on appeal in
Khan I, then it would have secured all that it could have obtained
in arbitration on the basis of a substantial defense on the merits.
Moreover, even if filing a motion for summary judgment alone
11
did not definitively waive Parsons’ right to compel arbitration,
independent of other litigation activity, two additional
considerations would render waiver appropriate here. First, the
specifics of Parsons’ litigation posture allowed for fewer indicia
of litigation activity than in cases like National Foundation and
St. Mary’s Medical Center of Evansville, Inc. Parsons’
non-pursuit of discovery is unsurprising given that “discovery
w[ould] likely focus almost entirely on documents and testimony
in the possession and control of [Parsons].” Appellants’ Br. at
20. In addition, once its first motion resulted in a favorable
judgment on the merits, Parsons had achieved its litigation aims,
making further litigation activity unnecessary. Second, the
Khans have suffered significant prejudice. They have been
forced to expend time and resources to oppose two motions in
the district court and to brief two appeals in this court. As the
court held in National Foundation, “[b]y moving for summary
judgment, [Parsons] forced [the Khans] to litigate the substantive
issues in the case[;] . . . [b]eing compelled to bear the expense of
this proceeding constitutes prejudice.” 821 F.2d at 777.
We hold that, irrespective of other indicators of involvement
in litigation, filing a motion for summary judgment based on
matters outside of the pleadings is inconsistent with preserving
the right to compel arbitration; if the motion is accompanied by
a motion to compel arbitration in the alternative, the movant
takes the risk that the district court will choose to rule on the
motion for summary judgment, thereby preventing the movant
from subsequently seeking arbitration. Parsons’ motion invited
the district court to consider the merits of the Khans’ claims and
the district court’s grant of summary judgment signified
acceptance of the invitation. Parsons must now accept the result
of its chosen litigation strategy: waiver of its right to compel
arbitration. Because Parsons waived its right to any arbitration,
the court need not address the Khans’ challenges to the
enforceability and applicability of the arbitration clause.
12
III.
Under District of Columbia law, a claim of intentional
infliction of emotional distress requires a showing of “(1)
extreme and outrageous conduct on the part of the defendant
which (2) intentionally or recklessly (3) causes the plaintiff
severe emotional distress.” Darrow v. Dillingham & Murphy,
LLP, 902 A.2d 135, 139 (D.C. 2006) (internal quotations
omitted). Whether conduct is “extreme and outrageous” depends
on “applicable contemporary community standards of
offensiveness and decency, and [] the specific context in which
the conduct took place.” King v. Kidd, 640 A.2d 656, 668 (D.C.
1993) (citations omitted). More specifically, the conduct must,
as Parsons notes, constitute behavior that is “‘atrocious’ and
‘utterly intolerable.’” Appellee’s Br. at 46 (citing Stevenson v.
Bluhm, No. 06-0632, 2006 WL 3096688, at *2 (D.D.C. Oct. 31,
2006) (internal quotations omitted)). Although this standard is
demanding, the allegations in the Khans’ complaint are sufficient
to state a claim, especially given that inferences derived from
these allegations should be drawn in Mrs. Khan’s favor. Broudy
v. Mather, 460 F.3d 106, 116-17 (D.C. Cir. 2006).
The district court, acting sua sponte, reasoned that Parsons
had not engaged in “extreme or outrageous” conduct and that
“there is no evidence that this situation was caused either directly
or indirectly by [Parsons].” Khan II, 480 F. Supp. 2d at 342. As
to the former, the Khans alleged, among other things, that
Parsons had disregarded Mr. Khan’s safety in favor of
minimizing future corporate kidnappings, thereby provoking Mr.
Khan’s kidnappers to torture him, to cut off a piece of his ear,
and to send a videotape of the event to Parsons, causing the
Khans severe mental distress. Mrs. Khan certainly can allege
facts, consistent with the complaint, that are “so outrageous in
character, and so extreme in degree, as to go beyond all possible
13
bounds of decency.” Hill v. Medlantic Health Care Group, 933
A.2d 314, 334 (D.C. 2007) (internal quotations omitted). For
example, Parsons’ alleged successful efforts to prevent Mrs.
Khan from privately paying the ransom, despite threats of torture
and mutilation, may have exposed Mrs. Khan to the guilt of
knowing that she could have prevented Mr. Khan’s suffering and
disfigurement if she had been able to convince Parsons to
provide the ransom details that they withheld from her. In the
context of Mr. Khan’s employment by Parsons, this could
certainly be considered “atrocious” conduct. The complaint also
alleges that Parsons’ actions were intentional and that Mrs. Khan
suffered severe emotional distress. The absence of evidence is
hardly surprising; the Khans have done nothing more than file a
complaint and defend against Parsons’ motions and the grant of
summary judgment. We hold that the Khans’ allegations are
sufficient to meet the criteria for intentional infliction of
emotional distress under Darrow, rendering dismissal
inappropriate. Cf. Bell Atl. Corp. v. Twombly, 127 S. Ct. 1955,
1969 (2007).
Accordingly, we reverse the order and judgment granting
Parsons’ motion to compel arbitration, denying the Khans’
discovery requests, and dismissing Mrs. Khan’s claim for
intentional infliction of emotional distress, and we remand the
case to the district court. Now that the arbitration predicate for
removal will no longer obtain, the district court might consider
whether to remand the case to the D.C. Superior Court.