HEINEN v. NORTHROP GRUMMAN CORP. (February 7, 2012)
Gregory Heinen accepted a job offer from Northrop Grumman Corp. that required him to move from his home in California to Illinois. As part of the hiring process, Heinen entered into an employment contract, a contract agreeing to abide by Northrop's dispute resolution process, and a relocation agreement. The dispute resolution process requires arbitration of all employment related disputes. The other two contracts do not refer to arbitration. Heinen brought suit in Illinois state court alleging that Northrop breached the relocation agreement. Northrop removed on diversity grounds, asserting that Heinen was a Massachusetts "resident," and therefore a Massachusetts "citizen." Judge Conlon (N.D. Ill.) dismissed the complaint on the ground that Heinen's agreement to arbitrate extended to his complaints about the relocation agreement. Heinen appeals.
In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Rovner and Tinder affirmed and denied Northrop's motion for sanctions. The Court had little difficulty in affirming on the merits. The dispute resolution agreement requires Davis to arbitrate "[a]ny employment-related claim." The clause is broad enough to cover a relocation benefits dispute since relocation benefits are related to employment. Collateral to the merits, the Court was quite critical of the lawyering in two respects. First, Northrop's removal papers referred only to residence. Citizenship for diversity purposes is based on domicile, not residence. The amended removal papers, filed after oral argument, were quite sufficient to show that Heinen was domiciled in Massachusetts. Northrop's failure to adequately allege citizenship in its original removal papers wasted a lot of the Court's time and the clients’ money. Second, Northrop sought sanctions for what it called a frivolous appeal but failed to follow Rule 38 in doing so and then unnecessarily filed a separate motion for sanctions after oral argument. The Court agreed that the appeal was frivolous but declined to award sanctions to a party that itself fails to follow the rules.