Blackwater Overtime Case Sent to Arbitration

WASHINGTON (CN) - Former Blackwater military contractors must arbitrate their overtime claims against the rechristened Xe Services LLC, a federal judge ruled.

C.J. Mercadante, Robert Biddle, Johnny Jefferson and Phillip W. OHara brought their lawsuit over Blackwater's classification of them as independent contractors with regard to work they performed between 2006 and 2009 in Iraq and Afghanistan.

Seeking $240 million in damages, the contractors say such improper designation had forced them to forego employment benefits such as health care and pensions.

Though each signed identical arbitration clauses in their independent contractor service agreements, the plaintiffs claimed that those agreements were fraudulently induced and made under duress.

The court initially advanced the lawsuit, but U.S. District Judge Colleen Kollar-Kotelly reconsidered the issue based on new information and granted Xe's motion to compel arbitration Thursday, citing "clear and unmistakable evidence of the parties' intent to delegate questions of arbitrability to an arbitrator."

Kollar-Kotelly agreed to stay the action rather than dismiss it since the ruling "only decides that an arbitrator must decide the gateway questions of arbitrability and does not now compel the arbitration of the substantive claims in this action."

The decision comes over a year after the U.S. Supreme Court upheld arbitration clauses in class action suits.

In American Express v. Italian Colors Restaurant, the Supreme Court voted 5-3 that plaintiffs who would qualify as a class must still resolve disputes through arbitration dictated in their contracts, even if that arbitration would obviate the benefits of dispersing litigation costs across a large number of plaintiffs - the rationale for most class-action suits.

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