Arbitration clauses contained in international commercial contracts – those involving parties domiciled in different countries and dealing with the cross-border supply and distribution of goods or services – are afforded more liberal construction by U.S. courts.  Thanks to a United Nations Convention adopted by 144 countries, disputes arising out of or related to an international commercial contract containing a properly-drafted arbitration clause are highly likely to be arbitrated in the place specified in that clause, notwithstanding the creative legal maneuvers of an unwilling party.  Surprisingly, the same cannot always be said of arbitration clauses in domestic commercial contracts.

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The general rule in New York is that an employee who does not work under an agreement for a definite term of employment is an “at-will” employee:  She or he may be terminated at any time, with or without cause, for any reason whatsoever.

Earlier this year, New York State’s highest court reaffirmed this general rule, and made a clear showing that it will guard closely against efforts to encroach on it.  In Smalley v. Dreyfus Corp., 10 N.Y.3d 55, 853 N.Y.S.2d 270 (2008), the plaintiffs were a group of employees at the Taxable Fixed Income Group at Dreyfus.  Each employee was hired at different times over a three year period.  Both prior to and during their employment, rumors had been circulating that this group might be merged with another fund management company.  Allegedly, the employees asked repeatedly about these rumors, and allegedly, these rumors were repeatedly and flatly denied.  Based upon these alleged denials, the employees claim they turned down other employment and remained with Dreyfus.  Four years after the first plaintiff was hired, Dreyfus merged the fixed income group with the fund management company, and shortly thereafter, all of the plaintiff-employees were terminated.

The plaintiff employees sued, asserting several claims, of which only one is relevant.  Plaintiffs claimed that Dreyfus fraudulently induced them to accept and remain in the employment of Dreyfus.  The plaintiffs alleged that they were misled into believing that Dreyfus’s Taxable Fixed Income Group would not merge with another company, and on that basis, they accepted and continued employment, and in some cases, turned down other employment.

The trial court dismissed all of the Smalley employees’ claims on the basis that their employment was at-will.  The intermediate appellate court (the Appellate Division), by a 4-1 majority,  reversed the dismissal with respect to the fraudulent misrepresentation claim, relying in large part upon a 1992 federal Court of Appeals case, Stewart v. Jackson & Nash, in which the federal court sustained a plaintiff’s claim of fraudulent inducement on a motion to dismiss.

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