#MeToo/#TheyLied Settlements, Arbitration, and Rescission

Reiterman v. Abid, decided today by the Eleventh Circuit (in an opinion by Judge Gerald Bard Tjoflat, joined by Judges Elizabeth Branch and Britt Grant), involves a sexual assault allegation which led to a libel lawsuit, and which in turn led to a settlement agreement calling for arbitration. The question is whether the settlement agreement was rescinded, so that the libel plaintiff (Reiterman) could again sue the initial accuser (Abid):

{We make no comment on the truth or falsity of any of the background facts of this case, as the merits of Reiterman's claims are not before us on appeal. For context purposes only, we summarize the facts of the merits dispute as they have been presented by the parties to this Court on appeal.}

Abid and Reiterman first met in 2014 in Tampa, Florida. At the time, Reiterman worked as an LSAT teacher for the test preparation company TestMasters. Abid was one of Reiterman's students, and the two briefly dated. After the relationship ended, Abid accused Reiterman of sexual assault. This accusation resulted in an investigation by the Tampa Police Department, which ultimately declined to charge Reiterman. The Florida Attorney General's Office also declined to intervene after reviewing the case at Abid's request.

Abid then allegedly engaged in a pervasive, anonymous internet campaign to ruin Reiterman's reputation by writing several blogposts accusing Reiterman of sexually assaulting multiple women. Each of these blogposts was ostensibly written by a different woman. The District Court would later describe this campaign as "remarkably extensive and forceful, in effect seeking to destroy Reiterman by painting him in the most graphic terms as a racist and a serial rapist." These allegations severely affected Reiterman's reputation while attending Harvard Law School from 2015 to 2018 and continue to impair his ability to obtain gainful employment.

On April 4, 2018, Reiterman sued Abid in the Middle District of Florida, claiming that she had defamed him by creating all or some of the anonymous blogposts. Abid denied involvement in the internet campaign, and so Reiterman and Abid quickly entered into settlement negotiations. In June 2018, the parties agreed to the 2018 Settlement Agreement disputed in this appeal. This agreement provided, inter alia, that the parties would exchange mutual releases for all claims they had against each other, that Reiterman would pay Abid a set amount of money in monthly installments, and that "[a]ny controversy or claim arising out of or relating to this contract, or breach thereof, shall be settled by arbitration."

After the parties agreed to the 2018 Settlement Agreement, Reiterman learned of evidence indicating that Abid was responsible for all or most of the blogposts, contrary to what she had stated during the settlement negotiations. Furthermore, three new blogposts were posted after the agreement was made, which Reiterman suspected Abid was responsible for. As a result, Reiterman sent a letter to Abid on April 3, 2019, through his attorney. This letter stated that Abid's conduct had rendered their 2018 Settlement Agreement "null and void" and that Reiterman was therefore relieved of his obligations under the agreement. Reiterman requested that Abid return the payments Reiterman had made so far and warned Abid that litigation would follow unless she agreed to Reiterman's demands.

Abid personally responded to Reiterman's letter on April 10 by email. In her response, Abid stated that "[s]ince Mr. Reiterman is accusing me of having breached the settlement agreement and believes he no longer has an obligation to abide by the clauses set therein, I will mirror that belief and no longer honor the clauses set forth in the agreement either." Abid then went on to describe the various actions she would take now that she was released from the 2018 Settlement Agreement, such as publishing a book she claimed to have written about Reiterman's alleged sexual assault and contacting politicians involved in the 2020 presidential race. In September 2019, Reiterman brought this action against Abid in the Middle District of Florida.

Once Abid obtained new counsel and waived service of process, she moved the District Court to issue an order compelling arbitration based on the arbitration clause in the 2018 Settlement Agreement. Reiterman opposed the motion, claiming that the parties had mutually agreed to rescind the 2018 Settlement Agreement through their April 2019 communications….

At [an] evidentiary hearing, the District Court heard testimony from both Abid and Reiterman's lawyer, Krista Baughman, who wrote Reiterman's April 2019 letter. Baughman's testimony, which the Court found credible, established that the parties intended to rescind the 2018 Settlement Agreement in their 2019 communications. While Abid testified that she did not intend to rescind the 2018 Settlement Agreement in her 2019 email, the Court found her testimony to not be credible and instead found that she had intended to rescind the agreement in her 2019 email. Following the hearing, the Court entered an order denying Abid's motion to compel arbitration as the parties had rescinded the 2018 Settlement Agreement. Abid timely appealed this order….

Abid is correct that courts must determine whether the parties formed a contract containing an arbitration clause before compelling arbitration and that this inquiry speaks to the existence of the contract. Abid is also correct that an arbitrator must decide any questions about whether a contract containing an arbitration agreement is void or voidable under state law.

But Abid's argument fails when it attempts to classify a subsequent mutual rescission as just another state law ground rendering a contract void or voidable. Rather, a subsequent mutual rescission is an agreement between the parties to not be bound by their former contract any longer. As arbitration is "simply a matter of contract between the parties," the parties may of course voluntarily decide to release each other from their obligations after forming a contract, including their obligation to arbitrate certain disputes. Any disputes about whether the parties later agreed to rescind their earlier contract are disputes about whether a new agreement was formed—and courts decide contract formation disputes, not arbitrators.

Furthermore, compelling arbitration after the parties have agreed to rescind their arbitration agreement would deprive the parties of the benefit of their subsequent bargain and encourage gamesmanship….

Lastly, the District Court did not clearly err in concluding that the parties intended to mutually rescind their 2018 Settlement Agreement through their April 2019 communications. The Court based its findings of fact in large part on its credibility determinations of the two witnesses: it found Baughman to be credible and Abid to not be credible. Federal Rule of Civil Procedure 52(a) allows reviewing courts to set aside trial court findings of fact only when they are clearly erroneous. But "[w]hen findings are based on determinations regarding the credibility of witnesses, Rule 52(a) demands even greater deference to the trial court's findings; for only the trial judge can be aware of the variations in demeanor and tone of voice that bear so heavily on the listener's understanding of and belief in what is said." …

Note: I intervened in the district court in this case to unseal the settlement agreement; the court granted my motion to intervene and unseal. My participation in the case was limited to the open records question.