Summary
In Ndanyi v. Rent-A-Center, Inc., 2004 WL 324516 (E.D. La. Dec. 11, 1004), which is cited by RAC, the identical arbitration provision was found to be valid and enforceable in an employment discrimination case.
Summary of this case from Barker v. Rent-A-Center East, Inc.Opinion
Civil Action No. 04-1769 Section "C" (5).
December 1, 2004
ORDER AND REASONS
This matter comes before the Court on Defendant Rent-a-Center's Motion for Dismissal under Fed.R.Civ.P. 12(b)(1), or in the alternative, to Stay Proceedings and Compel Arbitration. Defendant filed its motion in response to Plaintiff John Ndanyi's suit brought under a Title VII claim of racial discrimination. (Rec. Doc. 1). After considering the parties' briefs, supporting exhibits, and the applicable law, the Court hereby GRANTS Defendant's motion because the Court lacks subject matter jurisdiction due to the binding arbitration agreement between the parties.
I. Background
On or about May 12, 2001, and again on or about March 28, 2003, the plaintiff executed with Rent-a-Center a Mutual Agreement to Arbitrate Claims ("Arbitration Agreement"). It provides in pertinent part:
the Company and I mutually consent to the resolution by arbitration of all claims or controversies ("claims"), past, present or future, whether or not arising out of my application for employment, assignment/employment, or the termination of my assignment/employment that the Company may have against me or that I may have against any of the following: (1) the Company, (2) its officers, directors, employees, or agents in the capacity as such or otherwise, (3) the Company's parent, subsidiary, and affiliated entities. . . .
The only claims that are arbitrable are those that, in the absence of this Agreement, would have been justifiable under applicable state or federal law. The claims covered by this Agreement include, but are not limited to: claims for wages or other compensation due; claims for breach of any contract or covenant (express or implied); tort claims; claims for discrimination (including, but not limited to race, sex, sexual harassment, sexual orientation, religion, national origin, age, workers compensation, marital status, medical condition, handicapped or disability). . . .
(Rec. Doc. 5, App. 1). (Emphasis added).
The title of this document was featured in full caps in a print size markedly larger than the text in the body of the Arbitration Agreement. The heading of each paragraph is in bold and underlined. In the final paragraph of the document, which states that the employee and a Rent-a-Center representative had "carefully read" and understood the terms and subjects covered under the Arbitration Agreement, the type is again in full caps. ( Id. at 5).
Plaintiff claims that the text in the body of the Arbitration Agreement was printed in 8-point font. The print size appears larger than 8-point font in the copy furnished by the defendant, which may be due a subsequent enlargement of the document.
The plaintiff's complaint arises out of a voluntary resignation under an alleged threat of demotion in November 2003, which Mr. Ndanyi claims was motivated by race and/or national origin discrimination. (Rec. Doc. 1). After a series of applications to be store manager at Rent-a-Center's store #1529, the plaintiff was finally promoted on March 29, 2003. He held this position for approximately five months, purportedly with a mounting number of store accounts to his credit. Yet apparently in early October 2003, he claims that he was pressured into voluntarily stepping down to assume an assistant manager under threat of further demotion, allegedly because of his poor managerial performance.
The plaintiff claims that a number of other Rent-a-Center store managers, who were white, were routinely shuffled between stores during this same period, despite inferior performances to the plaintiff's. Allegedly, none suffered demotion due to poor performance reviews, as Mr. Ndanyi did. On November 4, 2003, the plaintiff submitted to the company a written complaint, claiming unfair treatment. After the defendant failed to respond to the plaintiff's claims, Mr. Ndanyi resigned on November 25, 2003.
The plaintiff asserts that he gave "notice" of his claim of unfair treatment at several junctures in a purported attempt to resolve the dispute, including the following instances: (1) his written complaint on November 4, (2) his verbal notice of intent to resign on November 24, (3) formal written resignation on November 25, (4) a request for unemployment benefits, (5) a Notice of Charge of Discrimination through the Equal Employment Opportunity Commission ("EEOC") on January 12, 2004, (6) the EEOC notice of right to sue on March 30, 2004, (6) the service of process on the defendant on June 28, 2004 in the present lawsuit. (Rec. Doc. 8 at 6). In response to service, Defendant's counsel sent a letter to the plaintiff on July 13, 2004 with a copy of the Arbitration Agreement, requesting that Mr. Ndanyi dismiss the suit based on the parties' consent to arbitrate such disputes. (Rec. Doc. 5 at 2).
III. Law and Analysis
The defendant argues that the Arbitration Agreement is valid and enforceable under its express terms, requiring dismissal of the suit under 9 U.S.C. § 2 and Fed.R.Civ.P 12(b)(1). The plaintiff opposes dismissal on grounds that the Arbitration Agreement is essentially an unconscionable contract of adhesion, that he thus did not genuinely consent to its terms (including the obligation to arbitrate), and alternatively that the defendant waived the arbitrability of claims because of an alleged failure to respond to the plaintiff's repeated notification of a claim of unfair treatment.
A. The Enforceability of the FAA
The Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq., provides in pertinent part:
A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract9 U.S.C. § 2.
Employment contracts that require arbitration of employment-related disputes, including employment discrimination suits, are enforceable under the Federal Arbitration Act. See Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991) (holding that employee who signed arbitration agreement was required to arbitrate an age discrimination suit dispute under the ADEA). Due to the liberal policy in favor of arbitration, the party objecting to arbitration bears the burden to show that the Agreement is invalid. See Walton v. Rose Mobile Homes, LLC, 298 F.3d 470, 473 (5th Cir. 2002).
In determining whether a dispute is subject to mandatory arbitration under the FAA, the Court must determine whether the employment contract supports a valid agreement to arbitrate the subject matter of the dispute. Payne Webber, Inc. v. Chase Manhattan Private Bank (Switzerland), 260 F.3d 462 (5th Cir. 2001). To decide whether the parties agreed to arbitrate a certain matter (including arbitrability), courts generally should apply ordinary state law principles that govern the formation of contracts. See, e.g., First Options of Chicago, Inc. V. Kaplan, 514 U.S. 938, 944 (1995). Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 475-476 (1989). Generally applicable contract defenses, such as fraud, duress, or unconscionability, may be applied to invalidate arbitration agreements without contravening the FAA. Doctor's Associates, Inc. v. Casarotto, 517 U.S. 681, 686-687 (1996).
Under Louisiana law, valid contract formation must have the following four elements: (1) the parties had the capacity to contract; (2) the parties freely gave their mutual consent to the contract; (3) the parties had cause or reason for obligated themselves; and (4) the contract has a lawful purpose. LA. CIV. CODE, arts. 1918, 1927, 1966, 1971, 2029 cmt. b. (1991). See also Crowe v. Homes Plus Manufactured Hous. Inc. 877 So. 2d 156 (La.Ct.App. 2004). A court may invalidate a contract under Louisiana law on grounds when a contract is unconscionable. Sutton's Steel Supply, Inc. v. Bellsouth Mobility, Inc., 776 So. 2d 589, 596-598, (La.App. 3th Cir. 2000), writ denied, 787 So.2d 316 (La. 2001).
A contract of adhesion is a standard contract, usually in printed form, prepared by a party of superior bargaining power for adherence or rejection of the weaker party. Where its provisions are in unusually small print, these contracts sometimes raise a question as to whether or not the weaker party actually consented to the terms. Golz v. Children's Bureau of New Orleans, Inc., 326 So. 2d 865, 869 (La. 1976). "The mere fact that a contract contains an arbitration provision does not render it adhesionary." Sutton's Steel Supply, Inc., 776 So.2d at 596. As a general rule, "a person who signs a written instrument is presumed to know its contents and cannot claim that he did not read or understand the document. Blount v. Smith Barney Shearson, 695 So. 2d 1001 (La.App. 4th Cir. 1997); Brown v. Simoneaux, 593 So.2d 939 (La.App. 4th Cir. 1992); Tweedel v. Brasseaux, 433 So.2d 133 (La. 1983).
The Court agrees with the defendant that the Arbitration Agreement is valid and enforceable. The document features in the preamble the general nature of the employment disputes covered under the Arbitration Agreement. See Rec. Doc. 5, Ex. A, Section 1. By its express terms, moreover, the parties agreed to arbitrate the exact types of racial discrimination claims which the plaintiff asserts here under a Title VII theory. See id., Section 2 ("Claims Covered by the Agreement"). Finally, it is apparent from the document's final paragraph, printed in bold letters, that each party had read and understood the Arbitration Agreement, and freely consented to its terms. Id., Section 18 ("Agreement"). Notwithstanding the plaintiff's insinuation that the 8-point font renders the document fundamentally unfair, the Court rejects the argument that Agreement is unduly burdensome, i.e., procedurally unconscionable. Absent unduly small print or lacking clarity in the Agreement's text, the plaintiff cannot overcome the presumptive duty to read. See Blount, 695 So.2d at 1003-1004. It is thus a valid contract under LA. CIV. CODE, arts. 1918, 1927, 1966, 1971, 2029 cmt. b. (1991) and Crowe, 877 So. 2d 156.
As to the substance of the Arbitration Agreement, the Court finds that it is not unduly burdensome. Moreover, its "adhesionary" nature does not necessarily render it unconscionable. See Sutton's Steel Supply, Inc., 776 So. 2d at 596. In a standard fashion, the document simply narrows the range of arbitrable issues, while excluding issues of workers' compensation, unemployment compensation, and injunctive relief in unfair competition and disclosure of trade secrets. In Simpson v. Pep Boys-Manny Moe Jack, Inc., 847 So.2d 617, 622-623 (La.App. 4th Cir. 2003), a Louisiana appellate court found that a strikingly similar arbitration agreement to the Agreement here was not unduly burdensome for the following reasons: (1) the arbitration agreement signed by Simpson was not in small print, but rather was a separate agreement in standard type; (2) the employee had the option of not signing the agreement and finding work elsewhere if he did not wish to be bound to arbitration; and (3) the terms of the arbitration agreement were not unduly burdensome or extremely harsh, as essentially all claims between the parties would be resolved by arbitration, with exception of worker's compensation or unemployment benefits and claims requiring injunctive relief (unauthorized disclosure of trade secrets and other confidential information). Id. at 623. Most important, the court accepted the contention that it was acceptable to narrow the claims the two parties would likely face in the context of the employment agreement. Id.
The court partially accepted the rationale of the defendants for the exclusion of these types of claims. Simpson, 847 So.2d at 623. ("[I]njunctive relief is more quickly obtained through the court system, this is true for preliminary injunctions but is debatable for permanent injunctions."
In deferring to Louisiana state law on the issue of unconscionability, the Court follows the reasoning of the Simpson court. The defendant correctly points out that there was nothing uneven about the rights created in the Arbitration Agreement. First, either party could take to arbitration the types claims outlined in Section 2 of the Agreement. Second, the textual limitation on discovery applies to both parties, while allowing either party to request from the arbitrator that discovery be expanded. See Rec. Doc. 5, Ex. A, Section 5. Therefore, if the plaintiff considers it necessary to take additional depositions, the expansion of discovery is not necessarily foreclosed to him. Third, the plaintiff makes an unsupported argument that judicial review under the Arbitration Agreement runs afoul of LSA-RS 9:4210 et seq. Even assuming arguendo the legal correctness of this argument, it is inconsequential because the FAA pre-empts conflicting state law. See Southland v. Keating, 465 U.S. 1 (1984) ("In enacting § 2 of the federal Act, Congress declared a national policy favoring arbitration and withdrew the power of the states to require a judicial forum for the resolution of claims which the contracting parties agreed to resolve by arbitration"). See also Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 272 (1995) (declining to overrule Southland holding on FAA's pre-emption of state anti-arbitration law).
The Arbitration Agreement, therefore, is valid under Louisiana law. The formation of the agreement was not marred by procedural or substantive unconscionability as to be unduly burdensome. Accordingly, as a valid agreement, the contractual obligation of the parties to arbitrate their dispute is controlling. Judicial review is precluded under 9 U.S.C. § 2.
B. Defendant's Alleged Waiver
The plaintiff argues that the defendant waived its right to demand arbitration because it was allegedly dilatory, in some unspecified manner, in seeking to arbitrate the dispute. The Fifth Circuit recognizes a presumption against a waiver of contractual arbitrability of claims: waiver will be granted only if "the party seeking arbitration substantially invokes the judicial process to the detriment of the other party." Miller Brewing Co. v. Fort Worth Dist., 781 F.2d 494, 496, 497 (5th Cir. 1986). The party asserting waiver bears a heavy burden of showing that defendant actually waived a contractual right. Walker v. Bradford and Co., 938 F.2d 494, 496 (5th Cir. 1991).
Plaintiff's argument is utterly without merit. Plaintiff misconstrues several instances of notification of his grievances as substantial attempts to resolve the claim either through some sort of internal dispute resolution process or through arbitration. Simply put, under the Arbitration Agreement, the parties designated arbitration as the preferred method of dispute resolution. The plaintiff did not initiate action to resolve the dispute in either an arbitral or judicial forum for several months; rather he chose to seek unemployment benefits and to file a grievance with the EEOC. While the plaintiff has a right to seek such relief and redress, the defendant need not respond. See Rodgers v. Brown, 986 F. Supp. 354, 360 (M.D. La. 1997) ("Pre-suit inactivity does not invoke the judicial process and cannot support a finding of waiver.")
The defendant is correct that Rent-a-Center immediately advised the plaintiff of its obligations under the Arbitration Agreement at the first indication that the plaintiff would actively seek to resolve the dispute in a judicial forum and not in arbitration. See Rec. Doc. 8, Ex. H (July 13, 2004 Letter from Defendant) (advising plaintiff of agreement to arbitrate and demanding that Title VII claim be dismissed). Therefore, prior to being served with the Complaint, the defendant sought to exercise its contractual right to arbitration. This prompt action on the defendant's part can hardly be considered dilatory.
Accordingly, the Court finds that the defendant did not waive its rights under the Arbitration Agreement.
III. Conclusion
The Arbitration Agreement is valid under Louisiana law. The plaintiff has made no persuasive showing either that the underlying contract was marred by unconscionability, or that the defendant waived its right to enforce the agreement to arbitrate employment-based disputes. Accordingly, judicial review is precluded under 9 U.S.C. § 2. Plaintiff's Complaint must therefore be dismissed with prejudice under Fed.R.Civ.P. 12(b)(1).
IT IS ORDERED that the defendant's Motion to Dismiss be GRANTED.