Barnett v. V.T. Motors LLC

• Court: District Court, D. Arizona
• Decided: December 3, 2021
• Docket: 2:21-cv-01195
• Status: Unknown

Opinion

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8

Christin a Barnett, ) No. CV-21-01195-PHX-SPL ) 9 ) 10 Plaintiff, ) ORDER vs. ) ) 11 ) V.T. Motors LLC, ) 12 ) 13 Defendant. ) ) 14 )

15 On July 9, 2021, Plaintiff Christina “Chris” Barnett1 filed this employment 16 discrimination action against his employer, Defendant V.T. Motors LLC. (Doc. 1). 17 Plaintiff’s Complaint alleges discrimination, retaliation, and failure to accommodate in 18 violation of the Americans with Disabilities Act; disability discrimination and retaliation 19 in violation of the Arizona Civil Rights Act; and sex discrimination and retaliation in 20 violation of Title VII. (Doc. 1 at 7–12). 21 On July 30, 2018, about two weeks after he was initially hired by Defendant, 22 Plaintiff signed a “Mutual Agreement to Arbitrate Claims” (the “Arbitration Agreement” 23 or “Agreement”). (Doc 10-1; Doc. 12 at 3). The Arbitration Agreement states in relevant 24 part: 25 The Employee and the Dealership will resolve by arbitration all statutory, contractual, and common law claims . . . that 26 arise out of or relate to the Employee’s hiring, employment, 27

28 1 Plaintiff is a transgender man who goes by “him, he, his” pronouns. (Doc. 1 ¶¶ 29, 51). or termination of employment by the Dealership, including: 1 claims of discrimination, harassment, or retaliation under any 2 federal, state or local statute or ordinance, including but not limited to Title VII . . . and the Americans with Disabilities 3 Act . . . . 4 (Doc. 10-1 at 3). The Agreement goes on to set forth various arbitration procedures. 5 (Doc. 10-1). On the basis of the Arbitration Agreement, the Defendant filed its Motion to 6 Dismiss Case and Compel Arbitration, which is now before the Court. (Doc. 10). 7 I. LEGAL STANDARD 8 The Federal Arbitration Act (“FAA”) “leaves no place for the exercise of 9 discretion by a district court, but instead mandates that district courts shall direct the 10 parties to proceed to arbitration on issues as to which an arbitration agreement has been 11 signed.” Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 218 (1985) (citing 9 U.S.C. 12 §§ 3, 4). “The court’s role under the [FAA] is therefore limited to determining 13 (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement 14 encompasses the dispute at issue.” Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 15 1126, 1130 (9th Cir. 2000) (citing 9 U.S.C. § 4) (other citations omitted). Courts must 16 decide these questions “according to the standard used by district courts in resolving 17 summary judgment motions pursuant to [Federal Rule of Civil Procedure (“FRCP”)] 56.” 18 Coup v. Scottsdale Plaza Resort, LLC, 823 F. Supp. 2d 931, 939 (D. Ariz. 2011). If a 19 district court finds that an arbitration agreement is valid and enforceable, “then it should 20 stay or dismiss the action pending arbitration proceedings to allow the arbitrator to decide 21 the remaining claims, including those relating to the contract as a whole.” Nagrampa v. 22 MailCoups, Inc., 469 F.3d 1257, 1276–77 (9th Cir. 2006). 23 “Arbitration agreements are presumptively enforceable under the FAA ‘save upon 24 such grounds as exist at law or in equity for the revocation of any contract.’” Taleb v. 25 AutoNation USA Corp., No. CV06-02013-PHX-NVW, 2006 WL 3716922, at *2 (D. 26 Ariz. Nov. 13, 2006) (quoting 9 U.S.C. § 2). The FAA’s saving clause, however, 27 “permits agreements to arbitrate to be invalidated by generally applicable contract 28 1 defenses, such as fraud, duress, or unconscionability.” AT&T Mobility LLC v. 2 Concepcion, 563 U.S. 333, 339 (2011) (internal quotation marks omitted). Thus, “[i]n 3 determining the validity of an agreement to arbitrate, federal courts ‘should apply 4 ordinary state-law principles that govern the formation of contracts.’” Cir. City Stores, 5 Inc. v. Adams, 279 F.3d 889, 892 (9th Cir. 2002) (citing First Options of Chi., Inc. v. 6 Kaplan, 514 U.S. 938, 944 (1995)). In determining the validity and enforceability of the 7 Arbitration Agreement here, then, Arizona’s law of contracts controls. Taleb, 2006 WL 8 3716922, at *2. 9 II. DISCUSSION 10 In this case, there is no dispute that the Arbitration Agreement encompasses 11 Plaintiff’s claims. The parties disagree, however, as to whether the Agreement is valid 12 and enforceable. Plaintiff advances two arguments challenging the validity of the 13 Arbitration Agreement: (1) there was no mutual assent to the Agreement, and (2) the 14 Agreement is unconscionable. 15 a. Mutual Assent 16 First, Plaintiff argues that Defendant has failed to provide evidence demonstrating 17 that the parties mutually assented to the Arbitration Agreement (Doc. 11 at 3–4). 18 Specifically, Plaintiff argues that the Arbitration Agreement, as attached to Defendant’s 19 Motion, “is merely hearsay with no party affidavit authenticating it or laying any 20 foundation or providing factual analysis of circumstance surrounding the signature.” 21 (Doc. 11 at 4). But Rule 56, the standard under which motions to compel arbitration are 22 decided, “was amended in 2010 to eliminate the unequivocal requirement that 23 evidence . . . must be authenticated,” although “the amended Rule still requires that such 24 evidence ‘would be admissible in evidence’ at trial.” Romero v. Nev. Dep’t of Corr., 673 25 Fed. Appx. 641, 644 (9th Cir 2016) (quoting Fed. R. Civ. P. 56(c)(4)). Moreover, 26 authentication is achieved under Federal Rule of Evidence 901(a) through “evidence 27 sufficient to support a finding that the item is what the proponent claims it is.” Here, 28 Plaintiff does not dispute the authenticity of the Arbitration Agreement attached to 1 Defendant’s Motion as Exhibit A nor the authenticity of his signature on the Agreement. 2 In fact, Plaintiff’s own affidavit admits that he signed the Arbitration Agreement 3 provided to the Court by Defendant. (Doc. 12 at 3). Plaintiff’s authentication argument 4 therefore does not carry weight. 5 As to Plaintiff’s hearsay argument, a document that “itself affects the legal rights 6 of the parties” is not hearsay. Fed. R. Evid. 801(c) adv. com. note; see also Stuart v. 7 UNUM Life Ins. Co. of Am., 217 F.3d 1145, 1154 (9th Cir. 2000) (holding that “a legally 8 operative document that defines the rights and liabilities of the parties” is not hearsay); 9 United States v. Rubier, 651 F.2d 628, 630 (9th Cir. 1981) (“Facts of independent legal 10 significance constituting a contract which is at issue are not hearsay.”). Thus, courts 11 routinely hold that arbitration agreements are not hearsay when deciding motions to 12 compel arbitration. See, e.g., Izett v. Crown Asset Mgmt., LLC, No. 18-cv-05224-EMC, 13 2019 WL 4845575, at *4 (N.D. Cal. Oct. 1, 2019); De La Vega v. Sterling Jewelers Inc., 14 No. SACV 17-440 JVS (KESx), 2017 WL 10605190, at *3 (C.D. Cal. July 7, 2017); 15 Bauscher v. Brookstone Sec., Inc., No. 4:12-cv-00028-BLW, 2012 WL 3100383, at *3 16 (D. Idaho July 30, 2012). Likewise, the Arbitration Agreement at issue in this case 17 defines the rights and obligations of the parties and is not hearsay. 18 Having dispensed of Plaintiff’s evidentiary arguments, the signed Arbitration 19 Agreement is clear evidence of mutual assent. Generally, “one who signs a written 20 document is bound to know and assent to its provisions in the absence of fraud, 21 misrepresentation, or other wrongful acts by the other party.” Teran v. Citicorp Pers.-to- 22 Pers. Fin. Ctr., 706 P.2d 382, 384–85 (Ariz. Ct. App. 1985) (stating that absent an 23 undertaking by one party to explain a document, it is immaterial that another party who 24 signs a document does not understand its legal significance). Plaintiff alleges no such 25 misconduct by Defendant, so he is bound to have assented to the terms of the Arbitration 26 Agreement. 27 /// 28 /// 1 b. Unconscionability 2 A contract, including an arbitration agreement, that is unconscionable is 3 unenforceable. See Clark v. Renaissance W., LLC, 307 P.3d 77, 79 (Ariz. Ct. App. 2013). 4 Unconscionability is evaluated “in the light of the general commercial background and 5 the commercial needs of the particular trade or case . . . under the circumstances existing 6 at the time of the making of the contract.” Maxwell v. Fid. Fin. Servs., Inc., 907 P.2d 51, 7 57 (Ariz. 1995) (internal quotation marks omitted). The purpose of the unconscionability 8 doctrine is “the prevention of oppression and unfair surprise . . . not of disturbance of 9 allocation of risks because of superior bargaining power.” Id. (internal quotation marks 10 omitted). Plaintiff argues that the Arbitration Agreement is both procedurally and 11 substantively unconscionable. 12 “Procedural unconscionability addresses the fairness of the bargaining process, 13 which ‘is concerned with “unfair surprise,” fine print clauses, mistakes or ignorance of 14 important facts or other things that mean bargaining did not proceed as it should.’” Clark, 15 307 P.3d at 79 (quoting Maxwell, 907 P.2d at 57–58). When assessing whether a contract 16 is procedurally unconscionable, factors for a court to consider include: “age, education, 17 intelligence, business acumen and experience, relative bargaining power, who drafted the 18 contract, whether the terms were explained to the weaker party, [and] whether alterations 19 in the printed terms were possible.” Maxwell, 184 Ariz. at 89 (internal quotation marks 20 omitted). A court may also consider “whether the contract was separate from other 21 paperwork, whether the contract used conspicuous typeface, and whether the contract 22 was signed hurriedly and without explanation in emergency circumstances.” Dueñas v. 23 Life Care Ctrs. of Am., Inc., 336 P.3d 763, 768 (Ariz. Ct. App. 2014) (internal citations 24 omitted). Ultimately, however, “the fundamental question is whether one party to a 25 contract has unfairly or surreptitiously deprived the other of the right of access to the 26 courts.” Id. 27 Plaintiff first argues that the Arbitration Agreement is procedurally 28 unconscionable because it is “a take-it-or-leave-it” contract of adhesion. “[T]he 1 distinctive feature of a contract of adhesion is that the weaker party has no realistic 2 choice as to its terms.” Broemmer v. Abortion Servs. of Phx., Ltd., 840 P.2d 1013, 1016 3 (Ariz. 1992) (holding a contract was adhesive where it was standardized, not negotiated, 4 and presented to the plaintiff without explanation as a condition of receiving services). 5 Here, Plaintiff’s affidavit asserts that he was rushed into signing documents including the 6 Arbitration Agreement, that he did not believe he had any power to negotiate the 7 documents, and that he felt he had to sign the documents in order to be employed by 8 Defendant. The Arbitration Agreement is thus a contract of adhesion under Arizona law. 9 Still, “[a] contract of adhesion is fully enforceable according to its terms unless 10 certain other factors are present.” Id. (internal quotation marks and citations omitted). An 11 adhesive contract is unenforceable only if it either falls outside the reasonable 12 expectations of the weaker party or is substantively unconscionable. See id.; see also 13 Longnecker v. Am. Express Co., 23 F. Supp. 3d 1099, 1109 (D. Ariz. 2014). Plaintiff 14 makes no argument or assertion that the Arbitration Agreement is contrary to his 15 reasonable expectations, so the Agreement is an unconscionable contract of adhesion 16 only if it is substantively unconscionable. 17 “Substantive unconscionability concerns the actual terms of the contract and 18 examines the relative fairness of the obligations assumed.” Maxwell, 907 P.2d at 58. A 19 contract may be substantively unconscionable if it includes “terms so one-sided as to 20 oppress or unfairly surprise an innocent party” or “an overall imbalance in the obligations 21 and rights imposed by the bargain.” Id. Plaintiff identifies four provisions of the 22 Arbitration Agreement that he argues make the Agreement unconscionable: (1) Section 23 23, which allows for unilateral modification of the Agreement by Defendant only (Doc. 24 10-1 at 9); (2) Section 4, which, if Plaintiff files a discrimination charge with an 25 administrative agency, allows Defendant to opt out of the Agreement and require Plaintiff 26 to proceed in court with respect to the claims in the charge (Doc. 10-1 at 4); (3) Section 5, 27 which requires that arbitration “be initiated within 180 days of the date the Employee 28 became aware of the alleged harm or should have become aware of the alleged harm, 1 unless a longer time period for commencing actions is provided under federal or state 2 statute” (Doc. 10-1 at 4); and (4) Section 20, which provides that “[t]he arbitration, 3 including the hearing and record of the proceeding, are confidential,” subject to narrow 4 exceptions (Doc. 10-1 at 8). 5 As to Section 23, the modification provision, a unilateral modification clause does 6 not render an arbitration agreement substantively unconscionable where such a clause has 7 not been exercised. See Longnecker, 23 F. Supp. 3d at 1111. Plaintiff does not allege that 8 Defendant has in any way modified the terms of the Arbitration Agreement to which he 9 assented. Thus, Plaintiff’s unconscionability argument falls flat. 10 As to Section 4, the administrative charge provision, Plaintiff points out that it 11 allows Defendant to opt out of arbitration but does not allow the same for Plaintiff. (Doc. 12 11 at 10). Under Arizona law, non-mutual exceptions to arbitration requirements are not 13 necessarily unconscionable. See Wernett v. Serv. Phx., LLC, No. CIV 09-168-TUC-CKJ, 14 2009 WL 1955612, at *8 (D. Ariz. July 6, 2009) (citing Smith v. Logan, 799 P.2d 1378, 15 1380 (Ariz. Ct. App. 1990)). For example, in Smith, the Arizona Court of Appeals held 16 that a provision stating, “Buyer shall not have the right to demand arbitration if in default 17 of any monies owed to SELLER,” was not unconscionable because “[p]arties may make 18 a distinction in their arbitration agreement between issues subject to arbitration and issues 19 for the court to decide.” Smith, 799 P.2d at 1280. On the other hand, in Wernett, the 20 district court found unconscionable an arbitration provision with an unconditional 21 exception for the employer to seek equitable remedies before a court but no such 22 exception for employees. Wernett, 2009 WL 1955612, at *8. 23 The Arbitration Agreement’s administrative charge provision is more like the 24 arbitration exception in Smith than the one in Wernett. First, the provision applies only to 25 particular issues—namely, discrimination claims—rather than to all possible claims, a 26 type of scheme to which the Smith court gave approval. Second, mutuality is lost only 27 under a specified condition, the filing of a discrimination charge by Plaintiff, unlike the 28 employer’s unfettered access to a judicial forum in Wernett. To be sure, an employee 1 filing a discrimination charge—an action they are entitled to take—is very different from 2 a buyer defaulting on payments as in Smith. But a conditional exception of this sort is 3 nevertheless significantly less beneficial to Defendant and does not create so severe of an 4 imbalance between the parties as to be substantively unconscionable. 5 As to Section 5, the 180-day time limit, Plaintiff argues that the provision deprives 6 him of the benefit of the continuing violations doctrine, which may apply to his claims, 7 because the time period starts when Plaintiff became aware of or should have become of 8 aware of the alleged harm. (Doc. 11 at 11); see Nat’l R.R. Passenger Corp. v. Morgan, 9 536 U.S. 101, 115–18 (2002). The language of Section 5 contains an important caveat, 10 however: the 180-day time limit does not apply if federal or state statute provides a 11 longer period to commence an action. The continuing violations doctrine is derived from 12 statutory text, so the Arbitration Agreement therefore does not preclude its application.2 13 See id. at 118; Scott-Ortiz v. CBRE Inc., 501 F. Supp. 3d 717, 727 (D. Ariz. 2020). 14 Because Section 5 provides that federal or state statutes of limitations supersede the 180- 15 day time limit, it does not deprive Plaintiff of any remedies that would otherwise be 16 available to him and is not substantively unconscionable. Cf. Cir. City Stores, Inc., 279 17 F.3d at 894–95. 18 As to Section 20, the confidentiality provision, such provisions are unconscionable 19 “if they favor the employer, if they are too broad, and if they essentially impose a gag 20 order such that employees are ‘unable to mitigate the advantages inherent in being a 21 repeat player.’” Longnecker, 23 F. Supp. 3d at 1110 (quoting Davis v. O’Melveny & 22 Myers, 485 F.3d 1066, 1078 (9th Cir. 2007). The arbitration agreement at issue in 23 Longnecker included a confidentiality provision similar to the one in this case, requiring 24 that “anything and everything pertaining to the arbitration remain confidential.” Id. The 25 court in Longnecker held that the provision was unconscionable because it was “unfairly

26 2 To the extent the continuing violations doctrine is not incorporated into the Agreement, 27 the 180-day time limit would be substantively unconscionable. See Cir. City Stores, Inc., 279 F.3d at 894. But even so, the provision would be severable. See infra p. 9; Wernett, 28 2009 WL 1955612, at *9. 1 one-sided,” reasoning that the defendant companies would have knowledge of prior 2 arbitrations in which they were involved while the plaintiffs, former employees of the 3 companies, would be kept in the dark. Id. The same is true in this case, and given the 4 similarly sweeping scope of the confidentiality provisions in this case as in Longnecker, 5 the same result follows: the Arbitration Agreement’s confidentiality provision is 6 unconscionable. Cf. Monsanto v. DWW Partners, LLLP, No. CV-09-01788-PHX-FJM, 7 2010 WL 234952, at *3 (D. Ariz. Jan. 15, 2010) (finding “a term providing for 8 communications in connection with arbitration proceedings to be privileged” was not 9 unconscionable because it was “neither overly broad nor unfairly one-sided”). 10 Although the confidentiality provision is unconscionable, it is severable from the 11 rest of the Arbitration Agreement, meaning the Agreement itself is not unconscionable 12 and is still enforceable. When a court determines that a contract clause is unconscionable, 13 the court has three options: “(1) refuse to enforce the contract; (2) enforce the remainder 14 of the contract without the unconscionable clause; or (3) limit the application of the 15 unconscionable clause as to avoid any unconscionable result.” Batory v. Sears, Roebuck 16 and Co., 456 F. Supp. 2d 1137, 1141 (D. Ariz. 2006). “A contract may be severed, 17 however, only if its terms clearly show the parties intended it to be severable.” Mousa v. 18 Saba, 218 P.3d 1038 (Ariz. Ct. App. 2009). Here, the parties clearly set forth their 19 intention that the Agreement be severable through a severability clause: “Should any 20 provision of this Agreement be found to be unenforceable, such portion will be severed 21 from the Agreement and the remaining portions shall remain in full force and effect.” 22 (Doc. 10-1 at 9). As in Longnecker, where the arbitration provision also contained a 23 severability clause, severing the confidentiality clause and otherwise enforcing the 24 Agreement is appropriate and consistent with the FAA and Arizona public policy 25 favoring arbitration. Longnecker, 23 F. Supp. 3d at 1111–12. 26 As a final matter, Plaintiff argues that the Arbitration Agreement is procedurally 27 unconscionable because the Agreement references and incorporates rules of the American 28 Arbitration Association (“AAA”) but Defendant did not provide the AAA rules for 1 Plaintiff’s review. Plaintiff argues that, although incorporation of arbitration rules by 2 reference is not itself unconscionable, all the circumstances of the Arbitration Agreement 3 together amount to procedural unconscionability. The Arbitration Agreement was 4 presented to Plaintiff as its own document requiring its own signature and was 5 conspicuously labelled as “MUTUAL AGREEMENT TO ARBITRATE CLAIMS.” 6 (Doc. 10-1 at 3); see Martin v. TEKsystems Mgmt. Inc., No. CV-20-02192-PHX-SPL, 7 2021 WL 2334389, at *4 (D. Ariz. June 8, 2021). Defendant did not “unfairly or 8 surreptitiously” cause Plaintiff to sign the Agreement, Dueñas, 336 P.3d at 768, nor are 9 the terms so one-sided as to be oppressive, Maxwell, 907 P.2d at 58. As in Longnecker, 10 many of the Arbitration Agreement’s provisions “are plainly intended to level the playing 11 field” between Defendant and its employees. Longnecker, 23 F. Supp. 3d at 1112. For 12 example, the Agreement permits discovery, requires Defendant to pay all but $150 of the 13 arbitration fees and costs, and requires that arbitration be held in or near Plaintiff’s city. 14 (Doc. 10-1 at 5–6); Longnecker, 23 F. Supp. 3d at 1112. Thus, taking all of the 15 circumstances together, the high bar of unconscionability is not met. Except for the 16 confidentiality provision, the Arbitration Agreement is enforceable, and arbitration will 17 be compelled. 18 III. CONCLUSION 19 When neither party requests a stay in the event a motion to compel arbitration is 20 granted and all claims are subject to arbitration, a court has discretion to dismiss the 21 action. See 2151 Michelson, L.P. v. Corp. of the Presiding Bishop of the Church of Jesus 22 Christ of Latter-Day Saints, 754 Fed. Appx. 596, 597 (9th Cir. 2019); Graham v. United 23 Servs. Auto. Ass’n, No. CV-20-02210-PHX-DWL, 2021 WL 2780865, at *5 (D. Ariz. 24 July 2, 2021). Here, neither party has requested a stay. Defendant has moved only for the 25 case to be dismissed and Plaintiff is silent on the issue. Moreover, the Arbitration 26 Agreement encompasses all of Plaintiff’s claims. The Court will thus exercise its 27 discretion in favor of dismissal. 28 Finally, pursuant to Section 26 of the Arbitration Agreement and A.R.S. §§ 12-341 and 12-341.01, Defendant seeks its attorneys’ fees and costs incurred in bringing the 2| instant Motion. Defendants may file a separate motion seeking reasonable fees and costs to which it believes it is entitled in accordance with Local Rule of Civil Procedure 54.2. 4| See Martin, 2021 WL 2334389, at *6. 5 IT IS THEREFORE ORDERED that Defendant’s Motion to Dismiss Case and 6 | Compel Arbitration (Doc. 10) is granted. 7 IT IS FURTHER ORDERED that this case is dismissed without prejudice. The 8 | Clerk of Court shall terminate this action. 9 IT IS FURTHER ORDERED that Defendant shall file any application for 10 | attorneys’ fees and costs in accordance with LRCiv. P. 54.2 by December 17, 2021. 11 Dated this 3rd day of December, 2021. 12 DK A 4 13 Honorable feven P. Légan 14 United States District Jadge 15 16 17 18 19 20 21 22 23 24 25 26 27 28