Palmer v. Infosys Technologies Limited Incorporated
OPINION AND ORDER that defendant Infosys Technologies Limited Incorporated's motion to compel arbitration 4 is denied. Signed by Honorable Judge Myron H. Thompson on 11/9/2011. (Attachments: # 1 Civil Appeals Checklist)(jg, )
IN THE DISTRICT COURT OF THE UNITED STATES FOR THE
MIDDLE DISTRICT OF ALABAMA, NORTHERN DIVISION
JACK PALMER, JR.,
CIVIL ACTION NO.
OPINION and ORDER
Pursuant to the Federal Arbitration Act (FAA), 9
U.S.C. §§ 1-16, defendant Infosys Technologies Limited
Incorporated moves to compel arbitration of plaintiff
intentional infliction of emotional distress, negligent
hiring, training, monitoring and supervising, and legal
U.S.C. §§ 1332 (diversity) & 1441 (removal).
reasons given below, the motion will be denied.
This case stems from allegations of visa fraud and
Palmer alleges that, while employed as an
Infosys consultant, he uncovered evidence of fraud in the
Specifically, he believes that Infosys improperly asked
“Whistleblower Team,” he was subjected to various forms
of harassment, including threatening phone calls, denial
of bonuses, derogatory comments, and increased working
hours without appropriate compensation.
Palmer filed suit in an Alabama state court, but
Infosys now moves to compel
arbitration pursuant to an arbitration agreement included
in Palmer’s employment contract.
Standard for Arbitration
The FAA is a “congressional declaration of a liberal
federal policy favoring arbitration agreements.”
H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S.
1, 24 (1983).
Section 2 of the FAA provides that an
arbitration agreement “shall be valid, irrevocable, and
enforceable, save upon such grounds as exist at law or
equity for the revocation of any contract.”
Section 2's final phrase “permits agreements to
unconscionability.” AT&T Mobility LLC v. Concepcion, ___
U.S. ___, ___, 131 S. Ct. 1740, 1746 (2011) (quotation
“The FAA thereby places arbitration agreements on an
equal footing with other contracts and requires courts to
enforce them according to their terms.”
West, Inc. v. Jackson, ___ U.S. ___, ___, 130 S. Ct.
2772, 2776 (2010) (internal citations omitted).
there is a “presumption of arbitrability” as to claims
Technologies, Inc. v. Communications Workers of America,
475 U.S. 643, 650 (1986).
In addition to arbitrating the merits of a dispute,
“parties can agree to arbitrate ‘gateway’ questions of
‘arbitrability,’ such as whether the parties have agreed
to arbitrate or whether the agreement covers a particular
controversy,” Rent-A-Center, ___ U.S. at ___, 130 S. Ct.
at 2777; “[a]n agreement to arbitrate a gateway issue is
simply an additional, antecedent agreement the party
seeking arbitration asks the federal court to enforce.”
Id. at ___, 130 S. Ct. at 2777-78.
Although federal policy permits arbitrators to decide
Arbitrators may not decide that which the parties have
not agreed to arbitrate.
See United Steelworkers of
America v. Warrior & Gulf Navigation Co., 363 U.S. 574,
582 (1960) (noting that “arbitration is a matter of
contract and a party cannot be required to submit to
arbitration any dispute which he has not agreed so to
submit”); Janiga v. Questar Capital Corp., 615 F.3d 735,
740 (7th Cir. 2010) (“[F]ederal law places arbitration
clauses on equal footing with other contracts, not above
arbitrators derive their authority to resolve disputes
only because the parties have agreed in advance to submit
such grievances to arbitration.” Communications Workers,
475 U.S. at 648-49.
The Supreme Court, therefore, has
mandated a heightened threshold for determining whether
there has been an agreement to arbitrate arbitrability:
“Unless the parties clearly and unmistakably provide
otherwise, the question of whether the parties agreed to
Id. at 649 (emphasis added).
arbitration. First, Palmer contends that the arbitration
agreement’s delegation provision does not “clearly and
unmistakably” grant the arbitrator the power to decide
arbitrability; if he prevails on this threshold argument,
Palmer submits that the arbitration agreement is void on
Palmer’s first argument focuses on which institution
decides arbitrability: the court or the arbitrator.
answering this question, the court must determine whether
the parties “clearly and unmistakably” delegated this
rather than an arbitral, forum.”
Rent-A-Center, ___ U.S.
at ___, 130 S. Ct. at 2783 (Stevens, J., dissenting)
(alteration in original) (quotation marks and footnote
The arbitration agreement provides, in all capital
letters, that: “ALL CONTROVERSIES, CLAIMS, OR DISPUTES
WITH ANYONE ... ARISING OUT OF, RELATING TO, OR RESULTING
FROM MY EMPLOYMENT WITH INFOSYS OR THE TERMINATION OF ANY
EMPLOYMENT WITH INFOSYS, INCLUDING ANY BREACH OF THIS
AGREEMENT, SHALL BE SUBJECT TO BINDING ARBITRATION.”
Arbitration Agreement, Doc. No. 4-1, at 7.
further states that: “THE ARBITRATOR SHALL HAVE THE POWER
AND/OR ADJUDICATION AND MOTIONS TO DISMISS AND DEMURRERS,
arbitration agreement requires conformity with California
law and American Arbitration Association (AAA) rules,
with the former controlling if there is a conflict.
controversies or claims “arising out of, relating to, or
contemplate questions concerning its own validity; the
See First Options of Chicago, Inc. v. Kaplan,
514 U.S. 938, 945 (1995) (“A party often might not focus
upon that question or upon the significance of having
arbitrators decide the scope of their own powers.”).
Rent-A-Center provides a useful comparison.
Arbitrator ... shall have exclusive authority to resolve
any dispute relating to the ... enforceability ... of
this Agreement including, but not limited to any claim
Rent-A-Center, ___ U.S. at ___, 130 S. Ct. at
2777 (alteration and ellipses in original) (quotation
The district court concluded that the
Id. at 2777 n.1.
contrast, there is no mention of who decides whether the
agreement is void.
Infosys contends that the AAA’s rules prescribe that
the arbitrator should determine this gateway question.
Even if such cross-references to rules and statutes could
arbitrator to decide arbitrability, Infosys’s argument is
misplaced. California law, which controls here, provides
that the court should decide whether an agreement to
arbitrate a gateway issue exists.
See Cal. Code Civ.
Pro. § 1281.2(b) (“[T]he court shall order the petitioner
and the respondent to arbitrate the controversy if it
determines that an agreement to arbitrate the controversy
exists, unless it determines that [g]rounds exist for the
revocation of the agreement.”).
Infosys further asserts that the Supreme Court’s
unconscionability challenges should be decided by the
Court’s opinion opens with a simple question: whether “a
district court may decide a claim that an arbitration
explicitly assigns that decision to the arbitrator.”
Rent-A-Center, ___ U.S. at ___, 130 S. Ct. at 2775
neither party disputed the district court’s finding that
authority to the arbitrator to decide gateway issues.
Id. at ___, 130 S. Ct. at 2777 n.1.
controls only if the “clearly and unmistakably” issue is
decided in Infosys’s favor.
See Morocho v. Carnival
Corp., 2011 WL 147750, *1 & n.2 (S.D. Fla. Jan. 18, 2011)
(Martinez, J.) (distinguishing Rent-A-Center on similar
revealed an intent to submit the arbitrability issue to
First Options, 514 U.S. at 944.
court must decide Palmer’s unconscionability challenge.
Under California law, “[u]nconscionability analysis
begins with an inquiry into whether the contract is one
Armendariz v. Foundation Health Psychcare
Services, Inc., 6 P.3d 669, 689 (Cal. 2000).
of adhesion is another term for a “standardized contract,
which, imposed and drafted by the party of superior
bargaining strength, relegates to the subscribing party
only the opportunity to adhere to the contract or reject
(internal quotation marks omitted).
Procedural unconscionability focuses on “‘oppression’ or
substantive unconscionability hinges on “‘overly harsh’
or ‘one-sided’ results.”
Id. at 690.
While both must be
present to invalidate a contract, “they need not be
California courts have
present in the same degree.”
procedurally nor substantively unconscionable because it
permitted Palmer to obtain legal advice prior to signing
accordance with California law.
Palmer relies on a
California trial court’s ruling that an identical Infosys
arbitration agreement was unconscionable. See Awasthi v.
Infosys Technologies Limited, No. RG09486022 (Cal. Super.
The court agrees with the California court’s
finding of unconscionability.
Here, it is clear that the arbitration agreement is
a contract of adhesion.
The arbitration provisions,
bargaining power, the employer.
The employment agreement begins: “As a
condition of my employment with Infosys ... I agree to
Arbitration Agreement, Doc. No. 4-1, at
Palmer concluded that this was a “take-it or leave-it
Affidavit, Doc. No. 8-1, at 4.
Indeed, “few employees
Armendariz, 6 P.3d at 690.
This type of “‘oppression’ ... due to unequal bargaining
Regarding substantive unconscionability, California
mutuality” in their arbitration agreements.
Id. at 691.
disputes between Infosys and Palmer, regardless of who
asserts the claim, shall be decided by an arbitrator.
The agreement then lists the types of claims to be
antidiscrimination or labor statutes protecting employee
See Arbitration Agreement, Doc. No. 4-1, at 7.
However, the arbitration agreement provides that either
party may seek injunctive relief in court for claims
relating to intellectual property or trade secrets.
id. at 8.
While these provisions are fair on their face, it is
obvious that the types of claims that must be arbitrated
are those most commonly brought by an employee, while
those likely initiated by an employer can be filed in
California Supreme Court explained: “If an employer does
mutuality] arrangement ... such an agreement would not be
Without such a justification, we must
Infosys’s motion to compel arbitration is silent as to
this provision and asserts that there is no lack of
mutuality in the arbitration agreement.
See Motion to
Compel Arbitration, Doc. No. 4, at 11-12.
In the absence
of a reasonable justification for this lack of mutuality,
the court must presume the contract is unconscionable.
The court also notes that California law “indicates
that protecting against breaches of confidentiality alone
does not constitute a sufficient justification” for lack
Davis v. O’Melveny & Myers, 485 F.3d 1066,
1081 (9th Cir. 2007).
This ruling accords with numerous
treatment of trade-secrets claims.
See, e.g., Nagrampa
v. MailCoups, Inc., 469 F.3d 1257, 1287 (9th Cir. 2006)
(en banc) (“[T]he arbitration provision itself states the
MailCoups's right to obtain provisional relief on any
cause of action it might assert: ‘to protect its Service
Marks and proprietary information.’ California courts
agreement access to the courts for provisional relief.”);
Armendariz, 6 P.3d at 694 (“An employee terminated for
stealing trade secrets, for example, must arbitrate his
or her wrongful termination claim ... while the employer
has no corresponding obligation to arbitrate its trade
Municipal Resource Consultants, 132 Cal. Rptr. 2d 116,
unconscionable for allowing judicial relief of tradesecrets claims).
completed, the Supreme Court handed down AT&T Mobility
LLC v. Concepcion, ___ U.S. at ___, 131 S. Ct. 1740
The Concepcion Court held that the FAA preempted
California’s rule that waivers of classwide arbitration
While this case also involves a
Valencia Holding Co., LLC, 2011 WL 5027488, *7 (Cal. Ct.
unconscionability doctrine survives Concepcion so long as
it does not relate to waiver of classwide arbitration).
“availability of classwide arbitration interferes with
fundamental attributes of arbitration and thus creates a
scheme inconsistent with the FAA.”
at ___, 131 S. Ct. at 1748.
Concepcion, ___ U.S.
The Court’s proffered
reasons for conflict were that classwide arbitration was
See id. at ___, 131 S. Ct. at 1751-
52. These attributes undermined the “principal advantage
of arbitration--its informality.”
Id. at ___, 131 S. Ct.
While the Concepcion Court expressed concern about
arbitration morphing into a set of formalized, classbased
unconscionable at an antecedent step. The arbitration
mutuality as to the availability of arbitration and the
types of claims that may proceed to a judicial forum.
The agreement does not impact the internal procedures of
arbitration at all.
In fact, California’s rule against
arbitration is contingent on both parties’s claims being
subject to the arbitral forum.
preempted by the FAA.
Thus, California’s “lack
Id. at ___, 131 S. Ct. at 1748.
* * *
Accordingly, it is ORDERED that defendant Infosys
arbitration (Doc. No. 4) is denied.
DONE, this the 9th day of November, 2011.
/s/ Myron H. Thompson
UNITED STATES DISTRICT JUDGE
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?