Coup et al v. Scottsdale Plaza Resort et al

Filing 33

ORDER Defendants' 24 Motion to Dismiss Case And/Or Stay Proceedings and Compel Arbitration is GRANTED in part and DENIED in part. This action is STAYED pursuant to 9 U.S.C. § 3 until further order of the Court so that neither party must p ay a second $350.00 filing fee to have the arbitration award confirmed. The parties shall file a Joint Status Report concerning the status of the arbitration on or before Friday, 01/06/12. Plaintiffs' request for oral argument is DENIED. Signed by Magistrate Judge Lawrence O Anderson on 10/04/11. (see attached pdf for complete details) (ESL)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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)
)
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Plaintiffs,
)
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vs.
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The Scottsdale Plaza Resort, LLC, an)
Arizona limited liability company; Rick)
Frinkler and Sharon Frinkler, husband and)
wife; Dawson Employee Benefits, LLC, )
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Defendants.
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Aurora Coup; Jonathon Coup,
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No. CV-11-931-PHX-LOA
ORDER

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This case arises on the Motion of Defendants Scottsdale Plaza Resort, LLC;

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Rick and Sharon Frinkler, husband and wife; and Dawson Employee Benefits, LLC

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(“Defendants”) to Dismiss Case And/Or Stay Proceedings and Compel Arbitration. (Doc. 24)

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Plaintiffs Aurora and Jonathon Coup (“Plaintiffs”) filed their opposition to the Motion to

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which Defendants replied. (Docs. 28, 29) Upon Plaintiffs’ request, the Court authorized a

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surreply to which Defendants responded. (Docs. 31, 32) Defendants’ Motion is ripe for

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ruling.

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Because the briefing is adequate and oral argument would not aid the Court,

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the Court will deny Plaintiffs’ request for oral argument. Mahon v. Credit Bur. of Placer

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County, Inc., 171 F.3d 1197, 1200 (9th Cir. 1999); Lake at Las Vegas Investors Group, Inc.

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v. Pac. Malibu Dev. Corp., 933 F.2d 724, 729 (9th Cir. 1991). After review of the parties’

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briefing, the Court will grant Defendants’ Motion, order the parties to promptly proceed to

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arbitration on all issues, and will stay this lawsuit for nine months or this case may be

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dismissed thereafter absent a showing of good cause and the exercise of due diligence.

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I. Introduction

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Plaintiffs filed this Title VII employment discrimination action on May 10,

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2011 and amended their complaint on July 14, 2011, alleging discrimination based on

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national origin (count one) and gender, hostile work environment (count two) and state law

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claims of intentional interference with contractual relations (third cause of action1), and

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assault and battery (fourth cause of action). (Docs. 1, 20) The First Amended Complaint’s

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assault and battery allegation claims that Defendant Rick Finkler, was “employed as a

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manager and employee of the Scottsdale Plaza Resort Defendants and was acting in his

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capacity of manager and employee of the Scottsdale Plaza Resort Defendants[.]” (Doc. 20

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at 7, ¶ 33) Rather than file an answer, Defendants filed the subject Motion. (Doc. 24)

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II. Jurisdiction

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Subject matter jurisdiction in Title VII cases is predicated upon a federal

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question, 28 U.S.C. § 1331, and supplemental jurisdiction exists pursuant to 28 U.S.C. §

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1367. All parties have expressly consented in writing to magistrate-judge jurisdiction

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pursuant to 28 U.S.C. § 636(c), Fed.R.Civ.P. (Docs. 18, 25) Neither party argues that an

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arbitrator, rather than a federal judge, should resolve their current disagreement about

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whether their disputes are arbitrable. Thus, this case does not implicate the reverse

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presumption applied by the Supreme Court in First Options of Chicago, Inc. v. Kaplan, 514

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U.S. 938, 944–45 (1995) (noting that where the question is “ who (primarily) should decide

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arbitrability[,] . . . the law reverses the presumption” in favor of arbitration and establishes

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a presumption that said question is for judicial determination unless there is clear and

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unmistakable evidence to the contrary). 514 U.S. at 944-45; Granite Rock Co. v. Int’l Bhd.

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of Teamsters, ___ U.S. ___, 130 S.Ct. 2847, 2857 n. 5 (2010)).

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The First Amended Complaint refers to the two state law claims as “causes of
action” rather than “counts” as the first two are labeled. (Doc. 20 at 5, 7)

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III. Background

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Defendants argue that federal law and the parties’ agreement to arbitrate

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require the parties to arbitrate Plaintiffs’ claims and the Court should either dismiss or stay

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this lawsuit pending the completion of the arbitration. (Doc. 24 at 2)

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Plaintiffs Aurora and Jonathon Coup, mother and son, were employed as

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banquet servers at the Scottsdale Plaza Resort (the “Resort”), a resort hotel, convention

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center, and restaurant catering to business travelers, in Scottsdale, Arizona, from June 2010

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until their employment was terminated on December 2, 2010. Defendant Dawson Employee

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Benefits, LLC (“Dawson”) is a professional employer organization which supplies

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employees and employee benefit services to the Resort. (Id. at 6) Dawson employed both

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Plaintiffs in 2010 but the parties disagree when they started with Dawson. Upon

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commencement of their employment with Dawson, or shortly thereafter, Plaintiffs received

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a copy of Dawson’s Introduction Guide & Orientation Manual (“employee manual”) and

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signed a separate document, entitled “Employee Receipt and Acknowledgment”

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(“Acknowledgment”). The Acknowledgments indicate that each Plaintiff received and

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understood the policies and rules set forth in the employee manual and agreed to arbitrate all

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employment-related disputes. Defendants attach a copy of the relevant employee manual to

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their Motion and copies of the signed Acknowledgments, both dated June 16, 2010. (Doc.

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24-1, Exhibit (“Exh.”) 1, 2 and 3)

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The signed Acknowledgments are identical and state: “By my signature

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below, I certify and acknowledge the following: . . . that my employment with [Dawson] is

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on an at-will basis which means that the employment relationship may be terminated at ant

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time by either the employee or Dawson . . . with or without cause and with or without

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notice.” (Id., Exh. 2 and 3) The Acknowledgments indicate Plaintiffs “received and read a

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copy of [Dawson’s employee manual].” (Id.) “In consideration of . . . actual employment if

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employed, [Plaintiffs] agree that all disputes involving alleged unlawful employment

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discrimination, termination by breach of alleged contract or policy, or employment tort

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committed by Dawson . . . shall be resolved pursuant to the Dawson [employee manual]

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without recourse to court, with or without jury trial.” (Id.)

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Dawson’s employee manual emphasizes, in capital letters, that arbitration is

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required for employees’ claims and disputes arising out of their employment. In relevant part,

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it provides:

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Grievance, Arbitration and Termination Dispute
Resolution Policy

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It is the policy of [Dawson] (herein “Employer) to provide an exclusive, final,
binding, speedy, inexpensive, and impartial method for employees to bring
employment claims to the attention of management without fear of reprisal and to
resolve claims and disputes arising out of alleged unlawful employment
discrimination, termination by breach of alleged contract or policy, violations of
federal or state discrimination statutes, governmental law, regulation, ordinance, or
public policy, or employment tort, not covered by worker’s compensation. No
employee will be harassed, intimidated, or otherwise disciplined in any way for filing
a grievance or participating in the grievance process. Access to arbitration is limited
to allegations of alleged unlawful employment discrimination, termination by breach
of alleged contract or policy, violations of federal or state discrimination statutes,
governmental law, regulation, ordinance, or public policy, or employment tort
committed by employer or representative of the employer.

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ALL DISPUTES INVOLVING ALLEGED UNLAWFUL EMPLOYMENT
DISCRIMINATION, TERMINATION BY BREACH OF ALLEGED CONTRACT
OR POLICY, OR EMPLOYMENT TORT COMMITTED BY . . . A
REPRESENTATIVE OF DAWSON EMPLOYEE BENEFITS, L.L.C., INCLUDING
CLAIMS OF VIOLATIONS OF FEDERAL OR STATE DISCRIMINATION
STATUTES, GOVERNMENTAL LAW, REGULATION, ORDINANCE, OR
PUBLIC POLICY, SHALL BE RESOLVED PURSUANT TO THIS POLICY AND
THERE SHALL BE NO RECOURSE TO COURT, WITH OR WITHOUT A JURY
TRIAL.

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For a complete, detailed copy of the Grievance, Arbitration and Termination Dispute
Resolution Policy, please contact the Human Resources Department.

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(Id., Exh. 1, at § 6 at p. 44) (emphasis in original). The parties have not provided the Court

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with any portion of the “complete, detailed copy of the Grievance, Arbitration and

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Termination Dispute Resolution Policy” purportedly setting forth Dawson’s arbitration rules

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and procedures.

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Relying on the Federal Arbitration Act, related case law, and the employer’s

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written arbitration policy contained primarily in two documents, Defendants argue that

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Plaintiffs’ allegations in the First Amended Complaint “fall within the scope of the

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employer’s arbitration policy [and the] Court must dismiss or stay these proceedings . . . and

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compel arbitration of all claims in the Plaintiffs’ Complaint.” (Id.) Alternatively, Defendants

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argue that if the Federal Arbitration Act is inapplicable to the instant case, “Arizona law also

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mandates that the parties arbitrate all of Plaintiffs’ claims.” (Id. citing Arizona Revised

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Statute (“A.R.S.”) § 12-1501)

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Defendants attach the affidavit of David Lunt, Vice President of

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Administration for Dawson to their Reply, which indicates that the Resort does not have its

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own employees; rather, workers at the resort, including Plaintiffs, are employees of Dawson.

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(Doc. 29-1, Exh. 1, ¶¶ 2, 5) He avers that Jonathon Coup and Aurora Coup were hired by

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Dawson as on-call employees on June 25, 2010 and June 9, 2010, respectively, and each

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attended an orientation meeting on June 16, 2010, where each of them completed certain

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paperwork and signed the Acknowledgments. (Id. at ¶¶ 6,7, 9-10) Mr. Lunt’s testimony is

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corroborated by the testimony of Jarred Elias, Dawson’s former Human Resources Manager

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who is no longer employed by Dawson, who confirms Plaintiffs attended the June 16, 2010

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orientation meeting, which Mr. Elias also attended. (Doc. 29-1, Exh. 2, ¶¶ 2, 6-7) Mr. Elias’

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affidavit indicates that each Plaintiff received Dawson’s employee manual and Dawson’s

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staff, including Mr. Elias, “went through the [employee manual] thoroughly and explained

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its contents to the individuals attending the orientation meeting. [Mr. Elias] gave all the

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individuals the opportunity to review the contents and ask any questions. [He] specifically

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pointed out the drug testing, harassment, and arbitration policies in the [employee manual].”

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(Id. at ¶¶ 8-9) At the June 16, 2010 orientation meeting, each Plaintiff “had the opportunity

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to ask questions regarding the information contained in the [employee manual], including the

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arbitration provisions [and] [n]either [Plaintiff] asked any questions . . . .” (Id. at ¶¶ 10-11)

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In response to Defendant’s Motion, Plaintiffs argue the Court should deny the

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arbitration motion because (1) the arbitration agreements are unenforceable because no

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consideration was given by Defendants for the agreements; (2) the arbitration agreements are

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adhesion contracts; (3) the arbitration agreements are “procedurally unconscionable” because

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Plaintiffs were not given an opportunity to read the employee manual or a complete copy of

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the arbitration procedure before Plaintiffs agreed to arbitrate their claims; and (4) the

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arbitration agreements are “substantively unconscionable” because: (a) the arbitration

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agreements are not mutual, i.e., only the employees must waive their rights to judicial

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remedies, (b) they do not provide any method or procedure for arbitration, and (c) they fail

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to provide an express allocation of arbitration expenses. (Doc. 28 at 3)

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Plaintiffs attach signed affidavits to their Response. (Doc. 28-1, Exh. 1 and 2,
¶ 2) Plaintiffs’ declarations are identical and state:

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[O]n June 16, 2010, [we] attended an orientation for new employees of defendants
Scottsdale Plaza Resort (the “Resort”). [We were] hired prior to June 16, 2010 as []
banquet server[s]. [We] had worked a couple of events before the June 16, 2010
orientation. [The Dawson employee manual] was given [to us] at the orientation. [The
Acknowledgment] that was attached to the Exhibit 1orientation manual with [our]
signature[s,] dated June 16, 2010. At the orientation, the Human Resource
representative Jarred Elias told us to sign the [Acknowledgment] and turn it in. We
were not told to read the Employee [manual] first. We were not given any time to read
the Employee [manual] before we were told to sign the [Acknowledgment]. It was not
possible based on the instructions given to read the Employee [manual] before [we]
signed it because we were supposed to pay attention to the orientation video that we
were told to watch. As soon as the video was finished we were instructed to go on an
orientation tour, which we did. [We] did not know that the document was purported
to be an agreement to arbitrate and waive a jury trial on any claim [we] might have
against defendants.

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Id.

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In their surreply, Plaintiffs erroneously contend that Defendants improperly

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“introduce[d] new factual matters and legal arguments in the reply memorandum.” (Doc. 30

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at 1) E.E.O.C. v. Creative Networks, LLC and Res-Care, Inc., 2008 WL 5225807, * 2 (D.

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Ariz. December 15, 2008) (challenged exhibits did not constitute new evidence where they

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rebutted arguments first raised by the opposition to a motion); Pestube Systems, Inc. v.

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Hometeam Pest Defense, LLC, 2007 WL 973964, * 5 (D. Ariz. March 30, 2007) (“Although

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these affidavits were not disclosed in Plaintiff’s opening Motion to the Court, it appears that

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the affidavits are not being offered as new evidence, but rather to controvert certain

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statements of fact submitted by Defendant.”). Nevertheless, the Court allowed Plaintiffs to

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file a surreply which does not provide any additional evidence, simply additional argument

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supporting Plaintiffs’ assertions that Defendants’ arbitration request should be denied.

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Defendants bring the Motion pursuant to “Rules 12(b)(1) and/or 12(b)(6),”

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Fed.R.Civ.P., citing DeGroff v. MascoTech Forming Technologies-Fort Wayne, Inc., 179

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F.Supp.2d 896, 899, n. 2 (N.D.Ind. 2001) (motion to compel arbitration may be properly

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brought pursuant to Rule 12(b)(1) or 12(b)(6)); Morrison v. Colorado Permanente Medical

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Group, P.C., 983 F.Supp. 937, 940 (D.Colo. 1997) (granting motion to compel arbitration

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pursuant to Rule 12(b)(1)). (Doc. 24 at 1, n. 1) Plaintiffs do not address the applicable

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standard of review.

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IV. Standard of Review

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A motion to compel arbitration is decided according to the standard used by

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district courts in resolving summary judgment motions pursuant to Rule 56, Fed.R.Civ.P.

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Craft v. Campbell Soup Co., 177 F.3d 1083, 1084 (9th Cir. 1999), abrogated on other

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grounds, Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001); Perry v. Northcentral

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University, Inc., 2011 WL 4356499, * 3 (D.Ariz. Sept. 19, 2011) (citing numerous cases that

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a motion to compel arbitration is resolved under the summary judgment standard of Federal

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Rule of Civil Procedure 56(c)); The O.N. Equity Sales Co. v. Thiers, 590 F.Supp.2d 1208,

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1211 (D.Ariz. 2008); Par-Knit Mills, Inc. v. Stockbridge Fabrics Co., 636 F.2d 51, 54 n. 9

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(3d Cir. 1980)). “If there is doubt as to whether such an agreement exists, the matter, upon

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a proper and timely demand, should be submitted to a jury. Only when there is no genuine

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issue of fact concerning the formation of the agreement should the court decide as a matter

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of law that the parties did or did not enter into such an agreement.” Three Valleys Mun.

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Water Dist. v. E.F. Hutton & Co., Inc., 925 F.2d 1136, 1141 (9th Cir. 1991) (citing with

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approval Par-Knit Mills, 636 F.2d at 54).

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If there exists a genuine dispute of material fact, i.e., the evidence is such that

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a reasonable jury could return a verdict for the non-moving party, a jury must decide the

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issue. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Celotex Corp. v. Catrett,

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477 U.S. 317, 322-23 (1986). Substantive law determines which facts are material.

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Anderson, 477 U.S. at 248; Jesinger v. Nevada Fed. Credit Union, 24 F.3d 1127, 1130 (9th

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Cir. 1994). The evidence of the non-movant is “to be believed, and all justifiable inferences

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are to be drawn in his favor.” Anderson, 477 U.S. at 255. In determining whether to grant or

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deny summary judgment, the district court examines the pleadings, depositions, answers to

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interrogatories, and admissions on file, together with any affidavits. Fed.R.Civ.P. 56(c).

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A principal purpose of summary judgment is “to isolate and dispose of

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factually unsupported claims.” Celotex, 477 U.S. at 323-24. If the evidence of the

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non-moving party is merely colorable or is not significantly probative, summary judgment

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may be granted. Anderson, 477 U.S. at 249-50. Summary judgment is appropriate against a

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party who “fails to make a showing sufficient to establish the existence of an element

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essential to that party’s case, and on which that party will bear the burden of proof at trial.”

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Id. at 322; Citadel Holding Corp. v. Roven, 26 F.3d 960, 964 (9th Cir. 1994).

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V. The Federal Arbitration Act

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The Federal Arbitration Act (“FAA”) governs arbitration agreements in

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contracts involving transactions in interstate commerce. 9 U.S.C. § 1. Under the FAA,

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arbitration agreements “shall be valid, irrevocable, and enforceable, save upon such grounds

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that exist at law or in equity for the revocation of any contract.” Id. at § 2. The FAA’s

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“provisions manifest a ‘liberal federal policy favoring arbitration agreements.’” Gilmer v.

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Interstate/Johnson Lane Corp., 500 U.S. 20, 25 (1991) (quoting Moses H. Cone Mem’l Hosp.

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v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)). “If the court finds that an arbitration clause

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is valid and enforceable, the court should stay or dismiss the action to allow the arbitration

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to proceed.” Kam-Ko Bio-Pharm Trading Co. Ltd-Australasia v. Mayne Pharma (USA), 560

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F.3d 935, 940 (9th Cir. 2009) (citing Nagrampa v. MailCoups, Inc., 469 F.3d 1257, 1276-77

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(9th Cir. 2006)) (en banc); Sparling v. Hoffman Constr. Co., 864 F.2d 635, 638 (9th Cir.

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1988) (citing Ninth Circuit precedent, “[t]his court held that 9 U.S.C. section 3 gives a court

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authority, upon application by one of the parties, to grant a stay pending arbitration, but does

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not preclude summary judgment when all claims are barred by an arbitration clause.” ). The

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district court also has the discretion under federal arbitration law, Buckeye Check Cashing,

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Inc. v. Cardegna, 546 U.S. 440, 445–46 (2006), as well as under Arizona law, WB, The

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Building Company, LLC v. El Destino, LP, 227 Ariz. 302, 257 P.3d 1182, 1186 (Az.Ct.App.

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2011), to sever an unconscionable arbitration provision and enforce the remainder of the

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contract.

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Similar to Arizona’s public policy, “[i]n enacting the FAA, Congress ‘declared

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a national policy favoring arbitration’ that was intended to reverse centuries of judicial

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hostility to arbitration agreements.” Samson v. NAMA Holdings, LLC, 637 F.3d 915, 934 (9th

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Cir. 2011) (quoting Southland Corp. v. Keating, 465 U.S. 1, 10 (1984)); U.S. Insulation, Inc.

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v. Hilro Const. Co., Inc., 146 Ariz. 250, 258, 705 P.2d 490, 498 (Az.Ct.App. 1985) (“[I]t is

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also well established that, due to the public policy favoring arbitration, arbitration clauses

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should be construed liberally and any doubts as to whether or not the matter in question is

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subject to arbitration should be resolved in favor of arbitration.”) (citation omitted).

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Therefore, the FAA mandates that federal courts “rigorously enforce agreements to

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arbitrate.” Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 221 (1985). “By its terms, the

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[FAA] leaves no place for the exercise of discretion by a district court, but instead mandates

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that district courts shall direct the parties to proceed to arbitration on issues as to which an

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arbitration agreement has been signed.” Samson, 637 at 934 (quoting Byrd, 470 U.S. at 218,

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and citing 9 U.S.C. §§ 3, 4) (emphasis original)).2

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Neither party argues that the subject arbitration agreement is exempt from arbitration
under Arizona statutory law. See, North Valley Emergency Specialists, L.L.C. v. Santana,
208 Ariz. 301, 306, 93 P.3d 501, 506 (Ariz. 2004) (in a matter of first impression, the plain
language of A.R.S. § 12–1517 exempts all employer and employee employment agreements
from the provisions of Arizona’s arbitration act.” The Court noted, however, in footnote 3,
that “[n]either party argued whether the arbitration clauses are enforceable as a common-law

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In determining whether to compel a party to arbitration, a district court may not

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review the merits of the dispute; rather, “the district court’s role is limited to determining

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whether a valid arbitration agreement exists and, if so, whether the agreement encompasses

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the dispute at issue. If the answer is yes to both questions, the court must enforce the

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agreement.” Lifescan, Inc. v. Pernaier Diabetic Servs., Inc., 363 F.3d 1010, 1012 (9th Cir.

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2004) (citing Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir.

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2000)). In construing the terms of an arbitration agreement, the district court “appl[ies]

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general state-law principles of contract interpretation, while giving due regard to the federal

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policy in favor of arbitration by resolving ambiguities as to the scope of arbitration in favor

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of arbitration.” Wagner v. Stratton Oakmont, Inc., 83 F.3d 1046, 1049 (9th Cir. 1996)

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(citation omitted). If the district court determines that a valid arbitration agreement

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encompasses the dispute, then the FAA requires the court to enforce the arbitration

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agreement according to its terms. Lifescan, Inc., 363 F.3d at 1012. The standard for

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demonstrating arbitrability is not a high one; in fact, a district court has little discretion to

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deny an arbitration motion, since the FAA is phrased in mandatory terms. Smith v.

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Autonation, Inc., 2011 WL 380517, * 1 (D.Ariz. Feb. 2, 2011) (quoting Simula, Inc. v.

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Autoliv, Inc., 175 F.3d 716, 719 (9th Cir. 1999)). “While ambiguities in the language of [an]

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agreement should be resolved in favor of arbitration, [courts] do not override the clear intent

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of the parties, or reach a result inconsistent with the plain text of the contract, simply because

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the policy favoring arbitration is implicated.” E.E.O.C. v. Waffle House, 534 U.S. 279, 294

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contract term.”); Van Dusen v. Swift Transp. Co., Inc., 2011 WL 3924831 (D.Ariz. Sept. 7,
2011) (certifying an interlocutory appeal whether order granting defendants’ motion to
compel arbitration and stay of action pending completion of arbitration was erroneous for
refusing to resolve plaintiffs’ claim of exemption from arbitration under Section 1 of the
FAA and Section 12–1517 of the Arizona Arbitration Act).
Having failed to raise the applicability of A.R.S. § 12-1517, the issue has been
waived. Protect Lake Pleasant, LLC v. Connor, 2010 WL 5638735, * 8 (D.Ariz. July 30,
2010); Magnesystems, Inc. v. Nikken, Inc., 933 F.Supp. 944, 949-50 (C.D.Cal. 1996).

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(2002) (citation omitted); Cape Flattery Ltd. v. Titan Maritime, LLC, 647 F.3d 914, 923 (9th

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Cir. 2011) (citation omitted)).

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Generally, district courts apply state contract law in determining the

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enforceabililty of an arbitration agreement that falls within the ambit of the FAA. First

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Options of Chicago, Inc., 514 U.S. at 944. Because Plaintiffs are Arizona residents, were

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employed in Arizona, and the parties do not dispute that Arizona law applies, Arizona law

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determines whether the subject arbitration agreement is valid. Ticknor v. Choice Hotels Int’l,

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Inc., 265 F.3d 931, 937 (9th Cir. 2001) (applying Montana law to decide whether arbitration

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clause was valid). Denials of motions to compel arbitration are immediately appealable;

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however, an order staying district court proceedings and compelling arbitration cannot be

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immediately appealed as a matter of right. 9 U.S.C. § 16(a); Cape Flattery, 647 F.3d at 917;

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Bushley v. Credit Suisse First Boston, 360 F.3d 1149, 1153 (9th Cir. 2004); Britton v. Co-op

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Banking Group, 916 F.2d 1405, 1412 (9th Cir. 1990).

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Section 2 of the FAA declares that state law, whether of legislative or judicial

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origin, may be applied “[i]f that law arose to govern issues concerning the validity,

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revocability, and enforceability of contracts generally.” Perry v. Thomas, 482 U.S. 483, 492

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n. 9 (1987) (emphasis in original). “A court may not, then, in assessing the rights of litigants

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to enforce an arbitration agreement, construe that agreement in a manner different from that

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in which it otherwise construes nonarbitration agreements under state law.” Id. While

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generally applicable defenses to a contract, such as, fraud, duress, or unconscionability

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invalidate arbitration agreements, the FAA preempts state-law defenses that apply only to

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arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue.

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AT & T Mobility LLC v. Concepcion, ___ U.S. ___, 131 S.Ct. 1740, 1745–47 (2011) (The

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FAA’s “[s]aving clause permits agreements to arbitrate to be invalidated by ‘generally

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applicable contract defenses.’”) (quoting Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681,

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687 (1996)).3 Because of the liberal Arizona and federal policies favoring arbitration, “any

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doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration,

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whether the problem at hand is the construction of the contract language itself or an

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allegation of waiver, delay, or a like defense to arbitrability.” Moses H. Cone Mem. Hosp.,

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460 U.S. at 24-25.

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Arbitration agreements in employment contracts are plainly enforceable and

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are covered by the FAA. Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001) (FAA

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provisions apply to arbitration agreements contained in employment contracts). Moreover,

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“statutory claims may be the subject of an arbitration agreement, enforceable pursuant to the

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FAA.” Gilmer, 500 U.S. at 26.

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V. State Law Defenses

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A. Lack of Consideration

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Plaintiffs argue that each arbitration agreement is unenforceable because no

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consideration was given by Defendants for each agreement. (Doc. 28 at 3, 5-7) Plaintiffs

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argue that the consideration recited in each Acknowledgment, i.e., “In consideration of

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investigating and considering my employment and actual employment if employed, I agree

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. . .[that all employees claims will be arbitrated],” referring to a future investigation and

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3

In Concepcion, the Supreme Court explicitly found the California Supreme Court’s
holding in Discover Bank v. Superior Court, 36 Cal.4th 148, 30 Cal.Rptr.3d 76, 113 P.3d
1100 (2005) was inapplicable to the parties’ arbitration agreement. Discover Bank provided
that in consumer disputes, arbitration clauses in non-negotiable contracts of adhesion are
unenforceable when the damages at issue are small and when the plaintiff alleges a scheme
to cheat consumers of small sums of money. Concepcion held that while arbitration
agreements may be invalidated by generally applicable contract defenses, such as, fraud,
duress, or unconscionability, state-law defenses like the one provided by Discover Bank that
apply only to arbitration or derive their meaning from the fact that an agreement to arbitrate
is at issue are preempted by federal law. 131 S.Ct. at 1745–47. Concepcion does not preempt
Arizona law on unconscionability as a defense to arbitration in this case.

26
27
28

- 12 -

1

decision whether to employ plaintiffs in the future, was illusory because plaintiffs were

2

already employed. Plaintiffs contend that because Plaintiffs were already employed by

3

Dawson at the time the Acknowledgments were signed, there was no consideration for the

4

modification of their implied-in-fact employment agreement, therefore, the alleged

5

arbitration agreement is not an enforceable contract. (Doc. 28 at 7)

6

Defendants argue that “[u]nder Arizona law, where the employment is on an

7

at-will basis, either an implied promise of employment or continued employment is sufficient

8

consideration for an employee’s agreement to arbitrate, executed after the employment has

9

commenced[,]” citing Mattison v. Johnston, 730 P.2d 286, 288-290 (Az.Ct.App. 1986)

10

(finding that the implied promise of employment and continued employment were sufficient

11

consideration for the employee’s agreement to a restrictive covenant); Penn v. Fidel, 2011

12

WL 1559224, * 2 (D.Ariz. April 25, 2011) (although plaintiff was hired two weeks prior to

13

signing an arbitration agreement, the arbitration agreement was valid and enforceable); Equal

14

Employment Opportunity Commission v. The Cheesecake Factory, Inc., 2009 WL 1259359

15

(D. Ariz. May 6, 2009); Taleb v. Autonation USA Corp., 2006 WL 3716922, * 3-6 (D.Ariz.

16

Nov. 13, 2006). (Doc. 29 at 2-3)

17

“Arbitration is a matter of contract, and the FAA requires courts to honor

18

parties’ expectations.” Concepcion, 131 S.Ct. at 1752 (citation omitted). “The general rule

19

in interpreting arbitration agreements is that courts ‘should apply ordinary state-law

20

principles that govern the formation of contracts.’” Cape Flattery, 647 F.3d at 920 (quoting

21

First Options of Chicago, Inc. v. Kaplan, 514 U.S. at 944; Mihlik v. Goodson, 2009 WL

22

2951114, * 4 (Az.Ct.App. Sept. 15, 2009) (“[T]he enforceability of [an] agreement to

23

arbitrate is determined by principles of general contract law.”) (citation omitted).

24

It is a basic tenet of Arizona contract law that in order for a promise to be

25

enforceable against the promisor, the promisee must have given some consideration for the

26

promise. Savoca Masonry Co., Inc. v. Homes & Son Const. Co., Inc., 112 Ariz. 392, 394, 542

27

P.2d 817, 819 (Ariz. 1975) (“[f]or an enforceable contract to exist there must be an offer, an

28

- 13 -

1

acceptance, consideration, and sufficient specification of terms so that the obligations

2

involved can be ascertained.”) (emphasis added); City of Cottonwood v. James L. Fann

3

Contracting, Inc., 179 Ariz. 185, 877 P.2d 284, 289 (Az.Ct.App. 1994) (In Arizona, a

4

“contract is void for lack of mutual consent, consideration, or capacity, or voidable for fraud,

5

duress, lack of capacity, mistake, or violation of a public purpose.”) (citing omitted)

6

(emphasis added); Castle v. Imagine Audio Video, L.L.C., 2011 WL 2176150, * 5

7

(Az.Ct.App. May 24, 2011) (citation omitted). Consideration is defined as bargained for

8

exchange whereby the promisors (here Plaintiffs) receive some benefit or the promisee (here

9

Dawson) suffers a detriment. Schade v. Diethrich, 158 Ariz. 1, 8, 760 P.2d 1050, 1057 (Ariz.

10

1988) (“To constitute consideration, a performance or a return promise must be bargained

11

for.”) (citing Restatement § 71(1) and Carroll v. Lee, 148 Ariz. 10, 712 P.2d 923 (Ariz.

12

1986)). “A performance or return promise is bargained for if sought or given in exchange for

13

the promise of the other party.” Id. (citing Restatement § 71(2)). “Monetary gain is not

14

always required as consideration.” Id. Thus, in order for the arbitration agreements to be

15

enforceable, there must be a detriment to Dawson or benefit to Plaintiffs that was bargained

16

for in exchange for Plaintiffs’ promises to arbitrate their disputes.

17

Similarly, “consideration necessary to modify an existing contract is ‘any

18

detriment to promise[e], or benefit to promisor’ that supports the new promise.” Demasse v.

19

ITT Corp., 194 Ariz. 500, 984 P.2d 1138 (Ariz. 1999) (citation omitted). “[L]egal

20

consideration, like every other part of a contract, must be the result of agreement. The parties

21

must understand and be influenced to the particular action by something of value . . . [that

22

is] recognized by all [parties] . . . as the moving cause.” Id. (citation and internal quotation

23

marks omitted). “Consideration will be found when an employer and its employees have

24

made a ‘bargained for exchange to support [the employees’] . . . relinquishment of the

25

protections they are entitled to under the existing contract.” Id. (citation omitted). “[A]ny

26

challenge to the adequacy of consideration is a fact question.” Hill v. Chubb Life American

27

Ins. Co., 182 Ariz. 158, 164, 894 P.2d 701, 707 (Ariz. 1995).

28

- 14 -

1

Construing the facts in the light most favorable to Plaintiffs that they were

2

employed by Dawson before they signed the Acknowledgments to arbitrate, the Court finds

3

that under clearly established Arizona law, “[i]n an at-will employment relationship, the

4

employer could discharge an employee who refused to sign the [arbitration] agreement.

5

Whether the consideration is viewed as ‘forbearance to discharge’ or ‘continued

6

employment’, as a practical matter, the consideration is the same.” Mattison, 730 P.2d at 289.

7

Here, it is undisputed that Plaintiffs were at-will employees and, like Mattison, nothing in

8

the record indicates that Dawson did not intend to continue the employment relationship with

9

Plaintiffs. The Court concludes that Dawson’s implied promises of Plaintiffs’ continued

10

employment were sufficient consideration for the arbitration agreements. Id.; Taleb, 2006

11

WL 3716922, * 5-6 (rejecting plaintiff’s interpretation of DeMasse in support of his lack-of

12

consideration argument, “[t]he Arbitration Agreement duly executed by Plaintiff and

13

Defendant is enforceable under Arizona law because there was (1) an offer communicated

14

to the offeree, (2) acceptance of the offer by the offeree, and (3) consideration, evidenced by

15

the fact that Taleb, an at-will employee, remained on the job after accepting the offer, though

16

he was free to leave.”) (citation omitted).

17
18

B. Adhesion Contracts
Next, Plaintiffs argue the arbitration agreements are not enforceable

19

because they are adhesion contracts, citing Wernett v. Service Phoenix, LLC, 2009 WL

20

1955612 (D. Ariz. July 6, 2009) and Broemmer v. Abortion Servs. Of Phoenix, Ltd., 173

21

Ariz. 148, 151, 840 P.2d 1013, 1016 (Ariz. 1992), and arguing the “arbitration agreement

22

contained in [the Acknowledgments] are adhesion contracts under Arizona law because they

23

were not negotiated, but were form agreements prepared by defendants and given to plaintiffs

24

on a ‘take it or leave it’ basis.” (Doc. 28 at 7-8)

25

Defendants do not directly address whether the Acknowledgments are

26

adhesion contracts under Arizona law; but rather, they discuss why the Acknowledgments

27

are not unconscionable because under Arizona law “[t]he conclusion that a contract is one

28

- 15 -

1

of adhesion is not, of itself, determinative of enforceability,” and the district court must

2

“conduct an independent unconscionability analysis[,]” citing Broemmer, 840 P.2d at 1016.

3

(Doc. 29 at 6-7) “To determine whether [an alleged] contract of adhesion is enforceable,

4

[courts] look to two factors: the reasonable expectations of the adhering party and whether

5

the contract is unconscionable.” Id.

6

“An adhesion contract is typically a standardized form ‘offered to consumers

7

of goods and services on essentially a ‘take it or leave it’ basis without affording the

8

consumer a realistic opportunity to bargain and under such conditions that the consumer

9

cannot obtain the desired product or services except by acquiescing in the form contract’ .

10

. . [t]he distinctive feature of a contract of adhesion is that the weaker party has no realistic

11

choice as to its terms.” Id., 173 Ariz. at 148, 840 P.2d at 1015-1016 (quoting Wheeler v. St.

12

Joseph Hosp., 63 Cal.App.3d 345, 356, 133 Cal.Rptr. 775, 783 (1976).4 See also, Cooper

13

v. QC Fin. Servs., Inc., 503 F.Supp.2d 1266, 1276 (D.Ariz. 2007). “A contract of adhesion

14

is fully enforceable, however, unless the contract is also unduly oppressive or

15

unconscionable.” Brady v. Universal Technical Institute of Arizona, Inc., 2009 WL 5128577,

16

* 2 (D. Ariz. Dec. 17, 2009) (citing Broemmer, 173 Ariz. at 151, 840 P.2d at 1016).

17

Because Arizona law directs that “[t]o determine whether [an alleged] contract

18

of adhesion is enforceable, [courts must] look to two factors: the reasonable expectations of

19

the adhering party and whether the contract is unconscionable[,]” the Court will separately

20

discuss these two factors. Id. The Court will first address Plaintiffs’ reasonable-expectations

21

claim regarding their alleged waiver of a jury trial in the context of whether the arbitration

22

clause is an adhesion contract. Maxwell v. Fidelity Financial Services, Inc., 184 Ariz. 82, 87,

23
4

27

Wheeler dealt with a California hospital’s arbitration clause contained in the
hospital’s conditions of admission form, requiring the patient-plaintiff to either place his
initials in the space provided on the form or, in the alternative, notify the hospital in writing
within 30 days of his discharge of his election not to agree to arbitration. During his
hospitalization, Wheeler suffered a brain stem infarction rendering him a total quadriplegic
with inability to speak or otherwise communicate except with his eyes.

28

- 16 -

24
25
26

1

907 P.2d 51, 56 (Ariz. 1995) (“‘[r]easonable expectations’ . . . is more correctly associated

2

with contracts of adhesion, not claims of unconscionability . . . [as] “reasonable

3

expectations” and unconscionability are two distinct grounds for invalidating or limiting the

4

enforcement of a contract and has stated that ‘even if [the contract provisions are] consistent

5

with the reasonable expectations of the party’ they are unenforceable if they are oppressive

6

or unconscionable.”) (citations omitted). The Court will then consider separately Plaintiffs’

7

claims of reasonable expectations, procedural unconscionability and substantive

8

unconscionability.

9

C. Plaintiffs’ Reasonable Expectations

10

The reasonable expectations doctrine protects parties to standardized contracts

11

against overreaching by “hold[ing] the drafter to good faith and terms which are

12

conscionable.” Darner Motor Sales, Inc. v. Universal Underwriters Ins. Co., 140 Ariz. 383,

13

394, 682 P.2d 388, 399 (Ariz. 1984). “This consumer-protection doctrine, ‘essentially a

14

relaxation of the rule barring parol evidence from being admitted to discern the intent of the

15

parties to the contract,’ can ‘override even unambiguous contract provisions when an insured

16

[or consumer] reasonably expected the provision to operate differently.’” James v. Burlington

17

Northern Santa Fe Ry. Co., 2007 WL 2461685, * 8 (D.Ariz. Aug. 27, 2007) (quoting Vencor

18

Inc. v. Nat'l States Ins. Co., 303 F.3d 1024, 1035 (9th Cir. 2002) (citing Gordinier v. Aetna

19

Cas. & Sur. Co., 154 Ariz. 266, 272, 742 P.2d 277, 283 (Ariz. 1987)).

20

In Darner, the Arizona Supreme Court relied upon the Restatement (Second)

21

of Contracts § 211 (Standardized Agreements), as a guide to analyzing, among other things,

22

contracts that contain non-negotiated terms. Broemmer, 173 Ariz. at 152, 840 P.2d at 1017.

23

The comment to subsection (3), quoted with approval by the majority in Darner, states in

24

part:

25

Although customers typically adhere to standardized agreements and are bound by
them without even appearing to know the standard terms in detail, they are not bound
to unknown terms which are beyond the range of reasonable expectation.
Id. (citing Darner, 140 Ariz. at 391, 682 P.2d at 396) (emphasis added). Under Arizona law

26
27
28

- 17 -

1

in the employment context, a court must also consider whether the employer had “reason to

2

believe that [Plaintiffs] would not have accepted the agreement if [they] had known that the

3

agreement contained the particular [arbitration term] term.” Harrington v. Pulte Home Corp.,

4

211 Ariz. 241, 247, 119 P.3d 1044, 1050 (Az.Ct.App. 2005). A reason to believe:

5
6

may be (1) shown “by the prior negotiations,” (2) “inferred from the circumstances,”
(3) “inferred from the fact that the term is bizarre or oppressive,” (4) proved because
the term “eviscerates the non-standard terms explicitly agreed to,” or (5) provided if
the term “eliminates the dominant purpose of the transaction.”

7
8

Id. (citations omitted). Additionally, the doctrine of reasonable expectations “(6) ‘requires

9

drafting of provisions which can be understood if the customer does attempt to check on his

10

rights” and consideration of “(7) any other facts relevant to the issue of what [the party]

11

reasonably expected in this contract.” Id. at 248, 119 P.3d at 1051; Wernett v. Service

12

Phoenix, LLC, 2009 WL 1955612, * 4 (D.Ariz. July 6, 2009) (arbitration agreement that had

13

elements of procedural unconscionability and contained several unconscionable terms was

14

nonetheless enforceable where “there was no reason for [the employer] to believe that

15

[plaintiff] would not have accepted the agreement if she had known of [its] particular

16

terms”).

17

In Broemmer, the Arizona Supreme Court found that the “failure to explain to

18

plaintiff that the agreement required all potential disputes, including malpractice disputes,

19

to be heard only by an arbitrator who was a licensed obstetrician/gynecologist requires” the

20

court “to view the ‘bargaining’ process with suspicion.” Broemmer, 173 Ariz. at 152, 840

21

P.2d at 1017. “It would be unreasonable to enforce such a critical term against plaintiff when

22

[the arbitration clause] is not a negotiated term and defendant failed to explain [the

23

arbitration clause] to [plaintiff] or call [plaintiff’s] attention to it.” Id.

24

Analyzing the seven Broemmer factors to determine whether the arbitration

25

clause and Dawson’s arbitration policy either violate Plaintiffs’ reasonable expectations or

26

create a fact question for jury resolution, the Court finds that Plaintiffs have failed to create

27

a question of fact that arbitration of their disputes with Defendants were beyond Plaintiffs’

28

- 18 -

1

reasonable expectations. First, the arbitration agreement here is in the context of an

2

employer-employee at-will relationship, not in a consumer context. Secondly, no evidence

3

has been presented of prior negotiations between Dawson and either Plaintiff to suggest that

4

either Plaintiff believed there would not be an arbitration clause in the Acknowledgments.

5

The same holds true as for the next factor from what the Court can “infer. . . from the

6

circumstances.” Harrington, 211 Ariz. at 248, 119 P.3d at 1051.

7

Addressing the third factor, the language in the employee manual and the

8

Acknowledgments’ arbitration clauses is clear, plain, unequivocal and explicit, not “bizarre

9

or oppressive” or “grossly inequitable,” id., 211 Ariz. at 249, 119 P.3d at 1052, i.e., “ALL

10

DISPUTES INVOLVING ALLEGED UNLAWFUL EMPLOYMENT DISCRIMINATION,

11

TERMINATION BY BREACH OF ALLEGED CONTRACT OR POLICY, OR

12

EMPLOYMENT TORT . . . SHALL BE RESOLVED PURSUANT TO THIS POLICY [of

13

arbitration] AND THERE SHALL BE NO RECOURSE TO COURT, WITH OR WITHOUT

14

A JURY TRIAL.” (Doc. 24-1, Exh. 1, at § 6 at p. 44) (emphasis in original). See also,

15

Harrington, 119 P.3d at 1050-51 (citing Darner, 682 at 397). The words identifying

16

Dawson’s “ARBITRATION AND TERMINATION DISPUTE RESOLUTION

17

POLICY” are in large, bolded capital letters, substantially larger than most of the manual’s

18

other print, which, undoubtedly, were intended to communicate to new or prospective

19

Dawson employees Dawson’s arbitration policy. (Doc. 24-1, Exh. 1, at § 6 at p. 44)

20

(emphasis in original).

21

Considering the fourth and fifth factors, and much like the arbitration

22

agreement in Autonation, the arbitration clauses in Dawson’s employee manual and

23

Acknowledgments do not eviscerate non-standard terms explicitly agreed to by the parties,

24

or otherwise eliminate the dominant purpose of the transaction, that is, Plaintiffs’

25

employment with Dawson, regardless whether it began on or before June 16, 2010.

26

Autonation, 2011 WL 380517 at 2. While Plaintiffs now contend that they want to present

27

their employment-related claims to a jury, they do not aver that had Dawson provided

28

- 19 -

1

Plaintiffs sufficient time at their orientation to read the employee manual and

2

Acknowledgments, they would have voluntarily terminated their employment with Dawson.

3

Dawson does not dispute that the terms of the Acknowledgments were not

4

negotiated with Plaintiffs or the Acknowledgments were on a form prepared by Dawson.

5

While Plaintiffs contend they were “not told to read the [employee manual and

6

Acknowledgments] first” and “were not given any time to read [them] before [they] were told

7

to sign the [Acknowledgments[,]” doc. 28-1, Exh. 1 and 2, Plaintiffs do not dispute that each

8

signed his or her single-page Acknowledgment. Thus, the Acknowledgments’ arbitration

9

clause is “presumptively valid and enforceable, whether or not [Plaintiffs] read [them] or

10

appreciated [their] full effect.” Harrington, 211 Ariz. at 247, 119 P.3d at 1050; Darner, 140

11

Ariz. at 391, 682 P.2d at 396. Plaintiffs have provided no evidence that Dawson had “reason

12

to believe that [Dawson] would not have accepted the agreement if [Plaintiffs] had known

13

that the agreement contained the particular [arbitration] term.” Id.

14

Considering all of the reasonable expectation factors, it is clear that on this

15

record, the reasonable-expectations doctrine does not prohibit application of the arbitration

16

clause to Plaintiffs’ claims or create a jury question on this issue.

17
18

D. Unconscionabily
Plaintiffs argue that the arbitration provision is unenforceable “because the

19

[arbitration] agreement if made, is unconscionable, both procedurally and substantively.”

20

(Doc. 28 at 1)

21

1. Generally

22

It is well-established that unconscionability is a generally applicable contract

23

defense, which may render an arbitration provision unenforceable. Doctor’s Assocs., 517

24

U.S. at 686-87. Plaintiffs, however, “have a high bar to meet in demonstrating that an

25

arbitration agreement is unconscionable.” Effio v. FedEx Ground Package, 2009 WL

26

775408, * 3 (D.Ariz. March 20, 2009). In Arizona, unconscionability includes both

27

procedural unconscionability, i.e., something is wrong with the bargaining process, such as,

28

- 20 -

1

oppression or surprise, or substantive unconscionability, i.e., the contract terms per se are

2

overly harsh or generate one-sided results. Wernett, 2009 WL 1955612 at * 3 (quoting

3

Nelson v. Rice, 198 Ariz. 563, 567, 12 P.3d 238, 242 (Az.Ct.App. 2000)). “The Supreme

4

Court of Arizona has recognized that, while contracts may have elements of both procedural

5

and substantive unconscionability, ‘a claim of unconscionability can be established with a

6

showing of substantive unconscionability alone[.]’” Id. (quoting Maxwell, 184 Ariz. at 90,

7

907 P.2d at 59). See also, Southwest Pet Products, Inc. v. Koch Industries, Inc., 107

8

F.Supp.2d 1108, 1111, n. 3 (D.Ariz. 2000).

9

In Maxwell, the Arizona Supreme indicated that “[t]raditionally, equity courts

10

recognized the defense of unconscionability in denying relief to plaintiffs who were guilty

11

of unconscionable conduct . . . The rule as it now exists is largely substantive, working

12

primarily as a defense both in law and in equity and applying to claims for damages as well

13

as specific performance.” 184 Ariz. at 88, 907 P.2d at 57 (citations omitted).

14

If after “a reasonable opportunity to present evidence; on a developed

15

record[,]” and a plaintiff or defendant fail to create a genuine dispute of material fact, the

16

determination of unconscionability may be made by the court as a matter of law. Id., 184

17

Ariz. 82, 87, 907 P.2d 51, 56 (quoting A.R.S. § 47-2302(A)).5 A trial court has “three

18

options [under A.R.S. § 47-2302(A)] in the event it determines that a clause of a contract is

19

unconscionable as a matter of law.” Batory v. Sears, Roebuck and Co., 456 F.Supp.2d 1137,

20

1141 (D.Ariz. 2006). The Court may: “(1) refuse to enforce the contract; (2) enforce the

21
22
23
24
25
26
27
28

5

A.R.S. § 47-2302(A) provides:

A. If the court as a matter of law finds the contract or any clause of the contract to
have been unconscionable at the time it was made the court may refuse to enforce the
contract, or it may enforce the remainder of the contract without the unconscionable
clause, or it may so limit the application of any unconscionable clause as to avoid any
unconscionable result.
A.R.S. § 47-2302(A) (emphasis added).
- 21 -

1

remainder of the contract without the unconscionable clause; or (3) limit the application of

2

the unconscionable clause as to avoid any unconscionable result.” Id.

3

2. Procedural Unconscionability

4

“Procedural unconscionability is concerned with unfair surprise; courts

5

examine factors influencing the ‘the real and voluntary meeting of the minds of the

6

contracting party: age, education, intelligence, business acumen and experience, relative

7

bargaining power, who drafted the contract, whether the terms were explained to the weaker

8

party, [and] whether alterations in the printed terms were possible . . . .’” Wernett, 2009 WL

9

1955612 at * 3 (quoting Maxwell, 184 Ariz. 82, 89, 907 P.2d 51, 58) (citation omitted). In

10

Maxwell, the Arizona Supreme Court left “for another day the questions involving the

11

remedy for procedural unconscionability alone.” 184 Ariz. at 90, 907 P.2d at 59.

12

“Mere inequality in bargaining power is not sufficient to invalidate an

13

arbitration agreement.” Equal Employment Opportunity Com’n v. Cheesecake Factory, Inc.,

14

2009 WL 1259359, * 3 (D.Ariz. May 6, 2009) (citing Gilmer, 500 U.S. at 33). “Moreover,

15

an agreement may be enforceable even if the terms offered are not negotiable.” Id. (citing

16

Phoenix Baptist Hosp. & Med. Ctr. v. Aiken, 179 Ariz. 289, 293, 877 P.2d 1345, 1349

17

(Az.Ct.App. 1994); Broemmer, 173 Ariz. at 151, 840 P.2d at 1016).

18

Plaintiffs argue that “the arbitration agreements are procedurally unconscio-

19

nable because plaintiffs were not given an opportunity to read the [employee manual] or any

20

complete copy of the arbitration procedure, before agreeing to arbitrate their claims.” (Doc.

21

28 at 3) Even though Dawson’s evidence disputes these factual claims, a jury trial is not

22

necessarily required on this issue. As Plaintiffs’ Response concedes, the fact that “plaintiffs

23

did not have time to read the agreement, and did not read them . . . is not dispositive[,]”

24

quoting Darner, “[t]hat Plaintiff did not read all of the terms has little bearing.” (Id. at 10)

25

(citation omitted).

26

Plaintiffs Aurora and Jonathon Coup are 48 and 22 years of age, respectively,

27

but Plaintiffs provide nothing else regarding their “education, intelligence, business acumen

28

- 22 -

1

and experience, relative bargaining power, . . . whether alterations in the printed terms were

2

possible [and] whether there were alternative[s]” to signing the Acknowledgments at the

3

orientation. Wernett, 2009 WL 1955612 at * 3. Moreover, Plaintiffs have presented no

4

evidence, or reasonable inference from admissible evidence, that had either Plaintiff asked

5

Jarred Elias, Dawson’s representative at the orientation, for more time to read the single-page

6

Acknowledgment or, perhaps, take the employee manual and Acknowledgments home to

7

more carefully review before signing and returning them the next day, that such reasonable

8

requests would have been denied. Plaintiffs’ argument that they were required to sign the

9

Acknowledgments at the orientation “on a ‘take it or leave it’ basis[]” is sheer speculation,

10

especially in light of Mr. Elias’ affidavit, conveying a cooperative attitude of giving all the

11

new Dawson employees “the opportunity to review the contents and ask any questions[]”

12

about the employee manual and Acknowledgment. (Doc. 29-1, Exh. 2, ¶ 9 at p. 7) See, Beus

13

Gilbert PLLC v. Pettit, 2011 WL 1949058, * (Az.Ct.App. May 12, 2011) (“Although Pettit

14

suggests he had no choice but to sign the agreement, he offers no evidence to support the

15

proposition that he could not have rejected the arbitration provision . . . .”). Even if Plaintiffs

16

had shown that the terms of the Acknowledgments were somehow grossly unfavorable to

17

them, which they have not, their unconscionability argument would nonetheless fail because

18

they have not made any showing of the lack of meaningful choice as necessary to establish

19

procedural unconscionability. There is no evidence that Dawson placed the

20

Acknowledgments before Plaintiffs on a take-it-or-leave-it basis, threatened to fire them if

21

they refused to sign them, forced them to sign the Acknowledgments on the spot or else, or

22

forbade them from reviewing the Acknowledgments with counsel or anyone else they saw

23

fit.

24

Similarly, there is no evidence that Plaintiffs were not given a copy of

25

Dawson’s arbitration procedures even though it was available upon request of Dawson’s

26

Human Resources Department. Dawson’s employee manual plainly indicates that “[f]or a

27

complete, detailed copy of the Grievance, Arbitration and Termination Dispute Resolution

28

- 23 -

1

Policy, please contact the Human Resources Department.” (Doc. 24-1, Exh. 1, § 6 at p. 44)

2

There is also no evidence that Plaintiffs ever requested a copy of the arbitration procedures

3

from Dawson’s Human Resources Department at any time before or after their employment

4

was terminated. Finally, each Plaintiff’s signed Acknowledgment states at the beginning that

5

by each “signature below, [each Plaintiff] certif[ies] and acknowledge[s]” that each Plaintiff

6

has “received and read a copy of the [employee manual[]” . . . and agree “that all disputes

7

involving alleged unlawful employment discrimination . . . or employment tort . . . shall be

8

resolved . . . [by] Dawson[’s] . . . Arbitration and Termination Dispute Resolution Policy

9

. . . .” (Doc. 24-2, Exh. 2, at p. 2)

10

Construing the facts in the light most favorable to Plaintiffs, as the Court

11

must under Rule 56, Fed.R.Civ.P., Plaintiffs’ admitted failure to read the employee manual

12

and Dawson’s alleged failure to give each Plaintiff enough time to read each single-page

13

Acknowledgment do not render Dawson’s arbitration policy and clause procedurally

14

unconscionable. Rocz v. Drexel Burnham Lambert, Inc., 743 P.2d 971, 975 (Az.Ct.App.

15

1987) (“Parties cannot repudiate their written contracts by asserting that they neglected to

16

read them or did not really mean them.”). “Darner specifically approved the enforceability

17

of standard form contract provisions:

18
19
20

The rule which we adopt today for interpretation of standardized contracts . . .
recognizes that most provisions of standardized agreements are not the result of
negotiation; often, neither the customer nor salesperson are aware of the contract
provisions. The rule . . . charges the customer with knowledge that the contract . . .
contains a form applied to a vast number of transactions and includes terms which are
unknown . . . ; it binds the customer to such terms.

21
22

Id. (quoting Darner, 140 Ariz. at 393-94, 682 P.2d at 398-99) (emphasis in original).

23

Plaintiffs’ after-the-fact speculation does not overcome the traditional rule of contract law

24

that a party to a contract is assumed to have read and understood the terms of a contract he

25

or she signs. Flores v. ADT Sec. Services, Inc., 2011 WL 1211769, * 3 (D.Ariz. Jan. 31,

26

2011) (“Ordinarily, a party to a standardized contract is bound by all the terms of the

27

contract even those terms that were not bargained for, understood, or even read by the party

28

- 24 -

1

at the time of contracting[,]” citing Darner, 140 Ariz. at 394, 682 P.2d at 399). Plaintiffs

2

have failed to establish a colorable claim that Dawson’s policy of arbitration for

3

employment-related disputes constitutes unfair surprise, is oppressive, or that Dawson

4

attempted to hide its arbitration policy from Plaintiffs. Plaintiffs’ procedural

5

unconscionability claim fails.

6

3. Substantive Unconscionability

7

“Substantive unconscionability concerns the actual terms of the contract and

8

examines the relative fairness of the obligations assumed at the time the contract was made.”

9

Cooper v. QC Financial Services, Inc., 503 F.Supp.2d 1266, 1279 (D.Ariz. 2007) (citation

10

omitted). “Indicative of substantive unconscionability are contract terms so one-sided as to

11

oppress or unfairly surprise an innocent party, an overall imbalance in the obligations and

12

rights imposed by the bargain, and significant cost-price disparity.” Id. (quoting Maxwell,

13

184 Ariz. at 89, 907 P.2d at 58) (internal quotation marks omitted).

14

Plaintiffs argue that the arbitration agreements are substantively uncon-

15

scionable because the arbitration agreement: (a) is not mutual, i.e., only Dawson’s employees

16

must waive their rights to judicial remedies; (b) does not provide any method or procedure

17

of arbitration; and (c) fails to provide an express allocation of arbitration expenses.” (Doc.

18

28 at 3)

19

a. Mutual Obligation to Arbitrate Disputes

20

Initially, Plaintiffs argue that the arbitration agreements are substantively

21

unconscionable because the agreements require only Dawson’s employees, but not Dawson,

22

to waive their rights to seek a judicial remedy for disputes that may arise, citing Nagrampa

23

v. MailCoups, Inc., 469 F. 3d 1257 (9th Cir. 2006); Davis v. O’Melveny & Myers, 485 F. 3d

24

10666 (9th Cir. 2007); Armendariz. v. Foundation Health Psychcare Services, Inc., 24 Cal.

25

4th 83, 99 Cal. Rptr. 2d 745, 6 P. 3d 669, 690-694 (2000); and Wernett, 2009 WL 1955612

26
27
28

6

Note: Plaintiffs’ Response inadvertently omitted the page number of the Davis case.
- 25 -

1

at * 5. (Doc. 28 at 11)

2

Conversely, Defendants argue that Plaintiffs’ lack-of-mutuality argument fails

3

because the employee manual “clearly provides for a mutually binding arbitration policy[.]”

4

(Doc. 29 at 8-9) Defendants point to the employee manual, which states, in pertinent part,

5

that

6
7
8

ALL DISPUTES INVOLVING ALLEGED UNLAWFUL EMPLOYMENT
DISCRIMINATION, TERMINATION BY BREACH OF ALLEGED CONTRACT
OR POLICY, OR EMPLOYMENT TORT COMMITTED BY . . . A
REPRESENTATIVE OF DAWSON . . . SHALL BE RESOLVED PURSUANT
TO THIS POLICY AND THERE SHALL BE NO RECOURSE TO COURT, WITH
OR WITHOUT A JURY TRIAL.

9
10

(Id. at 9) (emphasis in Defendants’ Reply). Defendants raise two reasons why Plaintiffs

11

argument should be rejected: (1)“in interpreting a similar arbitration clause,” the District

12

Judge in Brady v. Universal Technical Institute of Arizona, Inc., 2009 WL 5128577, * 2 (D.

13

Ariz. Dec. 17, 2009), “concluded that the parties were equally bound to arbitrate, because

14

the employer had no greater right to avoid arbitration of employment claims than

15

employee[,]” and, (2) “because the parties’ contract in this case is an at-will employment

16

contract, it is unilateral, and does not require that there be mutuality of obligation[,]” citing

17

Wagner v. City of Globe, 150 Ariz. 82, 85, 722 P.2d 250, 253 (Ariz. 1986) (at-will

18

employment contracts do not require mutuality of obligation), overruled on other grounds,

19

Demasse, 194 Ariz. 500, 984 P.2d 1138. (Doc. 29 at 9-10) (footnote omitted).

20

It appears universally true that “an arbitration agreement allowing one party

21

the unfettered right to alter the arbitration agreement’s existence or its scope is illusory[]”

22

and, therefore, is unenforceable. Dumais v. American Golf Corp., 299 F.3d 1216, 1219 (10th

23

Cir. 2002) (citing, among others, Floss v. Ryan’s Family Steak Houses, Inc., 211 F.3d 306,

24

315-16 (6th Cir. 2000) (holding that where the employer retained the unfettered right to alter

25

the arbitration agreement’s existence or its scope, it is illusory and unenforceable). “Under

26

modern contract law, however, so long as a contract is supported by sufficient consideration

27

there is no requirement of equivalent promises or ‘mutuality of obligation.’” Booker v.

28

- 26 -

1

Robert Half Intern., Inc., 315 F.Supp.2d 94, 101 (D.D.C. 2004) (citing Restatement (Second)

2

of Contracts § 79 (1981); 2 Corbin on Contracts § 6.1, at 197 (1995)). “Federal [circuit]

3

courts addressing the issue recently have consistently concluded that arbitration agreements

4

contain adequate consideration, need not have mutuality or equivalency of obligation, and

5

therefore are enforceable.” Id. (citing, e.g., Morrison v. Circuit City Stores, Inc., 317 F.3d

6

646, 667–68 (6th Cir. 2003) (en banc) (arbitration agreement supported by sufficient

7

consideration and mutuality of obligation under Ohio law and the Restatement (Second) of

8

Contracts) (emphasis added)); Blair v. Scott Specialty Gases, 283 F.3d 595, 603–04 (3rd Cir.

9

2002) (“when both parties have agreed to be bound by arbitration, adequate consideration

10

exists and the arbitration agreement should be enforced”); Harris v. Green Tree Fin. Corp.,

11

183 F.3d 173, 180–81 (3rd Cir. 1999) (arbitration contract need not have mutuality of

12

obligation as long as the contract is supported by consideration); Michalski v. Circuit City

13

Stores, Inc., 177 F.3d 634, 637 (7th Cir. 1999); Johnson v. Circuit City Stores, Inc., 148 F.3d

14

373, 378 (4th Cir. 1998); Doctor’s Assocs., Inc. v. Distajo, 66 F.3d 438, 451–53 (2nd Cir.

15

1995) (mutuality of obligation or remedy not required if arbitration agreement supported by

16

consideration)). See also, Ozormoor v. T-Mobile USA, Inc., 354 F. App’x 972, 975 (6th Cir.

17

2009) (plaintiff’s argument that arbitration provision is unenforceable because it did not

18

impose mutual obligations “is meritless. Arbitration provisions need not require both parties

19

to arbitrate their claims, so long as the contract as a whole imposes mutual obligations on

20

both parties.”); Pennington v. Northrop Grumman Space & Mission Sys. Corp., 269

21

Fed.Appx. 812, 820 (10th Cir. 2008) (“In the employment context, a reciprocal agreement

22

to arbitrate can provide the requisite consideration so long as the employer does not retain

23

the unilateral authority to terminate or modify the arbitration agreement once the employee’s

24

claim has accrued.”).

25

Another long-time tenet of Arizona contract law is “the general rule that there

26

must be mutuality of obligation to constitute a binding contract[.]” Gates v. Arizona Brewing

27

Co. 54 Ariz. 266, 95 P.2d 49 (Ariz. 1939). “Mutuality of obligation is a requirement for a

28

- 27 -

1

valid contract; however, mutuality is absent when only one of the contracting parties is

2

bound to perform.” Carroll v. Lee, 148 Ariz. 10, 13, 712 P.2d 923, 926 (Ariz. 1986). “Parties

3

are, within reason, free to contract as they please, and to make bargains which place one

4

party at a disadvantage; but a contract must have mutuality of obligation, and an agreement

5

which permits one party to withdraw at his pleasure is void.” Shattuck v. Precision Toyota,

6

Inc., 115 Ariz. 586, 588, 566 P.2d 1332, 1334 (Az.Ct.App. 1977) (citation omitted).

7

While numerous District of Arizona judges have addressed this issue,

8

Cheesecake Factory, Inc., 2009 WL 1259359, at * 47; Jones v. General Motors Corp., 640

9

F.Supp.2d 1124, 1131-1132 (D.Ariz. 2009); Brady v. Universal Technical Institute of

10

Arizona, Inc., 2009 WL 5128577 at * 2; Wernett, 2009 WL 1955612 at 8, the parties have

11

not cited, and the Court’s independent research has not discovered, a State of Arizona case

12

that squarely addresses whether there must be a mutual obligation to arbitrate in the context

13

of claim of substantive unconscionability in an employer-employee relationship.

14

Plaintiffs’ authorities - Nagrampa, Davis, and Armendariz - follow California,

15

not Arizona, law and therefore, are neither controlling nor persuasive. However, “[t]he

16

Arizona Supreme Court has repeatedly stated that the Restatement of Law will be followed

17

in the absence of a controlling statute or precedent.” Stevens/Leinweber/Sullens, Inc. v. Holm

18

Dev. and Management, Inc., 165 Ariz. 25, 28, 795 P.2d 1308, 1311 (Az.Ct.App. 1990)

19

(citing e.g., Bank of America v. J. & S. Auto Repairs, 143 Ariz. 416, 418, 694 P.2d 246, 248

20

(Ariz. 1985)); Keck v. Jackson, 122 Ariz. 114, 115, 593 P.2d 668, 669 (Ariz. 1979). Thus,

21

the Court need not determine whether there was mutuality of obligation to arbitrate, even

22
23
7

27

In this case, the District Judge found it was not necessary to determine whether the
arbitration agreement was mutually binding because it was part of an at-will employment
contract with plaintiff pursuant to Arizona law, citing, among others, Wagner v. City of
Globe, 150 Ariz. 82, 722 P.2d 250, 253 (Ariz. 1986) and Gates v. Arizona Brewing Co., 54
Ariz. 266, 95 P.2d 49, 52 (Ariz. 1939) (“mutual promises are not essential where a sufficient
consideration is otherwise present”).

28

- 28 -

24
25
26

1

though the evidence supports the conclusion that there was,8 because the Court has

2

previously determined herein that consideration exists to support Dawson’s arbitration

3

agreement, which “vitiates the need for . . . mutuality.” K-Line Builders, Inc. v. First Fed.

4

Sav. & Loan Ass’n, 139 Ariz. 209, 212, 677 P.2d 1317, 1320 (Az.Ct.App. 1983) (adopting

5

the Restatement (Second) of Contracts § 799 which provides that mutuality of obligation is

6

irrelevant in the presence of consideration).

7

Considering that both federal and “Arizona law favor[] arbitration, both

8

statutorily, see A.R.S. § 12-1501, and by the courts as a matter of public policy[,]” Foy v.

9

Thorp, 186 Ariz. 151, 153, 920 P.2d 31, 33 (Az.Ct.App. 1996), the Court concludes that

10

Plaintiffs’ argument that the parties’ arbitration agreement is substantively unconscionable

11

and void for lack of mutuality is without merit.

12
13
14
15
16
17
18
19

8

See, Gilmer, 500 U.S. at 23 (Supreme Court concluded that a provision requiring the
arbitration of “any dispute, claim or controversy” arising between the plaintiff and his
employer arising out of the employment required the arbitration of the plaintiff’s federal age
discrimination claim); Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S.
614, 628-29 (1985) (Supreme Court concluded that a provision requiring the arbitration of
“all disputes, controversies, or differences which may arise between [the parties] out of or
in relation to” the parties’ contract was broad enough to require the arbitration of a federal
antitrust claim.); Simula, 175 F.3d at 720 (Ninth Circuit liberally construed arbitration
provision that required arbitration of “[a]ll disputes arising in connection with” the parties’
contract.).

20
21

9

The Restatement (Second) of Contracts § 79 (1981) provides:

22
23
24
25
26

If the requirement of consideration is met, there is no additional requirement of
(a) a gain, advantage, or benefit to the promisor or a loss, disadvantage, or
detriment to the promisee; or
(b) equivalence in the values exchanged; or
(c) mutuality of obligation.
Restatement (Second) of Contracts § 79 (1981) (emphasis added).

27
28

- 29 -

1

b. No Method or Procedure of Arbitration Provided

2

Plaintiffs further argue that the arbitration agreement is substantively

3

unconscionable because no method or procedure for arbitration is included in the arbitration

4

agreement. (Doc. 28 at 11) Plaintiffs claim that “[w]here the arbitration agreement or clause

5

simply refers to some unspecified ‘policy’ or ‘procedure’ and does not contain the exact

6

arbitration procedures, and the employee is not provided with a copy or the means to

7

immediately look at a copy before signing, then there has been no assent to the arbitration

8

clause, and hence no agreement to arbitrate (no acceptance under common law of

9

contracts).” (Id.) Relying on a Ninth Circuit case following Washington law and

10

Weatherguard Roofing Co., Inc. v. D.R. Ward Const. Co., Inc., 214 Ariz. 344, 346, 152 P.3d

11

1227, 1229 (Az.Ct.App. 2007), Plaintiffs repeat their earlier argument that the arbitration

12

agreement is unconscionable because Plaintiffs were not given an opportunity to read the

13

employee manual or provided a copy of the Grievance, Arbitration and Termination Dispute

14

Resolution Policy referred to in the employee manual, “which might have contained an

15

arbitration procedure.” (Doc. 28 at 11) (emphasis added).

16

Defendants disagree, contending that because the Court is authorized under

17

section 5 of the FAA10 “to appoint the arbitrator in this case, the lack of specificity with

18

respect to the arbitrator selection procedures does not render the parties’ arbitration

19
20
21
22
23
24
25
26
27
28

10

Title 9 U.S.C. § 5, entitled “Appointment of arbitrators or umpire”, provides in
relevant part:
If in the agreement provision be made for a method of naming or appointing an
arbitrator or arbitrators or an umpire, such method shall be followed; but if no method
be provided therein, . . . then upon the application of either party to the controversy
the court shall designate and appoint an arbitrator or arbitrators or umpire, as the case
may require, who shall act under the said agreement with the same force and effect
as if he or they had been specifically named therein; and unless otherwise provided
in the agreement the arbitration shall be by a single arbitrator.
Title 9 U.S.C. § 5.
- 30 -

1

agreement substantively unconscionable.”11 (Doc. 29 at 10) While the Court finds that the

2

plain language of section 5 of the FAA does not support Defendants’ argument in this

3

regard, Plaintiffs’ argument is nevertheless unavailing.

4

Neither side has provided any Arizona authority that directly holds that when

5

an employer does not provide an employee a copy of the arbitration rules and procedures at

6

the time the employee signs an arbitration agreement that Arizona law would deem the

7

arbitration agreement or employer’s arbitration policy substantively unconscionable. Even

8

California’s pro-employee law in the arbitration arena12 has rejected a similar argument that

9

an employer’s mere reference to unattached arbitration rules renders an arbitration agreement

10

unconscionable per se. Mathis v. Screen Actors Guild Producer Pension Health Plan, 2011

11

WL 199002, * 6 (Cal.App. 2 Dist. January 24, 2011) (“We find no authority supporting the

12

argument and [the employee] cites to none.”). Similarly, Arizona law would appear to reject

13

such an argument. Plaintiffs’ own cited authority, Weatherguard, found that a subcontract’s

14

incorporation by reference of general construction contract documents which included an

15

arbitration clause was valid and enforceable on the subcontractor. 214 Ariz. at 347, 152 P.3d

16

at 1230. “[W]hether the general conditions were attached to the subcontract is irrelevant .

17

. . , ‘physical attachment is not necessary if the document . . . is clearly and unambiguously

18

incorporated by reference.’” Id. (quoting United California Bank v. Prudential Ins. Co. of

19

America, 140 Ariz. 238, 268, 681 P.2d 390, 420 (Az.Ct.App. 1983)). Dawson’s employee

20

manual clearly indicates where the arbitration rules and procedures may be found upon

21

request which plainly make clear they are a part of Dawson’s arbitration policy: “For

22
23

11

The Court notes that A.R.S. § 12-1503 is very similar to 9 U.S.C. § 5.

24
12

25
26

For example, in California, a contract to arbitrate disputes between an employer and
an employee raises a rebuttable presumption of substantive unconscionability. Ingle v.
Circuit City Stores, 328 F.3d 1165, 1174 (9th Cir. 2003).

27
28

- 31 -

1

complete, detailed copy of the Grievance, Arbitration and Termination Dispute Resolution

2

Policy, please contact the Human Resources Department.” (Doc. 24-1, Exh. 1, § 6 at p. 44)

3

As previously mentioned, “[s]ubstantive unconscionability concerns the actual

4

terms of the contract and examines the relative fairness of the obligations assumed.”

5

Maxwell, 184 Ariz. at 89, 907 P.2d at 58 (citation omitted). Factors showing substantive

6

unconscionability include “contract terms so one-sided as to oppress or unfairly surprise an

7

innocent party, an overall imbalance in the obligations and rights imposed by the bargain,

8

and significant cost-price disparity.” Id.; Nelson v. Rice, 198 Ariz. at 567, 12 P.3d at 242.

9

There is no evidence that Dawson intentionally hid the arbitration terms and procedures from

10

Plaintiffs or that Plaintiffs ever contacted Dawson’s Human Resources Department to obtain

11

a copy of the arbitration rules. “[T]he Arbitration Agreement’s failure to specify what

12

arbitration rules will apply and where arbitration proceedings will be held does not evidence

13

an attempt to conceal terms that will be unfair to [Plaintiffs].” Cheesecake Factory, 2009 WL

14

1259359 at * 3. An arbitration clause should not be struck down as unconscionable merely

15

because Plaintiffs’ counsel speculates, with no supporting facts of any kind, that the

16

arbitration rules themselves are not fair and are so one-sided to be oppressive to Plaintiffs.

17

Plaintiffs’ argument that because Dawson did not provide each Plaintiff a copy of the

18

arbitration rules and procedures at their orientation renders the arbitration agreement

19

substantively unconscionable is rejected because they were sufficiently incorporated by

20

Dawson’s employee manual.

21

c. No Express Allocation of Arbitration Expenses

22

Finally, Plaintiffs contend that the arbitration agreement is substantively

23

unconscionable “because it is silent on how arbitration fees will be allocated between the

24

parties, and therefore the arbitration fees and costs awarded against plaintiffs could be

25

prohibitive to plaintiffs who are indigent.” (Doc. 28 at 12) Defendants counter with citations

26

to several District of Arizona cases that “have found that an arbitration clause is not

27

substantively unconscionable where it does not provide for an allocation of arbitration costs,

28

- 32 -

1

if a party or its counsel states on the record that such a party will pay for the arbitration

2

costs[,]” citing Cheesecake Factory, 2009 WL 1259359 at * 3; Autonation, 2011 WL

3

380517 at * 1 (“Plaintiff has not met her burden [of showing likelihood of incurring

4

prohibitively expensive arbitration costs] given Defendants’ repeated and unequivocal offers

5

to pay all arbitration fees and costs.”). (Doc. 29 at 10) Defendants point to the Affidavit of

6

David Lunt, Dawson’s Vice President of Administration, that avers that, “if the Court finds

7

that Plaintiffs’ claims are subject to arbitration, Dawson will pay for all arbitration costs and

8

fees, other than Plaintiffs’ attorneys’ fees. (Id., citing Lunt’s Affidavit, doc. 29-1, Exh 1 at

9

¶ 4). “Therefore, Plaintiffs’ inability to afford the arbitration costs is no longer relevant to

10

their claim that the arbitration agreement is unenforceable.” (Id.)

11

Where “a party seeks to invalidate an arbitration agreement on the grounds that

12

arbitration would be prohibitively expensive, that party bears the burden of showing the

13

likelihood of incurring such costs.” Green Tree Financial Corp. v. Randolph, 531 U.S. 79,

14

92 (2000). In Harrington, the Arizona Court of Appeals rejected the argument that an

15

arbitration clause was substantively unconscionable because the party seeking to avoid

16

arbitration had failed to present “individualized evidence to establish that the costs of

17

arbitration [were] prohibitive.” 211 Ariz. at 252, 119 P.3d at 1055. The Arizona court so held

18

even though several of the parties seeking to avoid arbitration had submitted affidavits

19

providing that they could not afford the costs of arbitration, reasoning that “the allegation

20

that the arbitration clause is substantively unconscionable on this record is speculative at

21

best.” Id., 211 Ariz. at 253, 119 P.3d at 1056.

22

Plaintiffs have not shown that any arbitration costs or fees will be incurred, let

23

alone prohibitively expensive ones. They do not demonstrate that arbitration will put them

24

in any worse position than litigation in allowing them to pursue their claims, especially now

25

that Dawson has unequivocally agreed to pay for all arbitration costs and fees, other than the

26

fees for Plaintiffs’ attorneys who are representing Plaintiffs on a contingency fee basis.

27

Plaintiffs’ argument that the arbitration agreement is substantively unconscionable because

28

- 33 -

1

it is silent on how arbitration fees will be allocated between the parties is without merit.

2

Based on the foregoing,

3

IT IS ORDERED as follows:

4

1. Defendants’ Motion to Dismiss Case And/Or Stay Proceedings and Compel

5

Arbitration, doc. 24, is GRANTED in part and DENIED in part.

6

2. The parties are directed to promptly submit this matter to arbitration

7

consistent with Dawson’s arbitration rules and procedures, the provisions of the Federal

8

Arbitration Act, 9 U.S.C. §§ 1 et seq., and this order.

9

3. Upon completion of the arbitration proceedings and absent a voluntary

10

settlement of all claims, the parties must comply with the provisions of 9 U.S.C. §§ 9-13, as

11

applicable.

12

4. This action is STAYED pursuant to 9 U.S.C. § 3 until further order of

13

the Court so that neither party must pay a second $350.00 filing fee to have the arbitration

14

award confirmed.

15

5. The parties shall file a Joint Status Report concerning the status of the

16

arbitration on or before Friday, January 6, 2012. It is the responsibility of Plaintiffs to

17

initiate arbitration, prosecute their claims to a conclusion within nine (9) months of this

18

order, and prepare and file a Joint Status Report or this case may be dismissed without

19

prejudice absent a showing of good cause and the exercise of due diligence. Defendants shall

20

cooperate with Plaintiffs’ efforts to comply their obligations imposed herein.

21

6. Plaintiffs’ request for oral argument is DENIED.

22

Dated this 4th day of October, 2011.

23
24
25
26
27
28

- 34 -