TENBRINK v. TOSHIBA AMERICA MEDICAL SYSTEMS, INC.

Filing 29

ENTRY - The Motion to Dismiss is DENIED, and its Motion to Compel Arbitration is GRANTED (Dkt. 14 ). The parties shall proceed with arbitration as provided by the Agreement. Because all of the matters in this suit are subject to arbitration, the underlying proceedings are STAYED pending the outcome of arbitration. The parties are to notify the Court of the outcome of arbitration within ten (10) days of conclusion of those proceedings. Signed by Judge Tanya Walton Pratt on 6/18/2013. (JD)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
RONALD E. TENBRINK,
Plaintiff,
v.
TOSHIBA AMERICA MEDICAL SYSTEMS,
INC.,
Defendant.

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Case No. 1:12-cv-01214-TWP-DKL

ENTRY ON DEFENDANT’S MOTION TO DISMISS AND COMPEL ARBITRATION
This matter is currently before the Court on Toshiba America Medical Systems, Inc.’s
(“Toshiba”), motion to dismiss the complaint of Plaintiff Ronald E. TenBrink (“Mr. TenBrink”)
for lack of subject-matter jurisdiction and to compel Mr. TenBrink to pursue his claims through
arbitration. (Dkt. 14.) For the reasons set forth below, the Court GRANTS Toshiba’s motion in
part, DENIES it in part, and STAYS the case on its own motion.
I. BACKGROUND
Toshiba is a medical supply corporation with principal executive offices located in
California, and it provides high-end medical equipment to hospitals and healthcare providers in
every state. Mr. TenBrink, a sixty-two year old Indiana resident, began employment with
Toshiba on March 1, 1989, and remained employed until his termination on November 21, 2011.
As a condition of his continued at-will employment at Toshiba, in 1995 Mr. TenBrink
signed a Mutual Arbitration Agreement (“the Agreement”). The Agreement provided arbitration
as the “sole and exclusive remedy” for resolving disputes arising under the Agreement, including
disputes regarding employment discrimination based on age or disability. The Agreement also

applied to all disputes arising under federal, state or local laws relating to “Employee’s
employment or the termination of Employee’s employment with Toshiba.”
Within the last nine years of his employment, Mr. TenBrink received a combined income
of $1,473,351.00, an average of $163,705.00 per year, from Toshiba. On April 17, 2012, Mr.
TenBrink rolled over $555,931.56 from his company 401(k) account to his individual T. Rowe
Price Account (“IRA Account”), and on June 1, 2012, he rolled over $196,862.71 from his
company pension account to his IRA Account as well.
On August 12, 2012, Mr. TenBrink filed this action against Toshiba alleging three causes
of action: 1) Toshiba held him to a higher standard than non-disabled employees and terminated
him because of his disability in violation of the Americans with Disabilities Act of 1990, 42
U.S.C. § 12101 et seq. (“ADA”); 2) Toshiba held Mr. TenBrink to a higher standard than
younger employees and terminated him while retaining younger employees in violation of the
Age Discrimination in Employment Act of 1967, 29 U.S.C. § 621 et seq. (“ADEA”); and 3)
Toshiba terminated him in violation of the Family and Medical Leave Act of 1993, 29 U.S.C. §
2601 et seq. (“FMLA”).
Since his termination from Toshiba, Mr. TenBrink has been unemployed and his weekly
income consists of $351.00 in unemployment insurance benefits. The unemployment benefits
are scheduled to end on November 23, 2013. Although Mr. TenBrink has actively pursued other
employment, he has been unsuccessful and has no other source of income.

His monthly

expenses include a $2,351.81 mortgage payment, and he has been forced to liquidate all of his
assets, except for the IRA account described above. In the Agreement, the parties agreed to split
all costs of arbitration, which would leave Mr. TenBrink responsible for a minimum of
$5,437.50.

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On October 23, 2012, Toshiba filed a motion to dismiss Mr. TenBrink’s complaint and
compel him to pursue his claims in arbitration according to the terms of the Agreement. Mr.
TenBrink objected to Toshiba’s motion on the grounds arbitration would be prohibitively
expensive for him.
II. LEGAL STANDARD
A.

Enforcement of Arbitration Agreement
Arbitration agreements are viewed favorably under federal law.

Kiefer Specialty

Flooring, Inc. v. Tarkett, Inc., 174 F.3d 907, 909 (7th Cir. 1999) (citing Moses H. Cone Mem’l
Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24 (1983)). Whether an issue is subject to arbitration
is a matter of contract interpretation. Kiefer, 174 F.3d at 909 (citing United Steelworkers v.
Warrior & Gulf Navigation Co., 363 U.S. 574, 582 (1960)).
The Court may grant a motion to compel arbitration if the moving party demonstrates
there has been a written agreement to arbitrate, the dispute falls within the scope of the
agreement to arbitrate, and there has been a refusal to arbitrate. Zurich Am. Ins. Co. v. Watts
Indus., Inc., 417 F.3d 682, 687 (7th Cir. 2005); see also Estep v. World Fin. Corp. of Ill., 735 F.
Supp. 2d 1028, 1030 (C.D. Ill. 2010). Questions “concerning the scope of arbitrable issues
should be resolved in favor of arbitration, whether the problem at hand is the construction of the
contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.”
Moses, 460 U.S. at 24-25. The party claiming financial hardship has the burden of showing
arbitration would be prohibitively expensive. Green Tree Fin. Corp.—Ala. v. Randolph, 531
U.S. 79, 81 (2000).

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B.

Dismissal
A 12(b)(1) motion “asks the court to dismiss an action over which it allegedly lacks

subject matter jurisdiction.” McGreal v. AT & T Corp., 892 F. Supp. 2d 996, 1004 (N.D. Ill.
2012) (citing Fed. R. Civ. P. 12(b)(1)). The Court “must accept as true all well-pleaded factual
allegations and draw all reasonable inferences in favor of the plaintiff.” Long v. Shorebank Dev.
Corp., 182 F.3d 548, 554 (7th Cir. 1999) (citing Reuth v. United States EPA, 13 F.3d 227, 229
(7th Cir. 1993)).

Additionally, the Court “may properly look beyond the jurisdictional

allegations of the complaint and view whatever evidence has been submitted on the issue to
determine whether in fact subject matter jurisdiction exists.” Id. at 554 (quoting Capitol Leasing
Co. v. FDIC, 999 F.2d 188, 191 (7th Cir. 1993) (per curiam)). “If the court determines at any
time that it lacks subject-matter jurisdiction, the court must dismiss the action.” Fed. R. Civ. P.
12(h)(3).
III. DISCUSSION
Toshiba moves for a 12(b)(1) dismissal of this case and also seeks an order from this
Court instructing Mr. TenBrink to bring his claims through arbitration under the Federal
Arbitration Act (“FAA”). Fed. R. Civ. P. 12(b)(1); 9 U.S.C. § 4.1 Toshiba has created a paradox
of sorts. On one hand, the FAA allows district courts to “look through” a § 4 petition to
determine if the court has subject-matter jurisdiction over the controversy; if a court does not
have subject-matter jurisdiction over the controversy, it cannot compel a party to arbitrate the
claim. On the other hand, Toshiba moves for a dismissal of the case for lack of subject-matter
jurisdiction. These requests are incompatible, yet they are not pled in the alternative. Vaden v.

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In its motion and accompanying briefs, Toshiba cites 9 U.S.C. § 1, but § 1 defines the terms “maritime
transactions” and “commerce” under Title 9 and delineates certain exceptions to the operation of Title 9. The Court
assumes Toshiba refers to 9 U.S.C. § 4, which is a better fit to Toshiba’s claim and is the section cited by the
Seventh Circuit in the case Toshiba cites. See Zurich, 417 F.3d at 687.

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Discover Bank, 556 U.S. 49, 62-63 (2009) (quoting Moses, 460 U.S. at 25, n.32 (“noting in dicta
that, to entertain a § 4 petition, a federal court must have jurisdiction over the “underlying
dispute”)). The Court resolves this paradox by denying Toshiba’s motion for dismissal for lack
of subject-matter jurisdiction, granting Toshiba’s Motion to Compel Arbitration, and staying the
case on the Court’s own motion.
As a predicate matter, the Court finds the Agreement to be a valid arbitration agreement.
Mr. TenBrink has not challenged the Agreement’s validity. On its face, the Agreement is a
written provision involving an agreement to arbitrate future claims, it involves interstate
commerce because Toshiba conducts business in all fifty states, and it bears the parties’
signatures. Therefore the requirements of § 2, discussed below, are satisfied.
A.

Subject-Matter Jurisdiction
Congress enacted the FAA in 1925 to “overcome judicial resistance to arbitration,”

Vaden v. Discover Bank, 556 U.S. at 58 (quoting Buckeye Check Cashing, Inc. v. Cardegna, 546
U.S. 440, 443 (2006)), and create “‘a national policy favoring arbitration’ of claims that parties
contract to settle in that manner.” Preston v. Ferrer, 552 U.S. 346, 353 (2008). In relevant part,
§ 4 permits a party who seeks arbitration when the other has failed to abide by an arbitration
agreement, to petition for an order compelling arbitration in “any United States district court
which, save for [the arbitration] agreement, would have jurisdiction under title 28, in a civil
action . . . of the subject matter of a suit arising out of the controversy between the parties.”
Vaden, 556 U.S. at 62 (citing 9 U.S.C. § 4).
The Supreme Court has rejected the argument that district courts cannot evaluate the
subject matter of the underlying controversy in light of § 4. Indeed, district courts can only grant
§ 4 relief if they find they have subject-matter jurisdiction over the “substantive conflict”

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between the parties. Vaden, 556 U.S. 62-63 (citing Moses, 460 U.S. at 25, n.32). In Vaden,
Discover Bank sought to compel arbitration after Betty Vaden filed counterclaims against
Discover in a state court proceeding. Discover moved to compel arbitration in federal court, and
the district court granted Discover’s request. Since Discover’s complaint in state court did not
give rise to federal jurisdiction save for the arbitration agreement, the Supreme Court reversed,
and it denied Discover’s motion. Vaden, 556 U.S. at 72. Therefore, the Court turns to the
Complaint in this case to determine whether subject-matter jurisdiction exists.
The Court has federal question jurisdiction over this controversy because Mr. TenBrink’s
claims all arise under federal law. Mr. TenBrink relies on 28 U.S.C. § 1331, which provides,
“The district courts shall have original jurisdiction of all civil actions arising under the
Constitution, laws, or treaties of the United States.”

28 U.S.C. § 1331.

To invoke this

jurisdiction, a complaint must be well-pleaded, which means a suit “arises under” federal law
“only when the plaintiff’s statement of his own cause of action shows that it is based on [federal
law].” Vaden, 556 U.S. at 59-60 (quoting Louisville & Nashville R. Co. v. Mottley, 211 U.S.
149, 152 (1908)). Mr. TenBrink’s three claims each allege, with factual bases, a violation of a
federal law: the Americans with Disabilities Act, the Age Discrimination in Employment Act,
and the Family and Medical Leave Act. Therefore, the Court finds Mr. TenBrink’s claims “arise
under” federal law because Mr. TenBrink has shown they are based on federal law.
B.

Compelled Arbitration
Generally, district courts have no discretion to deny a motion to compel arbitration when

the parties have signed an arbitration agreement. The FAA states, “A written provision in . . . a
contract evidencing a transaction involving commerce to settle by arbitration a controversy
thereafter arising out of such contract or transaction . . . shall be valid, irrevocable, and

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enforceable.” 9 U.S.C. § 2. The FAA requires district courts to compel arbitration of arbitrable
claims when a party moves to compel arbitration, and “district courts shall direct the parties to
proceed to arbitration on issues as to which an arbitration agreement has been signed.” Dean
Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 217 (1985) (citing 9 U.S.C. §§ 3-4) (emphasis in
original). Mr. TenBrink does not contest the arbitrability of his claims, so the Court finds he has
conceded this point.

Indeed, the Agreement enumerated discrimination claims and claims

relating to his termination from Toshiba as claims to be arbitrated.
Mr. TenBrink’s sole argument is that he cannot afford the cost of arbitration. District
courts may decline to enforce arbitration agreements but only “upon such grounds as exist at law
or in equity for the revocation of any contract.” 9 U.S.C. § 2. Mr. TenBrink appears to rely on
the Supreme Court’s statement in Green Tree that “‘the existence of large arbitration costs may
well preclude a litigant . . . from effectively vindicating’ statutory rights in arbitration.” 531 U.S.
at 81; James v. McDonald’s Corp., 417 F.3d 672, 678 (7th Cir. 2005).
The Seventh Circuit in James found that high arbitration costs alone did not show
arbitration would be prohibitively expensive when a party has not petitioned for a fee waiver
from the American Arbitration Association (“AAA”).

Parties “seeking to invalidate an

arbitration agreement on the ground that arbitration would be prohibitively expensive [bear] the
burden of showing the likelihood of incurring such costs.” James, 417 F.3d at 679 (quoting
Green Tree, 531 U.S. at 81). The James court found the Eighth Circuit’s approach persuasive:
AAA . . . has a fee waiver procedure. It decides whether or not to waive, in whole
or in part, a fee on the basis of a claimant’s financial situation. It is clear,
however, from our reading of the evidentiary hearing transcript, that the [plaintiff]
never fully explored the AAA’s fee waiver procedures. . . . This is an important
step that must be taken before an unconscionability determination can be made.

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James, 417 F.3d at 679 (quoting Dobbins v. Hawk’s Enters., 198 F.3d 715, 717 (8th Cir. 1999)).
The James court also found the Fifth Circuit’s approach persuasive: “[T]he rules of the AAA
provide . . . sufficient avenues to request fee-paying relief, if necessary.” Since the Seventh
Circuit in James found these approaches persuasive, this Court does, too.
Mr. TenBrink has not shown a higher level of financial hardship than Linda James in
James. The court in James affirmed the district court’s order to compel arbitration over Linda
James’s objections, in part, because Linda James had not sought the AAA’s fee waiver. Mr.
TenBrink makes an extensive showing of the prices the AAA charges, but he dismisses the
AAA’s fee waiver as speculative and cryptic and complains that the AAA usually only defers its
administrative fees, and does not reduce or waive them. Mr. TenBrink’s failure to seek the AAA
fee waiver weighs heavily against his financial hardship claim. Mr. TenBrink did swear in an
affidavit to the Court that he could not afford arbitration and that he has liquidated all assets
except his IRA Account,2 but Mr. TenBrink did not disclose the amount of money within the
IRA Account. Id.
Unlike Linda James, Mr. TenBrink alleges arbitration is 15.5 times more expensive than
filing costs for litigation,3 but the Court finds his argument unpersuasive. In James, the court
found that in addition to Linda James’s failure to seek an AAA fee waiver, her failure to identify
the difference between costs of arbitration and litigation weighed against her financial hardship

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The Court finds Mr. TenBrink’s statement slightly misleading because Mr. TenBrink also swore he makes
mortgage payments on his home; it appears Mr. TenBrink has liquidated all assets except his IRA Account and his
home. (Dkt. 20.) Mr. TenBrink also fails to disclose the equity he possesses in his home. (Dkt. 20.)
3

Mr. TenBrink arrives at this figure by excluding attorneys’ fees because the ADA and ADEA contain fee-shifting
provisions under which Toshiba potentially could pay Mr. TenBrink’s reasonable attorneys’ fees if Mr. TenBrink
were to prevail. 42 U.S.C. § 12205; 29 U.S.C. § 626(b). Mr. TenBrink has not addressed whether the FMLA
contains a fee-shifting provision, and the litigation expenses relating to his FMLA claim have not been factored into
his conclusion that arbitration is 15.5 times more expensive than federal litigation. The Court finds Mr. TenBrink’s
failure to address the FMLA claim in computing this 15.5 cost differential figure lessens the persuasiveness of his
argument.

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claim. James, 417 F.3d at 679-80. The cost differential between arbitration and litigation can be
highly probative, James, 417 F.3d at 680, but the differential is only one factor. Mr. TenBrink
earned nearly $1.5 million in the past nine years, possesses a house in which he has an
undisclosed amount of equity, and he has deposited a minimum of $752,794.27 into his IRA
Account within the last 1.5 years.
arbitration costs is $5,437.50.4

Mr. TenBrink estimates his equal share of minimum

This value may be 15.5 times more expensive than Mr.

TenBrink’s filing costs for federal litigation, but Mr. TenBrink has deposited over 138 times the
minimum cost of arbitration into his IRA Account over the past 1.5 years. And Mr. TenBrink
has not factored in any of the other costs of federal litigation which arguably, could make the
costs of arbitration a bargain. Furthermore, it was Toshiba, and not Mr. TenBrink, who brought
to the Court’s attention the amount of money deposited into his IRA Account. Moreover, Mr.
TenBrink’s IRA Account remains unliquidated, and he can withdraw money from that account
without tax penalties because he is over 59.5 years old. 26 U.S.C. § 72(t)(2)(A)(i).
Given the favorability Congress has given arbitration agreements under § 1 et seq., the
amount of money Mr. TenBrink placed in his IRA Account within the past 1.5 years, Mr.
TenBrink’s statement that he has not liquidated his IRA Account, and the absence in Mr.
TenBrink’s affidavit of the amount of money in his IRA Account or the equity in his home, the
Court finds Mr. TenBrink has not met his burden of showing arbitration would be economically
prohibitive.
C.

Dismissal
A dismissal for lack of subject-matter jurisdiction would be inappropriate since federal

question jurisdiction exists in this case; such a dismissal would also render the Court unable to
grant Toshiba’s request to compel arbitration. The FAA is an “anomaly” in federal court
4

The Agreement contained a provision saying all costs of arbitration would be split evenly between the parties.

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jurisdiction. Moses, 460 U.S. at 942, n.32. It does not create independent federal-question
jurisdiction, but the Court can only grant an order to compel jurisdiction under § 4 if it would
have jurisdiction over the matters “save for” the arbitration agreement. Id. Since the Court has
federal-question jurisdiction over Mr. TenBrink’s claims, the Court denies Toshiba’s motion to
dismiss for lack of subject-matter jurisdiction.
Because the Court cannot grant Toshiba’s request to dismiss the case under Rule
12(b)(1), the Court on its own motion stays the case. Section 3 requires district courts to stay
rather than dismiss claims subject to arbitration when one party requests a stay, but the Seventh
Circuit has not expressly found that a district court may dismiss a case rather than stay it when
all claims are subject to arbitration and a party has not petitioned for a stay. 9 U.S.C. § 3;
Johnson v. Orkin, LLC, No. 12-141, 2013 WL 828506, at *15 (N.D. Ill. Mar. 6, 2013). Although
dismissals of such cases have received substantial support in other circuits. Id. (citing cases from
the First, Fourth, Fifth, Sixth, and Ninth Circuits in support), in the interest of judicial economy,
the Court will stay the case on its own motion in addition to compelling arbitration.
IV. CONCLUSION
For the reasons set forth above, Toshiba’s 12(b)(1) Motion to Dismiss is DENIED, and
its Motion to Compel Arbitration is GRANTED (Dkt. 14). The parties shall proceed with
arbitration as provided by the Agreement. Because all of the matters in this suit are subject to
arbitration, the underlying proceedings are STAYED pending the outcome of arbitration. The
parties are to notify the Court of the outcome of arbitration within ten (10) days of conclusion of
those proceedings.
SO ORDERED.
06/18/2013
Date: ______________
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________________________
Hon. Tanya Walton Pratt, Judge
United States District Court
Southern District of Indiana

DISTRIBUTION:
Sandra L. Blevins
BETZ & ASSOCIATES
[e-mail]
Benjamin C. Ellis
BETZ & BLEVINS
[e-mail]
Kevin W. Betz
BETZ & BLEVINS
[e-mail]
Gregory W. Guevara
BOSE MCKINNEY & EVANS, LLP
[e-mail]
Jonathan Lamont Mayes
BOSE MCKINNEY & EVANS, LLP
[e-mail]

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