Gergeni v. Evangelical Lutheran Good Samaritan Society, The
ORDER granting 4 Motion to Stay Proceedings and Compel Arbitration by Defendant. The Clerk of Court is directed to close this case administratively, subject to being reopened upon the conclusion of the arbitration proceedings. Signed by Judge Linda R Reade on 03/06/2018. (jjh)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF IOWA
RAMONA J. GERGENI,
THE EVANGELICAL LUTHERAN
GOOD SAMARITAN SOCIETY,
TABLE OF CONTENTS
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RELEVANT PROCEDURAL HISTORY . . . . . . . . . . . . . . . . . . . . . . . . 2
SUBJECT MATTER JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . . 2
RELEVANT FACTUAL BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . 3
ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Overview of the Dispute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Valid Arbitration Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Disparity in bargaining power . . . . . . . . . . . . . . . . . . . . . . 6
Substantive unfairness . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Unilateral modification . . . . . . . . . . . . . . . . . . . . . 8
Fees and costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Unilateral damages . . . . . . . . . . . . . . . . . . . . . . . 10
Arbitrability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
The matter before the court is Defendant Evangelical Lutheran Good Samaritan
Society’s (“Good Samaritan”) “Motion to Stay Proceedings and Compel Arbitration”
(“Motion”) (docket no. 4).
II. RELEVANT PROCEDURAL HISTORY
On May 30, 2017, Plaintiff Ramona J. Gergeni filed a Complaint (docket no. 1)
asserting a claim of age discrimination against Good Samaritan, in violation of the Age
Discrimination in Employment Act (“ADEA”), 29 U.S.C. § 623(a), and the Iowa Civil
Rights Act (“ICRA”), Iowa Code § 216.6. On July 27, 2017, Good Samaritan filed the
Motion. On August 24, 2017, Gergeni filed a Resistance (docket no. 9). On August 31,
2017, Good Samaritan filed a Reply (docket no. 12). Neither party has requested oral
argument and the court finds that oral argument is unnecessary. The matter is fully
submitted and ready for decision.
III. SUBJECT MATTER JURISDICTION
The court has original jurisdiction over the ADEA claim because it arises under the
Age Discrimination in Employment Act of 1967. See 28 U.S.C. § 1331 (“The district
courts shall have original jurisdiction of all civil actions arising under the Constitution,
laws, or treaties of the United States.”). The district court has supplemental jurisdiction
over the state law claim because it is so related to the claim within the court’s original
jurisdiction that they form part of the same case or controversy. See 28 U.S.C. § 1367(a)
(“[T]he district courts shall have supplemental jurisdiction over all other claims that are
so related to claims in the action within such original jurisdiction that they form part of the
same case or controversy . . . .”). In other words, “the federal-law claim and state-law
claim in the case derive from a common nucleus of operative fact and are such that [a
plaintiff] would ordinarily be expected to try them . . . in one judicial proceeding.” Kan.
Pub. Emps. Ret. Sys. v. Reimer & Koger Assocs., Inc., 77 F.3d 1063, 1067 (8th Cir.
1996) (third alteration in original) (quotation marks omitted) (quoting Carnegie-Mellon
Univ. v. Cohill, 484 U.S. 343, 349 (1988)).
IV. RELEVANT FACTUAL BACKGROUND
Gergeni is a citizen of the United States and a resident of Iowa. Complaint ¶ 3.
Good Samaritan is a North Dakota corporation licensed to do business in the State of Iowa.
Id. ¶ 4.
B. Overview of the Dispute
On February 14, 2002, Good Samaritan hired Gergeni as a Registered Nurse.
Motion Exhibit A (docket no. 5-1) at 1. In 2004, Good Samaritan implemented the Fair
Treatment Policy, “which include[d] the mandatory arbitration of covered disputes.” Id.
Good Samaritan “required all current and new employees to sign an Agreement to
Mediate/Arbitrate Claims and Disputes.” Id. The Agreement to Mediate/Arbitrate Claims
and Disputes stated that, “[b]y continuing their employment relationship, the parties
acknowledge that they understand and agree to follow and abide by the Fair Treatment
Policy and Procedure as a condition of employment.” Motion Exhibit B (docket no. 5-2)
at 1. On December 21, 2005, Gergeni signed the Agreement to Mediate/Arbitrate Claims
and Disputes. Id.
Periodically thereafter, employees would receive updated copies of Good
Samaritan’s employee handbook, which contained the current version of the Fair
Employees would sign a handbook acknowledgment form, “or
otherwise agree to the terms of the [h]andbook by [their] continued employment.” Motion
Exhibit A at 2.
On April 2, 2014, Gergeni signed the Acknowledgment Form (docket no. 5-3),
acknowledging that she had received the current employee handbook, which contained the
2014 Fair Treatment Policy (the “Agreement”) (docket no. 5-4). See Motion Exhibit A
at 2. The Agreement provides in relevant part:
Except as otherwise specified[,] . . . the Fair Treatment Policy
applies to all legal claims or disputes arising out of the
employment relationship, including termination of
employment, that either party may have against the other.
[Good Samaritan] reserves the right to revoke or modify the
Fair Treatment Policy, but only as applied to prospective
claims and disputes, and only upon a minimum of thirty . . .
days’ notice to all affected employees.
Unless the arbitrator decides otherwise, each party is
responsible for their own attorney’s fees and any other costs or
out-of-pocket expenses incurred by that party.
Agreement at 2-3, 5. On December 18, 2015, Gergeni resigned from Good Samaritan.
Exhibits in Support of Resistance (docket no. 9-2) at 1.
On May 30, 2017, Gergeni filed the instant action alleging that Good Samaritan had
discriminated against her based on her age, in violation of the ADEA and the ICRA.
In the Motion, Good Samaritan argues that the court should compel arbitration of
Gergeni’s age discrimination claim pursuant to the arbitration provision of the Agreement.
See Motion at 1-2. Gergeni contends that the court should not compel arbitration because
the Agreement is procedurally and substantively unconscionable. See Brief in Support of
Resistance (docket no. 9-1) at 4-8.
The Federal Arbitration Act (“FAA”) states that arbitration agreements “shall be
valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for
the revocation of any contract.” 9 U.S.C. § 2. “The Arbitration Act thus establishes a
federal policy favoring arbitration, requiring that [courts] rigorously enforce agreements
to arbitrate.” Shearson/Am. Express Inc. v. McMahon, 482 U.S. 220, 226 (1987)
(quotations omitted). The FAA “leaves no place for the exercise of discretion by a district
court, but instead mandates that 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, 218 (1985).
When reviewing an arbitration agreement, courts consider: “(1) whether there is a
valid arbitration agreement and (2) whether the particular dispute falls within the terms of
that agreement.” Robinson v. EOR-ARK, LLC, 841 F.3d 781, 783-84 (8th Cir. 2016)
(quoting Faber v. Menard, Inc., 367 F.3d 1048, 1052 (8th Cir. 2004)). “A court must
grant a motion to compel arbitration if a valid arbitration clause exists which encompasses
the dispute between the parties.” 3M Co. v. Amtex Sec., Inc., 542 F.3d 1193, 1198 (8th
Cir. 2008) (citing 9 U.S.C. § 4; MedCam, Inc. v. MCNC, 414 F.3d 972, 974 (8th Cir.
2005)). Gergeni does not dispute that the claim raised in the Complaint would fall within
the arbitration agreement. Rather, she limits her challenge to the validity of the arbitration
A. Valid Arbitration Agreement
“Gergeni claims that a combination of procedural and substantive facts render the
arbitration agreement unconscionable” and, therefore, the court “should declare the entire
agreement to be void.” Brief in Support of Resistance at 6, 10. Specifically, Gergeni
argues that the disparity in bargaining power and the substantive unfairness of the
arbitration provision render the Agreement unconscionable. Id. at 6-9.
“State contract law governs whether an arbitration agreement is valid.” Quam
Const. Co. v. City of Redfield, 770 F.3d 706, 708 (8th Cir. 2014) (quoting Lyster v.
Ryan’s Family Steak Houses, Inc., 239 F.3d 943, 946 (8th Cir. 2001)). “A contract is
unconscionable where no person in his or her right senses would make it on the one hand,
and no honest and fair person would accept it on the other hand.” Bartlett Grain Co. v.
Sheeder, 829 N.W.2d 18, 27 (Iowa 2013) (quoting C&J Vantage Leasing Co. v. Wolfe,
795 N.W.2d 65, 80 (Iowa 2011)). “[W]hether an agreement is unconscionable must be
determined at the time it was entered.” C&J, 795 N.W.2d at 81. Courts generally
analyze the following factors of unconscionability: (1) assent; (2) unfair surprise;
(3) notice; (4) disparity of bargaining power; and (5) substantive unfairness. See Bartlett
Grain, 829 N.W.2d at 27. “Under Iowa law, the burden of proof that a particular
provision or contract is unconscionable rests on the party claiming it is unconscionable.”
Faber, 367 F.3d at 1053 (citing In re Estate of Ascherl, 445 N.W.2d 391, 392 (Iowa Ct.
Gergeni argues that two factors, disparity in bargaining power and substantive
unfairness, support a finding that the Agreement is unconscionable. See Brief in Support
of Resistance at 6-8. However, to the extent that Gergeni’s argument could pertain to the
remaining factors, the court finds that, because she signed the Acknowledgment Form after
receiving the employee handbook, Gergeni has failed to establish lack of assent, lack of
notice or unfair surprise. See Faber, 367 F.3d at 1053 (“There is assent, clear notice, and
no unfair surprise here because [the employee] signed the agreement, which we presume
that he read before signing.”). The court shall now address the remaining factors.
Disparity of bargaining power
Gergeni points to the “disparity of bargaining power” between the parties and
contends that she was “merely one at-will employee at one of [Good Samaritan’s] many
locations.” Brief in Support of Resistance at 6. Good Samaritan does not dispute that
there is a disparity of bargaining power between the parties. See generally Reply at 2-3.
The court finds that there was a disparity of bargaining power between Gergeni, a
sole at-will employee, and Good Samaritan, a corporation with numerous locations across
the country. See Exhibits in Support of Resistance at 1; Brief in Support of Resistance at
6; see also Faber, 367 F.3d at 1053 (concluding that “[t]here was unquestionably a
disparity in bargaining power, as [the defendant] is a large national company and [the
employee] did not have the ability to negotiate and change particular terms in the form
contract”). The court notes that this disparity of bargaining power is a factor weighing in
favor of finding unconscionability. See Faber, 367 F.3d at 1053. However, “[m]ere
inequality in bargaining power does not make the contract automatically unconscionable
. . . and it is not enough by itself to overcome the federal policy favoring arbitration.” Id.
(citation omitted). Nevertheless, “disparity of bargaining power . . . calls for careful
scrutiny of the substance of the contract.” Id.
In light of the disparity of bargaining power, the court shall carefully scrutinize the
substance of the Agreement to determine if it is unconscionable.
Gergeni claims that the Agreement is substantively unconscionable because:
(1) Good Samaritan “had the unilateral right to revoke the [A]greement or amend any of
its terms at any time, subject only to the limitation that amendments would apply to
prospective claims on [thirty] days notice”; (2) the Agreement “provides that each party
is responsible for their own attorney fees and costs”; and (3) the Agreement gave Good
Samaritan “the unilateral right to seek damages and costs.” Brief in Support of Resistance
Substantive unconscionability “includes ‘harsh, oppressive and one-sided terms.’”
Bartlett, 829 N.W.2d at 27 (quoting In re Marriage of Shanks, 758 N.W.2d 506, 515
(Iowa 2008)). “A provision will be invalidated if it is a ‘nefarious provision, inimical to
the public good.’” Faber, 367 F.3d at 1053 (quoting Home Fed. Sav. & Loan Ass’n of
Algona v. Campney, 357 N.W.2d 613, 618 (Iowa 1984)). “However, the doctrine of
unconscionability does not exist to rescue parties from bad bargains.” C&J, 795 N.W.2d
at 80; see also In re Shanks, 758 N.W.2d at 515 (“People should be entitled to contract
on their own terms without the indulgence of paternalism by courts in the alleviation of one
side or another from the effects of a bad bargain.” (quoting Smith v. Harrison, 325
N.W.2d 92, 94 (Iowa 1982))). The court finds that none of Gergeni’s claims support a
finding of substantive unconscionability.
Gergeni first argues that the Agreement is substantively unconscionable because
Good Samaritan “had the unilateral right to revoke the [A]greement or amend any of its
terms at any time, subject only to the limitation that amendments would apply to
prospective claims on [thirty] days notice.” Brief in Support of Resistance at 7-8. Good
Samaritan asserts that “a provision allowing unilateral modification is not invalid as long
as employees are given reasonable advance notice and any such modifications apply only
to prospective claims.” Reply at 3.
The court finds that Good Samaritan did not have an unfettered ability to modify the
Agreement. Rather, pursuant to the Agreement, Good Samaritan could “modify the Fair
Treatment Policy, but only as applied to prospective claims and disputes.” Agreement at
3. This eliminates concerns that Good Samaritan might attempt to alter the Agreement to
influence pending disputes. See generally Owen v. Bristol Care, Inc., No. 11-04258-CVFJG, 2012 WL 1192005, at *2 (W.D. Mo. Feb. 28, 2012) (“[I]n the employment context,
contracts which permit unilateral amendments, by an employer, that are prospective in
application and which employees are afforded reasonable advance notice of modification
may prevent an employer’s mutual promise from being rendered illusory.”), rev’d on other
grounds by 702 F.3d 1050 (8th Cir. 2013).
Further, the Agreement requires Good Samaritan to provide a minimum of thirty
days’ notice to all affected employees. Agreement at 3. This would provide employees
an opportunity to review the modified agreement and to determine whether the employee
wanted to continue employment under the revised terms. See Cicle v. Chase Bank USA,
583 F.3d 549, 554-55 (8th Cir. 2009) (finding that a clause giving the plaintiff thirty days
to reject changes to the arbitration agreement, which would close her account, eliminated
concerns regarding unconscionability).
Although a unilateral modification provision may be unconscionable in some cases,
the court finds that because the Agreement limited Good Samaritan’s ability to modify the
Agreement by requiring notice and restricting the modification to prospective claims, the
provision was not substantively unconscionable.
Fees and costs
Gergeni also contends that the Agreement is substantively unconscionable because
it “provides that each party is responsible for their own attorneys’ fees and costs.” Brief
in Support of Resistance at 8. Gergeni argues that this provision “nullif[ies] statutory
rights” and therefore “should be declared per se unconscionable.”1 Id. Gergeni cites to
29 U.S.C. § 216(b), which states in relevant part, that “[t]he court . . . shall, in addition
to any judgment awarded to the plaintiff or plaintiffs [in an ADEA action], allow a
reasonable attorney’s fee to be paid by the defendant, and the costs of the action.”
Gergeni claims that because the Agreement provides that each party shall pay their own
attorney fees and costs, it is contrary to 29 U.S.C. § 216(b) and, therefore, it is
“[B]y agreeing to arbitrate a statutory claim, a party does not forgo the substantive
rights afforded by the statute; it only submits to their resolution in an arbitral, rather than
a judicial, forum.” Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26 (1991)
(quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628
(1985)). The Agreement, when read in totality, does not require Gergeni to forgo any
substantive rights. Rather, Gergeni attempts to isolate only a particular portion of the
To the extent that Gergeni asserts that the amount of the fees provided for in the
agreement are unconscionable, she has made no showing regarding an inability to pay at
any amount. See Faber, 367 F.3d at 1053-54 (“The burden of showing that arbitrators’
fees will be cost-prohibitive falls on the party seeking to avoid arbitration. . . . The party
seeking to avoid arbitration should present specific evidence of likely arbitrators’ fees and
its financial ability to pay those fees so that the court can determine whether the arbitral
forum is accessible to the party. If the party does not meet its burden, the district court
must honor the arbitration agreement and compel arbitration.” (citations omitted)).
relevant provision to give the appearance of unconscionability. Such an approach to
contract interpretation runs contrary to Iowa law. See C&J, 795 N.W.2d at 77 (explaining
that Iowa courts “strive to give effect to all the language of a contract” and that “an
interpretation which gives a reasonable, lawful, and effective meaning to all terms is
preferred to an interpretation which leaves a part unreasonable, unlawful, or of no effect”
(quoting Fashion Fabrics of Iowa, Inc. v. Retail Inv’rs Corp., 226 N.W.2d 22, 26 (Iowa
The full provision of the Agreement states that, “[u]nless the arbitrator decides
otherwise, each party is responsible for their own attorney’s fees, and any other costs or
out-of-pocket expenses incurred by that party.” Agreement at 5. This provision, when
read in its entirety, is not incompatible with any statutory rights provided by 29 U.S.C.
§ 216(b). This provision leaves it within the arbitrator’s power to award attorney fees and
costs if appropriate under the statute. See Faber, 367 F.3d at 1052 (“The arbitrator may
determine if a party has waived statutory rights, and may choose to enforce substantive
statutory rights even in the face of contractual limitations.”). Because this provision does
not require Gergeni to forgo any substantive rights, she has failed to carry her burden
establishing that this provision renders the Agreement substantively unconscionable.
Gergeni also claims that the Agreement is substantively unconscionable because it
gives Good Samaritan “the unilateral right to seek damages and costs.” Brief in Support
of Resistance at 8. Gergeni argues that this provision “nullif[ies] statutory rights” and
therefore “should be declared per se unconscionable.” Id. Good Samaritan asserts that
the “Acknowledgment Form contains a confidentiality agreement and entitles Good
Samaritan to recover damages and fees related to any breach of [the confidentiality]
agreement.” Reply at 4. Good Samaritan asserts, therefore, that this provision “does not
govern the instant dispute.” Id.
The Acknowledgment Form states in relevant part: “[Good Samaritan] is entitled
to recover damages and costs, including attorney’s fees caused by any breach of this policy
and/or a management agreement and, as the case may be, to seek other specific actions to
enforce or prevent any violations of the agreement.” Gergeni argues that the because the
Acknowledgment Form provides that Good Samaritan is entitled to recover damages, it
attempts to nullify Gergeni’s statutory rights to damages under 29 U.S.C. §§ 216(b) and
After reviewing the entirety of the Acknowledgment Form, the court finds that the
provision at issue does not attempt to provide Good Samaritan with the unilateral right to
seek damages and costs under the Agreement. Rather, it provides for damages and costs
to which Good Samaritan may be entitled in the case of disclosure or unauthorized use of
its trade secrets or patented, copyrighted or confidential information.
Acknowledgment Form. Even assuming that this provision governed arbitration claims,
however, it does not attempt to limit the relief to which an employee is entitled. Rather,
it simply provides that Good Samaritan may seek damages. See C&J, 795 N.W.2d at 77.
As stated above, whether an award of damages would be proper in this case is a
determination left to the arbitrator. See Faber, 367 F.3d at 1052 (“Although arbitration
agreements that limit the relief an arbitrator may award are disfavored, arbitrators have
power to fashion relief. The arbitrator may determine if a party has waived statutory
rights, and may choose to enforce substantive statutory rights even in the face of
contractual limitations.”); see also Gilmer, 500 U.S. at 26. Because this provision does
not require Gergeni to forgo any substantive rights, she has failed to carry her burden
establishing that this provision renders the Agreement substantively unconscionable.
Gergeni has failed to carry her burden of establishing that the terms of the
arbitration provision were harsh, oppressive or inimical to the public good, as required for
a finding of substantive unconscionability under Iowa law. Accordingly, Gergeni has
failed to establish that the Agreement is either procedurally or substantively
Gergeni does not dispute that the claim raised in the Complaint would fall within
the arbitration agreement. See generally, Brief in Support of Resistance at 5. Even if
Gergeni had raised this issue, the court finds that the parties have delegated this
determination to the arbitrator.
“[P]arties can agree to arbitrate ‘gateway’ questions of ‘arbitrability,’ such as
whether the parties have agreed to arbitrate or whether their agreement covers a particular
controversy.” Rent-A-Center, W., Inc. v. Jackson, 561 U.S. 63, 68-69 (2010). “[A]n
arbitration provision’s incorporation of the AAA Rules—or other rules giving arbitrators
the authority to determine their own jurisdiction—is a clear and unmistakable expression
of the parties’ intent to reserve the question of arbitrability for the arbitrator and not the
court.” Fallo v. High-Tech Inst., 559 F.3d 874, 878 (8th Cir. 2009).
The arbitration provision in the Agreement provides that “[t]he arbitrator, and not
any federal, state or local court, shall have exclusive authority to resolve any dispute
relating to the interpretation, applicability or enforceability of the Fair Treatment Policy,
including matters of arbitrability.” Agreement at 4. This language expressly leaves
disputes regarding the application or meaning of the Agreement to an arbitrator. See
AT&T Techs., Inc. v. Commc’ns Workers of Am., 475 U.S. 643, 649 (1986) (“Unless the
parties clearly and unmistakably provide otherwise, the question of whether the parties
agreed to arbitrate is to be decided by the court, not the arbitrator.”).
Accordingly, the question of whether Gergeni’s claim falls within the scope of the
arbitration provision of the Agreement shall be left to the arbitrator.
For the foregoing reasons, the Motion (docket no. 4) is GRANTED. The Clerk of
Court is DIRECTED to close this case administratively, subject to being reopened upon
the conclusion of the arbitration proceedings. The parties are DIRECTED to notify the
court if, and when, the case needs to be reopened.
IT IS SO ORDERED.
Dated this 6th day of March 2018.
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