De Dios v. Brand Energy and Infrastructure Services

Filing 23

OPINION AND ORDER - Denying 15 MOTION Conduct Discovery for pending Motion to Compel Arbitration filed by Samuel De Dios. Not later than June 27, 2018, Brand shall produce amendments, if any, to the Brand Dispute Resolution Program that oc curred during the period of De Dios's employment.Granting 8 MOTION to Dismiss And/or Stay And Compel Arbitration filed by Brand Energy and Infrastructure Services. The order compelling arbitration is stayed to and including July 27, 2018, to afford Brand the opportunity to produce amendments, if any, to the Brand Dispute Resolution Program, as ordered in paragraph 1. See order text for details. Signed by Judge Mark W Bennett on 6/13/2018. (src)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF IOWA
WESTERN DIVISION
SAMUEL DE DIOS,
No. C 18-4011-MWB
Plaintiff,
vs.
BRAND ENERGY AND
INFRASTRUCTURE SERVICES,
Defendant.

OPINION AND ORDER
REGARDING DEFENDANT’S
MOTION TO DISMISS AND/OR
STAY AND COMPEL
ARBITRATION and PLAINTIFF’S
MOTION TO CONDUCT
DISCOVERY

___________________________
TABLE OF CONTENTS
I. 

INTRODUCTION........................................................................... 2 
A. 
Factual Background ............................................................... 2 
1. 
The arbitration agreement ................................................ 2 
2. 
The accident and aftermath .............................................. 4 
B. 
Procedural Background ........................................................... 5 

II. 

LEGAL ANALYSIS ........................................................................ 6 
A. 
The Motion To Conduct Discovery .............................................. 6 
1. 
Arguments of the parties .................................................. 7 
2. 
Applicable standards ....................................................... 7 
3. 
Application of the standards ............................................. 9 
B. 
The Motion To Compel Arbitration ........................................... 12 
1. 
Arguments of the parties ................................................ 12 
2. 
Applicable standards ..................................................... 13 
3. 
Application of the standards ........................................... 15 
a. 
Unconscionability ................................................ 15 
b. 
Lack of consideration ........................................... 18 
4. 
Summary ................................................................... 19 
C. 
Dismiss Or Stay? .................................................................. 19 

III. 

CONCLUSION ............................................................................ 20 

In this action, originally filed in the Iowa District Court for Woodbury County and
removed to this court, plaintiff Samuel De Dios claims that his former employer,
defendant Brand Energy And Infrastructure Services, wrongfully terminated him for
asserting rights under the Iowa Workers’ Compensation Act. Brand has moved dismiss
or, alternatively, to stay, and compel arbitration of De Dios’s claim pursuant to an
Agreement to Arbitrate in De Dios’s employment application. De Dios contends that the
court should not enforce the Agreement to Arbitrate, because it is unconscionable, where
signing it was a condition of his employment and it binds only him, and because there is
no consideration for it. De Dios also seeks leave to conduct discovery to further develop
the factual record on the pending Motion To Compel Arbitration.
I.
A.
1.

INTRODUCTION
Factual Background

The arbitration agreement

As part of his application for employment with Brand, De Dios signed the
following Agreement to Arbitrate:
TO BE READ AND SIGNED BY APPLICANT
I understand my employment is contingent on acceptance of
agreement to arbitrate claims, under FAA, and I DO AGREE
AND CONSENT that I will settle any and all previously
unasserted claims, disputes, or controversies arising out of or
relating to my candidacy for employment, employment and/or
cessation of employment with Brand, exclusively by final and
binding arbitration before a neutral Arbitrator. By way of
example only, such claims include claims under federal, state,
and local statutory or common law, such as the Age
Discrimination in Employment Act, Title VII of the Civil
Rights Act of 1964, as amended, including the amendments
of the Civil Rights Act of 1991, the Americans with
Disabilities Act, the law of contract and the law of tort.
Defendant’s Exhibit A, Excerpt of Application, page 2 of 4.
2

On the date of his application, De Dios also signed a Brand Dispute Resolution
Program Acknowledgement, which stated the following:
I have received, read and understand the Brand Dispute
Resolution Program for Employees. I also understand and
agree that as a condition of my at-will employment and
continued employment, I will submit to and seek to resolve
any disputes arising out of or relating to my application or
candidacy for employment, employment and/or cessation of
employment through the Brand Dispute Resolution Program.
I understand that this Dispute Resolution Program provides
for binding arbitration as the exclusive, final and required
method to resolve all covered claims that I otherwise have a
right to litigate in court.
I acknowledge that I have had sufficient time to review and
consider the Brand Dispute Resolution Program, and to ask
whatever questions I may have about the Program to the
Company or to my private counsel, before signing this
acknowledgement form.
Defendant’s Exhibit B, Acknowledgement.
The Brand Dispute Resolution Program provides for a four-step dispute resolution
process. Defendant’s Exhibit D, Dispute Resolution Program. Step Four of the process
provides for arbitration, as follows:
STEP FOUR—ARBITRATION
If the dispute has not been resolved in Steps One or Two, or
mediation has not succeeded, the exclusive, final and required
method to resolve covered claims, that you would have a right
to litigate in court, is through binding arbitration. Either you
or Brand may request arbitration. While you do not have to
proceed through each of the options in their exact numerical
order, the Program is designed with multiple steps to
maximize the possibility of resolution prior to arbitration. Any
employment and/or personal injury claim arising out of or
relating to Brand and employees at-will employment or other
disputes covered in this Program, which have not been
3

resolved through Steps One, Two or Three (Mediation), shall
be governed by the Federal Arbitration Act (FAA) and
resolved by final, binding arbitration administered by the
American Arbitration Association under its current
Employment Rules, and judgment upon the award rendered
by the arbitrator(s) may be entered by any court having
jurisdiction thereof.
Defendant’s Exhibit D, Dispute Resolution Program, 5 (emphasis in the original). The
Program also provides that the employee “must pay a $50 processing fee to take your
legal dispute to an outside resolution process, such as arbitration,” but that “Brand will
pay any additional administrative costs associated with the arbitration that exceed this $50
fee.” Id.
2.

The accident and aftermath1

De Dios alleges, and Brand admits, that, on April 8, 2016, De Dios was assigned
by Brand to work on a construction site located on the private property of CF Industries.
To enter the property, he had to drive past a security gate and a security guard. De Dios
alleges, and Brand admits, that, after entering the property, a vehicle driven by Jonathan
Elizondo crashed into the back of his vehicle. De Dios alleges that the collision damaged
his vehicle and caused him injuries, including a lower back injury, which Brand denies.
De Dios reported the collision and his work injury to Brand’s safety manager, Ismael
Barba. Brand admits that De Dios reported an off-the-job injury. De Dios alleges that
Brand authorized him to choose a medical provider to provide care for the work injury,
which Brand denies. De Dios chose to be treated at St. Luke’s Hospital. After treating
De Dios in the emergency room at St. Luke’s Hospital, the ER doctor ordered De Dios
not to return to work until April 11, 2016. Brand admits these allegations, but denies the
treatment was for a work injury.

1

This statement of the circumstances giving rise to De Dios’s dispute with Brand
is drawn from De Dios’s Petition and Brand’s Answer.
4

De Dios alleges that, on April 11, 2016, he returned to work with Brand, but his
back pain worsened, which Brand denies. De Dios alleges that, on April 14, 2016, Brand
sent him home because of his work injury, but Brand admits only that it allowed De Dios
to go home on April 14, 2016, after De Dios stated to the Safety Manager, upon arrival,
that he was not ready to return to work. De Dios alleges that, on April 14, 2016, Brand
authorized De Dios to choose a medical provider to care for his work injury, which Brand
denies. De Dios alleges that, on April 15, 2016, his family doctor, Alisa M. Olson, DO,
treated him for the work injury, which Brand denies for lack of information. De Dios
alleges that, also on April 15, 2016, Dr. Olson wrote a letter to Brand regarding De
Dios’s work injury, which Brand also denies for lack of information. De Dios alleges
that, on April 15, 2016, he asserted his rights under the Iowa Workers’ Compensation
Act, which Brand denies. De Dios contends that, on April 19, 2016, Brand notified him
that it had decided to terminate his employment. Brand admits that it terminated De
Dios’s employment, but contends that the termination, effective May 1, 2016, was for
job abandonment.
B.

Procedural Background

De Dios filed his Petition against Brand in state court on January 4, 2018, alleging
wrongful termination for asserting rights under the Iowa Workers’ Compensation Act.
On February 13, 2018, Brand removed this action to this court and filed its Answer
denying De Dios’s claim and asserting, among other affirmative defenses, that De Dios’s
claim was subject to an agreement to submit it to binding arbitration.
On February 20, 2018, Brand filed the Motion To Dismiss And/Or Stay And
Compel Arbitration (Motion To Compel Arbitration) now before me. On March 30,
2013, De Dios filed his Resistance To Motion To Compel Arbitration. Brand filed its
Reply on April 4, 2018. A week later, on April 11, 2018, De Dios filed his Motion To
5

Conduct Discovery, which is also now before me. On April 24, 2018, Brand filed its
Resistance to that motion. De Dios filed no reply.
United States Magistrate Judge Kelly K.E. Mahoney held a scheduling conference
with the parties on May 2, 2018. On May 17, 2018, she entered a text order holding in
abeyance issuance of a scheduling order and discovery plan, as discussed at the May 2,
2018, scheduling conference, pending my ruling on Brand’s Motion To Compel
Arbitration and De Dios’s Motion To Conduct Discovery.
Although De Dios requested oral arguments on Brand’s Motion To Compel
Arbitration, I conclude that the parties’ written arguments sufficiently develop their
positions.

Therefore, I will rule on both pending motions on the parties’ written

submissions.
II.
A.

LEGAL ANALYSIS

The Motion To Conduct Discovery

Before ruling on Brand’s Motion To Compel Arbitration, I will first consider De
Dios’s Motion To Conduct Discovery, because it will determine whether or not the
Motion To Compel Arbitration should be decided on the present record. De Dios seeks
leave “to conduct discovery to further develop the factual record on the pending Motion
to Compel Arbitration.”

More specifically, he seeks leave to conduct discovery

including, but not limited to, the following:

(1) depositions of Brand’s corporate

representatives; (2) production of documents concerning any amendments to the
“BRAND Dispute Resolution Program” that occurred during the time period that he was
employed, the costs that he will incur in arbitration, and his personnel file; and
(3) identification of the address where the arbitration will take place and who the
arbitrators will be. Brand resists any discovery.

6

1.

Arguments of the parties

De Dios argues that courts have commented on the limited record available to
them on a motion to compel arbitration and, on occasion, appellate courts have remanded
cases back to district courts to fully develop the record to determine the issue of
unconscionability. He contends that discovery is particularly appropriate on motions to
compel arbitration, because the court must decide whether or not the arbitration
agreement is unconscionable in view of all the circumstances.
In response, Brand points out that De Dios requested an extension of time to file
a response to the Motion To Compel Arbitration and eventually filed that response, but
did not seek leave to conduct discovery at that time. Brand contends that, because it filed
its Reply a week before De Dios filed his Motion To Conduct Discovery, De Dios’s
Motion is simply untimely. Brand also argues that De Dios points to no material fact in
dispute that would be aided by discovery and that there is no need to conduct discovery,
where it is clear that the arbitration agreement is valid and that the dispute is arbitrable.
Brand also points out that discovery is unnecessary and inappropriate, because De Dios
does not articulate how the discovery he seeks is relevant to the disposition of Brand’s
Motion To Compel Arbitration, if, indeed, the information he seeks is not already
available to him. Brand also argues that De Dios’s request to depose its “corporate
representatives” for unspecified reasons is just a “fishing expedition.”
2.

Applicable standards

In a case in which the plaintiff argued that the district court erred in denying her
request for discovery concerning the alleged unconscionability of an arbitration
agreement, prior to resisting a motion to compel arbitration, the Eighth Circuit Court of
Appeals explained, “We review the district court’s order for an abuse of discretion,
allowing the court ‘great latitude’ in discovery matters.” Pleasants v. Am. Exp. Co., 541
F.3d 853, 859 (8th Cir. 2008) (citing Executive Air Taxi Corp. v. City of Bismarck, 518
F.3d 562, 570 (8th Cir. 2008)).

The court also considered whether the requested
7

discovery concerned matters that were “material to the determination” of the movant’s
claim that the arbitration agreement was unconscionable. Id.; accord Madol v. Dan
Nelson Auto. Grp., 372 F.3d 997, 1000 (8th Cir. 2004) (likewise concluding that, where
there are no disputed issues of material fact bearing on the propriety of granting a motion
to compel arbitration, discovery would serve no purpose); O.N. Equity Sales Co. v. Pals,
509 F. Supp. 2d 761, 764 (N.D. Iowa 2007) (denying a motion for immediate discovery
on the issue of arbitrability, because the movant had not shown that immediate discovery
was required to determine the issue of arbitrability). The Eleventh Circuit Court of
Appeals, for example, also agrees that discovery is not required prior to ruling on a
motion to compel arbitration, if the party requesting discovery fails to show how the
discovery would have any impact on the enforceability of the arbitration clause. Jackson
v. Cintas Corp., 425 F.3d 1313, 1318 (11th Cir. 2005).
In BOSC, Inc. v. Board of Cty. Commissioners of Cty. of Bernalillo, 853 F.3d
1165 (10th Cir. 2017), the Tenth Circuit Court of Appeals explained, that while certain
procedures under 9 U.S.C. § 4—the provision of the Federal Arbitration Act (FAA)
providing for motions to compel arbitration—“can look a lot like summary judgment, a
motion to compel arbitration sets in motion a summary trial procedure rather than the
usual discovery procedures.” 853 F.3d at 1176. Specifically,
[t]his framework is similar to summary judgment practice: the
party moving to compel arbitration bears the initial burden of
presenting evidence sufficient to demonstrate the existence of
an enforceable agreement and the opposing party’s failure,
neglect, or refusal to arbitrate; if it does so, the burden shifts
to the nonmoving party to raise a genuine dispute of material
fact regarding the existence of an agreement or the failure to
comply therewith. When a quick look at the case reveals that
no material disputes of fact exist, a district court may decide
the arbitration question as a matter of law through motions
practice and viewing the facts in the light most favorable to
the party opposing arbitration. But if material disputes of fact
8

do exist, the FAA calls for a summary trial—not death by
discovery. Unless the party alleged to be in default demands
a jury, the district court shall hear and determine the questions
at issue. The object of § 4 is to decide quickly—summarily—
the proper venue for the case, whether it be the courtroom or
the conference room, so the parties can get on with the merits
of their dispute.
BOSC, Inc., 853 F.3d at 1177 (internal quotation marks and citations omitted; emphasis
in the original).
3.

Application of the standards

Although there is no specific “timeliness” requirement stated in the standards set
out, just above, it stands to reason that a party who fails to request discovery prior to the
filing of his resistance to a motion to compel arbitration—and, indeed, a party who fails
to do so prior to the filing of the movant’s reply—has waived the opportunity to do so.
See Khan v. Orkin Exterminating Co., Inc., No. C 10–02156 SBA, 2011 WL 4853365,
at *4 n.3 (N.D. Cal. Oct. 13, 2011) (where a party had indicated its continued resistance
to a motion to compel arbitration, during a stay pending a decision in AT&T Mobility,
Inc. v. Concepcion, 563 U.S. 333 (2011), but only “embedded” a request for discovery
in its resistance, the request was untimely); Lloyd v. Hovensa LLC., 243 F. Supp. 2d
346, 349 (D.V.I. 2003) (where a party opposing a motion to compel arbitration did not
seek an order to conduct discovery until after resisting the motion to compel, but waited
until the hearing on the motion to compel, the request to conduct discovery was untimely),
reversed on other grounds, 369 F.3d 263 (3d Cir. 2004).
Yet, even if De Dios’s Motion To Conduct Discovery were timely, I conclude that
it should not be granted. That is so, because De Dios has failed to show that any of the
discovery he seeks would be material to the determination of the Motion To Compel
Arbitration. Pleasants, 541 F.3d at 859. Rather, this case is one in which a “quick
look . . . reveals that no material disputes of fact exist,” so that I may decide the Motion
To Compel as a matter of law through motions practice. BOSC, Inc., 853 F.3d at 1177.
9

As set out, below, De Dios argues that the Agreement to Arbitrate is
unconscionable because his employment was contingent upon agreeing to it and because
it unfairly binds only him, not Brand, to arbitrate claims. He also argues that Brand
“surprised” him with the Agreement and did not explain it to him, translate it into
Spanish, or give him time to consider it.

Finally, he argues that there was no

consideration for the Agreement to Arbitrate. Yet, De Dios has not demonstrated how
any of the discovery he seeks would be material to any of those contentions in the
circumstances of this case. See Pleasants, 541 F.3d at 859.
Rather, the fact that De Dios’s employment was contingent on his signing the
Agreement to Arbitrate is obvious from the face of the Agreement itself, see Defendant’s
Exhibit A, Excerpt of Application, page 2 of 4, and that point is reiterated in the Brand
Dispute Resolution Program Acknowledgement, which De Dios also signed, see
Defendant’s Exhibit B, Acknowledgement.

Similarly, even supposing De Dios’s

personnel file might somehow be material to the question of whether the Agreement to
Arbitrate that he signed prior to his employment is unconscionable—which I highly
doubt—Brand points out that De Dios already has access to his personnel file from
administrative proceedings, and De Dios filed no reply disputing that fact. What the
arbitration will cost him, where the arbitration will take place, and who the arbitrators
will be are also already known to De Dios from the Brand Dispute Resolution Program
document, Defendant’s Exhibit D to Motion To Compel Arbitration, and the AAA
Employment Arbitration Rules And Mediation Procedures, Defendant’s Exhibit A to
Resistance To Motion To Conduct Discovery, referenced in the Brand Dispute Resolution
Program and now in the record. The Brand Dispute Resolution Program also makes
clear that De Dios’s administrative costs for the arbitration are limited to $50.
De Dios seeks discovery of any amendments to the Brand Dispute Resolution
Program that occurred during the time period that he was employed. Brand contends that
only the arbitration procedures in effect at the time of De Dios’s agreement are relevant—
10

as that is all he agreed to. Brand’s argument on this point is faulty, because the Brand
Dispute Resolution Program does provide that subsequent amendments will be applicable
to employees.

Defendant’s Exhibit D, Brand Dispute Resolution Program at 6

(Amendments/Termination). Although I doubt that subsequent amendments to the Brand
Dispute Resolution Program, if any, would affect De Dios’s unconscionability argument,
there is always some possibility that they could.

Therefore, rather than authorize

discovery, I simply order that, not later than fourteen days from the date of this opinion,
Brand shall produce amendments, if any, to the Brand Dispute Resolution Program that
occurred during the period of De Dios’s employment.
De Dios also argues that Brand “surprised” him with the Agreement and did not
explain it to him, translate it into Spanish, or give him time to consider it. He does not
explain, however, how any of the discovery he is seeking goes to those issues. Even
supposing that it does, De Dios’s argument concerning the circumstances in which he
signed the Agreement to Arbitrate is not actually material, because it contradicts the
representations above his signature in the Acknowledgement. De Dios does not assert
that the Agreement to Arbitrate was obtained by fraud, and in the absence of fraud, he
cannot contradict his signed representations in the Acknowledgement that he had read
and understood the Agreement to Arbitrate and had been given time to consider it. Huber
v. Hovey, 501 N.W.2d 53, 55 (Iowa 1993); Bryant v. Am. Exp. Fin. Advisors, Inc., 595
N.W.2d 482, 486 (Iowa 1999) (noting that “[a]n agreement to arbitrate is to be treated
like any other contract . . . and a failure to fully read and consider the contract cannot
relieve him of its provisions.”).
Finally, as Brand suggests, De Dios’s desire for undefined Rule 30(b)(6)
depositions appears to be nothing more than a “fishing expedition.” Cf. Pony Computer,
Inc. v. Equus Computer Sys. of Mo., Inc., 162 F.3d 991, 996-97 (8th Cir. 1998) (the
district court did not abuse its discretion by denying a belated and general request for an
extension of the discovery deadline on the ground that it was a “fishing expedition”).
11

De Dios’s Motion To Conduct Discovery is denied. I will decide the Motion To
Compel Arbitration on the record already timely submitted by the parties.
B.

The Motion To Compel Arbitration

Having concluded that the record should not be amplified by discovery, I turn to
Brand’s Motion To Compel Arbitration, which De Dios opposes. I begin my analysis,
again, with a summary of the parties’ arguments.
1.

Arguments of the parties

In essence, Brand contends that De Dios acknowledged by his signature that he
read, understood, and agreed to be bound by the Agreement to Arbitrate, which was part
of his employment application and which provides for binding arbitration before the
American Arbitration Association (AAA), in accordance with the FAA; that the
Agreement to Arbitrate is valid and neither procedurally nor substantively
unconscionable, not least because there is no evidence that De Dios could not seek
employment elsewhere; and that De Dios’s wrongful termination claim is clearly
encompassed by that Agreement to Arbitrate.

Brand also argues that De Dios’s

acceptance and commencement of employment with Brand demonstrated both acceptance
and consideration with respect to that Agreement to Arbitrate. Thus, Brand argues that
the court should grant its Motion To Dismiss—or, in the alternative, stay this case pending
the outcome of arbitration—and compel arbitration of De Dios’s claim.
As mentioned, above, De Dios contends that the court should not enforce the
Agreement to Arbitrate, because Brand forced him to sign an unconscionable arbitration
clause, as a contract of adhesion, when it told him that his employment was contingent
upon agreeing to arbitration for any potential claim. He argues that Brand “surprised”
him with the Agreement to Arbitrate, that he does not remember anyone from Brand
explaining the various forms he signed or translating them into Spanish for him, and that
he was not given adequate time to contact an attorney. He also points out that the
12

Agreement to Arbitrate is unfair, because it binds only employees to mandatory
arbitration, but does not require Brand to arbitrate any claims against him. He also
contends that an arbitration agreement in a job application is not a legally enforceable
contract, because there is no consideration for it. Again, he points to the lack of mutuality
as demonstrating the lack of consideration.
In its Reply, Brand reiterates that De Dios acknowledged that he had read,
understood, and agreed to the Agreement to Arbitrate and, in the absence of fraud, the
fact that De Dios did not read or fully understand the Agreement to Arbitrate is
insufficient to render it void. Brand also points out that contracts of adhesion, including
arbitration agreements as a condition of employment, are not unconscionable. Brand
argues that, in the absence of substantive unfairness, unequal bargaining power does not
render the Agreement to Arbitrate unconscionable. Here, Brand argues that there is no
substantive unfairness, because it has agreed to bear all but $50 of the administrative
costs of the arbitration. Thus, Brand argues that the court should compel arbitration of
De Dios’s claim.
2.

Applicable standards

A motion pursuant to Rule 12(b)(6) or Rule 56 of the Federal Rules of Civil
Procedure is the appropriate procedure to stay or dismiss a case pending arbitration.
Seldin v. Seldin, 879 F.3d 269, 272 (8th Cir. 2018) (citing City of Benkelman v. Baseline
Eng’g Corp., 867 F.3d 875, 881 (8th Cir. 2017)). As the Eighth Circuit Court of Appeals
recently explained,
This court reviews de novo a district court’s decision to
compel arbitration. Pleasants v. Am. Exp. Co., 541 F.3d 853,
857 (8th Cir. 2008). Factual findings are reviewed for clear
error. Torres v. Simpatico, Inc., 781 F.3d 963, 968 (8th Cir.
2015).
Leonard v. Delaware N. Companies Sport Serv., Inc., 861 F.3d 727, 729 (8th Cir. 2017).
As the Eighth Circuit Court of Appeals has also explained, under the FAA,
13

“[A]rbitration is a matter of contract.” [Torres, 781 F.3d at
968] (internal quotation marks omitted), quoting AT&T
Mobility LLC v. Concepcion, 563 U.S. 333, 339, 131 S.Ct.
1740, 179 L.Ed.2d 742 (2011). A written agreement to
arbitrat[e] “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. “Doubts are
resolved in favor of arbitrability.” Cicle v. Chase Bank USA,
583 F.3d 549, 554 (8th Cir. 2009). But general contract
defenses may invalidate arbitration agreements. Id., quoting
Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681, 687, 116
S.Ct. 1652, 134 L.Ed.2d 902 (1996).
Leonard v. Delaware N. Companies Sport Serv., Inc., 861 F.3d 727, 729 (8th Cir. 2017).
Thus, the court “ask[s] only whether the arbitration agreement is valid and whether the
dispute falls within the terms of that agreement.” Torres v. Simpatico, Inc., 781 F.3d
963, 968 (8th Cir. 2015); accord Robinson v. EOR-ARK, LLC, 841 F.3d 781, 783-84
(8th Cir. 2016) (explaining that, 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” (internal quotation marks and
citations omitted)).
As to validity, under the FAA,
[b]ecause “arbitration is a matter of contract,” whether an
arbitration provision is valid is a matter of state contract law,
and an arbitration provision may be “invalidated by ‘generally
applicable contract defenses, such as fraud, duress, or
unconscionability,’ but not by defenses that apply only to
arbitration or that derive their meaning from the fact that an
agreement to arbitrate is at issue.” [AT&T Mobility LLC v.]
Concepcion, 131 S.Ct. [1740,] 1745–46 [(2011)] (quoting
Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681, 687, 116
S.Ct. 1652, 134 L.Ed.2d 902 (1996)). If a valid and
enforceable arbitration agreement exists under state-law
contract principles, any dispute that falls within the scope of
14

that agreement must be submitted to arbitration. See Faber [v.
Menard, Inc.], 367 F.3d [1048,] 1052 [(8th Cir. 2004)].
Torres, 781 F.3d at 968. Here, the parties agree that the applicable state law to determine
the validity of the Agreement to Arbitrate is Iowa law.
3.

Application of the standards

De Dios does not dispute that the second prong of the analysis is met, because his
claim of wrongful termination for asserting rights under the Iowa Workers’ Compensation
Act “falls within the terms of that agreement.” Robinson, 841 F.3d at 784; Torres, 781
F.3d at 968. Thus, what is at issue is the first prong of the analysis, whether the
Agreement to Arbitrate is valid. Id. at 783; Torres, 781 F.3d at 968. De Dios challenges
the validity of the Agreement to Arbitrate on grounds of unconscionability, surprise, and
lack of consideration.
a.

Unconscionability

In Faber, the Eighth Circuit Court of Appeals explained,
Under Iowa law, the burden of proof that a particular
provision or contract is unconscionable rests on the party
claiming it is unconscionable. In re Estate of Ascherl, 445
N.W.2d 391, 392 (Iowa Ct.App.1989). The Iowa Supreme
Court has established that we should analyze the following
factors of unconscionability: (1) assent; (2) unfair surprise;
(3) notice; (4) disparity of bargaining power; and
(5) substantive unfairness. Home Federal Sav. & Loan Ass’n
v. Campney, 357 N.W.2d 613, 618 (Iowa 1984). The ultimate
conclusion of whether a provision is unconscionable is to be
made “in view of all the circumstances.” C & J Fertilizer,
Inc. v. Allied Mut. Ins. Co., 227 N.W.2d 169, 181 (Iowa
1975).
Faber, 367 F.3d at 1053. De Dios relies on three of the factors identified under Iowa
law as relevant to the unconscionability analysis:

disparity of bargaining power,

substantive unfairness, and surprise. Faber, 367 F.3d at 1053.
15

There can be no doubt that Brand had the superior bargaining power in its
relationship with De Dios, because it was a large national company, and De Dios did not
have the ability to negotiate and change particular terms in the form employment
application. Id. Nevertheless, in Faber, the Eighth Circuit Court of Appeals stated that
“[m]ere inequality in bargaining power does not make the contract automatically
unconscionable,” id. (citing Home Federal, 357 N.W.2d at 619), “and is not enough by
itself to overcome the federal policy favoring arbitration.”

Id. (citing Gilmer v.

Interstate/Johnson Lane Corp., 500 U.S. 20, 33 (1991)). This is so, notwithstanding De
Dios’s reliance on various California decisions, non-binding, here, for the proposition
that such inequality in bargaining power, allowing an employer to require an agreement
to arbitrate as a condition of employment on a take-it-or-leave-it basis, may suffice to
render an arbitration agreement unconscionable. If I were writing on a clean slate, I
might agree with those California decisions, but I am not. Indeed, I was the trial judge
in Faber, and I held that the arbitration agreement at issue was both procedurally and
substantively unconscionable, see Faber v. Menard, 267 F. Supp. 2d 961 (N.D. Iowa
2003), but the Eighth Circuit Court of Appeals reversed, even though the plaintiff’s
argument that the arbitration agreement was unconscionable in that case was much
stronger than De Dios’s argument, here. See id. at 974-83.
As Brand points out, De Dios sought employment with Brand, but there is no
reason to believe that he could not have also sought employment elsewhere, or that he
could only have worked for Brand. Cf. In re Marriage of Shanks, 758 N.W.2d 506, 515
(Iowa 2008) (explaining that disparity in bargaining power “may show that the weaker
party had no meaningful choice, no real alternative” to assent to the contract (quoting
RESTATEMENT (SECOND) OF CONTRACTS § 208 cmt. d)). Nor does De Dios’s argument
that he was “surprised” by the Agreement to Arbitrate in his employment application, as
a condition of employment, tip the Agreement to Arbitrate into the unconscionable
category. In Faber, the Eighth Circuit Court of Appeals found no unfair surprise (and,
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indeed, assent and clear notice, as well) because the employee signed the agreement,
which the court presumed he had read before signing. Faber, 367 F.3d at 1053 (8th Cir.
2004). Here, De Dios not only signed the Agreement to Arbitrate in his employment
application, but the Acknowledgement, expressly representing that he had read and
understood the Agreement to Arbitrate and had been given time to consider it. Because
he does not allege any fraud, he cannot contradict these representations. Bryant v. Am.
Exp. Fin. Advisors, Inc., 595 N.W.2d 482, 486 (Iowa 1999); Huber v. Hovey, 501
N.W.2d 53, 55 (Iowa 1993). Thus, he cannot persuasively claim surprise.
In Faber, the Eighth Circuit Court of Appeals did caution that the unquestionable
disparity in bargaining power between a large company and an individual employee “calls
for careful scrutiny of the substance of the contract.” 367 F.3d at 1053.
A bargain is substantively unfair and therefore
unconscionable “if it is such as no person in his or her senses
and not under delusion would make on the one hand, and as
no honest and fair person would accept on the other.” Home
Federal, 357 N.W.2d at 619–20. A provision will be
invalidated if it is a “nefarious provision, inimical to the
public good.” Id. at 618.
Faber, 367 F.3d at 1053. On the other hand, the Iowa Supreme Court has cautioned,
that “the doctrine of unconscionability does not exist to rescue parties from bad
bargains.” C & J Vantage Leasing Co. v. Wolfe, 795 N.W.2d 65, 80 (Iowa 2011).
Even giving careful scrutiny to the Agreement to Arbitrate, I cannot find that it is
so substantively unfair as to require me to refuse to enforce it. The arbitration clause
here is a long way from one that “no person in his or her senses and not under delusion
would make on the one hand, and as no honest and fair person would accept on the
other,” nor is it “nefarious” or “inimical to the public good.” Faber, 367 F.3d at 1053
(defining substantive unfairness); see also C & J Vantage Leasing Co., 795 N.W.2d at
81 (“Substantive unconscionability involves whether or not the substantive terms of the
agreement are so harsh or oppressive that no person in his or her right senses would make
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it.”). Even though the Agreement to Arbitrate binds only De Dios (and other job
applicants and employees), but not Brand, to arbitrate their claims, I have not found any
authority supporting the contention that Iowa law requires mutuality of obligation in
arbitration clauses or that the absence of such mutuality renders an arbitration agreement
substantively unconscionable. Cf. Penn. Life Ins. Co. v. Simoni, 641 N.W.2d 807, 812
(Iowa 2002) (“While there may be inefficiencies in requiring arbitration of some of the
claims involving these parties, but not others, that is the agreement made by the
parties.”). Moreover, the adhesive nature of the Agreement to Arbitrate and its lack of
mutuality are offset by Brand’s assumption of all but $50 of the administrative costs to
the employee. Where the costs of the arbitration imposed on the employee are de
minimis, this is clearly not the kind of fee-splitting arrangement that may be
unconscionable, because it does not indicate that fees are cost-prohibitive or preclude the
vindication of statutory rights in an arbitral forum. Faber, 367 F.3d at 1053. While only
the employee or applicant is required to arbitrate claims, only Brand bears any significant
financial burden of the arbitration, so there is ultimately no substantive unfairness.
Therefore, I reject De Dios’s contention that the Agreement to Arbitrate is
unconscionable.
b.

Lack of consideration

As his final challenge to the validity of the Agreement to Arbitrate, De Dios
contends that, because it was in an employment application, it is not supported by
consideration.

He argues that an employer’s promise to hire and continue at-will

employment is not consideration for an employee to waive his right to a jury trial, citing
Caire v. Conifer Value Based Care, LLC, 982 F. Supp. 2d 582, 591-94 (D. Maryland
2013). He contends that, here, because the Agreement to Arbitrate binds only him to
mandatory arbitration, but not Brand, there are no mutual promises between the parties
to serve as consideration. While it is certainly true that Iowa law requires consideration
for a valid contract, see, e.g., Rick v. Sprague, 706 N.W.2d 717, 724 (Iowa 2005);
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Taggart v. Drake University, 549 N.W.2d 796, 800 (Iowa 1996), my colleague in the
Southern District of Iowa, Ronald E. Longstaff, then-Senior District Court Judge,
concluded that an arbitration clause in an employment application was supported by
consideration, under Iowa law, because the employer agreed to consider the prospective
employee’s application in exchange for her agreement to arbitrate.

Fuller v. A.G.

Edwards & Sons, Inc., No. 3:06-CV-072, 2006 WL 8436694, at *2 (S.D. Iowa Nov.
22, 2006). I reach the same conclusion, here. The Agreement to Arbitrate was supported
by adequate consideration, because Brand agreed to consider De Dios’s application in
exchange for his agreement to arbitrate. Thus, this challenge to the validity of the
Agreement to Arbitrate also fails.
4.

Summary

De Dios does not dispute that his claim of wrongful termination for asserting rights
under the Iowa Workers’ Compensation Act “falls within the terms of that agreement,”
and I conclude that, notwithstanding De Dios’s objections, the Agreement to Arbitrate is
valid. Robinson, 841 F.3d at 783-84; Torres, 781 F.3d at 968. Once the court determines
that an arbitration agreement is valid and that the dispute in question falls within the scope
of that arbitration agreement, § 4 of the FAA “[b]y its terms . . . ‘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.’” Pro Tech Indus., Inc. v. URS Corp., 377 F.3d 868, 871 (8th Cir.
2004) (quoting Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985), with
emphasis in the original).
C.

Dismiss Or Stay?

Brand requests that I grant its motion to dismiss Brand’s claim and compel
arbitration. Alternatively, Brand requests that I stay the action pending outcome of the
arbitration. “Where arbitration is required by § 4 of the FAA, § 3 requires that the court
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stay the court proceedings upon application of one of the parties.” Madol v. Dan Nelson
Automotive Group, 372 F.3d 997, 998 (8th Cir. 2004). I do not think that Brand’s
alternative request for a stay requires such a stay, and De Dios has not requested a stay.
Thus, I believe that, in the circumstance presented, here, whether to stay or dismiss lies
in my discretion. See, e.g., McLeod v. Gen. Mills, Inc., 856 F.3d 1160, 1168 (8th Cir.
2017); Unison Co. v. Juhl Energy Dev., Inc., 789 F.3d 816, 821 (8th Cir. 2015). A
district court may abuse its discretion by dismissing an action after compelling arbitration,
if it is not clear that the arbitration will resolve the entire controversy between the parties.
See Green v. SuperShuttle Int’l, Inc., 653 F.3d 766, 770 (8th Cir. 2011). Here, it appears
likely that the arbitration will resolve the entire controversy between the parties.
Nevertheless, I conclude that the likelihood that one or the other of the parties may seek
enforcement or review of any arbitration award warrants a stay rather than dismissal of
the case pending arbitration.
III.

CONCLUSION

Upon the foregoing,
1.

Plaintiff De Dios’s April 11, 2018, Motion To Conduct Discovery (docket

no. 15) is denied. Nevertheless, not later than June 27, 2018, Brand shall produce
amendments, if any, to the Brand Dispute Resolution Program that occurred during the
period of De Dios’s employment.
2.

Defendant Brand’s February 20, 2018, Motion To Dismiss And/Or Stay

And Compel Arbitration (docket no. 8) is granted, as follows:
a.

The parties are compelled to arbitration of De Dios’s claim that

Brand wrongfully terminated him for asserting rights under the Iowa Workers’
Compensation Act, but
b.

The order compelling arbitration is stayed to and including July

27, 2018, to afford Brand the opportunity to produce amendments, if any, to the
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Brand Dispute Resolution Program, as ordered in paragraph 1, above, and for De
Dios to move to reconsider the order compelling arbitration on the basis of such
amendments.
IT IS SO ORDERED.
DATED this 13th day of June, 2018.

______________________________________
MARK W. BENNETT
U.S. DISTRICT COURT JUDGE
NORTHERN DISTRICT OF IOWA

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