Rum v. DARCARS of New Carrollton, Inc.
Filing
11
MEMORANDUM OPINION. Signed by Chief Judge Deborah K. Chasanow on 7/10/12. (sat, Chambers)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
:
DEBRA A. RUM
:
v.
:
Civil Action No. DKC 12-0366
:
DARCARS OF NEW CARROLLTON, INC.
:
MEMORANDUM OPINION
Presently pending and ready for review in this employment
discrimination
alternative,
case
to
is
stay
the
action
“motion
to
pending
dismiss
or,
arbitration”
filed
Defendant DARCARS of New Carrollton, Inc. (“DARCARS”).
4).
in
the
by
(ECF No.
The issues have been fully briefed, and the court now
rules, no hearing deemed necessary.
Local Rule 105.6.
For the
following reasons, the motion will be granted.
I.
Background
A.
Factual Background
Plaintiff Debra A. Rum alleges the following facts in the
amended complaint.
woman.
Ms. Rum is over forty-years old and is a
In March 2003, she was hired as an assistant service
manager/service
advisor
at
DARCARS’s
automobile
dealership
located in New Carrollton, Maryland.
For the dealership to
maintain
manufacturer,
“high
star
status”
with
the
Ms.
Rum
maintained certification as a service manager/service advisor.
(ECF
No.
2
¶
9).
On
top
of
a
base
salary,
she
received
commissions, which were earned based on individual labor and
part sales, as well as a percentage of the total labor sales for
the service department.
In the fall of 2008, DARCARS hired two men — both of whom
were
younger
managers/service
experience
advisor.
or
than
Ms.
advisors.
was
Rum
—
Neither
certified
as
as
assistant
man
a
had
prior
service
service
dealership
manager/service
In November of that year, Ms. Rum learned that the two
men were paid a higher base salary and earned commissions at a
higher rate than she did.
Ms. Rum complained to her direct
supervisor about this pay differential.
She followed up about
her complaint on a weekly basis with other management personnel,
but she was told repeatedly that “the matter was under review.”
(Id. ¶ 14).
she
was
In January 2009, Ms. Rum informed management that
being
discriminated
against
and
subjected to a hostile work environment.
that
she
was
being
About two weeks later,
DARCARS retroactively paid Ms. Rum the difference between the
base salaries and the commission rates back to the time the two
male employees began their employment.
On January 19, 2010, three managers held a meeting with Ms.
Rum at which they informed her that a customer, whom they did
not
identify,
had
accused
her
of
“offering
customer’s vehicle for cash on the side.”
managers
demanded
that
Ms.
Rum
2
provide
to
repair
(Id. ¶ 18).
the
names
of
the
The
all
individuals
regarding
involved
vehicle
in
this
repairs.
violation
Ms.
Rum
of
DARCARS’s
repeatedly
policy
denied
the
allegations, but one of the managers used “an aggressive and
intimidating tone” with her.
(Id. ¶ 19).1
She ultimately stated
that she had her personal vehicles repaired at the dealership.
These repairs were in compliance with DARCARS’s policy regarding
such repairs.
Nevertheless, as a result of the meeting, Ms. Rum
was placed on administrative leave.
terminated
for
dealership.
having
her
personal
Two days later, she was
vehicles
repaired
at
the
The managers met with other employees to inform
them that Ms. Rum would not be working there anymore.
Ms. Rum has been unable to obtain comparable employment
since
her
termination,
dealerships
that
she
in
was
part,
because
terminated
DARCARS
for
told
violation
of
other
its
policies and practices.
B.
Procedural Background
On December 22, 2011, Ms. Rum filed a complaint against
DARCARS
in
Maryland.
the
Circuit
Court
for
Prince
George’s
County,
One week later, she amended the complaint.
After
service, DARCARS timely removed to this court on the basis of
federal
question
jurisdiction.
(ECF
complaint contains seven counts:
1
No.
1).
The
(1) intentional infliction of
DARCARS did not follow up with any male
regarding the alleged vehicle repair side business.
3
amended
mechanics
emotional
distress,
(2)
disparate
treatment
in
violation
of
Title VII of the Civil Rights Act of 1964 (“Title VII”), the Age
Discrimination in Employment Act (“ADEA”), and the Equal Pay
Act, (3) retaliation in violation of the same federal statutes,
(4)
violation
of
Prince
George’s
County
Code
Division
12,
Subdivision 7, (5) vicarious liability, (6) negligence, and (7)
breach of contract.
On
February
6,
2012,
DARCARS
filed
the
pending
motion.
(ECF No. 4).
Although DARCARS styles its motion as a “motion to
dismiss
in
or,
the
alternative,
to
stay
action
pending
arbitration,” it is, in effect, a motion to compel arbitration.
Ms. Rum filed opposition papers on February 29, 2012.
(ECF No.
9).
DARCARS replied on March 19, 2012.
(ECF No. 10).
II.
Applicability of the Federal Arbitration Act (“FAA”)
DARCARS and Ms. Rum disagree whether the FAA applies to the
employment contract between the parties (“the Agreement”).
FAA provides:
A written provision in any . . . contract
evidencing a transaction involving commerce
to settle by arbitration a controversy
thereafter arising out of such contract or
transaction, or the refusal to perform the
whole or any part thereof, or an agreement
in writing to submit to arbitration an
existing controversy arising out of such a
contract, transaction, or refusal, shall be
valid, irrevocable, and enforceable, save
upon such grounds as exist at law or in
equity for the revocation of any contract.
4
The
9 U.S.C. § 2.
As defined in the FAA, the term commerce
means commerce among the several States or
with foreign nations, or in any Territory of
the United States or in the District of
Columbia, or between any such Territory and
another, or between any such Territory and
any State or foreign nation, or between the
District of Columbia and any State or
Territory or foreign nation, but nothing
herein contained shall apply to contracts of
employment of seamen, railroad employees, or
any other class of workers engaged in
foreign or interstate commerce.
9 U.S.C. § 1.
Therefore, “[b]efore the [FAA] becomes applicable
[to an arbitration agreement], two findings must be made:
(1)
there was an agreement in writing providing for arbitration and
(2) the contract evidences a transaction involving interstate
commerce.”
Am. Home Assurance Co. v. Vecco Concrete Constr. Co.
of Va., 629 F.2d 961, 963 (4th Cir. 1980).2
As to the first prong, DARCARS attached to its motion a
copy of the Agreement.
(ECF No. 4-1).3
Ms. Rum does not dispute
2
The United States Supreme Court has explained that for a
contract to “evidenc[e] a transaction involving [interstate]
commerce” as required by the FAA, the transaction need only have
involved interstate commerce “in fact.”
See Allied-Bruce
Terminix Cos. v. Dobson, 513 U.S. 265, 277-78 (1995).
The
contract need not have “contemplated” interstate activity.
Id.
Thus, the Court rejected the notion that a contract evidences a
transaction involving interstate commerce only when there is an
explicit “reference to interstate commerce in the document.”
See id. at 278.
3
The Agreement, which Ms. Rum signed on March 16, 2004,
states that she is an at-will employee.
(ECF No. 4-1).
With
5
the authenticity of the Agreement or that the Agreement provides
respect to arbitration and incorporation, it reads, in pertinent
part:
Except for exclusively monetary claims
of less tha[n] $5000, any dispute or
controversy
(including
the
question
of
whether
the
dispute
or
controversy
is
subject
to
arbitration)
which
would
otherwise require or allow res[or]t to any
court
or
other
governmental
dispu[t]e
resolution forum, between the employee and
the company (or its owners, employees,
agents, directors, and officers, and parties
affiliated with its employee benefit and
health plans) arising from, related to, or
having
any
relationship
or
connection
whatsoever with law, equity, or otherwise,
specifically including but not limited to
any and all matters arising under the
constitution of the United States or of any
state, . . . Title VII of the Civil Rights
Act of 1964, . . . the Equal Pay Act, . . .
similar state and local status regulations,
and ordinances, as well as any other
federal, state, or local personal injury,
civil rights, or employment related law,
regulations, rules or theories (except for
worker’s compensation claims which shall not
be subject to these procedures) shall be
submitted to, and determined by, binding
arbitration under the Federal Arbitration
Act . . . .
This is the exclusive procedure for
remedy
for
any
dispute
or
controversy
covered.
This is the entire understanding
between
the
Company
and
employee
reg[]ardin[g] employment and reasons for
termination of employment.
There is no
contract concerning employment between the
Company and the Employee.
(Id.).
6
for
arbitration.
As
to
the
second
prong,
however,
Ms.
Rum
challenges the Agreement’s relationship to interstate commerce.
(See ECF No. 9-1, at 2-3).
Regarding the burden of proving this
second prong, the United States Court of Appeals for the Fourth
Circuit has held that the FAA
does not require proof by affidavit or other
specific evidence of the nexus to interstate
commerce.
Where . . . the party seeking
arbitration alleges that the transaction is
within the scope of the Act, and the party
opposing application of the Act does not
come
forward
with
evidence
to
rebut
jurisdiction under the federal statute, we
do not read into the Act a requirement of
further proof by the party invoking the
federal law.
Maxum Founds., Inc. v. Salus Corp., 779 F.2d 974, 978 n.4 (4th
Cir. 1985); see also Jih v. Long & Foster Real Estate, Inc., 800
F.Supp. 312, 316 (D.Md. 1992) (“[O]nce one party asserts that
the transaction is within the scope of the Act, the burden is
upon the other party to come forward with evidence to rebut
jurisdiction under the federal statute.” (citing Maxum Founds.,
Inc., 779 F.2d at 978 n.4)).
Here, DARCARS’s motion clearly asserts that the FAA applies
to the Agreement.
Not only does the motion explicitly reference
the FAA (ECF No. 4 ¶ 5), it also refers to and attaches the
Agreement, which by its own terms states that “any dispute or
controversy . . . shall by submitted to, and determined by,
binding arbitration under the Federal Arbitration Act” (ECF No.
7
4-1) (emphasis added).
evidence
to
rebut
The burden is thus on Ms. Rum to proffer
the
Agreement’s
connection
to
interstate
commerce.
Ms.
Rum’s
amended
complaint
contains
claims
under
three
federal statutes, including Title VII and the ADEA, which only
apply to an employer engaged in commerce.
See 42 U.S.C. §
2000e(b), (g), (h) (Title VII); 29 U.S.C. § 630(b), (g), (h)
(ADEA).
engaged
The third, the Equal Pay Act, applies to employees
in
commerce.
See
29
U.S.C.
§§
203,
206(d).
By
asserting those claims, then, Ms. Rum in effect concedes the
interstate nexus for her employment.
The amended complaint also
alleges that her compensation depended in part on commissions
based on her own labor and part sales, as well as a percentage
of
the
total
labor
sales
for
the
service
department.
Her
affidavit establishes at most that she is a resident of Maryland
and that she was employed and signed relevant documents only in
Maryland.
actual
(ECF No. 9-2 ¶¶ 2-3).
job
responsibilities
She does not state that her
were
confined
to
intrastate
activities nor does she prove that her employment at DARCARS’s
was limited to the state’s borders.
In its reply, DARCARS further alleges the following:
DARCARS is in the business of selling and
servicing automobiles, a good that travels
and “flows” through interstate commerce.
DARCARS
sells
vehicles
and
parts
to
customers from multiple states and the
8
District of Columbia.
[Ms.] Rum was hired
as an Assistant Service Manager/Service
Advisor
for
DARCARS.
[Ms.]
Rum’s
compensation for her employment was based on
labor sales and part7 sales — services which
were provided to customers, from multiple
states, for automobiles that travel in
interstate commerce.
________________
7
Car parts are manufactured and shipped from
throughout the United States.
Furthermore,
the
cars
sold
at
DARCARS
are
not
manufactured
here
in
Maryland,
but
in
several other states and countries, and then
shipped to Maryland for sale.
(ECF No. 10, at 6).
Ms. Rum does not challenge these additional
allegations, which she could have done via surreply.
See Local
Rule 105.2.a (permitting surreply after obtaining leave of the
court).
This record, then, shows that DARCARS has established that
the
Agreement
commerce.
principle
evidences
a
transaction
involving
interstate
This finding is not inconsistent with the general
that,
“[e]mployment
contracts,
except
for
those
covering workers engaged in transportation, are covered by the
FAA.”
E.E.O.C. v. Waffle House, Inc., 534 U.S. 279, 289 (2001);
see also Aggarao v. MOL Ship Mgmt. Co., 675 F.3d 355, 369 (4th
Cir. 2012) (“‘[A] contract evidencing a transaction involving
commerce’
includes
an
employment
contract.”
(quoting
City Stores, Inc. v. Adams, 532 U.S. 105, 113 (2001)).
the
issue
of
the
applicability
of
the
FAA
to
an
Circuit
Although
employment
contract was not specifically challenged as it is here, the FAA
9
has
been
repeatedly
applied
to
employment
contracts
in
this
circuit.
See, e.g., Am. Gen. Life & Accident Ins. Co. v. Wood,
429
83,
F.3d
87
(4th
Cir.
2005);
Murray
v.
United
Food
&
Commercial Workers Int’l Union, Local 400, 289 F.3d 297, 301 (4th
Cir. 2002); Hooters of Am., Inc. v. Phillips, 173 F.3d 933, 93637 (4th Cir. 1999).
III. Consideration
Ms. Rum also contends that the agreement is not enforceable
due to a failure of consideration.
In deciding a motion to
compel arbitration, district courts must “engage in a limited
review to ensure that the dispute is arbitrable — i.e., that a
valid agreement to arbitrate exists between the parties and that
the specific dispute falls within the substantive scope of that
agreement.”
Hooters of Am., Inc., 173 F.3d at 938 (internal
quotation marks omitted).
In so doing, courts apply “ordinary
state-law principles that govern the formation of contracts.”
First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1995).
Under Maryland contract law, a legally binding agreement
must be supported by sufficient consideration.
Cheek v. United
Healthcare of the Mid–Atl., Inc., 378 Md. 139, 147 (2003).
A
promise may become consideration for another promise only when
it
constitutes
a
binding
obligation.
Id.
at
148.
When
a
promise is composed of words in a promissory form that do not
actually
bind
or
obligate
the
10
promisor
to
do
anything,
the
promise
is
said
consideration.
to
be
“illusory”
and
does
not
constitute
Id. at 148–49.
Ms. Rum argues that the Agreement lacked consideration and
was illusory.
(See ECF No. 9-1, at 4).
Citing Cheek, she
contends that an “arbitration agreement [is] illusory [if] the
employer reserve[s] the right to rescind, to alter or amend the
arbitration agreement in its employee’s handbook.”
(Id.).
She
states that
despite
the
language
of
the
alleged
arbitration agreement between the parties,
[she] does not know whether the employee
packet she was provided, which contained an
employee handbook, at the time she was hired
contained additional information related to
any policies [DARCARS] had with respect to
arbitration beyond the alleged arbitration
agreement.
(Id.).
As a result, Ms. Rum argues that she needs discovery in
part to ascertain the validity of the arbitration agreement.
(Id. at 5).
Ms. Rum misconstrues the holding in Cheek, however, as the
Court
of
conclusion.
Appeals
an
Maryland
did
not
reach
such
a
broad
In Cheek, the plaintiff received a copy of the
defendant-employer’s
signed
of
handbook
acknowledgment
on
form
his
first
day
indicating
of
that
work
and
he
had
“‘specifically received and reviewed,’ among other things, an
‘Internal
Dispute
Resolution/Employment
Arbitration
Policy’”
summarized in the handbook, and that he “agree[d] to submit all
11
employment-related
disputes
.
.
.
to
employer’s] policy.” 378 Md. at 143.
arbitration
under
[the
The arbitration policy
itself gave the employer the right to “alter, amend, modify, or
revoke the [policy] at its sole and absolute discretion at any
time with or without notice.”
Id. at 142–43.
The Court of
Appeals observed that “the plain and unambiguous language of
[this] clause” allowed the employer “to revoke the Employment
Arbitration Policy even after arbitration is invoked, and even
after
a
decision
is
rendered,
because
‘revoke’ the Policy ‘at any time.’”
[the
employer]
Id. at 149.
can
Under those
circumstances, the court determined, the employer’s “‘promise’
to
arbitrate
employment
disputes
therefore, no real promise at all.”
is
entirely
illusory,
and
Id.
Thus, in Cheek, while the arbitration policy at issue was
contained in the employee handbook itself, the court did not
hold that there is anything special about an employee handbook
requiring a separate review of that document to see whether an
arbitration agreement is illusory.
precisely the opposite conclusion:
In fact, Cheek stands for
rather than look at outside
documents, such as an employee handbook, the court must limit
its search for supporting consideration to the four corners of
the Agreement itself.
As the Fourth Circuit explained:
[T]he reservation of rights in Cheek
was contained in the arbitration policy.
Looking
at
the
four
corners
of
the
12
arbitration policy in Cheek, the court
understandably concluded that the policy
contained an illusory promise.
In the
instant case, by contrast, looking at the
four corners of the separate Arbitration
Agreement, the agreement contains no such
illusory promise.
To be sure, it is only
when we are asked to look beyond the four
corners of the Arbitration Agreement . . . —
something Cheek tells us we are not allowed
to do — that [the plaintiff’s] argument
finds its support.
In sum, the district court simply was
not at liberty to go beyond the language of
the Arbitration Agreement in determining
whether the agreement contained an illusory
promise.
When one examines the language of
the Arbitration Agreement itself, only one
conclusion is tenable — the agreement is
binding and enforceable.
Hill v. Peoplesoft USA, Inc., 412 F.3d 540, 544 (4th Cir. 2005)
(internal citation omitted).
In
this
case
as
well,
the
search
for
supporting
consideration is limited to the Agreement’s four corners as Hill
and Cheek instruct.4
that
there
is
an
Accordingly, despite Ms. Rum’s assertion
employee
handbook
or
that
there
are
other
documents that might contain language that could possibly render
the
arbitration
extrinsic
provision
evidence
has
no
in
the
bearing
4
Agreement
on
whether
illusory,
the
such
Agreement
Moreover, the Agreement specifically disclaims any
reference to or reliance on outside documents. (See ECF No. 4-1
(“This is the exclusive procedure for remedy for any dispute or
controversy covered.
This is the entire understanding between
the Company and employee reg[]ardin[g] employment and reasons
for termination of employment. There is no contract concerning
employment between the Company and the Employee.”)).
13
itself evidences sufficient consideration.
To that end, the
Agreement does impose mutual obligations on Ms. Rum and DARCARS.
Most
notably,
it
requires
that
“any
dispute
or
controversy
(including the question of whether the dispute or controversy is
subject to arbitration) . . . be submitted to, and determined
by,
binding
“[M]utual
arbitration.”
promises
enforceable
to
contract[,
(ECF
No.
arbitrate
i.e.,]
4-1)
act
each
(emphasis
as
an
party
added).
independently
has
promised
to
arbitrate disputes arising from an underlying contract, and each
promise provides consideration for the other.”
Cheek, 378 Md.
at 153 (internal quotations and citations omitted); see also
O’Neil v. Hilton Head Hosp., 115 F.3d 272, 275 (4th Cir. 1997)
(“A
mutual
promise
to
arbitrate
constitutes
consideration for [an] arbitration agreement.”).
parties
mutually
provision,
the
agreed
to
Agreement
be
bound
was
by
sufficient
Because the
the
supported
arbitration
by
adequate
consideration.
IV.
Stay or Dismissal
When an issue in a judicial proceeding is referable to
arbitration, the FAA requires the court, upon the motion of a
party, to stay the proceedings until that issue is arbitrated.
9
U.S.C.
§
3;
see
Waffle
House,
Inc.,
534
U.S.
at
289.
“[D]ismissal is a proper remedy,” however, “when all of the
issues presented in a lawsuit are arbitrable.”
14
Choice Hotels
Int’l, Inc. v. BSR Tropicana Resort, Inc., 252 F.3d 707, 709–10
(4th Cir. 2001).
Ms.
Rum
argues
that
if
arbitration
is
compelled,
instant action should merely be stayed, not dismissed.
No. 9-1, at 5).
the
(See ECF
She contends that Count Seven of the amended
complaint, the breach of contract claim, is not covered by the
Agreement.
Though left unsaid, the inference appears to be that
the matter should not be dismissed because Ms. Rum’s claims are
not all arbitrable.
Despite having held that “questions of arbitrability” are
generally
appropriate
for
courts,
see
Howsam
v.
Dean
Witter
Reynolds, Inc., 537 U.S. 79, 84 (2002), the Supreme Court has
also
held
determine
that
the
issues
unmistakably
parties
of
provide”
may
agree
arbitrability
so,
see
AT&T
to
if
have
they
Techs.,
Workers of Am., 475 U.S. 643, 649 (1986).
an
arbitrator
“clearly
Inc.
v.
and
Comm’ns
Here, questions of
arbitrability are expressly within the purview of the Agreement.
(See
ECF
No.
4-1
(applying
to
“any
dispute
or
controversy
(including the question of whether the dispute or controversy is
subject to arbitration)” (emphasis added))).
Thus, whether any
of Ms. Rum’s claims — including the breach of contract claim —
are arbitrable is for the arbitrator to decide.
Accordingly, it
is not yet clear that “all of the issues presented in a lawsuit
are arbitrable,” see Choice Hotels Int’l, Inc., 252 F.3d at 709–
15
10, and the court will stay the action rather than dismiss it
while the arbitrator makes that determination.
V.
Conclusion
For the foregoing reasons, the motion to compel arbitration
filed by Defendant DARCARS of New Carrollton, Inc., will be
granted.
A separate order will follow.
/s/
DEBORAH K. CHASANOW
United States District Judge
16
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