Munoz v. Green Country Imports, LLC et al
Filing
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OPINION AND ORDER by Chief Judge Gregory K Frizzell ; staying case; granting 15 Motion to Stay; granting 16 Motion to Compel Arbitration (hbo, Dpty Clk)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF OKLAHOMA
JORGE A. MUNOZ,
Plaintiff,
v.
GREEN COUNTRY IMPORTS, LLC,
a Division of Global Dealer Group, LLC,
and VOLKSWAGEN TULSA, LLC,1
Defendants.
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Case No. 12-CV-322-GKF-FHM
OPINION AND ORDER
Before the court is the Motion to Stay and to Compel Arbitration [Dkt. #15] filed by
defendants Green Country Imports, LLC, (“GCI”) and Volkswagen Tulsa LLC (“Volkswagen
Tulsa”). Defendants seek to compel arbitration of the claims asserted in this action by plaintiff,
Jorge A. Munoz (“Munoz”), and to stay this action pending arbitration.
I. Background/Status of Case
Munoz was employed as a sales consultant for GCI from June 24, 2009, to August 2,
2009. [Dkt. #2, Complaint, ¶¶7, 17]. His Complaint asserts claims of hostile work environment,
race discrimination and retaliation pursuant to Title VII of the Civil Rights Act of 1964 as
amended, 42 U.S.C. § 2000e et seq.
On June 23, 2009, plaintiff and GCI executed an Arbitration Agreement (the
“Agreement”) that requires submission to arbitration of “any dispute between any employee(s)
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The Complaint alleges, based on information and belief, that GCI may have transferred all assets and liabilities to
Volkswagen Tulsa. [Dkt. #2, ¶6]. Defendants asserts GCI legally changed its name to Volkswagen Tulsa, LLC in
2010. [Dkt. #15 at 2, n. 1].
and [GCI] which arises either directly or indirectly from Employee’s employment with [GCI].”
[Dkt. #15, Ex. 1, Arbitration Agreement]. The Agreement also states, in pertinent part:
[S]uch dispute shall be settled by arbitration in accordance with the rules for
commercial arbitration of the American Arbitration Association (or a similar
organization) in effect at the time the arbitration is initiated, and subject further to
the provisions of any applicable Oklahoma arbitration law.
I will submit any dispute—including but not limited to my termination—arising
under or involving my employment with Green Country Imports LLC to binding
arbitration within one (1) year from the date the dispute first arose;
The prevailing party shall be awarded all of the filing fees and related
administrative costs. Administrative and other costs of enforcing an arbitration
award, including the costs of subpoenas, depositions, transcripts and the like,
witness fees, payment of reasonable attorney’s fees, and similar costs related to
collecting an arbitrator’s award, will be added to, and become a part of, the
amount due pursuant to this Agreement.
[I]n accordance with Green Country Imports LLC’s Arbitration Policy I agree that
the arbitration shall be the exclusive forum for resolving all disputes arising out of
or involving my employment with Green Country Imports LLC or the termination
of that employment.
[Id.].
In its Motion to Stay, GCI makes the following representations:
GCI affirmatively stated that it will bear all arbitration costs such as the filing fee
and arbitrator’s fees. GCI did not , however, waive the right, in the event it is the
prevailing party, to seek attorney’s fees.
GCI waived any right to seek dismissal of plaintiff’s claim based on the one-year
limitation for submitting disputes to arbitration.
[Dkt. #15 at 5, 7].
II. General Law
Agreements containing arbitration provisions are valid, enforceable, and irrevocable
under the Federal Arbitration Act (“FAA”). 9 U.S.C. § 2. The FAA requires a district court to
stay judicial proceedings where a written agreement provides for the arbitration of the dispute
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that is the subject of the litigation. Coors Brewing Co. v. Molson Breweries, 51 F.3d 1511, 1514
(10th Cir. 1995); 9 U.S.C. § 3.
In considering a motion to compel arbitration, the court must determine (1) whether a
valid agreement to arbitrate exists, and (2) whether the subject matter of the dispute is covered
by the arbitration agreement. Pierce v. Kellogg, Brown & Root, Inc., 245 F.Supp.2d 1212, 121516 (E.D. Okla. 2003) (citing Coors, 51 F.3d at 1515-16).
Plaintiff does not dispute his claims are covered by the arbitration agreement. However,
he asserts the cost-splitting and cost-shifting provisions, as well as the one-year limitation period,
render the agreement invalid. Additionally, he argues the agreement has no severability clause
and therefore, the offending provisions cannot be severed from the contract; and defendant’s
after-the-fact waiver of the objectionable provisions does not render the agreement enforceable.
Arbitration agreements in employment contracts are generally enforceable. Circuit City
Stores, Inc. v. Adams, 532 U.S. 105 (2001). Agreements that require arbitration of statutory
claims, including the Title VII claims at issue here, are also generally enforceable. Gilmer v.
Interstate/Johnson Lane Corp., 500 U.S. 20 (1991).
Before 2000, circuit courts were split on the enforceability of fee-shifting provisions in
arbitration agreements. The Tenth, Eleventh and District of Columbia Circuits refused to
enforce arbitration agreements that potentially imposed high costs on an employee, holding that
they effectively denied the Title VII plaintiff’s forum to vindicate his claims. See Shankle v. B-G
Maint. Mgmt., Inc., 163 F.3d 1230, 1234;2 Paladino v. Avnet Computer Technologies, Inc., 134
F.3d 1054, 1062 (11th Cir. 1998); Cole v. Burns Int’l Sec. Services, 105 F.3d 1465, 1484-85
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In Shankle, the employee signed an arbitration agreement as a condition of his ongoing employment. 163 F.3d at
1232, 1233, 1235. The agreement covered all claims between the parties, including federal statutory claims, and
explicitly required that the employee pay one-half of the arbitrator’s fees. Id. at 1231. The court held that if the
employee pursued arbitration, he would have been required to pay an arbitrator between $1,875 and $5,000, which
he could not afford. Thus, he was effectively unable to vindicate his federal statutory rights.
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(D.C. Cir. 1999). The First, Fifth and Seventh Circuits, in contrast, took the position that the
presence of a fee-sharing provision did not automatically render the agreement unenforceable.
See Rosenberg, v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 170 F.3d 1, 15-16 (1st Cir.
1999); Williams v. Cigna Fin. Advisors, Inc., 197 F.3d 752, 764 (5th Cir. 1999); Koveleskie v.
SBC Capital Markets, Inc., 167 F.3d 361, 366 (7th Cir. 1999).
In 2000, however, the Supreme Court in Green Tree Financial Corp.-Alabama v.
Randolph, 531 U.S.79, 91-92 (2000) rejected the argument that a plaintiff’s risk of having to pay
high arbitration costs prevented her from vindicating her statutory rights. The court held that in
light of the “liberal federal policy favoring arbitration agreements,” such risk was “too
speculative to justify the invalidation of an arbitration agreement.” Id. at 91. It stated that
“where … a party seeks to invalidate an arbitration agreement on the ground that arbitration
would be prohibitively expensive, that party bears the burden of showing the likelihood of
incurring such costs.” Id. at 92.
After Green Tree, most circuits have recognized that a Title VII plaintiff seeking to avoid
an arbitration agreement by arguing that prohibitive costs would undermine his statutory remedy
bears the burden of demonstrating he is likely to bear such costs. See Musnick v. King Motor Co.
of Fort Lauderdale, 325 F.3d 1255, 1258-59 (11th Cir. 2003) (compiling cases). Instead, courts
have held that the question of enforceability must be answered on a case-by-case basis,
considering whether the party seeking to avoid arbitration “establish[es] that enforcement of the
agreement would ‘preclude’ him from ‘effectively vindicating [his] federal statutory right in the
arbitral forum.’” Id. at 1259.
In Smith v. AHS Oklahoma Heart, LLC, 2012 WL 3156877 (N.D. Okla.),Case No. 11CV-691-TCK-FHM, Senior District Court Judge Terence C. Kern recently considered whether a
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mandatory “loser pays” fee-shifting provision in an arbitration agreement between a physician
and her employer rendered the arbitration agreement unenforceable. The provision at issue
stated:
Attorneys’ fees in connection with the arbitration and the other costs and expenses
of arbitration shall be awarded to the prevailing party. The decision and award of
attorneys’ fees of the arbitrator(s) shall be binding, final and conclusive on the
Group and Physician.
Id. at *1. In Smith, plaintiff had sued the employer for alleged Title VII and Equal Pay Act
(“EPA”) violations. Judge Kern, reviewing post-Green Tree decisions, observed:
These cases generally conclude that, because it is entirely speculative that the
defendant will succeed and be awarded fees, the plaintiff cannot show that the
fee-shifting provision prevents him from vindicating his statutory cause of action.
These courts further reason that the arbitrator may refuse to enforce the feeshifting provision as an impermissible contractual imitation on the plaintiff’s
statutory remedies, which creates yet another layer of speculation as to whether
the plaintiff will actually bear prohibitive costs.
Finally, such courts reason, any fee award that shows manifest disregard of the
law is subject to judicial review and reversal. However, this reasoning has been
called into question by Subsequent Supreme Court decisions. Therefore, this
particular reasoning regarding the possibility of judicial review is of less
persuasive value that at the time Musnick was decided.
Id. at *2 (citations omitted).
Judge Kern noted that although the Tenth Circuit, post-Green Tree, has not addressed the
enforceability of a fee-shifting provision in the context of a Title VII case, it has considered the
enforceability of such a provision in a Sarbanes-Oxley Act (“SOX”)3 whistle blower case, Hill v.
Ricoh Am. Corp., 603 F.3d 766, 779 (10th Cir. 2010). The arbitration agreement at issue in Hill
stated, in pertinent part:
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Hill sued Ricoh under 18 U.S.C. § 1514A, which forbids employers from retaliating against “whistleblower”
employees who report fraud in certain circumstances. A discharged employee who prevails in an enforcement
action is entitled to reinstatement, lost wages, and reimbursement of other expenses, including reasonable attorney
fees. 18 U.S.C. § 1514A(c)(2).
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Each party shall pay for his/her/its own fees and expenses of arbitration except
that the cost of the arbitrator and any filing fee exceeding the applicable filing fee
in federal court shall be paid by the Company; provided, however, that all
reasonable costs and fees necessarily incurred by any party are subject to
reimbursement from the other party at the discretion of the arbitrator.
Id. at 779 (emphasis in original). Hill argued the agreement was unenforceable because he might
not be awarded attorney fees if he prevailed and he might be ordered to pay attorney fees if he
lost. Id. The court rejected this argument, because nothing in the Employment Agreement’s
arbitration clause required the arbitrator to deny Mr. Hill his rights under SOX. Id. The court
stated:
The clause gives the arbitrator discretion to award him attorney fees if he prevails
on his SOX claim. And assuming, without deciding, that Mr. Hill is correct that
SOX prohibits imposing attorney fees on an unsuccessful plaintiff, nothing in the
arbitration clause requires the arbitrator to compel him to pay Ricoh’s attorney
fees if he loses. Thus, the arbitrator has full authority to grant Mr. Hill the same
SOX relief that he would receive in court.
Id. at 780. Citing Green Tree, the court found that Hill’s fear that his SOX rights would not be
vindicated was based on “an unsupported assumption that the arbitrator will be hostile to the
substantive rights created by SOX,” and “such an assumption is inappropriate.” Id.
In Smith, the court found that since the fee-shifting provision was mandatory, its
enforcement would preclude plaintiff from effectively vindicating, in an arbitral forum, her Title
VII right to bring a non-frivolous suit without risking paying her opponent’s fees and her right
under the EPA to bring any suit without risking paying her opponent’s fees. Id. at *3.
Additionally, the court concluded that the language providing the arbitrators’ decision would be
“binding, final and conclusive” further decreased plaintiff’s ability to effectively vindicate her
statutory causes of action. Id. However, finding that the offending provision was not essential to
the bargain, the court excised it and granted the motion to compel arbitration. Id. at *4.
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III. Analysis
Under the terms of this Agreement, the prevailing party is to be awarded all filing fees
and related administrative costs. Further, administrative and other costs—including the costs of
subpoenas, depositions, transcripts and the like, witness fees, payment of reasonable attorney’s
fees and similar costs related to collecting the arbitrator’s award, are to be added to and become
part of the amount due pursuant to the Agreement. [Dkt. #15, Ex. 1]. The Agreement also
contains a one-year limitation for filing a claim. [Id.].
In its motion, GIC waived any right to seek dismissal of plaintiff’s claim based on the
one-year limitation in the Agreement. [Dkt. #15 at 7]. Further, it affirmatively stated it will bear
“all arbitration costs such as the filing fee and arbitrator’s fees.” [Dkt. #15 at 5]. It does not,
however, waive the right to recover attorney fees if it prevails on plaintiff’s claims. It argues,
instead, that the attorney fee issue is too speculative to conclude the Agreement abridges
plaintiff’s statutory rights.
Although the one-year limitation clearly is an impermissible restriction of plaintiff’s Title
VII rights, defendant’s waiver moots the issue. Additionally, plaintiff’s objection based on
arbitration costs is obviated by defendant’s express agreement to bear such costs.4 However, the
court finds, as did Judge Kern in Smith, that the mandatory “loser pays” attorney fee provision
“nullifies plaintiff’s right under Title VII to bring a non-frivolous suit without risking paying his
opponent’s fees.” Smith at *3. Therefore, the court finds this provision to be unenforceable.
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Plaintiff has submitted an affidavit stating he is the sole wage earner for his family, which consists of his wife and
two sons. [Dkt. #17, Ex. 6, Jorge Munoz Affid., ¶3] His total income for 2010 was $15,904; for 2011 was $28,390
and for 2012 to date is $22,048.97. [Id., ¶2]. Further, he has submitted evidence that arbitration fees could be as
high as $6,650, and the fees and expenses of the arbitrator would be substantial. [Dkt. #17, Ex. 2, pp. 54, 57; Exs. 34].
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As in Smith, the court must determine whether to sever the unenforceable term or
invalidate the entire agreement. This issue is controlled by the law governing the contract.
Smith at *4 (citing Spinetti v. Serv. Corp. Int’l, 324 F.3d 212, 219 (3d Cir. 2003)). In this case,
the Agreement is governed by Oklahoma law. [Dkt. #15, Ex. 1].
The Oklahoma Supreme Court has stated:
If [a] provision is determined to be unlawfully discriminatory, and therefore
unenforceable, the trial court must then determine whether the remaining parts of
the contract are also unenforceable. Restatement (Second) of Contracts § 184
(1981). The enforceability of the remaining parts is dependent upon the
expectations of the parties. If the invalid contractual provision is an essential part
of the agreement and the parties would not have agreed absent that provision, then
the entire contract is unenforceable. Id.; Zerbetz v. Alaska Energy Center, 708
P.2d 1270, 1282 (Alaska 1985). However, if the discriminatory and hence
unenforceable provision is not considered essential, the offending provision will
be excised and the remaining portions of the contract will be enforced. Id.
Hargrave v. Canadian Valley Elec. Co-op, Inc., 792 P.2d 50, 60 (Okla. 1990).
The primary purpose of this arbitration agreement is to provide a mechanism to resolve
employment related disputes. The court finds the attorney fee provision is not an “essential part”
of the contract and, given the “liberal federal policy favoring arbitration agreements,” concludes
severance of the offending provision, is appropriate. See Green Tree, supra. See also, Smith at
*4-*5.5
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Plaintiff argues the provision cannot, as a matter of law, be severed because the contract lacks a severability clause.
The court disagrees. The court in Hargrave did not hold that a severability clause is a prerequisite to severability,
and in Spinetti, the court rejected an argument that only contracts with severability clauses are capable of being
severed, noting that the court’s “unique power to modify the parties’ contract … arises from the general equity
powers of the court.” 324 F.3d at 220.
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III. Conclusion
For the foregoing reasons, defendant GCI’s Motion to Stay and Motion to Compel
Arbitration [Dkt. #15] is granted.
ENTERED this 3rd day of October, 2012.
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