Adams v. Republic Parking System Inc

Filing 16

ORDER granting 10 defendant's motion to compel arbitration ordering the parties to arbitrate plaintiff's claims...the clerk of court is directed to administratively close this case without prejudice...parties have the right to move to reo pen the case upon completion of the arbitration or for another proper purpose...if a motion to reopen is not filed within 30 day of completion of the arbitration proceeding this action shall be deemed dismissed with prejudice. Signed by Honorable Joe Heaton on 04/09/2013. (lam)

IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF OKLAHOMA
JAMES E. ADAMS,
Plaintiff,
vs.
REPUBLIC PARKING SYSTEM, INC.,
Defendant.

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NO. CIV-12-1310-HE

ORDER
Plaintiff James E. Adams filed this action against Republic Parking System, Inc.
(“Republic”), his former employer, asserting claims for race discrimination under Title VII
and 42 U.S. § 1981. Republic has filed a motion to compel arbitration of plaintiff’s claims
pursuant to the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 3, 4 and the Oklahoma
Uniform Arbitration Act, 12 Okla. Stat. §§ 1856, 1858. Having considered the arbitration
agreement and the parties’ submissions, the court concludes the motion should be granted.
When he applied with Republic for employment, plaintiff signed an application which
included a provision requiring both employer and employee to arbitrate employment-related
disputes. The arbitration clause provided:
[In consideration of the Company’s offer of employment and Applicant’s
acceptance of the Company’s offer of employment,] the parties agree that they
will settle any and all previously unasserted claims, disputes or controversies
arising out of or relating to the Applicant’s application or candidacy for
employment, promotion, demotion, or termination of employment with the
Company exclusively by the final and binding arbitration before a neutral
arbitrator. Examples of such claims include, but are not limited to claims
under federal, state, and statutory or common law, such as the Age
Discrimination in Employment Act, Title VII of the Civil Rights Act, as

amended, including the 1991 amendments, the Americans with Disabilities
Act, the law of contract and the law of tort.
This arbitration provision is not intended to, and does not affect the
substantive, legal rights of the parties.
The arbitration shall be conducted in accordance with the Federal Arbitration
act, 9 U.S.C. § 1-16. If the parties are unable to agree on an arbitrator, they
shall jointly request the Federal Mediation and Conciliation Service to
designate a panel of five arbitrators. Upon receipt of the panel of arbitrators,
the parties shall meet and select an arbitrator by alternatively rejecting one of
the names on the panel of arbitrators; the parties shall meet and select an
arbitrator by alternatively rejecting one of the names on the panel. The right
to make the first rejection shall be determined by a flip of the coin.
The costs and expenses of the arbitration, including the arbitrator’s fees, shall
be borne equally by the parties. Each party will be responsible for his, her or
its own attorney’s fees, if any.
Defendant’s Exhibit 1. Republic now seeks to enforce the agreement to arbitrate.
“The FAA provides that contractual agreements to arbitrate disputes ‘shall be valid,
irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the
revocation of any contract.’” Hill v. Ricoh Americas Corp., 603 F.3d 766, 770-71 (10th Cir.
2010) (quoting 9 U.S.C. § 2). The Act is intended “to place an arbitration agreement upon
the same footing as other contracts and to overturn the judiciary's longstanding refusal to
enforce agreements to arbitrate.” Id. (quoting Glass v. Kidder Peabody & Co., Inc., 114 F.3d
446, 451 (4th Cir.1997)). It obligates “courts to stay litigation on matters that the parties
have agreed to arbitrate; and . . . authorizes a federal district court to compel arbitration when
it would have jurisdiction over a suit on the underlying dispute.” Id. Plaintiff does not
dispute that his claims fall within the scope of the arbitration clause or that it is governed by

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the Federal Arbitration Act. Instead, he contends the agreement is invalid and unenforceable
because it impairs his ability to recover his attorney’s fees, requires him to pay one-half of
the arbitration costs and expenses, including the arbitrator’s fees, and omits essential contract
terms.1
Plaintiff claims the attorney’s fee provision is unenforceable as it requires him to
forego his substantive right under Title VII to recover his attorney’s fees if he prevails.
Republic asserts that this issue is not ripe because plaintiff “might drop his fee-shifting
claims or lose them on the merits.” If he does prevail, defendant asserts that plaintiff “can
ask the arbitrator to award fees,”2 and if the arbitrator refuses, plaintiff could seek review in
this court under 9 U.S.C. § 10(a)(4).3
Defendant’s arguments are not compelling and the cases it cites are distinguishable.
In Hill, 603 F.3d at 779-80, the “clause [gave] the arbitrator discretion to award [the
plaintiff] attorney fees if he prevail[ed] . . . .” Id. Smith v. AHS Oklahoma Heart, LLC, 2012
1

Generally, “[w]hether there is an enforceable contract to arbitrate is a matter of contract
law to be decided by the court” under state law. See Hill, 603 F.3d at 777; Spinetti v. Serv. Corp.
Int’l, 324 F.3d 212, 219 (3rd Cir. 2003) (“Under the FAA, federal arbitration policy must be
implemented in lock-step with a determination of contract validity under state law.”). The parties
have relied on Oklahoma law when addressing the contract-law issues in the case and the court
finds no basis to apply another state’s law.
2

Defendant also offers a strained construction of the fee clause, focusing on the “if any”
ending. The court is not persuaded by its assertion that “Plaintiff could contend that a reasonable
interpretation of this provision is that if he prevails on his claims, he has not incurred attorneys’
fees because the statutory law permits him to recover his attorneys’ fees from Republic.”
Defendant’s reply, p. 4.
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Defendant acknowledges, though, that judicial review on the ground of manifest disregard
of the law may not be available. See defendant’s reply, p. 5 n.8, referring to Stolt-Nielsen S.A. v.
AnimalFeeds Int'l Corp., 559 U.S. 662, ___ n.3 (2010).
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WL 3156877 (N.D. Okla. 2012) and Munoz v. Green Country Imports, LLC, 2012 WL
4736332 (N.D. Okla. 2012) dealt with fee-shifting, “loser pays” provisions. While some
courts have upheld arbitration agreements that require a party asserting civil rights claims to
pay his own attorney’s fees, the agreements included language not present in the application
plaintiff signed, such as “[t]his Agreement is intended to be performed in accordance with,
and only to the extent permitted by, all applicable laws, ordinances, rules and regulations.”
Herrera v. Katz Commc’ns, Inc., 532 F. Supp. 2d 644, 647 (S.D.N.Y. 2008) (internal
quotations omitted).
Defendant is correct that plaintiff might not recover his attorney’s fees, even if they
were available, as he may not prevail on his claims. However, the court cannot state that
plaintiff’s “fear that his [Title VII] rights would not be vindicated is mere speculation,” Hill,
603 F.3d at 780, when there is no opportunity for him to recover his attorney’s fees. The
“proviso requiring each party to pay its own attorney's fees — regardless of the outcome of
the arbitration — runs counter to [the] statutory provision[] under Title VII ... that permit[s]
an award of attorney's fees and costs to a prevailing party.” Spinetti v. Serv. Corp. Int’l, 324
F.3d 212, 216 (3d Cir. 2003); see Whitman v. Legal Helpers Debt Resolution, LLC, 2012
WL 6210591 at *3 (D.S.C. 2012) ( “Courts that have examined arbitration clauses that limit
a plaintiff’s statutory right to damages or attorney’s fees generally find those clauses
unenforceable.”). The court therefore concludes the attorney’s fee provision is invalid. It
reaches the same conclusion with respect to the fee-splitting clause.
Republic argues that the fee-splitting provision does not make the agreement per se
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invalid as courts analyze issues regarding alleged prohibitive arbitration costs on a case-bycase basis. Citing Green Tree Fin. Corp.-Alabama v. Randolph, 531 U.S. 79 (2000), it
contends that if plaintiff seeks to avoid arbitration by claiming its prohibitive costs would
undermine his statutory remedy, then he must demonstrate he is likely to bear those expenses.
See Smith, 2012 WL 3156877 at *2 (“After Green Tree, the majority of circuits addressing
the specific type of provision at issue in this case—a mandatory ‘loser pays’ fee-shifting
provisions that is contrary to fee-shifting provisions in federal anti-discrimination
statutes—have held that such provisions do not render an arbitration agreement per se
unenforceable. Instead, courts have held that the question of enforceability must be answered
on a case-by-case basis . . . .”) (internal quotations and citation omitted). Plaintiff has made
the requisite showing here.
The agreement expressly provides that the “costs and expenses of the arbitration,
including the arbitrator’s fees, shall be borne equally by the parties,” defendant’s Exhibit 1
(emphasis added), and plaintiff has shown that having to pay one-half of the cost of
arbitrating his claims would preclude him “from effectively vindicating [his] federal statutory
rights in the arbitral forum.” Green Tree, 531 U.S. at 90. Defendant did not dispute
plaintiff’s evidence demonstrating that arbitration costs range from approximately $5000 to
$10,000, see plaintiff’s exhibits 2-4, or his affidavit reflecting his current financial status.
Rather, Republic states that it is willing, as an “accommodation to Plaintiff’s plight,” to bear
the costs of the arbitration if the court should find “Plaintiff’s condition is an impediment to
Republic’s right to arbitrate.” Defendant’s reply, pp. 6-7.
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The court concludes the arbitration agreement places plaintiff “between the proverbial
rock and a hard place-it prohibit[s] use of the judicial forum, where a litigant is not required
to pay for a judge's services, and the prohibitive cost substantially limit[s] use of the arbitral
forum.” Shankle v. B–G Maint. Mgmt. of Colo., Inc., 163 F.3d 1230, 1235 (10th Cir.1999).
Here, as in Shankle, the employer has required its job applicants “to agree to mandatory
arbitration as a term of ... employment, yet failed to provide an accessible forum in which
[they] could resolve [their] statutory rights.” Id
Plaintiff’s remaining argument – that the entire agreement is invalid because there was
no meeting of the minds regarding its essential terms – is not compelling. The lack of
provisions regarding “what discovery rules apply, forum selection or rules of evidence” are
not essential in the sense that without them a contract could not be formed. An offer and
acceptance does not have to contain every term of the agreement.
Having concluded the attorney’s fee and fee-splitting clauses in the arbitration
agreement are invalid, the court now must determine whether, as defendant requests, those
provisions should be severed and arbitration compelled. Defendant argues that because the
“primary purpose of the agreement was to provide a mechanism to resolve employee-related
disputes ... severance of the fee and costs provision does not abrogate the primary purpose
of the Arbitration clause,” thereby making severance appropriate. Defendant’s reply, p. 9.
Courts look to state law when determining the effect of invalid provisions in an
arbitration agreement. E.g., Spinetti, 324 F.3d at 219. The Oklahoma Supreme Court has
held that “if the discriminatory and hence unenforceable provision is not considered essential,
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the offending provision will be excised and the remaining portions of the contract will be
enforced.” Hargrave v. Canadian Valley Elec. Coop., Inc., 792 P.2d 50, 60 (Okla.1990).
Clearly the primary purpose of the arbitration agreement was to provide a means of resolving
employment-related disputes. For that reason courts often sever provisions similar to those
found to be unenforceable here. E.g., Smith, 2012 WL 3156877 at *4. In light of the
purpose of the parties’ agreement and the liberal federal policy favoring arbitration
agreements,4 the court concludes the invalid attorney’s fee and fee splitting provisions should
be severed and plaintiff’s employment claims should be arbitrated under the remainder of the
agreement.5 See Spinetti, 324 F.3d at 214 (“You don't cut down the trunk of a tree because
some of its branches are sickly.”); see generally Herrera, 532 F.Supp.2d at 647 (if arbitration
clause had precluded arbitrator from awarding prevailing FMLA plaintiff attorney’s fees, the
proper remedy would have been to server the invalid provision because “[a]ny other
approach would serve to thwart the very essence of the arbitral agreement the parties have
reached.”).
Accordingly, defendant’s motion (Doc # 10) is GRANTED and the parties are
ordered to arbitrate plaintiff’s claims. The portion of the parties’ agreement referencing costs
and expenses of the arbitration and attorneys fees is deemed illegal and unenforceable.

4

Defendant asserts that “[i]n furtherance of the FAA’s pro-arbitration policy, an order
granting a motion to compel is not appealable . . . .” Defendant’s motion, p. 7 n.2. Some courts
have concluded otherwise. See e.g., Spinetti, 324 F.3d at 215, citing Green Tree, 531 U.S. at 89.
5

Shankle, relied upon by plaintiff, was not decided under Oklahoma law.
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Plaintiff’s claims against defendant will be stayed pending arbitration. 9 U.S.C. § 3. The
Clerk of Court is directed to administratively close this case in his records without prejudice
to the right of a party to move to have the case reopened upon completion of the arbitration
proceedings or for another proper purpose. If a motion to reopen is not filed within thirty
(30) days of completion of the arbitration proceeding, this action shall be deemed dismissed
with prejudice.
IT IS SO ORDERED.
Dated this 9th day of April, 2013.

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