Jensen v. Fisher Communications, Inc. et al
Filing
26
OPINION and ORDER - The Court GRANTS Fisher's Motion 15 to Dismiss and Compel Arbitration and REFERS this matter to arbitration in King County Washington pursuant to the Employment Agreement. DATED this 1st day of December, 2014, by United States Magistrate Judge John V. Acosta. (peg)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
THOMJENSEN
Civ. No. 3:14-cv-00137-AC
OPINION AND ORDER
Plaintiff,
v.
FISHER COMMUNICATIONS, INC., aka
Sinclair Broadcast Group, Inc., FISHER
BROADCASTING COMPANY, aka
Sinclair Television Media, Inc., and FISHER
BROADCASTING- PORTLAND TV,
LLC, aka Sinclair Television ofPortland,
LLC.
Defendants.
ACOSTA, Magistrate Judge:
Introduction
This case arises out of an employment agreement ("Employment Agreement") between Thorn
Jensen ("Jensen") and his former employers, Fisher Communications, Inc., Fisher Broadcasting
OPINION AND ORDER- I
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1
Company, and Fisher Broadcasting - Portland TV, LLC (collectively "Fisher"). Jensen filed this
suit in January 2014 stating ten employment-related claims for relief. Fisher now moves to dismiss
or stay this case, and compel arbitration pursuant to an arbitration clause governing disputes arising
out of the Employment Agreement. Jensen opposes arbitration. He argues the arbitration clause is
unconscionable and unenforceable under Oregon and federal law, and that Fisher has waived its right
to compel arbitration.
Factual Background
In October 2006, Fisher hired Jensen to serve as an investigative repmter on a news program
broadcast on KATU-TV, a television station in Pmtland, Oregon. (Declaration of John Tamerlano
in Support of Motion to Compel Arbitration ("Tamerlano Dec!.") Ex. Bat 1, 8.) Jensen served for
seven years atKATU-TV. (Tamerlano Dec!. Exs. C, D.) After he completed his three-year contract
signed in 2006, he subsequently signed two-year extensions in 2009 and 2011.
The three
employment agreements are largely identical, the primary difference being Jensen's yearly salary,
which increased from $75,000 to $88,000 during his seven years with KATU-TV. (Id.)
Included in each of Jensen's three contracts is a section entitled "Resolutio n ofDisputes, Fees
and Costs." (Tamerlano Dec! Exs. B, C, D.) That section provides that, for any controversy or claim
"arising out of, or relating to, [Jensen's] employment or termination of employment" with Fisher,
the patties will first attempt to negotiate the matter. (Tamerlano Dec!, Ex B, C, D at 6-7.) If the
Fisher Communications, Inc., Fisher Broadcasting Company, and Fisher Broadcasti ngPortland TV, LLC have changed their names and are now known as Sinclair Broadcasting Group,
Inc., Sinclair Television Media, Inc., and Sinclair Television of Portland, LLC respectively. The
court will nonetheless refer to Defendants as "Fisher," as that is the name used by both parties in
their comt filings.
1
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parties cannot successfully negotiate a mutually agreeable resolution, the contract calls for a nonbinding mediation. (Tamerlano Dec!, Ex. D at 7.) If the dispute persists after mediation, then:
[t]he dispute shall be settled by final and binding arbitration in Seattle, Washington,
in accordance with the national rules for the resolution of employment disputes ofthe
American Arbitration Association. The arbitrator shall have the power to award
monetary damages, costs, and reasonable attomeys' fees to the prevailing pmty. The
only disputes not covered by this Agreement shall be worker's compensation claims,
claims for unemployment compensation, and claims for injunctive relief and/or
equitable relief by the Company for violation of Section 6 above. The parties agree
to abide by and perfmm in accordance with any award rendered by the arbitrator, and
agree that judgment upon the award may be entered by the prevailing party in any
coUlt having jurisdiction thereof. The arbitrator's fees and costs of arbitration shall
be home equally by the pmties, subject to the authority above of the arbitrator to
awm·d costs and reasonable attomeys' fees to the prevailing party; provided, however,
that arbitration costs which are prohibitively expensive for the Employee may be
borne by the company, including such costs as the arbitration filing fee and the
arbitrator's expenses.
Should either party file a judicial or administrative action asserting claims which are
subject to this arbitration provision, and the other party successfully stays such action
and/or succeeds in compelling arbitration of such claims, the party which filed the
action shall pay the other pmty's costs and expenses incurred in seeking a stay or
compelling arbitration, including its reasonable attorneys' fees.
(Tamerlano Dec!. Exs. B, C, D at 7.)
Procedural Background
In March 2013, Jensen filed a claim for Declaratory Judgment in Multnomah County Circuit
Court. (Declaration of Aaron W. Baker ("Baker Dec!.") Ex. A.) In his complaint, Jensen asked the
court to declare the non-compete provisions of the Employment Agreement void and award him
attomey fees and costs pursuant to OR. REv. STAT. § 28.1 00. (Baker Dec!. Ex. A at 3.) Fisher filed
an answer followed by a motion for summary judgment. Neither ofFisher's documents mentioned
the arbitration clause or asserted that the matter was improperly before the Multnomah County CoUlt.
The record does not reflect if, when, or how Jensen's Multnomah County CoUlt case resolved.
FINDINGS & RECOMMEN DATION- 3
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In January 2014, Jensen filed the present class-action suit in the U.S. District Court for the
District of Oregon. (Dkt. No. 1.) Fisher answered Jensen's complaint and again did not asse1t or
otherwise raise its contractual right to arbitration. (Dkt. No. 10.) However, on June 5, 2014, Fisher
filed a Motion to Compel Arbitration. (Dkt. No. 15.) In it, Fisher asks the court to dismiss, or
alternatively, stay the present suit and order Jensen to participate in a binding arbitration in Seattle,
Washington pursuant to the Employment Agreement. (Id.)
Legal Standard
The Federal Arbitration Act ("the FAA") establishes the validity and enforceability of
agreements to arbitrate disputes arising out of contract, "save upon such grounds as exist at law or
in equity for the revocation of any contract." 9 U.S.C. § 2. As a general principle, the Supreme
Comt has held that arbitration agreements in employment contracts are valid and enforceable. See
Circuit City Stores v. Saint Clair Adams, 532 U.S. 105, 119 (2001) (the exemptio n in the FAA for
employment contracts extends only to those of transportation workers). The FAA expresses the
strong federal policy in favor of arbitration. Moses H Cone Mem 'I Hosp. V. Mercury Constr. Corp.,
460
u.s. 1, 24 (1983).
"Evaluating a motion to compel arbitration requires a court to determine: '(1) whether a valid
agreement exists, and if it does, (2) whether the agreement encompasses the dispute at issue."'
Simpson v. Lifestyles, LLC, Civil No. 07-1251-HA, 2008 WL 1882838, at *2 (D. Or. Apr. 24, 2008),
quoting Chiron Corp. v. Ortho Diagnostic Sys., 207 F.3d 1126, 1130 (9th Cir.2000). If the
agreement is valid and encompasses the dispute, the comt must "enforce the arbitration agreement
in accordance with its terms." Id Furthermore, there is "a presumption in favor of arbitrability."
Livingston v. Metropolitan Pediatrics, LLC, 234 Or. App. 137, 147 (2010).
FINDINGS & RECOMM ENDATI ON - 4
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An othe1wise valid arbitration clause may be found unconscionable and, thus, unenforceable.
This is a question of law to be determined by the comt and is "based on the facts in existence at the
time the contract was made." Id at 151, citing Bestv. US. National Bank, 303 Or. 557, 560 (1987).
Contract terms are evaluated for both procedural and substantive unconscionability, and the party
asserting it bears the burden of demonstrating unconscionability. Simpson, 2008 WL 1882838, at
*9.
Discussion
I. Applicability of the Federal Arbitration Act
Before reaching the merits of Fisher's motion, the court must make first
dete~mine
the
applicable law. Federal courts siting in diversity must apply state substantive law and federal
procedural law. Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 427 (1996). However, the
distinction between the procedural and substantive is not always clear. Id. In parsing the procedural
from the substantive, courts analyze whether the law in question has "so important an effect upon
the fortunes of one or both of the litigants that failme to apply it" would lead to inconsistent results
or judicial forum shopping. Hanna v. Plummer, 380 U.S. 460, 468 n.9 (1965). More recently, the
Supreme Court held that a state statute is substantive if it "significantly affects the result of a
litigation" on the merits. Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 559 U.S. 393,
406 (2010).
The Federal Arbitration Act ("FAA") "was enacted in 1925 in response to widespread
judicial hostility to arbitration agreements." AT&T Mobility LLC v. Conception, -U.S.-, 131 S.
Ct. 1740, 1745 (2011). It expresses a "liberal federal policy favoring arbitration" and shows an
"unmistakably clear congressional purpose that the arbitration procedure, when selected by the
FINDINGS & RECOMMENDATION- 5
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patties to a contract, be speedy and not subject to delay and obstruction in the coutts." Id.; Prima
Paint Corp. v. Flood & Conclin Mfg. Co., 388 U.S. 395,404 (1967). The Supreme Court has held
that the FAA is "substantive law" for Erie analysis purposes, but nonetheless applies it in diversity
cases. Id. The court explained:
[t]he question in this case . . . is not whether Congress may fashion federal
substantive rules to govern questions arising in simple diversity cases. Rather the
question is whether Congress may prescribe how federal courts are to conduct
themselves with respect to subject matter over which Congress plainly has power to
legislate. The answer to that can only be in the affirmative. And it is clear beyond
dispute that the federal arbitration statute is based upon and confined to the
incontestable federal foundations of 'control over interstate commerce and over
admiralty.'
Id. at 405. Although the Court's holding in Prima Paint Corp. appears to entirely obviate the Erie
analysis entirely so long as Congress intended a substantive statute to apply in diversity cases, the
Coutt has repeatedly upheld Paint Corp., and Erie analyses remain commonplace in diversity cases.
Allied-Bruce Terminix Companies, Inc. v. Dobson, 513 U.S. 265,271 (1995). The Court has even
extended the FAA to apply in state coutts where no federal jurisdiction exists and held that the FAA
preempts state laws which would invalidate arbitration provisions which otherwise are enforceable
under the FAA. Id.,AT& T Mobility LLC, 131 S. Ct. at 1753.
The FAA applies to all transactions and agreements between individuals in commerce. 9
U.S.C. § 1. Because of the broad language used therein, Congress intended the FAA to have an
"expansive" reach and "provide for the enforcement of arbitration agreements within the full reach
of the Commerce Clause." Perry v. Thomas, 482 U.S. 483, 490 (1987). In EEOC v. Wajjle House,
Inc, the Supreme Comt specifically held that "[e]mployment contracts, except for those covering
workers engaged in transpottation, are covered by the FAA." 534 U.S. 279,289 (2002).
FINDINGS & RECOM MENDA TION- 6
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interstate commerce.
The parties do not dispute that the Employment Agreement is in
and Fisher.
Therefore, the FAA applies to the Employment Agreement between Jensen
II. Merits of Fisher 's Motion
Fisher argues that, under theFAA's broad language, the arbitration clause
ofthe Employment
to submit to arbitration.
Agreement is valid and enforceable, and the court should require Jensen
Jensen disagrees and contends that the contract is unenforceable under
generally applicable Oregon
contract law.
The FAA provides that agreements to arbitrate "shall be valid, irrevoc
save upon such grounds as exist at law or in equity for the revocation
able, and enforceable,
of any contract." 9 U.S.C. §
according to principles of
2. Thus, under the FAA, an arbitration clause can be invalidated only
contract law which may invalidate contracts generally, like unconsciona
bility, lack of consideration,
n to determine whether
or formation problems. State law provides the substantive law of decisio
the
However, to be consistent
arbitration clause is enforceable. AT&T Mobility LLC, 131 S. Ct. at 1746.
cts and must not place
with the FAA, the state law must be generally applicable to all contra
As the court held in Docto r's
heightened standards of enforceability on arbitration agreements. !d.
tion agreements under state
Associates, Inc. v. Casarotto, "[c]ourts may not ... invalidate arbitra
laws applicable only to arbitration provisions" because arbitration agreem
ents must be put on "the
same footing as other contracts." 517 U.S. 681,68 7.
ents in Oregon, and
OR REv. STAT. § 36.620 governs the validity of arbitration agreem
provides:
existing or
(1) An agreement contained in a record to submit to arbitration any
ent is valid,
subsequent controversy arising between the patties to the agreem
in equity for
enforceable and irrevocable except upon a ground that exists at law or
the revocation of a contract.
FINDINGS & RECO MME NDAT ION- 7
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an agreement to arbitrate exists or a
(2) . . . the court shall decide whether
trate.
controversy is subject to an agreement to arbi
into between an employer and employee
(5) A written arbitration agreement entered
this section is voidable and may not be
and otherwise valid under subsection (1) of
enforced by a court unless:
the employee's employment, the
(a) At least 72 hours before the first day of
employment offer from the
employee has received notice in a written
is required as a condition of
employer that an arbitration agreement
provided with the required
employment, and the employee has been
irements of, and includes the
arbitration agreement that meets the requ
of this section; or
acknowledgment set forth in, subsection (6)
upon a subsequent bona fide
(b) The arbitration agreement is entered into
r.
advancement of the employee by the employe
specifically to, and creates a higher bar of
ause OR. REv. STAT. § 36.620(5) applies
Bec
urt v.
it is likely precluded by the FAA. Bettenco
validity to enforce, arbitration agreements,
at *7 (D. Or.
, No. 09-cv-1200-BR, 2010 WL 274331,
Brookdale Senior Living Communities, Inc.
issue, as
ed). However, the court need not decide that
Jan. 14, 2010) (finding§ 36.620(5) preempt
Instead, he
e that the arbitration agreement is invalid.
Jensen does not rely on § 36.620(5) to argu
the FAA
defenses to contract are available even if
uses the statute to underscore that state-law
(1) the
se to apply the arbitration agreement because:
applies. He then contends the court should refu
Employment Agreement is a contract of adh
esion void for public policy reasons; (2) the
ved its opportunity to com
clause is unconscionable; and (3) Fisher wai
arbitration
pel arbitration.
A. Contract ofAdhesion
Jensen first argues that the entire Employm
ent Agreement is void or voidable because
it is
l
"an agreement between parties of unequa
of adhesion. A contract of adhesion is
a contract
FINDINGS & RECOMMENDATION- 8
[RM D]
it-or-leave-it' basis." Sprague v. Quality
bargaining power, offered to the weaker patty on a 'take-
Reeves v. Chern Industrial Co. 262 Or.
Restaurants Nw., Inc., 213 Or. App. 521, 526 (2007), citing
as procedurally unfair, and may be void
95, 101 (1972). Contracts of adhesion are often viewed
. See Sprague, 213 Or. App. at 526
when coupled with unfair or umeasonable substantive terms
(finding a contract of adhesion evidence of procedural unfai
rness). "However, under Oreg on law,
it unenf
the fact that a contract is adhesive does not alone render
orceable." Id. In fact, contracts of
ercial life" and are regulm·ly enforced by
adhesion "are a comm on feature of contemporary comm
contract is but one factor courts use to
Oregon courts. Id. Instead, the adhesive nature of a
determine whether a contract or contract provision is uncon
scionable. Id. Although the Employment
Agreement contains some characteristics of a contract of
adhesion, this fact alone is not sufficient
to invalidate the Employment Agreement.
A challenge to the validity of a contract containing an arbitr
ation clause can be of two types,
that challenge is determined. In Buckeye
and the type fo challenge determines the venue in whic h
:
Check Cashing, Inc. v. Cardegna the Supreme Com t wrote
be divided into two types.
Challenges to the validity of m·bitration agreements ... can
to arbitrate. The other
One type challenges specifically the validity of the agreement
directly affects the entire
challenges the contract as a whole, either on a ground that
or on the ground that the
agreement (e.g., the agreement was fraudulently induced),
whol e contract invalid.
illegality of one of the contr act's provisions renders the
category of contractual challenges, those
546 U.S. 440, 444 (2006) (citations omitted). The latter
be decided by an arbitrator. Id. at 446.
whic h challenge the validity of an entire contract, must
ed by the court. Id.
Conversely, the fmme r category of challenges may be decid
FINDINGS & REC OMM END ATIO N- 9
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In arguing that the Employment Agreement
is a contract of adhesion, Jens en's challeng
e falls
ract. This
urges the com t to invalidate the entire cont
into the latter Buckeye category because he
challenge must be decided by the arbitrato
r, not the comt.
B. Unconscionability
Second, Jensen argues that the arbitration clau
se is unenforceable because it is procedurally
Jens en's adhesion argument, this argu
and substantively unconscionable. Unlike
the unconscionabilit
the arbitration clause. Thus, under Buckeye
In Oregon, as in most jurisdictions, contrac
ment attacks only
y issue is decided by the court.
ts or pa1ts ther eofmay be invalidated because
they
(2007). The
eficial Oregon, Inc., 210 Or. App. 553, 566
are unconscionable. Vasquez-Lopez v. Ben
Or. App. at
burden of pro of on the issue. Sprague, 213
party asserting unconscionability bears the
s in existence
n ofla w "to be assessed on the basis of fact
525. Further, unconscionability is a questio
-Lopez, 210 Or. App. at 566.
at the time the contract was made." Vasquez
ive
a procedural component and a substant
Unconscionability is defined relative to
substantively
ire a contract to be both procedurally and
component. Id. Some jurisdictions requ
onscionable
ision. Id. Others will find a contract unc
unconscionable to void the one-sided prov
not
edural unconscionability. Id. "Oregon has
n the presence of either substantive or proc
give
,
and substantive unconscionability are relevant
a formal template." Id. "[B]oth procedural
adopted
case
lutely necessary. With that proviso, each
h only substantive unconscionability is abso
althoug
is decided on its own unique facts." I d.
1. Procedural Unconscionability
Procedural Unconscionability refers to the
conditions under which a contract is formed.
Id.
surprise. Oppression arises from an
[It] focuses on two factors: oppression and
lts in no real negotiation and an absence
inequality of bargaining power which resu
FINDINGS & REC OM ME ND ATI ON - 10
[RM D]
eedextent to which the supposedly agr
ngful choice. Surprise involves the
of meani
by the party
den in a prolix printed form drafted
upon terms of the bargain are hid
seeking to enforce the terms.
rn. ,Inc., 211 F. Supp. 2d 1160,
!d., quoting Acorn v. Household Inte
California law defining unconscio
1168 (N.D. Cal. 2002) (applying
nability).
Som e
nce of bargaining power exists.
tractual relationship, some imbala
In nearly any con
ion,
en Jensen and Fisher were no except
icates contract negotiations bet we
evidence on the record ind
Agreement. Bu t despite Fis her 's
certain portions of the Employment
as Fisher refused to negotiate
g pow er as sho wn
t, Jensen clearly had some bargainin
negotiate certain terms ofthe contrac
refusal to
ry, the term of the
terms of the contract: Jen sen 's sala
ties ' negotiation oftlu-ee express
by the pm
ess to negotiate
to certain holidays. An unwillingn
Jen sen 's wo rk schedule as it related
contract, and
does not render
bargaining process oppressive and
s of a con trac t does not render the
some portion
ed above tha t
Moreover, although the court not
orceable contract unconscionable.
an otherwise-enf
clusion does
of a contract of adhesion, that con
reement has some characteristics
the Em plo ym ent Ag
t-negotiation
g process. Therefore, the contrac
ing of oppression in the bargainin
not mandate a find
process wa s not "oppressive."
stence of
reement do not evidence the exi
language of the Employment Ag
Th e terms and
ment bears the bol d and underlined
twelve oft he Em plo ym ent Agree
"sm pri se, " however section
states the appropriate procedure to
put es, Fees and Costs" and clearly
heading "Resolution of Dis
Employment Agreement:
resolve disputes arising out of the
otiation
dispute through negotiation. If neg
pt shall first be ma de to resolve the
Attem
e to mediation .
the pm ties shall submit the disput
wit hou t me dia tion is unsuccessful,
led by final
uccessful, the dispute shall be sett
negotiation and mediation are uns
. . . If
the national rules
, Washington, in accordance wit h
and binding arbitration in Seattle
ociation.
es of the American Arbitration Ass
resolution of employment disput
for the
TIO N- 11
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(Tamerlano Dec!. Ex. D at 7.) The language explaining the dispute-resolution process is not hidden
in fine print or prolix, or stated in terms incomprehensible to a layperson. Futther, at only nine
pages, the Employment Agreement is not so long as to conceal the arbitration agreement by the sheer
volume of material. In addition, Jensen signed three nearly identical Employment Agreements
between 2006 and 2011, all of which contained the agreement to arbitrate. Parties to a contract
generally are presumed to have read the contract's terms. Tokyo Ohlw Kogyo America, Inc. v.
Huntsman Propylene Oxide LLC, -F. Supp. 2d -,No. 3:13-cv-01580-SI, 2014 WL 3893031, at
*15 (D. Or. Aug. 8, 2014). Therefore, the court must presume that Jensen read the Employment
Agreement and its predecessor versions, before signing them and was, thus, not surprised by the
contents of the Employment Agreement he now challenges. The record does not show he objected
to either of his previous contracts or to the arbitration clauses they contained.
At oral argument, Jensen argued that the Employment Agreement and its predecessors
contain elements of "surprise" because the arbitration clause does not contain language explicitly
waiving Jensen's right to a jury trial. However, Jensen did not present any authority to support his
argument, and did not carry his burden on the issue.
Therefore, although the Employment
Agreement has some elements of procedural unconscionability, is not so unfair as to mandate the
contract's invalidation.
2. Substantive Unconscionability
Jensen claims the arbitration clause is substantively unconscionable for two reasons. First,
he argues it is unreasonable that the arbitration agreement requires arbitration to occur in Seattle,
Washington. Second, Jensen contends that arbitration would be prohibitively expensive and would
deny him access to an arbitral forum.
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A substantively unconscionable contract is a contract whose terms are unfairly
favorable to
actual terms of the
the party of superior bargaining power, and the comt's analysis focuses on the
lity, courts apply
contract. Vasquez-Lopez, 210 Or. App. at 567. Like other aspects of unconscionabi
However, comts have
a totality-of-the-circumstances approach to substantive unconscionability. Id.
found arbitration agreements substantively unconscionable where they bar all class-a
ction litigation
and contain unreasonable fee-sharing provisions. Jd at 571-75.
a v. Banco
The enforceability of forum-selection clauses is controlled by federal law. Arguet
are entitled to a
Mexicano, S.A., 87 F.3d 320, 324 (9th Cir. 1996). Forum-selection clauses
presumption of validity, "and should not be set aside unless the patty challen
ging enforcement ...
on marks omitted).
can show it is unreasonable under the circumstances." ld. at 325 (internal quotati
Under prevailing precedent:
t was
A forum selection clause is umeasonable if (1) its incorporation into the contrac
the
the result of fraud, undue influence, or overweening bm·gaining power; (2)
party
selected forum is so "gravely difficult and inconvenient" that the complaining
or (3) enforcement
will "for all practical purposes be deprived of its day in court;"
suit
of the clause would contravene a strong public policy of the forum in which the
is brought.
!d. (citations omitted).
nable. He
Jensen does not carry his burden to prove the forum-selection clause is umeaso
does not argue the clause resulted from "fraud, undue influence, or overweening
bargaining power, "
counsel against
nor does he point to a "strong public policy" of this jurisdiction which would
gton is umeaso nable
enforcement. Instead Jensen argues the selected fmum of Seattle, Washin
Oregon. The court
because at the time he signed the agreement, he lived and worked in Pmtland,
t or inconv
disagrees. This relatively minor geographic distance is not "so gravely difficul
enient" so
d, Oregon to Seattle,
as to deprive him of his ability to arbitrate this dispute. Driving from Pmtlan
FINDINGS & RECO MMEN DATIO N- 13
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Washington takes only three hours, and Jensen has not produced evidence showing that, similar to
the Vasquez-Lopez plaintiffs, his resources and income are disproportionately small compared to the
anticipated cost of arbitration. Thus, the court concludes that requiring arbitration in Seattle would
not deprive Jensen of his day in comt. ld.
Jensen also does not sufficiently demonstrate the fee-shifting provisions of the arbitration
agreement make arbitration prohibitively expensive. An arbitration agreement is unenforceable
when the cost of arbitrating a matter functionally denies a claimant access to an arbitral forum.
Vasquez-Lopez, 210 Or. App. at 573-74.
Denial of access to an arbitral forum occurs when the cost of arbitration is large in
absolute terms, but also, comparatively, when that cost is significantly larger than the
cost of a trial; otherwise, it is the existence of the claim itself and not the forum
choice that deters the plaintiff.
ld. at 574.
The fee-shifting aspect of the arbitration clause does not render the clause unconscionable.
In Green Tree Financial Corp.-Ala. v. Randolph, 531 U.S. 79, 91 (2000), the plaintiff asked the
court to invalidate an arbitration agreement because arbitrating the dispute at issue would have been
prohibitively expensive in comparison to litigation. Id. at 84. However, the agreement did not
specify the proportion of costs to be borne by each party or the expected cost of the arbitration. Id.
The agreement's silence on these issues would have required the court to estimate the costs involved
and speculate as to the manner in which those costs would likely be divided. Id. at 90-91. Because
there was insufficient evidence that arbitration would be prohibitively expensive for the plaintiff, the
court rejected the plaintiffs argument and held that "[t]he 'risk' that [plaintiff] will be saddled with
prohibitive costs is too speculative to justify invalidation of an arbitration agreement." Id. at 91.
FINDINGS & RECOMMENDA TION- 14
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An example of a substantively unconscionable fee-sharing provision can be found in
Vasquez-Lopez. 210 Or. App. at 574-75. There, the arbitration agreement in Plaintiffs mmigage
provided: (I) the lender-defendant would pay the first $100.00 of arbitration filing costs; (2) the
remaining filing costs would be divided equally among the patiies; (3) arbitration costs exceeding
the claimant's loan amount were to be paid by the claimant; and (4) the arbitrator's fees for the first
day of hearings would be divided equally among the patiies, but the cost for subsequent days of
hearings would be borne only by the party requesting arbitration. Id. at 572. The court determined
that the precise language of the fee-sharing agreement removed any speculation about the costs
associated with the plaintiffs' anticipated arbitration. Id. at 574. Further, the court reasoned that,
"by the second hour of the second day of arbitration, [plaintiffs] would owe $1 ,000 in arbitration fees
and that, with their cunent earnings and expenses, they would need six months to save that amount
of money." I d. at 572. Thus, according to the Oregon Comi of Appeals, the arbitration clause at
issue was substantively unconscionable and unenforceable. Id. at 574-75.
The fee-shifting provision in the Employment Agreement is not substantively
unconscionable. The Employment Agreement provides that "[t]he arbitrator's fees and costs of
arbitration shall be borne equally by the patiies," but "[t]he arbitrator shall have the power to award
monetary damages, costs, and reasonable attorneys' fees to the prevailing patiy." (Tamerlano Dec!.
Ex. D at 7.) However, it goes on to state that "arbitration costs which are prohibitively expensive
for the Employee may be borne by the Company, including such costs as the arbitration filing fee
and the arbitrator's expenses." (Tamerlano Dec!. Ex. D at 7.) Like the Green Tree fee-shifting
provision, the wording of the present agreement leaves the court to speculate as to (I) the amount
of fees likely necessaty to fully arbitrate the matter; (2) whether the arbitrator will award fees and
FINDINGS & RECOMMENDATION- 15
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costs to the prevailing party; and (3) whether the cost truly will be prohibitively expensive for
Jensen. Further, the agreement specifically provides that, if the costs of arbitration are prohibitively
expensive, the costs will be borne by Fisher.
In sum, the arbitration clause is neither procedurally nor substantively unconscionable.
Therefore, the court will not invalidate the arbitration agreement as unconscionable and grants
Fisher's motion to compel arbitration so long as they did not waive their right to arbitration.
3. Waiver
Third, Jensen argues even if the arbitration clause is enforceable, Fisher waived its right to
compel arbitration by failing to raise the arbitration clause during Jensen's previous Multnomah
County Circuit Court case or in Fisher's answer to Jensen's complaint in this case. Fisher denies that
they waived their right to arbitrate but that, regardless, the issue should be decided by the arbitrator
instead ofthis court. The comt agrees with Fisher and concludes that the arbitrator is the appropriate
decisiomnaker on issues of waiver. 2
Under the FAA, state laws governing contract interpretation are determinative when
analyzing choice of forum issues. Citigroup Smith Barney v. Henderson, 241 Or. App. 65, 72
(2011). Parties may agree to a particular fotum of decision or to apply "a particular state's
substantive contract law to their dispute or a state's procedural rules to their arbitration hearing."
!d. at 72, quoting Industria/Matrix Joint Venture v. Pope & Talbot, Inc., 341 Or. 321, 330 (2006).
However, "where the arbitration agreement is silent as to whether the court or the arbitrator should
2
The court notes that the arbitration clause expressly exempts from its application "claims
for injunctive relief and/or equitable relief by the Company for violation of Section 6 above."
(Tamaerlano Dec!., Ex. D at 7.) The parties Multnomah County lawsuit involved Jensen's noncompete obligations in Section 6.
FINDINGS & RECOMMENDATION- 16
[RMD]
decide issues of waiver, the FAA supplies a default rule: It is presumed that waiver issues are to be
decided by the arbitrator." Citigroup Smith Barney, 241 Or. App. at 72, citing Howsam v. Dean
Witter Reynolds, Inc., 537 U.S. 79, 84-85 (2002). In fact, nearly all issues of procedural arbitrability,
like waiver, should be decided by the arbitrator absent a binding agreement otherwise. !d. at 85. The
Employment Agreement is silent on the issue of waiver, so the court declines to decide the issue and
instead refer it to the arbitrator.
Conclusion
For the aforementioned reasons, the court GRANTS Fisher's Motion to Dismiss and Compel
Arbitration and refers this matter to arbitration in King County Washington pursuant to the
Employment Agreement.
DATED this 1st day of December, 2014.
~OHN V. A OSTA
Unit\~ States
FINDINGS & RECOMMENDATION- 17
Magistrate Judge
[RMD]
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