Melendez et al v. Sheraton PR Management, LLC et al

Filing 21

OPINION AND ORDER re 13 Motion to Dismiss and to Compel Arbitration. Signed by US Magistrate Judge Bruce J. McGiverin on 2/1/2013. (jm)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO

JULIO CESAR MELENDEZ, ET AL.,

Civil No. 12-1516 (JAG/BJM)

Plaintiffs,
v.
STARWOOD HOTELS & RESORTS
WORLDWIDE, INC., ET AL.,
Defendants.

OPINION AND ORDER
Julio C. Meléndez (“Meléndez”) and Sylvia Elizabeth Meléndez (“Mrs. Meléndez”) sued
Starwood Hotels and Resorts Worldwide, Inc. (“Starwood”) and Sheraton Puerto Rico
Management, LLC, (“Sheraton”), alleging age discrimination and unjust dismissal pursuant to
federal and Puerto Rico law. (Docket No. 1). Defendants answered the complaint (Docket No.
14) and filed a motion to dismiss and to compel arbitration. (Docket No. 13). Specifically,
defendants moved to dismiss Meléndez’s claims for lack of subject matter jurisdiction and
improper venue under Federal Rule of Civil Procedure 12(b)(1) and (3), and to compel
arbitration under the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1 et seq. (Id.). Defendants
moved to dismiss Mrs. Meléndez’s claims without prejudice or, in the alternative, to stay
proceedings pending resolution of Meléndez’s claims through arbitration.

(Id.).

Plaintiffs

opposed (Docket No. 15), and defendants replied. (Docket No. 19). This matter was referred to
me under 28 U.S.C. § 636(b)(1)(A). (Docket No. 17). For the reasons that follow, defendants’
motion to compel arbitration is granted.

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STANDARD ON MOTION TO DISMISS
Federal Rule of Civil Procedure 12(b)(1) is a “large umbrella, overspreading a variety of
different types of challenges to subject-matter jurisdiction,” Valentin v. Hosp. Bella Vista, 254
F.3d 358, 362-63 (1st Cir. 2001), including the existence of a valid arbitration agreement
covering the dispute. See Evans v. Hudson Coal Co., 165 F.2d 970, 972-73 (3d Cir. 1948) (“Rule
12(b)(1) will authorize the defendant to make an application for a stay pending arbitration if, as a
matter of law, the issues presented by the instant suit are referable to arbitration.”). In deciding a
motion to dismiss for lack of subject matter jurisdiction, the court “must construe the complaint
liberally, treating all well-pleaded facts as true and drawing all reasonable inferences in favor of
the plaintiffs.” Viqueira v. First Bank, 140 F.3d 12, 16 (1st Cir. 1998) (citing Royal v. Leading
Edge Prods., Inc., 833 F.2d 1, 1 (1st Cir. 1987)). However, “the court may consider whatever
evidence has been submitted,” including exhibits, without converting the Rule 12(b)(1) motion
into a motion for summary judgment. Aversa v. United States, 99 F.3d 1200, 1210 (1st Cir.
1996).
STANDARD ON MOTION TO COMPEL ARBITRATION
Under the FAA, “[a] party aggrieved by the alleged failure, neglect, or refusal of another
to arbitrate under a written agreement for arbitration may petition any United States district court
which, save for such agreement, would have [civil or admiralty] jurisdiction . . . for an order
directing that such arbitration proceed in the manner provided for in such agreement.” 9 U.S.C.
§ 4.

Federal policy strongly favors arbitration over litigation, so long as an agreement to

arbitrate exists in the first place. See HIM Portland, LLC v. DeVito Builders, Inc., 317 F.3d 41,
43 (1st Cir. 2003). Thus, “there is a presumption of arbitrability in the sense that ‘[a]n order to
arbitrate the particular grievance should not be denied unless it may be said with positive
assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted

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dispute.’” AT & T Techs., Inc. v. Communs. Workers of Am., 475 U.S. 643, 650 (1986) (quoting
Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582-583 (1960)); Mun’y of San
Juan v. Corp. Para El Fomento Econ. De La Ciudad Capital, 415 F.3d 145, 149 (1st Cir. 2005).
“By its terms, the Act 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.” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213,
218 (1985) (emphasis in original). Thus, if neither “the making of the agreement for arbitration”
nor the “failure to comply therewith” are in issue, a court must order arbitration “in accordance
with the terms of the agreement.” 9 U.S.C. § 4. If either “the making of the arbitration
agreement or the failure, neglect, or refusal to perform the same” are at issue in the case, the nonmoving party may demand a jury trial of that issue; in the absence of such a demand, the court
“shall hear and determine such issue.” Id.
FACTUAL AND PROCEDURAL BACKGROUND
The factual background is taken from the Complaint (Docket No. 1) as well as other
documents filed by the parties.
Meléndez began working for Starwood in 1999. (Docket No. 1, p. 3). In March 2008,
Starwood named Meléndez as Director of Finance of the Westin Roco Ki Beach and Golf Resort
in Macao, Dominican Republic. Meléndez signed an employment offer letter with Starwood
(“Dominican Republic Contract”). The contract included an “Exclusive Dispute Resolution
Procedure” clause (“clause”) and a “Mutual Agreement to Arbitrate” (“MAA”). (Docket No. 13,
p. 2-3; Docket No. 14, p. 1). The clause stated that “[a]ny and all disputes relating to this offer
letter, your transfer at Starwood or the termination of employment in the Dominican Republic
will be resolved solely and exclusively through the Dominican Labor Courts pursuant to the
employment rules of the Dominican Labor Code.” (Docket No. 13-1, p. 2). The MAA stated:

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…Starwood Hotels & Resorts Worldwide, Inc. (“Starwood”) and I hereby agree that,
except as otherwise provided herein, all disputes and claims for which a court otherwise
would be authorized by law to grant relief, in any manner, that I may have, now or in the
future, during or after my employment with Starwood, of any and every kind or nature
whatsoever with or against Starwood, any of Starwood’s affiliated or subsidiary
companies, partners, joint ventures, owners of properties Starwood manages, and/or any
of his, her, its or their directors, officers, employees or agents, or any disputes and claims
that Starwood may have against me (collectively, “Claims”), shall be submitted to the
American Arbitration Association (“AAA”) to be resolved and determined through final
and binding arbitration before a single arbitrator and to be conducted in accordance with
the Dominican Labor Laws.
[…]
Starwood and I hereby agree that the Claims subject to arbitration shall include but not be
limited to any and all Claims that arise out of or are related to the offer of employment,
transfer or promotion extended by Starwood to me, any withdrawal or rescission of that
offer, any aspect of my employment with Starwood or the terms and conditions of that
employment, any claim for bonus, vacation pay or other compensation, any termination
of that employment and any Claim of discrimination, retaliation, or harassment based
upon age, race, religion, sex, creed, ethnicity, pregnancy, veteran status, citizenship
status, national origin, disability, handicap, medical condition, sexual orientation or any
other unlawful basis, or any other unlawful conduct.
[…]
By entering into this Agreement, Starwood and I each specifically acknowledge and
understand that the right to the determination and/or trial of any Claims in court before
any judge or jury is a valuable right, and that by signing this Agreement Starwood and I
hereby knowingly and voluntarily waive any and all rights we may have to assert any
Claims in any court of competent jurisdiction and to a determination and/or trial before a
judge or a jury.
[…]
This Agreement shall survive my employer-employee relationship with Starwood and
shall apply to any covered Claim whether arising or asserted during my employment or
after the termination of my employment with the Company. This Agreement can be
modified or revoked only by a writing signed by both Starwood’s Executive Vice
President, Human Resources and me and that expressly refers to this Agreement and
specifically states an intent to modify or revoke it. This is the complete agreement of the
parties on the subject of arbitration of disputes. (Docket No. 13-2, p. 1-3).
Starwood later named Meléndez as Director of Finance at the Sheraton Puerto Rico
Convention Center Hotel, where he worked from June 2009 to November 2011. (Docket No. 1,
p. 3). In April 2009, Meléndez signed another employment contract with Starwood for this new

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position (“Puerto Rico Contract”). (Docket No. 19, p. 2). This contract also included an
exclusive dispute resolution procedure clause and an arbitration agreement. (Docket No. 19-1, p.
3). That clause states:
Any and all disputes relating to this offer letter, your transfer at Starwood or the
termination of that employment will be resolved solely and exclusively through binding
arbitration pursuant to the employment rules of the American Arbitration Association.
Accordingly, you acknowledge and agree that this offer of employment and the benefits
provided herein are contingent upon your execution of the Arbitration Agreement
provided to you herewith (Attachment A). 1 (Id.)
In November 2011, Meléndez was informed that he was being investigated for breaking
company rules and was sent home pending outcome of the investigation. Two days later, he was
informed that his employment was being terminated for allegedly sexually harassing a staff
member for about a year. Meléndez was 62 years old at the time. (Docket No. 1, p. 3-5).
Defendants initially argued that Meléndez is bound by the agreement to arbitrate in the
Dominican Republic Contract. Plaintiffs argue that Meléndez was not bound by the Dominican
Republic Contract because that contract was resolved when Meléndez was transferred to Puerto
Rico. (Docket No. 15, p. 1-2). Defendants counter that Meléndez also signed the Puerto Rico
Contract for his position as Director of Finance at the Sheraton Puerto Rico Convention Center
Hotel, and that he is bound by the arbitration provisions contained in both contracts. (Docket
No. 19, p. 2).
DISCUSSION
Section 2 of the FAA provides that written agreements to arbitrate “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 (1947). There is a strong federal policy favoring
arbitration, and any doubts concerning the scope of the arbitrable issues should be resolved in

1

Copy of the referenced arbitration agreement was not included and is not available in the record.

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favor of arbitration. Kristian v. Comcast Corp., 446 F.3d 25, 35 (1st Cir. 2006) (citing Moses H.
Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983)).

“By its terms, the

[FAA] 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.” Byrd, 470 U.S. at 218 (emphasis in original).
“A party who attempts to compel arbitration must show that a valid agreement to arbitrate
exists, that the movant is entitled to invoke the arbitration clause, that the other party is bound by
that clause, and that the claim asserted comes within the clause’s scope.” InterGen N.V. v. Grina,
344 F.3d 134, 142 (1st Cir. 2003).

The party seeking to compel arbitration has the burden to

show the existence of an arbitration agreement. See Diskin v. J.P. Stevens & Co., Inc., 836 F.2d
47, 51 (1st Cir. 1988); James Brearton, et al., American Jurisprudence 2d, Alternative Dispute
Resolution § 122 (2007). Once the movant makes this showing, “the party resisting arbitration
bears the burden of proving that the claims at issue are unsuitable for arbitration.” Green Tree
Financial Corp.-Alabama v. Randolf, 531 U.S. 79, 91 (2000).
Pursuant to the FAA, courts evaluate the facts and the positions espoused by the parties in
light of the “liberal federal policy favoring arbitration agreements” that “requires a liberal
reading of [such] agreements.” Moses H. Cone, 460 U.S. at 24. Accordingly, “any doubts
concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the
problem at hand is the construction of the contract language itself or an allegation of waiver,
delay, or a like defense to arbitrability.” Mitsubishi Motors Corp. v. Soler Chrystler-Plymouth,
Inc., 473 U.S. 614, 626 (1985). Courts must compel the parties to arbitrate once satisfied that
neither the making of the arbitration agreement nor the failure to comply therewith is at issue.
Moses H. Cone, 461 U.S. at 22 n.27; see also Sanchez v. Morgan Stanley Dean Witter, 376
F.Supp.2d 132, 135 (D.P.R. 2005).

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Nevertheless, the Supreme Court has noted that “‘arbitration is a matter of contract and a
party cannot be required to submit to arbitration any dispute which he has not agreed so to
submit.’” Communs. Workers of Am., 475 U.S. at 648 (quoting Warrior & Gulf Navigation Co.,
363 U.S. at 582). The First Circuit, for its part, has noted that “a party seeking to substitute an
arbitral forum for a judicial forum must show, at a bare minimum, that the protagonists have
agreed to arbitrate some claims.” McCarthy v. Azure, 22 F.3d 351, 354-55 (1st Cir. 1994)
(emphasis in the original).
“Whether or not the parties have agreed to submit a certain dispute to arbitration
‘depends on contract interpretation, which is a question of law.’” Dialysis Access Center, LLC v.
RMS Lifeline, Inc., 638 F.3d 367, 376 (1st Cir. 2011) (quoting Combined Energies v. CCI, Inc.,
524 F.3d 168, 171 (1st Cir. 2008)). “Arbitration is strictly ‘a matter of consent’ . . . and thus ‘is a
way to resolve those disputes—but only those disputes—that the parties have agreed to submit to
arbitration.’” Granite Rock Co. v. Int’l Bhd. of Teamsters, 130 S.Ct. 2847, 2857 (2010)
(emphasis in original, quotations omitted). The construction of arbitration agreements under the
FAA “must be resolved according to federal law,” and “is ordinarily a function of the parties’
intent as expressed in the language of the contract documents.” McCarthy, 22 F.3d at 355. The
terms of the arbitration clause should be applied if its terms, conditions, and exclusions are clear
and specific, and leave no room for ambiguity or for diverse interpretations. Dialysis Access
Center, LLC, 638 F.3d at 379.
In this case, the “Exclusive Dispute Resolution Procedure” clause of the Puerto Rico
Contract that Meléndez signed on May 30, 2009 for the Puerto Rico position states that “[a]ny
and all disputes relating to this offer letter, your transfer at Starwood or the termination of that
employment will be resolved solely and exclusively through binding arbitration pursuant to the
employment rules of the American Arbitration Association. Accordingly, you acknowledge and

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agree that this offer of employment and the benefits provided herein are contingent upon your
execution of the Arbitration Agreement provided to you herewith (Attachment A).” (Docket No.
19-1, p. 3-4). The parties’ intent and mutual agreement to submit any and all disputes arising
from that employment to arbitration is evident from the language contained in that clause.
Furthermore, Meléndez’s claims all relate to the termination of his employment with the
defendants. Plaintiffs’ arguments that Meléndez is not bound by the arbitration clause of the
contract for the Dominican Republic position are meritless given that he later signed another
contract with an arbitration clause for the Puerto Rico position. Plaintiffs do not argue that
Meléndez is not bound by the arbitration provisions of the latter contract.
Here, the record shows that (1) the parties signed a valid agreement that contains an
arbitration clause, (2) defendants Starwood and Sheraton are entitled to invoke the arbitration
clause, (3) Meléndez is bound by that clause, and (4) Meléndez’s claims come within the clause’s
scope. Grina, 344 F.3d at 142. It is also undisputed that Meléndez has not submitted his claim to
arbitration. Defendants’ motion to compel arbitration must therefore be granted.
The FAA also mandates that “[i]f any suit or proceeding be brought in any of the courts
of the United States upon any issue referable to arbitration under an agreement in writing for
such arbitration, the court in which such suit is pending, upon being satisfied that the issue
involved in such suit or proceeding is referable to arbitration under such an agreement, shall on
application of one of the parties stay the trial of the action until such arbitration has been had in
accordance with the terms of the agreement, providing the applicant for the stay is not in default
in proceeding with such arbitration.” 9 U.S.C § 3. "However, a court may dismiss, rather than
stay, a case when all of the issues before the court are arbitrable." Bercovitch v. Baldwin Sch.,
133 F.3d 141, 156 (1st Cir. 1998) (citations omitted). Given that Meléndez’s discrimination and
state tort claims fall within the scope of the arbitration agreement, the instant suit must be

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referred to arbitration in accordance with the terms of his agreement with Starwood. As to Mrs.
Meléndez, her claims are non-arbitrable because she is not a party to the arbitration agreement.
Therefore, defendants’ motion to compel arbitration as to Meléndez is granted, and Mrs.
Meléndez’s claims are stayed pending resolution of the arbitrable claims.
CONCLUSION
For the foregoing reasons, the defendants’ motion to compel arbitration is GRANTED.
The case is stayed pending resolution of the arbitrable claims.
IT IS SO ORDERED.
In San Juan, Puerto Rico, this 1st day of February, 2013.
S/Bruce J. McGiverin
BRUCE J. McGIVERIN
United States Magistrate Judge