Noffsinger-Harrison v. LP Spring City, LLC et al

Filing 17

MEMORANDUM with order to follow; Signed by District Judge Curtis L Collier on 2/7/2013. (AWH, )

UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF TENNESSEE
AT CHATTANOOGA
ELIZABETH NOFFSINGER-HARRISON,
individually and on behalf of all persons
similarly situated,

)
)
)
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Plaintiff,
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v.
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LP SPRING CITY, LLC, LP SPRING CITY, LLC, )
doing business as SPRING CITY CARE AND
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REHABILITATION CENTER, and SIGNATURE )
HEALTHCARE, LLC,
)
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Defendants.
)

Case No. 1:12-CV-161
Judge Curtis L. Collier

MEMORANDUM
Before the Court is a motion to compel arbitration and stay the proceedings filed by
Defendants LP Spring City, LLC; LP Spring City, LLC, doing business as Spring City Care and
Rehabilitation Center; and Signature Healthcare, LLC (collectively, “Defendants”) (Court File No.
9). Shortly thereafter, Plaintiff Elizabeth Noffsinger-Harrison (“Plaintiff”) filed an amended
complaint (Court File No. 12). Plaintiff also filed a response in opposition to Defendants’ motion
(Court File No. 13). After considering the parties’ arguments and the relevant case law, the Court
will GRANT IN PART Defendants’ motion to compel arbitration and will STAY the action
pending arbitration (Court File No. 9). Specifically, the Court deems the arbitration agreement
enforceable with the exception of the cost-splitting provisions incorporated into the arbitration
agreement in accordance with the American Health Lawyers Association’s (“AHLA”) Rules of
Procedure for Arbitration. The Court concludes the cost-splitting provisions would deter Plaintiff
from vindicating her statutory rights and are therefore unenforceable. The cost-splitting provisions

will be severed from the rest of the agreement. The Court will order Defendants to pay the entire
administrative fee as well as the other arbitration-related expenses that were originally to be split
by the parties under the AHLA’s rules. In the event Plaintiff prevails, however, she will be required
to reimburse Defendants for those costs and expenses.

I.

RELEVANT FACTUAL AND PROCEDURAL BACKGROUND
The facts relevant to this motion are not in dispute and come primarily from Plaintiff’s first

amended complaint unless otherwise indicated (Court File No. 12 (“Am. Compl.”)). Plaintiff was
hired at Defendants’ Spring City, Tennessee facility as the Director of Nursing around December
15, 2008 (Am. Compl. ¶ 5).1 Plaintiff’s workload increased during the spring and summer of 2011
when several employees quit their jobs (id. ¶ 6). In June 2011, Plaintiff received a satisfactory job
evaluation as well as a salary increase (id. ¶ 8). On July 28, 2011, Plaintiff became ill at work and
was subsequently admitted to the hospital in critical condition (id. ¶ 9). She was discharged on
August 8, 2011, and told not to return to work for approximately four to six weeks (id. ¶ 10). During
this time period, Plaintiff informed Defendants of her medical condition and requested FMLA leave
(id. ¶ 11). On August 11, 2011, Plaintiff was informed by phone that her position had been
terminated (id. ¶ 12).
Defendants maintain an employee handbook that is referred to as the “Stakeholder
Handbook” (Am. Compl. ¶ 13). Section 2.6 of the Stakeholder Handbook discusses arbitration. The
section reads as follows:

1

Defendants contend Plaintiff’s actual employer was Signature Payroll Services, LLC,
though Defendants are affiliates of Signature Payroll Services, LLC (Court File No. 10 at 2 n.2;
Court File No. 11 (“McCoy Decl.”), ¶ 3).
2

All disputes between Stakeholders and the company or its management, which are
not resolved through the Conflict Resolution procedure, must be submitted to
binding arbitration. As a condition of employment, applicants and stakeholders shall
sign an Arbitration Agreement.
Signed acknowledgment of receipt of the Stakeholder Handbook shall serve as
acceptance and understanding of this condition of employment, thereby binding
Stakeholders to the Arbitration Agreement.
(Court File No. 11-3 at 2). Defendants have also offered a copy of the “Stakeholder Handbook
Acknowledgment” signed by Plaintiff (Court File No. 11-2). Both parties have provided a copy of
the “Arbitration Agreement” signed and dated by Plaintiff on December 15, 2008 (Court File Nos.
11-1 at 1; 12-2 at 2). The form reads in pertinent part:
In consideration of the company employing you and the mutual promises set
forth herein, you and the company and your and its representatives, successors, and
assigns agree to the following:
(1) All claims relating to your recruitment, employment with, or termination
of employment from the Company shall be deemed waived unless submitted to final
and binding arbitration in accordance with the Federal Arbitration Act (“FAA”) or,
if a court determines the FAA does not apply, by any applicable state arbitration act,
in accordance with the rules of the American Health Lawyers Association
(“AHLA”). . . .
(2) In the event that either the employee or the company seeks relief in a
court of competent jurisdiction for a dispute covered by this Agreement, the other
party may, at any time within sixty (60) days of the service of the complaint, require
the dispute to be arbitrated, and that the decision and award of the arbitrator shall be
final, binding, and enforceable in the courts.
(3) This dispute resolution agreement covers all matters directly or indirectly
related to your recruitment, employment, or termination of employment by the
Company, including, but not limited to, alleged violations of [list of various federal
statutes] . . . and any and all claims under federal, state, and local laws and common
law but excluding Worker’s Compensation Claims and unemployment benefits.
(4) In the event any portion of this Agreement shall be determined by a court
to be invalid, the remainder of this Agreement shall remain in full force and effect,
and this provision shall survive such determination.

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(5) The arbitrator shall have the authority to award the full range of remedies
that could be awarded by a court setting in the applicable jurisdiction and applying
relevant law including, without limitation and if applicable, an award of attorney’s
fees and costs.
(6) This agreement shall be binding upon your heirs, successors, and assigns.
YOU MAY WISH TO CONSULT AN ATTORNEY PRIOR TO SIGNING
THIS AGREEMENT. IF SO, TAKE A COPY OF THIS FORM WITH YOU.
HOWEVER, YOU WILL NOT BE OFFERED EMPLOYMENT UNTIL THIS
FORM IS SIGNED AND RETURNED BY YOU.
PLEASE READ THESE PROVISIONS CAREFULLY. BY SIGNING
BELOW, YOU ARE ATTESTING THAT YOU HAVE READ AND
UNDERSTOOD THIS DOCUMENT AND ARE KNOWINGLY AND
VOLUNTARILY AGREEING TO ITS TERMS.
BOTH PARTIES WAIVE TRIAL BY JURY.
(id.). Finally, Defendants offer a copy of a second arbitration agreement signed and dated by
Plaintiff on February 17, 2010 (Court File No. 11-1 at 2).
Plaintiff filed suit against Defendants alleging violations of the Family Medical and Leave
Act (“FMLA”) and its regulations, pursuant to 29 U.S.C. §§ 2601 et seq. (Am. Compl. ¶¶ 3, 28-39).
Plaintiff seeks back pay, reinstatement (or in the alternative, front pay and benefits), liquidated
damages, and attorney’s fees and costs (id. at 8). Plaintiff also requests that the Court order
Defendants to “(1) cease requiring its employs to sign agreements calling for arbitration of
employment law claims, (2) amend its employee handbook to conform with the applicable
regulations concerning notice of rights under the FMLA, and (3) notify its employees of these
actions” (id. at 8-9). Finally, if the Court concludes Defendants can require its employees to sign the
arbitration agreement at issue, Plaintiff requests that the Court order Defendants “to cease purporting
to require its employees to pay an excessive administrative fee or to split the cost of all arbitration
expenses” (id. at 9).
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II.

DISCUSSION
A motion to compel arbitration is governed by the Federal Arbitration Act (“FAA”), 9 U.S.C.

§§ 1 et seq. Under the FAA, arbitration clauses in commercial contracts “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; see also Rent-A-Center, West, Inc. v. Jackson, 130 S.Ct. 2772, 2776 (2010).
Moreover, the provisions of the FAA are mandatory. Dean Witter Reynolds, Inc. v. Byrd, 470 U.S.
213, 218 (1985). “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.” Id. (emphasis in original) (citing 9
U.S.C. §§ 3-4).
If a party challenges the validity or enforceability of an arbitration agreement under § 2 of
the FAA, the court must consider those issues before ordering compliance with the agreement. See
Rent-A-Center, West, Inc., 130 S.Ct. at 2778. A party may avoid arbitration if it can show the
agreement itself is invalid or unenforceable. Great Earth Cos. v. Simons, 288 F.3d 878, 889 (6th Cir.
2002). The party “resisting arbitration bears the burden of proving that the claims at issue are
unsuitable for arbitration.” Green Tree Fin. Corp.–Alabama v. Randolph, 531 U.S. 79, 91 (2000).
Moreover, to show the validity of the agreement is in question, the party opposing arbitration must
show a genuine issue of material fact exists on this issue. Id.
Here, neither party disputes Plaintiff consented to arbitration. Plaintiff was given a copy of
the Stakeholder Handbook, which describes Defendants’ arbitration policy, and she signed the
Stakeholder Handbook Acknowledgment (Court File No. 11-2). Plaintiff also signed and dated two
arbitration agreements, one dated December 15, 2008 (Court File Nos. 11-1 at 1; 12-2 at 2), and the

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other dated February 17, 2010 (Court File No. 11-1 at 2). Although some of these documents were
produced by Defendants, Plaintiff does not dispute their authenticity. Therefore, the Court will
assume, for purposes of this motion, that the forms are authentic memorializations of the parties’
agreement to arbitrate. See Pennington v. Frisch’s Rests., Inc., 147 F. App’x 463, 467 (6th Cir.
2005).
Plaintiff does, however, challenge the enforceability of the arbitration agreement. Plaintiff
takes a novel approach--that is, by arguing the Norris-LaGuardia Act, 29 U.S.C. §§ 101 et seq.,
prohibits the enforcement of the arbitration agreement in this case and, in the event the NorrisLaGuardia Act is in conflict with the FAA, the Norris-LaGuardia Act must prevail. Plaintiff also
contends the arbitration agreement cannot be enforced because it is part of a larger scheme to
interfere with employees’ rights under the FMLA, in violation of 29 U.S.C. § 2615(a)(1). In the
alternative, Plaintiff challenges the provision that provides arbitration shall be conducted in
accordance with the rules of the American Health Lawyers Association (“AHLA”) on two grounds.
Plaintiff contends the AHLA’s cost-splitting provisions are unenforceable and questions the
neutrality of the AHLA and its rules. The Court will address each issue in turn.
A.

Norris-LaGuardia Act

As a preliminary matter, Plaintiff argues the Court should not enforce Defendants’ arbitration
agreement because the Norris-LaGuardia Act prohibits its enforcement. Plaintiff concedes the
United States Supreme Court, the Court of Appeals for the Sixth Circuit, and this Court have all
consistently enforced arbitration agreements under the FAA. Nonetheless, Plaintiff via counsel
argues she “is not aware of either the Supreme Court or the Sixth Circuit ordering enforcement of
an employer-imposed arbitration ‘agreement’ in the face of a challenge based upon the Norris-

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LaGuardia Act, which declared employer-imposed contracts contrary to the public policy of the
United States and unenforceable in its courts” (Court File No. 13 at 7). Certainly, however, this is
due in part to the fact that such a challenge has never been raised in those courts. Plaintiff also
argues the mandates of the FAA must yield to the Norris-LaGuardia Act if there is a conflict
between the two statutes. In making these arguments, Plaintiff relies primarily upon a recent
decision of the National Labor Relations Board (“NLRB”), D.R. Horton, Inc., 357 N.L.R.B. No.
184, 2012 WL 36274 (Jan. 3, 2012).
Notwithstanding the lack of case law on the interrelationship between the FAA and the
Norris-LaGuardia Act, Defendants argue it is well-established that arbitration agreements are to be
liberally enforced under the FAA. Defendants also claim Plaintiff’s primary source of support, D.R.
Horton, Inc., is not binding on this Court, has not been followed by other courts, and is not relevant
to the facts of this case. For the reasons explained below, the Court agrees with Defendants that the
Norris-LaGuardia Act does not prevent the Court from enforcing the arbitration agreement in this
case.
The Norris-LaGuardia Act was enacted in 1932. The statute prohibits courts from ordering
injunctive relief under circumstances such as those “growing out of a labor dispute” or “contrary to
the public policy” declared in the Act. 29 U.S.C. § 101. The Norris-LaGuardia Act is most
recognized for prohibiting the enforcement of “yellow dog” contracts--that is, employment
agreements or contracts where a party agrees “not to join, become, or remain a member of any labor
organization or of any employer organization” or a party agrees to “withdraw from an employment
relation in the event that he joins, becomes, or remains a member of any labor organization or of any
employer organization.” 29 U.S.C. § 103.

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Plaintiff highlights the fact that the statute forbids the enforcement of any such agreement
that would be contrary to public policy. See 29 U.S.C. § 103 (“Any undertaking or promise, such
as is described in this section, or any other undertaking or promise in conflict with the public policy
declared in section 102 of this title, is declared to be contrary to the public policy of the United
States, shall not be enforceable in any court of the United States . . . .”). Among other things, the
public policy rationale behind the Act, as explained in section 102, reads in part:
Whereas under prevailing economic conditions, developed with the aid of
governmental authority for owners of property to organize in the corporate and other
forms of ownership association, the individual unorganized worker is commonly
helpless to exercise actual liberty of contract and to protect his freedom of labor,
and thereby to obtain acceptable terms and conditions of employment, wherefore,
though he should be free to decline to associate with his fellows, it is necessary that
he have full freedom of association, self-organization, and designation of
representatives of his own choosing, to negotiate the terms and conditions of his
employment, and that he shall be free from the interference, restraint, or coercion
of employers of labor, or their agents, in the designation of such representatives or
in self-organization or in other concerted activities for the purpose of collective
bargaining or other mutual aid or protection . . .
29 U.S.C. § 102 (emphasis added). Plaintiff contends Defendants’ arbitration agreement is contrary
to public policy in light of section 102. In Plaintiff’s own words, “[t]he public policy referred to was
the recognition that contracts entered into between employers and individual employees are not
contracts freely entered into and will not be enforced against employees in courts of the United
States” (Court File No. 13 at 9).
In making her arguments, Plaintiff primarily relies upon D.R. Horton, Inc., a decision issued
by the NLRB. In D.R. Horton, Inc., the NLRB determined that an employer violated section 8(a)(1)
of the National Labor Relations Act when it required its employees to sign an arbitration agreement
containing a class and collective action waiver. Among other grounds offered in support of its
decision, the NLRB discussed the applicability of the Norris-LaGuardia Act, explaining that
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under the Norris-LaGuardia Act, a private agreement that seeks to prohibit a “lawful
means [of] aiding any person participating or interested in” a lawsuit arising out of
a labor dispute (as broadly defined) is unenforceable, as contrary to the public policy
protecting employees’ “concerted activities for . . . mutual aid or protection.” To the
extent that the FAA requires giving effect to such an agreement, it would conflict
with the Norris-LaGuardia Act.
D.R. Horton, Inc., 2012 WL 36274 at *16. In the event of a conflict between the Norris-LaGuardia
Act and the FAA, the Board explained the Norris-LaGuardia Act would prevail because it was
enacted seven years after the FAA and section 15 of the Norris-LaGuardia Act expressly repeals all
conflicting acts.2 Id.
While the Court has given careful thought to Plaintiff’s arguments, Plaintiff’s stance cannot
be adopted by this Court for several reasons. First and foremost, Plaintiff attempts to topple decades
of case law supporting the enforceability of arbitration agreements yet offers no binding case law
in support of her position. The NLRB’s decision, particularly its view on the relationship between
the FAA and the Norris-LaGuardia Act, is not binding on this Court. See Morvant v. P.F. Chang’s
China Bistro, Inc., 870 F. Supp. 2d 831, 843 (N.D. Cal. 2012) (noting “[w]hile the NLRB’s
interpretation of the [National Labor Relations Act] should be given some deference, its
interpretation of other federal statutes is not,” in explaining why the D.R. Horton, Inc. decision
would not alter its conclusion that the Norris-LaGuardia Act does not prohibit the enforcement of
the arbitration agreement). Moreover, even if D.R. Horton, Inc. had some precedential value, the
case is largely distinguishable on its facts given that the parties in the instant case have not raised
any concerns about class action waivers in arbitration agreements, which was the underlying issue
in D.R. Horton, Inc.

2

This section of the Norris-LaGuardia Act reads in entirety: “All acts and parts of acts in
conflict with the provisions of this chapter are repealed.” 29 U.S.C. § 115.
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Plaintiff’s argument that the Norris-LaGuardia Act repeals the FAA if the statutes are in
conflict also lacks merit. As the Court of Appeals for the Eighth Circuit noted in a recent decision,
the FAA was reenacted in 1947, fifteen years after the passage of the Norris-LaGuardia Act. Owen
v. Bristol Care, Inc., 12-1719, 2013 WL 57874, at *3 (8th Cir. Jan. 7, 2013). The Eighth Circuit
opined, “[t]he decision to reenact the FAA suggests that Congress intended its arbitration protections
to remain intact even in light of the earlier passage of three major labor relations statutes [such as
the Norris-LaGuardia Act].” Id. If the Court was to follow Plaintiff’s interpretation of the law, it
would have the effect of making most, if not all, arbitration agreements unenforceable, which is
clearly contrary to the clear mandates of the FAA.
Accordingly, Plaintiff’s arguments, while novel, fail to sway this Court to adopt an
interpretation of the law that flies in the face of decades of law supporting the liberal enforcement
of arbitration agreements under the FAA.
B.

FMLA Violation

Plaintiff also argues the Court should decline to enforce the arbitration agreement because
the agreement itself is part of “an elaborate and misleading scheme to deter the exercise of employee
rights under the FMLA” (Court File No. 13 at 15). In support of this argument, Plaintiff notes the
economic barriers that exist before an employee can exercise the right to arbitrate her claims.
Plaintiff also highlights her concerns regarding the neutrality of the AHLA and its arbitration rules.
She contends these matters as well as other conduct on the part of Defendants interferes with
employees’ rights under the FMLA, in violation of 29 U.S.C. § 2615(a)(1). While Plaintiff seeks
relief by requesting that the Court not enforce the arbitration agreement, Plaintiff is also, in essence,
asking the Court to rule on the merits of this particular FMLA claim alleged in the amended

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complaint.
At this stage, it is important that the Court distinguish between matters pertaining solely to
arbitrability and matters pertaining to the merits of Plaintiff’s case. In the remaining sections of this
memorandum, the Court will address Plaintiff’s specific concerns about the enforceability of the
arbitration agreement. The Court will not, however, make any broader determinations on the merits
of Plaintiff’s FMLA claims. Those matters should be decided by the arbitrator.
C.

Unenforceable Provisions

The arbitration agreement provides that arbitration shall be conducted in accordance with
the rules of the AHLA. Plaintiff has expressed concerns, however, about (1) the enforceability of
the cost-splitting provisions incorporated into the arbitration agreement in accordance with the
AHLA’s rules and (2) the neutrality of the AHLA and its rules.
1. Cost-Splitting Provisions
Plaintiff argues the Court should not enforce the AHLA’s cost-splitting provisions that are
incorporated into the arbitration agreement. Plaintiff claims she cannot afford to pay the costs
associated with arbitration. She contends she would have to pay one-half of the arbitration
administrative fee at the outset, which is approximately $1,375, as well as one-half of the arbitrator’s
projected costs. Plaintiff contends she, as well as other similarly situated employees, would be
deterred from arbitrating their cases by these very terms. One solution Plaintiff proposes is to have
Defendants pay all the costs of arbitration. Defendants argue, on the other hand, that the terms of
the arbitration agreement are not prohibitively expensive and, in the event Plaintiff prevails on the
merits, she will be entitled to full recovery of costs, fees, and expenses.
The arbitration agreement expressly states it must be enforced in accordance with the rules

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of the AHLA. The AHLA’s “Rules of Procedure for Arbitration” discuss expenses and cost in
sections 7.01 through 7.03. See American Health Lawyers Association, Rules of Procedure for
Arbitration, www.healthlawyers.org/adr. In particular, section 7.01 states “[a]ll expenses of the
arbitration, including required travel and other expenses of the arbitrator, and any witness or other
proof produced at the written request of the arbitrator, shall be borne equally by the parties, unless
the arbitrator in the award assesses such expenses or any part thereof against a specified party or
parties.” Id. According to Appendix I, the total arbitration administration fee alone would be
$2,750.00. Id. Meanwhile, section 7.03 provides that the parties may be required to deposit “such
sums of money as the arbitrator deems reasonable and necessary to defray the expense of the
arbitration, including the arbitrator’s fee.” Id.
The Supreme Court has explained that “[b]y agreeing to arbitrate a statutory claim, a party
does not forgo the substantive rights afforded by the statute; it only submits to their resolution in an
arbitral, rather than a judicial, forum.” Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.,
473 U.S. 614, 628 (1985). If “the splitting or sharing of the costs of the arbitral forum under a
particular arbitration agreement effectively prevents the vindication of a plaintiff’s statutory rights,
those rights cannot be subject to mandatory arbitration under that agreement.” Morrison v. Circuit
City Stores, Inc., 317 F.3d 646, 658 (6th Cir. 2003). In Morrison, the Sixth Circuit devised a test that
could be applied on a case-by-case basis to determine whether a cost-splitting measure in an
arbitration agreement should be enforced. The court held “potential litigants must be given an
opportunity, prior to arbitration on the merits, to demonstrate that the potential costs of arbitration
are great enough to deter them and similarly situated individuals from seeking to vindicate their
federal statutory rights in the arbitral forum.” Id. at 663. As part of this analysis, courts should

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“define the class of such similarly situated potential litigants by job description and socioeconomic
background.” Id. It should also consider the average cost of arbitration and, in contrast, the cost to
litigate in a judicial forum. Id. at 664. Finally, courts should “discount the possibilities that the
plaintiff will not be required to pay costs or arbitral fees because of ultimate success on the merits,
either because of cost-shifting provisions in the arbitration agreement or because the arbitrator
decides that such costs or fees are contrary to federal law.” Id. at 664. The party challenging the
cost-splitting provision bears the burden of demonstrating that the provision would deter employees
from vindicating their statutory rights. Howell v. Rivergate Toyota, Inc., 144 F. App’x 475, 481 (6th
Cir. 2005) (citing Morrison, 317 F.3d at 659-60).
Here, Plaintiff has raised a valid issue for the Court’s consideration--that is, whether the costsplitting provisions would deter her and other similarly situated employees from vindicating their
statutory rights. While Plaintiff bears the burden on this matter and has not fully addressed all of the
Morrison factors in her brief, the Court nonetheless concludes the cost-splitting provisions in this
case are unenforceable. With respect to defining the class, Plaintiff has stated in her affidavit that,
while employed for Defendants, she worked as the Director of Nursing and made approximately
$75,000 annually (Court File No. 13-1 (“Noffsinger-Harrison Aff.”), ¶ 2). After being terminated
from this position, she was unemployed for approximately four months (id. ¶ 3). She worked at her
next job until May 2012, and since then, has only worked sporadically (id.). For example, in June
and July 2012, Plaintiff contends she only earned $700.00 (id.). Plaintiff offers as her comparators
the hourly employees who worked at Defendants’ nursing home. She contends the “vast majority
of employees” at Defendants’ nursing home were hourly employees and earned approximately $8.00
to $9.00 an hour (id. ¶ 4).

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Given that Plaintiff was a salaried employee who worked as a director making $75,000, the
Court is hesitant to define Plaintiff’s class to include the typical hourly employee. Those individuals
probably did not have the same job responsibilities as Plaintiff nor would they likely be in the same
socioeconomic group. At the same time, even assuming Plaintiff’s class was comprised of
individuals who had a similar income and job position, the arbitration fees and costs would still be
prohibitive to many such individuals and would discourage many of them from utilizing arbitration
to resolve their claims. The employee would be responsible for paying an administrative fee of
$1,375 at the outset. Moreover, she would also be responsible for paying one-half of all other
arbitration-related costs, some of which the employee may have to deposit upfront. While the $1,375
administrative fee may not be totally cost-prohibitive for someone in Plaintiff’s salary range, it is
still a significant sum of money, nevermind the other arbitration costs the employee would be
responsible for paying at some point during the arbitration process. These considerations are
magnified after taking into account the fact that Plaintiff has experienced periods of unemployment
since being terminated by Defendants and, at the time this motion was filed, she was performing
limited contract work. See Morrison, 317 F.3d at 669 (“In the abstract, this sum may not appear
prohibitive, but it must be considered from the vantage point of the potential litigant in a case such
as this. Recently terminated, the potential litigant must continue to pay for housing, utilities,
transportation, food, and the other necessities of life in contemporary society despite losing her
primary, and most likely only, source of income.”).
Moreover, with respect to the cost of arbitration in contrast to litigation, arbitration can cost
thousands or even tens of thousands of dollars, which is often greater than what that same plaintiff

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would have had to pay had the case been tried in court.3 See id. In her brief, Plaintiff references an
employment discrimination case previously before this Court where the parties participated in
arbitration; according to Plaintiff, the arbitration costs totaled $43,730.00. While this is certainly not
the norm, the Court is concerned about the deterrent effect high arbitration costs would have on
employees.
Finally, with respect to mitigating factors, Defendants note Plaintiff is entitled to relief under
the statute if she prevails. Such relief would include costs, fees, and expenses. However, the Sixth
Circuit has generally frowned upon provisions that promise later relief due to the chilling effect it
may have on employees’ decisions to arbitrate at the outset. “In many cases, if not most, employees
considering the consequences of bringing their claims in the arbitral forum will be inclined to err
on the side of caution, especially when the worst-case scenario would mean not only losing on their
substantive claims but also the imposition of the costs of the arbitration.” Morrison, 317 F.3d at 665.
Although this certainly might affect higher-income individuals differently than lower- or middleincome individuals, the Court must still take this into account. Here, Plaintiff avers in her affidavit
that the fees and costs would be too high for her to pay (id. ¶ 5).
After considering the Morrison factors and the available facts in this case, the Court
concludes the provisions of the arbitration agreement are cost-prohibitive to Plaintiff and similarly
situated employees and are, therefore, unenforceable. The arbitration agreement contains a
severability clause (Court File Nos. 11-1 at 1; 12-2 at 2). Accordingly, the cost-splitting provisions
as provided in the AHLA’s rules will be severed from the rest of the arbitration agreement. See

3

Though of course, there are certainly other factors that may influence how much the
employee would actually pay upfront taking into account varying fee arrangements that might be
offered by counsel.
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Morrison, 317 F.3d at 677-78 (holding that, under both Tennessee contract law and federal
precedent, a cost-splitting provision can be severed from an arbitration agreement where “that
provision was not interwoven with the rest of the agreement and may be deleted without affecting
the rest of the agreement’s provisions regarding arbitration”). The Court will, however, order
Defendants to pay the entire administrative fee as well as all the arbitration expenses that the
AHLA’s rules stated should be split by the parties. In the event Plaintiff prevails, she will be
required to reimburse Defendants for those costs and expenses.
2. The AHLA
Finally, Plaintiff challenges the neutrality of the AHLA, the organization that created the
rules that govern the arbitration agreement in this case. Plaintiff contends the AHLA is likely biased
because its panel is selected from a private bar association consisting of lawyers who represent
management. Plaintiff also notes one of Defendants’ attorneys is an officer of the AHLA. Finally,
Plaintiff argues the AHLA’s procedures for selecting, utilizing, and terminating arbitrators during
the arbitration process lack transparency. Defendants, in contrast, claim Plaintiff’s arguments lack
any substantive basis and that the AHLA as well as its rules are fair and neutral.
Most of the issues raised in Plaintiff’s brief are speculative at best. Unlike in many of the
cases where courts have concluded the arbitral forum was not neutral, the AHLA is a non-profit
entity and Plaintiff has not shown there is a financial relationship between Defendants and the
AHLA or that Defendants exercise any power over the AHLA. See Walker v. Ryan's Family Steak
Houses, Inc., 400 F.3d 370, 386 (6th Cir. 2005); McMullen v. Meijer, Inc., 355 F.3d 485, 493 (6th
Cir. 2004). Plaintiff is correct that one of Defendants’ attorneys, Mark Peters, is a vice-chair of the
AHLA’s labor and employment committee. However, as explained by Defendants, Peters is vice-

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chair of publications and his role is to assist in publishing articles and providing other updates to
members. Defendants contend he has no role in selecting arbitrators, creating arbitration rules, or
training arbitrators, nor does he have any relationship with the administrator of the AHLA’s
arbitration program. Plaintiff also points out that most members of the AHLA’s board work for
private firms. While true, at least one board member is a law professor and another, according to the
website, is deputy general counsel for the Department of Health and Human Services. These facts
alone, as alleged by the parties, are insufficient to convince the Court that the AHLA could not
provide fair and neutral rules and procedures for arbitration.
Plaintiff also questions the lack of transparency in the AHLA’s arbitration policies and
procedures. However, the same rules Plaintiff cited to illustrate the AHLA’s cost-splitting
requirements also set forth procedures pertaining to the arbitrator selection process, particularly
sections 2.01 through 2.05. While the arbitrators’ names are not available in advance, that
information can be requested once the arbitration process is initiated. Moreover, the rules provide
a mechanism in which the parties receive a list of ten proposed mediators, can strike the name of one
mediator, and can rank the remaining arbitrators by preference. Finally, the Court has not found, nor
has Plaintiff offered, any cases in which another court has determined that the AHLA is an unfair
or non-neutral forum. Accordingly, the Court dismisses Plaintiff’s arguments challenging the
neutrality of the AHLA and its rules.
D.

Stay Versus Dismissal

In the event the Court concludes the case should be submitted to arbitration, Defendants
request that the case be dismissed or, in the alternative, stayed. Under the FAA, if a court determines
a cause of action is covered by an arbitration agreement, it must stay the proceedings until the

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arbitration is completed. 9 U.S.C. § 3.4 In keeping with the requirements of the FAA, the Court will
stay the proceedings pending arbitration.

III.

CONCLUSION
For the foregoing reasons, the Court will GRANT IN PART Defendants’ motion to compel

arbitration and STAY the proceedings (Court File No. 9). The Court will enforce the arbitration
agreement with the exception of the cost-splitting provisions, which will be severed from the rest
of the agreement. The Court will order Defendants to pay the entire administrative fee as well as the
arbitration expenses that the AHLA’s rules stated should be split by the parties. In the event
Plaintiff prevails, however, she will be required to reimburse Defendants for those costs and
expenses.
An Order shall enter.

/s/
CURTIS L. COLLIER
UNITED STATES DISTRICT JUDGE

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Under some circumstances, this circuit has provided that courts can dismiss an action where
all of the claims are arbitrable. Fazio v. Lehman Bros., Inc., 340 F.3d 386, 392 (6th Cir. 2003).
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