Opinion
No. 61029-5-I.
September 2, 2008.
Appeal from a judgment of the Superior Court for Snohomish County, No. 07-2-02570-5, Richard J. Thorpe, J., entered November 28, 2007.
The questions here are whether the claimants agreed to arbitrate their employment discrimination claims against their employer or their individual claims against their managers and supervisors, and if so, whether the arbitration agreement was unenforceable as procedurally unconscionable. We hold the agreement to arbitrate encompassed the claims asserted, including those against the named individuals, and that the agreement is enforceable. We therefore reverse.
BACKGROUND
Brandi Ayala, Breanna Ferguson, Samantha Ivy, Amy Robinett and Leilani Wells (the plaintiffs) worked for Continental Services as telemarketers, selling extended warranties for cars over the phone. In February 2007, they filed suit against Continental alleging sexual discrimination and harassment. Their complaint included individual claims of assault, battery, and negligent and intentional infliction of emotional distress against their managers and supervisors, who were allegedly acting in the scope of their employment.
The parties had an employment contract, which included the following agreement to arbitrate:
8.00 Arbitration.
8.1. Except as otherwise provided with respect to Disability, all claims, disputes and other matters in question arising out of or related to this Agreement or the breach hereof, shall be decided by arbitration in accordance with the then current commercial arbitration rules of the American Arbitration Association [AAA] unless the Parties mutually agree otherwise. The award rendered by the arbitrators shall be final, and judgment may be entered upon it in accordance with California law in any court having jurisdiction thereof. Any arbitration shall be conducted in the City of Los Angeles.
8.2. Notice of demand for arbitration shall be filed in writing with the other party and with the American Arbitration Association. The demand for arbitration shall be made before the date when the institution of legal or equitable proceeding based upon such claim, dispute or other matter would be barred by the applicable statute of limitations.
8.3. The charges, expenses and fees of the arbitrators shall be borne and paid fifty percent by the disputing Party instituting the arbitration and the balance by the other Party.
8.4. The prevailing Party shall have the right to be reimbursed for all costs and expenses of the arbitration, including legal fees.[]
Clerk's Papers at 142.
Continental moved to compel arbitration, but not to enforce all of the arbitration agreement's terms. The company declared it will not enforce clauses relating to venue, choice of law, and fees. All remedies available in litigation will be available through arbitration as well.
The court denied the motion to compel without stating its reasoning. Continental appeals. A decision on a motion to compel arbitration is reviewed de novo.
Zuver v. Airtouch Communications, 153 Wn.2d 293, 302, 103 P.3d 753 (2004).
ANALYSIS
Entire Agreement
We first address the plaintiffs' contention that there is no agreement because the contract states the "execution date" is the date the agreement "is signed by the last Party," and no one from Continental Services ever signed. Challenges to the contract as a whole should be addressed in arbitration. Because we enforce the arbitration agreement, we do not decide this question.
Clerk's Papers at 124.
Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 446, 126 S. Ct. 1204, 163 L. Ed. 2d 1038 (2006).
We note that section 2 of the Federal Arbitration Act requires that arbitration agreements be in writing, but not that they be signed by the parties. 9 U.S.C. § 2. See also Nghiem v. NEC Electronic, Inc., 25 F.3d 1437, 1439 (9th Cir. 1994) (party may be bound by an agreement to arbitrate absent a signature).
Scope
The plaintiffs contend their discrimination claims are not within the scope of the arbitration agreement. Generally, what the parties have agreed to arbitrate is a question to be decided by the court applying state law. Washington courts employ the context rule. Where, as here, interpretation of a contract provision does not depend on extrinsic evidence, it is a question of law.
Tacoma Narrows Constructors v. Nippon Steel-Kawada Bridge, Inc., 138 Wn. App. 203, 213-14, 156 P.3d 293 (2007), review granted, 163 Wn.2d 1011 (2008); Comedy Club, Inc. v. Improv West Assoc., 514 F.3d 833, 842 (9th Cir. 2007).
Adler v. Fred Lind Manor, 153 Wn.2d 331, 351, 103 P.3d 773 (2004) (citing Berg v. Hudesman, 115 Wn.2d 657, 667, 801 P.2d 222 (1990)).
Go2Net, Inc. v. C I Host, Inc., 115 Wn. App. 73, 85, 60 P.3d 1245 (2003).
The contract addresses many aspects of the job, including duties and shifts, drug testing, compensation, confidentiality and noncompete obligations, and contains a provision requiring arbitration of "all claims, disputes and other matters in question arising out of or related to this Agreement or the breach hereof."
Clerk's Papers at 129.
An arbitration clause encompassing controversies "relating to" a contract is broader than one covering claims "arising out" of a contract. The plaintiffs compare their contract to those at issue in Adler v. Fred Lind Manor and Zuver v. Airtouch Communications, contending the language in those agreements was broader. The arbitration clause in Adler applied to "any dispute related to" the employment relationship. The proviso in Zuver covered all claims between the parties, expressly including discrimination claims. But the parties' agreement here governed the entire employment relationship, and the arbitration clause applies to any claim arising out of the agreement or breach thereof. The claims arise out of the plaintiffs' employment. In this context, the clause encompasses employment discrimination and sexual harassment claims.
McClure v. Tremaine, 77 Wn. App. 312, 314-15, 890 P.2d 466 (1995).
Adler, 153 Wn.2d at 338.
Zuver, 153 Wn.2d at 299.
In Adler, our Supreme Court held that the Washington Law Against Discrimination, chapter 49.60 RCW, does not demand a judicial forum. Parties may agree to arbitrate discrimination claims. Adler, 153 Wn.2d at 344.
Continental contends the plaintiffs' individual tort claims against the managers and supervisors are also subject to arbitration. The plaintiffs argued to the trial court that these claims should not be arbitrated, but presented no supporting authority. They do not respond to Continental's argument on appeal.
Arbitration agreements may encompass nonsignatories under contract and agency principles. Among these principles are incorporation by reference, assumption, agency, veil-piercing/alter ego, estoppel, and enforcement by third party beneficiaries. For purposes of arbitration, employees are agents of the employer if the parties intended the agreement to apply to them or if the alleged liability arises out of the same misconduct alleged against the employer.
Comer v. Micor, Inc., 436 F.3d 1098, 1101 (9th Cir. 2006); Powell v. Sphere Drake Ins. P.L.C., 97 Wn. App. 890, 895, 988 P.2d 12 (1999).
Comer, 436 F.3d at 1101.
McCarthy v. Azure, 22 F.3d 351, 357-58 (1st Cir. 1994) (where officer signed purchase and sale agreement only on behalf of corporation and agreement does not refer to the operations of the company, officer cannot compel arbitration of claims against him as individual); Roby v. Corporation of Lloyd's, 996 F.2d 1353, 1360 (2d Cir. 1993) (where complaints against employees depend on the complaints against the employer, employees are protected by employer's arbitration agreement); Letizia v. Prudential Bache Securities, Inc., 802 F.2d 1185, 1188 (9th Cir. 1986) (arbitration agreement applies to claims against securities brokers in their individual capacities where all of their allegedly wrongful acts related to their handling of client's securities account).
The plaintiffs' individual tort claims are based on the same conduct giving rise to the sexual harassment claims lodged against Continental, and the complaint alleges that each named defendant acted "within the course and scope of employment . . . and . . . for the benefit of [Continental]."
Clerk's Papers at 393.
In these circumstances, the claims against the managers and supervisors as individuals are subject to arbitration.
Conscionability
Although arbitrability is presumed, contract defenses such as fraud, duress, or unconscionability are available to challenge arbitration agreements. State contract law applies.
Zuver, 153 Wn.2d at 302.
Seawright v. Am. Gen. Fin. Serv., Inc., 507 F.3d 967, 972 (6th Cir. 2007).
In its motion to compel, Continental declared it does not seek to enforce the following terms of the agreement: that arbitration occur in Los Angeles, that California law apply, that the plaintiffs pay 50 percent of the arbitration costs, and that the plaintiffs pay Continental's attorney fees and costs should the company prevail. Continental asserts it seeks only to enforce "the heart of the agreement" which is arbitration itself."
These concessions eliminated a choice of law provision arguably favorable to the plaintiffs, see Armendariz v. Foundation Health Psychcare Servs., Inc., 24 Cal. 4th 83, 6 P.3d 669, 99 Cal. Rptr. 2d 745 (2000), as well as several terms widely held to be substantively unconscionable. See also Nagrampa v. MailCoups, Inc., 469 F.3d 1257, 1287-89 (9th Cir. 2006) (requirement that California employee arbitrate in Boston was substantively unconscionable); Zuver, 153 Wn.2d at 309 (arbitration fee splitting provision unconscionable if employee presents evidence she cannot afford fees); Adler, 153 Wn.2d at 355 (term requiring each party to bear their own respective costs and attorney fees unconscionable because it required employees to waive statutory right to attorney fees).
Clerk's Papers at 380.
Below, the plaintiffs alleged that the exact provisions Continental did not seek to enforce were substantively unconscionable and not severable, and that the agreement was procedurally unconscionable as an adhesion contract. In a supplemental response, they asserted additional grounds supporting their procedural unconscionability argument.
On appeal, plaintiffs do not mention substantive unconscionability as a ground for affirmance. They focus their arguments upon procedural unconscionability. We will do the same.
We note that substantively unconscionable terms (such as those imposing burdens of cost or travel) may effectively deter claimants from pursuing their legal remedies, especially where numerous terms combine to increase the deterrent effect. Severance cannot cure the deterrent effect upon potential claimants who do not come forward.
To determine whether an agreement is procedurally unconscionable, we examine the circumstances surrounding the transaction, including the manner in which the contract was entered, whether the party had a reasonable opportunity to understand the terms of the contract, and whether the important terms were hidden in a maze of fine print, to determine whether a party lacked meaningful choice. "At minimum, an employee who asserts an arbitration agreement is procedurally unconscionable must show some evidence that the employer refused to respond to her questions or concerns, placed undue pressure on her to sign the agreement without providing her with a reasonable opportunity to consider its terms, and/or that the terms of the agreement were set forth in such a way that an average person could not understand them." The fact that a contract is an adhesion contract is relevant but not determinative.
Adler, 153 Wn.2d at 345.
Zuver, 153 Wn.2d at 306-07.
Id., 306-07.
This agreement is clearly an adhesion contract. The arbitration clause is, however, understandable and is printed in the same size font as the rest of the agreement under a bolded heading (albeit in the middle of nine pages).
To determine whether an adhesion contract exists, we weigh the following factors: "`(1) whether the contract is a standard form printed contract, (2) whether it was `prepared by one party and submitted to the other on a `take it or leave it' basis,' and (3) whether there was `no true equality of bargaining power' between the parties.'" Id. at 304 (quoting Yakima County (W.Valley) Fire Prot. Dist. No. 12 v. City of Yakima, 122 Wn.2d 371, 393, 858 P.2d 245 (1993)).
But the plaintiffs allege they were pressured to sign. They state they had the agreement for only a few minutes as the orientation moderator reviewed other provisions and told them where to sign; no one reviewed the arbitration clause with them; they were not given enough time to read the agreements; and they understood they must sign the forms "without discussion or negotiation." Continental provided no evidence to rebut their testimony.
In Adler, the employee had a week to review the agreement and seek advice. In Zuver, the employee had 15 days. Here, it appears the plaintiffs had less than 15 minutes. These circumstances support a finding of procedural unconscionability.
Adler, 153 Wn.2d at 349.
Zuver, 153 Wn.2d at 306.
The Adler court declined to decide whether procedural unconscionability, standing alone, will render an arbitration agreement unenforceable. The plaintiffs do not address this question. Ordinarily, "the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa." The plaintiffs do not allege that they attempted to ask questions or for more time and were rebuffed, only that they believed questions would be unwelcome. On this record, in the absence of any substantive unconscionability, we cannot conclude that the demonstrated procedural unconscionability by itself precludes enforcement of an otherwise unremarkable arbitration agreement.
Adler, 153 Wn.2d at 346-47.
Armendariz, 24 Cal. 4th at 114.
We therefore reverse.
WE CONCUR: