Opinion
Civil Action 3:21-cv-3428-JFA-TER
04-01-2022
ANNZALA PITT, Plaintiff, v. WELLS FARGO BANK, National Assoc., Defendant.
REPORT AND RECOMMENDATION
Thomas E. Rogers, III United States Magistrate Judge
I. INTRODUCTION
This action arises out of Plaintiff's employment with Defendant. Plaintiff alleges race discrimination, hostile work environment, and retaliation in violation of Title VII of the Civil Rights Act of 1964 (Title VII), 42 U.S.C. § 2000(e) et seq. and 42 U.S.C. § 1981. Presently before the Court is Defendant's Motion to Compel Arbitration (ECF No. 16). Plaintiff filed a Response (ECF No. 19), and Defendant filed a Reply (ECF No. 22). All pretrial proceedings in this case were referred to the undersigned pursuant to the provisions of 28 U.S.C. § 636(b)(1)(A) and (B) and Local Rule 73.02(B)(2)(g), DSC. This report and recommendation is entered for review by the district judge.
II. FACTUAL ALLEGATIONS
Plaintiff is an African-American female over the age of forty with extensive experience as a Teller and Personal Banker. Am. Compl. ¶¶ 20-21 (ECF No. 5). She worked with Defendant as a Teller and Personal Banker until 2007 when she enlisted in the United States Army. Am. Compl. ¶ 21. Plaintiff served in the United States Army from 2007 until 2014, when she became disabled. Am. Compl. ¶ 22. In 2014, she returned to Defendant to continue her career in banking. Am. Compl. ¶ 23. From 2014-2018, Plaintiff worked in the legal and fraud departments. Am. Compl. ¶¶ 26-27. In June of 2018, she returned to a position as Personal Banker at the Shaw Air Force Base branch. Am. Compl. ¶¶ 27-28. The Branch Manager who hired her, Robert Tillman, resigned in October of 2018. Am. Compl. ¶¶ 28-29. Denise Coleman-Smith returned to her position as Teller Manager in October of 2018 following maternity leave. Am. Compl. ¶ 30. Coleman-Smith subjected Plaintiff to unfair treatment, a hostile work environment, retaliation for reporting ColemanSmith's conduct to the District Manager, and ultimately termination. Am. Compl. ¶¶ 31-59.
III. CONTRACTUAL AGREEMENT
On June 7, 2018, Plaintiff signed a document entitled “Wells Fargo Mutual Arbitration Agreement.” Arbitration Agreement (ECF No. 16-2). The Arbitration Agreement provides that
Wells Fargo and I mutually agree that any legal Claims arising out of my application for employment, employment, or separation from employment with Wells Fargo shall be resolved by final and binding arbitration. Except as noted below, Wells Fargo and I agree to waive our rights to pursue any Claims in court before a jury. This Agreement is subject to the Federal Arbitration Act.See Arbitration Agreement. It further provides that “the Claims covered by this Agreement . . . include, but are not limited to, claims for discrimination, harassment, retaliation, tortious conduct, wrongful discharge, . . . or claims for violations of any federal, state, or local statute, regulation, or common law, including, but not limited to, Title VII of the Civil Rights Act of 1974 . . . .” See Arbitration Agreement.
IV. STANDARD OF REVIEW
Defendant did not specifically set forth the standard of review applicable to its motion. The Fourth Circuit has found that a motion to dismiss and compel arbitration is most properly considered under Rule 12(b)(3) for improper venue, noting that the Supreme Court has characterized an arbitration clause as “a specialized kind of forum-selection clause.” Aggarao v. MOL Ship Mgmt. Co., 675 F.3d 355, 365 n.9 (4th Cir. 2012) (citing Scherk v. Alberto-Culver Co., 417 U.S. 506, 519, 94 S.Ct. 2449, 41 L.Ed.2d 270 (1974)); Sucampo Pharm., Inc. v. Astellas Pharma, Inc., 471 F.3d 544, 550 (4th Cir.2006) (“A motion to dismiss based on a forum-selection clause should be properly treated under Rule 12(b)(3) as a motion to dismiss on the basis of improper venue.”); see also Brown v. Five Star Quality Care, Inc., No. 2:15-CV-4105-RMG, 2016 WL 8710474, at *2 (D.S.C. Jan. 8, 2016) (applying Rule 12(b)(3)). “The party seeking to compel arbitration bears the burden of establishing the existence of an arbitration provision that purports to cover the dispute.” Scales v. SSC Winston-Salem Operating, Co., LLC, No. 1:17CV539, 2017 WL 4467278, at *2 (M.D. N.C. Oct. 5, 2017) (internal quotation marks and citation omitted). “If the party makes this evidentiary showing, the party opposing arbitration must come forward with sufficient facts to place the entitlement to arbitration in dispute.” Id. (citing Chorley Enters., Inc. v. Dickey's Barbecue Rests., Inc., 807 F.3d 553, 564 (4th Cir. 2015)). When considering a motion under Rule 12(b)(3), the Court may consider evidence outside the pleadings, but the facts are viewed in the light most favorable to the plaintiff because a plaintiff need only make a prima facie showing of proper venue to survive a motion to dismiss. Id. at 365-66.
V. DISCUSSION
Defendant argues that dismissal of this action is proper because all of the claims raised by Plaintiff are subject to mandatory arbitration pursuant to the Arbitration Agreement between it and Plaintiff. Plaintiff argues that the motion should be denied because Defendant unreasonably delayed the presentation of the Arbitration Agreement, and because the Arbitration Agreement is unenforceable. In deciding whether to compel arbitration, the trial court is tasked with determining two gateway issues. Howsam v. Dean Witter Reynolds, 537 U.S. 79, 83-84 (2002). Courts should “engage in a limited review to ensure that the dispute is arbitrable - i.e., that a valid agreement to arbitrate exists between the parties and that the specific dispute falls within the substantive scope of that agreement.” Hooters of America, Inc. v. Phillips, 173 F.3d 933, 938 (4th Cir. 1999). In deciding whether the parties have an enforceable agreement to arbitrate, courts apply state law principles governing the formation of contracts. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995).
As set forth above, the arbitration agreement contained within the Contract provides that the Federal Arbitration Act (FAA), 9 U.S.C. § 3, et seq. is applicable here. The FAA “creates a body of federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the Act.” Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985). While Congress considered the advantage of expeditious resolution of disputes through arbitration in enacting the FAA, its primary purpose was to enforce agreements into which parties have entered. Volt Information Sciences, Inc. v. Board of Trustees of the Leland Stanford Junior University, 489 U.S. 468, 478 (1989).
Referred to as the “United States Arbitration Act” in the Contract.
“[Q]uestions of arbitrability must be addressed with a healthy regard for the federal policy favoring arbitration.” Gilmer, 500 U.S. at 26. The “liberal federal policy favoring arbitration agreements manifested by this provision and the Act as a whole, is at bottom a policy guaranteeing the enforcement of private contractual arrangements; the Act simply ‘creates a body of federal substantive law establishing and regulating the duty to honor an agreement to arbitrate.'” Mitsubishi, 473 U.S. at 625 (citing Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1 (1983). However, the presumption in favor of arbitration “applies only when ‘a validly formed and enforceable arbitration agreement is ambiguous about whether it covers the dispute at hand,' not when there remains a question as to whether an agreement even exists between the parties in the first place.” Raymond James Fin. Servs. v. Cary, 709 F.3d 382, 385-386 (4th Cir. 2013).
The Supreme Court has directed that we “apply ordinary state law principles that govern the formation of contracts, ” First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995), and the “federal substantive law of arbitrability.” Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). Thus state law determines questions “concerning the validity, revocability, or enforceability of contracts generally, ” Perry v. Thomas, 482 U.S. 483, 493 n. 9, 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987), but the Federal Arbitration Act, 9 U.S.C. § 2 (1994), “create[s] a body of federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the Act.” Moses H. Cone Mem'l Hosp., 460 U.S. at 24, 103 S.Ct. 927.
Plaintiff argues that (1) Defendant unreasonably delayed presenting the Arbitration Agreement, (2) it was not presented to her until after she had been employed with Defendant for years and, thus, lacks consideration, (3) it is unconscionable because was not explained to her, (4) it is procedurally unfair because it not does specifically set forth the procedure applicable to the arbitration, and (5) it is not covered by the FAA because the parties' transactions do not relate to interstate commerce.
Plaintiff filed this action on October 20, 2021, and then filed an Amended Complaint, changing only the spelling of her name, on October 25, 2021. Am. Compl. (ECF No. 5). On December 10, 2021, Defendant filed its Answer to the Amended Complaint. Answer (ECF No. 7). On January 14, 2021, Plaintiff served Defendant with Plaintiff's First Set of Interrogatories and First Set of Requests for Production of Documents. Certificate of Service (ECF No. 16-1). In the process of preparing its response to Plaintiff's discovery requests, Defendant located the Arbitration Agreement that was entered into by the Parties on June 7, 2018. Arbitration Agreement (ECF No. 16-2). Defendant's counsel presented the Arbitration Agreement to Plaintiff's counsel on February 7, 2021 and requested that Plaintiff agree to dismissal of the Complaint pursuant to the terms of the Agreement. February 7, 2022, E-mail Correspondence (ECF No. 16-3). On February 11, 2022, Plaintiff indicated that she would not consent to dismissal pursuant to the Arbitration Agreement. February 11, 2022, E-Mail Correspondence (ECF No. 16-4). Defendant filed the present Motion the same day. Mot. to Compel Arbitration (ECF No. 16).
Plaintiff argues that this case has been pending with the EEOC since February 4, 2020, and in this court since October of 2021, with no mention of the Arbitration Agreement until February of 2022. Plaintiff argues that Defendant should have filed the present motion instead of filing an Answer. Without citation to case law, Plaintiff argues that the delay in raising the Arbitration Agreement amounts to a waiver of the right to arbitration. She also argues that the delay is prejudicial to her.
The FAA commands the federal courts to refer a matter to arbitration upon application of a party to a valid arbitration agreement, unless the applicant is in “default.” 9 U.S.C. § 3. The Fourth Circuit has explained that “[a]lthough this principle of ‘default' is akin to waiver, the circumstances giving rise to a statutory default are limited, and ... are not to be lightly inferred.” Maxum Founds., Inc. v. Salus Corp., 779 F.2d 974, 981 (4th Cir.1985). The party opposing arbitration bears a heavy burden of proving waiver. Hasco, Inc. v. Schuyler, Roche & Zwirner, 172 F.3d 43 (4th Cir. 1998) (citing American Recovery Corp. v. Computerized Thermal Imaging, Inc., 96 F.3d 88, 91, 95 (4th Cir.1996); Britton v. Co-op Banking Group, 916 F.2d 1405, 1412 (9th Cir.1990)). A party defaults on its right to compel arbitration under the FAA where it “ ‘so substantially utilize[es] the litigation machinery that to subsequently permit arbitration would prejudice the party opposing the stay.'” Forrester v. Penn Lyon Homes, Inc., 553 F.3d 340, 343 (4th Cir.2009) (citations omitted). The party arguing default must have suffered actual prejudice as a result of the moving party's failure to demand arbitration at an earlier stage in the proceedings. Rota-McLarty v. Santander Consumer USA, Inc., 700 F.3d 690, 702 (4th Cir. 2012) (citing MicroStrategy, Inc. v. Lauricia, 268 F.3d 244, 249 (4th Cir. 2001); Two factors are considered in analyzing actual prejudice: “(1) the amount of the delay; and (2) the extent of the moving party's trial-oriented activity.” Id. Plaintiff does not address either of these factors or otherwise explain the prejudice she would suffer if this matter is referred to arbitration. “[E]ven in cases where the party seeking arbitration has invoked the ‘litigation machinery' to some degree, ‘[t]he dispositive question is whether the party objecting to arbitration has suffered actual prejudice.' ” MicroStrategy, Inc., 268 F.3d at 249 (quoting Fraser v. Merrill Lynch Pierce, Fenner & Smith, Inc., 817 F.2d 250, 252 (4th Cir. 1987)). Both the amount of delay and the extent of Defendant's trial-oriented activity are minimal. Counsel for Defendant became aware of the Arbitration Agreement in the very beginning stages of discovery, immediately brought it to the attention of Plaintiff's counsel, and filed the present motion the same day Plaintiff's counsel declined to dismiss the action. The present motion was filed less than four months after Plaintiff filed the original complaint. “A delay of several months, without more, is insufficient to demonstrate the opposing party suffered actual prejudice.” Rota-McLarty, 700 F.3d at 703 (no waiver of right to seek arbitration for party who spent six months litigating through discovery before requesting arbitration); compare Forrester, 553 F.3d at 343-44 (default proper where party sought arbitration after litigation began more than two years prior); Fraser, 817 F.2d at 252-53 (same, with four-year delay). Plaintiff has failed to meet the “heavy burden” of establishing that Defendant has waived its right to arbitration under the Arbitration Agreement. Rota-McLarty, 700 F.3d at 702.
Plaintiff also argues that the Arbitration Agreement is not valid because it was presented to her after she had been employed with Defendant for years and, thus, lacked consideration. “The necessary elements of a contract are offer, acceptance, and valuable consideration.” Electro Lab of Aiken, Inc. v. Sharp Constr. Co. of Sumter, 357 S.C. 363, 368, 593 S.E.2d 170, 173 (Ct. App. 2004). In South Carolina, continued at-will employment constitutes sufficient consideration for an arbitration agreement. See Towles v. United Healthcare Corp., 524 S.E.2d 839, 845 n. 4 (S.C. Ct. App. 1999) (noting that an employee's continued employment constituted acceptance and sufficient consideration to make arbitration agreement binding); see also Marzulli v. Tenet S.C., Inc., No. 2015-UP-132, 2018 WL 1531507, at *4 (S.C. Ct. App. Mar. 28, 2018) (“[W]e have held continued employment sufficient consideration to support arbitration agreements.”); Morton v. Darden Restaurants, Inc., No. CV 8:17 1865 HMH KFM, 2018 WL 1531634, at *4 (D.S.C. Mar. 2, 2018), report and recommendation adopted, 2018 WL 1524093 (D.S.C. Mar. 28, 2018). In addition, a mutual promise to arbitrate constitutes sufficient consideration to underpin an arbitration agreement. O'Neil v. Hilton Head Hosp., 115 F.3d 272, 275 (4th Cir. 1997) (citing Rickborn v. Liberty Life Ins. Co., 321 S.C. 291, 468 S.E.2d 292, 300 (1996)). Accordingly, valid consideration exists to support the Arbitration Agreement.
Next, Plaintiff argues that the Arbitration Agreement is unconscionable because it was not explained to her before she signed it. A court may invalidate an arbitration agreement based on defenses applicable to contracts generally, including unconscionability. Kindred Nursing Ctrs. Ltd. P'ship v. Clark, - U.S. -, 137 S.Ct. 1421, 1426, 197 L.Ed.2d 806 (2017). To prove the arbitration provision unconscionable, Plaintiffs must show that (1) they lacked a meaningful choice as to whether to arbitrate because the arbitration agreement's provisions were one sided, and (2) the terms were so oppressive no reasonable person would make them and no fair and honest person would accept them. Simpson v. MSA of Myrtle Beach, Inc., 373 S.C. 14, 24B25, 644 S.E.2d 663, 668 (2007). Plaintiff does not specifically address these factors. Further, South Carolina law “does not impose a duty to explain a document's contents to an individual when the individual can learn the contents from simply reading the document.” Towles, 524 S.E.2d at 845; see also Sydnor v. Conseco Fin. Servicing Corp., 252 F.3d 302, 306 (4th Cir. 2001) (stating “an elementary principle of contract law is that a party signing a written contract has a duty to inform himself of its contents before executing it, ... and in the absence of fraud or overreaching he will not be allowed to impeach the effect of the instrument by showing that he was ignorant of its contents or failed to read it ... That the appellees did not make themselves aware of the arbitration clause and disclosure is irrelevant.” (internal marks and citation omitted)). Similar arguments have been rejected by this court on multiple occasions. See, e.g., Gourdine v. Redstone Mod. Dentistry, No. 0:21-CV-2656-MGL-SVH, 2021 WL 5333012, at *4 (D.S.C. Oct. 21, 2021), report and recommendation adopted, 2021 WL 5330619 (D.S.C. Nov. 16, 2021) (enforcing arbitration agreement where the plaintiff argued that the agreement was not explained to her); Lincoln v. G2 Secure Staff, LLC, No. CV 2:20-1954-DCN-MHC, 2020 WL 12772535, at *4 (D.S.C. Nov. 18, 2020), report and recommendation adopted, No. 2:20-CV-1954 DCN, 2021 WL 5936391 (D.S.C. Jan. 7, 2021) (enforcing arbitration agreement where the plaintiff argued that “no one explained the Agreement to her and the Agreement was mandatory); Hamlin v. Dollar Tree Stores, Inc., No. 2:17-CV-2648-PMD, 2017 WL 6034325, at *1 (D.S.C. Dec. 6, 2017) (enforcing arbitration agreement where the plaintiff claimed that the agreement was “buried among other work training documents, ” no one explained the agreement to her, and the agreement was mandatory). Plaintiff's argument that the Arbitration Agreement is unenforceable because no one explained it to her is unavailing.
Plaintiff also argues that the Arbitration Agreement is “riddled with procedural unfairness by failing to set forth any procedure, any culpability for payment of the arbitration or any benefit to the Plaintiff as a party to surrender her rights to a trial by jury of her peers” and that the Agreement “fails to set forth sufficient rules to conduct the arbitration” and “merely recites some factors and fails to set forth what governs the procedure.” Pl. Resp. at 5-6 (ECF No. 19). The only case cited by Plaintiff with respect to this argument is Raglani v. Ripken Pro. Baseball, 939 F.Supp.2d 517, 524 (D. Md. 2013), in which the court found the arbitration agreement at issue to be unenforceable because “undermine[d the plaintiff's] access to a neutral forum to vindicate her rights” by giving her employer the exclusive right to select the list of potential arbitrators. No such circumstance is present in this case. The Arbitration Agreement specifically provides that “arbitration shall be conducted by single neutral arbitrator in accordance with the American Arbitration Association's (“AAA”) Employment Arbitration Rules and Mediation Procedures” (with a link to the applicable rules), that the “parties shall have the right to conduct adequate discovery necessary to the full and fair exploration of the case, file dispositive motions, and present witnesses and evidence, ” and that the “arbitrator is authorized to grant all remedies available under applicable law.” See Arbitration Agreement. With respect to costs, the Agreement states that “other than the filing fee . . . Wells Fargo will pay all costs unique to arbitration, including any further filing fees, arbitrator fees, or AAA administrative fees.” Id. Plaintiff fails to show how the Arbitration Agreement is “riddled with procedural unfairness.” Therefore, this argument is without merit.
Finally, Plaintiff argues that Defendant fails to show that the parties' transactions relate to interstate commerce such that the FAA is applicable. Section 2 of the FAA provides that
A written provision in ... a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof ... 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 (emphasis added). The United States Supreme Court has interpreted the term “involving commerce” to signal “the broadest permissible exercise of Congress' Commerce Clause power.” Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 56 (2003). Defendant is a federally chartered national banking association organized and existing under the laws of the United States of America. Answer at ¶ 7 (ECF No. 7); see https://www.occ.treas.gov/topics/charters-andlicensing/financial -institution-lists/national-by-name.pdf. Further, the Arbitration Agreement itself specifically provides that it “is subject to the Federal Arbitration Act.” See Arbitration Agreement. Plaintiff has failed to present any valid argument to the contrary. The FAA does not impose a burden on the party invoking the FAA to put forth specific evidence proving the interstate nature of its transactions. Rota-McLarty, 700 F.3d at 697; see also Maxum Founds., Inc. v. Salus Corp., 779 F.2d 974, 978 n.4 (4th Cir. 1985) (refusing, where party seeking arbitration under FAA asserts contract affects interstate commerce and party opposing arbitration “does not come forward with evidence to rebut” that assertion, to “read into the Act a requirement of further proof” by party invoking FAA).
For the reasons discussed above, the parties entered into a valid and enforceable Arbitration Agreement covering the claims asserted in this action and arbitration is appropriate.
VI. CONCLUSION
Accordingly, it is recommended that Defendant's Motion Compel Arbitration (ECF No. 16) be granted and this case be compelled to arbitration and dismissed.