Opinion
6:22-cv-00214-MK
10-03-2022
VINCENT J. RUIZ, Plaintiff, v. BRUCEPAC, INC., a State of Oregon Corporation; and DOES 1-7, Defendants,
FINDINGS AND RECOMMENDATION
MUSTAFA T. KASUBHAI (He / Him) United States Magistrate Judge
Plaintiff Vincent J. Ruiz brought this lawsuit pursuant to various state and federal employment statutes against Defendants BrucePac, Inc. and Does 1-7. Defendants move to compel arbitration, which Plaintiff opposes. See ECF Nos. 9, 16, 18. For the reasons that follow, Defendants' motion should be GRANTED in part.
BACKGROUND
Defendants are a food manufacturing business that sells packaged meat products at various locations in Oregon. Compl. ¶ 22-23, ECF No. 1. On June 21, 2016, Defendants offered Plaintiff the position of Production Laborer II with a start date of July 5, 2016. de Soto Decl. ¶ 2, ECF No. 10. Defendants offered this position to Plaintiff in their Offer of Employment letter (“Offer of Employment”). de Soto Decl. ¶ 3, Ex. 1 at 7, ECF No. 10. Included with the Offer of Employment was a copy of Defendant's Arbitration Program Arbitration Agreement (“Arbitration Agreement”). Id., Ex. 1 at 1-5. Plaintiff accepted the position and signed the Arbitration Agreement on June 21, 2016. Id. at 8. Plaintiff specifically signed under the following acknowledgment:
Bruce Packing Co. Inc., DBA BrucePac (“Company”) is committed to maintaining a harmonious workplace. The Company recognizes that on occasion there may be disagreements regarding employment issues that are unable to be resolved informally. For those instances, it is mutually agreed between the Employee and Company that any and all employment-related disputes or controversies on behalf of the Company or the Employee, including previously unasserted claims, arising out of or relating to the Employee's application or candidacy for employment, promotion or transfer, employment (including performance or nonperformance of duties), and/or cessation of employment with the Company, shall be subject to resolution exclusively through final and binding arbitration before a neutral, third-party arbitrator. This arbitration will be held in accordance with the Federal Arbitration Act, in conformity with the procedures of the Oregon Arbitration Act, and pursuant to the arbitration rules and procedures of the Arbitration Service of Portland, Inc., except as modified by applicable law and/or the terms of this Agreement. The claims covered by this Agreement include claims under federal, state, or local statutory or common law, including, but not limited to, claims arising under Title VII of the Civil Rights Act of 1964, as amended, including the amendments of the Civil Rights Act of 1991; the Americans with Disabilities Act (“ADA”); the Age Discrimination in Employment Act (“ADEA”); the Family Medical Leave Act (“FMLA”) the Fair Labor Standards Act (“FLSA”); 42 U.S.C. § 1981, as amended, including the
amendments to the Civil Rights Act of 1991; the Oregon Fair Employment Practices Act (including [Or. Rev. Stat. (“ORS”)] Chapters 652, 653, 659, and 659A); the Oregon Equity Act; and any other statutory or common law regulating employment, discrimination, harassment, or retaliation claims; wage and hour claims; contract claims; tort claims (including, but not limited to, defamation and false light claims); claims for wrongful discharge, wrongful arrest/false imprisonment, intentional/negligent infliction of emotional distress or malicious prosecution; and claims for violation of any public policy, federal, state or other governmental law, statute, regulation or ordinance ....Id., Ex. 1 at 1 (emphasis added).
Plaintiff alleges that during the course of his employment at BrucePac, two employees made racist remarks and slurs pertaining to Plaintiff's Mexican-American ancestry. Compl. ¶ 33, ECF No. 1. After the incident, Plaintiff lodged a formal complaint about the remarks to his supervisors. Id. ¶ 34. The incident was not formally investigated or addressed by BrucePac for more than five years. Id. ¶ 35. However, the Human Resources Department “rebuke[d]” Plaintiff's claim of discrimination and never investigated. Id. ¶ 41.
On May 11, 2021, Defendant terminated Plaintiff's employment. Id. ¶ 20. Plaintiff filed charges of discrimination with the Equal Employment Opportunity Commission (“EEOC”) shortly thereafter and received a “Right to Sue” letter from EEOC on November 30, 2021. Id. ¶ 27. On February 10, 2022, Plaintiff filed this lawsuit. Id. at 1. Plaintiff's lawsuit includes 15 claims:
• Hostile Work Environment based on National Origin in Violation of Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e-2(a);
• National Origin Discrimination (Disparate Treatment) in Violation of Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000 e-2(a);
• Retaliation in Violation of Title VII of the Civil Rights Act;
• Constructive Discharge in Violation of Title VII of the Civil Rights Act;
• Title VI of the Civil Rights Act of 1964, Title IX of Education, Amended, Of 1972, section 504 Privacy HIPAA;
• Failure to Prevent Discrimination and Harassment in Violation of FEHA;
• Retaliation in Violation of Oregon Labor Code § 839, Discrimination Retaliation against Employees for making a Discrimination Claim;
• Negligent Supervision;
• Unfair Labor Practices;
• Whistleblower Retaliation;
• Gross Negligence;
• Hostile Work Environment Based on Race in Violation of 42 U.S.C. § 1981;
• Hostile Work Environment Based on Race in Violation of 42 U.S.C. § 1981;
• Race Discrimination (Disparate Treatment) in Violation of 42 U.S.C. § 1981;
• Violation of ORS § 659A.030(1)(b).Id.
Plaintiff makes two similar claims. See Compl. ¶ 168-186, ECF No. 1.
STANDARD OF REVIEW
Congress enacted the Federal Arbitration Act (“FAA”) to “advance the federal policy favoring arbitration agreements.” Lowden v. T-Mobile USA, Inc., 512 F.3d 1213, 1217 (9th Cir. 2008). The FAA provides that arbitration agreements generally “shall be valid, irrevocable, and enforceable.” Id.; see also 9 U.S.C. § 2. Courts must “rigorously enforce” arbitration agreements and “must order arbitration if it is satisfied that the making of the agreement for arbitration is not in issue.” Simula, Inc. v. Autoliv, Inc., 175 F.3d 716, 719 (9th Cir. 1999) (citing Dean WitterReynolds v. Byrd, 470 U.S. 213, 218 (1985)). Accordingly, a court's inquiry is twofold. First, it must determine “whether a valid agreement to arbitrate exists[.]” Chiron Corp. v. OrthoDiagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000). And second, if it does, “whether the agreement encompasses the dispute at issue.” Id.
In the context of a motion to compel arbitration, the burden of proof is on the party contesting arbitration. Shearson/Am. Express, Inc. v. McMahon, 482 U.S. 220, 227 (1987). “[A]ny doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem” is construction of the contract language, “an allegation of waiver,” or a “defense to arbitrability.” Moses H. Cone Mem'l Hosp. v. Mercury Const. Corp., 460 U.S. 1, at 24-25 (1983). If the court finds the matter is subject to arbitration, it may either stay the matter pending arbitration or dismiss the matter. EEOC v. Waffle House, Inc., 534 U.S. 279, 289 (2002); see also 9 U.S.C. § 3, 4. However, although the FAA authorizes a court to stay an action that is subject to a valid agreement to arbitrate, 9 U.S.C. § 3, a court instead may dismiss an action, rather than merely staying it, when all of the issues raised in the action are arbitrable. Sparling v. Hoffman Constr. Co., 864 F.2d 635, 638 (9th Cir. 1988) (“The district court acted within its discretion when it dismissed [the plaintiff's] claims.).
DISCUSSION
Defendants move to compel arbitration and dismiss this lawsuit, asserting that the arbitration agreement is enforceable, valid, and covers all of Plaintiff's claims. Def.'s Mot. Compel Arb. (“Def.'s Mot.”) at 5-7, ECF No. 9. Plaintiff disagrees. He argues that four of his claims fall outside the scope of the Arbitration Agreement: (1) Retaliation in Violation of Oregon Labor Code § 839; (2) Negligent Supervision; (3) Unfair Labor Practices; and (4) Gross Negligence. Pl.'s Resp. at 6-7, ECF No. 16. Plaintiff also seeks leave to amend his complaint to add a claim for recission of the Arbitration Agreement on the grounds that it is invalid for unconscionability as it is an illegal adhesion contract. Id. at 8.
A. Scope of the Arbitration Agreement
Federal courts generally apply state contract law when interpreting an arbitration agreement. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995). However, state law is preempted to the extent it directly conflicts with the FAA. Id. Any doubts concerning the scope of arbitrability are resolved in favor of compelling arbitration. Moses H. Cone Mem'l Hosp., 460 U.S. at 24-25.
As noted, the parties dispute whether four of Plaintiff's claims fall within the scope of the Arbitration Agreement. Oregon law follows a two-step inquiry to determine whether the parties intended an arbitration agreement to include a particular claim. First, courts analyze the text and context of the arbitration agreement. Industra/Matrix Joint Venture v. Pope & Talbot, Inc.,341 Or. 321, 332 (2006). If the text and context of the agreement are unambiguous after this analysis, the inquiry ends. Eagle Industries, Inc. v. Thompson, 321 Or. 398, 405 (1995). If ambiguity remains, all doubts concerning arbitrability are resolved in favor of arbitration. Industra/Matrix, 341 Or. at 332 (citing Moses H. Cone Mem. Hosp.,460 U.S. at 24-25 (1983) (“[A]ny doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration ....”)).
1. Retaliation in Violation of Oregon Labor Code 839
Oregon Labor Code § 839 prohibits retaliation against an employee when that employee engages in protected activity by explicitly or implicitly opposing an unlawful practice and that person is subjected to adverse treatment that is causally connected to the protected activity. OAR § 839-005-0125. The Arbitration Agreement states that it covers “any other statutory or common law regulating employment; discrimination, harassment, or retaliation claims ....” de Soto Decl. ¶ 3, Ex. 1 at 1, ECF No. 10 (emphasis added). Plaintiff's Oregon Labor Code § 839 claim falls squarely within the scope of the text of the Arbitration Agreement because it alleges “retaliation” and “discrimination.” Accordingly, the Arbitration Agreement is not ambiguous as to Plaintiff's Oregon Labor Code § 839 claim, which is subject to the Arbitration Agreement.
2. Negligent Supervision
Plaintiff next contends that his “Negligent Supervision” cause of action is outside the scope of the Arbitration Agreement. See Pl.'s Resp. at 7, ECF No. 16. Plaintiff's negligent supervision claim alleges that Defendants “knew or reasonably should have known that their failure [to] adequately supervise their employees created the risk of the commission, by those employees, of wrongful conduct[.]” Compl. ¶ 135, ECF No. 1. As noted, the Arbitration Agreement covers “any other statutory or common law regulating employment; discrimination, harassment, or retaliation claims[.]” Id. (emphasis added). Plaintiff's negligent supervision claim is a “common law [claim] regulating employment” and thus within the scope of the Arbitration Agreement.
3. Unfair Labor Practices
Plaintiff asserts that his “Unfair Labor Practices” claim is outside the scope of the Arbitration Agreement. See Pl.'s Resp. at 7, ECF No. 16. Plaintiff's unfair labor practices claim alleges that Defendants “failed to protect Plaintiff from discrimination in his place of employment” and therefore violated ORS § 243.672. Compl. ¶ 142, ECF No. 1. The Arbitration Agreement states that it applies to “claims for violation of any public policy, federal, state or other governmental law, statute, regulation or ordinance[.]” Decl. ¶ 3, Ex. 1 at 1, ECF No. 10 (emphasis added). Consequently, Plaintiff's unfair labor practices claim is also within the scope of the Arbitration Agreement as it is a claim for violation of a “state or other governmental law, statute.” Thus, this claim is also subject to the Arbitration Agreement.
4. Gross Negligence
Finally, Plaintiff argues that his “gross negligence” claim falls outside the scope of the Arbitration Agreement. See Pl.'s Resp. at 7, ECF No. 16. Plaintiff's gross negligence claim alleges that Defendants are legally responsible for the management of employees and were grossly negligent in breaching their duties by failing to investigate Plaintiff's complaints of discrimination. Compl. ¶ 162-63, ECF No. 1. The Arbitration Agreement compels arbitration of “any other statutory or common law regulating employment; discrimination, harassment, or retaliation claims[.]” de Soto Decl. at 1, ECF No. 10 (emphasis added). Plaintiff's gross negligence claim also falls within the scope of the Arbitration Agreement as it is a common law claim regulating employment. The Arbitration Agreement is therefore not ambiguous as to Plaintiff's gross negligence claim, which is also subject to arbitration.
In sum, all four of the disputed claims are subject to the Arbitration Agreement.
B. Unconscionability
Plaintiff seeks leave to amend his complaint to add a claim for recission of the Arbitration Agreement on the grounds that it is invalid for unconscionability as an illegal adhesion contract. Pl.'s Resp. at 8, ECF No. 16. “Like other contracts, arbitration agreements can be invalidated for fraud, duress, or unconscionability.” Chavarria v. Ralphs Grocery Co., F.3d 916, 921 (9th Cir. 2013). “The party asserting unconscionability bears the burden of demonstrating that the arbitration clause in question is, in fact, unconscionable.” Motsinger v. Lithia Rose-FT, Inc., 211 Or.App. 610, 614 (2007). Unconscionability is a question of law determined by the court “based on the facts in existence at the time the contract was made.” Id. There are two types of unconscionability-procedural and substantive. Although some jurisdictions require both substantive and procedural unconscionability to invalidate a contract, the Oregon Supreme Court has expressly declined to resolve that question. See Bagley v. Mt. Bachelor, Inc., 356 Or. 543, 555 (2014). The Ninth Circuit, however, interpreting Oregon law, has explained that “[a]lthough both forms of unconscionability ‘are relevant . . . only substantive unconscionability is absolutely necessary.'” Chalk v. T-Mobile USA, Inc., 560 F.3d 1087, 1093 (9th Cir. 2009) (quoting Vasquez-Lopez v. Beneficial Or., Inc., 210 Or.App. 553, 566 (2007)).
1. Procedural Unconscionability
“Procedural unconscionability refers to the conditions of contract formation and focuses on two factors: oppression and surprise.” Bagley, 356 Or. at 555. In considering the “oppression” prong of procedural unconscionability, a court should consider whether “there is inequality in bargaining power between the parties, resulting in no real opportunity to negotiate the terms of the contract and the absence of meaningful choice.” Id. Evidence of oppression can include “gross inequality of bargaining power, a take-it-or-leave-it bargaining stance, and the fact that a contract involves a consumer transaction.” Id. The “surprise” prong of procedural unconscionability, on the other hand, “involves whether terms were hidden or obscure from the vantage of the party seeking to avoid them . . . such as ambiguous contract wording and fine print.” Id.
Plaintiff argues that the Arbitration Agreement is an illegal adhesion contract, because he was the weaker party and was offered employment on a “take-it-or-leave-it” basis. Sprague v. Quality Restaurants Nw., Inc., 213 Or.App. 521, 526 (2007). However, that fact alone “does not render [an arbitration agreement] unenforceable” absent “other oppressive circumstances” or deception. Id.; see also Siggelkow v. Nw. Grp., Inc., No. 3:18-cv-01494-HZ, 2019 WL 294759, at *7 (D. Or. Jan. 22, 2019) (“[I]n Oregon, more than a contract of adhesion and unequal bargaining power is required to void an arbitration clause.”).
Plaintiff was not surprised by his obligation to sign the Arbitration Agreement and was not rushed into signing the contract. Plaintiff read and signed the agreement over a week before he began work. de Soto Decl. Ex. 1 at 8, ECF No. 10. Additionally, there is no evidence that the Arbitration Agreement was written in a deceptive manner. The Arbitration Agreement is five pages in length, printed in size twelve font, with section headings and key phrases bolded. Id. Neither the circumstances nor the structure of the Arbitration Agreement support Plaintiff's argument that the Arbitration Agreement was procedurally unconscionable. See Lovelance, v. DEKRA N. Am. Inc., No. 3:17-cv-00318-BR, 2017 WL 2927153, at *9-10 (D. Or. June 30, 2017) (holding that a nine-page long arbitration agreement written in regular-sized font was not procedurally unconscionable).
2. Substantive Unconscionability
“Substantive unconscionability . . . generally refers to the terms of the contract, rather than the circumstances of formation, and focuses on whether the substantive terms contravene the public interest or public policy.” Bagley, 356 Or. at 555. A court “must determine . . . whether, given . . . unequal bargaining power, the effect of the arbitration clause makes the parties' respective obligations so unbalanced as to be unconscionable.” Motsinger v. Lithia Rose-FT, Inc., 211 Or.App. at 625.
Here, the terms of the Arbitration Agreement are not so unbalanced as to render the agreement unconscionable. First, the Arbitration Agreement provides that the parties are to select an arbitrator in accordance with the Arbitration Service of Portland's Procedural Rules. de Soto Decl. ¶ 3, Ex. 1 at 2, ECF No. 10. Neither party has outsized influence in selecting the arbitrator who will ultimately resolve the dispute. Second, the Arbitration Agreement procedures apply equally to both parties. Id. at 2-3. The agreement is binding on both parties who are subject to the same discovery rules. Id.
Finally, the agreement does not impose any costs on the Plaintiff. Mandatory filing fees for indigent plaintiffs without a provision for waiver of the filing fee can in some circumstances make an arbitration agreement so one sided as to be substantively unconscionable. See Ingle v. Cir. City Stores, Inc., 328 F.3d 1165, 1177 (9th Cir. 2003); Taylor v. Ash Grove Cement Co., No. cv-03-1509-ST, 2004 WL 1382726, at *8 (D. Or. Feb. 25, 2004), adopted, No. cv-03-1509-ST, 2004 WL 1418783 (D. Or. June 22, 2004). Plaintiff has been granted in forma pauperis status in this case. See Order Proceed In Forma Pauperis, ECF No. 5. However, the Arbitration Agreement here provides that “the Employee may be exempt from a filing fee upon a showing of indigence, pursuant to the applicable law of a court of competent jurisdiction in which the dispute could have been brought in the absence of this Agreement.” Decl. ¶ 3, Ex. 1 at 4, ECF No. 10. Under the terms of the Arbitration Agreement therefore Plaintiff's status as indigent will allow him to have any filing fee waived. Consequently, Plaintiff will incur no costs in the arbitration process. As such, the Arbitration Agreement as applied here is not substantively unconscionable.
In sum, because Plaintiff cannot establish either procedural or substantive unconscionability any amendment of the Complaint would be futile.
C. Staying or Dismissing the Matter
Plaintiff argues that the Court should stay this case pending resolution of the arbitration. When all claims against a party are covered by an arbitration, a party is entitled to move both to compel arbitration and also for a dismissal of the lawsuit with prejudice. Lewis v. UBS Financial Services Inc., 818 F.Supp.2d 1161, 1165 (N.D. Cal. 2011) (noting that “the Court may stay the action pending arbitration or dismiss the action.”); Quevedo v. Macy's, Inc., 798 F.Supp.2d 1122, 1143 (C.D. Cal. 2011) (“The FAA authorizes a court to grant a stay pending arbitration, but it does not ‘limit the court's authority to grant a dismissal' where the court requires a plaintiff ‘to submit all claims to arbitration.'”).
However, the Oregon Uniform Arbitration Act (“OAA”) provides that “[i]f the court orders arbitration, the court on just terms shall stay any judicial proceeding that involves a claim subject to the arbitration.” ORS § 36.625(7) (emphasis added). The Arbitration Agreement states: “This arbitration will be held in accordance with the Federal Arbitration Act, in conformity with the procedures of the Oregon Arbitration Act, and pursuant to the arbitration rules and procedures of the Arbitration Service of Portland, Inc[.]” de Soto Decl. ¶ 3, Exhibit 1 at 1, ECF No. 10 (emphasis added). Consequently, the Court should grant Defendant's Motion to Compel Arbitration and stay this case in accordance with the OAA.
The OAA is only preempted by the FAA insofar as it “imposes additional enforceability conditions not applicable to other contracts.” Hermida v. JP Morgan Chase Bank, N.A., No. 3:15-cv-00810-HZ, 2015 WL 6739129, at *3 (D. Or. Nov. 3, 2015) (citing Bettencourt v. Brookdale Senior Living Communities, Inc., No. 09-cv-1200-BR, 2010 WL 274331 (D. Or. Jan. 14, 2010); see also Volt Info. Scis., Inc. v. Bd. of Trustees of Leland Stanford Junior U., 489 U.S. 468, 469 (1989) (stating the FAA contains no express preemptive provision nor does it reflect a congressional intent to occupy the entire field of arbitration and FAA's principal purpose is to ensure that private arbitration agreements are enforced).
RECOMMENDATION
For the reasons above, Defendants' motion to compel arbitration and dismiss this lawsuit (ECF No. 9) should be GRANTED in part. The Court should enter an order compelling arbitration and stay this case pending resolution of the arbitration.
This recommendation is not an order that is immediately appealable to the Ninth Circuit Court of Appeals. Any notice of appeal pursuant to Federal Rule of Appellate Procedure 4(a)(1) should not be filed until entry of the district court's judgment or appealable order. The Findings and Recommendation will be referred to a district judge. Objections to this Findings and Recommendation, if any, are due fourteen (14) days from today's date. See Fed.R.Civ.P. 72. Failure to file objections within the specified time may waive the right to appeal the District Court's order. Martinez v. Ylst, 951 F.2d 1153, 1157 (9th Cir. 1991).