Opinion
Civil Action No. 04-0701 (RMU), Document No. 3.
November 5, 2004
MEMORANDUM OPINION
GRANTING THE DEFENDANTS' MOTION TO DISMISS I. INTRODUCTION
This matter comes before the court on the defendants' motion to dismiss and compel arbitration. The defendants argue that the plaintiffs must submit their claims to binding arbitration pursuant to the terms of the employment agreement the plaintiff signed with defendants. Because the parties entered into a valid and enforceable arbitration agreement that encompasses the claims brought in the plaintiffs' complaint, the court grants the defendants' motion to dismiss.
II. BACKGROUND A. Factual History
Plaintiff Thian Lok Tio, M.D. ("Dr. Tio") is a former employee of Washington Hospital Center, et al. (collectively, "the Hospital") who once held the position of Director of Endoscopy in the Section of Gastroenterology. Compl. ¶ 3. The employment relationship commenced on November 30, 2000, when Dr. Tio executed a written employment contract ("Agreement") Compl. Ex. 1. This Agreement set forth the terms and renewal of Dr. Tio's annual employment. Compl. ¶ 16. Paragraph 5 of the Agreement, titled "Term and Termination," indicated that the contract was renewable from year to year and stated that "[e]ither party shall have the right at any time to terminate this Agreement without cause by providing at least ninety (90) days prior written notice to the other party of intention to terminate." Compl. Ex. 1, ¶ 5. Paragraph 12 of the Agreement, titled "Dispute Resolution," stated that "[a]ny controversy, dispute or disagreement arising out of or relating to this Agreement, or the breach thereof, shall be settled by binding arbitration." Compl. Ex. 1, ¶ 12. On April 18, 2003, the Hospital terminated Dr. Tio with cause, effective immediately, by way of a "Notice of Termination with Cause" letter. Compl. Ex. 3.
B. Procedural History
On March 17, 2004, Dr. Tio and his wife, Ting Soan Tio ("Mrs. Tio"), filed suit against the Hospital in D.C. Superior Court, alleging: (1) tortious breach of contract; (2) tortious interference with contract of employment; (3) denial of common-law good faith and fair dealing; (4) tortious interference with third-party physician-patient contracts; (5) defamation/slander; (6) intentional infliction of emotional distress; (7) fraud/misrepresentation; (8) antitrust violations; (9) wrongful discrimination under state and federal law; and (10) loss of consortium. Compl. ¶¶ 16-106.
On April 28, 2004, the Hospital removed the action to this court on the grounds that the complaint included a claim for relief under the Federal Civil Rights Act of 1866, 42 U.S.C. § 1981, a federal statute arising under the laws of the United States. Def.'s Mot. for Removal, ¶¶ 3-4 (citing 28 U.S.C. § 1441).
Finally, on May 5, 2004, the defendants moved to dismiss the complaint and compel the plaintiffs to pursue arbitration in accordance with the terms of Dr. Tio's Employment Agreement and the Federal Arbitration Act. The court now turns to that motion.
III. ANALYSIS A. Legal Standard for Motion to Dismiss and Compel Arbitration
The Federal Arbitration Act ("FAA") provides that "a written provision in . . . a contract to settle by arbitration a controversy thereafter arising out of such contract . . . shall be valid, irrevocable, and enforceable save upon any grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. The FAA creates a strong presumption in favor of enforcing arbitration agreements and "[a]ny doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration." Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 226-27 (1987) (stating that arbitration agreements must be rigorously enforced); Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983) (noting that federal policy favors arbitration). Nevertheless, parties cannot be forced into arbitration unless they have agreed to do so. ATT Techs. Inc. v. Communications Workers, 475 U.S. 643, 648-49 (1986). Moreover, the authority of arbitrators to resolve disputes is derived from the agreement of parties to engage in arbitration. Equal Employment Opportunity Comm'n v. Waffle House, Inc., 534 U.S. 279, 294 (2002). Because arbitration provisions are in essence a matter of contract between the parties, it is for the courts to decide whether the parties are bound by a given arbitration clause. Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84 (2002) (holding that "a gateway dispute about whether the parties are bound by a given arbitration clause raises a question of arbitrability for a court to decide") (internal quotation omitted).
Such questions of arbitrability are typically brought before the court pursuant to section 4 of the FAA, which permits a party to petition any United States district court which would otherwise have subject matter jurisdiction "for an order directing that such arbitration proceed in the manner provided for in such agreement." 9 U.S.C. § 4. When presented with a motion to compel arbitration, a district court must "determine the enforceability of the agreement [to arbitrate] and decide whether arbitration should be compelled." Nelson v. Insignia/ESG, Inc., 215 F. Supp. 2d 143, 146 (D.D.C. 2002). It is well-settled law that to make such a determination, courts must engage in a two-part inquiry. Id. at 149-50. First, the court must decide whether the parties entered into a valid and enforceable arbitration agreement. Nur v. K.F.C. USA, Inc., 142 F. Supp. 2d 48, 50-51 (D.D.C. 2001). If the court finds that the parties did enter a valid arbitration agreement, the second step is to determine whether the arbitration agreement encompasses the claims raised in the complaint. Id.
If the party opposing arbitration contends that no agreement to arbitrate was entered, this effectively raises the issue of whether there was a meeting of the minds on the agreement to arbitrate, and the standards for resolving a summary judgment motion pursuant to Federal Rule of Civil Procedure 56 should be applied. Booker v. Robert Half Int'l, Inc., 315 F. Supp. 2d 94, 99 (D.D.C. 2004). Hence, "the proper approach to employ in reviewing the defendant's motion to dismiss and compel arbitration is to apply the same standard of review that governs Rule 56 motions." Brown v. Dorsey Whitney, LLP, 267 F. Supp. 2d 61, 67 (D.D.C. 2003).
B. Legal Standard for Motion for Summary Judgment
Summary judgment is appropriate when the pleadings and the evidence demonstrate that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Diamond v. Atwood, 43 F.3d 1538, 1540 (D.C. Cir. 1995). To determine which facts are "material," a court must look to the substantive law on which each claim rests. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A "genuine issue" is one whose resolution could establish an element of a claim or defense and, therefore, affect the outcome of the action. Celotex, 477 U.S. at 322; Anderson, 477 U.S. at 248.In ruling on a motion for summary judgment, the court must draw all justifiable inferences in the nonmoving party's favor and accept the nonmoving party's evidence as true. Anderson, 477 U.S. at 255. A nonmoving party, however, must establish more than "the mere existence of a scintilla of evidence" in support of its position. Id. at 252. To prevail on a motion for summary judgment, the moving party must show that the nonmoving party "fail[ed] to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex, 477 U.S. at 322. By pointing to the absence of evidence proffered by the nonmoving party, a moving party may succeed on summary judgment. Id.
In addition, the nonmoving party may not rely solely on allegations or conclusory statements. Greene v. Dalton, 164 F.3d 671, 675 (D.C. Cir. 1999); Harding v. Gray, 9 F.3d 150, 154 (D.C. Cir. 1993). Rather, the nonmoving party must present specific facts that would enable a reasonable jury to find in its favor. Greene, 164 F.3d at 675. If the evidence "is merely colorable, or is not significantly probative, summary judgment may be granted." Anderson, 477 U.S. at 249-50 (internal citations omitted).
C. Agreement to Arbitrate is Valid and Should Be Enforced
The court concludes that Dr. Tio entered into a valid and enforceable agreement with the Hospital. The Supreme Court has held that the coverage of the FAA extends to employment contracts. Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 119 (2001). The evidence shows that the plaintiff entered into and signed an Employment Agreement with the Hospital that included a requirement that all disputes arising out of or relating to the Agreement be arbitrated. Compl. Ex. 1, ¶ 12. Furthermore, it is basic law that "[o]ne who signs a contract which he had an opportunity to read and understand is bound by its provisions." Paterson v. Reeves, 304 F.2d 950, 951 (D.C. Cir. 1962).
Nevertheless, the plaintiff challenges the enforceability of the Agreement on the grounds that (1) there was no mutuality or meeting of the minds, (2) the agreement is an unconscionable contract of adhesion, (3) there was no consideration, and (4) there was fraud in the inducement of the agreement. Pl.'s Opp'n to Mot. to Dismiss ("Pl.'s Opp'n"). The court determines each of these arguments to be equally unavailing.
First, it is clear that "a signature on a contract indicates `mutuality of assent' and a party is bound by the contract unless he or she can show special circumstances relieving him or her of such an obligation." Emeronye v. CACI Int'l, Inc., 141 F. Supp. 2d 82, 86 (D.D.C. 2001); Davis v. Winfield, 664 A.2d 836, 838 (D.C. 1995) (stating that "[m]utual assent to a contract, often referred to as a `meeting of the minds,' is most clearly evidenced by the terms of a signed written agreement"). No such special circumstances are evidenced or adduced by the plaintiffs in this action. All of Dr. Tio's arguments regarding his perceived lack of mutual assent relate to his subsequent dissatisfaction with the Hospital's apparent failure to honor "future revenue participation in all his professional and client referred income." Pl.'s Opp'n at 10. But it is basic contract law that in giving effect to the mutual intent of the parties, a court is to assume that the language of a contract reflects the intentions of the parties. NRM Corp. v. Hercules, Inc., 758 F.2d 676, 681-82 (D.C. Cir. 1985). As for the parties' meeting of the minds at the time the contract was made, the plaintiff simply relies on his own bare assertion that there was no meeting of the minds. Pl.'s Opp'n at 9. However, a plaintiff cannot solely rely on this conclusory statement to defeat the defendant's argument. Greene, 164 F.3d at 625. Thus, the court concludes that the plaintiff's signature on the contract indicates mutuality of assent.
The court is not persuaded by Dr. Tio's alternative claim that the arbitration clause is unenforceable as a provision of an unconscionable contract of adhesion imposed on one party by the other. Pl.'s Opp'n at p. 11. To establish unconscionability, the plaintiff must prove both that he lacked a meaningful choice and that the terms of the contract were unreasonably favorable to the other party. Smith, Bucklin Assoc., Inc. v. Sonntag, 83 F.3d 476, 480 (D.C. Cir. 1996). Dr. Tio has proven neither in this case.
Courts refuse to hold that a plaintiff has been deprived of a meaningful choice where the plaintiff had a fair opportunity to understand the terms of his Employment Agreement and was not compelled to sign the agreement out of fear of unemployment. Booker, 315 F. Supp. 2d at 102; Nur, 142 F. Supp. 2d at 51. Here, it is manifest that Dr. Tio had ample opportunity to go over the terms of the Agreement. Not only did Dr. Tio read and understand the terms, he even negotiated for additional and/or different terms himself. Pl.'s Opp'n Ex. 10. As demonstrated in a letter from the Hospital to Dr. Tio, the Hospital responded to Dr. Tio's concerns by sending him a "revised agreement." Pl.'s Opp'n Ex. 11. The fact that the plaintiff actually negotiated terms himself, and had the Hospital modify terms, shows that the plaintiff had a fair opportunity to understand the terms of his Employment Agreement.
Moreover, the fact that the plaintiff is a well-educated professional with an international reputation in the specialized field of gastroenterological medicine further supports the conclusion that he should be bound by the terms of the Agreement. "Courts have often taken the education and background of the employee into account in determining whether the employee should be bound by an arbitration agreement." Brown, 267 F. Supp. 2d at 82-83; see, e.g., Emeronye, 141 F. Supp. 2d at 86 n. 5 (stating that "the fact that the plaintiff had a legal education and two law degrees supports that the plaintiff should be bound by the terms of the contract she signed"); Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 33 (1991) (noting there was "no indication in this case . . . that Gilmer, an experienced businessman, was coerced or defrauded into agreeing to the arbitration clause in his registration application"). Similarly, Dr. Tio's education and experience demonstrate that he was fully aware of the implications of signing the Agreement with the Hospital. The fact that Dr. Tio was able to negotiate for a revised agreement is further proof of his competence. Pl.'s Opp'n, Ex. 11.
Given that the plaintiff here had a fair opportunity to understand the terms of the agreement, including the arbitration clause, the Court concludes that he had a meaningful choice when he decided to sign the agreement. Moreover, the court notes that this is not a case where the plaintiff was compelled to sign the agreement out of a fear of being unemployed if he failed to do so. Brown, 267 F. Supp. 2d at 74. It is clear from the plaintiff's own allegations that had he not signed the Agreement with the Hospital, Dr. Tio could have remained at Georgetown University Medical Center. Compl. ¶ 83.
Dr. Tio has adduced no evidence whatsoever that the terms of the agreement "are so unreasonably favorable to the defendant that the Court must find the Employment Agreement as a whole unconscionable." Brown, 267 F. Supp. 2d at 75. Dr. Tio was to be compensated at an annual salary of $225,000.00, plus fringe benefits, in exchange for his professional services. Compl. Ex. 1 at 2. Nothing in the Agreement indicates anything other than reasonable and fair contract of employment between Dr. Tio and the Hospital.
As stated above, Dr. Tio was compensated at an annual rate of $225,000.00 for his services. Id. Despite Dr. Tio's apparent dissatisfaction with the Hospital's alleged failure to compensate him for patient referrals, Pl.'s Opp'n at 12, the court does not consider any such allegations as sufficient to render the contract unconscionable. The seminal line of cases regarding unconscionable contract claims, starting with Williams v. Walker-Thomas Furniture Co., 350 F.2d 445 (D.C. Cir. 1965), demonstrate that courts are only willing to find price-value as an unreasonable contract term where the pricing is so gross, excessive or exploitative as to render the contract terms unconscionable and the contracts unenforceable. See, e.g., Patterson v. Walker-Thomas Furniture Co., 277 A.2d 111, 114 (D.C. 1971) (concluding that in a proper case gross overpricing may be raised in defense as an element of unconscionability). However, the facts of the instant case hardly rise to level of exploitative, as evidenced by the fact that the plaintiff has not even attempted to provide evidence that an annual salary of $225,000.00 is akin to gross under-pricing of his services.
Finally, the plaintiff's assertion that he was fraudulently induced into entering the entire Agreement carries no weight. Only if the plaintiff were alleging fraudulent inducement of the specific arbitration clause would this have any bearing on the court's power to hear this dispute. It is well established that "if the claim is fraud in the inducement of the arbitration clause itself — an issue which goes to the `making' of the agreement to arbitrate — the federal court may proceed to adjudicate it." Prima Paint Corp. v. Flood Conklin Mfg. Co., 388 U.S. 395, 403-04 (1967). However, when a party raises fraud in the inducement of the contract generally, this is a matter for arbitration. Id.
Here, the plaintiff alleges that he was "fraudulently induce [sic] to leave the employment of Georgetown University Medical Center" and "to refer his patients to Defendant WHC based upon false promises, statements and misrepresentations by Defendants on behalf of the WHC upon which the plaintiff relied to his detriment." Compl. ¶¶ 83-84. Dr. Tio also argues that "[t]he fraudulent promise of future revenue participation in all his professional and client referred income generated for the hospital was never honored and the allegation of similar treatment of all physicians were misrepresentations upon which plaintiff was induced to rely to sign the contract and to accept the arbitration clause to his detriment [sic]." Pl.'s Opp'n at 10. Both of these arguments suggest that Dr. Tio was fraudulently induced to enter into the entire Agreement. Significantly, nowhere in his Complaint does Dr. Tio argue that he was fraudulently induced to specifically enter into the arbitration clause. Def.'s Reply at 9-10. Thus, his argument regarding fraudulent inducement is ultimately without merit. In sum, the court concludes that the Employment Agreement entered into by the parties is valid and should be enforced.
D. The Arbitration Agreement Encompasses the Claims in the Complaint
Next, the court must determine whether the Agreement to Arbitrate encompasses the claims Dr. Tio raises in his Complaint. ATT Techs., 475 U.S. at 648-49. Here, the Agreement requires that "any controversy, dispute or disagreement arising out of or relating to this Agreement, or breach thereof, shall be settled by binding arbitration." Compl. Ex. 1 ¶ 12. The Supreme Court has held that the "language `arising out of or relating to' the underlying contract or agreement" should be interpreted broadly. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 624 n. 13 (1985); Prima Paint, 388 U.S. at 406. The Court concludes that the arbitration provision contained in the Agreement between Dr. Tio and the Hospital is broad enough to encompass each claim in the plaintiffs' complaint, including those brought by Dr. Tio for defamation and slander.
Dr. Tio argues that the defamation and slander was "committed after the contract was terminated" and thus is not arbitrable because "the contract and the provision for arbitration was never intended to cover actions after the contract is revoked or breached by either party." Pl.'s Opp'n at p. 8. However, Dr. Tio's defamation claim is based on his allegation that the Hospital "falsely and maliciously composed and published in a conspicuous place . . . its letter of termination." Compl. at ¶ 63. Since the alleged defamation is based entirely on Dr. Tio's termination letter, the court concludes that Dr. Tio's defamation claim falls within the scope of the arbitration clause of the employment contract. Pearce v. E.F. Hutton Group, Inc., 828 F.2d 826, 832-33 (D.C. Cir. 1987) (enforcing an arbitration agreement over claims of defamation).
Dr. Tio nonetheless submits that he is exempt from the provisions of the FAA under section 1 of the Act because he is within the "class of workers engaged in foreign or interstate commerce." Pl.'s Opp'n at 15-17. However, this argument has been squarely rejected by the Supreme Court, which held in Circuit City that the exemption only applies to "transportation workers." Circuit City, 532 U.S. at 109. Numerous other courts have also examined the exemption in question, and all have found that section 1 of the FAA "exempts only the employment contracts of workers actually engaged in the movement of goods in interstate commerce." Cole v. Burns Int'l Security Serv., 105 F.3d 1465, 1471 (D.C. Cir. 1997) (citing cases from the First, Second, Third, Fifth, Sixth and Seventh Circuits).
The court also determines that Mrs. Tio's claims are entirely derivative of and dependent on Dr. Tio's claims, and should accordingly be arbitrated along with Dr. Tio's claims. Mrs. Tio is seeking damages "as a direct and proximate result of her husband's intentional and wrongful termination by Defendants." Compl. ¶ 9. All of Mrs. Tio's claims are derivative of her husband's action for wrongful termination, as each is entirely dependent on and cannot survive without a finding that Dr. Tio's termination was wrongful. Smith v. Brown Williamson Tobacco Corp., 3 F. Supp. 2d 1473, 1477 n. 5 (D.D.C. 1998); Meek v. Shepard, 484 A.2d 579, 582 n. 6 (D.C. 1984) (dismissing spouse's claim along with the plaintiff's claim because spouse's claim for damages was wholly derivative and dependent on the plaintiff's claim). Thus, the court dismisses Mrs. Tio's claims along with her husband's and compels them to arbitrate the claims together.
Finally the Court finds equally meritless the plaintiff's assertion that the Hospital has somehow waived its arbitration rights because it did not seek arbitration before it terminated Dr. Tio. Pl.'s Opp'n at 19. Nowhere in the Agreement does it say that the Hospital must seek arbitration before it may exercise its right to terminate the Dr. Tio. In fact, the Agreement itself gives both parties the right "to terminate the Agreement" without cause. Compl. Ex. 1, ¶ 5. Since the Hospital has acted consistently within its arbitration right, the court finds that the Hospital has not waived any right to compel arbitration.