Opinion
C. A. 3:21-1191-MGL-SVH
01-24-2022
Tutankhamun Baker, Plaintiff, v. SC Dowdy LLC, The Worrell Network Office, and Northwestern Mutual Life Insurance Company, Defendants.
REPORT AND RECOMMENDATION
SHIVA V. HODGES UNITED STATES MAGISTRATE JUDGE
In this employment discrimination case, an employee seeks to sue his former employee for discrimination. In response, the employer argues the former employee agreed to submit his claims to arbitration such that the court should compel arbitration.
Tutankhamun Baker (“Plaintiff”) sues S.C. Dowdy, LLC (“SC Dowdy”), the Richard Worrell General Agency, LLC (“RWGA”), and the Northwestern Mutual Life Insurance Company (“Northwestern Mutual”) (collectively, “Defendants”), and asserts claims for age and race discrimination and retaliation in violation of the Age Discrimination in Employment Act (“ADEA”), 29 U.S.C. §§ 621 et seq., and Title VII of the Civil Rights Act of 1964, as amended (“Title VII”), 42 U.S.C. § 2000e et seq., as well as a state-law claims for breach of contract and promissory estoppel, negligent misrepresentation, and/or detrimental reliance.
Defendants have informed the court RWGA has been improperly identified as “The Worrell Network Office.” [See ECF No. 18 at 1 n.1]. The undersigned employs the correct identification of RWGA and directs the Clerk of Court to correct the caption.
Plaintiff also alleges a purported claim based on violation of the Equal Employment Opportunity Act of 1972 (“EEOA”). See 42 U.S.C. § 2000e-16. However, the EEOA is an amendment to Title VII passed by Congress to ensure federal employees had sufficient protection against employment discrimination. See, e.g., Pueschel v. United States, 369 F.3d 345, 352 (4th Cir. 2004).
This matter comes before the court on Defendants' motion to dismiss, or in the alternative, stay, and compel arbitration pursuant to the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1-16 [See ECF No. 18-1 at 1]. The motion having been fully briefed [ECF Nos. 24, 25], it is ripe for disposition.
All pretrial proceedings in this case were referred to the undersigned pursuant to the provisions of 28 U.S.C. § 636(b)(1)(B) and Local Civ. Rule 73.02(B)(2)(g) (D.S.C.). Because the motion is dispositive, this report and recommendation is entered for the district judge's consideration. For the reasons that follow, the undersigned recommends the district court grant Defendants' motion and compel arbitration.
I. Factual and Procedural Background
Defendants have submitted evidence that Northwestern Mutual is a Wisconsin mutual life insurance company with a core business of underwriting, issuing, and servicing life insurance, disability income insurance, long term care insurance and annuity products. [ECF No. 18-2 ¶¶ 4-5]. RWGA is the general agent authorized to sell Northwestern Mutual products within portions of North Carolina, South Carolina, and Georgia via a contract with Northwestern Mutual. Id. ¶ 15. General agents, such as RWGA, are authorized to contract with district agents who, in turn, may contract with full-time or part-time sales agents. Id. ¶ 9.
Samuel C. Dowdy (“Dowdy”) is the sole member of the single member limited liability company S.C. Dowdy and a district agent RWGA contracted with to sell Northwestern Mutual products within RWGA's territory. [ECF No. 18-2 ¶ 16, ECF No. 18-3, ECF No. 18-4 ¶¶ 2, 4]. Dowdy, in turn, entered into a part-time special or soliciting agent's contract with Plaintiff to sell Northwestern Mutual products within RWGA's territory. [ECF No. 18-2 ¶ 17].
Plaintiff alleges he went through Defendants' “onboarding process” starting September 25, 2020, [ECF No. 1 at 7], and on October 14, 2020, received an email containing a conditional offer letter from “Dowdy, ” although this offer was not signed by Defendants. [See ECF No. 24-2].
Plaintiff does not clarify whether he is referencing S.C. Dowdy or Dowdy.
Plaintiff alleges he was hired by Defendants thereafter on November 2, 2020. [ECF No. 1 at 7]. Plaintiff and “Dowdy” both signed a part-time contract on November 9, 2020 and November 4, 2020, respectively, and that this parttime contract included an “addendum to college student agent's or part-time/full-time special or soliciting agent's contract: agreement to arbitrate and waiver of class, collective, or representative claims” (“arbitration agreement”), signed by Plaintiff on November 9, 2020. [See ECF No. 24-4, see also ECF No. 24 at 5 (“the Arbitration Agreement was sent to me as an Addendum to the Part-Time Contract”)].
Plaintiff alleges that during his employment, Defendants gave preferential treatment to white employees under the age of 40, versus Plaintiff who is black and older. [See ECF No. 1, see also ECF No. 24 at 3-5]. Plaintiff was orally informed that if he was unsuccessful in passing the securities industry essential exam (“SIE exam”)-an exam related to his employment- he would be given the opportunity to take in-house tutoring. [ECF No. 1 at 6]. Plaintiff also alleges he was informed he would be given the opportunity to complete all tasks outlined in his conditional offer letter and then negotiate a full-time contract; however, after failing the SIE exam, his employment was terminated. Id. at 7.
Plaintiff's employment was terminated on December 10, 2020, following his complaints about a member of Defendants' management team to the ethics resource center. Id. Other employees who are white and under 40 were not fired for failing or not taking the SIE exam. Id. at 6.
The arbitration agreement, submitted by both parties, provides in relevant part as follows:
(1) Mandatory Bilateral Arbitration. To the fullest extent permitted by law, other than as expressly excepted or modified elsewhere in this Arbitration and Class Action Waiver Addendum, and subject to the review rights of Paragraph 11 of this Addendum, each category of disputes set forth in Paragraph 2 below between (a) me or any of the incorporated or unincorporated business entities through which I conduct business in whole or in part (collectively referred to as the “Signatory”), on the one hand, and (b) the First Party, District Agent, General Agent and/or The Northwestern Mutual Life Insurance Company (the “Company”), and/or its/their respective officers, directors, trustees, employees, agents, independent contractors, representatives, subsidiaries or affiliates (collectively referred to as “Northwestern Mutual”), on the other hand, shall be subject to binding arbitration as provided for in this Addendum, regardless whether such claims are asserted as claims, counterclaims, third-party claims, crossclaims, or through any other procedural mechanism, and regardless whether such claims are initiated by Signatory, by Northwestern Mutual, or by a third person acting in a purported representative capacity, and shall be collectively referred to as “Claims.”
(2) Categories of Arbitrable Claims. Other than as expressly and specifically modified elsewhere in this Addendum, the Claims subject to the binding arbitration provision of this Addendum include any claims or disputes: (a) related to or arising out of Signatory's Contract, Signatory's Registered Representative Agreement, or any other related contract or agreement; (b) concerning Signatory's and Northwestern Mutual's respective rights and obligations under statutes, common law or regulation concerning expense reimbursement, wages and compensation, including without limitation claims or disputes concerning federal, state, or local wage-and-hour laws, statutes or regulations (including but not limited to claims for minimum wage and overtime compensation); (c) concerning Signatory's and
Northwestern Mutual's respective rights and obligations under federal, state, or local statutes, common law or regulation concerning unlawful discrimination or harassment, and/or any claims alleging retaliation for asserting such rights or claims; (d) concerning Signatory's and Northwestern Mutual's respective contractual, common law, statutory, tort, or equitable rights and obligations arising out of or relating to the formation, performance, continuation, termination, modification, and/or terms or conditions of Signatory's contractual, business, principal-agency, and/or independent contractor relationship with Northwestern Mutual; (e) concerning the enforcement, interpretation and/or application of the terms and conditions and/or any provision of this Arbitration and Class Action Waiver Addendum; and (f) concerning whether and to what extent a particular claim or dispute is subject to arbitration under this Addendum.[ECF No. 18-5 ¶¶ 1-2, see also ECF No. 24-4 ¶¶ 1-2].
II. Discussion
A. Legal Standard
Defendants ask the court to compel arbitration under Section 4 of the FAA, which provides, in part, that a “party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court . . . for an order directing that such arbitration proceed in the manner provided for in such agreement.” 9 U.S.C. § 4. Section 2 of the FAA states that a written arbitration agreement “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. “[Q]uestions of arbitrability must be addressed with a healthy regard for the federal policy favoring arbitration . . . [and] any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.” Moses H. Cone Meml Hosp. v. Mercury Const. Corp., 460 U.S. 1, 25-26 (1983). Although federal law governs the arbitrability of disputes, ordinary state-law principles resolve issues regarding the formation of contracts. Am. Gen. Life & Accident Ins. Co. v. Wood, 429 F.3d 83, 87 (4th Cir. 2005).
“In the Fourth Circuit, a litigant can compel arbitration under the FAA if he can demonstrate ‘(1) the existence of a dispute between the parties, (2) a written agreement that includes an arbitration provision which purports to cover the dispute, (3) the relationship of the transaction, which is evidenced by the agreement, to interstate or foreign commerce, and (4) the failure, neglect or refusal of the defendant to arbitrate the dispute.'” Adkins v. Lab. Ready, Inc., 303 F.3d 496, 500-01 (4th Cir. 2002) (citing Whiteside v. Teltech Corp., 940 F.2d 99, 102 (4th Cir. 1991); see also Hooters of America, Inc. v. Phillips, 173 F.3d 933, 937-38 (4th Cir. 1999) (employing two-part inquiry to ensure the dispute is arbitrable: (1) whether a valid agreement to arbitrate exists between the parties, and (2) whether the specific dispute is within the scope of the agreement).
B. Analysis
Defendants, as the parties seeking to enforce the arbitration agreement, “bear[] the initial burden of persuading this court that the parties entered into an enforceable arbitration agreement”; if such a showing is made, “the burden shifts to the plaintiff[s] to show that even though there was some written contract, [they] did not actually agree to it-because the[ir] signature was forged, the terms of the contract were misrepresented, or some other reason evincing lack of true agreement.” Gordon v. TBCRetail Grp., Inc., C/A No. 2:14-03365-DCN, 2016 WL 4247738, at *5 (D.S.C. Aug. 11, 2016) (citations omitted).
Here, Defendants have carried their initial burden of persuading the court that the parties entered into an enforceable agreement. There is a dispute between the parties regarding Plaintiff's employment relationship with Defendants. The arbitration agreement purports to cover the disputes, an issue discussed more below, and the dispute involves interstate commerce.
Plaintiff does not dispute that an employee's agreement to arbitrate with a multistate employer “involves interstate commerce” sufficient for the purposes of the FAA. Here, Defendants have submitted evidence Northwestern Mutual is mutual life insurance company doing business throughout the United States. [ECF No. 18-2 ¶¶ 4-7]. RWGA is a North Carolina company doing business in North Carolina, South Carolina, and Georgia, and S.C. Dowdy does business within RWGA's territory. Id. ¶¶ 15-16. Plaintiff contracted with S.C. Dowdy to sell insurance products within a portion of RWGA's territory. Id. ¶ 17. The sale of insurance policies affects interstate commerce. See, e.g., United States v. Turner, 301 F.3d 541, 544 (7th Cir. 2002) (finding the “business of insurance does affect interstate commerce”); see also, e.g., Cox v. Assisted Living Concepts, Inc., C/A No. 6:13-00747, 2014 WL 1094394, at *11 (D.S.C. Mar. 18, 2014) (holding that “[b]y asserting [Title VII and ADEA] claims, then, [Plaintiff] in effect concedes the interstate nexus” of his claims in that Title VII and the ADEA only apply to an employer engaged in commerce) (citations omitted).
Finally, Plaintiff has failed to arbitrate this dispute prior to bringing this lawsuit.
In his response in opposition to Defendants' motions, Plaintiff does not address Defendants' evidence and argument that, for example, the FAA applies in this case or that the claims he agreed to arbitrate include disputes involving any or all of the three defendants, Northwestern Mutual, RWGA, and S.C. Dowdy.
Plaintiff, in response, argues (1) he is an employee, not an independent contractor, (2) the arbitration agreement is unenforceable because it was not signed by Defendants, (3) some of Plaintiff claims arose prior to the date of signing the arbitration agreement, (4) he signed the arbitration agreement under duress, and (5) the arbitration agreement is unconscionable. [See ECF No. 24].
First, Plaintiff's claims are subject to arbitration whether he was classified as an employee or an independent contractor. See Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 122-24 (2001) (holding the FAA applies in the employment context); Finch v. Lowe's Home Centers, LLC, C/A No. 3:20-02981-JMC, 2021 WL 2982863, at *1 (D.S.C. July 15, 2021) (enforcing arbitration clause between the defendant and “independent contraction”); Rock v. Atl. Specialty Ins. Co., C/A No. 4:19-01433-SAL, 2020 WL 1892193, at *1 n.1 (D.S.C. Apr. 16, 2020) (noting the dispute between the parties as to whether the signatory to the arbitration agreement was an employee or an independent contractor “is not pertinent to the resolution of the . . . motion” to compel arbitration).
Second, the arbitration agreement is enforceable even where Plaintiff is the only signatory. Under South Carolina law, an arbitration agreement signed by an employee, or an independent contractor, is enforceable and binding even where an employer does not sign. Poteat v. Rich Prods. Corp., 91 Fed.Appx. 832, 834 (4th Cir. 2004) (finding an agreement to arbitrate was enforceable under South Carolina law despite the fact that the employer never signed the agreement that contained the arbitration provision); Jaffe v. Gibbons, 351 S.E.2d 343, 346 (S.C. Ct. App. 1986) (“[I]t has long been a paradigm of South Carolina law that when a contract signed by one party only is accepted by the other party, it becomes binding upon both just as if it were signed by both.”);Carter v. MasTec Servs. Co., C/A No. 2:09-2721-PMD, 2010 WL 500421, at *4 (D.S.C. Feb. 5, 2010) (compelling arbitration against multiple defendants, none of whom signed the arbitration agreement).
Plaintiff does not dispute that he signed the arbitration agreement.
Defendants offer numerous other arguments as to why the arbitration agreement is enforceable by all Defendants even though Plaintiff is the only signatory, including, for example, that even if Defendants are not considered parties to the arbitration agreement, they are third-party beneficiaries. [ECF No. 25 at 3-5]. Because it appears that Plaintiff only argues Defendants cannot enforce the arbitration agreement because they did not sign it [see ECF No. 24 at 5-6], it is unnecessary for the court to address Defendants' additional arguments.
Third, Plaintiff argues that “[a] large portion of [his] complaint” concerns the conditional offer letter entered into by the parties, although it was not signed by Dowdy, prior to the parties signing the arbitration agreement, and, therefore, some of Plaintiff's claims concerning the conditional offer letter fall outside the arbitration agreement. [ECF No. 24 at 6].
However, section 2 of the arbitration agreement provides that the disputes subject to arbitration include broad classes of disputes including “any claims or disputes related to or arising out of [Plaintiff's] Contract . . . or any other related contract or agreement, ” presumably including the conditional offer letter. (Emphasis added). Section 2 also includes as arbitrable, without limit, “any claims or disputes” concerning the parties' “respective rights and obligations under federal, state, or local statutes, common law or regulation concerning unlawful discrimination or harassment.” Finally, section 2 includes as arbitrable “any claims or disputes” concerning the parties' “respective contractual, common law, statutory, tort, or equitable rights and obligations arising out of or relating to the formation, performance, continuation, termination, modification, and/or terms or conditions of Signatory's contractual, business, principal-agency, and/or independent contractor relationship with Northwestern Mutual.” (Emphasis added).
In Newbanks v. Cellular Sales of Knoxville, Inc., 548 Fed.Appx. 851, 854 (4th Cir. 2013), “the scope of the Compensation Agreements' arbitration requirement is as follows: ‘All claims, disputes, or controversies arising out of, or in relation to this document [the Compensation Agreement] or Employee's employment with Company ....” In Newbanks, the Fourth Circuit determined this arbitration provision did not contemplate the allegations contained in the plaintiffs' complaint in that the complaint concerned “acts and omissions that occurred prior to the date they become at-will employees” and a time period where plaintiffs “did not have any formal or contractual relationship with Cellular Sales at all.” Id. at 854-55, see also id. at 855 (“Newbanks and Walton did not become at-will employees of Cellular Sales until December 2011, when they executed the Compensation Agreements. By that same document, they also agreed to arbitrate disputes arising from or related to ‘Employee's employment with Company.' We conclude that this arbitration requirement only applies to causes of action accruing from the execution of the Compensation Agreements and onward.”).
Here, however, Plaintiff has alleged a contractor relationship with Defendants pre-dating his allegations of wrongdoing, and the relevant arbitration agreement employs expansive language as to the claims to be arbitrated. See, e.g., Levin v. Alms & Assocs., Inc., 634 F.3d 260, 269 (4th Cir. 2011) (holding as subject to arbitration claims that accrued before the provision's execution, “given the broad scope of the arbitration clause applying to ‘any dispute' between the parties, and in light of the arbitrability presumption that applies with special force to broadly written clauses”); Mey v. DIRECTV, LLC, 971 F.3d 284, 292, 293 (4th Cir. 2020) (“precedent requires us to ask . . . whether the arbitration agreement is susceptible of an interpretation that covers the asserted dispute .... the phrase ‘all disputes and claims between us' includes Mey's claims .... Nothing about the phrase is limited to disputes or claims arising out of or relating to the underlying contract or the provision of wireless service.”).
Turning to Plaintiff's final arguments, he argues first that the arbitration agreement is unenforceable because he was under duress because the arbitration agreement was sent to him after the conditional offer letter, and he was trying to meet the conditions of the conditional offer letter. [ECF No. 24 at 7]. However, Plaintiff has failed to offer any allegation or evidence that the arbitration agreement should be found void based upon duress, where he would need to show (1) he has been the victim of a wrongful or unlawful act or threat, (2) such act or threat must be one which deprives the victim of his unfettered will, (3) as a direct result the coerced party must be compelled to make a disproportionate exchange of values or give up something for nothing, (4) the payment or exchange must be made solely for the purposes of protecting the coerced party's business or property interests, and (5) the coerced party must have no adequate legal remedy. Callan v. Singletary, C/A No. 408-1928-TLW-TER, 2009 WL 2997001, at *4-5 (D.S.C. Sept. 14, 2009) (citing Johnson v. City of Columbia, S.C., 949 F.2d 127, 132 (4th Cir. 1991)). Threats of loss of income or future promotions upon a refusal to sign an arbitration agreement are not wrongful threats or proof of improper pressure overcoming a party's volition. Hooters of Am., Inc. v. Phillips, 39 F.Supp.2d 582, 608 n.25 (D.S.C. 1998), aff'd and remanded, 173 F.3d 933 (4th Cir. 1999).
Likewise, Plaintiff has failed to show the arbitration agreement is unconscionable where his only argument is that he was under duress. In South Carolina, unconscionability requires proof of an “absence of meaningful choice” and “oppressive and one-sided” arbitration terms. Simpson v. MSA of Myrtle Beach, Inc., 644 S.E.2d 663, 668, 671 (S.C. 2007). Plaintiff has offered no evidence or argument in support of his claim and therefore has not carried his “burden of showing that the arbitration provisions in the agreements at issue are unenforceable.” Smalls v. Advance Am., C/A No. 2:07-3240-TLW-TER, 2008 WL 4177297, at *14 (D.S.C. Sept. 5, 2008) (citing Green Tree Fin. Corp. v. Randolph, 531 U.S. 79, 92 (2000)).
III. Conclusion and Recommendation
For the foregoing reasons, the undersigned recommends the district judge grant Defendants' motion [ECF No. 18] and dismiss this action for the parties to pursue arbitration. In the alternative, the undersigned recommends the district judge grant Defendants' motion and stay the case pending arbitration.
As this court has recognized, although the Fourth Circuit has held that dismissal of a lawsuit is the proper remedy when all the issues presented in the lawsuit are arbitrable, see Oyekan v. Educ. Corp. of Am., C/A No. 4:18-01785-RBH, 2019 WL 978865, at *6 (D.S.C. Feb. 28, 2019) (citing Choice Hotels, Int'l, Inc. v. BSR Tropicana Resort, Inc., 252 F.3d 707, 709 (4th Cir. 2001)), other Fourth Circuit cases have indicated a stay is more appropriate. See, e.g., Hooters, 173 F.3d 933; see also Aggarao v. MOL Ship Mgmt. Co., 675 F.3d 355, 376 (4th Cir. 2012) (noting unresolved “tension” between Choice Hotels and Hooters).
IT IS SO RECOMMENDED.
The parties are directed to note the important information in the attached “Notice of Right to File Objections to Report and Recommendation.”
Notice of Right to File Objections to Report and Recommendation
The parties are advised that they may file specific written objections to this Report and Recommendation with the District Judge. Objections must specifically identify the portions of the Report and Recommendation to which objections are made and the basis for such objections. “[I]n the absence of a timely filed objection, a district court need not conduct a de novo review, but instead must ‘only satisfy itself that there is no clear error on the face of the record in order to accept the recommendation.'” Diamond v. Colonial Life & Acc. Ins. Co., 416 F.3d 310 (4th Cir. 2005) (quoting Fed.R.Civ.P. 72 advisory committee's note).
Specific written objections must be filed within fourteen (14) days of the date of service of this Report and Recommendation. 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72(b); see Fed.R.Civ.P. 6(a), (d). Filing by mail pursuant to Federal Rule of Civil Procedure 5 may be accomplished by mailing objections to:
Robin L. Blume, Clerk
United States District Court
901 Richland Street
Columbia, South Carolina 29201
Failure to timely file specific written objections to this Report and Recommendation will result in waiver of the right to appeal from a judgment of the District Court based upon such Recommendation. 28 U.S.C. § 636(b)(1); Thomas v. Arn, 474 U.S. 140 (1985); Wright v. Collins, 766 F.2d 841 (4th Cir. 1985); United States v. Schronce, 727 F.2d 91 (4th Cir. 1984).