Opinion
1:23-CV-762-RP
02-20-2024
STACEY CLEVELAND, Plaintiff, v. SALESFORCE, INC., Defendant.
MARK LANE, UNITED STATES MAGISTRATE JUDGE
REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
TO THE HONORABLE ROBERT PITMAN, UNITED STATES DISTRICT JUDGE:
Before the court is Defendant Salesforce Inc.'s Opposed Motion to Compel Arbitration and Dismiss (Dkt. 11) and all related briefing. Having reviewed the pleadings, the relevant case law, as well as the entire case file, and determining that oral arguments are not necessary, the undersigned submits the following Report and Recommendation to the District Court.
United States District Judge Robert Pitman referred the Motion to the undersigned for a Report and Recommendation as to the merits pursuant to 28 U.S.C. § 636(b)(1)(B), Rule 72 of the Federal Rules of Civil Procedure, and Rule 1(d) of Appendix C of the Local Rules of the United States District Court for the Western District of Texas. Text order, Oct. 6, 2023.
I. Background
Plaintiff Stacey Cleveland currently works for Defendant Salesforce, Inc. (“Salesforce”) as the company's first “Director, Equality Partner,” charged with creating a vision for equality, equity, and inclusion in the North American sales organization. Dkt. 1 (Complaint) ¶10. Cleveland contends Salesforce engaged race discrimination prohibited by 42 U.S.C. § 1981, id. ¶39, by declining to promote her and later demoting her. Id. ¶¶ 42, 44.
Based on the arbitration agreement (“Arbitration Agreement”) that Cleveland signed, Salesforce contends Cleveland must resolve her claim in arbitration and that this lawsuit should be dismissed with prejudice. Dkt. 11 at 1-2. Cleveland argues that the court should deny Salesforce's Motion “because the Arbitration Agreement [] is unconscionable under Texas law.” Dkt. 13 at 1. Cleveland also requests in the alternative that the court set an evidentiary hearing on the issues bearing on unconscionability. Id. ¶35
The Arbitration Agreement states:
By entering into this Agreement, you and the Company mutually consent to resolve by arbitration all claims or controversies, past, present or future, whether or not arising out of your employment (or its termination), that the Company may have against you or that you (and no other person) may have against any of the following: (1) the Company, (2) its officers, directors, employees, or agents (in their capacity as such or otherwise), (3) the Company's parent, subsidiary and affiliated entities (“affiliate”), (4) the Company's benefit plans or the plans' sponsors, fiduciaries, administrators, affiliates and agents, and (5) all successors and assigns of any of the foregoing.
This Agreement is governed by the Federal Arbitration Act, 9 U.S.C. § 1 et seq. (the “FAA”) and evidences a transaction involving interstate commerce. If for any reason the FAA is held not to apply, then the law of arbitrability of the state in which you work or last worked for the Company shall apply. This Agreement survives after the employment relationship terminates. Nothing contained in this Agreement shall be construed to prevent you from using the Company's existing internal procedures for resolution of complaints, and the Company encourages you to use them.
Dkt. 11-1 (Arbitration Agreement § 1) at 5. Cleveland entered into the Arbitration Agreement on December 28, 2020. Dkt. 11-1 (Declaration of Kristine Kopelakis) ¶8; see id at 8; see also id. at 7 (acknowledgement of right to opt out).
II. Arbitration Agreements
When parties agree to arbitrate certain disputes, courts naturally expect those parties to resolve those disputes before an arbitrator, rather than a court. 20/20 Commc'ns v. Crawford, 930 F.3d 715, 718 (5th Cir. 2019). Enforcement of an arbitration agreement involves two analytical steps: (1) whether there is a valid agreement to arbitrate; and (2) whether the dispute falls within the scope of that agreement. Huckaba v. Ref-Chem, L.P., 892 F.3d 686, 688 (5th Cir. 2018) (citing Klein v. Nabors Drilling USA L.P., 710 F.3d 234, 236 (5th Cir. 2013)).
Determining whether there is a valid arbitration agreement is a question of state contract law and is for the court. Id. (citing Kubala v. Supreme Prod. Servs., Inc., 830 F.3d 199, 202 (5th Cir. 2016)). The parties agree that Texas law applies. Texas has no presumption in favor of arbitration when determining whether a valid arbitration agreement exists. Id. (citing J.M. Davidson v. Webster, 128 S.W.3d 223, 227 (Tex. 2003)). Instead, the party moving to compel arbitration must show that the agreement meets all of the requisite contract elements. Id. In addition, because the validity of the agreement is a matter of contract, at this stage, the strong federal policy favoring arbitration does not apply. Id. at 688-89 (citing Klein, 710 F.3d at 236).
Under Texas law, a binding contract requires: “(1) an offer; (2) an acceptance in strict compliance with the terms of the offer; (3) a meeting of the minds; (4) each party's consent to the terms; and (5) execution and delivery of the contract with intent that it be mutual and binding.” Id. at 689; In re Capco Energy, 669 F.3d 274, 279-80 (5th Cir. 2012). As to the last element, whether a signature is required to bind the parties is a question of the parties' intent. Huckaba, 892 F.3d at 689; Tricon Energy Ltd. v. Vinmar Int'l, Ltd., 718 F.3d 448, 454 (5th Cir. 2013). Signatures are not required “[a]s long as the parties give their consent to the terms of the contract, and there is no evidence of an intent to require both signatures as a condition precedent to it becoming effective as a contract.” Huckaba, 892 F.3d at 689.
III. Analysis
Validity of the Arbitration Agreement is not at issue. Cleveland acknowledges that she signed the Arbitration Agreement. Dkt. 13 ¶22. And she concedes that her sole claim-racial discrimination-falls within the scope of the Arbitration Agreement. Id. She nonetheless contends that she should not be subject to the Arbitration Agreement because it is unconscionable.
As a threshold matter, the undersigned concludes that the Arbitration Agreement is a valid, binding contract. Under Texas law, a binding contract requires five elements. See supra at 3. For the reasons stated in Salesforce's Motion, Dkt. 11 at 5-7, the Arbitration Agreement is a valid, biding contract. Cleveland concedes she signed the Arbitration Agreement and that it is enforceable. Dkt. 13 ¶22.
“Arbitration agreements may be either substantively or procedurally unconscionable, or both.” Royston, Rayzor, Vickery & Williams v. Lopez, 467 S.W.3d 494, 499-500 (Tex. 2015). “Substantive unconscionability refers to the fairness of the arbitration provision itself, whereas procedural unconscionability refers to the circumstances surrounding adoption of the arbitration provision.” In re Palm Harbor Homes, 195 S.W.3d 672, 677 (Tex. 2006). Once it is established that a valid arbitration agreement exists and that the claim in question is within the scope of the agreement, a presumption arises, favoring of arbitrating that claim; and the party opposing arbitration has the burden to prove a defense to arbitration. J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex. 2003). Arbitration is strongly favored. Id.
Cleveland argues the Arbitration Agreement is substantively unconscionable. She contends it is unconscionable because (1) she may be limited to “three fact witness depositions,” id. ¶27, and becuase (2) the arbitration must take place in Williamson County, Texas (Cleveland's home county) but Salesforce will not consent to the only JAMS arbitrator in the area, “den[ying] her the contractually required venue.” Id. ¶¶33-34.
1. Depositions
Cleveland first argues that limiting her to three fact witnesses is an unreasonable constraint on discovery. Id. ¶27. She asserts that “there are numerous witnesses who are not Salesforce employees but who are beyond the reach of [her] lawyers without the ability to go to where they are and take their depositions [sic].” Id. The sum of her argument is that she “must be able to depose more than three depositions [sic] of current Salesforce personnel.” Id.
Cleveland then (accurately) predicts that “Salesforce will certainly argue that the Texas Supreme Court held that the appropriate scope of discovery should be left to the arbitrator and will point to the fact the [Arbitration] Agreement provides, ‘Arbitrator may grant such additional discovery if the Arbitrator find that the party has demonstrated that it needs that discovery to adequately arbitrate the claim.'” Id. ¶28; see Dkt. 14 at 3 (citing In re Fleetwood Homes of Tex., 257 S.W.3d 692, 695 (Tex. 2008)). She then reports that her “offer[] to waive a jury and try this case to this Court with the discovery limits established by the Federal Rules of Civil Procedure” was rebuffed by Salesforce's counsel. She contends Salesforce's declination is “uncontroverted evidence that Salesforce intends to resist any effort by Cleveland to obtain additional discovery.” Dkt. 13 ¶29.
“Courts consistently hold that limitations on discovery in arbitration do not render arbitration agreements substantively unconscionable.” Dkt. 14 at 6. Although arbitration discovery “procedures might not be as extensive as in the federal courts, by agreeing to arbitrate, a party ‘trades the procedures and opportunity for review of the courtroom for the simplicity, informality, and expedition of arbitration.'” Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 31 (1991) (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, 473 U.S. 614, 628 (1985)). The Texas Supreme Court has held likewise: “arbitration's limits on discovery for both parties does not make it unconscionable.” In re Fleetwood Homes of Tex., 257 S.W.3d 692, 695 (Tex. 2008) (emphasis in original). Indeed “limited discovery is one of arbitration's ‘most distinctive features.'” Id. (quoting Perry Homes v. Cull, 258 S.W.3d 580, 599 (Tex. 2008)).
The District Court has pointed out that in the Fifth Circuit when “the scope of discovery is left to the discretion of the arbitrator” an agreement is not unconscionable where that restriction applies equally to all parties. Mason v. Regions Bank, No. 1:16-CV-1299-RP, 2017 U.S. Dist. LEXIS 111458, at *6 (W.D. Tex. 2017) (Pitman, J.) (citing Alamo Moving & Storage One Corp. v. Mayflower Transit, 46 Fed.Appx. 731 (5th Cir. 2002) (per curiam)).
The Arbitration Agreement provides “Each party shall have the right to take depositions of three fact witnesses and any expert witness designated by another party.” Dkt. 11-1, Ex. A § 5(a). This limitation on discovery for both parties does not make the Arbitration Agreement unconscionable.
Cleveland also complains that because “this [is an] employment discrimination case, limiting [her] to three depositions would unreasonably constrain her ability to conduct discovery and present her claims at trial.” Dkt. 13 ¶ 27. First, the undersigned notes that she is not absolutely limited to three fact witnesses. Dkt. 11-1 (Arbitration Agreement § 5(a)) at 6. Second, the U.S. Supreme Court has rejected a similar argument. Gilmer, 500 U.S. at 31 (“It is unlikely, however, that age discrimination claims require more extensive discovery than other claims that we have found to be arbitrable, such as RICO and antitrust claims.”). Lastly, the case Cleveland excerpted in her brief and on which she primarily relies, is clear:
But at this point in the proceedings, without knowing what the particular claims and defenses-and the evidence needed to prove them-will be, discerning the discovery limitations' potential preclusive effect is largely speculative. The assessment of particular discovery needs in a given case and, in turn, the enforceability of limitations thereon, is a determination we believe best suited to the arbitrator as the case unfolds.
Dkt. 13 at 10 (quoting In re Poly-America, L.P., 262 S.W.3d 337, 358 (Tex. 2008)).
There is on-point case law from the Supreme Court and the Texas Supreme Court that instructs how this court should resolve this Motion. Those cases counsel that a starting point of three depositions does not render the Arbitration Agreement unconscionable.
2. Venue
Cleveland also argues that the Arbitration Agreement is unconscionable because she “will effectively be denied the contractually required venue in Williamson County” because there is only one JAMS arbitrator that serves the area and Salesforce will not consent to that arbitrator. Dkt. 13 ¶34. Cleveland provides only a few sentences on this argument, which as Salesforce notes, appears based “on a misreading of the [Arbitration] Agreement.” Dkt. 14 at 10.
The Arbitration Agreement provides: “The arbitration shall take place in the county . . . in which you are or were last employed by [Salesforce], and no dispute affecting your rights or responsibilities shall be adjudicated in any other venue or forum.” Dkt. 11-1 (Arbitration Agreement § 5(d)) at 6.
Contrary to Cleveland's reading, the arbitrator need not be from the county (or area) where venue lies. Id. (Arbitration Agreement § 5(e)). Rather, “[t]he Arbitrator shall be either a retired judge, or an attorney who is experienced in employment law and licensed to practice in the state in which the arbitration is convened (“the Arbitrator”), selected pursuant to JAMS rules or by mutual agreement of the parties.” Id.
Also, contrary to Cleveland's reading, Salesforce has not rejected the only arbitrator in the Williamson County area. Rather, Salesforce rejected Cleveland's offer to proceed with arbitration subject to Salesforce's agreement to the only JAMS arbitrator in the area. Dkt. 13-2 (Email from Salesforce's counsel to Cleveland's counsel) at 7 (“Given that you intend to oppose the motion to compel arbitration, we think it premature to discuss arbitrator selection at this time.”).
Cleveland's venue arguments hold no water; they are based on misreading and mischaracterization. The Arbitration Agreement does not require an arbitrator from the Williamson County area. And Salesforce has not rejected any proposed arbitrators.
IV. Conclusion
At bottom, Cleveland is complaining that she should not be bound by the Arbitration Agreement she signed. Courts strongly favor arbitration, and Cleveland does not dispute the validity of the Arbitration Agreement or that her claim falls squarely within its provisions. What Cleveland is asking the court to do is forge a new path against the long, steady stream of on-point case law to provide her with her desired venue and preferred discovery procedures. This court will not do so. Cleveland was not required to agree to the procedures in the Arbitration Agreement, but she did so. Dkt. 11-1 at 7. The undersigned will recommend she be bound to her agreement.
V. Stay or Dismiss
Salesforce contends the entire case should be dismissed with prejudice or in the alternative stayed pending arbitration. Dkt. 11 at 10.
“The Federal Arbitration Act provides that a federal court should stay a civil action upon finding that an issue is referrable to arbitration.” Jha v. Asuragen Inc., No. 1:19-CV-1070-RP, 2020 WL 7029157, at *4 (W.D. Tex. Nov. 30, 2020) (Pitman, J.) (citing 9 U.S.C. § 3). “When all of the issues in an action must be submitted to arbitration, a court may (not must) dismiss the action.” Id.
Accordingly, the undersigned will recommend the case be stayed pending arbitration.
VI. Recommendation
For the reasons given above, the undersigned RECOMMENDS the District Court GRANT in part and DENY in part Defendant's Motion to Compel Arbitration and Dismiss (Dkt. 11) and REFER the entire action to arbitration and STAY this case pending arbitration.
VII. Objections
The parties may file objections to this Report and Recommendation. A party filing objections must specifically identify those findings or recommendations to which objections are being made. The District Court need not consider frivolous, conclusive, or general objections. See Battles v. United States Parole Comm'n, 834 F.2d 419, 421 (5th Cir. 1987).
A party's failure to file written objections to the proposed findings and recommendations contained in this Report within fourteen (14) days after the party is served with a copy of the Report shall bar that party from de novo review by the District Court of the proposed findings and recommendations in the Report and, except upon grounds of plain error, shall bar the party from appellate review of unobjected-to proposed factual findings and legal conclusions accepted by the District Court. See 28 U.S.C. § 636(b)(1)(C); Thomas v. Arn, 474 U.S. 140, 150-53 (1985); Douglass v. United Services Auto. Ass'n, 79 F.3d 1415 (5th Cir. 1996) (en banc).