Opinion
Civil Action No. 03-5816.
September 30, 2004
MEMORANDUM/ORDER
In this action under Title VII of the Civil Rights Act of 1964 and Pennsylvania antidiscrimination laws, plaintiff Lisa Plebani seeks to redress alleged sexual harassment, discrimination, and related retaliatory employment actions by her former employer, defendant Bucks County Rescue Emergency Medical Services ("the Squad"). The Squad has counterclaimed seeking to compel arbitration of plaintiff's claims under the Federal Arbitration Act and equivalent Pennsylvania law, and to recover for alleged on-the-job misconduct by Ms. Plebani. Currently before the court are plaintiff's motion to dismiss the Squad's counterclaims, and defendant's motion for summary judgment on its arbitration demand. Because defendant has stated potential claims, but plaintiff has raised material factual questions about the validity of the alleged arbitration agreement, both parties' motions must be denied.
Plaintiff's father, Michael Plebani, also worked for the Squad, and has brought a separate action (No. 03-6225) against the Squad based on alleged retaliation against him for protesting his daughter's harassment. Although the parties have conducted joint discovery in the two cases, and seem inclined to submit identical briefs in both, the cases are not officially consolidated. Identical motions pending in Michael Plebani's case are decided in a separate order issued today.
I. Facts
Ms. Plebani began working for the Bucks County Rescue Squad in July 2000 as an Emergency Medical Technician (EMT). In May 2001, her father, Michael Plebani, (plaintiff in a companion case) returned to the Squad as Operations Manager, and Ms. Plebani's supervisor; Mr. Plebani had worked for the Squad in the 1970s and 1980s as a volunteer and a paid paramedic. Plaintiff claims that a volunteer board member for the Squad, Harry Crohe, sexually harassed her at work, and that the Squad did nothing to stop the harassment, even after she and her father complained about it. She also claims that the Squad unlawfully paid her less than men performing the same work, and that the Squad retaliated against her and her father for protesting the harassment. Ms. Plebani and her father both allege various retaliatory events; the Squad disputes both the reasons for its actions and the exact sequence of events. Both Ms. Plebani and her father maintain that they were ultimately fired in retaliation for their protests.
More importantly for today's decision, though, defendant claims that plaintiff and her father are bound by a mandatory arbitration policy set forth in the Squad's employee handbook, which was allegedly distributed to all employees. Besides the arbitration policy, the handbook contained company rules and policies on various everyday employment matters, such as scheduling, discipline, and benefits. The arbitration policy required both employees and the Squad to arbitrate all employment-related disputes, including statutory discrimination claims like Ms. Plebani's, and stated that simply working for the Squad constituted acceptance of the policy. The Squad apparently required at least some employees to sign an acknowledgment form stating that they had read the arbitration policy and agreed that their employment-related disputes would be subject to mandatory arbitration.
The specific, rather awkward, language of the policy reads as follows: "[A]rbitration shall be the exclusive means of resolving any dispute arising out of your employment or termination from employment by BCRS or you." Answer, ¶ 67. The most natural reading of this language seems to be that both parties are bound to arbitrate disputes.
However, the Squad has produced neither acknowledgment forms signed by Ms. Plebani and her father, nor testimony that the two signed such forms. (In fact, the Squad has produced an acknowledgment form for only one employee.) Neither plaintiff recalls signing such a form. Indeed, Ms. Plebani and her father both maintained at their respective depositions that they never read the arbitration policy while working for the Squad. Mr. Plebani knew that some such policy existed, but claims to have been told that it was obsolete. Ms. Plebani claims that she did not know that the handbook contained an arbitration policy at all.
In addition to the arbitration allegations, the Squad alleges that Ms. Plebani used a work cell phone for personal calls, and that she scheduled herself for unauthorized overtime work. Defendant brings claims for conversion and unjust enrichment based on this alleged misconduct. The Squad has also brought counterclaims alleging similar workplace misconduct against Ms. Plebani's father.
If the alleged arbitration agreement between the parties is valid, as the Squad maintains, the record now before the court suggests no reason to suppose these claims would not also be subject to arbitration.
II. Plaintiff's Motion to Dismiss
Plaintiff has moved to dismiss defendant's arbitration claims (Counts I and II of its counterclaim) for failure to state a claim, and its misconduct claim (Count III) for lack of subject-matter jurisdiction. For the reasons that follow, none of defendant's counterclaims will be dismissed.
Plaintiff seeks to dismiss defendant's arbitration counterclaims under Fed.R.Civ.P. 12(b)(6), for failure to state a claim on which relief can be granted. In considering such a motion, "[a] court may dismiss a [claim] only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Hishon v. King Spalding, 467 U.S. 69, 73 (1984). Thus, the court construes the claim in the light most favorable to the non-moving party, accepts that party's material allegations as true, and draws any reasonable inferences that can be drawn from the pleadings in that party's favor. 5B Charles Alan Wright Arthur R. Miller, Federal Practice and Procedure § 1357 (3d ed. 2002). The low hurdle presented by a Rule 12(b)(6) motion reflects the "lenient standards of notice pleading" embodied in the modern rules; parties today need not spell out every detail of their claims at this early stage of litigation. Weston v. Pennsylvania, 251 F.3d 420, 429 (3d Cir. 2001).
Plaintiff contends that the arbitration claims must be dismissed because defendant has failed to plead that plaintiff received notice of the arbitration policy, and because the policy itself is not "clear and unmistakable." While plaintiff is correct that defendant's counterclaim does not specifically plead facts proving that plaintiff had notice of the arbitration policy, it is enough under the notice pleading system that defendant pleads that plaintiff agreed to be bound. One may logically infer that plaintiff must have known of the policy and accepted its terms in order to agree to it; in evaluating a Rule 12(b)(6) motion, the court must make this inference in favor of defendant, the non-moving party. Weston, 251 F.3d at 429. More detailed pleading is thus unnecessary.
Plaintiff's argument that the arbitration policy itself is not "clear and unmistakable" is similarly unpersuasive. Arbitration agreements in collective bargaining agreements must, indeed, be "clear and unmistakable." Wright v. Universal Maritime Service Corp., 525 U.S. 70, 80 (1998). However, the arbitration policy at issue here was not part of a collective bargaining agreement. Individual employment arrangements are not subject to the same high standard, but must simply satisfy state law requirements for an ordinary contract. See id. Failure to plead to a legal standard that does not apply cannot logically justify dismissal.
Plaintiff also maintains that a counterclaim to compel arbitration is somehow inherently inappropriate. Plaintiff has not provided any support for this claim, however, and the court is satisfied that a counterclaim is an acceptable way to seek arbitration where an action involving allegedly arbitrable matters is already pending. Courts have entertained such counterclaims without protest. See, e.g., Flintkote Co. v. Textile Workers Union of America, 243 F. Supp. 205 (D.N.J. 1965) (refusing summary judgment on union's counterclaim to compel arbitration). Defendant seeks relief well within the power of the court: should defendant prove that a valid arbitration agreement exists, the court will issue an order compelling plaintiff to arbitrate her claims. Therefore, plaintiff's motion to dismiss must be denied as to the arbitration counterclaims.
Plaintiff also claims that the court lacks jurisdiction over defendant's counterclaim concerning her own alleged misconduct. Because defendant does not contend that the misconduct claim presents any independent basis for federal jurisdiction, the court may hear the claim only if it constitutes a compulsory counterclaim and falls within the court's supplemental jurisdiction. See Great Lakes Rubber Corp. v. Herbert Cooper Co., 286 F.2d 631, 633 (3d Cir. 1961). A counterclaim is compulsory if it arises out of "same transaction or occurrence" as the initial claim. Fed.R.Civ.P. 13(a). This "same transaction or occurrence" test is generally liberally construed. 6 Wright Miller, Federal Practice and Procedure § 1410 (2d ed. 1990). Similarly, the court's supplemental jurisdiction extends to counterclaims that form part of the same case or controversy as the matter within the court's original jurisdiction. 28 U.S.C. § 1367(a).
The Third Circuit uses the same "logical relationship" test to determine whether supplemental jurisdiction is appropriate and whether a counterclaim is compulsory. Great Lakes, 286 F.2d at 633 (3d Cir. 1961). A logical relationship exists between two claims where they involve "(1) many of the same factual issues; (2) the same factual and legal issues; or (3) offshoots of the same basic controversy between the parties." Xerox Corp. v. SCM Corp., 576 F.2d 1057, 1059 (3d Cir. 1978). Here, defendant's counterclaims in conversion and unjust enrichment do appear logically connected to plaintiff's claims, and thus compulsory. Since the Squad appears to claim that plaintiff's alleged misconduct was its true reason for firing her, it will attempt to prove her alleged misconduct as a legitimate reason for her termination and an affirmative defense to her retaliation claim. The Squad's affirmative defense and its counterclaim will thus involve similar factual issues, namely whether Ms. Plebani in fact engaged in misconduct.
Also, at least portions of the parties' claims appear to be offshoots of the same basic controversy: Ms. Plebani was fired, and the parties disagree about the reasons. The connection between the parties' claims here is not merely that both involve the same employment relationship, a connection some courts have rejected as inadequate. See, e.g, Stewart v. Lamar Advertising of Penn, LLC, Nos. 03-2914, 03-2690, 03-5293, 2004 WL 90078 (Jan. 14, 2004, E.D. Pa.) (noting that employment relationship alone does not make counterclaims compulsory, but finding counterclaim compulsory where same proof would support counterclaim of employee misconduct and Title VII defense). Rather, the parties' claims involve differing views of certain events that occurred within the employment relationship. They are thus logically related.
Plaintiff contends that courts universally dismiss counterclaims in employment discrimination claims, but has cited no authority that supports this sweeping proposition. Where employers sue over conduct unrelated to underlying harassment or discrimination claims, counterclaims may often fail to satisfy the "logical relationship" test for finding counterclaims compulsory. E.g., Spencer v. Banco Real, S.A., 623 F. Supp. 1008, 1012 (S.D.N.Y. 1985) (dismissing employer's counterclaims). However, this possibility does not convert the logical relationship test into a simple bar against any and all counterclaims in Title VII cases.
Because defendant's counterclaim based on Ms. Plebani's alleged misconduct is logically related to Ms. Plebani's original claims, the counterclaim is compulsory and the court has supplemental jurisdiction. Therefore, plaintiff's motion to dismiss will be denied in its entirety.
III. Defendant's Motion for Summary Judgment
Defendant has moved for partial summary judgment on its counterclaims seeking to compel arbitration. Defendant maintains that the arbitration policy in its employee handbook was valid and binding against Ms. Plebani and her father, and that no material factual disputes remain to preclude summary judgment. As discussed below, the parties' unresolved disagreement over material questions of fact makes summary judgment impossible.
Plaintiff concedes that if the agreement is valid, "the disputes at issue herein would fall under the scope of the agreement." Pltf's Mem. of Law in Resp. to Mot. Summ. J. 3 n. 3.
Summary judgment is appropriate only if there is no genuine issue as to any material fact. Fed.R.Civ.P. 56(c). The substantive law at issue determines what facts are material; a factual dispute that is legally irrelevant will not preclude summary judgment. Anderson v. Liberty Lobby, 477 U.S. 242, 248 (1986). A "genuine" issue exists if, on the evidence presented, a reasonable fact-finder could find in favor of the non-moving party. Id. At the summary judgment stage, the court does not "weigh the evidence and determine the truth of the matter," but only determines whether any genuine issue exists. Id. at 249. Thus, the court may not evaluate the weight or credibility of evidence, but must accept the non-moving party's evidence as true, and draw all reasonable inferences in that party's favor. Id. at 255.
Because defendant's claim involves an alleged employee arbitration agreement, the court must look to the substantive law governing such agreements to evaluate defendant's motion. Defendant seeks to compel arbitration of plaintiff's claims under Section Four of the Federal Arbitration Act (FAA), 9 U.S.C. § 4. Arbitration agreements are a form of contract; the FAA "makes arbitration agreements enforceable to the same extent as other contracts." See Harris v. Green Tree Financial Corp., 183 F.3d 173, 178 (3d Cir. 1999). The Supreme Court has determined that the FAA applies to arbitration agreements concerning all but a very narrow subset of employment disputes not at issue here. Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 123 (2001).
Where the validity or scope of an arbitration agreement is disputed, courts evaluate the agreement under state contract law. Spinetti v. Service Corp. Int'l, 324 F.3d 212, 219 (3d Cir. 2003); Blair v. Scott Specialty Cases, 283 F.3d 595, 603 (3d Cir. 2002). Here, no party suggests that anything other than Pennsylvania contract law should apply. Under Pennsylvania contract law, courts looks to three factors to determine whether a valid contract has been formed: "(1) whether both parties manifested an intention to be bound by the agreement; (2) whether the terms of the agreement are sufficiently definite to be enforced; and (3) whether there was consideration." ATACS Corp. v. Trans World Communications, Inc., 155 F.3d 659, 666 (3d Cir. 1998). Arbitration agreements in employee handbooks can clearly be binding where basic contract requirements are met, and there appears to be no substantial dispute over the latter two factors here. See Blair, 283 F.3d at 603 (enforcing arbitration policy announced in employee handbook where employee had acknowledged receipt of the policy, under Pennsylvania law). However, defendant's summary judgment motion founders on the first factor: intent to be bound.
Defendant has not shown that a reasonable fact-finder would necessarily find that plaintiff and her father manifested an intent to be bound by the alleged arbitration agreement. A genuine issue remains whether the pair had notice of the alleged agreement. Ms. Plebani and her father both insist, in sworn deposition testimony, that they did not read the arbitration policy while they worked for the Squad. Ms. Plebani, indeed, claims not to have known such a policy existed at all. Her father, while he admits that he knew such a policy existed, claims he was told the policy was obsolete. Defendant has produced no evidence directly controverting the two plaintiffs' statements that they never read the policy; even if defendant had done so, the court could not weigh the conflicting evidence at this stage of litigation. Given the Plebanis' testimony, the court cannot, in addressing defendant's motion for summary judgment, conclude that either of the Plebanis manifested the necessary intent to be bound by the arbitration policy.
Not surprisingly, perhaps, defendant has pointed to no case binding an employee to a contract of which he had no notice. Although the Supreme Court has expressed a clear preference for enforcing arbitration agreements where employees agree to them, the Court has also made it clear that arbitration agreements do not suspend ordinary rules of contract law and essential justice. Even in the arbitration context, courts will only enforce agreements to which the parties have in fact agreed. EEOC v. Waffle House, Inc., 534 U.S. 279, 293 (2002).
Because the court may not evaluate credibility at this point, plaintiff's sworn assertion of lack of notice prevents summary judgment for defendant. A fact-finder could find this testimony credible, and if it did so, it could not bind plaintiff to the alleged arbitration agreement. The Plebanis' testimony that they never read the Squad's arbitration policy raises a genuine issue of material fact as to the first element required to prove the existence of a contract under Pennsylvania law: whether the parties agreed to be bound. ATACS, 155 F.3d at 666. At least in the current posture of the case, defendant has failed to establish that Lisa Plebani and her father agreed to arbitrate anything. Therefore, summary judgment for defendant is inappropriate
Of course, it remains to be seen whether plaintiff's claimed ignorance of the arbitration policy will be persuasive under more rigorous evaluation.
Section Four of the FAA provides that when the existence of an arbitration agreement is disputed, as it is here, the court shall proceed to a summary hearing on that issue. 9 U.S.C. § 4. Section Three of the FAA provides that in these circumstances, all other federal court proceedings should be stayed pending determination of the validity of the arbitration agreement. 9 U.S.C. § 3. Accordingly, because summary judgment for defendant is inappropriate, the court will conduct a summary hearing on the validity of the alleged arbitration agreement, and stay consideration of any other matters until that issue has been resolved.
Therefore, it is hereby ORDERED that Plaintiff's Motion to Dismiss Defendant's Counterclaim (Docket No. 9) is DENIED, and that Defendant's Motion for Partial Summary Judgment (Docket No. 14) is also DENIED. All other proceedings in this court are STAYED pending a hearing to determine whether there was a binding arbitration agreement between the parties.