Opinion
Civil Action No. 3:04-cv-1777-B.
January 23, 2005
MEMORANDUM ORDER
The following motions are before the Court: 1) Defendant McAfee, Inc.'s ("McAfee") Motion to Stay Pending Binding Arbitration and for Attorney's Fees ("Motion to Compel Arbitration" and "Motion for Attorney's Fees"), filed October 26, 2004; and 2) McAfee's Motion to Stay Discovery Pending Ruling on its Motion to Compel Arbitration ("Motion to Stay Discovery"), filed January 10, 2005. For the reasons that follow the Court GRANTS McAfee's Motion to Compel Arbitration, DENIES McAfee's Motion for Attorney's Fees, and DENIES as moot McAfee's Motion to Stay Discovery.
I. Background
Plaintiff Lorraine Arriaga-Jobe ("Arriaga") originally filed this action against McAfee in Texas state court asserting claims of wrongful termination, gender/race/national origin discrimination, libel, slander, and intentional infliction of emotional distress. (Pl.'s 1st Am. Pet. ¶¶ 27-40). McAfee filed an answer in state court on August 12, 2004, and removed the case to federal court the next day. McAfee asserted as an affirmative defense that the case should be dismissed or abated pursuant to the terms of a mandatory arbitration agreement between the parties. (Def.'s Orig. Answer ¶ 2). That arbitration agreement forms the basis for McAfee's Motion to Compel Arbitration.
In September 2001 Arriaga signed a written "Offer of Employment" (hereinafter, "letter agreement" or "arbitration agreement") with McAfee which contained the following provision:
In the event of any dispute or claim relating to or arising out of our employment relationship, this agreement, or the termination of our employment relationship (including, but not limited to, any claims of wrongful termination or age, sex, disability, race or other discrimination), you and [McAfee] agree that all such disputes shall be fully, finally and exclusively resolved by binding arbitration conducted by the American Arbitration Association in California or the state you work in, and we waive our rights to have such disputes tried by a court or jury.
(Def.'s App. in Supp. Mot. Compel Arb. ["Def.'s App."] at 2). McAfee contends that all of Arriaga's claims asserted in this lawsuit fall within the compass of this provision and must therefore be arbitrated.
II. Analysis
A. Legal Standard
Section 2 of the Federal Arbitration Act ("FAA") provides that a written provision in a contract "evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction . . . 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. Federal policy favors arbitration and "ambiguities as to the scope of the arbitration clause itself [must be] resolved in favor of arbitration." Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 62 (1995) (quoting Volt Info. Sci., Inc. v. Bd. of Trustees, 489 U.S. 468, 476 (1989)). In the Fifth Circuit, courts generally follow a two-step procedure in determining whether to compel arbitration. Webb v. Investacorp, Inc., 89 F.3d 252, 257-58 (5th Cir. 1996). First, the Court must ascertain whether the parties agreed to arbitrate the dispute at issue. Id. at 258. An agreement to arbitrate a dispute is shown where (a) there exists between the parties a valid agreement to arbitrate; and (2) the dispute in question falls within the scope of the agreement. Id. Once the Court is satisfied that the parties agreed to arbitrate the dispute, it must then determine whether any external legal constraints foreclose arbitration of the dispute. Id.
B. Whether the Parties Agreed to Arbitrate Arriaga's Claims
1. Validity of arbitration agreement between the parties
Arriaga argues that the arbitration agreement fails for indefiniteness. Specifically, Arriaga contends that the agreement is unconscionable because it does not address which party is to pay the costs of the arbitration, nor does it specify which rules would govern the arbitration. The Court finds that the arbitration agreement's failure to allocate the costs of the arbitration between the parties does not render the agreement unenforceable. In Green Tree Financial Corp. v. Randolph, the Supreme Court of the United States held that an arbitration agreement's "silence on the subject" of fees and costs, taken alone, "is plainly insufficient to render it unenforceable." 531 U.S. 79, 91 (2000); see also Euro-Mec Import, Inc. v. Pantrem C., S.p.A., 1992 WL 350211, at *4 (E.D. Pa. 1992) (granting motion to compel arbitration despite plaintiff's claim that the arbitration clause failed to specify method of choosing arbitrators, the governing arbitration association, or the governing laws for the arbitration).
Rather, a party seeking to invalidate an arbitration agreement on the ground that arbitration would be prohibitively expensive bears the burden of establishing the likelihood of such costs. Green Tree, 531 U.S. at 92. Although Arriaga speculates that filing and case service fees for which she would be responsible could range from $6000 to $10,500 if the American Arbitration Association's ("AAA") commercial rules were applied, she makes no showing that such rules and fee schedules would or should apply. And even if they did apply, the Court notes that Arriaga's professed inability to afford these expenses is belied by her $90,000 per year base salary. (Arriaga Decl. ¶ 4 [sic], Pl.'s App. in Supp. Resp. ["Pl.'s Resp. App."], at 7). In short, the Court finds that the arbitration of this case would not impose prohibitive costs upon Arriaga.
McAfee maintains that by agreeing to submit to binding arbitration conducted by the American Arbitration Association, Arriaga consented to having the National Rules for the Resolution of Employment Disputes become part of the agreement. (Def.'s App. in Supp. Reply ["Def.'s Reply App."] at 5). Under the fee schedule in the Employment Rules, employees must pay a nonrefundable filing fee capped in the amount of $125 (and possibly postponement/cancellation fees), while the employer must pay all remaining fees. ( Id. at 13-14).
The Court further finds that the arbitration agreement is not fatally indefinite for failing to specify with exactitude the rules to govern the arbitration proceeding. The agreement provides that all disputes arising out of the parties' employment relationship would be resolved by binding arbitration conducted by the AAA. (Def.'s App. at 2). As such, the parties are deemed to have made the National Rules for the Resolution of Employment Disputes (the "Employment Rules") a part of the arbitration agreement. (Def.'s Reply App. at 5); Schulze and Burch Biscuit Co. v. Tree Top, Inc., 642 F.Supp. 1155, 1157 (N.D. Ill. 1986) (finding that all disputes arising out of commercial contract would be governed by the relevant AAA commercial arbitration rules). Inasmuch as all of Arriaga's claims arise out of her employment with McAfee, it is fitting that the AAA's Employment Rules shall apply. Id. In sum, the Court finds that the arbitration agreement between the parties is valid and enforceable.
2. Scope of the arbitration agreement
Having found the existence of a valid agreement to arbitrate between the parties, the Court must next determine whether the dispute in question falls within the scope of that agreement. Webb, 89 F.3d at 258. The arbitration provision in the letter agreement sweeps broadly, covering all claims "relating to or arising out of [the] employment relationship" to be submitted to arbitration. (Def.'s App. at 2). McAfee contends that all of Plaintiff's claims fall within the scope of that provision. Arriaga, in her response, does not contest this point. Prudential Sec. Inc. v. Marshall, 909 S.W.2d 896, 899-900 (Tex. 1995) (stating that the burden falls upon the party opposing arbitration to show that its claims fall outside the scope of the arbitration agreement). The Court agrees with McAfee that all of Arriaga's claims, including her tort claims, arise from or relate to her employment relationship with McAfee and thus must be sent to arbitration. See e.g. Rojas v. TK Communications, Inc., 87 F.3d 745, 749 (5th Cir. 1996) (finding that arbitration clause in employment contract covering "any other disputes" sufficiently broad to encompass Title VII claims); Valdiviezo v. Phelps Dodge Hidalgo Smelter, Inc., 995 F.Supp. 1060, 1067-68 (D. Ariz. 1997) (finding that torts arising during course of employment relationship were covered by arbitration clause requiring arbitration of any disputes arising out of employment relationship); Stone v. Pennsylvania Merchant Group, Ltd., 949 F.Supp. 316, 324-26 (E.D. Pa. 1996) (same).
C. External Legal Constraints
Having found that the parties entered into a valid arbitration agreement and that all of Arriaga's claims are encompassed by that agreement, the Court must next determine whether any external legal constraints foreclose arbitration of the dispute. Webb, 89 F.3d at 258. Arriaga maintains that McAfee has waived its right to compel arbitration by: waiting to move to compel arbitration until several months after it removed the case, participating in status report conferences, filing stipulations, and exchanging disclosures. The Court cannot say, however, that by engaging in these activities McAfee has substantially invoked the judicial process to Arriaga's detriment. Williams v. Cigna Fin. Advisors, Inc., 56 F.3d 656, 661-62 (5th Cir. 1995) (finding no waiver where party removed case, filed a motion to dismiss and a motion to stay proceedings, answered plaintiff's complaint, and exchanged Rule 26 discovery). Accordingly, the Court finds that McAfee did not waive its right to arbitrate the matters at issue in this case.
D. Request for Attorney's Fees
McAfee requests an award of attorney's fees incurred in preparation of its Motion to Compel Arbitration because Arriaga's counsel refused to agree to pursue Arriaga's claims in arbitration. As pointed out by Arriaga, McAfee cites to no statutory authority providing for an award of attorney's fees and presumably seek attorney's fees as a form of sanction upon Arriaga for opposing its Motion to Compel Arbitration in bad faith. According to Arriaga, McAfee failed to apprise her of its intent to seek attorney's fees prior to filing its Motion to Compel Arbitration, in violation of this Court's conference requirements. See Local Rule 7.1(a). Furthermore, to the extent McAfee's request for attorney's fees should be construed as a motion for sanctions under Rule 11 of the Federal Rules of Civil Procedure, the Court notes that McAfee has failed to comply with the procedural requirements of that rule. For example, the motion for sanctions was not made separately from McAfee's Motion to Compel Arbitration, nor does it appear to have been served upon Arriaga 21 days before its filing. FED. R. Civ. P. 11(c)(1)(A). Accordingly, the Court denies McAfee's request for an award of attorney's fees.
III. Conclusion
For the reasons set forth in this order, the Court GRANTS McAfee's Motion to Stay Pending Binding Arbitration and for Attorney's Fees in part and DENIES it in part. Pursuant to 9 U.S.C. § 3, this action is hereby STAYED pending arbitration. McAfee's request for an award of attorney's fees is DENIED, and McAfee's Motion to Stay Discovery Pending Ruling on its Motion to Compel Arbitration is DENIED as MOOT.