Opinion
C. A. 1:21-cv-2334-JMC-SVH
09-30-2021
Kris A. Boerstler, Plaintiff, v. UHS of Delaware, Inc. and Aiken Regional Medical Centers, LLC, Defendants.
REPORT AND RECOMMENDATION
SHIVA V. HODGES, UNITED STATES MAGISTRATE JUDGE.
In this employment discrimination case, Kris A. Boerstler (“Plaintiff”) sues UHS of Delaware, Inc. (“UHS”), and Aiken Regional Medical Centers, LLC (“ARMC”) (collectively “Defendants”), and asserts claims for sexual harassment, hostile work environment, and constructive discharge in violation of Title VII of the Civil Rights Act of 1964, as amended (“Title VII”), 42 U.S.C. § 2000e et seq. Plaintiff filed her claims in the Aiken County Court of Common Pleas on June 25, 2021, and Defendants removed the case to this court on July 28, 2021.
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, et seq. and Fed.R.Civ.P. 12(b)(3). See ECF No. 5 at 1. The motion having been fully briefed [ECF Nos. 5-1, 10, 11], 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 dismiss the proceedings and compel arbitration.
I. Factual and Procedural Background
Defendant UHS is a corporation that owns and operates defendant ARMC. [ECF No. 1-1 at 3]. Plaintiff alleges she began working for ARMC in 1989 and was employed as a lead histologist when her employment ended in December 2019. Id. at 4. She alleges she was subjected to sexual harassment and a hostile work environment beginning in 2017 and was retaliated against and constructively discharged after reporting the illegal actions. Id. at 4-7.
Defendants argue Plaintiff is a party to a valid and binding arbitration agreement that requires she submit all matters relating to her employment with ARMC to binding arbitration, as opposed to pursuing them in court. [ECF No. 5-1]. Defendants have submitted an Alternative Resolution of Contracts Agreement (“ARC Agreement”), which provides in relevant part as follows:
1. How This Agreement Applies
This Agreement is governed by the Federal Arbitration Act, 9 U.S.C. § 1 et seq. and evidences a transaction involving commerce.
This Agreement applies to any dispute arising out of or related to Employee's employment with Company or one of its affiliates, subsidiaries or parent companies (“Company”) or termination of employment and survives after the employment relationship terminates. Nothing contained in this Agreement shall be construed to prevent or excuse Employee from utilizing the Company's existing internal procedures for resolution of complaints, and this Agreement is not intended to be a substitute for the utilization of such procedures.
Except as it otherwise provides, this Agreement is intended to apply to the resolution of disputes that otherwise would be resolved in a court of law or before a forum other than arbitration (“Covered Claims”). This Agreement requires all such disputes to be resolved only by an arbitrator through final and binding arbitration and not by way of court or jury trial. Such disputes include disputes arising out of or related to interpretation or application of this agreement.
Except as it otherwise provides, this Agreement also applies, without limitation, to disputes regarding the employment relationship, compensation, breaks and rest periods, termination, or harassment and claims arising under the Civil Rights Act of 1965, Americans with Disabilities Act, Age Discrimination in Employment Act, Family Medical Leave Act, Fair Labor Standards Act, Employee Retirement Income Security Act (except for claims for employee benefits under any benefit plan sponsored by the Company and covered by the Employee Retirement Security Act of 1974 or funded by insurance), Genetic Information NonDiscrimination Act, and state statutes, if any, addressing the same or similar subject matters, and all other state statutory and common law claims.[ECF No. 5-2 at 14 ¶¶ 1-3].
Defendants have submitted the declaration of Kristen Medlin (“Ms. Medlin”), who served as Human Resources (“HR”) director at ARMC from 2011 to January 2017, as well as multiple documents referenced in Ms. Medlin's declaration. [ECF No. 5-2]. According to Ms. Medlin, Defendants implemented their employee arbitration agreement beginning in or around October 2013 through HealthStream, an online learning management system. Id. at 2-3 ¶¶ 1-5. Employees were required to review and electronically acknowledge the ARC Agreement through their participation in HealthStream's online learning activity entitled “Alternative Resolution of Conflicts Course” (“ARC Course”). Id. at 3 ¶ 6. This course had four parts: (1) ARC Summary; (2) Step Two-Read ARC Agreement; (3) Step Three-Review ARC Acknowledgment; and (4) ARC Attestation. Id. at 4-6 ¶¶ 7-13. The ARC Agreement appeared at the second step of the ARC Course. Id. at 4 ¶ 9. To achieve 100% completion, an employee was required to complete all four parts of the ARC Course and select an option that stated: “I acknowledge this course contains the ARC Program materials, and I have had an opportunity to review them.” Id. at 5-6 ¶13. Employees who completed all four steps of the ARC Course received a certificate of completion and their course details page in HealthStream showed each step “completed, ” along with the time and date of completion. Id. at 6 ¶ 14.
Relevant to the parties' arguments, the ARC Agreement contained the following language:
9. An Employee's Right to Opt Out of Arbitration
Arbitration is not a mandatory condition of Employee's employment at the Company, and therefore an Employee may
submit a form stating that the Employee wishes to opt out and not be subject to this Agreement. In order to Opt Out of Arbitration, the Employee must submit a signed and dated statement on a “Alternative Resolution of Conflicts Agreement Opt Out Form” (“Form”) that can be obtained from the Company's local or corporate Human Resources Department. In order to be effective, the signed and dated Form must be returned to the Human Resources Department within 30 days of the Employee's receipt of this agreement. An employee who timely opts out as provided in this paragraph will not be subject to any adverse employment action as a consequence of that decision and may pursue available legal remedies without regard to this Agreement. Should an employee not opt out of this Agreement within 30 days of the Employee's receipt of this Agreement, continuing the Employee's employment constitutes mutual acceptance of the terms of this Agreement by Employee and the Company. An Employee has the right to consult with counsel of the Employee's choice concerning this.Id. at 17 ¶ 9] (emphasis in original).
Ms. Medlin claims and provides evidence to indicate employees were not required to select the option indicating they had had the opportunity to review the ARC Program materials and could select an alternative providing: “I acknowledge this course contains the ARC Program materials, but have difficulty understanding or accessing the information.” Id. at 5-6 ¶ 13; ECF No. 5-2 at 21. If an employee selected this option, her course details page would not show the ARC Course as completed and would reflect a score of 0%. Id. at 6. If an employee chose to opt out of the ARC Agreement, she could click on a link for an Opt-Out Form in HealthStream. Id. at 6-7 ¶ 15. Her course details page would reflect “Completed” next to the link for Opt-Out Form and include a date and time stamp showing when she accessed the Opt-Out Form. Id. If she declined to open the Opt-Out Form, the status beside the link would reflect “Not Yet Started.” Id.
Defendants have put forth evidence that on December 6, 2013, Plaintiff logged on to HealthStream, using her unique username and password, and completed all four steps of the ARC Course. Id. at 7 ¶¶17, 18. They provided a course details page for Plaintiff that shows the ARC Attestation as “Passed” and a score of 100% with a date and time stamp of “12/6/2013 7:53 AM.” Id. at 7 ¶ 17; ECF No. 5-2 at 29. It suggests Plaintiff did not open and view the OptOut Form, as it reflects a status of “Not Yet Started.” Id. at 8 ¶19; ECF No. 52 at 29. A certificate of completion was issued showing that Plaintiff completed the ARC Course on December 6, 2013. Id. at 7 ¶ 18; ECF No. 5-2 at 31. According to Ms. Medlin, Plaintiff continued her employment without completing and submitting the Opt-Out Form to the HR department within the 30-day period required by the ARC Agreement or at any time thereafter. Id. at ¶¶ 20, 21. Defendants maintain that because Plaintiff failed to timely opt out of the ARC Agreement, she is bound by its arbitration provision.
Plaintiff argues the ARC Agreement is unenforceable because she never signed a document agreeing to its terms. [ECF No. 10. at 2-3]. She does not dispute that she clicked the ARC Attestation, providing that she “acknowledge[d] that this course contains the ARC Program materials, and [she] ha[d] had the opportunity to review them, ” but maintains she did not electronically or otherwise sign any material indicating she agreed to the provisions of the ARC Agreement. Id. at 3. She further contends the ARC Agreement is unenforceable because it does not reflect a meeting of the minds as to all essential and material terms of the contract, particularly with respect to payment of the costs of arbitration. Id. at 1-2. Plaintiff requests that, should the court grant Defendant's motion, it stay the case while arbitration proceeds, given the provision in the ARC Agreement for the parties to return to the court for appointment of an arbitrator if they cannot agree on an arbitrator. Id. at 34.
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 MemlHosp. 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 she 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 [a party] 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 have demonstrated the requirements for compelling arbitration under the FAA. The record reflects the presence of a dispute between the parties, as Plaintiff alleges Defendants violated her rights under Title VII. [ECF No. 1-1]. Defendants have produced a written agreement that includes an arbitration provision that covers the dispute, as the ARC Agreement specifies it “applies, without limitation, to disputes regarding the employment relationship . . . termination, or harassment and claims arising using the Civil Rights Act of 1964.” [ECF No. 5-2 at 14]. They have provided evidence that suggests Plaintiff was presented with the ARC Agreement and failed to opt out of it. [ECF No. 5-2]. The transaction appears to be related to interstate commerce, as the ARC Agreement states it “evidences a transaction involving commerce.” Id. at 14. Finally, Plaintiff's failure, neglect, or refusal of to arbitrate the dispute is reflected by her filing of the case in the Aiken County Court of Common Pleas and her demand for a jury trial. See ECF No. 1-1.
Plaintiff does not dispute that a dispute exists between the parties; the relationship of the transaction to foreign commerce; or her failure to arbitrate the dispute. See generally ECF No. 10. However, she maintains she is not a party to a written agreement that includes an arbitration provision which purports to cover the dispute. See id. at 2-3.
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 to show that even though there was some written contract, [she] did not actually agree to it-because the signature was forged, the terms of the contract were misrepresented, or some other reason evincing lack of true agreement.” Gordon v. TBC Retail 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 met their burden by presenting evidence that created a rebuttable presumption that Plaintiff entered into the ARC Agreement. Plaintiff does not dispute that she reviewed the ARC Agreement and that she declined to opt out of it. She claims she is not bound by the ARC Agreement due to its lack of specificity as to costs of arbitration and her failure to sign it. [ECF No. 10].
The formation of a binding contract requires “the parties [to] have a meeting of the minds with regard ‘to all essential and material terms of the agreement.'” Vessel v. DPS Associates of Charleston, Inc., 148 F.3d 407, 410 (4th Cir. 1998). General principles of state contract law determine whether an agreement exists. Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 685 (1996) (“‘[S]tate law, whether of legislative or judicial origin, is applicable if that law arose to govern issues concerning the validity, revocability, or enforceability of contracts generally'”) (quoting Perry v. Thomas, 482 U.S. 483, 493 n.9 (1987) (alteration in original). In South Carolina, “[t]he necessary elements of a contract are an offer, acceptance, and valuable consideration.” Sauner v. Pub. Serv. Auth. Of S.C., 581 S.E.2d 161, 166 (S.C. 2003).
The evidence must establish that Plaintiff had sufficient notice of the ARC Agreement to establish a meeting of the minds under South Carolina law. Although Plaintiff argues her failure to manually or electronically sign to indicate her agreement to the terms of the ARC Agreement refutes the existence of a contract, her signature was not required for her to be bound by its terms. See Laidlaw Envtl. Servs. (TOC), Inc. v. Honeywell, Inc., 966 F.Supp. 1401, 1409 (D.S.C. 1996), aff'd, 113 F.3d 1232 (4th Cir. 1997). (“Pursuant to South Carolina law, conduct manifesting assent constitutes acceptance of the offered terms. Thus, compliance with the proffered terms and conditions constitutes acceptance of an offer, and assent need not be express, but may be inferred from the parties' conduct.”) (citations omitted); see also Farrow Road Dental Group, PA v. AT&T Corp., C/A No. 3:17-1615-CMC, 2017 WL 4216158 (D.S.C. Sept. 22, 2017) (finding plaintiff's continued use of services under the contract and failure to communicate disagreement with the contract constitutes assent to the contract terms).
Defendants have presented unrebutted evidence that Plaintiff completed the ARC Course, which required she: (1) review the ARC Agreement containing the warning that failure to complete the Opt-Out Form and return it to HR within 30 days would result in her being bound by the ARC Agreement; (2) confirm acknowledgment of receipt of the ARC Agreement and the availability of the Opt-Out Form; and (3) attest to having had an opportunity to review the ARC Program materials. See ECF No. 5-2 at 4-7 ¶¶ 9-18. This court has recognized in prior cases that employees' failures to opt out of disputeresolution policies within a specified period were sufficient to show their assent to the policies. See Hughes v. Charter Communications, Inc., C/A No. 3:19-1703-SAL, 2020 WL 1025687, at *10 (D.S.C. Mar. 2, 2020) (“The agreement presented to Plaintiff was an opt-out agreement. If Plaintiff did not opt out within the specified time, she was bound by the agreement's terms.”); Carter v. MasTec Services Co., Inc., C/A No. 2:09-2731-PMD, 2010 WL 500421 (D.S.C. Feb. 5, 2010) (“[T]his court finds that Plaintiffs cannot legitimately claim they did not knowingly assent to the dispute resolution policy when they failed to opt out of it within the 30-day period provided to take such action.”). In Towles v. United Healthcare Corporation, 338 S.C. 29, 37-38, 524 S.E.2d 839, 844 (S.C. Ct. App. 1999), the South Carolina Court of Appeals determined an employee had assented to an arbitration agreement where he signed an acknowledgment that he received an employee handbook that provided a requirement for the arbitration of employment-related disputes and failed to opt out of it during the 30-day period provided to take such action. Towles indicates that an employee's acknowledgment of having received an arbitration policy and her failure to object thereto is sufficient to show her assent. See Id. It further indicates an employee does not have to specifically acknowledge her agreement to the terms of the arbitration agreement, as the agreement was not a stand-alone document in Towles. See id.
Because Plaintiff attested to having reviewed the ARC Agreement, declined to complete and return the Opt-Out Form to HR, and continued her employment with ARMC after the 30-day period for opting out, she assented to the terms of the ARC Agreement. Her failure to physically or electronically sign a stand-alone arbitration agreement does not render the agreement unenforceable against her, given her conduct that reflected her assent.
The undersigned also rejects Plaintiff's argument that the ARC Agreement is unenforceable because it does not reflect a meeting of the minds as to all essential and material terms of the contract, particularly with respect to payment of the costs of arbitration. [ECF No. 10 at 1-2]. The ARC Agreement addresses the costs of arbitration as follows:
7. Paying for The Arbitration
Each party will pay the fees for his, her or its own attorneys, subject to any remedies to which that party may later be entitled under applicable law. However, in all cases where required by law, the Company will pay the Arbitrator's and arbitration fees. If under applicable law the Company is not required to pay all of the Arbitrator's and/or arbitration fees, such fee(s) will be apportioned between the parties in accordance with said applicable law, and any disputes in that regard will be resolved by the Arbitrator.[ECF No. 5-2 at 16].
Although Plaintiff argues the ARC Agreement has “left empty the prospect of who pays for the arbitration, ” ECF No. 10 at 2, it clearly provides that the costs of arbitration “will be apportioned between the parties in accordance with . . . applicable law, ” where Defendants are not required by law to pay the fees. See id. Any perceived vagueness is readily filled by the governing law of the Fourth Circuit, which allows the parties to split the costs of arbitration. See Bradfordv. Rockwell Semiconductor Systems, Inc., 238 F.3d 549 (4th Cir. 2001). While Plaintiff claims the potential costs associated with arbitration are too speculative to reflect a meeting of the minds, the undersigned notes the ARC Agreement permits Plaintiff control over the costs in that it provides for the arbitrator to “be selected by mutual agreement of the Company and the Employee” and indicates “[t]he location of the arbitration proceeding shall be no more than 45 miles from the place where the Employee last worked for the Company, unless each party to the arbitration agrees in writing otherwise.” [ECF No. 15].
In Bradford, the Fourth Circuit recognized that fee splitting could render an arbitration agreement unenforceable where the arbitration fees and costs were so prohibitive as to effectively deny the employee access to the arbitral forum, but concluded the issue required a case-by-case analysis that focused on the individual's ability to pay the arbitration fees and costs, the expected cost differential between arbitration and litigation in court, and whether that cost differential was so substantial as to deter the bringing of claims. Id. The court in Bradfordleaned heavily on the U.S. Supreme Court's decision in Green Tree Financial Corp.-Alabama v. Randolph, 531 U.S. 79, 91 (2000), stating: “the ‘risk' that Randolph w[ould] be saddled with prohibitive costs [was] too speculative to justify the invalidation of an arbitration agreement.” It further noted: “To invalidate the agreement on that basis would undermine the ‘liberal federal policy favoring arbitration agreements'” and “would conflict with [its] prior holdings that the party resisting arbitration bears the burden of proving that the claims at issue are unsuitable for arbitration.” Id. (quoting Moses H. Cone Memorial Hospital, 460 U.S. at 24; citing Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26 (1991); Shearson/American Express, Inc. v. McMahon, 482 U.S. 220 (1987)). In Murithi v. Shuttle Exp., Inc., 712 F.3d 173, 182 (4th Cir. 2013), the Fourth Circuit recognized that a party resisting arbitration bears “a substantial burden under Green Tree of showing prohibitive arbitration costs.” It concluded Murithi had not met “his burden of showing that he likely will incur prohibitive arbitrator fees simply by showing the fees that some arbitrators are charging” and “plainly did not offer evidence regarding the arbitrator's fees likely to be incurred in the resolution of the present dispute, even though ‘[i]t was within his power to obtain this information by simply investigating the option of arbitration in the first place.'” Id. (quoting Adkins v. Labor Ready, Inc., 303 F.3d 496, 503 (4th Cir. 2002).
Plaintiff does not claim she is unable to pay the arbitration costs and fees or that the cost differential between arbitration and litigation is too substantial as to deter her from bringing her claims. See ECF No. 10 at 1-2. She presents no evidence as to the arbitrator's fees likely to be incurred in the resolution of this case. See id. She merely maintains Defendants can more readily bear the costs as they “can be prohibitively expensive.” Id. at 2. Plaintiff has failed to meet the substantial burden of showing prohibitive arbitration costs and has not demonstrated that the costs of arbitration would be prohibitive such that they would deter her from pursuing her statutory rights and render the ARC Agreement invalid.
In light of the foregoing, the undersigned recommends the court find the ARC Agreement valid and enforceable.
III. Conclusion and Recommendation
For the foregoing reasons, the undersigned recommends the district judge grant Defendants' motion [ECF No. 5] and dismiss the case. 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).
The ARC agreement provides for the court's intervention in selecting an arbitrator, as follows:
“If for any reason the parties cannot agree to an Arbitrator, either party may apply to a court of competent jurisdiction with authority over the location where the arbitration will be conducted for appointment of a neutral Arbitrator. The court shall then appoint an arbitrator, which shall act under this Agreement with the same force and effect as if the parties had selected the arbitrator by mutual agreement.[ECF No. 5-2 at 15]. It further provides: “A court of competent jurisdiction shall have the authority to enter a judgment upon the award made pursuant to the arbitration.” Id. at 17. Because the ARC Agreement indicates further intervention from this court may be required, the undersigned recommends the court retain jurisdiction for enforcement of the terms of the arbitration, for example in the event the parties are unable to agree on the designation of an arbitrator, but otherwise to dismiss the case.
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).