Opinion
EP-05-CA-045-DB.
July 22, 2005
MEMORANDUM OPINION AND ORDER
On this day, the Court considered a "Motion To Compel Arbitration And Motion To Stay The Underlying Proceedings And Brief In Support" ("Motion to Compel" and "Motion to Stay," respectively), filed in the above-captioned cause by Defendant Providian Bancorp Services, d/b/a Providian Financial Corporation ("Providian"), on February 24, 2005. On March 21, 2005, Plaintiff Jennie Lora ("Lora") filed a "Response In Opposition To Defendants' Motion To Compel Arbitration And Motion To Stay The Underlying Proceedings And Brief In Support" ("Response"). On March 31, 2005, Defendant filed a "Reply To Plaintiff's Response To Defendant's Motion To Compel Arbitration" ("Reply"). After due consideration, the Court is of the opinion that both of Defendant's Motions should be granted for the reasons discussed below.
BACKGROUND
This is an employment discrimination case. Providian is headquartered in San Francisco, California and specializes in providing financial services to clients nationwide. Lora is 51 year-old Mexican-American woman. On November 6, 2000, Lora submitted an employment application to Providian. By letter dated November 29, 2000, and entitled "Employment Agreement" ("Agreement"), Providian offered Lora the position of Human Resources Site Director, "on the . . . terms" enumerated in the Agreement. Among the terms included in the Agreement was a paragraph regarding arbitration which states, in pertinent part:
"Other than claims exclusively heard before the workers' compensation or unemployment insurance boards or claims under the National Labor Relations Act, in case of any dispute or disagreement arising out of or in any way related to this Agreement, your employment with us, or the termination of your employment (including but not limited to, claims of discrimination, harassment, wrongful discharge, breach of contract, tortious conduct, statutory violations or any injury to your physical, mental, or economic interests), you and the Company agree to submit the dispute or disagreement to binding arbitration before JAMS/Endispute (or its successor or a mutually-agreed upon arbitrator at AAA if JAMS/Endispute is unable or unwilling to hear the dispute), pursuant to the California Arbitration Act, CCP § 1280 et seq. . . . IN AGREEING TO ARBITRATE UNDER THIS PROVISION, THE PARTIES EXPRESSLY WAIVE ANY RIGHT TO A JURY TRIAL."
The Agreement further states that "[t]his letter and Exhibit 1, which is incorporated herein, constitute the complete, final and exclusive embodiment of the entire agreement between you and the Company." In relevant part, Exhibit 1 states that the "Agreement will be governed by and construed according to the laws of the State of California." On December 11, 2000, Lora signed the Agreement and began working for Providian. Providian employed Lora as a Human Resource Site Director for its El Paso facility from December 11, 2000 until February 7, 2003, when Providian terminated Lora's employment.
After her termination on February 7, 2003, Lora filed the instant cause on January 19, 2005, in the County Court at Law No. 5, El Paso County, Texas, asserting claims under 42 U.S.C. § 1981 and the Texas Commission on Human Rights Act. See TEX. LABOR CODE §§ 21.001, et seq. Specifically, Lora avers that her age and "race/national origin" were motivating factors in Providian's decision to terminate her employment, in violation of Texas Labor Code § 21.051. Lora also asserts that Providian decided to terminate her in retaliation for having opposed and complained about employment discrimination, in violation of Texas Labor Code § 21.055. Additionally, Lora seeks all relief to which 42 U.S.C. § 1981 entitles her. On February 16, 2005, Providian filed a "Notice of Removal" pursuant to 28 U.S.C. §§ 1331 and 1441. The instant Motions followed.
42 U.S.C. § 1981 states:
(a) Statement of equal rights
All persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts, to sue, be parties, give evidence, and to the full and equal benefit of all laws and proceedings for the security of persons and property as is enjoyed by white citizens, and shall be subject to like punishment, pains, penalties, taxes, licenses, and exactions of every kind, and to no other.
(b) "Make and enforce contracts" defined
For purposes of this section, the term "make and enforce contracts" includes the making, performance, modification, and termination of contracts, and the enjoyment of all benefits, privileges, terms, and conditions of the contractual relationship.
(c) Protection against impairment
The rights protected by this section are protected against impairment by nongovernmental discrimination and impairment under color of State law.42 U.S.C.A. § 1981 (West 2003).
DISCUSSION
The Court currently considers Providian's Motion to Compel and Motion to Stay. Through the Motion to Compel, Providian prays the Court compel Lora to arbitrate her discrimination and retaliation claims. Through the Motion to Stay, Providian requests that if the Court finds that Lora's claims are subject to arbitration, the Court stay the proceedings in the instant cause. Because the Motion to Stay is premised on the Court's decision regarding the Motion to Compel, the Court first considers the Motion to Compel, and then turns to the Motion to Stay.
I. Motion to Compel
Under the Federal Arbitration Act ("FAA"), an arbitration agreement which involves interstate commerce is "valid, irrevocable, and enforceable, save upon such grounds as exist for the revocation of any contract." 9 U.S.C.A. § 2 (West 1999). To determine whether an arbitration agreement is enforceable, courts must apply the relevant state law principles that govern contract formation. See First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943-44, 115 S. Ct. 1920, 1924, 131 L. Ed. 2d 985 (1995). There is a strong presumption in favor of arbitration and a party seeking to invalidate an arbitration agreement bears the burden of establishing its invalidity. Carter v. Countrywide Credit Indust., Inc., 362 F.3d 294, 297 (5th Cir. 2004) (citing Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24, 111 S. Ct. 1647, 114 L. Ed. 2d 26 (1991)).
As an initial matter, the Court notes that the Parties do not dispute that the Agreement is governed by the FAA, nor that the Agreement affects interstate commerce as required by the FAA. Rather, at issue remains whether the Agreement is valid under basic contract principles, and which source of law should guide the Court's determination.
Through its Motion to Compel, Providian asks the Court to compel the instant cause to arbitration and dismiss or stay the pending litigation, pursuant to the FAA and the Texas General Arbitration Act, TEX. CIV. PRAC. REM. CODE § 171.001, et seq. In her Response, Lora directs the Court's attention to a choice of law clause in the Agreement, which specifies that California law governs the Agreement. Further, Lora argues that under California law she is not bound to arbitrate her claims against Providian on four separate grounds: (1) the Agreement is unenforceable because it was never signed by Providian's authorized agent; (2) there was insufficient consideration; (3) the arbitration clause in the Agreement is unconscionable; and (4) Providian has waived its right to arbitration. The Court first takes up the law used to evaluate the Agreement's enforceability, and then examines each of Lora's arguments in turn.
A. Law Governing the Agreement
Federal district courts have original jurisdiction over civil cases that present a federal question. 28 U.S.C.A. § 1331. Federal district courts also possess supplemental jurisdiction over state law claims that are part of the same case. 28 U.S.C.A. § 1367(a). The Erie doctrine requires that a federal court apply state law to cases not governed by federal law. Erie R. Co. v. Tompkins, 304 U.S. 64, 78 (1938). Thus, a federal court exercising supplemental jurisdiction over state law claims must apply the substantive law of the state in which it sits. See Sommers Drug Stores Co. Employee Profit Sharing Trust, 883 F.2d at 353. Through her Original Petition, in addition to asserting several state law claims, Lora seeks relief under 42 U.S.C. § 1981. Accordingly, the Court has federal question jurisdiction over Lora's federal law claim, see 28 U.S.C.A. § 1331, and exercises supplemental jurisdiction over Lora's state law claims, pursuant to 28 U.S.C. § 1367(a). As a result, the Erie doctrine requires that the Court apply the substantive law of the state in which it sits to Lora's claims which are not governed by federal law. See Sommers, 883 F.2d at 353. Therefore, the Court applies Texas law to any portion of the instant cause not governed by federal law.
28 U.S.C. § 1331 provides:
"The district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States."28 U.S.C.A. § 1331 (West 1993).
In pertinent part, 28 U.S.C. § 1367(a) states:
"[I]n any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are . . . part of the same case or controversy."28 U.S.C.A. § 1367(a) (West 1993).
Through her response, Lora asserts, however, that California law controls the interpretation of the Agreement because it contains a choice of law provision. "Texas choice of law rules recognize parties' autonomy to select the law to be applied to their contract." See Exxon Corp. v. Burglin, 4 F.3d 1294, 1298 (5th Cir. 1993) (citing DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 677, cert. denied, 498 U.S. 1048, 111 S. Ct. 755, 112 L. Ed. 2d 775 (1991). In the instant case, Exhibit 1, which is incorporated by reference into the Agreement, clearly states that the "Agreement will be governed by and construed according to the laws of the State of California," evidencing the Parties intent that they desired the Agreement to be interpreted according to California law. Because Texas's choice of law rules acknowledge Lora and Providian's right to select the law applied to the Agreement, the Court construes the Agreement pursuant to California law, as the Parties contracted. Having clarified the law under which the Agreement is evaluated, the Court turns to Lora's arguments regarding the Agreement's enforceablity.
B. Agreement Unsigned by Providian's Authorized Agent
Lora first argues that the Agreement is unenforceable because Providian has provided no "competent evidence to show that an authorized officer or agent of Defendant signed" the Agreement. Providian retorts that no signature is required in order for the agreement to bind the Parties. The Court agrees with Providian.
A party may be bound by an agreement to arbitrate even absent her signature. Valero Refining, Inc. v. M/T Lauberhorn, 813 F.3d 60, 64 (5th Cir. 1987). In Valero, the plaintiff argued that the arbitration clause in question was unenforceable because the agreement in which it was contained had not been signed or dated. See id. at 63. The Fifth Circuit held that while Section 3 of the FAA provides that courts may only enforce written arbitration clauses, the FAA does not require that the agreement containing the arbitration clause be signed. See id. at 63-64. Here, as in Valero, there is no question that the Agreement containing the arbitration clause is in writing. As such, no signatures are necessary in order to bind the Parties, much less one from an "authorized officer or agent," and Lora's argument fails.
C. Insufficient Consideration for the Agreement
Lora next contends that the Agreement is unenforceable because it lacks the necessary consideration to establish a valid contract. While Providian did not address this assertion, the Court ultimately finds Lora's argument unpersuasive.
"A single consideration may support the several counter promises made by the other party to the transaction." Vogel v. Bankers Bldg. Corp., 245 P.2d 1069, 1074 (Cal.Ct.App. 1952). Lora proceeds on the theory that by consenting to the Agreement and Exhibit 1, each of which require her to abdicate different rights, she entered into two contracts with Providian. Lora concludes that Providian provided insufficient consideration, barring the enforcement of the arbitration clause contained in the Agreement, because Providian provided employment as the sole consideration for both the Agreement and Exhibit 1. However, as is plainly stated in the Agreement, "[the Agreement] and Exhibit 1, which is incorporated herein, constitute the complete, final and exclusive embodiment of the entire agreement between you and the Company." Thus, Exhibit 1 is part of the Agreement, and Lora entered into one contract — the Agreement — with Providian. Therefore, Providian's single promise of employment serves to support Lora's several promises made through the Agreement, Vogel, 245 P.2d at 1074, and Lora's argument that there was insufficient consideration barring the Agreement's enforcement fails.
D. Agreement is Unconscionable
The general contract defense of unconscionability may be applied to invalidate an arbitration agreement. Doctor's Associates, Inc. v. Casarotto, 517 U.S. 681, 687, 116 S. Ct. 1652, 134 L. Ed. 2d 902. Unconscionability has "both a procedural and a substantive element, the former focusing on oppression or surprise due to unequal bargaining power, the latter on overly harsh or one-sided results." Discover Bank v. Superior Court of Los Angeles, No. S113725, 2005 WL 1500866, at *7 (Cal. June 27, 2005) (internal quotes omitted). The procedural element of an unconscionable contract generally takes the form of a contract of adhesion, which is imposed and drafted by the party of superior bargaining power, and relegates to the subscribing party only the opportunity to adhere to the contract or reject it. Little v. Auto Stiegler, Inc., 63 P.3d 979, 983 (Cal. 2003). Both procedural and substantive unconscionability must be present in order for a court to exercise its discretion to refuse to enforce the contract or clause at issue. Armendariz v. Foundation Health Psychcare Services, Inc., 6 P.3d 669, 690 (Cal. 2000).
Lora contends that the Agreement is procedurally unconscionable because it is a contract of adhesion, and she was only given the option of adhering to its terms or rejecting it. Providian does not challenge the Agreement's adhesive nature. Rather, Providian maintains that the Agreement's adhesive nature does not alone make it unenforceable on unconscionability grounds. The Court agrees with Providian. While the adhesive nature of the Agreement establishes the procedural element of unconscionablity, see Little, 63 P.3d at 983, Lora must still prove up the substantive element before the Court can exercise its discretion not to enforce the Agreement. Armendariz, 6 P.3d 669, 690.
Through her Response, Lora asserts that the arbitration clause contained in the Agreement is substantively unconscionable because it includes one-sided terms which maximize the employer's advantage regarding which claims are subject to arbitration. Lora claims that the arbitration clause lists "with great specificity all of the claims which Mrs. Lora may conceivably have, . . . yet has failed to articulate any disputes which [Providian]" would be bound to arbitrate. Providian contends that the arbitration clause is sufficiently mutual to require the Court's enforcement. The Court finds that the arbitration clause is sufficiently bilateral to call for enforcement.
In order to be enforceable, an arbitration agreement must contain a "modicum of bilaterality" regarding the arbitration remedy. See Armedariz, 6 P.3d at 693. In Armendariz, the California Supreme Court considered an arbitration agreement through which an employer imposed the arbitration forum on an employee without accepting the forum for itself. See id. at 692. The arbitration agreement required the employee to submit all claims regarding a wrong termination to arbitration, without requiring the employer to submit to arbitration any claims it might have against the employee. See id. The Armendariz Court concluded that, without reasonable justification based on business realities, such one-sidedness rendered the arbitration agreement substantively unconscionable. Id. Here, the clause at issue states "in case of any dispute or disagreement arising out of or in any way related to this Agreement, your employment with us, or the termination of your employment (including but not limited to, claims of discrimination, harassment, wrongful discharge, breach of contract, tortious conduct, statutory violations or any injury to your physical, mental, or economic interests), you and the Company agree to submit the dispute or disagreement to binding arbitration." The Court agrees with Providian that the claims listed in the arbitration clause are but examples of the claims which both Lora and Providian agreed to arbitrate, and that it is not an exhaustive list, as evidenced by the Agreement's use of the words "including by not limited to." Moreover, unlike Armendariz where the arbitration clause required only the arbitration of wrongful termination claims, 6 P.3d at 694, the clause here states that "any dispute or disagreement arising out of or in any way related to this Agreement" is subject to arbitration. Further, contrary to Lora's assertion, by including "breach of contract, tortious conduct, [and] statutory violations," the clause does identify claims which Providian would be required to arbitrate. In conclusion, because Lora has failed to establish that the arbitration clause is so one-sided, such that would render it substantively unconscionable, the Court cannot find the Agreement unenforceable on unconscionability grounds.
E. Right to Arbitration Waived
Lastly, Lora argues, that "Providian waived its right to compel arbitration by selecting a forum and requesting a trial by jury when it removed this case from state to federal court." Providian counters that Fifth Circuit precedent dictates that Providian has not substantially invoked the judicial process and waived its right to arbitration by removing this suit to federal court. See Williams v. Cigna Fin. Advisors, Inc., 56 F.3d 656, 661 (5th Cir. 1995). The Court agrees with Providian, and is unmoved by Lora's supposition that Providian waived its right to compel arbitration because it complied with the Court's requirements to advance this litigation toward resolution. II. Motion to Stay
The Federal Arbitrarion Act provides for a stay of legal proceedings whenever the issues in a case are within the scope of an arbitration agreement. 9 U.S.C.A. § 3; In re Hornbeck Offshore Corp., 981 F.2d 752, 754 (5th Cir. 1993). When ruling on a motion for a stay under § 3, a court must first determine whether there is a written agreement to arbitrate; then, whether any of the issues raised are within the reach of that agreement. In re Hornbeck Offshore Corp., 981 F.2d at 754. If the issues in a case are within the reach of the agreement, the district court has no discretion under § 3 to deny the stay. Id.
Section 3 states:
"If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration."9 U.S.C. § 3.
While Lora raised several challenges regarding the enforceability of the arbitration clause contained in the Agreement, she did not assert that the issues raised through the case at bar are outside the scope of the arbitration clause. As such, the Court has no basis for finding that Lora's claims under 42 U.S.C. § 1981 and the Texas Commission on Human Rights Act are not within the ambit of the arbitration clause. Thus, having found above that there is a written arbitration agreement, and because Lora's claims are within the scope of the arbitration clause of the Agreement, the Court has no discretion to deny Providian's Motion for Stay.
CONCLUSION
The Court is of the opinion that Providian's "Motion To Compel Arbitration" should be granted because Lora has failed to demonstrate the Agreement's invalidity. Additionally, because all of Lora's claims are within the scope of a written arbitration agreement, the Court also grants Providian's "Motion to Stay."Accordingly, IT IS HEREBY ORDERED that Defendant Providian's "Motion To Compel Arbitration" is GRANTED. IT IS FURTHER ORDERED that Defendant Providian's "Motion To Stay The Underlying Proceedings" is GRANTED. IT IS FURTHER ORDERED that the instant cause is STAYED PENDING ARBITRATION. IT IS FINALLY ORDERED that the instant cause is ADMINISTRATIVELY CLOSED until further order of the Court.