Opinion
Case No. 03-2662-GTV-DJW.
January 20, 2005
REPORT AND RECOMMENDATION NOTICE
Within ten days after a party is served with a copy of these proposed findings and recommendations that party may, pursuant to 28 U.S.C. § 636(b)(1) and Fed.R.Civ.P. 72, file written objections to such proposed findings and recommendations, including any findings of fact and conclusions of law. A party must file any objections within the ten-day period allowed; if that party wants to have appellate review of the proposed findings of fact, conclusions of law, and the recommended disposition. If no objections are timely filed, no appellate review will be allowed by any Court.
REPORT AND PROPOSED FINDINGS
On December 30, 2003, Plaintiffs filed a Collective Action Complaint pursuant to the Fair Labor Standards Act ("FLSA") alleging that Defendant GE Transportation violated the FLSA by failing to award proper compensation and overtime wages. On June 16, 2004, Defendant filed a Motion to Stay Proceedings and Compel Alternative Dispute Resolution (doc. 15). For the following reasons, the undersigned Magistrate Judge recommends Defendant's motion be overruled.
Relevant Factual Background
Plaintiffs Mark Lynn, Jeffrey Gordon and Joseph Ragonese were employed within the Rail Operating Component of GE Transportation (formerly known as "GE Transportation Systems") at all times relevant to this action. Plaintiffs' hire dates were as follows:Ragonese — Sometime prior to April 1996;
Gordon — October 19, 1998; and
Lynn — October 19, 1998.
On June 30, 1999, GE Transportation Systems implemented an internal issue resolution program known as GETS RESOLVED. The procedure guidelines describe the program as "a written agreement for the resolution of employment issues, pursuant to the Federal Arbitration Act, 9 U.S.C.A. Sections 1-14." The program covers various claims related to employment. More specifically, claims "related to compensation" are covered, but workers' compensation claims, ERISA claims, and claims under the National Labor Relations Act are excluded from the program.
The Program's issue resolution process consists of four levels. Levels I and II occur within the company. If an employee is not satisfied with the results there, the employee must submit the claim to Level III mediation. This third level utilizes an outside mediator whose "job is to open up the lines of communication between the employee and the Company and help them to reach a mutually acceptable agreement."
Level III proceedings are confidential and private, and they occur under the guidance of a neutral mediator. Both parties may be represented by counsel during the mediation process, and, except for a $50 initiation fee, GE Transportation Systems pays costs and fees associated with mediation under the program.
If successful, the mediation results in a Settlement Agreement binding on both GE Transportation Systems and the employee. Although GETS RESOLVED does not require that the settlements be approved by a court or the Secretary of Labor, nothing in the GETS RESOLVED Program precludes such approval and GE Transportation Systems does not oppose such a requirement for purposes of this Fair Labor Standards Act matter.
If the parties are unable to reach a settlement through Level III mediation, employees who were employed at the time GETS RESOLVED was implemented may take their claim to court or may proceed to binding arbitration. Upon submission of an issue to the GETS RESOLVED Program, any statute of limitations that had not yet run on the employee's claim is tolled pending completion of the GETS RESOLVED process. GE Transportation Systems specifically agrees not to change, modify or discontinue the GETS RESOLVED Program while an employee's claim is pending at any level of the Program.
Relevant to those employees already working for GE Transportation Systems on June 30, 1999 when the GETS RESOLVED program was implemented, the procedure guidelines provide that
by continuing employment with GE Transportation Systems . . ., all covered employees whose continuity of service date was before the effective date of this procedure (6/30/99), agree as a condition of employment to attempt to resolve their dispute using the first three levels (through mediation) of [the] GETS RESOLVED procedure. If the dispute remains unresolved following mediation, the employee will have the option of pursuing his or her claim through binding arbitration or pursuing the matter in court.
In preparation for the implementation of the GETS RESOLVED Program on June 30, 1999, Defendant asserts GE Transportation Systems notified employees of the upcoming Program using the following methods:
(1) On June 16, 1999, a letter from Human Resources Manager William Casey was sent to the home of each covered GE Transportation Systems employee and included
• a copy of the GETS RESOLVED Handbook explaining the program;
• a notification of the June 30, 1999 effective date of the program; and
• an explanation of each employee's obligation to submit employment-related claims through the first three levels of the GETS RESOLVED Program, i.e., through mediation.
(2) The June 1999 GE Transportation Systems Company newsletter included an article describing the Program.
(3) During the relevant time period, GE Transportation Systems provided employees with additional information regarding the Program, including a copy of the GETS RESOLVED Guidelines, on its intra-company web site.
(4) During the relevant time period, Angela Walter, GE Transportation Systems Communication Specialist, drafted and sent an e-mail to all covered employees announcing and providing a link to the website.
Notwithstanding the notification process implemented by Defendant, Plaintiffs maintain they
(1) did not receive the June 16, 1999 letter mailed to their homes;
(2) did not read the June 1999 newsletter article;
(3) did not access information regarding the Program on the intra-company web site; and
(4) did not read an e-mail regarding the Program.
Discussion
A. Length of Plaintiffs' Brief
Defendant argues that the 107-page brief filed by Plaintiffs in opposition to Defendant's twelve-page memorandum should be disregarded by the Court on grounds that the brief violates D. Kan. Rules 7.1 and 7.6, which require short and concise statements in opposition to any motion. Although Plaintiffs concede the pleading is voluminous and readily apologize for the length of the brief, Plaintiffs go on to explain that "the defects in both Defendant General Electric's procedure in attempting to adopt GETS RESOLVED and in the substance of what it drafted were too numerous for Plaintiff's counsel not to enumerate the most significant and discuss those in light of the applicable law to the best of his ability."
Plaintiffs' Opposition Brief at p. 106 (doc.).
Upon a rather tedious review of the 107-page brief at issue, the Court is unwilling to embrace Plaintiffs' explanation. The pleading is replete with unnecessary facts, as well as repetitious and irrelevant legal arguments, which not only violates D. Kan. Rules 7.1 and 7.6, but impedes the Court's ability to "secure the just, speedy, and inexpensive determination of every action" as required by Fed.R.Civ.P. 1.
Notwithstanding counsel's violation of local rules and practices, the Court will not disregard Plaintiffs' responsive pleading as requested by Defendant. With that said, counsel for Plaintiffs is admonished that he must comply with local rules requiring succinct and concise pleadings, as well as the local practice limiting the length of briefs to 30 pages after the entry of a scheduling order. A failure to do so may result in the imposition of sanctions upon both counsel and his clients.
B. Staying Litigation Pending Participation in Mediation
Before determining whether a stay of this litigation pending participation in mediation is appropriate, the Court must first determine whether an agreement to participate in mediation exists. In other words, the first issue the Court must address is whether implementation by Defendant of the GETS RESOLVED procedure established a valid agreement between the parties to utilize the internal issue resolution procedure.
Avedon Engineering, Inc. v. Seatex, 126 F.3d 1279, 1283 (10th Cir. 1997) (citing 9 U.S.C. §§ 3 and 4)
When deciding whether the parties have made a valid agreement to participate in alternative dispute resolution, the court applies ordinary state law principles that govern the formation of contracts. With that said, if the validity of the contract at issue is an agreement to arbitrate, the agreement must be construed pursuant to The Federal Arbitration Act ("FAA"), which requires
First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944-45, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995).
9 U.S.C. § 1 et seq.
• courts to give due regard to federal policy favoring arbitration in applying general state law contract principles
• a jury trial on the existence of a contract if the record reveals genuine issues of material fact regarding such contract.
Volt Info. Sciences, Inc. v. Bd. of Trs. of Leland Stanford Jr. Univ., 489 U.S. 468, 475-76, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989) (citing 9 U.S.C. § 2).
See 9 U.S.C. §§ 3-4; Avedon Eng'g, Inc. v. Seatex, 126 F.3d 1279, 1283 (10th Cir. 1997).
Given this legal backdrop, it becomes clear that even before determining whether a valid agreement to mediate exists, this Court first must determine whether or not the potential agreement at issue here would be an agreement governed by the FAA.
1. Applicability of the Federal Arbitration Act
The United States Arbitration Act ("USAA") was unanimously passed by Congress in 1925. The USAA was renamed the Federal Arbitration Act ("FAA") and was formally codified in 1947. The history of the FAA indicates that the motivation for adopting the Act was "to reverse the longstanding judicial hostility to arbitration agreements . . . and to place arbitration agreements upon the same footing as other contracts." To that end, the FAA requires the court to enforce a valid arbitration agreement by compelling participation in the arbitration process upon request:
Nicole Karas, Note, EEOC v. Luce and the Mandatory Arbitration Agreement, 53 DePaul L.Rev. 67, 77 (Fall 2003).
9 U.S.C. § 1-16 (1996).
Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991); see, also, Durkin v. CIGNA Property Cas. Corp., 942 F. Supp. 481, 484 (D. Kan. 1996) (citing Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 115 S.Ct. 834, 838 (1995); Volt Info. Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 478 (1989)).
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, or the refusal to perform the whole or any part thereof . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.
* * * * * * * * * *
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 . . . 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.
9 U.S.C. § 2 (emphasis added).
The FAA does not precisely define what processes constitute "arbitration." Relying on Fisher v. GE Medical Systems, Defendant argues the word "arbitration" as used in the FAA is a broad term that encompasses all forms of non-court alternative dispute resolution, including the mediation process at issue here.
276 F.Supp.2d 891 (M.D. Tenn. 2003).
The Court is not persuaded by Defendant's argument. First, this position is not supported by recent Tenth Circuit precedent. Second, reporter notes reveal that adding mediation in its own right to the Uniform Arbitration Act's ("UAA") mandatory enforcement provision recently was considered but rejected as unnecessary. Third, further reporter notes reveal that adding a mandatory enforcement provision to the Uniform Mediation Act ("UMA") likewise was considered and rejected as unnecessary.
a. Recent Tenth Circuit Precedent: Salt Lake Tribune Publishing Co., LLC v. Management Planning, Inc.
Although the facts are readily distinguishable from the facts presented here, the recent Tenth Circuit case of Salt Lake Tribune Publishing Co., LLC v. Management Planning, Inc. provides important guidance for this Court in terms of defining the word "arbitration" as used in the FAA.
390 F.3d 684 (10th Cir. 2004).
By way of background, the litigation in Salt Lake Tribune involved a contractual Option Agreement to purchase The Salt Lake Tribune newspaper. Under the Option Agreement, the exercise price of the option equaled the "Fair Market Value" of the newspaper's assets. If the parties could not agree on an exercise price, each side was to appoint an appraiser to assess the newspaper's Fair Market Value. If the party appraisers differed from each other by more than ten percent in their estimation of the newspaper's value, they would jointly select a third appraiser and the exercise price would equal the average of the two closest appraisal values reported by the three appraisers.
Applying arbitration principles to the appraisal process, the district court below granted the considerable deference owed to aribtrators' decisions and, as a result, dismissed the case. On appeal, the Tenth Circuit reversed and remanded, holding the appraisal process does not constitute arbitration under the Federal Arbitration Act. Despite the factual differences between the two cases, the rationale utilized by the Tenth Circuit Court of Appeals in determining the definitional scope of the term "arbitration" as used in the FAA is completely applicable here.
As a preliminary matter, the Tenth Circuit held it is federal law — not state law — that governs the process of defining the term "arbitration" as used in the FAA. The court then followed the rationale set forth in the First Circuit case of Fit Tech, Inc. v. Bally Total Fitness Holding Corp. and embraced the following two-prong test to determine whether a particular procedure falls within the purview of "arbitration" as that term is used in the FAA: (1) "how closely the specified procedure resembles classic arbitration;" and (2) "whether treating the procedure as arbitration serves the intuited purposes of Congress." i. The Mediation Process Does Not Resemble the Arbitration Process
Id. at 688-89.
374 F.3d 1, 7 (1st Cir. 2004)
Id.
Applying the first prong of the test, the Court finds arbitration and mediation are completely different processes that do not resemble each other at all. First, the Court finds it helpful to define the processes at issue using Black's Law Dictionary:
• mediation. A method of nonbinding dispute resolution involving a neutral third party who tries to help the disputing parties reach a mutually agreeable solution.
• arbitration. a method of dispute resolution involving one or more neutral third parties who are usually agreed to by the disputing parties and whose decision is binding. Also termed (redundantly) binding arbitration.
• alternative dispute resolution. A procedure for settling a dispute by means other than litigation, such as arbitration or mediation. Abbr. ADR.
Black's Law Dictionary (8th ed. 2004) (emphasis added).
Id. (emphasis added).
Id.
As reflected by these definitions, and as noted by the Tenth Circuit Court of Appeals in the Salt Lake Tribune case, "[c]entral to any conception of classic arbitration is that the disputants empower a third party to render a decision settling their dispute. This does not happen in the mediation process.
Salt Lake Tribune Publishing Co., LLC v. Management Planning, Inc., 390 F.3d 684 (10th Cir. 2004) (citing Harrison v. Nissan Motor Corp., 111 F.3d 343, 350 (3d Cir. 1997) ("the essence of arbitration" is that parties "agreed to arbitrate [their] disputes through to completion, i.e. to an award made by a third-party arbitrator.")).
Moreover, although both mediation and arbitration fall under the "alternative dispute resolution" umbrella, arbitration is a binding ADR process and differs significantly from mediation. The most important difference is that when parties agree to binding arbitration, they waive their rights to litigate; whereas parties to non-binding ADR processes preserve their rights to have claims resolved in court.
Binding arbitration is more analogous to the court litigation process: the decision-maker is a neutral disinterested third-party, attorneys speak on behalf of clients and clients participate only as witnesses. Mediation, by contrast, puts the clients at center stage: they are the decision-makers and the focus is not on what happened in the past, but on how to resolve the existing conflict in the future to the satisfaction of the all involved.
With regard to this first prong of the Salt Lake Tribune test, the Court finds the mediation process is much too distinct from the arbitration process to constitute arbitration under the Federal Arbitration Act. ii. Congress Did Not Intend to Encompass Mediation in the Arbitration Clause
With regard to the second prong of the Salt Lake Tribune test, the Court notes that Congress implemented an enforcement mechanism for arbitration agreements due to "a longstanding judicial hostility to arbitration agreements . . . and to place arbitration agreements upon the same footing as other contracts." Unlike enforcement of arbitration agreements, there is no historical evidence of hostility by the courts in enforcing mediation contracts; accordingly, there is no reason to believe Congress intended to encompass mediation within arbitration enforcement.
Gilmer v. Interstate/Johnson Lane, 500 U.S. 20 (1991); see, also, Durkin v. CIGNA Property Cas. Corp., 942 F. Supp. 481, 484 (D. Kan. 1996) (citing Allied-Bruce Terminix Cos. v. Dobson, 115 S.Ct. 834, 838 (1995); Volt Info. Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 478 (1989)).
Upon application of the Tenth Circuit's two-prong test to the facts presented here, this Court finds (1) the mediation procedure here does not resemble classic arbitration; and (2) Congress never intended to encompass the mediation process here in the definition of arbitration as used in the FAA. Accordingly, the Court concludes that under the facts presented, mediation does not fall within the purview of "arbitration" as that term is used in the FAA. As discussed below, this conclusion is supported by recent revisions to the Uniform Arbitration Act and the recent introduction of the Uniform Mediation Act. b. The Revised Uniform Arbitration Act ("RUAA")
In addition to The Uniform Arbitration Act ("UAA") — drafted by the National Council of Commissioners on Uniform State Laws ("NCCUSL") — recently was revised and, in the process, policy-makers distinguished between the arbitration and mediation processes. More specifically, the NCCUSL declined to extend the UAA to mandate summary enforcement of promises to participate in mediation. The NCCUSL's decision in this regard further supports a finding that the term "arbitration" as used in the Federal Arbitration Act does not include mediation.
The drafting of uniform laws is a well-established part of the legislative process in the United States. Gregory Firestone, Ph.D., An Analysis of Principled Advocacy in the Development of the Uniform Mediation Act, 22 N.Ill.U. L.Rev. 265, 266 (Spring 2002). The NCCUSL consists of more than 300 commissioners from each state and works to develop uniform and model state laws. Id. After adoption by NCCUSL, the membership encourages state enactment of these Acts in order to establish uniformity of law between the various states and jurisdictions.
Revised Uniform Arbitration Act ("RUAA").
See Uniform Mediation Act § 5(i)-(iii) (Annual Meeting Draft, Jul. 23-30, 1999) athttp://www.law.upenn.edu/bll/ulc/mediat/medam99.htm (last visited January 6, 2005) (reflecting that the National Council of Commissioners on State Laws ("NCCUSL") recently considered and rejected the expansion of the UAA to mandate specific enforcement of agreements to mediate).
c. The Uniform Mediation Act ("UMA")
The Court also finds compelling the fact that, although included in preliminary drafts of the Uniform Mediation Act ("UMA"), the final version of the UMA drafted by the National Council of Commissioners on State Laws does not require enforcement of agreements to mediate. "Instead, drafters of the UMA assumed that courts order parties to participate in mediation in accordance with contract and equity principles, and therefore determine enforcement in light of public interest, transactional facts, and any irreparable harm due to a failure to mediate." "In addition, the UMA Reporters commented that they assumed courts would more readily enforce mediation, despite courts' traditional hostility to arbitration." The NCCUSL's decision to leave out an enforcement mechanism for agreements to mediate further supports a finding that the arbitration enforcement mechanism within the Federal Arbitration Act does not include mediation.
Compare July 23-30, 1999 Annual Meeting Draft, see, id., with Uniform Mediation Act, reprinted in 22 N. Ill. U. L.Rev. 165, 166-72 (2002) (providing final draft without summary enforcement provisions).
Amy Schmitz, Refreshing Contractual Analysis of ADR Agreements by Curing Bipolar Avoidance of Modern Common Law, Harv. Negot. L.Rev. 1, 13 (Spring 2004) (citing Uniform Mediation Act § 5(i) (Annual Meeting Draft, Jul. 23-30, 1999) (discussing court's equitable analysis in determining whether to specifically enforce mediation agreements)).
Id.
For the reasons stated above, the Court hereby rejects Defendant's proposition that the word "arbitration" as used in the FAA includes the process of mediation. Accordingly, the Court will apply ordinary state law principles that govern the formation of contracts to determine whether implementation by Defendant of the GETS RESOLVED procedure established a valid agreement between the parties to utilize the internal issue resolution procedure.
2. Application of Kansas Common Law Governing Formation of Contracts
Plaintiffs here had no written employment contract; thus, Plaintiffs were at-will employees under Kansas law. Notwithstanding the absence of a written agreement, however, an at-will employee does work under an employment contract: the employee promises to do a certain job and the employer promises payment therefor. The failure to fulfill either promise constitutes a breach of contract. As this Court explained in Durkin:
Employment at will is not a state of nature but a continuing contractual relation. Wages, benefits, duties, working conditions, and all (but one) of the other terms are specified and a breach of any of them will give the employee a cause of action for breach of contract. All that is missing is a provision that gives the contract a fixed term or that entitles one or both parties to a specified amount of notice before the other party can cancel the contract without liability.
See Durkin v. CIGNA Property Cas. Corp., 942 F.Supp. 481, 487-88 (D. Kan. 1996)
Id.
Id. (citation omitted); see, also, Jordan v. Duff Phelps, Inc., 815 F.2d 429, 438 (7th Cir. 1987) (citing Epstein,In Defense of the Contract at Will, 51 U.Chi. L.Rev. 947 (1984)).
In the present case, Plaintiffs agreed to work for Defendant under certain conditions of employment, while Defendants agreed to compensate them for such work. Thus, a contract between the parties exists. The issue presented, then, is whether that contract contains a certain provision — in this case, an agreement to participate in mediation prior to filing suit.
On this record, Defendant has not demonstrated there is a provision within the employment contract whereby Plaintiffs agreed to mediate disputes prior to filing suit. Fatal to the existence of an agreement here is a complete lack of evidence from Defendant to establish that any of the procedures implemented by GE Transportation Systems to notify employees of the new mediation requirement actually made Plaintiffs aware of the new requirement. Such evidence could take the form of a signature verifying receipt of the new policy. Moreover, some type of evidence demonstrating that Plaintiffs actually opened the emails sent to them or accessed that particular portion of the website containing the Program could work to establish notifiication.
The only evidence submitted for Court consideration on this issue are affidavits submitted by Plaintiffs swearing under oath that they did not receive the June 16, 1999 letter, did not read the June 1999 newsletter article, did not access information regarding the Program on the intra-company web site, and did not read an e-mail regarding the Program. Plaintiffs do not dispute that Defendant launched the notification process alleged; instead, Plaintiffs argue they never received such notice.
This scenario is dramatically different from the one presented in Durkin, where the evidence clearly established the plaintiff had actual notice of the policy. In noting the relevance of such notice, the Durkin court cited to Sweet v. Stormont Vail Reg. Medical Ctr, where the Kansas Supreme Court held that "[w]hen, as in the instant case, the employee is made aware of company policy, which is a part of the terms of the employment contract, the employee will be bound by those terms."
Id.
231 Kan. 604, 611, 647 P.2d 1274, 1280 (1982); see, also, Holmes v. Unified School Dist. No. 259, 46 P.3d 1158, 1161, 273 Kan. 864, 868 (Kan. 2002).
As a matter of law, proof that Defendant disseminated the new policy in and of itself is not sufficient to establish a binding agreement. Defendant has failed to controvert Plaintiffs' assertions under oath that they never read or were aware of the new policy.
RECOMMENDATION
Because Defendant has not submitted evidence sufficient to establish an enforceable agreement to mediate, the Court recommends Defendant's Motion to Stay and Compel Mediation (doc. 15) and Defendant's Renewed Motion to Stay and Compel Mediation (doc. 53) be overruled.
RESPECTFULLY SUBMITTED,