Styczynski v. Marketsource, Inc.
Styczynski v. Marketsource, Inc.
Opinion of the Court
This is an action where plaintiff alleges that she experienced sexual harassment severe enough to create a hostile work environment, forcing her to resign. The defendant employers have moved to compel arbitration under the terms of an employment contract. Some five years ago, Judge Schiller of this Court faced a similar case and wrote an eloquent opinion enforcing the contract, while expressing his misgivings about the result he was compelled to reach. Porreca v. Rose Group ,
I. Factual and Procedural Background
Plaintiff Rachel Styczynski was formerly employed by Defendants MarketSource, Inc. and Allegis Group. Pl.'s Am. Compl. 1, ECF No. 7. Allegis "is the largest privately-held *538talent management firm in the world" and MarketSource is its wholly owned subsidiary. Id. 3; Defs.' Mot. Dismiss 3, ECF No. 8-1. Plaintiff was promoted by Defendants several times over the course of her four-year employment with them: first to Sales Manager, then to Electronics and Entertainment Lead, and finally to District Manager. Pl.'s Am. Compl. 7-8, 15. But Plaintiff's career path stalled after a male supervisor repeatedly harassed her, touching Plaintiff inappropriately and prying into her sexual orientation and marital status. Id. 8-9. Plaintiff alleges that Defendants' response was inadequate, discriminatory, and retaliatory. Id. 1-2, 8-9, 15. Defendants purportedly failed to address the harassment, commanded that Plaintiff continue reporting to and working alongside her harasser, and created a hostile work environment that ultimately forced Plaintiff to resign. Id. 1-2, 15.
Upon resigning, Plaintiff filed multiple discrimination charges with the U.S. Equal Employment Opportunity Commission, which issued Plaintiff a Notice of Right to Sue. Pl.'s Am. Compl. 6-7, Ex. 4. Plaintiff subsequently filed suit in this court asserting federal question and supplemental claims under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e, et seq. , the Americans with Disabilities Act of 1990,
Defendants move to dismiss on the basis of a three-page document Plaintiff signed when she was promoted to District Manager. Defs.' Mot. Dismiss 1, 2. This document contains contractual language and reads as follows:
MUTUAL ARBITRATION AGREEMENT ("AGREEMENT")
As consideration for my application for and/or my employment with MarketSource, Inc. and for the mutual promises herein, I and the Company (as defined below) (each a "party" and collectively "the parties") agree that:
Except (i) as expressly set forth in the section, "Claims Not Covered by this Agreement," all disputes, claims, complaints, or controversies ("Claims") that I may have against MarketSource and/or any of its subsidiaries, affiliates, officers, directors, employees, agents, and/or any of its clients or customers (collectively and individually the "Company"), or that the Company may have against me, including contract claims; tort claims; discrimination and/or harassment claims; retaliation claims; claims for wages, compensation, penalties, or restitution; and any other claim under any federal, state, or local statute, constitution, regulation, rule, ordinance, or common law, arising out of and/or directly or indirectly related to my application for employment with the Company, and/or my employment with the Company, and/or the terms and conditions of my employment with the Company, and/or termination of my employment with the Company (collectively "Covered Claims"), are subject to a confidential arbitration pursuant to the terms of this Agreement and will be resolved by Arbitration and NOT by a court or jury. The parties hereby forever waive and give up the right to have a judge or a jury decide any Covered Claims.
....
While I have the right to file a charge or complaint with the Equal Employment Opportunity Commission, the National Labor Relations Board ("NLRB"), the *539Department of Labor, the Occupational Safety and Health Commission, or any other federal, state, or local administrative agency, if any federal, state or local administrative agency proceeding does not finally resolve the Covered Claim, the parties must submit the claim to arbitration under this Agreement.
....
Arbitration Procedures
• The parties will use Judicial Arbitration and Mediation Services ("JAMS") subject to its then-current employment arbitration rules and procedures (and the then-existing emergency relief procedures contained in the JAMS comprehensive arbitration rules and procedures if either party seeks emergency relief prior to the appointment of an Arbitrator), available at www.jamsadr.com, unless those rules and/or procedures conflict with any express term of this Agreement, in which case this Agreement is controlling;
....
• The Arbitrator shall issue a final and binding written award, subject to review on the grounds set forth in the FAA....
Arbitration Fees and Costs
• I will pay any JAMS filing or administrative fee up to the amount of the initial filing fee to commence an action in a Court that otherwise would have jurisdiction ("filing fee"), and the Company will pay any amount in excess of the filing fee.
• The Company will pay any other JAMS administrative fees, the Arbitrator's fees, and any additional fees unique to arbitration.
• I will pay my own attorneys' fees and all other costs and fees that I incur in connection with the Arbitration.
• The Company will pay its own attorneys' fees and all other costs and fees that it incurs in connection with the Arbitration.
• The Arbitrator will not have the authority to award attorneys' fees unless a statute or contract at issue in the dispute authorizes the award of attorneys' fees to the applicable prevailing party, in which case the Arbitrator shall have the authority to make an award of attorneys' fees to the full extent permitted by applicable law. If there is a dispute as to whether the Company or I am the prevailing party, the Arbitrator will decide this issue.
....
Damages and Other Relief
Any Covered Claims arbitrated hereunder are subject to the same affirmative rights to individual damages and other relief and the same limitations regarding damages and ability to obtain other relief as would have applied in a judicial forum.
....
Governing Law
This Agreement is governed by the FAA....
All the text quoted above appears on the first two pages of the document; the text below appears on its own, on the last, third, page of the document:
I ACKNOWLEDGE THAT:
• I have carefully read this Agreement, understand the terms of this Agreement, and am entering into this Agreement voluntarily;
• I am not relying on any promises or representations by the Company except those contained in this Agreement;
*540• I am giving up the right to have Covered Claims decided by a court or jury;
• I have been given the opportunity to discuss this Agreement with my own attorney if I wish to do so; and
• My affirmative signature and/or acknowledgement of this Agreement is not required for the Agreement to be enforced. If I begin working for MarketSource without signing this Agreement, this Agreement will be effective, and I will be deemed to have consented to, ratified and accepted this Agreement through my acceptance of and continued employment with MarketSource.
Defs.' Mot. Dismiss Ex. B.
Plaintiff's signature appears on page 3 of the document, directly below the fifth bullet point of the above quoted acknowledgements section.
II. Standard of Review
"A party to a valid and enforceable arbitration agreement is entitled to a stay of federal court proceedings pending arbitration as well as an order compelling such arbitration." Alexander v. Anthony Int'l, L.P. ,
III. Discussion
The Federal Arbitration Act provides that a "written provision in ... a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such conduct or transaction ... shall be valid, irrevocable, and enforceable."
To "decid[e] whether an arbitration agreement is valid under the FAA," federal courts must "look first to the relevant state law of contracts, here Pennsylvania."
*541Spinetti v. Serv. Corp. Int'l ,
"To prove unconscionability under Pennsylvania law, a party must show that the contract was both substantively and procedurally unconscionable." Quilloin ,
A. The Arbitration Agreement Is Not Substantively Unconscionable.
"Substantive unconscionability refers to contractual terms that are unreasonably or grossly favorable to one side and to which the disfavored party does not assent." Harris v. Green Tree Fin. Corp. ,
Provisions that can invalidate arbitration agreements on substantive unconscionability grounds include clauses "requiring parties to bear their own attorney's fees, costs, and expenses .... [and a] restriction on the arbitrator's ability to award attorney's fees, costs, and expenses." Nino v. Jewelry Exch., Inc. ,
Plaintiff's primary, global objection to arbitration cannot withstand the Supreme Court's pro-arbitration jurisprudence. Plaintiff argues that arbitration is "an inherently unfair and biased forum" that favors the Defendant corporation and not her, the victimized individual. Pl.'s Resp. Defs.' Mot. Dismiss 7, 16, ECF No. 9. But, the Supreme Court has flatly rejected the general proposition that arbitral panels are inherently biased and "decline[d] to indulge the presumption that the parties and the arbitral body conducting a proceeding will be unable or unwilling to retain competent, conscientious and impartial arbitrators." Gilmer ,
Plaintiff's next, more specific contention is that she is disadvantaged by the JAMS rules and procedures for appointing arbitrators because they totally deny her the ability to gauge and challenge arbitrators' potential conflicts of interest and bias. Pl.'s Resp. Defs.' Mot. Dismiss 17. Under existing case law, I cannot agree. JAMS' own rules and procedures governing employment arbitration provide several avenues for assessing and challenging potential conflicts and bias. JAMS Rule 15 puts the initial burden on JAMS to "provide each Party with a brief description of the background and experience of each Arbitrator candidate" should the parties not agree on an arbitrator. JAMS Employment Arbitration Rules & Procedures , JAMS Alternative Dispute Resolution (July 1, 2014), https://www.jamsadr.com/files/Uploads/Documents/JAMS-Rules/JAMS_employment_arbitration_rules-2014.pdf. JAMS Rule 14(b) allows for limited ex parte communication between a party and an arbitrator to assure the absence of conflicts .
*543And, even if conflicts and biases are present, JAMS Rule 15 somewhat allays Plaintiff's concern that she could not withstand the imposition of a partial arbitrator. Rule 15 provides that it is the parties, not JAMS, that drive the appointment of arbitrators in individual matters.
Furthermore, the Federal Arbitration Act itself allows federal courts to vacate an arbitration award if: "there was evident partiality or corruption in the arbitrators;" an arbitrator "refus[es] to hear evidence pertinent and material to the controversy;" there was "any other misbehavior by which the rights of any party have been prejudiced;" or "the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award on the subject matter was not made."
Plaintiff's remaining arguments concern the arbitral forum's discovery limitations. As noted above, limitations on the scope and extent of discovery do not necessarily render an arbitration agreement substantively unconscionable. Gilmer ,
And because Plaintiff has not pointed to any additional provisions in the arbitration agreement rendering it substantively unconscionable, she has failed to show that JAMS' processes deny her a fair opportunity to present her claim. Nino ,
B. The Arbitration Agreement Is Not Procedurally Unconscionable.
Because the U.S. Supreme Court has foreclosed most of Plaintiff's substantive unconscionability arguments and I have rejected the others, I do not need to determine whether the arbitration agreement is procedurally unconscionable. See Quilloin,
"Procedural unconscionability pertains to the process by which an agreement is reached and the form of an agreement, including the use therein of fine print and convoluted or unclear language." Harris v. Green Tree Fin. Corp. ,
Still, "courts should remain attuned to well-supported claims that the agreement to arbitrate resulted from the sort of fraud or overwhelming economic power that would provide grounds for the revocation of any contract." Gilmer at 33 (cleaned up). So my "role is to distinguish acceptable bargaining situations from those that violate 'strong public policy[.]' "
The Third Circuit did not find procedural unconscionability where a highly educated economist willingly accepted an offer of employment and did not allege that he lacked an opportunity to negotiate. Zimmer v. CooperNeff Advisors, Inc. ,
In contrast, the Third Circuit has found procedural unconscionability where an employee was instructed to read and sign an employment contract without being given an opportunity to negotiate over its terms and was dependent on the employer, one of the world's largest jewelry retailers, for his immigration status and his "very capacity to work." Nino ,
Plaintiff's case lands somewhere between these competing precedents. As in Zimmer , plaintiff here did not allege that she lacked an opportunity to negotiate the terms of the agreement. And like the plaintiff in Quilloin , plaintiff did "not contend that she failed to read the document containing the arbitration agreement, or *546that she was coerced into signing it." Nor did she allege that she failed to fully comprehend the terms at the time of signing and, in fact, the contractual language is not particularly technical or ambiguous. Rather, it notes three times, in clear language, that Plaintiff was giving up her right to access a court. She agreed that disputes "will be resolved by Arbitration and NOT by a court or jury," that she "forever waive[d] and g[a]ve up the right to have a judge or a jury decide any Covered Claims," that she "must submit [her] claim[s] to arbitration" and that she was "giving up the right to have Covered Claims decided by a court or jury." Defs.' Mot. Dismiss Ex. B. The last of these phrases was printed in what appears to be size 11 font, among just five bullet points directly above the space for Plaintiff's signature.
There are factors weighing against enforceability, including a degree of inequality in bargaining power. At the time Plaintiff was asked to sign the arbitration agreement, she had already been working for Defendants for over two years and was being offered a promotion. She could take it or leave it. If she didn't agree to arbitration, she'd lose her job. Pl.'s Resp. Defs.' Mot. Dismiss 13. Plaintiff does not posit specific facts about her financial situation but simply asserts that she was economically compelled to accept the agreement. Id. 14. This lack of specificity along with a lack of information about the circumstances under which she was asked to sign the documents make it difficult to assess the degree of compulsion. But I think it is plausible that, when presented with a job or no job scenario, Plaintiff didn't feel that she had a meaningful choice. See Quilloin ,
The other troubling fact is a term in the agreement noting that Plaintiff's "signature and/or acknowledgment of th[e] Agreement is not required for the Agreement to be enforced." Defs.' Mot. Dismiss Ex. B. Simply by continuing to work, Plaintiff triggered the enforcement of the arbitration agreement and was "deemed to have consented to, ratified and accepted th[e] Agreement."
Like Judge Schiller in Porreca v. Rose Group ,
Judge Schiller's reasoning in Porreca applies equally here. Even under the Third Circuit's sliding scale approach, this case does not present a sufficiently egregious example of procedural unconscionability to make up for the lack of substantive unconscionability. The Supreme Court has rejected most of Plaintiff's general arguments on substantive unconscionability and the remainder lack force. The arbitration agreement is therefore valid.
C. This Dispute Over Alleged Harassment, Discrimination, and Retaliation Arising Out of Plaintiff's Employment with Defendants Falls Squarely Within the Scope of the Arbitration Agreement.
Having determined that the arbitration agreement here is valid, I must ensure *547that Plaintiffs' claims fall within its scope before I refer this case to arbitration. Trippe Mfg. Co. ,
The plain terms of the agreement state that covered claims "subject to a confidential arbitration" include claims "against MarketSource and/or any of its ... affiliates " including all "discrimination and/or harassment claims; retaliation claims ; ... and any other claim under any federal, state , or local statute, constitution, regulation, rule, ordinance, or common law, arising out of and/or directly or indirectly related to my application for employment with the Company, and/or my employment with the Company , and/or the terms and conditions of my employment with the Company, and/or termination of my employment with the Company." Defs.' Mot. Dismiss Ex. B (emphasis added). All of Plaintiff's discrimination, harassment, and retaliation claims under federal and state law arise out of and directly relate to her employment with MarketSource and its affiliate Allegis and are therefore subject to the Agreement.
D. Defendants Did Not Waive Their Right to Arbitrate.
Plaintiff's final argument is that Defendants MarketSource and Allegis waived their right to arbitrate by delaying their demand for arbitration. Pl.'s Resp. Defs.' Mot. Dismiss 23-24. They should, she argues, have made their demand for arbitration at some point during the EEOC proceedings and not waited until after Plaintiff filed suit in this court. This argument is meritless. I am aware of no procedure whereby Defendants could have forestalled the EEOC proceedings in favor of arbitration. In fact, the agreement itself contemplates that arbitration would follow an EEOC or other administrative proceeding. The relevant provision states:
While I have the right to file a charge or complaint with the Equal Employment Opportunity Commission, the National Labor Relations Board ("NLRB"), the Department of Labor, the Occupational Safety and Health Commission, or any other federal, state, or local administrative agency, if any federal, state or local administrative proceeding does not finally resolve the Covered Claim, the parties must submit the claim to arbitration under this Agreement.
Defs.' Mot. Dismiss Ex. B.
This provision makes clear that Plaintiff retained the right to file a charge with the EEOC, but that if the EEOC proceeding did not "finally resolve" the claim, she "must submit the claim to arbitration." See
Plaintiff's reliance on Hoxworth v. Blinder ,
Nor can Plaintiff show prejudice, which is "the touchstone for determining whether the right to arbitrate has been waived." Hoxworth ,
E. Reconsidering the Effects of Mandatory Arbitration in Employment Cases
Although I will enforce the arbitration agreement in this case, broader issues underlie Plaintiff's objections. Seventeen years ago, the U.S. Supreme Court perceived "real benefits to the enforcement of arbitration provisions" in the employment context, including avoidance of litigation costs. Circuit City Stores ,
One empirical study found that employee win rates in the arbitral forum are significantly lower than in employment litigation trials; median award amounts in arbitration are five to ten times lower than awards reported in employment litigation; and there is strong evidence of a repeat employer-arbitrator bias where employees win less often and receive smaller awards when the same arbitrator is involved in multiple cases with the same employer. Alexander J. S. Colvin, An Empirical Study of Employment Arbitration: Case Outcomes and Processes , 8 J. Emp. Legal Stud. 1, 1-14 (2011) (finding that employees win 23.4% of cases that don't involve a repeat-employer-arbitrator pairing but only 12.0% of cases involving a repeat pairing and that the average damage award was $27,039 in cases not involving a repeat pairing but only $7,451 in cases involving a repeat-employer-arbitrator pairing). A survey of "a growing body of empirical research suggests arbitration's ultimate effect is to impose a diluted brand of justice on employee claimants ... [where] employees win less often and receive smaller monetary awards in arbitration." Mark D. Gough, *549The High Costs of an Inexpensive Forum: An Empirical Analysis of Employment Discrimination Claims Heard in Arbitration and Civil Litigation ,
More troubling still is the likelihood that a substantial number of employees who have claims covered by arbitration agreements are not filing at all. See Cynthia Estlund, The Black Hole of Mandatory Arbitration ,
Plaintiff cites an EEOC policy statement issued in 1997, and never rescinded, that underscores these concerns. U.S. Equal Emp. Opportunity Comm'n, Policy Statement on Mandatory Binding Arbitration of Employment Discrimination Disputes as a Condition of Employment , Notice No. 915.002 (July 10, 1997), https://www.eeoc.gov/policy/docs/mandarb.html. It cautioned that "[t]he private arbitral system differs in critical ways from the public judicial forum and, when imposed as a condition of employment, it is structurally biased against applicants and employees."
In light of the growing body of empirical research and the EEOC's admonition, courts must continue to scrutinize the fairness of mandatory arbitration, especially in employment cases. To quote from Judge Schiller's eloquent analysis:
There is a reason that arbitration is the favored venue of many businesses for deciding employment disputes, and it is not to ensure that employees are afforded the best chance to have their claims adjudicated by a judge or jury picked from the community.
Porreca ,
It bears mention that similar concerns were raised by Chief Justice Warren Burger some twenty years earlier:
Plainly, it would not comport with the congressional objectives behind a statute seeking to enforce civil rights protected by Title VII to allow the very forces that had practiced discrimination to contract away the right to enforce civil rights in the courts. For federal courts to defer to arbitral decisions reached by the same combination of forces that had long perpetuated invidious discrimination would have made the foxes guardians of the chickens.
Barrentine v. Arkansas-Best Freight Sys., Inc. ,
The concerns addressed above are not intended as an indictment of JAMS, a highly respected alternative dispute resolution service that I retained as a practitioner. Both JAMS and the American Arbitration Association, the other of the country's two largest arbitration firms, take seriously their responsibility to eliminate bias and conflicts. But just as the judiciary has come to recognize the challenges judges face in overcoming implicit bias on racial and ethnic grounds,
Around the time Judger Schiller published his opinion, a major media outlet was researching the growth of arbitration. See Jessica Silver-Greenberg & Michael Corkery, In Arbitration, a 'Privatization of the Justice System ;' Beware the Fine Print , N.Y. Times, Nov. 1, 2015. Research done by the press is not always conducted with the same rigor as academic research, but the ability of reporters to engage directly with participants in a system sometimes yields insights that fall outside the ken of academia. More than three dozen arbitrators, including those working for JAMS and AAA, told the New York Times that "they felt beholden to companies. Beneath every decision, the arbitrators said, was the threat of losing business."
Even if individual arbitrators adhere to high standards, we ignore reality if we forget that private arbitration services are profit-making enterprises that advertise and compete for business. An arbitrator in *551Boston explained that "after a company complained that she had scheduled an extra hearing for a plaintiff, the arbitration firm she was working with canceled it behind her back."
Like Judge Schiller, I am bound by the rulings of higher courts. "[T]he plain language of [the Federal Arbitration Act] affords a district court no discretion to dismiss a case where one of the parties applies for a stay pending arbitration." Lloyd v. Hovensa, LLC ,
IV. Conclusion
For the foregoing reasons, I grant Defendants' motion to stay the proceedings in this Court pending the completion of arbitration and refer this dispute to arbitration per the terms of the agreement. An appropriate Order follows.
This opinion uses (cleaned up) to indicate that extraneous, non-substantive information-such as internal quotation marks, alterations, and citations-has been omitted from quotations. See, e.g. , United States v. Steward ,
Pennsylvania law applies because Pennsylvania is where the agreement was formed. See First Options of Chicago, Inc. v. Kaplan ,
Contracts of employment of transportation workers are exempted by statute. Circuit City Stores ,
Further discussion is also warranted, because under Salley's sliding-scale approach, "where the procedural unconscionability is very high, a lesser degree of substantive unconscionability may be required." Salley ,
Scholars are hardly unanimous. Several researchers suggest that concerns with mandatory arbitration in employment cases may not be supported by the available data. See, e.g. , David Sherwyn et al., Assessing the Case for Employment Arbitration: A New Path for Empirical Research ,
See, e.g. , Jerry Kang, Implicit Bias: A Primer for Courts, National Center for State Courts (2009); Justin D. Levinson et al., Judging Implicit Bias: A National Empirical Study of Judicial Stereotypes ,
Reference
- Full Case Name
- Rachel STYCZYNSKI v. MARKETSOURCE, INC., and Allegis Group, Inc.
- Cited By
- 11 cases
- Status
- Published