Crump v. MetaSource Acquisitions, LLC
Crump v. MetaSource Acquisitions, LLC
Opinion of the Court
Plaintiff James Crump brings claims of discrimination under federal and state law against Defendants MetaSource Acquisitions, LLC, MetaSource Employee Services, LLC, MetaSource, LLC, and MetaSource, LLC d/b/a MetaSource (collectively, "MetaSource"), and Defendant David Brodecki. MetaSource is Plaintiff's former employer, and Brodecki his former supervisor. In separate motions, Defendants each move to compel arbitration pursuant to an agreement signed by Plaintiff near the outset of his employment. For the reasons set forth below, the motions shall be denied.
I. BACKGROUND
On February 20, 2017, Plaintiff began working for MetaSource. On March 2, 2017, he received several text messages from Brodecki, soliciting Plaintiff to come to Brodecki's home over lunch. Plaintiff agreed, believing that Brodecki wanted to discuss work related matters. However, when Plaintiff arrived, Brodecki began making sexual advances and ultimately performed unwanted oral sex on Plaintiff. Plaintiff forced Brodecki to stop and left.
Afterwards, attempting to grapple with the situation, Plaintiff alleges that he asked another supervisor for a copy of the employee handbook, but the supervisor was not able to provide Plaintiff with a copy. Brodecki continued to contact Plaintiff, asking him to meet outside the office. On March 27, 2017, Plaintiff alleges that he was constructively terminated.
Plaintiff subsequently brought this suit, which Defendants move to dismiss and compel arbitration. In support of their motion, Defendants point to the employee handbook, which Plaintiff signed near the outset of his employment. In addition to setting forth various office policies, the final page of the handbook contains an "Acknowledgement and Agreement,"
*543which Plaintiff signed.
[E]xcept for the policy of at-will employment, the Company reserves the right to revise, delete, and add to the provisions of this Employee Handbook. All such revisions, deletions, or additions must be in writing and must be signed by the President of the Company.... [E]xcept for the policy of at-will employment, terms and conditions of employment with the Company may be modified at the sole discretion of the Company with or without cause or notice at any time.
Under the bolded headline "MetaSource Alternative Dispute Resolution Program ," the final paragraph of the page provides that,
[I]n the event employment disputes arise between [the signatory] and the Company, [the signatory] will be bound by the MetaSource Alternative Dispute Resolution Program which provides for final and binding arbitration for disputes relating to termination of employment, unlawful discrimination, and alleged sexual harassment or other unlawful harassment, as defined in the MetaSource Alternative Dispute Resolution Program.
Below this paragraph, there is a space for the employee to sign and date. On Friday, February 24, 2017, Plaintiff signed a copy of this agreement. Plaintiff alleges that he began working on Monday, February 20, 2017-thus, Plaintiff signed the agreement after about a week of employment. At some point, Brodecki signed a copy as well.
The terms of the Alternative Dispute Resolution Program are set out in a separate document which provides that the American Arbitration Association would administer any arbitration. There are no signatures on this document.
II. PROCEDURAL POSTURE AND APPLICABLE STANDARDS
A motion to compel arbitration may be evaluated under either the motion to dismiss standard of Rule 12(b)(6) or the summary judgment standard of Rule 56. See Guidotti v. Legal Helpers Debt Resolution, L.L.C. ,
In this case, Defendants initially filed a motion to dismiss and compel arbitration in October of 2018. Given that it was not clear from the face of the complaint or the documents relied upon in the *544complaint whether the suit was subject to arbitration, in accordance with Guidotti , the parties were given an opportunity to engage in limited discovery on the question of arbitrability. That discovery has now been had and Defendants have renewed their motions to compel arbitration, which shall be evaluated under a summary judgment standard.
Under the applicable summary judgment standard, "a motion to compel arbitration should only be granted if there is no genuine dispute as to any material fact and, after viewing facts and drawing inferences in favor of the non-moving party, the party moving to compel is entitled to judgment as a matter of law." White v. Sunoco, Inc. ,
III. DISCUSSION
"[T]he Federal Arbitration Act (FAA or Act),
"Because arbitration is a matter of contract," "[t]o determine whether the parties agreed to arbitrate, we turn to ordinary state-law principles that govern the formation of contracts." Kirleis v. Dickie, McCamey & Chilcote, P.C. ,
Plaintiff asserts that MetaSource's reservation of the right to unilaterally change the terms and conditions of his employment renders the arbitration agreement illusory. In effect, Plaintiff argues that MetaSource's reservation of the right to modify the arbitration agreement means that MetaSource's promise to arbitrate cannot constitute sufficient consideration in return for Plaintiff's promise to arbitrate. In response, Defendants assert that its promise to arbitrate is not illusory, and that, even if it is, MetaSource's employment of Plaintiff constitutes sufficient consideration.
A. Whether MetaSource's Promise to Arbitrate is Illusory
Under Pennsylvania law, "[i]f the promise is entirely optional with the promisor, it is said to be illusory and, therefore, lacking consideration and unenforceable. The promisor has committed him/herself to nothing."
*545SCF Consulting, LLC v. Barrack, Rodos & Bacine ,
As a general matter, "an arbitration agreement allowing one party the unfettered right to alter the arbitration agreement's existence or its scope is illusory." Dumais v. Am. Golf Corp. ,
In Blair v. Scott Specialty Gases , the Third Circuit applied Pennsylvania law and articulated a similar rule.
Within this circuit, district courts applying Blair have held that agreements permitting the employer to make changes to an arbitration provision are not illusory where (1) the employer may only make modifications in writing; (2) the employer must provide notice to the employees of any modifications; (3) the employee is permitted to accept the modifications by continuing employment; and (4) the modifications are effective only prospectively. See, e.g. , Gutman v. Baldwin Corp. ,
Turning to the instant matter, application of the above principles demonstrates that the arbitration agreement is illusory. Though there is some squabbling about the effect of the particulars of the arbitration program being set out in a *546separate document, MetaSource agrees that the arbitration provision on the final page of the employee handbook contains MetaSource's promise to arbitrate. That page also provides that MetaSource may only makes changes to the employee handbook in writing-a fact which cuts in favor of finding the agreement not to be illusory. The remaining factors, however, cut in the opposite direction. The agreement page specifically states that MetaSource need not give "notice at any time" of any modifications. Nor is there any term providing for the employee's acceptance of modifications. Nor is there any statement limiting the effect of any modifications to future incidents. Thus, the agreement permits MetaSource to change any of its obligations (other than at-will employment) at any time, simply by putting its desired changes in writing-without so much as telling its employees of these changes. In other words, MetaSource has the "unfettered discretion," to modify its arbitration obligations, Blair ,
Defendants do not quarrel with this analysis, but instead propose an altogether different interpretation of the contract that would render this analysis unnecessary. Specifically, they assert that the arbitration provision is separate and distinct from the remainder of the employee handbook, and thus MetaSource has not reserved the right to modify its arbitration obligations. Effectively, they claim that there are two entirely separate agreements: first, the employee handbook, which MetaSource may modify at any time without notice, and, second, the arbitration provision, which it may not. MetaSource notes that the arbitration provision is in a separate paragraph, under its own heading, and includes the language that the signatory "also " acknowledges and agrees to arbitration. Defendants argue that this visual and linguistic separation means that MetaSource's ability to modify the employee handbook, as provided for at the top of the page, simply does not extend to the arbitration agreement at the bottom of the page.
This argument is unavailing. The arbitration provision appears on the last page of the employee handbook, which is numbered page 39 as part of the continuous pagination throughout the handbook. The very top of page 39 contains the words "ACKNOWLEDGEMENT AND AGREEMENT ," which are bolded, in capital letters, centered on the page, and set above the rest of the text. There is no other heading which could be read to distinguish between portions of the page: the heading applies to the full page, including the arbitration agreement. The text near the top of the page provides for Metasource's right to "revise, delete, and add to the provisions of this Employee Handbook" and "the terms and conditions of employment." The arbitration provision is the final paragraph on this same page.
Accordingly, MetaSource's promise to arbitrate is illusory, and does not serve as consideration.
B. Whether Continuing Employment Serves as Alternative Consideration
Defendants argue that, regardless of whether the arbitration agreement is illusory, MetaSource supplied sufficient consideration for Plaintiff's promise to arbitrate by continuing to employ Plaintiff.
The majority of the courts to have found an arbitration provision to be illusory have declined to enforce the agreement-without considering whether alternative consideration may suffice. See, e.g. , Druco Restaurants ,
[An employer's] offering initial or continued employment in consideration for the employee's agreement to abide by the arbitration agreement ... is not an empty or illusory promise but an offer of continued employment, a benefit to the [employee], conditioned on a promise that the [employee] would agree to the arbitration agreement. The [employee may] accept[ ] that offer by signing the arbitration agreement and by working thereafter for [the employer]. Thus, [employer]'s agreement to employ the [employee] provides sufficient consideration for the [employee's] agreement to arbitrate the[ ] disputes with [the employer].
Martinez v. Utilimap Corp. ,
Other courts have rejected this view. In Cheek v. United Healthcare of Mid-Atlantic, Inc. , the Maryland Court of Appeals held that an arbitration agreement lacked consideration because employer's "promise to arbitrate was illusory," and employment "cannot serve as consideration for the arbitration agreement."
The Pennsylvania Supreme Court is yet to resolve this precise issue, and thus this Court must predict how the Pennsylvania Supreme Court would rule on this issue.
When a non-competition clause is required after an employee has commenced his or her employment, it is enforceable only if the employee receives 'new' and valuable consideration-that is, some corresponding benefit or a favorable change in employment status. Sufficient new and valuable consideration has been found by our courts to include, inter alia, a promotion, a change from part-time to full-time employment, or even a change to a compensation package of bonuses, insurance benefits, and severance benefit.... More specifically, the mere continuation of the employment relationship at the time of entering into the restrictive covenant is insufficient to serve as consideration for the new covenant, despite it being an at-will relationship terminable by either party.
Socko is consonant with another line of Pennsylvania cases where an employee attempts to enforce the terms of an employee handbook against the employer. See, e.g. , Braun v. Wal-Mart Stores, Inc. ,
Extrapolating from Socko and the employee handbook cases leads to the conclusion that the arbitration agreement here was not supported by sufficient consideration in the form of continued employment. Plaintiff had already been working at MetaSource for about a week when he signed the employee handbook with the arbitration provision (he began work on a Monday and signed the handbook that Friday). Thus MetaSource had already offered, and Plaintiff had already accepted, an at-will employment relationship. The employee handbook, with the arbitration provision, did not impose any new obligations on MetaSource-it provided that MetaSource could change anything in the employee handbook, and thus any term or condition of Plaintiff's employment, other than the at-will nature of Plaintiff's employment. Accordingly, MetaSource did not provide any "new" consideration to Plaintiff. In the absence of such " 'new' and valuable consideration," the fact that MetaSource continued to employ Plaintiff at-will is insufficient consideration to support Plaintiff's agreement to arbitrate. Socko ,
For the reasons given, the arbitration agreement is not supported by adequate consideration, and is thus unenforceable. Accordingly, Defendants motions to compel arbitration shall be denied.
An appropriate order follows.
ADDENDUM
*550--------
The full page is attached to this opinion as an addendum.
The parties agree that Pennsylvania law applies.
To the extent that the Defendants argue that the use of the words "I also acknowledge ..." at the beginning of the paragraph regarding arbitrations somehow sets it off from the rest of the page, the argument is unavailing because of the five paragraphs on the page four begin with either the words "This is to acknowledge ..." (the first paragraph), or the words "The second, third and fifth (concerning arbitrations)".
It is true that in Blair , the Third Circuit suggested that, where the terms of the arbitration agreement itself are illusory, continued employment may serve as alternative consideration sufficient to uphold an arbitration agreement. Blair ,
Some courts have also analyzed situations where an employer creates a handbook far after the employee began working. See, e.g. , Baron v. Quad Three Grp., Inc. ,
At-will employment is the default employment status under Pennsylvania law. See Socko ,
Plaintiff asserts that his claims against Brodecki are not subject to the arbitration agreement for the separate reason that there is no privity of contract between Plaintiff and Brodecki. Because the arbitration agreement is not enforceable, the Court does not reach this issue.
Reference
- Full Case Name
- James CRUMP v. METASOURCE ACQUISITIONS, LLC, MetaSource Employee Services, LLC, MetaSource, LLC, MetaSource, LLC doing business as MetaSource and David Brodecki
- Cited By
- 8 cases
- Status
- Published