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Russ v. United Services Automobile Association

United States District Court, D. Arizona

May 10, 2017

Ronald C. Russ, Plaintiff,
United Services Automobile Association; and Gary W. Sherry, Defendants.


          Paul G. Rosenblatt United States District Judge.

         Pending before the Court is defendant United Services Automobile Association's Motion to Dismiss and Compel Arbitration (Doc. 15) and Defendant Gary W. Sherry's Motion to Dismiss and Compel Arbitration (Doc. 28). Having considered the parties' memoranda in light of the submitted evidence, the Court finds that the motions should be granted.


         According to the First Amended Complaint (“FAC”) (Doc. 21), plaintiff Ronald Russ was hired by defendant United Services Automobile Association (“USAA”), a leading provider of financial planning, insurance, investments, and banking products, in November 2006 and was terminated in September 2014. At the time of his termination, the plaintiff was a Wealth Management Service and Implementation Specialist who was responsible for providing customer support to USAA's high net worth members by servicing their financial and investment accounts. Defendant Sherry was the plaintiff's direct supervisor and manager beginning in November 2013. The two-count FAC alleges a retaliation claim against USAA pursuant to the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq. (Count One) and an interference claim against both defendants pursuant to the Family and Medical Leave Act, 29 U.S.C. § 2601 et seq. (Count Two).

         According to the evidence submitted by USAA, which is not disputed by the plaintiff, USAA implemented a dispute resolution program in August 2004 known as the Dialogue Dispute Resolution Program (“Dialogue Program”), which provides in part that all employment-related disputes between USAA and its employees (with some exceptions not relevant here) that are not resolved through other available Dialogue dispute resolution programs must be submitted to binding arbitration using, where applicable, the Employment Dispute Resolution Rules of the American Arbitration Association.[1] The plaintiff received notice providing him with the Dialogue Program's terms and conditions on or about his start date, he returned his signed notice acknowledging that he had received, reviewed, and understood the Dialogue Program materials and consented to be contractually bound by them on November 13, 2006[2], and he attended a training session on using the Dialogue Program on November 30, 2006. In his declaration, the plaintiff states in part that he did not fully understand and comprehend the notice regarding the Dialogue Program he signed nor the potential adverse consequences and limitations the notice placed on his legal rights and access to the federal court system.


         The defendants seek to have the Court compel the plaintiff to arbitrate all of the claims alleged in the FAC and to dismiss the FAC in its entirety.[3] The Dialogue Program provides that the Federal Arbitration Act (“FAA”) applies to arbitrations under it.

         The FAA broadly provides that written agreements to arbitrate controversies arising out of contracts involving interstate commerce[4] “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. Absent a valid contractual defense, the FAA mandates that district courts “shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed.” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985) (emphasis in original). The Court's role under the FAA is limited to (1) determining whether a valid agreement to arbitrate exists and, if it does, whether the agreement encompasses the dispute at issue. Chiron Corp. v. Ortho Diagnostic Systems, Inc., 207 F.3d 1126, 1130 (9th Cir. 2000); 9 U.S.C. § 4. Since the plaintiff does not dispute that both of his claims in the FAC fall within the purview of the Dialogue Program's arbitration agreement, the only issue before the Court is the validity of the arbitration agreement.

         The plaintiff argues that the arbitration provision is unenforceable because it is both procedurally and substantively unconscionable. Unconscionability is a generally applicable contract defense that may render an arbitration provision unenforceable under the FAA, Doctor's Associates, Inc. v. Casarotto, 517 U.S. 681, 687 (1996), and the determination of unconscionability in the arbitration context is determined according to the laws of the state of contract formation, here Arizona.[5] Chalk v. T-Mobile USA, Inc., 560 F.3d 1087, 1092 (9th Cir.2009). Under Arizona law, the plaintiff bears the burden of proving the unenforceablity of the arbitration provision, and the determination of unconscionability is to be made by the Court as a matter of law. Maxwell v. Fidelity Financial Services, Inc., 907 P.2d 51, 56 (Ariz.1995); Taleb v. AutoNation USA Corp., 2006 WL 3716922, at *2 (D.Ariz. Nov. 13, 2006) (“Because a court order compelling arbitration is the functional equivalent of a summary disposition on the issue of the enforceability of the Arbitration Agreement, the burden is properly upon the plaintiff to produce specific facts showing that such a triable issue exists.”) The Court concludes as a matter of law that the plaintiff has not met the “high bar” necessary to demonstrate unconscionability. Longnecker v. American Express Co., 23 F.Supp.3d 1099, 1108 (D.Ariz.2014).

         A. Procedural Unconscionabilty

         The plaintiff argues that the Dialogue Program's arbitration agreement is procedurally unconscionable. Procedural unconscionability involves a finding that something was wrong in the bargaining process in that it “is concerned with ‘unfair surprise, ' fine print clauses, mistakes or ignorance of important facts or other things that mean bargaining did not proceed as it should.” Maxwell, 907 P.2d at 57-58.

         The plaintiff raises two reasons why the Dialogue Program's arbitration agreement is procedurally unconscionable, the first of which is because it constitutes a contract of adhesion. For purposes of the resolution of the defendants' motions, the Court assumes that the Dialogue Program constitutes an adhesion contract given the mandatory terms of the Dialogue Program and the plaintiff's uncontroverted statement in his declaration that signing the Dialogue Program notice regarding the arbitration requirement was a “take it or leave it” situation on his part because he was told that he had to sign it in order to be employed at USAA. See Broemmer v. Abortion Services of Phoenix, Ltd., 840 P.2d 1013, 1015 (Ariz.1992) (Court stated that an adhesion contract “is typically a standardized form offered to consumers of goods and services on essentially a take it or leave it basis without affording the consumer a realistic opportunity to bargain and under such conditions that the consumer cannot obtain the desired product or services except by acquiescing in the form contract.”)

         The Court rejects, however, the plaintiff's argument that a finding that a contract is one of adhesion constitutes in and of itself a finding of procedural unconscionability under Arizona law. Longnecker v. American Express Co., 23 F.Supp.3d at 1109 (“But even if the arbitration agreements were contracts of adhesion that would not mean that they are procedurally unconscionable. Contracts of adhesion are not per se unenforceable.”); Perry v. NorthCentral University, Inc., 2011 WL 4356499, at *5 (D.Ariz. Sept. 19, 2011) (same); R & L Limited Investments, Inc. v. Cabot Investment Properties, LLC, 729 F.Supp.2d 1110, 1115 (D.Ariz.2010) (Court noted that “it does not appear that there is any Arizona law supporting the assertion that a finding of adhesion equates to a finding of procedural unconscionability. ... The fact that a given contract was a contract of adhesion is not itself dispositive[.]”) Arizona law recognizes that a contract of adhesion is presumptively valid and fully enforceable according to its terms unless the contract is unconscionable or beyond the range of reasonable expectations, Broemmer, 840 P.2d at 1016, which are two distinct grounds for invalidating or limiting the enforcement of a contract, Maxwell, 907 P.2d at 57, and the plaintiff does not argue the applicability of the latter exception. See also, AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740, 1750 (2011) (Court rejected the idea that arbitration agreements are per se unconscionable when found in adhesion contracts.) As the defendants note, and the plaintiff simply and inexplicably ignores without comment, another Judge of this Court has already determined that the same USAA Dialogue Program arbitration agreement at issue here is not a procedurally unconscionable adhesion contract. O'Bannon v. United Services Automobile Ass'n, CV-15-02231-PHX-SRB (Doc. 51, dated June 17, 2016) (In compelling arbitration, court stated that “[e]ven assuming that the arbitration agreement in this case was a ‘take it or leave it' contract of adhesion, it was not procedurally unconscionable. ... [T]he arbitration agreement in the Dialogue program is not a procedurally unconscionable contract of adhesion.”) The Court agrees with that position.[6]

         The plaintiff also argues that the arbitration agreement is procedurally unconscionable because it allows USAA to impose mandatory arbitration pursuant to AAA rules of procedure that are not provided to employees when they receive the Dialogue Program and the Dialogue Program does not contain any information as to how an employee might obtain a copy of the AAA rules. The Court also rejects this argument. See O'Bannon order compelling arbitration (“The Court concludes that [USAA's] failure to provide a copy of the AAA rules did not make the arbitration provision in this case procedurally unconscionable.”); Perry v. NorthCentral University, 2011 WL 4356499, at *7 (This Court rejected the argument that an arbitration provision was procedurally unconscionable because the employer did not give the employee a copy of the AAA rules governing the arbitration process.); Godhart v. Direct Alliance Corp., 2011 WL 2713977, at *3 (D.Ariz. July 13, 2011) (Court concluded that an arbitration provision in an employment contract was not procedurally unconscionable ...

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