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Adams v. Conn Appliances Inc.

United States District Court, D. Arizona

August 1, 2017

Scott Adams, Plaintiff,
v.
Conn Appliances Inc., d/b/a Conn's HomePlus, Defendant.

          ORDER

          DOUGLAS L. RAYES, UNITED STATES DISTRICT JUDGE

         Before the Court is Defendant Conn Appliances' motion to dismiss or stay the proceedings and compel arbitration. (Doc. 11.) The motion is fully briefed. (Docs. 25, 32.) For reasons that follow, the motion is granted.[1]

         BACKGROUND

         Conn Appliances, which does business as Conn's HomePlus (Conn's), is a consumer goods retailer headquartered in Texas that operates eleven stores in Arizona. (Doc. 1 ¶¶ 11-12.) Plaintiff Scott Adams worked at the Conn's location in Goodyear, Arizona as a full-time salesperson from September 2014 until his termination on May 13, 2016. (¶ 10.) Adams alleges that he suffered racial harassment and discrimination from a supervisor and a sales associate at Conn's, that none of his managers were responsive to his complaints, and that he ultimately was terminated in retaliation for filing a complaint with the EEOC. (¶¶ 20-78.)

         When Adams began employment with Conn's, he signed a Dispute Resolution Plan (DRP) that includes a “mandatory binding arbitration procedure.” (Doc. 11-2 at 2-11.) The DRP provides that any disagreements that arise during or after termination of employment with Conn's must be submitted to binding arbitration. (Id. at 5.) The DRP specifically required Adams to arbitrate any claim “regarding or relating to employment discrimination terms and conditions of employment.” (Id.) The DRP also includes a provision (the “delegation clause”) stating that issues of arbitrability will be submitted to arbitration: “[This agreement] [c]overs any dispute concerning the arbitrability of any such controversy or claim.” (Id.)

         According to Adams, he was not aware of either the existence or terms of the DRP when he signed it. (Doc. 26 ¶¶ 6, 14.) Adams has no legal training or college education. (¶ 2.) He signed the form at the end of a two-week training program in Texas, and the woman directing the employment training sped through the papers requiring signatures without giving Adams sufficient time to read them. (¶¶ 5-13.) Adams did not feel entitled to change the terms and believed that his job hinged on whether he signed each page. (¶¶ 14-16.)

         On February 3, 2017, Adams filed a complaint against Conn's pursuant to Title VII and the Arizona Civil Rights Act, asserting race discrimination and retaliation claims. (Doc. 1.) Shortly thereafter, Conn's moved to dismiss or stay the action and compel arbitration. (Doc. 11.)

         LEGAL STANDARD

         The Federal Arbitration Act (FAA) provides that written agreements to arbitrate disputes “shall be valid, irrevocable, and enforceable except upon grounds that exist at common law for the revocation of a contract.” 9 U.S.C. § 2; see AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011) (discussing liberal federal policy favoring valid arbitration agreements). The FAA “leaves no place for the exercise of discretion by a district court, but instead 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). The court's role is to answer two gateway questions: does a valid agreement to arbitrate exist, and does the agreement encompass the dispute at issue. Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000). If both questions are answered in the affirmative, the court must compel arbitration.

         “Where a contract contains an arbitration clause, courts apply a presumption of arbitrability as to particular grievances, and the party resisting arbitration bears the burden of establishing that the arbitration agreement is inapplicable.” Wynn Resorts, Ltd. v. Atl.-Pac. Capital, Inc., 497 F.App'x 740, 742 (9th Cir. 2012) (internal citations omitted); see also AT&T Mobility, 563 U.S. at 339 (“We have described [§ 2 of the FAA] as reflecting . . . a ‘liberal federal policy favoring arbitration[.]'”). Despite this federal policy favoring arbitration, state law is not entirely displaced from federal arbitration analysis because “generally applicable contract defenses, such as fraud, duress, or unconscionability, may be applied to invalidate arbitration agreements without contravening § 2.” Ticknor v. Choice Hotels Int'l, 265 F.3d 931, 936-37 (9th Cir. 2001) (citing Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 686 (1996)). Unless the challenge is to the arbitration clause itself, however, “the issue of the contract's validity is considered by the arbitrator in the first instance.” Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 445 (2006).

         Parties may also agree to delegate threshold issues of arbitrability to the arbitrator, even though these issues presumptively are reserved for the court. Momot v. Mastro, 652 F.3d 982, 987 (9th Cir. 2011); Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63, 69-70 (2010) (holding that delegation of authority to arbitrator to determine the enforceability and scope of arbitration agreement was valid under FAA). A discrete agreement to submit gateway arbitrability questions to the arbitrator is treated as “an additional, antecedent agreement the party seeking arbitration asks the federal court to enforce[.]” Rent-A-Ctr., 561 U.S. at 70. In other words, a delegation provision is severable from the contract in which it is embedded, and challenges to the validity of the latter must be considered by the arbitrator in the first instance. Id. at 70-72.

         Significantly, however, the same presumption of arbitrability does not apply to agreements delegating authority over the enforceability of arbitration agreements. Rather, “the Supreme Court has cautioned that ‘[c]ourts should not assume that the parties agreed to arbitrate arbitrability unless there is ‘clear and unmistakable' evidence that they did so.'” Momot, 652 F.3d at 987 (quoting First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1995)). Such clear and unmistakable evidence of agreement to arbitrate arbitrability might include “a course of conduct demonstrating assent” or “an express agreement to do so.'” Id. (quoting Rent-A-Ctr., 561 U.S. at 79-80).

         ANALYSIS

         Adams argues that the delegation clause and the arbitration agreement as a whole are unconscionable. (Docs. 37 at 9, 26 at 5-16.) Adams also contends that Conn's waived its right to arbitrate by complying with a separate action filed with the EEOC and by failing to adhere to the terms set out in the DRP. (Doc. 26 at 16-17.) Conn's argues that the Court should confine its analysis to questions concerning the enforceability of the delegation clause because the parties clearly and unmistakably agreed to arbitrate questions of arbitrability. (Doc. 32 at 4.) As a threshold matter, then, the Court must determine whether the parties' intent to arbitrate questions of arbitrability is clear and unmistakable and, if so, whether such delegation is enforceable under ...


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