United States District Court, D. Arizona
Jason E. Rappaport, Plaintiff,
Federal Savings Bank, et al., Defendants.
HONORABLE G. MURRAY SNOW UNITED STATES DISTRICT JUDGE
before the Court are Defendants' Motion to Stay, (Doc.
12), and Plaintiff's Motion to Strike, (Doc. 33). The
Court grants both motions.
Jason E. Rappaport brought suit against his former employer,
Defendant The Federal Savings Bank (“TFSB”), and
its CEO, Stephen M. Calk. (Doc. 1). Mr. Rappaport alleges
that TFSB illegally terminated his employment after he
developed leukemia, and that TFSB and Mr. Calk lied to Mr.
Rappaport's clients about his dismissal. (Doc. 1). The
first four counts of Mr. Rappaport's Complaint concern
the defamation and intentional interference with a business
relationship claims, and the last two counts concern the
wrongful dismissal and retaliation claims. (Doc. 1).
Rappaport's employment contract with TFSB included an
arbitration agreement. (Doc. 12, Exh. A ¶ 10). It states
that any dispute “concerning the wages, hours, working
conditions, terms, rights, responsibilities or obligations
between them or arising out of their employment relationship
. . . shall be resolved through binding arbitration in
accordance with the rules of JAMS Arbitration . . . .”
(Doc. 12, Exh. A ¶ 10). Pursuant to this clause and the
Federal Arbitration Act, Defendants have requested the Court
to stay this case until arbitration is completed. (Doc. 12).
the Federal Arbitration Act (“FAA”), an
arbitration provision in an employment contract “shall
be valid, irrevocable, and enforceable . . . .” 9
U.S.C. § 2; see, e.g., Circuit City Stores, Inc. v.
Adams, 532 U.S. 105, 113-19 (2001) (holding that the FAA
applies to employment contracts except those of
transportation workers); Chiron Corp. v. Ortho Diagnostic
Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000);
Tracer Research Corp. v. Nat'l Envtl. Servs.
Co., 42 F.3d 1292, 1294 (9th Cir. 1994), cert.
dismissed, 515 U.S. 1187 (1995). “Although [a] contract
provides that [state] law will govern the contract's
construction, the scope of the arbitration clause is governed
by federal law.” Tracer Research Corp, 42 F.3d
at 1294 (citing Mediterranean Enters., Inc. v. Ssangyong
Corp., 708 F.2d 1458, 1463 (9th Cir. 1983)); see
Circuit City Stores, Inc. v. Adams, 279 F.3d 889, 892
(9th Cir. 2002) (holding that FAA “not only placed
arbitration agreements on equal footing with other contracts,
but established . . . a federal common law of arbitrability
which preempts state law”); Simula, Inc. v.
Autoliv, Inc., 175 F.3d 716, 719 (9th Cir. 1999)
(“Federal substantive law governs the question of
the federal policy favoring it, ‘arbitration is a
matter of contract and a party cannot be required to submit
to arbitration any dispute which he has not agreed so to
submit.'” Tracer Research Corp., 42 F.3d
at 1294 (quoting United Steelworkers of Am. v. Warrior
& Gulf Navigation Co., 363 U.S. 574, 582 (1960));
see French v. Merrill Lynch, Pierce, Fenner & Smith,
Inc., 784 F.2d 902, 908 (9th Cir. 1986). Where the
arbitrability of a dispute is in question, a court must look
to the terms of the contract. See Chiron Corp., 207
F.3d at 1130. “Any doubts concerning the scope of
arbitrable issues should be resolved in favor of
arbitration.” Simula, 175 F.3d at 719 (quoting
Moses H. Cone Mem'l Hosp. v. Mercury Constr.
Corp., 460 U.S. 1, 20 (1983)). However, a court
“cannot expand the parties' agreement to arbitrate
in order to achieve greater efficiency.” Tracer
Research Corp., 42 F.3d at 1294. “[T]he judicial
inquiry . . . must be strictly confined to the question
whether the reluctant party did agree to arbitrate . . .
.” United Steelworkers, 363 U.S. at 582.
“The court's role under the [FAA] is therefore
limited to determining (1) whether a valid agreement to
arbitrate exists and, if it does, (2) whether the agreement
encompasses the dispute at issue.” Chiron
Corp., 207 F.3d at 1130 (citations omitted); see
Simula, 175 F.3d at 720 (stating that “the
district court can determine only whether a written
arbitration agreement exists, and if it does, enforce it in
accordance with its terms”) (citation omitted).
Conscionability of Arbitration Provision
evaluating whether the parties intended to arbitrate, courts
apply ordinary state-law contract principles. Wynn
Resorts, Ltd. v. Atlantic-Pacific Capital, Inc., 497
Fed.Appx. 740, 741 (9th Cir. 2012) (applying New York law in
arbitrability determination) (citing First Options of
Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1995)). The
arbitration agreement states that the terms were “made
and entered into in the State of Illinois” and shall be
governed by “the laws of the State of Illinois.”
(Doc. 12, Exh. A ¶ 10).
law favors arbitration and enforces valid arbitration
agreements. Williams v. Jo-Carroll Energy, Inc., 382
Ill.App.3d 781, 784 (2d Dist. 2008) (citations omitted). An
arbitration agreement is not enforceable if it is
unconscionable. Id. “Unconscionability may be
either procedural or substantive, or a combination of
both.” Id. (citation omitted).