Drake v. Conn's HomePlus

          ORDER

          Douglas L. Rayes United States District Judge

         Before the Court is Defendant Conn's Appliances Incorporated's (“Conn's”) motion to dismiss or, in the alternative, stay proceedings and compel arbitration. (Doc. 12.) The motion is fully briefed. For the following reasons, Conn's motion is granted in part and denied in part.

         I. Background

         Conn's operates retail stores selling furniture, household appliances, and electric goods. (Doc. 1 ¶¶ 6-7.) Plaintiff Konnie Drake was an employee at Conn's location on East Thomas Road, Phoenix, Arizona from July 2015 to June 2018. (Doc. 24-1 at 2.) Drake filed a complaint against Conn's pursuant to the Civil Rights Act of 1866 and Title VII of the Civil Rights Act of 1964, alleging that he was the victim of racial harassment from his manager and other co-workers; that neither Drake's manager nor human resources were sufficiently responsive to his complaints; and that his manager retaliated against Drake for reporting the racial harassment. (Doc 1 ¶¶ 1, 11-39.) Conn's subsequently moved to dismiss the action or, in the alternative, stay proceedings and compel arbitration. (Doc. 12.)

         Relevant to resolution of the present motion before the Court, Drake signed an acknowledgement form for Conn's Dispute Resolution Plan (“DRP”) when he began his employment with Conn's. (Doc. 12-1 at 15.) The DRP requires that, as a condition of employment, any controversy or claim arising during or after employment will be submitted for final and binding arbitration. (Id. at 9.) The acknowledgement form that Drake signed provides, “I have received a copy of Conn's Dispute Resolution Plan . . . . I understand that I am agreeing to substitute one dispute resolution form (arbitration) for another (litigation) and that I am, hereby, waiving my right to have covered disputes resolved by a court and/or jury.” (Id. at 15.) The DRP expressly requires the arbitration of “claims for discrimination []including discrimination based on . . . race . . . [and] claims of retaliation due to exercising statutorily protected rights . . . .” (Id. at 9-10.) The DRP also contains a delegation clause that states the DRP “[c]overs any dispute concerning the arbitrability of any controversy or claim.” (Id. at 9.)

         II. Legal Standard

         The Federal Arbitration Act (“FAA”) provides that written contracts 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.A. § 2; see AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) (discussing liberal federal policy favoring valid arbitration agreements). In evaluating the validity of an arbitration agreement, “generally applicable contract defenses, such as fraud, duress, or unconscionability, may be applied to invalidate arbitration agreements without contravening [9 U.S.C.] § 2.” Ticknor v. Choice Hotels Int'l, 265 F.3d 931, 936-37 (9th Cir. 2001).

         Because of the strong federal policy favoring 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). Therefore, this Court's limited role is to determine “(1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue.” Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000). “Where a contract contains an arbitration [agreement], 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 Fed. App'x. 740, 742 (9th Cir. 2012).

         III. Discussion

         Conn's seeks to compel arbitration pursuant to the provisions of the DRP. Conn's argues that the DRP is a valid agreement and that all issues, including the question of arbitrability, have been delegated to the arbitrator and are thus outside the scope of this Court's review. (Doc. 33 at 2-4.) In response, Drake argues that the DRP is procedurally and substantively unconscionable, that he did not assent to the DRP, and that the DRP's requirements to arbitrate are permissive and not mandatory.

         A. Arbitrability

         “Although gateway issues of arbitrability presumptively are reserved for the court, the parties may agree to delegate them to the arbitrator.” Momot v. Mastro, 652 F.3d 982, 987 (9th Cir. 2011). “Courts should not assume that the parties agreed to arbitrate arbitrability unless there is ‘clear and unmistakable' evidence that they did so.” First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1995). “Clear and unmistakable ‘evidence' of agreement to arbitrate arbitrability might include . . . a course of conduct demonstrating assent . . . or . . . an express agreement to do so.” Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63, 79-80 (2010). Even if a delegation of arbitrability is clear and unmistakable, it may be found unenforceable if the delegation itself is unconscionable. Id. at 71-74.

         The Court finds clear and unmistakable evidence that Drake and Conn's expressly agreed to delegate the issue of arbitrability to the arbitrator. Pursuant to the DRP, it “[c]overs any dispute concerning the arbitrability of any such controversy or claim . . . .” (Doc. 12-1 at 9.) Furthermore, “incorporation of the [American Arbitration Association (AAA)] rules constitutes clear and unmistakable evidence that [the] contracting parties agreed to arbitrate arbitrability.” Brennan v. Opus Bank, 796 F.3d 1125, 1130 (9th Cir. 2015). The DRP expressly provides that the arbitration will be conducted according to the rules of the AAA. (Doc. 12-1, at 12, 13.) Such provisions are clear and unmistakable evidence of an express agreement to arbitrate arbitrability.

         B. ...