Cecil Goff v. Nationwide Mutual Ins. Co. ( 2020 )

NOT RECOMMENDED FOR PUBLICATION
File Name: 20a0506n.06
No. 19-4078
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT FILED
Aug 27, 2020
CECIL GOFF, )
DEBORAH S. HUNT, Clerk
)
Plaintiff-Appellant, )
)
ON APPEAL FROM THE
v. )
UNITED STATES DISTRICT
)
COURT FOR THE
NATIONWIDE MUTUAL INSURANCE, CO., et )
SOUTHERN DISTRICT OF
al. )
OHIO
)
Defendants-Appellees. )
BEFORE: DONALD, THAPAR, and NALBANDIAN, Circuit Judges.
BERNICE BOUIE DONALD, Circuit Judge. This case regards the validity of an
arbitration clause in an agreement between Plaintiff-Appellant Cecil Goff and his employer,
Defendant-Appellee Nationwide Mutual Insurance Company (“Nationwide”). After Nationwide
terminated Goff, he filed suit alleging violations of the Racketeer Influenced and Corrupt
Organizations Act (“RICO”) under 18 U.S.C. § 1961. Nationwide responded with a motion to
dismiss Goff’s complaint and moved to compel arbitration per the terms of its contract with Goff.
The arbitration clause provides that Nationwide retains the right to change, alter, amend,
or otherwise modify the rules and procedures of any arbitration proceedings between Goff and
Nationwide without providing direct notice to Goff or receiving his consent to the modifications.
The district court concluded that, although one-sided, this provision is not procedurally
unconscionable because it does not pertain to the formation of the arbitration agreement. On
No. 19-4078, Cecil Goff v. Nationwide Mutual Ins. Co., et al.
appeal, Goff maintains that the provision renders the arbitration clause unconscionable and
illusory. We affirm.
I.
Goff began working for Nationwide as a sales manager in the early 2000s. June of 2013,
Goff decided to join Nationwide’s “Advantage Program,” which would allow him to become an
insurance program agent. To join the program, Goff executed Nationwide’s Advantage Program
Independent Contractor Exclusive Agent Master Agreement (the “Advantage Agreement”). The
Advantage Agreement included the following arbitration clause, which is the subject of this
appeal:
35. All Controversies and Disputes Between the Parties Subject to
Mandatory Binding Arbitration. Without affecting Nationwide’s rights under
Section 30(E) of this Agreement, any controversy, claim or dispute between Agent
and Nationwide, including, but not limited to, any claims arising out of or relating
to any aspect of the parties’ relationship, before, during or after the cancellation of
the Agreement, whether based upon contract, tort, statute, fraud, misrepresentation
or any other legal theory, shall be adjudicated by mandatory binding arbitration
pursuant to the Arbitration Procedures for Nationwide Agents (the “Arbitration
Procedures”) and those Nationwide Arbitration Rules (the “Nationwide Arbitration
Rules”) set forth on Agent Gateway [Nationwide’s intranet] or such other place
designated by Nationwide and accessible to Agent. Agent may obtain a copy of
the Arbitration Procedures and the Nationwide Arbitration Rules from Nationwide
at any time by submitting a written request to Agent’s regional sales management
or agtdisp@nationwide.com. Nationwide shall have the right to change, alter,
amend or otherwise modify such Arbitration Procedures and/or the Nationwide
Arbitration Rules at any time and from time to time and Agent acknowledges and
agrees that any such change, alteration, amendment or limitation shall become
effective on the date published by Nationwide.
The parties acknowledge and agree that any and all proceedings and awards relating
to any mandatory binding arbitration proceeding shall be kept confidential and shall
not be disclosed or imparted by either party as further set forth in the Nationwide
Arbitration Rules.
THE PARTIES UNDERSTAND THAT THEY ARE GIVING UP THE
RIGHT TO: (A) PARTICIPATE IN ANY CLASS ACTION; AND (B) HAVE
ANY CLAIM OR DISPUTE BETWEEN THEM DECIDED BY A COURT
OR JURY.
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No. 19-4078, Cecil Goff v. Nationwide Mutual Ins. Co., et al.
Goff signed his initials directly after this clause. After Goff’s initials, the clause continues, stating:
This Agreement and the Sub-Agreements provide for transactions in interstate
commerce by and among the parties and are subject to the provisions of the Federal
Arbitration Act which shall govern the enforcement and interpretation of this
Section.
Any arbitration proceeding, action, suit or proceeding at law or in equity brought
under this Agreement or any Sub-Agreement must be commenced and process must
be served within the shorter of: (i) three (3) years after the cause of action accrues;
or (ii) to the extent Ohio law provides for any shorter statute of limitations
applicable to the particular claim within that time period.
...
Except as otherwise provided in this Agreement, this Section does not limit either
party’s right to pursue equitable remedies (including, without limitation,
preliminary and permanent injunctive relief) from a court of competent jurisdiction
before, after, or during the pendency of any arbitration, and the exercise of any such
remedy does not waive either party’s agreement to participate in arbitration.
...
36. Attorneys’ Fees. In the event that Nationwide is successful in any
arbitration, suit or proceeding brought or instituted to enforce any of the provisions
of this Agreement or any Sub-Agreement, or on account of any damages sustained
by Nationwide by reason of a violation of the terms or provisions of this Agreement
or any Sub-Agreement, Agent agrees to pay to Nationwide all reasonable attorneys’
fees and expenses incurred in the prosecution or defense of such action or
proceeding, unless prohibited or limited by applicable law.
In July of 2015, Nationwide terminated Goff for failing to meet his production targets. In
response to his termination, Goff filed the present action on behalf of himself and others similarly
situated alleging RICO violations and violations of California state law.1 Goff initially filed suit
in the Central District of California, however, upon a timely motion from the defendants, the
district court transferred venue to the Southern District of Ohio.
1
Over the course of his two years participating in the program, Goff invested approximately $200,000 of his own
funds into his Nationwide agency to build a “book of business” for Nationwide. Upon his termination, however, Goff
learned that despite this investment, he neither retained rights in the “book of business,” nor was he entitled to receive
any of the money he had invested in the program back. These grievances gave rise to his filing of the present lawsuit.
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No. 19-4078, Cecil Goff v. Nationwide Mutual Ins. Co., et al.
In response to Goff’s First Amended Complaint, Nationwide filed an Amended Motion to
Dismiss the First Amended Complaint, arguing that Goff should be compelled to arbitrate his
claims pursuant to the terms of the Advantage Agreement’s Arbitration Clause. Finding the
arbitration agreement valid and enforceable, the district court dismissed Goff’s claims and
compelled the parties to arbitrate their dispute.
II.
A. Motion for Judicial Notice
As a preliminary matter, we must resolve Goff’s motion for this Court to take judicial
notice of a factual affidavit and related exhibit filed in a separate state court action.
Pursuant to Rule 201(b) of the Federal Rules of Evidence, we may take judicial notice of
“a fact that is not subject to reasonable dispute” because that fact is “generally known” or “can be
accurately and readily determined from sources whose accuracy cannot reasonably be questioned.”
“Judicial records are a source of ‘reasonably indisputable accuracy’ when they record some
judicial action such as dismissing an action, granting a motion, or finding a fact. Courts can
properly notice prior judicial acts for the purpose of acting upon them.” United States v. Ferguson,
681 F.3d 826, 834 (6th Cir. 2012) (quoting 21B Charles Alan Wright et al., Federal Practice and
Procedure § 5106.4 (2d ed. 2005)).
Notably, Goff did not seek to include these documents in the record at any point during the
proceedings before the district court. Although Goff asks us to take judicial notice of documents
constituting part of another court’s judicial record, he also asks us to consider the substance of
these documents in support of his appeal. He is thus asking us to supplement the record on appeal
with documents he failed to present to the district court for consideration.
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This Court traditionally will not take judicial notice of documents in order to allow parties
to supplement the record with documents they failed to first present to the district court for
consideration. See, e.g., Davis v. City of Clarksville, 492 F. App’x 572, 578 (6th Cir. 2012)
(declining to take judicial notice of exhibits from other litigation because appellant requested that
the Court rely on the factual assertions within those exhibits in an effort to supplement the record).
Accordingly, we deny Goff’s motion to take judicial notice of these documents and decline to
consider his arguments related to these documents.
B. Standard of Review
“We review a district court’s ruling on a motion to compel arbitration de novo.” Richmond
Health Facilities v. Nichols, 811 F.3d 192, 194 (6th Cir. 2016). “Before compelling an unwilling
party to arbitrate . . . the court must engage in a limited review to determine whether the dispute is
arbitrable; meaning that a valid agreement to arbitrate exists between the parties and that the
specific dispute falls within the substantive scope of that agreement.” Id. at 195 (quoting Javitch
v. First Union Sec., Inc., 315 F.3d 619, 624 (6th Cir. 2003)). “In order to show that the validity of
the agreement is ‘in issue,’ the party opposing arbitration must show a genuine issue of material
fact as to the validity of the agreement to arbitrate.” Great Earth Cos., Inc. v. Simons, 288 F.3d
878, 889 (6th Cir. 2002). Thus, the Court views all facts and inferences in the light most favorable
to the non-moving party to determine whether “a reasonable finder of fact could conclude that no
valid agreement to arbitrate exists.” Id.Under the Federal Arbitration Act (“FAA”), arbitration agreements are “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. The FAA “is at bottom a policy guaranteeing the enforcement of private
contractual agreements” arising from a “liberal federal policy favoring arbitration agreements.”
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Mitsubishi Motors Corp. v. Soler Chrysler–Plymouth, Inc., 473 U.S. 614, 625 (1985) (quoting
Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)).
“We review the enforceability of an arbitration agreement according to the applicable state
law of contract formation.” Morrison v. Circuit City Stores, Inc., 317 F.3d 646, 666 (6th Cir.
2003). Both parties agree that Ohio law governs the arbitration clause at issue. “In applying state
law, we anticipate how the relevant state’s highest court would rule in the case and are bound by
controlling decisions of that court. Intermediate state appellate courts’ decisions are also viewed
as persuasive unless it is shown that the state’s highest court would decide the issue differently.”
In re Dow Corning Corp., 419 F.3d 543, 549 (6th Cir. 2005) (citation omitted). “[W]here a state
appellate court has resolved an issue to which the high court has not spoken, we will normally treat
[those] decisions . . . as authoritative absent a strong showing that the state’s highest court would
decide the issue differently,” regardless of whether the decision is published or unpublished. Aarti
Hospitality, LLC v. City of Grove City, Ohio, 350 F. App’x 1, 7-8 (6th Cir. 2009) (alterations in
original) (quoting Hisrich v. Volvo Cars of N. Am., Inc., 226 F.3d 445, 449 n.3 (6th Cir. 2000)).
“We may refuse to follow intermediate appellate court decisions where we are persuaded that they
fail to reflect state law correctly, but we ‘should not reject a state rule just because it was not
announced by the highest court of the state,’ even if we believe that the rule is ‘unsound.’” Ziebart
Int’l Corp. v. CNA Ins. Cos., 78 F.3d 245, 251 (6th Cir. 1996) (quoting FL Aerospace v. Aetna
Cas. & Sur. Co., 897 F.2d 214, 219 (6th Cir. 1990)).
In evaluating the validity of the arbitration agreement, the Court must only analyze the
arbitration clause itself; arguments concerning the validity of the contract as a whole are inapposite
at this stage. Great Earth Cos., 288 F.3d at 889-90. “[G]enerally applicable state-law contract
defenses like fraud, forgery, duress, mistake, lack of consideration or mutual obligation, or
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unconscionability, may invalidate arbitration agreements.” Cooper v. MRM Inv. Co., 367 F.3d
493, 498 (6th Cir. 2004). However, “state law is preempted to the extent it ‘stands as an obstacle
to the accomplishment and execution of the full purposes and objectives’ of the FAA.” Lamps
Plus, Inc. v. Varela, 139 S. Ct. 1407, 1415 (2019) (quoting AT&T Mobility LLC v. Concepcion,
563 U.S. 333, 352 (2011)). To that end, “any doubts concerning the scope of arbitrable issues
should be resolved in favor of arbitration, whether the problem at hand is the construction of the
contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.” Moses,
460 U.S. at 24-25.
C. Scope of Review
On appeal, Goff argues that the arbitration clause in the Advantage Agreement is
unenforceable because it (1) is an illusory agreement; (2) contains essential terms that are
insufficiently definite, rendering it impossible for a “meeting of the minds” to have occurred; and
(3) is unconscionable. Nationwide vehemently asserts that Goff failed to adequately raise any
argument aside from his unconscionability challenge in his briefing before the district court and
thus cannot do so now. We agree with Nationwide.
While the case was still pending in the Central District of California, Nationwide filed a
motion to dismiss Goff’s First Amended Complaint. In response, Goff filed an opposition brief
arguing that the arbitration clause is illusory and lacked mutuality of obligation and, separately,
that the arbitration clause is unconscionable. After the case was transferred to the Southern District
of Ohio, Nationwide filed an amended motion to dismiss. In his response to Nationwide’s
amended motion dismiss, Goff chose to solely argue that the arbitration clause is unconscionable.
Although Goff mentioned the illusory nature of the arbitration agreement and that it lacked
mutuality of obligation in his revised opposition brief, these arguments were presented as sub-
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arguments in support of Goff’s unconscionability challenge. In turn, the district court only
addressed Goff’s unconscionability challenge.
This Court typically will not consider arguments presented for the first time on appeal.
United States v. Ellison, 462 F.3d 557, 560 (6th Cir. 2006). Accordingly, in light of Goff’s decision
to change his argument in response to Nationwide’s amended motion to dismiss, we limit our
review solely to his arguments regarding the unconscionability of the arbitration agreement and
decline to exercise our discretion to consider arguments a party failed to properly raise before the
district court. See United States v. Martin, 438 F.3d 621, 627 (6th Cir. 2006) (“The general
principle ‘that courts of appeals do not consider claims or arguments that were not raised before
the district court,’ however, ‘is a prudential rule, not a jurisdictional one.’” (quoting United States
v. Hayes, 218 F.3d 564, 567-78 (6th Cir. 2000))).
D. Unconscionability
Goff argues that the arbitration clause in the Advantage Agreement is unconscionable.
Ohio’s unconscionability doctrine has two components: “‘(1) substantive unconscionability, i.e.,
unfair and unreasonable contract terms, and (2) procedural unconscionability, i.e., individualized
circumstances surrounding each of the parties to a contract such that no voluntary meeting of the
minds was possible.’ Both elements must be present to find a contract unconscionable.” Jeffrey
Mining Prods., L.P. v. Left Fork Mining Co., 758 N.E.2d 1173, 1181 (Ohio Ct. App. 2001) (internal
citation omitted) (quoting Dorsey v. Contemporary Obstetrics & Gynecology, Inc., 680 N.E.2d
240, 243 (Ohio Ct. App. 1996)). “The party asserting unconscionability of a contract bears the
burden of proving that the agreement is both procedurally and substantively unconscionable.”
Eastham v. Chesapeake Appalachia, LLC, 754 F.3d 356, 365 (6th Cir. 2014) (internal citation
(quoting Hayes v. Oakridge Home, 908 N.E.2d 408, 412 (Ohio 2009)).
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Goff first contends that the district court erred in rigidly evaluating whether the arbitration
clause is both procedurally and substantively unconscionable, arguing that Ohio law dictates that
analysis of these elements is to be done along a spectrum. For support, Goff points to DeVito v.
Autos Direct Online, Inc., which states that “the more substantively oppressive the contract term,
the less evidence of procedural unconscionability is required.” 37 N.E.3d 194, 201 (Ohio Ct. App.
2015) (en banc) (citing 1 E. Allan Farnsworth, Farnsworth on Contracts, § 4.28, at 585 (3d ed.
2004)). Goff’s argument is unpersuasive. Although Ohio law dictates that a court’s findings as to
“whether an arbitration agreement is procedurally unconscionable . . . must be considered in
tandem with the analysis on substantive unconscionability,” Goff must still show that the
arbitration agreement at issue is both procedurally and substantively unconscionability. Hayes,
908 N.E.2d at 412. Thus, the district court did not err in declining to address whether the
arbitration agreement is substantively unconscionable upon finding that it was not procedurally
unconscionable.
To show that an agreement is procedurally unconscionable, the party asserting the
agreement’s unconscionability must demonstrate that “the individualized circumstances
surrounding the contract were so unfair as to cause there to be no voluntary meeting of the minds.”
Sikes v. Ganley Pontiac Honda, Inc., No. 82889, 2004 WL 67224, at *2 (Ohio Ct. App. Jan. 15,
2004).
In determining procedural unconscionability, Ohio courts look to “factors bearing
on the relative bargaining position of the contracting parties, including their age,
education, intelligence, business acumen and experience, relative bargaining
power, who drafted the contract, whether the terms were explained to the weaker
party, and whether alterations in the printed terms were possible.”
Morrison, 317 F.3d at 666 (quoting Cross v. Carnes, 724 N.E.2d 828, 837 (Ohio Ct. App. 1998)).
“The crucial question is whether ‘each party to the contract, considering his obvious education or
lack of it, [had] a reasonable opportunity to understand the terms of the contract, or were the
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important terms hidden in a maze of fine print . . . ?’” Id. (quoting Ohio Univ. Bd. of Trs. v. Smith,
724 N.E.2d 1155, 1161 (Ohio Ct. App. 1999)) (alterations in original).
To support his argument that the arbitration clause at issue is procedurally unconscionable,
Goff points primarily to Arnold v. Burger King, 48 N.E.3d 69 (Ohio Ct. App. 2015). Like the
provision at issue in this case, under the arbitration clause at issue in Arnold the appellees retained
the ability to change the rules and procedures of arbitration at any time without notifying the
appellant, which the court held was substantively unconscionable. Id. at 89-90. Although the
Arnold court determined that the arbitration agreement was procedurally unconscionable on other
grounds, it noted in a footnote that “[t]his may also be considered an element of procedural
unconscionability as it involves the acquiescence to future, unknown, and uncontrollable terms,
subject to change without notice at any time.” Id. at 89 n.10.
In opposition, Nationwide points to Smith v. Nationwide Mutual Insurance Company, a
subsequent Ohio appellate court case that addressed whether the identical arbitration clause at
issue in this case was procedurally unconscionable due to Nationwide’s unfettered power to alter
the arbitration rules and procedures. 120 N.E.3d 72 (Ohio Ct. App. 2018). In its analysis, the
Smith court outright rejected the Arnold court’s conclusion, noting that procedural
unconscionability specifically pertains to the formation of the agreement. Id. at 78-79. Reasoning
that Nationwide’s authority to alter the rules and procedures of arbitration at any time “is a
substantive right that Nationwide may invoke during future dispute-resolution proceedings
between the parties, not one that it could invoke during the formation of the Advantage
Agreement,” the Smith court concluded that the “provision does not support [an] argument for
procedural unconscionability.” Id. at 79.
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As the district court noted, this leaves the Court with two conflicting Ohio appellate cases.
The district court found Smith’s reasoning slightly more persuasive, agreeing that the argument
regarding Nationwide’s authority under the agreement to alter the arbitration rules and procedures
at any time related to substantive unconscionability, not procedural unconscionability.
Although the Smith court determined that the unilateral modification right at issue was a
“substantive right” that Nationwide could not “invoke during the formation of the Advantage
Agreement,” the court failed to explain why this precludes review of such a provision in the
procedural-unconscionability context with regard to the definiteness of the contract’s terms.
Smith, 120 N.E.3d at 79. Indeed, as the Smith court acknowledged, “[p]rocedural
unconscionability concerns ‘whether alterations to the contract were possible’ during the formation
of the contract containing the arbitration provision.” Id. (quoting Shearer v. VCA Antech, Inc., No.
11AP-44, 2011 WL 4600444, at *5 (Ohio Ct. App. Oct. 6, 2001)). Further, one of Nationwide’s
repeated assertions is that the terms of Nationwide’s arbitration rules and procedures were
appropriately incorporated by reference into the arbitration agreement. Thus, it appears that
Nationwide effectively concedes that the terms of its arbitration rules and procedures were
intended to frame its agreement to arbitrate any disputes arising between itself and Goff.
Accordingly, this “substantive right” to modify the terms of the agreement at any time also
inherently authorizes Nationwide to alter the terms of the arbitration agreement during the
contract’s formation. As the Arnold court noted, however, “no single factor alone determines
whether a contract is procedurally unconscionable; a court must consider the totality of the
circumstances.” 48 N.E.3d at 86. Thus, as explained below, Goff’s failure to establish that the
totality of the circumstances indicate that “the individualized circumstances surrounding the
contract were so unfair as to cause there to be no voluntary meeting of the minds” leads us to
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conclude that the arbitration agreement is not procedurally unconscionable. Sikes, 2004 WL
67224, at *2.
Goff contends that the clause is procedurally unconscionable due to the parties’ difference
in bargaining power and because the contract at issue is an adhesion contract. Aside from
mentioning the “adhesive nature” of the contract at issue, Goff does not further develop this
argument. This Court has “cautioned that ‘[i]ssues adverted to in a perfunctory manner,
unaccompanied by some effort at developed argumentation, are deemed waived,’ and that ‘[i]t is
not sufficient for a party to mention a possible argument in the most skeletal way, leaving the court
to . . . put flesh on its bones.’” United States v. Robinson, 390 F.3d 853, 886 (6th Cir. 2004)
(quoting McPherson v. Kelsey, 125 F.3d 989, 995-96 (6th Cir. 1997)). Accordingly, the Court
need not address whether this is an adhesion contract.
As to Goff’s imbalance-of-bargaining-power argument, the Ohio appellate court already
squarely addressed the issue in Smith. As Nationwide points out in its brief:
Considering the power dynamic between Nationwide and an Advantage Program
agent (like Goff), the appellate court in Smith held that “the difference in bargaining
power” was not “great enough to support a finding of procedural
unconscionability,” as the agent had, among other things, “worked with Nationwide
for over two years before . . . enter[ing] the Advantage Program.” Smith, 120
N.E.3d at 80.
Prior to signing this agreement, Goff worked for Nationwide for ten years, giving him ample
opportunity to develop a thorough understanding of the Advantage Program he was joining.
Although Nationwide, as the drafter of the agreement, and Goff’s employer clearly retained an
advantage in bargaining power, Goff has failed to show that it was a sufficient imbalance to
warrant finding the contract procedurally unconscionable on those grounds. In light of Goff’s
relative sophistication as well as his familiarity and experience with the Advantage Program due
to his decade-long employment history with Nationwide, we find that the arbitration agreement is
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not procedurally unconscionable. Further, as explained above, because we find that the provision
is not procedurally unconscionable, we need not determine whether it is substantively
unconscionable.
III.
For the forgoing reasons, we AFFIRM the district court’s dismissal of Goff’s First
Amended Complaint and its order compelling arbitration.
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