Lindsey v. Travelers Commercial Ins. Co. al ( 2022 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 | Brent Lindsey, No. 2:19-ev-01855-KJM-CKD 12 Plaintiff, ORDER 13 v. 14 Travelers Commercial Insurance Co.., et al., 1S Defendants. 16 17 This employment discrimination case was dismissed and submitted to arbitration. The 18 | arbitrator found in favor of defendant Travelers Commercial Insurance Company and against 19 | plaintiff Brent Lindsey. As explained below, the arbitrator refused “to hear evidence pertinent 20 | and material to the controversy” under the Federal Arbitration Act, so Mr. Lindsey’s motion to 21 | vacate the arbitration award is granted. 22 | I. BACKGROUND 23 This case began in California state court in 2019. See generally Compl., Not. Removal 24 | Ex. A, ECF No. 1-1. Mr. Lindsey alleged he had worked as a claims adjuster at Travelers for 25 | several years and that Travelers had discriminated against him and harassed him. See id. □□ 11- 26 | 24. He asserted eleven claims under federal and state law. See id. 27-119. For present 27 | purposes, only his ninth claim is relevant. In that claim, he alleged Travelers had denied him 28 | promotions and raises because of his race, which is African American. See id. 88-94. Under 1 the California Fair Employment and Housing Act, which he cited in his complaint, it is unlawful 2 for an employer to discriminate on the basis of race when setting compensation or the “terms, 3 conditions, or privileges of employment.” Cal. Gov’t Code § 12940(a). 4 Travelers removed the case to this court, ECF No. 1, then moved to compel arbitration, 5 ECF No. 6. Before that motion was resolved, the parties stipulated to dismiss the action and to 6 submit the case to arbitration. ECF No. 17. Arbitration then began before the American 7 Arbitration Association. See Arbitration Agreement, Anderson Decl. Ex. B, ECF No. 22-1. The 8 parties selected David G. Freedman, an experienced attorney, as their arbitrator. See id. ¶ 4 & 9 Ex. C, ECF No. 22-1; see also id. Ex. B at 3 (describing the selection process). 10 During discovery, Mr. Lindsey requested documents, propounded interrogatories, and 11 noticed depositions. See id. ¶¶ 6–7 & Ex. E, ECF No. 22-1. Travelers complied with many of 12 these discovery requests, and Mr. Lindsey took four depositions. See id. But a dispute arose over 13 one of Mr. Lindsey’s document requests, which he submitted alongside his request for deposition 14 testimony by a Travelers corporate representative. See Kottke Decl. Ex. C, ECF No. 19-1. In that 15 request, he asked for copies of “all documents showing pay of other adjusters in [Mr. Lindsey’s] 16 department at during [sic] relevant periods of their employment with [Travelers].” Id. at 9. 17 Based on a conversation with a former manager, Mr. Lindsey believed Travelers had paid him 18 much less than it had paid his similarly qualified white coworkers. See Mot. Compel at 2, Kottke 19 Decl. Ex. R, ECF No. 19-1. Travelers objected and refused to produce the records. See id. 20 Mr. Lindsey moved to compel three times. Discovery Order No. 1, Kottke Decl. Ex. D, 21 ECF No. 19-1; R. Kottke Email to D. Freedman (Nov. 13, 2020), Kottke Decl. Ex. M at 2, ECF 22 No. 19-1; Mot. Compel, Kottke Decl. Ex. R, ECF No. 19-1. The arbitrator denied all three 23 motions. See id. He instead granted summary judgment to Travelers. See generally Ruling on 24 Summ. J., Kottke Decl. Ex. T, ECF No. 19-1. On the ninth claim, the arbitrator concluded 25 Lindsey had not cited evidence to show “race was even a factor” in Travelers’ pay and promotion 26 decisions. Id. at 12. The arbitrator thus entered a final award for Travelers. See Final Award, 27 Kottke Decl. Ex. W, ECF No. 19-1. 1 Mr. Lindsey then filed his current petition to vacate the arbitrator’s award. See generally 2 Pet., ECF No. 19. He limits his motion to his ninth claim and argues the award should be vacated 3 with respect to that claim under the Federal Arbitration Act. See id. at 1 (citing Compl. ¶ 89 and 4 9 U.S.C. § 10). He argues the arbitrator refused “to hear evidence pertinent and material to the 5 controversy.” Pet. at 1 (quoting 9 U.S.C. § 10(a)(3)). Travelers opposes the motion, see 6 generally Opp’n, ECF No. 22, and Lindsey has replied, see generally Reply, ECF No. 23. The 7 court submitted the matter without hearing oral argument. Min. Order 24. 8 II. LEGAL STANDARD 9 Under the Federal Arbitration Act, a federal district “must confirm an arbitration award 10 unless it is vacated, modified or corrected as prescribed in §§ 10 and 11.” Hall Street Assocs., 11 LLC v. Mattell, Inc., 552 U.S. 576, 582 (2008) (citations and quotation marks omitted). “Section 12 10 lists grounds for vacating an award, while § 11 names those for modifying or correcting one.” 13 Id. The only grounds for vacating an arbitration award are, as a result, those listed in § 10. U.S. 14 Life Ins. Co. v. Superior Nat’l Ins. Co., 591 F.3d 1167, 1173 (9th Cir. 2010). That section permits 15 a district court to vacate an award “where the arbitrators were guilty of misconduct . . . in refusing 16 to hear evidence pertinent and material to the controversy.” 9 U.S.C. § 10(a)(3). The party 17 seeking to vacate an arbitration award must show it is entitled to that relief. U.S. Life Ins., 591 18 F.3d at 1173. If “procedural aberrations rise to the level of affirmative misconduct,” the court 19 may not settle the merits itself. United Paperworkers Int’l Union, AFL-CIO v. Misco, Inc., 484 20 U.S. 29, 40 n.10 (1987). “Instead, the court should simply vacate the award, thus leaving open 21 the possibility of further proceedings if they are permitted under the terms of the agreement.” Id. 22 III. DISCUSSION 23 The Supreme Court and Ninth Circuit have set a high bar for those who move to vacate an 24 arbitration award under § 10(a)(3). A federal court’s review “is ‘both limited and highly 25 deferential.’” Schoenduve Corp. v. Lucent Techs., Inc., 442 F.3d 727, 730 (9th Cir. 2006) 26 (quoting Poweragent Inc. v. Elec. Data Sys. Corp., 358 F.3d 1187, 1193 (9th Cir. 2004)). When a 27 court assesses a claim of misconduct or misbehavior under section 10(a)(3), it does not ask 28 whether the arbitrator’s decisions were right or wrong; rather, it asks “whether the parties 1 received a fundamentally fair hearing.” Move, Inc. v. Citigroup Global Markets, Inc., 840 F.3d 2 1152, 1158 (9th Cir. 2016). “A hearing is fundamentally fair if the minimal requirements of 3 fairness—adequate notice, a hearing on the evidence, and an impartial decision by the 4 arbitrator—are met.” Carpenters 46 N. Cal. Counties Conference Bd. v. Zcon Builders, 96 F.3d 5 410, 413 (9th Cir. 1996). A hearing is not fundamentally fair if the arbitrator’s procedure was a 6 “sham, substantially inadequate or substantially unavailable.” Fed. Deposit Ins. Corp. v. Air Fla. 7 Sys., Inc., 822 F.2d 833, 842 (9th Cir. 1987) (citations and quotation marks omitted). 8 These general rules extend to an arbitrator’s evidentiary decisions. Arbitrators enjoy 9 “wide discretion to require the exchange of evidence, and to admit or exclude evidence, how and 10 when they see fit.” U.S. Life Ins., 591 F.3d at 1175 (quoting Indus. Risk Insurers v. M.A.N. 11 Gutehoffnungshutte GmbH, 141 F.3d 1434, 1444 (11th Cir. 1998)). As the First Circuit has put it, 12 § 10(a)(3) “does not require arbitrators to consider every piece of relevant evidence presented to 13 them.” Doral Fin. Corp. v. Garcia-Velez, 725 F.3d 27, 31 (1st Cir. 2013). An award can be 14 vacated under § 10(a)(3) only if an error was “in bad faith or so gross as to amount to affirmative 15 misconduct,” United Paperworkers, 484 U.S. at 40, thus depriving the parties of a 16 “fundamentally fair” hearing, Move, 840 F.3d at 1158. 17 Three frequently cited and persuasive decisions by the First, Second, and Fifth circuits 18 illustrate the kinds of refusals to consider evidence that have run afoul of § 10(a)(3). The first is 19 Gulf Coast Industries Workers Union v. Exxon Co., USA, 70 F.3d 847 (5th Cir. 1995), an 20 employment dispute. The employer had hired an inspector to search for drugs in its refinery. See 21 id. at 848. The inspector found marijuana in a car that belonged to an employee whose 22 responsibilities included the handling of “highly volatile gasses and liquids and high temperatures 23 and pressures.” Id. The employee refused a drug test, so the company fired him. Id. at 849. 24 During the ensuing arbitration, the company attempted to introduce test results showing that what 25 the inspector had found in the employee’s car was in fact marijuana. See id. at 849. The 26 arbitrator said that was not necessary; “it was already in evidence.” Id. But after the hearings 27 were complete, the arbitrator ordered the employer to reinstate the employee with backpay 28 because the employer had not proven the inspector had found marijuana. Id. “The arbitrator then 1 spent five pages of his decision in a diatribe on the unreliability of hearsay.” Id. This constituted 2 misconduct. See id. at 850. 3 Second, in Hoteles Condado Beach, La Concha & Convention Center v. Union de 4 Tronquistas Local 901, 763 F.2d 34 (1st Cir. 1985), another employment dispute, a man had been 5 fired after a guest claimed he had exposed himself to her. See id. at 36. The employee was later 6 convicted of indecent exposure, but his conviction was overturned on appeal. Id. In the 7 employment arbitration that followed, the guest, a married woman, agreed to testify, but only if 8 her husband could be there with her when she did. See id. at 36–37. The arbitrator denied that 9 request, so the wife refused to testify. Id. at 37. In lieu of the woman’s live testimony, the 10 arbitrator permitted the hotel to introduce a transcript of the couple’s testimony during the 11 criminal case. Id. But the arbitrator then refused to give the transcript any weight and found in 12 the employee’s favor. Id. at 40. This counted as was misconduct. “The testimony was 13 unquestionably relevant,” and “no other evidence was available to substantiate or to refute the 14 Company’s charges.” Id. 15 Finally, in Tempo Shain Corp. v. Bertek, Inc., 120 F.3d 16 (2d Cir. 1997), a contract 16 dispute, a witness with “crucial testimony” was temporarily unavailable due to a family medical 17 problem. See id. at 17–18. The arbitration panel decided not to wait for the witness to be 18 available because it could consider several letters and reports instead. See id. at 18, 20. These 19 letters and reports were “not at all representative” of what the witness would likely have said if he 20 had testified. See id. at 20. The panel’s refusal to hear his testimony was “misconduct” under 21 § 10(a)(3). 22 This case is an example of a similarly inexplicable refusal to hear “evidence pertinent and 23 material to the controversy.” 9 U.S.C. § 10(a)(3). The arbitrator denied Mr. Lindsey’s request 24 for payroll data because—according to the account of Travelers’ attorney, which Mr. Lindsey 25 does not dispute—salary comparisons were irrelevant. See Anderson Decl. ¶ 12, ECF No. 22-1. 26 Travelers then moved for summary judgment. It contended among other things that Mr. Lindsey 27 had no evidence to prove any Travelers employees who were not African American had been 28 treated more favorably. See Mot. Summ. J. at 13–14, Anderson Decl. Ex. A, ECF No. 22-1. 1 While Travelers’ motion was pending, Mr. Lindsey again moved to compel production of 2 information about what it had paid its other employees. See Mot. Compel, Kottke Decl. Ex. R, 3 ECF No. 19-1. He explained why he thought these records were relevant: he had spoken to a 4 manager about his pay before he had left the company, and the manager had told him he was 5 making about $30,000 to $40,000 less than white employees with similar or less experience. See 6 id. at 2. He had said the same thing in response to Travelers’ interrogatories. See Resp. to Form 7 Interrog. No. 201.3, Kottke Decl. Ex. A, ECF No. 19-1. 8 Rather than ruling on the motion to compel, the arbitrator granted summary judgment to 9 Travelers. See generally Ruling on Summ. J., Kottke Decl. Ex. T, ECF No. 19-1. On the 10 disputed ninth claim, the arbitrator concluded Lindsey had not cited evidence to show “race was 11 even a factor” in Travelers’ pay and promotion decisions. Id. at 12. According to the arbitrator, 12 Mr. Lindsey had relied solely “on his uncorroborated opinion that his race was a reason he did not 13 receive the promotions.” Id. Nor had he offered evidence “to support his allegation that race was 14 even a factor in his compensation.” Id. In conclusion, the arbitrator emphasized once more that 15 Mr. Lindsey’s “subjective belief that his race was a reason he did not receive a raise is 16 insufficient to raise a triable issue.” Id. After granting summary judgment to Travelers, the 17 arbitrator denied Mr. Lindsey’s motion to compel production of the salary data. See Case Mgmt. 18 Order No. 5, Kottke Decl. Ex. S, ECF No. 19-1. Now that summary judgment had been granted, 19 the arbitrator explained, the discovery dispute was moot. See id. 20 In short, the arbitrator denied Mr. Lindsey the very evidence he later faulted him for not 21 producing. That decision rendered the proceedings fundamentally unfair. Any differences 22 between Mr. Lindsey’s compensation and the compensation Travelers had paid its similarly 23 qualified white employees would corroborate Mr. Lindsey’s claims of disparate treatment in 24 circumstances suggestive of discrimination, supporting his prima facie case. See Guz v. Bechtel 25 Nat. Inc., 24 Cal. 4th 317, 354 n.20 (2000). Statistical disparities between salaries could also 26 prove a facially neutral policy had a “disproportionate adverse effect,” id., and thus could have 27 supported a disparate impact claim, see Jumaane v. City of Los Angeles, 241 Cal. App. 4th 1390, 28 1404–05 (2015). 1 This case is thus similar to Gulf Coast, 70 F.3d 847, Hoteles Condado, 763 F.2d 34, and 2 Tempo Shain, 120 F.3d 16. In each of those cases, the arbitrator excluded or refused to consider 3 the only evidence a party offered to support a crucial aspect of its claim. In Gulf Coast, it was the 4 company’s evidence that it had found drugs in its employee’s car. See 70 F.3d at 849–50. In 5 Hoteles Condado, it was the only testimony that could have proven or refuted the hotel’s charge 6 that its employee had exposed himself to a guest. See 763 F.2d at 40. In Tempo Shain, it was 7 crucial testimony about the disputed negotiations and contract. See 120 F.3d at 18–20. In this 8 case, it was evidence that Travelers had paid Mr. Lindsey less than its other employees. 9 For all of the foregoing reasons, the court will grant the motion to vacate. While the 10 court “also has the authority to remand for further proceedings when this step seems appropriate,” 11 United Paperworkers, 484 U.S. at 40 n.10, plaintiff has not requested remand and the court 12 declines to order the matter remanded on the present record. If either or both parties request an 13 order of remand, the court will consider the question at that time. 14 IV. CONCLUSION 15 The motion to vacate (ECF No. 19) is granted. 16 IT IS SO ORDERED. 17 DATED: October 19, 2022.