Fox v. Computer World Services Corp. ( 2013 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
____________________________________
)
PHILLIP W. FOX, )
)
Plaintiff, )
)
v. ) Civil Action No. 12-0374 (ABJ)
)
COMPUTER WORLD SERVICES )
CORP., et al., )
)
Defendants. )
____________________________________)
MEMORANDUM OPINION
Plaintiff Phillip Fox has sued his former employers: Computer World Services Corp.
(“CWS”); C2 Essential, Inc. (“C2”); Farrukh Hameed, President and CEO of CWS; and
Kimberly Lundy, Director of Strategic Human Resources for C2. He brings this action under the
District of Columbia Human Rights Act (“DCHRA”), D.C. Code § 2-1402.11 et seq, and District
of Columbia common law, alleging age discrimination, retaliation, and failure to pay earned
bonus compensation. Compl. [Dkt. # 1-1] ¶¶ 1, 61–109. In response, defendants have moved to
dismiss the case on the grounds that the Court should compel Fox to arbitrate his claims in
accordance with an arbitration agreement between the parties. For the reasons set forth below,
the Court concludes that the arbitration agreement is enforceable and that Fox must arbitrate his
claims against all defendants. Therefore, it will grant defendants’ motions to dismiss and compel
arbitration.
BACKGROUND
The following facts are undisputed except where noted. Defendant CWS is an
information technology solutions and network operations company that outsources its recruiting,
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human resources, and other back-office administrative functions to co-defendant C2. Compl. ¶¶
5, 6; Fox Affidavit, Ex. 1 to Pl.’s Reply in Opp. to Defs.’ Mot. to Dismiss [Dkt. # 24-1] (“Fox
Aff.”) ¶¶ 3, 7. The relationship between CWS and C2 is governed by a joint employment
agreement whereby C2 acts as a “co-employer” and “share[s] many employer liabilities” with
CWS. Compl. ¶ 12. Pursuant to this relationship, C2 recruited Fox for employment with CWS
and on September 25, 2009, Fox received an employment offer letter from CWS. Fox Aff. ¶ 3;
CWS Employment Offer Letter, Ex. 1 to Compl. (“Employment Offer Letter”). The letter
outlined the terms of Fox’s employment with CWS including the requirement that “any disputes
arising out of the employment relationship [] be resolved by arbitration . . . .” Employment Offer
Letter at 3. The letter directed Fox to indicate his acceptance of the offer and its terms by
signing and returning the letter. Id. at 2. Fox never signed the offer letter but he asserts in his
complaint that he “accepted” its terms and began working for CWS on September 30, 2009, as
the Director of Bids and Proposals/Chief Engineer. Compl. ¶¶ 9–10, 13.
On his first day of work, Fox attended a new employee orientation that was conducted by
a C2 employee. Fox Aff. ¶ 8; see also Catherine Gouldin Affidavit, Ex. A to C2 Reply in Supp.
of Mot. to Compel. Arb. (“C2 Reply”) [Dkt. # 26-1] ¶ 3. During the orientation, the C2
employee asked Fox to review, acknowledge, and complete a number of online forms including
an arbitration agreement that provided in part:
I understand that the term “C2” in this Agreement is defined to include
C2, any other entity that is a signatory to this Agreement including
without limitation any client who may be a signatory to this Agreement,
any subsidiary and affiliated entities . . . . All parties to this agreement
agree to the resolution by arbitration of all claims, disputes or
controversies (“Claims”), whether or not arising out of my employment, or
its termination, that all or any of the entities identified collectively as “C2”
may have against me or that I may have against all or any such C2 entities,
or against their respective officers, directors, employees or agents. The
claims covered by this Agreement include, but are not limited to, Claims
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for wages or other compensation due; Claims for breach of any contract or
covenant (express or implied); tort Claims; Claims for discrimination of
any kind . . . and Claims for violation of any federal, state, or other
governmental law, statute, regulation, ordinance . . .
[Administrative Claims:] Except for claims that I may have for workers’
compensation or unemployment compensation, all parties to this
agreement agree not to initiate or prosecute any lawsuit or administrate
action in any way related to any Claim covered by this Agreement, other
than as set out in this Agreement.
Required Notice of All Claims and Statute of Limitations: All parties
to this agreement agree that one bringing a Claim must give written notice
of any such Claim to the other party within six (6) months. . . . Otherwise,
the claim shall be void and deemed waived even if there is a federal or
state statute of limitations that would have given more time to pursue such
Claim.
Discovery: Each party shall have the right to take the deposition of one
individual and any expert witnesses designated by another party. . . .
Additional discovery may be had only where the arbitrator . . . so orders,
upon a showing of substantial need.
Either party, at its expense, may arrange for and pay the cost of a court
reporter . . . .
Arbitration Fees and Costs: All parties to this agreement agree to share
the fees and costs of the arbitrator. If I am initiating the claim, I am
responsible for $150 towards the filing fee . . . Each party will deposit
funds for its share of the arbitrator’s fee, in an amount and manner
determined by the arbitrator. . . .
Agreement to Arbitrate, Ex. 2 to Compl. at 1–2; Fox Aff. ¶ 9. The arbitration agreement
(“Agreement”) included signature lines for “Employee” on one side and for “C2 Portfolio
Essentials, Inc.” and a “Co-Employer” on the other side. Agreement to Arbitrate at 3. Fox
electronically signed the arbitration agreement on September 30, 2009, and a C2 representative
signed it two days later on October 2, 2009. Id. CWS never signed the signature line for a “co-
employer” and was never mentioned by name in the agreement. Id.In his complaint, Fox asserts that on March 7, 2011, defendants Hameed, president and
CEO of CWS, and Lundy, Director of Strategic Human Resources for C2, “summarily
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terminated [him] – effective immediately – because his ‘position was being eliminated due to the
lack of new business and the need for his technical skill set.’” Compl. ¶ 37. In an exchange of
letters between March 11 and May 6, 2011, Fox accused CWS and C2 of terminating him
because of his age in violation of the Age Discrimination in Employment Act and demanded
additional compensation according to the terms of the CWS employment offer letter. Fox
Letters to CWS and C2 (March 11, 2011 and April 1, 2011), Exs. 3–4 to Compl. Both
companies disputed Fox’s allegations and directed Fox to submit his claims to arbitration
pursuant to the arbitration agreement. Letters from CWS and C2 and Their Attorneys (March
28, 2011 and May 6, 2011), Exs. 4 and 6 to Compl. In an April 1, 2011 letter to defendants, Fox
questioned the enforceability of the arbitration agreement and refused to submit his claims to
arbitration. Fox Letter to CWS and C2, Ex. 4 to Compl. at 1–2. On August 23, 2011, Fox filed a
discrimination and retaliation claim against CWS with the Equal Employment Opportunity
Commission (“EEOC”). Fox EEOC Claim, Ex. B to C2 Reply [Dkt. # 26-2].
On January 25, 2012, Fox filed an action against CWS and C2 under the DCHRA and
D.C. common law in the District of Columbia Superior Court alleging age discrimination,
retaliation, and failure to pay earned bonus compensation. Compl. ¶¶ 61–109. In his complaint
and his later pleadings, Fox asserts that the arbitration agreement with C2 is unenforceable
because the provisions regarding the filing of administrative claims, the statute of limitations,
discovery, and fee-sharing are unconscionable. Compl. ¶ 16; Pl.’s Opp. to Defs.’ Mot. to
Dismiss [Dkt. # 24] (“Pl.’s Opp.”) at 18–19. He further argues that he did not agree to arbitrate
his disputes with CWS because CWS did not sign the arbitration agreement. Compl. ¶ 15.
After removing the case to this Court, the C2 defendants (“C2”) filed a motion to compel
arbitration and dismiss Fox’s complaint, or, in the alternative, to stay the underlying proceedings
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pending the outcome of the arbitration. C2 Mem. in Supp. of Mot. to Compel Arb. [Dkt. # 6]
(“C2 Mem.”) at 1. In its motion, C2 contends that the arbitration agreement is not
unconscionable but to address Fox’s concerns about the cost of arbitration, it offered to waive the
fee-sharing provision and bear all the arbitration costs. C2 Mem. at 10–11. The CWS
defendants (“CWS”) also moved to compel arbitration and dismiss Fox’s complaint under
Federal Rules of Civil Procedure 12(b)(1) and (b)(6), or, in the alternative, to stay the
proceedings pending arbitration under Section 3 of the Federal Arbitration Act (“FAA”), 9
U.S.C. § 1 et seq. CWS and Hameed Mot. to Dismiss, or Stay Ct. Proceedings and Compel Arb.
and Mem. in Supp. [Dkt. # 7] (“CWS Mem.”) at 1. In its motion, CWS adopts C2’s arguments
regarding the enforceability of the arbitration agreement. Id. at 2. CWS also asserts that it was
party to that arbitration agreement, and that even if the Court concludes otherwise, it should
nonetheless compel arbitration of Fox’s claims against CWS because they are intertwined with
the claims against the remaining defendants. Id. at 3–6.
In opposition to defendants’ motions, Fox argues that defendants’ waiver of the fee-
sharing provision “cannot save the agreement from a finding of unconscionability” because since
the agreement does contain a severability clause, defendants cannot unilaterally alter it by
waiving the fee-sharing provision. Pl.’s Opp. at 16–17. Defendants have filed additional briefs
in support of their motions. See C2 Reply; CWS Reply in Supp. of Mot. to Dismiss [Dkt. # 25]
(“CWS Reply”).
STANDARD OF REVIEW
The appropriate standard of review for a motion to compel arbitration is the summary
judgment standard under Federal Rule of Civil Procedure 56(c). See Aliron Int’l., Inc. v.
Cherokee Nation Indus., Inc., 531 F.3d 863, 865 (D.C. Cir. 2008). “How the parties style the
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motion seeking arbitration is not determinative.” Booker v. Robert Half Int’l, Inc., 315 F. Supp.
2d 94, 99 (D.D.C. 2004) (“Booker I”) aff’d, 413 F.3d 77, 81 (D.C. Cir. 2005) (“Booker II”).
Under this standard, the party seeking to compel arbitration must first present “evidence
sufficient to demonstrate an enforceable agreement to arbitrate.” Hill v. Wackenhut Services
Int’l, 865 F. Supp. 2d 84, 89 (D.D.C. June 7, 2012), quoting SmartText Corp. v. Interland, Inc.,
296 F. Supp. 2d 1257, 1263 (D. Kan. 2003). “The burden then shifts to [the non-moving party]
to raise a genuine issue of material fact as to the making of the agreement, using evidence
comparable to that identified in Fed. R. Civ. P. 56.” Id. (internal quotation marks and citation
omitted). The Court will compel arbitration if the pleadings and the evidence show that “there is
no genuine issue as to any material fact and that the moving party is entitled to judgment as a
matter of law.” Booker I, 315 F. Supp. at 99, quoting Fed. R. Civ. P. 56(c).
The existence of a factual dispute is insufficient to preclude summary judgment.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48 (1986). A dispute is “genuine” only if a
reasonable fact-finder could find for the non-moving party; a fact is “material” only if it is
capable of affecting the outcome of the litigation. Id. at 248; Laningham v. U.S. Navy, 813 F.2d
1236, 1241 (D.C. Cir. 1987). “A party asserting that a fact cannot be or is genuinely disputed
must support the assertion by citing to particular parts of materials in the record. . . .” Fed. R.
Civ. P. 56(c)(1)(A). In assessing a party’s motion, “[a]ll underlying facts and inferences are
analyzed in the light most favorable to the non-moving party.” N.S. ex rel. Stein v. District of
Columbia, 709 F. Supp. 2d 57, 65 (D.D.C. 2010), citing Anderson, 477 U.S. at 247.
ANALYSIS
By enacting the Federal Arbitration Act, Congress adopted “a liberal federal policy
favoring arbitration agreements, notwithstanding any state substantive or procedural policies to
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the contrary.” Moses H. Cone Mem’l Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24 (1983).
Specifically, the FAA provides that an arbitration agreement “shall be valid, irrevocable, and
enforceable save upon any grounds as exist at law or in equity for the revocation of any
contract.” 9 U.S.C. § 2. However, since arbitration is a matter of contract, parties cannot be
compelled to arbitrate their disputes unless they have agreed to do so. First Options of Chicago,
Inc. v. Kaplan, 514 U.S. 938, 943–44 (1995). When one party resists arbitration, the opposing
party may petition any United States district court that would otherwise have subject-matter
jurisdiction “for an order directing that such arbitration proceed in the manner provided for in
[their written arbitration] agreement.” 9 U.S.C. § 4. When presented with such a motion, the
court should bear in mind that the FAA creates a strong presumption favoring the enforcement of
arbitration agreements, and that “any doubts concerning the scope of arbitrable issues should be
resolved in favor of arbitration.” Moses H. Cone, 460 U.S. at 24–25.
In this case, Fox argues that the Court should deny defendants’ motions to compel
arbitration because (1) his arbitration agreement with C2 is unconscionable and thus
unenforceable, and (2) CWS is not a party to the agreement. These arguments are unpersuasive.
I. The Arbitration Agreement Between Fox and C2 Is Not Unconscionable and Thus
Enforceable
Fox does not dispute the existence of an arbitration agreement with C2; rather he argues
that the “agreement to arbitrate with C2 . . . is so pervaded with unconscionable provisions that it
cannot be enforced by any of the defendants.” Pl.’s Opp. at 11. “Like other contracts, . . .
[arbitration agreements] may be invalidated by ‘generally applicable contract defenses, such as
fraud, duress, or unconscionability.’” Rent-A-Center, West, Inc. v. Jackson, 130 S.Ct. 2772,
2776 (2010), quoting Doctor’s Assocs., Inc. v. Cassarotto, 517 U.S. 681, 687 (1996). State law
governs these contract-based challenges and D.C. law governs the enforceability of this
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arbitration agreement because there is no choice of law provision in the Agreement designating
another state’s law be followed. See Booker I, 315 F. Supp. 2d at 98–99. The parties have also
accepted the application of D.C. law by asserting arguments based on D.C. law in their briefs.
Under D.C. law, a court can void a contract on the grounds that it is unconscionable if the
party seeking to avoid the contract proves that the contract was both procedurally and
substantively unconscionable. See Urban Invs., Inc. v. Branham, 464 A.2d 93, 99 (D.C. 1983);
see also Smith, Bucklin & Assoc., Inc. v. Sonntag, 83 F.3d 476, 480 (D.C. Cir. 1996).
A. The Arbitration Agreement Is Not Procedurally Unconscionable
Fox argues that the arbitration agreement is procedurally unconscionable because it was
presented to him on a “take it or leave it basis and buried within a larger series of new employee
documents sent to him electronically for acknowledgement,” and CWS and C2 did not disclose
that they were joint-employers. Pl.’s Opp. at 13. A contract is procedurally unconscionable
where a party lacked meaningful choice as to whether to enter the agreement. Urban Invs., 464
A.2d at 99. “Whether a meaningful choice is present in a particular case can only be determined
by consideration of all the circumstances surrounding the transaction.” Williams v. Walker-
Thomas Furniture Co., 350 F.2d 445, 449 (D.C. Cir. 1965). Specifically, the court must ask
whether “each party to the contract, considering his obvious education or lack of it, ha[d] a
reasonable opportunity to understand the terms of the contract, or [whether] the important terms
[were] hidden in a maze of fine print and minimized by deceptive [] practices.” Id.The evidence in this case demonstrates that Fox had a meaningful choice as to whether to
sign the arbitration agreement. First, the fact that the Agreement was presented to Fox as a
condition of employment without further negotiation does not render it unenforceable. See
Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 33 (1991) (“Mere inequality in bargaining
power [ ] is not a sufficient reason to hold that arbitration agreements are never enforceable in
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the employment context.”). Second, the Agreement was not “hidden in a maze of fine print” but
was presented as separate document with the title “AGREEMENT TO ARBITRATE” in all
capital letters and in bold font. Immediately before the signature line, the Agreement also stated
in capital letters:
I ACKNOWLEDGE THAT I HAVE CAREFULLY READ THIS
AGREEMENT, THAT I UNDERSTAND ITS TERMS, THAT
ALL UNDERSTANDINGS AND AGREEMENTS BETWEEN
C2 AND ME RELATING TO THE SUBJECTS COVERED IN
THIS AGREEMENT ARE CONTAINED IN IT, AND THAT I
HAVE ENTERED INTO THIS AGREEMENT AND NOT IN
RELIANCE ON ANY PROMISES OR REPRESENTATIONS
BY THE COMPANY OTHER THAN THOSE CONTAINED IN
THE AGREEMENT ITSELF. I FURTHER ACKNOWLEDGE
THAT I HAVE BEEN GIVEN THE OPPORTUNITY TO
DISCUSS THIS AGREEMENT WITH MY PERSONAL LEGAL
COUNSEL AND HAVE AVAILED MYSELF OF THAT
OPPORTUNITY TO THE EXTENT THAT I WISH TO DO SO.
Agreement to Arbitrate at 3.
Third, Fox’s assertion that he did not “understand that by acknowledging the purported
agreement that he was agreeing to its terms,” Pl.’s Opp. at 8, is immaterial to the determination
of the Agreement’s validity. Nur v. K.F.C., USA, Inc., 142 F. Supp. 2d 48, 51 (D.D.C. 2001)
(“That [the plaintiff] may not have comprehended the implications of his decision [to sign the
arbitration agreement] is irrelevant as to whether the agreement is valid.”). What matters is that
Fox had a fair opportunity to review the Agreement, and he does not contend that he failed to
understand its terms. See Paterson v. Reeves, 304 F.2d 950, 951 (D.C. Cir. 1962) (“One who
signs a contract which he had an opportunity to read and understand is bound by its
provisions.”).1
1 The fact that Fox was the Director of Bids and Proposals/Chief Engineer at CWS and that
he describes himself in his complaint as having “more than 40-years of experience,” Compl. ¶
10, demonstrate that he was not lacking the education necessary to understand the terms of the
agreement.
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Fourth, that Fox received and signed the Agreement electronically does not render it
unconscionable: “a contract . . . may not be denied legal effect, validity, or enforceability solely
because an electronic signature or electronic record was used in its formation.” 15 U.S.C. §
7001(a). Fifth, Fox’s alleged lack of knowledge about C2 and CWS’s co-employment
relationship is not relevant to the enforceability of the Agreement with C2: C2 gave Fox the
Agreement and Fox signed it, thereby demonstrating his desire to be bound by its terms. Lastly,
the employment offer letter, which Fox acknowledges that he accepted, expressly notified Fox
that the employment relationship would be subject to an agreement to arbitrate disputes.
The cases that Fox cites to support his argument of procedural unconscionability are
inapposite because they do not arise in the employment context or they apply the law of a
different state. See Pl.’s Opp. at 12-13, citing Morris v. Capitol Furniture & Appliance Co., 280
A.2d 775, 776 (D.C. 1971) (holding that a consumer contract for the purchase of furniture was
not unconscionable where the plaintiff was able to buy the goods from another seller); Toledano
v. O’Connor, 501 F. Supp. 2d 127, 138–39 (D.D.C. 2007) (applying California contract law to an
agreement to arbitrate a dispute over book royalties). Therefore, Fox has failed to allege facts
demonstrating that the Agreement is procedurally unconscionable.
B. Substantive Unconscionability
Fox next avers that the Agreement is substantively unconscionable because the statute of
limitations period is impermissibly short, the fee-sharing provision is invalid, discovery is
extremely limited, and the Agreement prohibits the filing of administrative discrimination
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claims. Pl.’s Opp. at 13–19.2 A contract is substantively unconscionable if the contract terms
are unreasonably favorable to one party. Urban Invs., 464 A.2d at 99.
Substantive unconscionability requires an assessment of whether the
contract terms are so outrageously unfair as to shock the judicial
conscience. A substantively unconscionable contract is one that “no man
in his senses and not under delusion would make on the one hand, and as
no honest and fair man would accept on the other.”
Hill, 865 F. Supp. 2d at 95, quoting Hume v. United States, 132 U.S. 406, 411 (1889). The
present case does not meet this standard.
1. Statute of Limitations and Administrative Claims
Fox contends that the statute of limitations and administrative claims provisions of the
Agreement are unconscionable because they deprive him of the ability to enforce his substantive
rights. Compl. ¶ 16; Pl.’s Opp. at 13, 18–19. The statute of limitations provision requires the
aggrieved party to notify “the other party within six (6) months of the date that party first has
knowledge of the event giving rise to the Claim. Otherwise, the claim shall be void and deemed
waived even if there is a federal or state statute of limitations that would have given more time to
pursue such Claim.” Agreement to Arbitrate at 1. The Agreement also requires all parties to
“agree not to initiate or prosecute any lawsuit or administrative action in any way related to any
Claim covered by this Agreement . . . .” Id.The “party resisting arbitration on the ground that the terms of an arbitration agreement
interfere with the effective vindication of statutory rights bears the burden of showing the
2 These are the only issues that remain. Fox initially challenged the enforceability of the
Agreement because of the “extremely limited judicial review of an arbitrator’s decision.”
Compl. ¶ 16. But as defendants correctly point out, in his opposition, Fox did not address any of
defendants’ arguments regarding the sufficiency of judicial review of an arbitration award. C2
Reply at 5. Therefore, the Court will consider Fox’s arguments regarding judicial review as
conceded. See FDIC v. Bender, 127 F.3d 58, 67–68 (D.C. Cir. 1997) (when a party does not
address arguments advanced by her opponent, the court may treat those arguments as conceded).
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likelihood of such interference.” Booker II, 413 F.3d at 81, citing PacifiCare Health Sys., Inc. v.
Book, 538 U.S. 401, 406–07 (2003) (allowing arbitration of plaintiff’s RICO claims pursuant to
an arbitration agreement that precluded punitive damages because the plaintiff did not show that
the arbitrator would interpret the bar against punitive damages to also preclude treble damages,
which was allowed under RICO). Fox cannot meet this standard. With respect to the statute of
limitations issue, Fox notified his employers of his claims four days after he was terminated so
his ability to assert his substantive rights was not affected by the Agreement’s provisions. See
Fox Letter to CWS and C2, Ex. 3 to Compl. Similarly, he filed an EEOC claim five months after
his termination and thus he cannot show that the administrative claims provision “interfere[d]
with the effective vindication of his statutory rights” under federal civil rights laws or the
EEOC’s Enforcement Guidance. See EEOC Claim. Therefore, the statute of limitations and the
administrative claims provisions do not render the Agreement unenforceable.
2. Discovery Provision
Fox also argues that the discovery provision in the Agreement is “extremely limited”
because it allows each party to take the deposition of only one individual and any expert witness
designated by another party. Compl. ¶ 16. To be enforceable, an arbitration agreement must
provide for more than minimal discovery. Cole v. Burns Int’l Sec. Servs., Inc., 105 F.3d 1465,
1482 (D.C. Cir. 1997). An arbitration agreement that leaves the decision about which discovery
tool to use and in what manner to the discretion of the arbitrator will not be invalidated based on
speculation that the arbitrator may not allow adequate discovery. See Booker II, 413 F.3d at 82(holding that an arbitration agreement that gave the arbitrator discretion about what discovery to
allow was enforceable despite the plaintiff’s speculation that the arbitrator might not provide him
with adequate discovery). Here, the Agreement allows the arbitrator to order additional
discovery if the requesting party shows “substantial need” for such discovery. Agreement to
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Arbitrate at 2. Since the arbitrator has the discretion to order additional discovery as necessary,
“speculation about what might happen in the arbitral forum is plainly insufficient to render the
agreement to arbitrate unenforceable.” See Booker II, 413 F.3d at 82.
3. Fee-Sharing Provision
Fox lastly contends that the Agreement’s requirement that he “share the fees and costs of
the arbitrator” and pay for a court reporter violates “the D.C. Circuit’s seminal decision in Cole,
[which held that] it is substantially unconscionable to require an employee to pay all or part of
the arbitrator’s fee.” Pl.’s Opp. at 14.
In Cole, an employer sought to compel an employee to submit his Title VII of the Civil
Rights Act of 1964, 42 U.S.C. § 2000 et seq. (“Title VII”) employment discrimination claim to
arbitration pursuant to an arbitration agreement between the parties. 105 F.3d at 1467. Since the
arbitration agreement was silent as to who would pay for the arbitrator’s fees, the court went on
to decide who should bear the cost. Id. at 1484. The court reasoned that requiring an employee
to pay arbitration fees, other than “reasonable costs” analogous to federal court “filing fees and
other administrative expenses,” would be “prohibitively expensive” and deter the employee from
“pursu[ing] his statutory claims.” Id. at 1484. It added that since arbitration is meant to be a
reasonable substitute for a judicial forum, it “would undermine Congress’s intent to prevent
employees who are seeking to vindicate statutory rights from gaining access to a judicial forum
and then require them to pay for the services of an arbitrator when they would never be required
to pay for a judge in court.” Id. The court therefore held that an employee “could not be
required to agree to arbitrate his public law claims as a condition of employment if the arbitration
agreement required him to pay all or part of the arbitrator’s fees and expenses.” Id. at 1485.
After Cole, the Supreme Court in Green Tree Fin. Corp.-Ala. v. Randolph, considered the
validity of an arbitration agreement that was similarly silent on the payment of filing fees,
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arbitrators’ costs, and other arbitration expenses. 531 U.S. 79, 84 (2000). The Green-Tree Court
rejected the plaintiff’s argument that “the arbitration agreement’s silence with respect to costs
and fees creates a ‘risk’ that she will be required to bear prohibitive arbitration costs if she
pursues her claims in an arbitral forum.” Id. at 90–92. Instead, it concluded that “where, as here,
a party seeks to invalidate an arbitration agreement on the ground that arbitration would be
prohibitively expensive, that party bears the burden of showing the likelihood of incurring such
costs.” Id. at 92.
Since Green Tree, the D.C. Circuit has not addressed whether Cole remains fully intact
but it has limited its application. In Brown v. Wheat First Sec., Inc., the D.C. Circuit considered
whether the Cole per se rule invalidating arbitration agreements requiring an employee to pay
any part of the arbitrator’s fees applies when the employee is pursuing non-statutory claims. 257
F.3d 821, 823 (D.C. Cir. 2001). In answering this question, the court explained that the Cole
decision was based on balancing the goals of two competing federal statutes: promoting
arbitration under the FAA and preventing employment discrimination under Title VII. Id. at
826–27. However, Cole’s “central rationale – respecting congressional intent [in enacting the
two competing federal statutes] – does not extend beyond the statutory context.” Id. at 825.
Therefore, the court concluded that the Cole per se invalidation rule did not apply where the
plaintiff is pursuing a non-statutory claim and those cases should to be resolved in favor of the
only federal law involved, the FAA’s “liberal federal policy favoring arbitration agreements.”
Id.Brown’s limitation of Cole and its rationale has led a court in this district to conclude that
Cole’s per se invalidation rule applies only in the context in which it was originally announced,
i.e. when an employee is pursing federal statutory claims. Nelson v. Insignia/Esg, Inc., 215 F.
14Supp. 2d 143, 156–57 (D.D.C. 2002). But the court said, it “does not apply [when] only District
of Columbia statutory and common law claims are being pursued.” Id. at 157. In those
circumstances, the party seeking to invalidate the agreement on the basis that it would be
prohibitively expensive must demonstrate the likelihood of incurring such costs pursuant to the
Supreme Court’s decision in Green-Tree. Id.Since Fox is pursuing claims under the DCHRA and D.C. common law, the Court will
not apply the Cole rule because Cole’s “central rationale – respecting congressional intent” is not
directly implicated. See id. at 156. Instead, the Court will apply the Green-Tree standard and
analyze whether Fox has met “the burden of showing the likelihood of incurring [prohibitively
expensive arbitration] costs,” deterring him from vindicating his rights. See Green Tree, 531
U.S. at 92. The Agreement states “[a]ll parties . . . agree to share the fees and costs of the
arbitrator. . . . Each party will deposit funds for its share of the arbitrator’s fee, in an amount and
manner determined by the arbitrator. . . . ” Agreement to Arbitrate at 2. The Court is not
persuaded by Fox’s contention that “the plain meaning of this provision is that the arbitrator
determines the total amount of his or her fee to be paid by all the parties and the amount required
to be deposited in advance of the hearing.” Pl.’s Opp. at 15. Rather, as defendants argue, the
Agreement’s requirement that each party “deposit funds for its share of the arbitrator’s fee, in an
amount . . . determined by the arbitrator” gives the arbitrator discretion to determine the
apportionment of the arbitration fees.3 See C2 Mem. at 10–11. Since the Agreement gives the
arbitrator discretion to apportion the arbitrator’s fees between the parties, Fox’s speculation
3 Even if the Court determines that this provision is ambiguous, the Court’s interpretation
would not change because “any ambiguities in the language of the agreement should be resolved
in favor of arbitration.” See EEOC v. Waffle House, Inc., 534 U.S. 279, 294 (2002).
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regarding the costs that he might incur from the arbitration is insufficient to render it
unenforceable.
Moreover, Fox cannot show that he would incur “prohibitively expensive” costs from the
arbitration because defendants have waived the fee-sharing provision and have agreed to “bear
the entirety of the arbitrator’s fees,” C2 Mem. at 10. See Nelson, 215 F. Supp. 2d at 157
(enforcing an arbitration agreement with a fee-splitting provision because “the defendant’s offer
to pay all arbitration fees and expenses effectively obviated any concerns the plaintiff may have
raised regarding her ability to vindicate her claims in an arbitral forum because of the fee-
splitting provision”). Defendants’ waiver of the fee-sharing provision also distinguishes this
case from the situation that the court addressed in Cole because Fox will not be required to pay
any of the arbitrator’s fees and expenses.
Regarding Fox’s argument that he cannot be required to pay for a court reporter, Cole
does not bar arbitration agreements that require the employee to pay administrative fees. See
LaPrade v. Kidder, Peabody & Co., Inc., 246 F.3d 702, 707–08 (D.C. Cir. 2001) (concluding
that requiring the plaintiff to pay a limited amount of arbitral forum fees, such as a filing fee or
fees solely related to non-statutory claims is not barred by Cole). Thus, the term providing that
Fox may be required to pay administrative costs, such as a court reporter’s fees, is not
unconscionable because he would have to pay for court transcripts in D.C. federal and local
courts. See id. at 707 (stating that arbitration is not required to be cost-free for the plaintiff, just
as litigating in court would not be).
Therefore, the fee-sharing provision is not substantively unconscionable because the risk
that Fox might be saddled with prohibitive costs based on the language of the Agreement is too
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speculative, and in any event, defendants’ waiver of the fee-sharing provision has eliminated this
risk.4
The Court concludes that the arbitration agreement between Fox and C2 is enforceable
because Fox has not demonstrated that it is procedurally or substantively unconscionable.
II. The Court Will Compel Fox To Arbitrate His Claims With CWS
Fox also contends that the Court should not compel him to arbitrate his claims against
CWS because CWS is a non-signatory and thus not a party to the arbitration agreement. Pl.’s
Opp. at 6–11. Under the doctrine of estoppel, a signatory to an arbitration agreement may be
compelled to arbitrate with a non-signatory when the non-signatory is seeking to resolve issues
that are intertwined with an agreement that the signatory has signed. See Khan v. Parsons
Global Servs., Ltd., 480 F. Supp. 2d 327, 341–42 (D.D.C. 2007), rev’d on other grounds, 521
F.3d 421 (D.C. Cir. 2008).5
In Khan, the plaintiffs asserted identical tort claims against one of the plaintiff’s
employers and the employer’s agents. Id. at 341. The employer and its agents moved to compel
the plaintiffs to arbitrate their claims pursuant to an arbitration agreement contained in the
plaintiff’s employment agreement. Id. at 331–32. The plaintiffs argued that even if their claims
against the employer had to be arbitrated pursuant to the arbitration agreement, they could not be
4 Plaintiff relies on Booker to support his argument that defendants’ waiver of the fee-
sharing provision “cannot save the agreement from a finding of unconscionability” because (a)
the agreement does not contain a severability clause allowing such waiver and (b) allowing
defendants to unilaterally waive the fee-sharing provision would “encourage employers to
include onerous provisions in order to discourage employees from bringing claims in the first
place.” Pl.’s Opp. at 16–17. But Booker is not on point because it analyzes the severability of an
unenforceable punitive damages clause. See Booker II, 413 F.3d at 83. Here, the Court’s
decision to uphold the fee-sharing provision is based on its conclusion that the provision is valid
under Green-Tree and not based solely on defendant’s waiver or the severance of the provision.
5 Since the Court will compel Fox to arbitrate his claims against CWS based on the
doctrine of estoppel, it need not reach a decision on whether CWS is a party to the agreement.
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required to arbitrate their claims against the remaining defendants who were not signatories to
the employment agreement (or the arbitration provision it contained). Id. at 341. The court
disagreed and explained that courts in other circuits have been “willing to estop a signatory from
avoiding arbitration with a nonsignatory when the issues the nonsignatory is seeking to resolve in
arbitration are intertwined with the agreement that the estopped party has signed.” Id., quoting
Thomson-CSF, S.A. v. Am. Arbitration Ass’n, 64 F.3d 773, 779 (2d Cir. 1995) (internal quotation
marks omitted). Applying this principle, the court compelled the plaintiffs to arbitrate their
disputes with the non-signatory defendants because: (1) their claims against the signatory and
non-signatory defendants were identical; and (2) the claims arose from one plaintiff’s
employment with defendants and were thus “intertwined with the [plaintiff’s] employment
agreement (and the arbitration therein).” Id.Similarly, this Court will compel Fox to arbitrate his claims against CWS under the
doctrine of estoppel.6 Estoppel is a “bar that prevents one from asserting a claim or right that
contradicts what one has said or done before . . . .” Black’s Law Dictionary 629 (9th ed. 2009).
As in Khan, Fox’s claims against all defendants are identical, and further his claims arose from
his employment with CWS and are thus intertwined with his employment offer letter from CWS.
Although Fox never signed the offer letter, he repeatedly asserts in his complaint that he
“accepted” it and relied on its terms. Compl. ¶¶ 13, 77, 80, 83, 88, 99. Notably, one of the terms
6 Fox cites Toledano v. O’Connor, 501 F. Supp. 2d 127, 153 (D.D.C. 2007) for the
proposition that in the D.C. Circuit, “there is no precedent . . . compelling a party to an
arbitration agreement to arbitrate with a non-signatory on the basis of equitable estoppel.” Pl.’s
Opp. at 10. But that the D.C. Circuit has not yet decided this issue does not preclude this Court
from opining on it especially when other courts in this district have adopted a similar approach.
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of the employment offer letter was that “any disputes arising out of the employment relationship
will be resolved by arbitration . . . .”7 Employment Offer Letter at 2.
Despite admitting that he accepted the terms of the employment offer letter – which
include an agreement to arbitrate claims arising out of his employment with CWS – Fox argues
that requiring him to arbitrate his claims against CWS under the doctrine of estoppel “would
create an unfair asymmetry where CWS could compel Plaintiff to arbitrate his claims but
Plaintiff could not compel CWS to arbitrate its potential claims against him.” Pl.’s Opp. at 10.
This argument fails because the arbitration clause in the employment offer letter requires
arbitration of all disputes arising out of the employment relationship regardless of whether those
claims are initiated by Fox or CWS. Moreover, Fox’s acceptance of the employment letter is
critical to his case because a number of his claims are based on his alleged reliance on the terms
of the letter, specifically the provisions regarding compensation and benefits. Compl. ¶¶ 76–91,
98–105. As Fox put it, allowing him to pursue claims based on the employment offer letter and
to simultaneously avoid the arbitration clause in that letter “would create [an] unfair asymmetry.”
The Court will therefore compel Fox to arbitrate his disputes with CWS under the
doctrine of estoppel because the issues CWS is seeking to resolve in arbitration are intertwined
7 Neither party addressed in their pleadings whether this statement constitutes a binding
arbitration agreement between Fox and CWS. Under D.C. law, “an enforceable contract does
not exist unless there has been a ‘meeting of the minds’ as to all material terms.” Bailey v.
Federal Nat. Mortg. Ass’n, 209 F.3d 740, 746 (D.C. Cir. 2000), citing Jack Baker, Inc. v. Office
Space Dev. Corp., 664 A.2d 1236, 1238 (D.C. 1995). The arbitration clause in the employment
offer letter does not meet this standard because it did not outline the material terms that would
govern arbitration between Fox and CWS such as discovery, type of relief available, payment of
arbitration fees, etc. See Cole, 105 F.3d at 1482 (concluding that an arbitration agreement is
enforceable so long as it “(1) provides for neutral arbitrators, (2) provides for more than minimal
discovery, (3) requires a written award, (4) provides for all of the types of relief that would
otherwise be available in court, and (5) does not require employees to pay either unreasonable
costs or any arbitrators’ fees or expenses as a condition of access to the arbitration forum”).
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with the claims against the C2 defendants and with the employment offer letter that Fox has
accepted (and the arbitration clause it contained).8
8 Fox also argues that the Khan decision was based on the fact that the non-signatories who
were seeking to compel arbitration were not the plaintiff’s direct employer and the plaintiff’s
claims against the non-signatories were derivative of his claims against his direct employer, who
did sign the arbitration agreement. Pl.’s Opp. at 8-9. Based on this interpretation, Fox argues
that Khan is not applicable to his case because here, CWS, the non-signatory, was his direct
employer and his claims against CWS arise out of that direct employment relationship and not
out of his relationship with C2. Id. at 9. But the Khan decision was not based on whether the
non-signatory was the direct employer or its agent; rather it was based on the theory of estoppel.
See Khan, 480 F. Supp. 2d at 341. Therefore, that the facts of this case are not exactly the same
as those in Khan does not undermine the Court’s estoppel analysis.
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CONCLUSION
The Court concludes that the arbitration agreement between Fox and C2 is not
unconscionable and therefore enforceable. Additionally, although CWS is not a signatory to the
arbitration agreement, the Court will nonetheless compel Fox to arbitrate his disputes with CWS
under the doctrine of estoppel. Accordingly, the Court will grant defendants’ motions to compel
arbitration and dismiss the case.9 A separate order will issue.
AMY BERMAN JACKSON
United States District Judge
DATE: February 1, 2013
9 The Court will dismiss this case rather than stay it pending arbitration, in accordance with
the approach adopted by other courts when all claims must be submitted to arbitration. See
Booker I, 413 F.3d at 85–86 (affirming the district court’s dismissal of a case where all claims
had to be submitted to arbitration); Nelson, 215 F. Supp. 2d at 158, citing 9 U.S.C. § 3 (stating
that “[w]hile the FAA provides that once arbitration is compelled by a district court it ‘shall on
application of one of the parties stay the trial of the action until such arbitration has been had in
accordance with the terms of the agreement,’” when all of the issues presented in a case are
arbitrable, dismissal is warranted.). Although, defendants also requested a “stay pending
arbitration” as a secondary remedy, the Court’s decision is in accordance with their primary
request for dismissal.
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