Thomas v. Hyundai of Bedford , 2020 Ohio 185 ( 2020 )

[Cite as Thomas v. Hyundai of Bedford, 2020-Ohio-185.]
COURT OF APPEALS OF OHIO
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
SHANNON THOMAS, :
Plaintiff-Appellant, :
No. 108212
v. :
HYUNDAI OF BEDFORD, ET AL. :
Defendants-Appellees. :
JOURNAL ENTRY AND OPINION
JUDGMENT: REVERSED AND REMANDED
RELEASED AND JOURNALIZED: January 23, 2020
Civil Appeal from the Cuyahoga County Court of Common Pleas
Case No. CV-18-903250
Appearances:
Friedman & Associates, and Avery Friedman; Klebanow
Law, L.L.C., and Jared S. Klebanow, for appellant.
Zashin & Rich Co., L.P.A., Stephen S. Zashin, and David P.
Frantz, for appellees.
KATHLEEN ANN KEOUGH, J.:
Plaintiff-appellant, Shannon Thomas (“Thomas”), appeals from the
trial court’s judgment that granted the motion of defendants-appellees, Migdal 1,
L.L.C., d.b.a. Hyundai of Bedford, Joe Delguidice, and Kyle Pisani (“appellees”), to
stay proceedings pending arbitration. We reverse and remand.
I. Background
On December 15, 2017, Thomas signed an arbitration agreement with
his then-employer, Migdal 1, L.L.C. The arbitration agreement provided that
[a]s the exclusive means of initiating adversarial proceedings to resolve
any Covered Dispute, and pursuant to the Federal Arbitration Act (9
U.S.C. §1, either Migdal or Employee may demand that the dispute be
resolved by final and binding arbitration using the procedures
described in this Agreement, and each party hereby consents to all
Covered Disputes being so resolved.
The agreement defined “Covered Disputes” as
any actual or alleged claim or liability, regardless of its nature, that
Migdal or its owners, managers, members, officers, employees, agents,
or insurers may wish to bring against Employee, or that Employee may
wish to bring against Migdal or any of Migdal’s owners, managers,
members, officers, employees, agents, or insurers.
(Emphasis added.) The agreement excluded from consideration as a “Covered
Dispute” any claim by an employee for unemployment compensation or workers’
compensation benefits, any claim relating to a violation of the National Labor
Relations Act, or any other claim that under law cannot be the subject of a pre-
dispute arbitration agreement.
The agreement provided that in any arbitration conducted pursuant
to the agreement, either Migdal or the employee “may seek and recover any amount
or type of damages or other legal or equitable relief that could have been recovered
had the action been brought in a court.” The agreement further provided that the
arbitrator’s award would be “final and binding forever” on both the employee and
Migdal, and neither Migdal nor the employee could appeal the arbitrator’s decision.
In September 2018, Thomas filed a two-count complaint against
Migdal, Pisani, and Delguidice. Thomas’s complaint asserted claims for race
discrimination (Count 1) and retaliation (Count 2) under Ohio Revised Code
Chapter 4112. Count 1 alleged that Thomas was discriminated against on the basis
of his race while he was employed by Migdal,1 and Count 2 alleged that Migdal,
Pisani, and Delguidice retaliated against Thomas by demoting him and not paying
him in the same manner as white employees when he complained about the
discrimination.
Appellees answered the complaint and then filed a motion to stay
proceedings pending arbitration and for costs and sanctions. Thomas filed a brief
opposing the motion. The trial court subsequently granted the motion to stay
proceedings pending arbitration and denied the motion for costs and sanctions.
This appeal followed.
II. Law and Analysis
In his sole assignment of error, Thomas contends that the trial court
erred in granting appellees’ motion to stay proceedings pending arbitration. He
asserts that he cannot be compelled to arbitrate his discrimination and retaliation
1 Thomas, an African-American male, alleged in his complaint that employees
regularly used the “n-word” around him; one employee used a water balloon to act as if
he were spraying urine on Thomas; Thomas was paid half the pay of white managers;
Thomas’s pay was reduced even though white managers’ pay remained the same; white
managers were allowed to take a car from the lot home at night but Thomas was not
afforded the same privilege; white employees were paid a revenue bonus but Thomas was
not; management took no action when an employee told Thomas “I don’t fight n---ers, I
kill them”; and management did not discipline the same employee when he brought a gun
to work and was overheard threatening to shoot Thomas.
claims because Ohio’s public policy commitment to challenging racial bias in the
workplace, as codified in R.C. Chapter 4112, “is so strong * * * that it permits direct
access to the courts without any administrative prerequisite.” (Appellant’s Brief, p.
10). He further contends that the arbitration agreement cannot be enforced because
it is unconscionable.
This court reviews a trial court’s decision to grant a motion to stay
litigation pending arbitration for an abuse of discretion. Avery v. Acad. Invest.,
L.L.C., 8th Dist. Cuyahoga No. 107550, 2019-Ohio-3509, ¶ 9.
Ohio courts recognize a presumption favoring arbitration that arises
when the claim in dispute falls within the scope of the arbitration provision. Wallace
v. Ganley Auto Group, 8th Dist. Cuyahoga No. 95081, 2011-Ohio-2909, ¶ 13.
Indeed, Ohio law requires a stay of proceedings when an arbitrable dispute has been
improperly brought before a court. See, e.g., McGuffey v. LensCrafters, Inc., 141
Ohio App.3d 44, 50, 749 N.E.2d 825 (12th Dist.2001) (noting that a trial court
“shall” stay proceedings pending arbitration once it is satisfied that an issue is
arbitrable); Sasaki v. McKinnon, 124 Ohio App.3d 613, 618, 707 N.E.2d 9 (8th
Dist.1997) (“The Ohio Arbitration Act, which strongly favors arbitration, compels
the court to review the arbitration clause at issue and, if the court is satisfied that
the dispute or claim is covered by the arbitration clause, give effect to the clause and
stay the proceedings pursuant to R.C. 2711.02.”). In light of this strong presumption
favoring arbitration, any doubts regarding arbitration should be resolved in its favor.
Ignazio v. Clear Channel Broadcasting, Inc., 113 Ohio St.3d 276, 2007-Ohio-1947,
865 N.E.2d 18, ¶ 18.
Nevertheless, Thomas asserts that he should not be compelled to
arbitrate his race discrimination and retaliation claims. As support for his
argument, Thomas first directs us to Justice Ruth Bader Ginsburg’s dissent in Epic
Sys. Corp. v. Lewis, 584 U.S. __, 138 S.Ct. 1612, 200 L.Ed.2d 889 (2018), wherein
Justice Ginsburg stated:
It would be grossly exorbitant to read the FAA [Federal Arbitration Act]
to devastate Title VII of the Civil Rights Act of 1964 * * * and other laws
enacted to eliminate, root and branch, class-based employment
discrimination * * *. With fidelity to the Legislature’s will, the Court
could hardly hold otherwise.
Id. at 1648. Thomas suggests that this statement by Justice Ginsburg stands for the
proposition that after Epic Sys., individual, non-class action claims brought
pursuant to R.C. Chapter 4112 are not arbitrable.
We fail to see any connection between Epic Systems and this case.
The issue decided in Epic Systems was whether the Federal Arbitration Act permits
employers to include class-action waivers in arbitration agreements with their
employees, even though the National Labor Relations Act allows employees to
engage in “concerted activities” for their “mutual aid and protection.” Id. at 1633.
The majority held that class-action waivers in arbitration agreements are
enforceable; Justice Ginsburg would have answered the question with a “resounding
no.” Id. As aptly stated in Thomas’s brief, “Epic Systems had nothing to do with
individual, non-class action cases like Shannon Thomas’s case.” (Appellant’s Brief,
p. 9).
The excerpt Thomas quotes from Justice Ginsburg’s dissent does not
support his argument that after Epic Systems, non-class action discrimination
claims are immune from arbitration. To the contrary, reading the paragraph as a
whole, it explains Justice Ginsburg’s belief that the majority’s holding in Epic
Systems does not threaten an individual litigant’s ability to pursue disparate impact
or pattern-or-practice claims, even though such claims may require proof on a
group-wide basis.
We also find no merit to Thomas’s assertion that this is a case of “first
impression” after Epic Systems involving non-class action claims for workplace
discrimination subject to an arbitration agreement. In Jones v. Carrols, L.L.C., 9th
Dist. Summit No. 28918, 2019-Ohio-211, Jones argued that the arbitration
agreement he had signed requiring him to arbitrate claims against his employer was
against public policy because it contained a class-action waiver. The Ninth District
disagreed, noting that in Epic Systems, the Supreme Court held that arbitration
agreements requiring individualized arbitration instead of class or collective
proceedings did not violate the National Labor Relations Act, and that the Federal
Arbitration Act required enforcement of the agreements. Id. at ¶ 27, citing Epic
Systems, __ U.S. __, 138 S.Ct. at 1616, 200 L.Ed.2d 889. Notably, as relevant to
Thomas’s argument, the Ninth District also rejected Jones’s other arguments
regarding the enforceability of the arbitration agreement, and held, even after Epic
Systems, that Jones’s individual, non-class action claims for, among other things,
racial and age discrimination, were subject to arbitration under the arbitration
agreement. Id. at ¶ 47.
Thomas next contends the trial court erred in staying proceedings
pending arbitration because there is “Ohio precedent which affords Ohio workers
the choice to go to arbitration or to the court of common pleas under O.R.C. Section
4112.” (Appellant’s Brief, p. 9.) But Thomas’s citations to Thomas v. GE Co., 131
Ohio App.3d 825, 723 N.E.2d 1139 (1st Dist.1999), and Luginbihl v. Milcor L.P., 3d
Dist. Allen No. 1-01-162, 2002-Ohio-2188, as support for this argument are not on
point. Both Thomas and Luginbihl stand for the proposition that a union cannot, in
a collective bargaining agreement, prospectively waive a member’s right to select a
judicial forum for the resolution of the member’s statutory claims, even if the
collective bargaining agreement contains a grievance procedure that culminates in
binding arbitration. Thomas at 831; Luginbihl at ¶ 28. That is so because statutory
discrimination rights are distinct from contractual collective bargaining rights and
are independent of the arbitration process. Haynes v. Ohio Turnpike Comm., 177
Ohio App.3d 1, 2008-Ohio-133, 893 N.E.2d 850, ¶ 17-18 (8th Dist.); Luginbihl at
¶ 29. Thus, the employee is not required to proceed to arbitration under the
collective bargaining agreement and may proceed in state court with his or her
discrimination and retaliation claims. Thomas at 831.
This case does not involve a collective bargaining agreement,
however, or a union acting on Thomas’s behalf. Instead, it involves an arbitration
agreement that Thomas signed on his own behalf in which he agreed to submit his
claims to arbitration. Despite Thomas’s failure to so acknowledge, there are
numerous cases from Ohio courts holding that an employee’s race discrimination
and retaliation claims brought pursuant to R.C. Chapter 4112 are arbitrable where
the employee has signed an arbitration agreement. See, e.g., Doe v. Contemporary
Servs. Corp., 8th Dist. Cuyahoga No. 107229, 2019-Ohio-635; Jones, 9th Dist.
Summit No. 28918, 2019-Ohio-211; Wolfe v. J.C. Penney Corp., 10th Dist. Franklin
No. 18AP-70, 2018-Ohio-3881; Hay v. Summit Funding, Inc., 4th Dist. Ross No.
16CA3577, 2017-Ohio-8261; Rivera v. Rent A Ctr., Inc., 8th Dist. Cuyahoga No.
101959, 2015-Ohio-3765; Melia v. OfficeMax N. Am., Inc., 8th Dist. Cuyahoga No.
87249, 2006-Ohio-4765; Butcher v. Bally Total Fitness Corp., 8th Dist. Cuyahoga
No. 81593, 2003-Ohio-1734.
Nevertheless, although arbitration is encouraged as a way to settle
disputes, an arbitration clause is not enforceable if it is unconscionable. Felix v.
Ganley Chevrolet, Inc., 8th Dist. Cuyahoga Nos. 86990 and 86991, 2006-Ohio-
4500, ¶ 15. Questions of unconscionability are reviewed under a de novo standard
of review. McCaskey v. Sanford-Brown College, 8th Dist. Cuyahoga No. 97261,
2012-Ohio-1543, ¶ 8. Under a de novo standard, we give no deference to the trial
court’s decision. Brownlee v. Cleveland Clinic Found., 8th Dist. Cuyahoga No.
97707, 2012-Ohio-2212, ¶ 9.
Unconscionability includes both an absence of meaningful choice on
the part of one of the parties to a contract, together with contract terms that are
unreasonably favorable to the other party. Hayes v. Oakridge Homes, 122 Ohio
St.3d 63, 2009-Ohio-2054, 908 N.E.2d 408, ¶ 20; Collins v. Click Camera & Video,
Inc., 86 Ohio App.3d 826, 834, 621 N.E.2d 1294 (2d Dist.1993). It consists of two
separate concepts: (1) substantive unconscionability; and (2) procedural
unconscionability. Olah v. Ganley Chevrolet, Inc., 8th Dist. Cuyahoga No. 86132,
2006-Ohio-694, ¶ 14.
Substantive unconscionability goes to the unfairness or
unreasonableness of the contractual terms. Featherstone v. Merrill Lynch, Pierce,
Fenner & Smith, Inc., 159 Ohio App.3d 27, 2004-Ohio-5953, 822 N.E.2d 841, ¶ 13
(9th Dist.). When a contractual term is “so one-sided as to oppress or unfairly
surprise” a party, the contractual term is said to be substantively unconscionable.
Neubrander v. Dean Witter Reynolds, Inc., 81 Ohio App.3d 308, 311-312, 610
N.E.2d 1089 (9th Dist.1992).
Procedural unconscionability, on the other hand, concerns the
formation of the agreement, and occurs when one party has such superior
bargaining power that the other party lacks a “meaningful choice” to enter into the
contract. DeVito v. Autos Direct Online, Inc., 2015-Ohio-3336, 37 N.E.3d 194, ¶ 19
(8th Dist.), citing Taylor Bldg. Corp. of Am. v. Benfield, 117 Ohio St.3d 352, 2008-
Ohio-938, 884 N.E.2d 12, ¶ 33. Courts have also characterized it as a lack of
voluntary meeting of the minds due to the circumstances surrounding the execution
of the contract. Collins at 834. In determining procedural unconscionability, courts
should consider factors relating to the bargaining power of each party, “such as 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.” Id. Generally, no one factor
alone determines whether a contract is procedurally unconscionable. Hayes at ¶ 29.
Instead, a court must consider the totality of the circumstances. Id. at ¶ 30.
A finding of unconscionability requires both procedural and
substantive unconscionability, although procedural and substantive aspects of
unconscionability are often integrally related. DeVito at ¶ 20. Most cases of
unconscionability involve a combination of procedural and substantive
unconscionability, and if more of one is present, then less of the other is required.
Id. “The more substantively oppressive the contract term, the less evidence of
procedural unconscionability is required.” Id., citing 1 E. Allan Farnsworth,
Farnsworth on Contracts, § 4.28, at 585 (3d Ed.2004).
Our review of the arbitration agreement demonstrates that it is both
substantively and procedurally unconscionable because the agreement, drafted by
Migdal, as the employer, requires Thomas, as an employee of Migdal, to arbitrate
any claim whatsoever he might have against Migdal, its owners, managers,
members, officers, agents, insurers, or other employees, regardless of the nature of
the claim. Thus, although the relationship of the parties to the agreement is one of
employer and employee, the agreement, by its terms, includes as arbitrable all
claims between the parties, even those that are outside the scope of the employment
relationship.
Appellees assert that Thomas’s claims are arbitrable because they
arise out of his employment relationship with appellees. But the agreement does
not specify that it applies only to claims that arise out of the employment
relationship; it provides that it encompasses “any actual or alleged claim or liability,
regardless of its nature.” In Arnold v. Burger King, 2015-Ohio-4485, 48 N.E.3d 69(8th Dist.), this court found substantively unconscionable an arbitration agreement
between an employee and employer where the agreement provided that it applied
to “any and all disputes, claim or controversies arising out of or relating to [your]
employment,” as well as “claims or controversies relating to events outside the scope
of your employment.” Id. at ¶ 4. This court reasoned that the agreement was
substantively unconscionable because the relationship between the parties was that
of employer and employee, but “inasmuch as the [agreement] sought to include
every possible situation that might arise in an employee’s life, * * * the arbitrator
would be resolving disputes unrelated to employment.” Id. at ¶ 84. We find the
same reasoning applicable here.
We likewise find the arbitration agreement to be procedurally
unconscionable. We recognize that in an at-will employment situation, Ohio
employers may condition employment on the employee’s agreement to arbitrate
disputes. Dacres v. Setjo, 8th Dist. Cuyahoga No. 107638, 2019-Ohio-2914, ¶ 36;
Overman v. Ganley Ford W., Inc., N.D. Ohio No. 1:15 CV 1581, 2015 U.S. Dist.
LEXIS 169601, 3-4 (Dec. 17, 2015) (rejecting plaintiff’s argument that the arbitration
agreement should not be enforced because, among other reasons, “he was forced to
sign the Arbitration Agreement to keep his job”). Thus, Thomas’s argument that the
agreement is procedurally unconscionable because he had no choice but to sign the
agreement in order to keep his job is without merit.2
Nevertheless, an employer may not condition an employee’s
continued employment on his assent to an arbitration agreement that provides that
every conceivable claim the employee may ever have against the employer, even if
the claim does not arise out of the employment relationship, must be resolved by
arbitration. In such cases, the agreement is necessarily procedurally
unconscionable. In its reply to Thomas’s brief in opposition to Migdal’s motion to
stay proceedings pending arbitration, Migdal admitted that Thomas’s continued
employment was conditioned upon his signing the arbitration agreement. (Reply
Brief, p. 7.)
Even a diligent reading of the “covered disputes” clause would not
inform a reasonable reader of its actual effect. The clause does not explain that
disputes arising outside the scope of employment — disputes an employee would
not reasonably expect to be covered by an arbitration agreement with his employer
— must also proceed to arbitration. In Arnold, supra, this court found a similar
clause to be procedurally unconscionable, reasoning that “[t]he agreement does not,
2 We also reject Thomas’s argument that the “final and binding” nature of the
arbitration award makes the agreement unconscionable because he would have no ability
to appeal if he experienced any bias from the arbitrator. Under this logic, almost all
arbitration agreements would be unconscionable, given the ubiquity of agreements that
provide for final and binding arbitration.
in any way explain the tremendously overreaching impact of its terms on the
employee’s life both within and outside the scope of employment.” Arnold, 2015-
Ohio-4485, 48 N.E.3d 69, at ¶ 81. This court stated further, “[o]ne may be willing
to arbitrate disputes that arise in the course of employment. It is an entirely
different scenario when one agrees to arbitrate claims that arise outside the scope of
employment because the variety of potential claims is practically infinite and
unforeseeable.” Id. at ¶ 82.
Accordingly, because the arbitration agreement at issue is both
substantively and procedurally unconscionable, we find that the trial court abused
its discretion in granting appellees’ motion to stay proceedings pending arbitration.
The assignment of error is sustained, and the matter is remanded for further
proceedings.
Reversed and remanded.
It is ordered that appellant recover from appellees costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate be sent to said court to carry this judgment
into execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27
of the Rules of Appellate Procedure.
KATHLEEN ANN KEOUGH, JUDGE
MARY EILEEN KILBANE, P.J., and
EILEEN A. GALLAGHER, J., CONCUR