Eckstein v. East Coast Facilities Inc ( 2021 )

1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 WESTERN DISTRICT OF WASHINGTON AT SEATTLE 9 10 NICHOLAS ECKSTEIN, CASE NO. C21-257 MJP 11 Plaintiff, ORDER GRANTING MOTION TO COMPEL ARBITRATION 12 v. 13 EAST COAST FACILITIES INC, et al., 14 Defendants. 15 16 17 This matter comes before the Court on Defendants’ Motion to Compel Arbitration. (Dkt. 18 No. 11.) Having reviewed the Motion, Plaintiff’s Opposition (Dkt. No. 14), the Reply (Dkt. No. 19 18), and all relevant materials filed by the Parties, the Court GRANTS the Motion and 20 DISMISSES this action. 21 BACKGROUND 22 Plaintiff Nicholas Eckstein was fired from his job as an associate forecaster 23 (meteorologist) at True Weather LLC, an affiliate of East Coast Facilities Inc. Eckstein has filed 24 suit against East Coast, True Weather, and Michael Defino (the Chief Meteorologist of True 1 Weather), pursuing disability discrimination claims under the Americans with Disabilities Act 2 and the Washington Law Against Discrimination. Eckstein also pursues claims under the 3 Washington Paid Medical Leave Act (RCW Title 50A), the Family Medical Leave Act (29 4 U.S.C. § 2601, et seq.), the Washington Minimum Wage Act (RCW 49.46), Washington Wage 5 Payment Act (RCW 49.48) and the Washington Wage Rebate Act (RCW 49.52). Defendants 6 have moved to compel arbitration, asserting that Eckstein’s employment agreement requires it. 7 Eckstein opposes on the grounds that the arbitration provision is unconscionable and therefore 8 unenforceable. The Court reviews the facts related to Eckstein’s employment and the arbitration 9 provisions put at issue by the Motion. 10 A. Employment-Related Facts 11 In December 2018, Eckstein was hired to work for True Weather and East Coast. At the 12 time of his hire, Eckstein was living in Oregon and was to provide weather forecasts for the 13 Northwest and Southwest regions. (Eckstein Decl. ¶ 3 (Dkt. No. 16).) Both East Coast and True 14 Weather are located in Pennsylvania, though East Coast is incorporated under the laws of 15 Delaware and True Weather is a Pennsylvania limited liability company. Eckstein was hired by 16 Defino who lives in Pennsylvania. 17 The parties dispute the precise date of Eckstein’s hiring. Eckstein argues that he was 18 “formally offered the position on December 6, 2018” and that he accepted the offer on December 19 10, 2018 while also demanding a higher salary. (Eckstein Decl. ¶ 3.) This appears consistent with 20 the email communications between Eckstein and Defino, which show Eckstein accepted the offer 21 on the 10th while asking for a higher salary, and that he began work on the 27th of December 22 2018. (Ex. A. to Eckstein Decl. (Dkt. No. 16 at 12).) Defino does not necessarily contradict this 23 assertion, though he maintains that the job offer was conditional on Eckstein completing various 24 1 paperwork, including executing an employment agreement. (Defino Decl. ¶ 3.) It is undisputed 2 that on December 26, 2018 East Coast provided Eckstein with the Employment Agreement. 3 After its receipt, Eckstein attempted to negotiate changes to the non-solicitation and noncompete 4 provisions in the Employment Agreement. (Defino Decl. ¶ 5; Eckstein Decl. ¶ 4.) Defino and 5 East Coast rejected those proposed changes, stating that they were non-negotiable. (Id.) Eckstein 6 made no objection to the arbitration provisions in the Employment Agreement. 7 When Eckstein negotiated the job and started to work, he lived in Oregon, while working 8 part time in Washington at Pierce College in Lakewood, Washington. At no time during the 9 negotiations or his tenure did Eckstein work, travel to, or reside in Pennsylvania. (Eckstein Decl. 10 ¶ 3.) In March 2019, Eckstein moved to Washington to teach at Pierce College. (Id. ¶ 6.) 11 Eckstein then moved temporarily to Oregon in March 2020 and stayed for a prolonged period 12 while maintaining his Washington residency. (Id.) 13 In September 2019, Eckstein began to suffer medical episodes later diagnosed as 14 epileptic seizures. (Eckstein Decl. ¶ 7.) In October 2019 he was hospitalized for three days and 15 had other episodes in November and December 2019. (Id.) He then took approved FMLA leave 16 from February 3, 2020 to March 2, 2020. (Id.) He returned to work on March 4, 2020, but had 17 another seizure. (Id.) East Coast then terminated Eckstein on March 27, 2020 and did not pay 18 him for any of the work he performed after he returned to work on the theory it had overpaid him 19 while he was on FMLA leave. (Id. ¶¶ 8-9.) Defendants claim that they were forced to lay off 20 Eckstein because they lost their primary client for whom Eckstein’s work was performed and 21 other market conditions. (Defino Decl. ¶ 7.) 22 23 24 1 B. Arbitration-Related Facts 2 Prior to filing suit, the parties attempted to mediate this dispute, as required by the 3 Employment Agreement. The mediation failed. The Employment Agreement also contains an 4 arbitration provision, which the Court reviews given the issues presented by the parties. 5 First, the Employment Agreement states the arbitrator “shall apply applicable 6 Commonwealth and/or federal substantive law to determine liability and damages regarding all 7 claims to be arbitrated.” (Employment Agreement § 9.4.4.) Second, the Employment Agreement 8 states that the arbitrator “shall have the authority to determine what constitutes reasonable 9 discovery.” (Id. § 9.4.4.) But the arbitrator “shall apply the Federal rules of evidence to the 10 proceeding.” (Id.) Third, the Employment Agreement states that “the parties shall each bear their 11 own costs and attorneys’ fees in any arbitration proceeding.” (Id. § 9.4.6.) Fourth, the 12 Employment Agreement states that “[e]ither party may seek to confirm and/or enforce the 13 arbitrator’s award in any competent court of law . . . [h]owever, there shall be no right to appeal 14 the arbitration award.” (Id. § 9.4.8.) 15 Separately, Eckstein takes issues with two of the AAA Arbitration rules that apply. First, 16 Eckstein flags the following rule as to discovery: 17 The arbitrator shall have the authority to order such discovery, by way of deposition, interrogatory, document production, or otherwise, as the arbitrator considers necessary to 18 a full and fair exploration of the issues in dispute, consistent with the expedited nature of arbitration. 19 The AAA does not require notice of discovery related matters and communications 20 unless a dispute arises. At that time, the parties should notify the AAA of the dispute so that it may be presented to the arbitrator for determination. 21 (Employment Arbitration Rules and Mediation Procedures No. 9 (Ex. C. to Norgaard Decl.).) 22 Second, Eckstein flags the rule about confidentiality: 23 24 1 The arbitrator shall maintain the confidentiality of the arbitration and shall have the authority to make appropriate rulings to safeguard that confidentiality, unless the parties 2 agree otherwise or the law provides to the contrary. 3 (Id., Arbitration Rule No. 23.) 4 ANALYSIS 5 Defendants’ Motion requires an analysis of the choice of law and the validity and 6 enforceability of the arbitration clause under the applicable law. The Court reviews those issues 7 and then assesses Defendants’ request for sanctions and whether to dismiss or stay this action. 8 A. Choice of Law 9 Although the Section 10 of the Employment Agreement states that Pennsylvania law 10 applies, the Court is obliged to perform an analysis of the correct law to be applied in 11 determining the validity of the arbitration clause. 12 Section 2 of the Federal Arbitration Act (“FAA”) provides that arbitration agreements in 13 commercial contracts “shall be valid, irrevocable, and enforceable, save upon such grounds as 14 exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. “In determining the 15 validity of an agreement to arbitrate, federal courts ‘should apply ordinary state-law principles 16 that govern the formation of contracts.’” Ferguson v. Countrywide Credit Indus., Inc., 298 F.3d 17 778, 782 (9th Cir. 2002) (quoting First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 18 (1995)). “Before a federal court may apply state-law principles to determine the validity of an 19 arbitration agreement, it must determine which state’s laws to apply [and i]t makes this 20 determination using the choice-of-law rules of the forum state. . . .” Pokorny v. Quixtar, Inc., 601 21 F.3d 987, 994 (9th Cir. 2010). 22 Under Washington law, courts “generally enforce contract choice of law provisions with 23 certain exceptions.” McKee v. AT & T Corp., 164 Wn.2d 372, 384 (2008). The Court will 24 “disregard the contract provision and apply Washington law if, [1] without the provision, 1 Washington law would apply; [2] if the chosen state’s law violates a fundamental public policy 2 of Washington; and [3] if Washington’s interest in the determination of the issue materially 3 outweighs the chosen state’s interest.” Id. (citation omitted). The Court will enforce a choice of 4 law provision unless all three of these conditions are met. Id. 5 1. Factor One: Would Washington law apply? 6 To assess the first condition, the Court applies a “most significant relationship” test from 7 Restatement (Second) of Conflict of Laws § 188. See McKee, 164 Wn.2d at 384. Under this test, 8 “Courts weigh the relative importance to the particular issue of (a) the place of contracting, (b) 9 the place of negotiation of the contract, (c) the place of performance of the contract, (d) the 10 location of the subject matter of the contract, and (e) the domicile, residence, or place of 11 incorporation of the parties.” Id. at 384-85. 12 The factors here weigh in favor of Pennsylvania, not Washington. First, the place of 13 contracting was between Eckstein in Oregon and Defino/East Coast in Pennsylvania. There was 14 no tie to Washington. Second, the place of negotiation was split between Oregon and 15 Pennsylvania. Third, the place of performance was Eckstein’s remote location in Oregon and 16 Washington. Fourth, the subject matter of the contract was for Eckstein to provide of 17 meteorological reports to Defino and True Weather in Pennsylvania for the company’s use from 18 its headquarters in Pennsylvania. It also required Eckstein to produce work remotely from his 19 locations in Oregon and Washington. Fifth, the location of the parties at the time of contracting 20 was Oregon and Pennsylvania. On balance, Pennsylvania has the most significant and consistent 21 relationship to the parties and subject matter of the agreement, with Oregon as close second- 22 place. Eckstein’s ties to Washington are attenuated for purposes of this analysis, given that he 23 did not reside there at the time of contract negotiation or the commencement of his job and only 24 1 spent some of his time residing there while he was employed. Eckstein has not satisfied this 2 factor, which compels the Court to apply Pennsylvania law as provided in the Employment 3 Agreement. 4 2. Factor Two: Washington’s fundamental policy 5 Given the Court’s analysis on the first factor, it need not consider the second. But for 6 completeness, the Court reviews it. 7 The primary issue to resolve is whether use of Pennsylvania’s law on the enforceability 8 of the arbitration provision would violate a fundamental policy of Washington State. On this 9 point Eckstein has identified what appears to be a higher burden of proof under Pennsylvania law 10 than Washington law in proving the unconscionability of an arbitration provision. Under 11 Washington law one can prove unconscionability either because the arbitration clause is 12 procedurally or substantively unconscionable. Gandee v. LDL Freedom Enters., Inc., 176 Wn.2d 13 598, 603 (2013). But under Pennsylvania law, one must prove both substantive and procedural 14 unconscionability, though under a sliding scale. Salley v. Option One Mortg. Corp., 592 Pa. 323, 15 331, 340 n.12 (2007). Application of Pennsylvania law would thus undermine Washington’s 16 fundamental policy in favor of protecting against enforcement of unconscionable arbitration 17 agreements even if they are only procedurally or substantively unconscionable. 18 Eckstein also argues that there is a fundamental policy in Washington to allow a plaintiff 19 to recover attorneys’ fees and costs, but they are only discretionary in Pennsylvania. But 20 Eckstein confuses the inquiry. This factor in the choice of law analysis concerns only whether 21 application of Pennsylvania law on the unconscionability of the arbitration clause would violate 22 a fundamental policy of Washington law. Whether Eckstein may be entitled to fees and costs on 23 the substantive claims he pursues is not relevant to this inquiry. And as Defendants concede, 24 1 Eckstein can still pursue his Washington claims even if Pennsylvania law applies to the gateway 2 issue of the enforcement of the arbitration clause. (Reply at 5.) 3 3. Factor Three: Washington’s interest in this case 4 Eckstein has failed to persuade the Court that Washington has a materially greater 5 interest in the outcome and subject matter of this litigation than Pennsylvania. Eckstein briefly 6 states that Washington’s interest in protecting workers outweighs Pennsylvania’s interest. But 7 Eckstein provides no meaningful analysis or citation to authority. The Court is left without 8 sufficient reason to believe this factor favors Eckstein. 9 * * * 10 Because Eckstein has not satisfied all three factors of the choice of law analysis, the 11 Court applies Pennsylvania law to determine the enforceability of the arbitration clause. 12 B. Enforceability of Arbitration Clause 13 There is no dispute between the parties that a valid contract was formed and that the 14 Employment Agreement is binding. Instead, the parties dispute whether the arbitration clause is 15 unconscionable and therefore unenforceable. 16 Under Pennsylvania law, Eckstein bears the burden of showing both substantive and 17 procedural unconscionability. Salley, 592 Pa. at 331. “[A] contract or term is unconscionable, 18 and therefore avoidable, where there was a lack of meaningful choice in the acceptance of the 19 challenged provision and the provision unreasonably favors the party asserting it.” Id. 20 “[P]rocedural and substantive unconscionability are generally assessed according to a sliding- 21 scale approach (for example, where the procedural unconscionability is very high, a lesser degree 22 of substantive unconscionability may be required).” Id. at 340 n.12 (citing Delta Funding Corp. 23 v. Harris, 912 A.2d 104, 111 (N.J. 2006)). 24 1 1. Procedural Unconscionability 2 Eckstein fails to show procedural unconscionability. “Procedural unconscionability 3 pertains to the process by which an agreement is reached and the form of an agreement, 4 including the use therein of fine print and convoluted or unclear language.” Harris v. Green Tree 5 Fin. Corp., 183 F.3d 173, 181 (3d Cir. 1999) (considering Pennsylvania law). The question is 6 whether the party lacked a meaningful choice. See id.; Salley, 592 Pa. at 331. At most, Eckstein 7 has demonstrated that the contract was presented on a take-it-or-leave-it basis and he was unable 8 to negotiate its terms. But “merely because a contract is one of adhesion does not render it 9 unconscionable and unenforceable as a matter of law.” Salley, 592 Pa. at 344. Eckstein fails to 10 show that the Employment Agreement buried the arbitration provision in fine print or that he was 11 misled as to its existence. Eckstein read the document and challenged its nondisclosure and 12 noncompete provisions. This cuts against his argument that the terms about arbitration were 13 hidden. While Eckstein has certainly shown the agreement was nonnegotiable, he has not 14 demonstrated that Defendants unfairly hid or buried the arbitration provision in the fine print. 15 The Court is not convinced that Eckstein lacked a meaningful choice to enter into the 16 Employment Agreement and finds an absence of procedural unconscionability. 17 Under Pennsylvania law this determination alone defeats Eckstein’s position because he 18 must prove both procedural and substantive unconscionability. But for completeness, the Court 19 analyzes his arguments about substantive unconscionability. 20 2. Substantive Unconscionability 21 Eckstein makes five arguments as to substantive unconscionability. Of these, only one 22 has merit. 23 24 1 First, Eckstein argues that the arbitration clause’s requirement that each party bear its 2 own costs is unconscionable because it deprives him of his right to fees and costs available to 3 him under Washington law. The Employment Agreement states: “The parties shall each bear 4 their own costs and attorneys’ fees in any arbitration proceeding.” (Employment Agreement § 5 9.4.6.) Under Pennsylvania law, “[P]rovisions requiring parties to be responsible for their own 6 expenses, including attorneys’ fees, are generally unconscionable because restrictions on 7 attorneys’ fees conflict with federal statutes providing fee-shifting as a remedy.” Quilloin v. 8 Tenet HealthSystem Philadelphia, Inc., 673 F.3d 221, 230–31 (3d Cir. 2012) (citing Spinetti v. 9 Serv. Corp. Int'l, 324 F.3d 212, 216 (3d Cir. 2003)). Read in isolation, the provision Eckstein 10 cites would appear to be unconscionable. But as Defendants point out, this limitation on fees is 11 balanced by another provision which states that the arbitrator is “authorized to award only those 12 remedies in law and equity which are requested by the parties and allowed by law.” 13 (Employment Agreement § 9.4.5.) Read together, and as Defendants concede, Eckstein is 14 entitled to request fees and costs as permitted by the claims he pursues under Washington and 15 federal law. 16 Second, Eckstein argues that a confidentiality provision is substantively unconscionable. 17 The Court is not convinced. The provision itself is not in the body of the Employment 18 Agreement, but in the referenced AAA Arbitration rules. The rule states that “The arbitrator shall 19 maintain the confidentiality of the arbitration and shall have the authority to make appropriate 20 rulings to safeguard that confidentiality, unless the parties agree otherwise or the law provides to 21 the contrary.” (Arbitration Rule No. 23.) Eckstein argues that this is impermissible only under 22 Washington law and makes no mention of Pennsylvania law that might apply. But even 23 considering this argument under Washington law, the case Eckstein relies on is distinguishable. 24 1 (See Pl. Opp at 18 (citing McKee).) In McKee, the Court found the confidentiality provision in 2 the agreement itself unconscionable because it was a blanket provision that, in a consumer 3 context, made it impossible for consumers to learn of patterns of misconduct engaged in by the 4 defendant. Here, this is not a consumer case and there is no evidence that other employees of 5 East Coast and/or True Weather would be deprived of seeing the results of a challenge to a 6 pattern of misconduct. And the confidentiality provision is not absolute—the parties can agree 7 not to keep materials confidential and they cannot be kept confidential if doing so is contrary to 8 law. The Court does not find this term unconscionable. 9 Third, Eckstein argues that the discovery procedures are unfair because it gives too much 10 discretion to the arbitrator. The Court disagrees. The Supreme Court has noted that limitations on 11 discovery are to be expected in an arbitration agreement. See Gilmer v. Interstate/Johnson Lane 12 Corp., 500 U.S. 20, 31 (1991) (“Although those procedures might not be as extensive as in the 13 federal courts, by agreeing to arbitrate, a party trades the procedures and opportunity for review 14 of the courtroom for the simplicity, informality, and expedition of arbitration.”) That said, 15 discovery procedures which are one-sided or which deprive a party of a “fair opportunity to 16 present their claims” can be unconscionable. Id. Here, the discovery procedures are not one-sided 17 and there is nothing in the AAA rules to suggest that the arbitrator will unfairly favor 18 Defendants. The Court does not find the provision unconscionable. 19 Fourth, Eckstein argues that the Employment Agreement unconscionably requires waiver 20 of any appeals. Defendants concede that the provision cannot be enforced to deprive Eckstein of 21 his right to appeal as set forth under the Federal Arbitration Act. This is correct—a non-appeal 22 provision is read to still allow for appeals under the FAA. See In re Wal-Mart Wage and Hour 23 Employment Practices Litig., 737 F.3d 1262, 1268 (9th Cir. 2013). This provision is not so much 24 1 unconscionable as ineffective and, below, the Court will consider whether it invalidates the 2 entire arbitration provision or should simply be severed. 3 Fifth, Eckstein argues that the Employment Agreement improperly bars him from 4 bringing claims under Washington law given its provision that the arbitrator may only apply 5 “Commonwealth” or federal law. If Eckstein was correct, this would be unconscionable. But 6 Defendants concede that Eckstein can pursue claims under Washington law because the 7 Employment Agreement allows the arbitrator to apply federal substantive law and “[u]nder the 8 Erie doctrine, federal substantive law, of course, permits the application of state substantive law 9 to resolve state law claims.” (Reply at 5.) While the Employment Agreement is hardly a model 10 of clarity on this issue, the Court finds Defendants’ concession and position resolves the issue. 11 Because Eckstein may bring his Washington claims and seek attorneys’ fees and costs if he 12 prevails in the arbitration, the Court does not find this provision unconscionable. 13 While Eckstein has shown one unconscionable term, the Court determines that it is 14 severable from the Employment Agreement. Under Pennsylvania law, “[t]he severability of a 15 contract may be apparent from its explicit language.” Wert v. Manorcare of Carlisle PA, LLC, 16 633 Pa. 260, 279, 124 A.3d 1248, 1260 (2015). The Court cannot re-write an agreement but 17 “[a]rbitration clauses are no more or less valid, enforceable, or irrevocable than any other 18 contractual provision.” Id. Here, the Employment Agreement states that any term can be severed 19 if it “is determined to be invalid or unenforceable” and that the “remainder of the Agreement will 20 not be affected thereby.” (Employment Agreement § 12.) The unconscionable appeal provision is 21 not so integral to the arbitration agreement as to be inseverable. It is but one limited provision in 22 the agreement which contains many other provisions that do not appear to be unconscionable 23 under Pennsylvania law. Its removal does not substantively change the terms or tenor of the 24 1 agreement, and the Court therefore severs it and otherwise finds the arbitration agreement 2 enforceable. 3 C. Terms/Sanctions 4 Defendants ask for the Court to impose terms on Eckstein for his refusal to submit to 5 arbitration. This request has no merit. The Employment Agreement expressly reserved the issue 6 of arbitrability for the courts: “either party may request provisional relief from a court of 7 competent jurisdiction.” (Employment Agreement § 9.4.) Even if that provision was absent, 8 Eckstein was entitled to litigate the issue of arbitrability and he presented close, colorable 9 questions for the Court to consider on whether the arbitration clause at issue is enforceable. 10 Additionally, Defendants failed to make any argument in the opening brief as to why terms 11 would be appropriate. Defendants instead attempted to “reserve” the issue for the reply. But the 12 moving party must present all arguments in their opening brief to obtain any relief sought. A 13 party cannot merely “reserve” the opportunity to present arguments for the first time in reply. 14 The Court denies this request. 15 D. Dismissal 16 Based on its assessment of the issues and the nature of the matter, the Court finds that 17 dismissal of this matter to be the appropriate relief, rather than a stay. Eckstein will still possess 18 his appellate rights under the FAA, but the Court does not find that this compels entering a stay 19 pending arbitration. 20 CONCLUSION 21 The Court finds that by applying Pennsylvania law and assessing the specific provisions 22 of the Employment Agreement, Eckstein must arbitrate his claims. That said, Eckstein will be 23 permitted to pursue his state and federal law claims and obtain all relief under those laws to 24 1 which he is entitled, including attorneys’ fees and costs. And Eckstein shall be entitled to pursue 2 his appellate rights under the FAA. The Court therefore GRANTS the Motion, compels the 3 parties to arbitrate Eckstein’s claims consistent with the Employment Agreement and this Order, 4 and DISMISSES this action. 5 The clerk is ordered to provide copies of this order to all counsel. 6 Dated July 26, 2021. A 7 8 Marsha J. Pechman United States Senior District Judge 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24