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GOLENIA v. BOB BAKER TOYOTA

February 13, 1996

GERD J. GOLENIA, Plaintiff,
v.
BOB BAKER TOYOTA, Defendant.



The opinion of the court was delivered by: JONES

 BACKGROUND

 Plaintiff Gerd J. Golenia's complaint charges Bob Baker Toyota with multiple violations of the Americans With Disabilities Act ("ADA"), 42 U.S.C. §§ 12101-12213. Plaintiff worked as a salesperson at Bob Baker Toyota from June 20, 1994, to September 5, 1994. The allegations of ADA violations concern the conditions of his employment and termination. Plaintiff signed an employment agreement with an arbitration clause on May 9, 1994, the date that he applied for the position. In addition, on June 20, 1994, his first day of work, he signed a document evidencing receipt of the Employee Handbook, which also described the arbitration provisions, and a form entitled "Employee Acknowledgment of Receipt of Arbitration Policy," which referred the plaintiff to the descriptions in the employment contract and the handbook.

 Before the Court are defendant's motions to compel arbitration and to stay proceedings pending arbitration. Sections 3 and 4 of the FAA empower federal courts to stay actions subject to an arbitration agreement and to order a refusing party to abide by the procedures in the agreement. 9 U.S.C. §§ 3 (court must stay action pending arbitration if issues are referable under the agreement), 4 (court must enter order to follow arbitration procedures if applicable). Plaintiff argues in opposition (1) that the Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 1-14, does not apply to employment contracts; (2) that the arbitration clause is unenforceable; and (3) that the arbitration clause, even if enforceable, does not represent a knowing and voluntary waiver of his ADA claims. For the reasons stated below, the Court rejects each of these arguments, and grants the motions to stay and compel arbitration.

 APPLICABILITY OF FEDERAL ARBITRATION ACT

 Plaintiff argues that the FAA does not apply to employment contracts because of section 1's exclusion of "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." 9 U.S.C. § 1 (emphasis added). He cites Mittendorf v. Stone Lumber Co., 874 F. Supp. 292, 294-95 (D. Or. 1994), which held that the italicized language operates to exempt all employment contracts, not just those for workers involved directly in interstate commerce.

 This issue was left open by the Supreme Court in Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 25 n.2, 114 L. Ed. 2d 26, 111 S. Ct. 1647 (1991) (declining to decide issue raised by amici curiae whether section 1 "excludes from the coverage of the FAA all 'contracts of employment'" because the clause at issue was not contained in a contract of employment). The Ninth Circuit has not yet ruled on it. See Mago v. Shearson Lehman Hutton Inc., 956 F.2d 932, 934 (9th Cir. 1992) (noting that FAA's application to employment contracts was unresolved, but declining to reach issue because not raised below). The one-line dictum in Herring v. Delta Airlines, Inc., 894 F.2d 1020, 1023 (9th Cir. 1989) does not bind this court.

 The majority of the circuits that have addressed this issue have concluded that the exclusion should be narrowly construed to apply only to workers who, like the enumerated classes of seamen and railroad workers, are involved directly in interstate transportation of goods. See Dickstein v. duPont, 443 F.2d 783, 785 (1st Cir. 1971); Erving v. Virginia Squires Basketball Club, 468 F.2d 1064, 1069 (2d Cir. 1972); Tenney Eng'g, Inc. v. United Elec. Radio & Mach. Workers, 207 F.2d 450, 452 (3d Cir. 1953); Asplundh Tree Expert Co. v. Bates, 71 F.3d 592, 596-602 (6th Cir. 1995) (rejecting earlier dictum in Willis v. Dean Witter Reynolds, 948 F.2d 305, 311 (6th Cir. 1991); Miller Brewing Co. v. Brewery Workers Local No. 9, 739 F.2d 1159, 1162 (7th Cir. 1984), cert. denied, 469 U.S. 1160, 83 L. Ed. 2d 926, 105 S. Ct. 912 (1985). Justice Stevens, dissenting in Gilmer, indicated his belief that the exclusionary clause should be read as excluding all employment contracts. However, the only circuit that has announced such a rule is the Fourth. In 1954 the Fourth Circuit decided, in an expressly limited holding, that the FAA does not apply to arbitration clauses in collective bargaining agreements because these were employment contracts, and indicated that it would probably apply the same rule to other employment agreements. See United Elec. Radio & Mach. Workers v. Miller Metal Prods., 215 F.2d 221, 224 (4th Cir. 1954). The viability of this decision is questioned by courts even within the Fourth Circuit. See Kropfelder v. Snap-On Tools Corp., 859 F. Supp. 952, 958 (D. Md. 1994) (opining that Fourth Circuit would not apply Miller to non-collective bargaining agreements).

 In Asplundh, the Sixth Circuit reversed its prior dictum, announced in Willis, that employment agreements were excluded from the FAA's scope, based upon the following considerations: (1) the legislative history indicates that Congress was specifically concerned with seaman and railroad workers, implying a lack of any intent to exclude others; (2) the language of the exclusionary clause of section 1 uses narrower terms than the scope provisions of section 2; and (3) the policy of the act supports the result of broad application. See Bates, 71 F.3d at 596-602. The Court finds the reasoning in Asplundh persuasive and holds that the exclusionary clause in section 1 of the FAA should be narrowly construed to cover only workers directly involved in the interstate transportation of goods.

 ENFORCEABILITY OF THE CLAUSE

 Plaintiff argues that the clause in unenforceable because (1) the plaintiff did not read the clause before signing the employment agreement or the "Acknowledgement of Receipt of Arbitration Policy"; and (2) the clause is an oppressive term in an adhesion contract.

 Section 2 of the FAA provides that an arbitration clause may be attacked "upon such grounds as exist at law or in equity for the revocation of any contract." This section has been interpreted to create a federal substantive law of arbitrability. See Bayma v. Smith Barney, Harris Upham and Co., Inc., 784 F.2d 1023, 1024-25 (9th Cir. 1986) (citing Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24-25, 74 L. Ed. 2d 765, 103 S. Ct. 927 (1983) ("The effect of the section is to create a body of federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the Act."). California state law of contracts, while informative where it conforms to federal law, does not control.

 The plaintiff may not argue that he is not bound because of his own failure to read the contract, especially given the bold-faced all-caps admonition in the agreement not to sign it prior to reading and understanding its terms. See Madden v. Kaiser Foundation Hospitals, 17 Cal. 3d 699, 710, 131 Cal. Rptr. 882, 552 P.2d 1178 (Cal. 1976) (describing "general rule" that "one who assents to a contract is bound by its provisions and cannot complain of unfamiliarity with the language of the instrument"). Madden also rejected the plaintiff's argument that the arbitration agreement at issue was a contract of adhesion. The California Supreme Court relied in part upon the observation that arbitration agreements do not bear the essential feature of adhesion clauses, which "limit the obligations or liability of the stronger party." Id. at 711. Rather, arbitration "substitute one forum for another," and not necessarily an inferior forum. Id. This adhesion analysis is consistent with the strong federal policy favoring arbitration. See Moses H. Cone Hospital v. Mercury Constr. Corp., 460 U.S. 1, 24, 74 L. Ed. 2d 765, 103 S. Ct. 927 (1983) ("Section 2 is a congressional declaration of a liberal federal policy favoring arbitration agreements, notwithstanding any state substantive or procedural policies to the ...


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