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Stefani Stacy v. Brinker Restaurant Corporation

October 16, 2012

STEFANI STACY,
PLAINTIFF,
v.
BRINKER RESTAURANT CORPORATION, ET AL.,
DEFENDANTS.



The opinion of the court was delivered by: Barbara A. McAuliffe United States Magistrate Judge

FINDINGS AND RECOMMENDATIONS ON DEFENDANTS' MOTION TO COMPEL ARBITRATION

I. INTRODUCTION

Currently before the Court is the motion of Brinker Restaurant Corporation, Brinker International Payroll Company, L.P., and Brinker Services Corporation (collectively referred to as "Brinker") to compel arbitration and dismiss, or in the alternative, stay proceedings pending the outcome of arbitration (Brinker's "Motion to Compel"). (Doc. 10.) Plaintiff Stefani Stacy filed an opposition to Defendant's Motion to Compel on August 31, 2012. (Doc. 16.) Brinker filed its reply brief on September 7, 2012. (Doc. 18, 19.) The Court heard oral arguments on October 12, 2012. (Doc. 21.) Counsel Michael Bracamontes appeared telephonically on behalf of Plaintiff. Counsel Michael Christian appeared telephonically on behalf of Brinker. (Doc. 21.) Having considered the parties' briefs, the declarations and exhibits attached thereto, arguments presented at the October 12, 2012 hearing, as well as the Court's file, the Court issues the following findings and recommendations.

II. FACTUAL BACKGROUND

Brinker is several related businesses operating restaurant food chains. (Pl.'s Compl., ¶¶ 4-7, Doc. 1, Attach. 1.) In or around November 2007, Plaintiff was hired by Brinker as a server at a Chili's restaurant. (Pl.'s Compl., ¶ 7.) When Plaintiff was hired, she was required to fill out an employment application and sign, among other documents, a pre-dispute mandatory arbitration agreement. (Declaration of Glenn Brown, ¶ 4, Ex. A.) The employment application provided that "[t]he Agreement to Arbitrate accompanying this application must be read and signed in order for you to be considered for employment with the Company." Id.

In or around October 2008, Plaintiff relocated to a different Chili's location, owned by Brinker, and worked as a bartender. (Pl.'s Compl., ¶ 8.) Between the summer of 2010 and December 2011, Plaintiff alleges two managers (one male, one female) repeatedly made sexually derogative comments and conducted themselves inappropriately towards Plaintiff. (Pl.'s Compl., ¶¶ 9-25.) Plaintiff alleges she complained to her general manager of the misconduct, however, no action was taken. Brinker terminated Plaintiff in December of 2011, citing Plaintiff's unsatisfactory job performance as the reason. Plaintiff alleges her termination was pretext for gender-based discrimination, and retaliation for complaining to the general manager.

On February 23, 2012, Plaintiff filed a complaint against Brinker in the Superior Court of the State of California, County of Stanislaus. (Doc. 1, Attach. 1.) Plaintiff alleges several gender discrimination and sexual harassment claims under the California Fair Employment and Housing Act ("FEHA"), Cal. Gov't. Code §§ 12900, et seq., as well as several common law tort claims. Id. On May 24, 2012, Brinker removed Plaintiff's claims to this Court pursuant to 28 U.S.C. §§ 1332(a), 1441(a) and 1446. (Doc. 1.)

On August 10, 2012, Brinker filed the instant Motion to Compel Arbitration. (Doc. 10.) Brinker argues Plaintiff's claims are not properly before the Court because Plaintiff entered into an agreement to arbitrate her claims, which states in pertinent part:

Because of, among other things, the delay and expense which result from the use of the court systems, any legal or equitable claims or disputes arising out of or in connection with employment, terms and conditions of employment, or the termination of employment with Brinker will be resolved by binding arbitration instead of in a court of law or equity. This agreement applies to all disputes involving legally protected rights (e.g., local, state and federal statutory, contractual or common law rights) regardless of whether the statute was enacted or the common law doctrine was recognized at the time this agreement was signed. . . .

The arbitration proceedings shall take place in or near the city where the employee worked. There will be one arbitrator chosen by mutual agreement of the parties. If, within 60 days after the employee submits a notice of intention to arbitrate to Brinker, and no arbitrator has been chosen, then an arbitrator shall be chosen by the American Arbitration Association pursuant to its National Rules for the Resolution of Employment Disputes ("National Rules"). . . . . . . The employee is entitled to representation by an attorney throughout the proceedings at his or her own expense. The fees and expenses of the arbitration shall be borne by the parties, pursuant to the schedule set forth in the National Rules unless otherwise awarded by the arbitrator in the final, written decision. (the "Agreement") (Declaration of Michael Christian, Ex. A, Doc. 12.)

III. LEGAL STANDARD

Pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq., a written arbitration agreement is "valid, irrevocable, and enforceable" and, upon the request of either party to the agreement, a court may compel arbitration "in accordance with the terms of the agreement." 9 U.S.C. §§ 2--4. When such a request is made, the court is limited to deciding "(1) whether a valid agreement to arbitrate exists, and if it does, (2) whether the agreement encompasses the dispute at issue." Cox v. Ocean View Hotel Corp., 533 F.3d 1114, 1119 (9th Cir. 2008) (quoting Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1131 (9th Cir. 2000)).

The Supreme Court has identified two types of contract-based challenges to the validity of arbitration agreements: "[o]ne type challenges specifically the validity of the agreement to arbitrate ... [and][t]he other challenges the contract as a whole, either on a ground that directly affects the entire agreement ... or on the ground that the illegality of one of the contract's provisions renders the whole contract invalid." Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 444, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006). Challenges to the contract's validity are first considered by the arbitrator. Id. If, however, "the crux of the complaint is ... the arbitration provision itself, then the federal courts ... must decide whether the arbitration provision is invalid and unenforceable ...." Cox, 533 F.3d at 1119 (quoting Davis v. O'Melveny & Myers, 485 F.3d 1066, 1072 (9th Cir. 2007)).

The parties agree that an agreement requiring arbitration of employment disputes is not per se unconscionable, and additionally, that if the Agreement is enforceable, Plaintiff's claims fall within the scope of the Agreement. Plaintiff, however, argues the arbitration agreement is unenforceable because it is unconscionable under California law. (Pl.'s Opp. Mot., 1: 19-26, Doc. 16.) Specifically, Plaintiff argues the agreement is procedurally unconscionable because is was offered as a take-it-or-leave-it condition of employment, and substantively unconscionable because it includes a waiver of Plaintiff's statutory right to recover all costs and fees (including attorneys' fees). Id.

Brinker responds the Agreement is not unconscionable because, under the National Rules for the American Arbitration Association cited in the Agreement, the arbitrator has the discretion to award fees and costs to either party. Alternatively, Brinker argues if either of these provisions were unconscionable, those two provisions can be severed because the agreement is not permeated with unconscionability.

IV. DISCUSSION

A. Legal Standard for Unconscionability

While there exists a general public policy favoring the enforcement of arbitration agreements, section 2 of the FAA provides that arbitration clauses may be invalidated based "upon the same grounds as exist in law or in equity for the revocation of any contract," such as fraud, duress or unconscionability. 9 U.S.C. § 2 (emphasis added); Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). The court applies ordinary state-law principles governing the formation of contracts to determine unconscionability. Pokorny v. Quixtar, 601 F.3d 987, 994 (9th Cir. 2010).

"Under California law, a contractual clause is unenforceable if it is both procedurally and substantively unconscionable."*fn1 Davis, 485 F.3d at 1072. Procedural unconscionability focuses on oppression or surprise due to unequal bargaining power, while substantive unconscionability focuses on overly-harsh or one-sided results. Stirlen v. Supercuts, Inc., 51 Cal.App.4th 1519, 1532, 60 Cal.Rptr.2d 138 (1997). While both types of unconscionability must be present in order for a court to find a contract unenforceable, it is not necessary that they be present in the same degree. Davis, 485 F.3d at 1072. For this reason, "[c]courts apply a sliding scale: 'the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to ...

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