LUCY H. KOH, United States District Judge.
Plaintiff Farrow filed this suit against his former employer, Defendant Fujitsu America, Inc. ("Fujitsu"), alleging federal and California state law claims related to age discrimination and workplace retaliation. See ECF No. 1 (Compl.). Fujitsu has moved in the alternative to dismiss under Fed. R. Civ. P. 12(b)(1) or 12(b)(6), or to compel arbitration and stay this litigation. See ECF No. 10. Farrow filed an Opposition, see ECF No. 17, and Fujitsu filed a Reply and objections to certain evidence, see ECF No. 19. The Court finds the Motion suitable for decision without oral argument pursuant to Civil Local Rule 7-1(b), and therefore VACATES the hearing and case management conference set for April 10, 2014. Having considered the briefing, the record in this case, and applicable law, the Court GRANTS the Motion for the reasons stated below.
This dispute arises from Farrow's employment with Fujitsu. The following facts are undisputed. Farrow applied for a job with Fujitsu by submitting an application dated June 20, 2005. Decl. of Cora Quiroz (ECF No. 28, "Quiroz Decl. 1") ¶ 8, Ex. A. Farrow's application included a signed acknowledgment that a condition of his employment was his "agreement to submit claims related to termination of employment, discrimination, unlawful harassment, including sexual harassment,... to final and binding arbitration." Id. Ex. A. In a letter dated July 27, 2005, Fujitsu Computer Systems Corporation (the predecessor to Defendant Fujitsu America, Inc.) extended Farrow an employment offer to become "Director, Federal Sales," which Farrow signed on July 28, 2005 and faxed back to Fujitsu. Quiroz Decl. 1 ¶ 9, Ex. B. Before Farrow started his job with Fujitsu, he received a package of materials from Fujitsu, including an "Arbitration Policy and Agreement." Id. ¶ 10, Ex. C ("Agreement"). Farrow signed the Agreement on August 22, 2005, his first day with Fujitsu. Id. At the times he signed his application and the offer
The Agreement states in part:
Agreement § 1. The Agreement also contains provisions for selecting an arbitrator, the scope of the arbitrator's authority, and procedures for discovery and hearings. Id. §§ 2-13.
During his employment with Fujitsu, Farrow sold products to a variety of customers across the country. From approximately 2005 to 2007, Farrow handled sales to the federal government, but then sold to federal, state, and local governments from 2007 to 2011, and then also to private customers from 2011 to the end of his employment. Opp'n at 4. Farrow's customers were located nationwide, including Maryland and California. Id. While Farrow travelled to multiple locations during his employment—including to Fujitsu's headquarters in California—he worked at a Fujitsu office in Maryland until 2009, and then from his Maryland home until his termination. See Quiroz Decl. 1 ¶ 3; Reply at 3.
Fujitsu terminated Farrow on November 13, 2012. Compl. ¶ 7. In response, Farrow filed this lawsuit, alleging that Fujitsu fired him because of his age (he was 65 at the time) and because he reported and opposed sexual harassment and age discrimination against other employees. See id. ¶¶ 26-29. Farrow pleaded claims under the Age Discrimination in Employment Act, Title VII, and the California Fair Employment and Housing Act. Id. at 11-16.
On December 9, 2013, Fujitsu filed the instant motion to dismiss Farrow's complaint or stay this case pending arbitration under the Agreement. ECF No. 10 ("Mot."). Farrow filed an opposition on January 6, 2014 (ECF No. 17, "Opp'n"), and Fujitsu filed a reply and objections to certain evidence provided by Farrow on January 17, 2014 (ECF No. 19).
Fujitsu's motion to dismiss or compel arbitration turns on the existence of a valid arbitration agreement between the parties that covers Farrow's claims, pursuant to the Federal Arbitration Act ("FAA"). Under Section 3 of the FAA, "a party may apply to a federal court for a stay of the trial of an action `upon any issue referable to arbitration under an agreement in writing for such arbitration.'" Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63, 130 S.Ct. 2772, 2776, 177 L.Ed.2d 403 (2010) (quoting 9 U.S.C. § 3). If all claims in litigation are subject to a valid arbitration agreement, the court may dismiss or stay the case. See Hopkins & Carley, ALC v. Thomson Elite, No. 10-CV-05806, 2011 WL 1327359, at *7-8,
The FAA states that written arbitration agreements "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. In deciding whether a dispute is arbitrable, a court must answer two questions: (1) whether the parties agreed to arbitrate, and, if so, (2) whether the scope of that agreement to arbitrate encompasses the claims at issue. See Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir.2000). If a party seeking arbitration establishes these two factors, the court must compel arbitration. Id.; 9 U.S.C. § 4. "The standard for demonstrating arbitrability is not a high one; in fact, a district court has little discretion to deny an arbitration motion, since the [FAA] is phrased in mandatory terms." Republic of Nicar. v. Std. Fruit Co., 937 F.2d 469, 475 (9th Cir.1991). Nonetheless, "arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit." AT & T Techs., Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 648, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986) (quoting Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960)).
The FAA creates a body of federal substantive law of arbitrability that requires a healthy regard for the federal policy favoring arbitration and preempts state law to the contrary. Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468, 475-79, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989); Ticknor v. Choice Hotels Int'l, Inc., 265 F.3d 931, 936-37 (9th Cir.2001). State law is not entirely displaced from the federal arbitration analysis, however. See Ticknor, 265 F.3d at 936-37. When deciding whether the parties agreed to arbitrate a certain matter, courts generally apply ordinary state law principles of contract interpretation. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995). Parties may also contract to arbitrate according to state rules, so long as those rules do not offend the federal policy favoring arbitration. Volt, 489 U.S. at 478-79, 109 S.Ct. 1248. Thus, in determining whether parties have agreed to arbitrate a dispute, the court applies "general state-law principles of contract interpretation, while giving due regard to the federal policy in favor of arbitration by resolving ambiguities as to the scope of arbitration in favor of arbitration." Mundi v. Union Sec. Life Ins. Co., 555 F.3d 1042, 1044 (9th Cir.2009) (quoting Wagner v. Stratton Oakmont, Inc., 83 F.3d 1046, 1049 (9th Cir.1996)). "[A]s with any other contract, the parties' intentions control, but those intentions are generously construed as to issues of arbitrability." Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985). If a contract contains an arbitration clause, there is a presumption of arbitrability, AT & T, 475 U.S. at 650, 106 S.Ct. 1415, and "any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration," Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983).
As noted above, state contract law generally governs interpretation of arbitration agreements under the FAA. See Mundi, 555 F.3d at 1044; Volt, 489 U.S. at 476, 109 S.Ct. 1248 ("[T]he federal policy is simply to ensure the enforceability, according to their terms, of private agreements to arbitrate."). However, the Agreement in this case does not specify which state's
Restatement (Second) of Conflicts of Laws § 188.
As noted above, the Agreement omits a choice-of-law provision to establish which state's law governs interpretation of the contract. See Agreement § 1. The parties concur that, under Chuidian, the Restatement's "most significant relationship" test should decide the governing law. However, the parties disagree on the outcome: Farrow insists that California law governs, while Fujitsu believes it is Maryland's. See Opp'n at 2-9; Reply at 2-5. The Court agrees with Fujitsu.
Application of the Restatement factors indicates that Maryland has the strongest relationship to the parties' employment relationship. The first three factors address the place of contracting, place of negotiation of the contract, and the place of performance. Here, Farrow received his employment offer in Maryland and signed both his acceptance letter and the Agreement in Maryland. See Restatement (Second) of Conflicts § 188 cmt. e ("the place of contracting is the place where occurred the last act necessary").
The fourth and fifth Restatement factors address the location of the subject matter of the contract and the locations of the parties. Overall, these considerations also favor Maryland. The subject matter of the Agreement was Farrow's employment, which (as explained above) centered in Maryland. Additionally, Farrow lived and worked in Maryland when the alleged discrimination and his termination occurred. Cf. Economu v. Borg-Warner Corp., 652 F.Supp. 1242, 1248 (D.Conn.1987) (finding New York had the "most significant relationship" to an employment dispute partly because "plaintiff's original employment was negotiated in New York, [and] he maintained an office and staff there"). Farrow also filed a claim with the Equal Employment Opportunity Commission ("EEOC"), based on the same issues in this case, in Maryland. Reply at 4.
Farrow offers numerous facts that supposedly tie his employment to California, many of which relate to the fact that Fujitsu's headquarters and much of its infrastructure were located in California during Farrow's employment. See Opp'n at 2-9; Decl. of Robert Farrow (ECF No. 15, "Farrow Decl.") ¶¶ 7-21.
Farrow also argues that applying California law will promote consistency and predictability for Fujitsu employees who work in other states. See Opp'n at 8-9. Fujitsu responds that Maryland has a greater interest in applying its law to employees who live and work within its borders, and that applying Maryland law best protects the justified expectations of the parties because both Farrow and Fujitsu expected Farrow to work out of Maryland. See Reply at 4 (citing Restatement (Second) of Conflict of Laws § 6). The Court need not decide, as a general matter, which state has a more significant relationship to an employment dispute when the employer and employee are located in different states. Under the facts presented here, the Court concludes that Maryland has the strongest connection to this dispute, and therefore applies Maryland state law for purposes of interpreting the Agreement.
Farrow does not dispute that he signed the Agreement or that his claims are subject to mandatory arbitration if the Agreement is valid and enforceable. Indeed, all of Farrow's pleaded causes of action relate to workplace discrimination, and the Agreement plainly covers "any dispute ... arising out of any claim of discrimination." Agreement § 1. Rather, Farrow's sole challenge to the enforceability of the Agreement is the doctrine of unconscionability. Farrow contends that the Agreement is both procedurally and substantively unconscionable due to unequal negotiating power between the parties and certain unfair provisions. See Opp'n at 9-20. In reply, Fujitsu asserts that none of the contested provisions in the Agreement is unconscionable and requests, in the alternative, that the Court sever any unconscionable provisions and preserve the remainder of the Agreement. See Reply at 13-14.
As explained above, state law governs written arbitration agreements under the FAA. See 9 U.S.C. § 2 (stating that an arbitration agreement "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract"). "Thus, generally applicable contract defenses, such as fraud, duress, or unconscionability, may be applied to invalidate arbitration agreements without contravening § 2." Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 687, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996). Accordingly, if the Agreement is unconscionable under Maryland law, the Agreement is unenforceable.
The Court of Appeals of Maryland has recognized that "[a]n unconscionable bargain or contract has been defined as one characterized by `extreme unfairness,' which is made evident by `(1) one party's lack of meaningful choice, and (2) contractual terms that unreasonably favor the other party.'" Walther v. Sovereign Bank, 386 Md. 412, 426, 872 A.2d 735 (2005) (quoting Black's Law Dictionary 1560 (8th ed. 2004)). Under Maryland law, "a contract is unconscionable only if it is both procedurally and substantively unconscionable." Mould v. NJG Food Serv., 986 F.Supp.2d 674, 678 (D.Md.2013) (applying Maryland law). Accordingly, the Court addresses Farrow's claims of procedural and substantive unconscionability in turn.
Farrow believes that the Agreement was procedurally inequitable because Fujitsu was the stronger party and presented Farrow with the Agreement "on a take it or leave it basis," rendering the Agreement a contract of adhesion. Opp'n at 10; see also Restatement (Second) of Conflict of Laws § 187 cmt. b (defining an adhesion contract as "one that is drafted unilaterally by the dominant party and then presented on a `take-it-or-leave-it' basis to the weaker party who has no real opportunity to bargain about its terms"). Farrow also argues that the Agreement "was buried in a bunch of other employment hiring documents," and that he received no explanation about the arbitration provisions and no opportunities to negotiate the terms or consult a lawyer. Opp'n at 10; Farrow Decl. ¶¶ 4-7. Fujitsu does not dispute that the Agreement was adhesive, but contends that Farrow received sufficient notice
The Court concludes that, under Maryland law, the Agreement was not procedurally unconscionable. On one hand, it is undisputed that Fujitsu had superior bargaining power relative to Farrow and conditioned Farrow's employment on acceptance of arbitration. On the other hand, Farrow received notice of Fujitsu's arbitration requirement even before he submitted his employment application, and thus had at least several weeks after he applied to address any concerns with Fujitsu or seek independent advice. Farrow's June 20, 2005 job application included his signed acknowledgment that: "I understand that a condition of my employment is my agreement to submit claims... to final and binding arbitration." Quiroz Decl. 1 Ex. A. Farrow then received his offer letter on July 27, 2005, roughly five weeks later. The offer letter, which preceded Farrow's receipt of the Agreement itself, gave Farrow two days (until July 29, 2005) to accept the offer and required him to "agree to submit to final and binding arbitration any dispute arising out of the termination of your employment." Quiroz Decl. 1 Ex. B. However, the letter also told Farrow he could contact Fujitsu with any questions, and Farrow signed and returned the offer letter after only one day (on July 28, 2005). Farrow then had until August 22, 2005 (his first work day) to raise any questions about the Agreement itself, but apparently never did so. While Farrow claims that he asked a future supervisor about an invention policy, there is no indication that he inquired about arbitration or attempted to seek legal advice. Farrow Decl. ¶ 4.
Farrow implies that Fujitsu was affirmatively required to explain the arbitration provisions to Farrow and tell him that he could consult a lawyer.
Id. at 429-30, 872 A.2d 735. In response to plaintiffs' argument that the agreement was adhesive, the Walther court held: "A contract of adhesion is not automatically deemed per se unconscionable." Id. at 430, 872 A.2d 735. Thus, Walther largely forecloses Farrow's theory of procedural unconscionability here, and Farrow cites no contrary Maryland authority. For these reasons, the Court concludes that, overall, the Agreement was not procedurally unconscionable.
Farrow raises a host of challenges to the substantive fairness of the Agreement, alleging
Apart from the Agreement provisions that Farrow challenges, other clauses support the conclusion that the Agreement is not substantively unconscionable. See Mot. at 15-16. Other courts have indicated that restrictions on remedies or judicial review can render an arbitration agreement unconscionable. See Armendariz v. Found. Health Psychcare Servs., Inc., 24 Cal.4th 83, 103-07, 99 Cal.Rptr.2d 745, 6 P.3d 669 (2000) (rejecting damages limitation in arbitration agreement and discussing need for judicially reviewable findings). Here, the Agreement does not restrict remedies that would otherwise be available in court, permitting the arbitrator to award "remedies in law or equity which are requested by the parties and which
Because Farrow has not demonstrated that the Agreement was procedurally unconscionable, or that any of the challenged provisions is substantively unconscionable, the Agreement remains enforceable, and all of Farrow's claims are subject to arbitration.
Because the Court determines that all of Farrow's claims are subject to arbitration, Fujitsu's motion to compel arbitration should be granted. When arbitration is mandatory, courts have discretion to stay the case under 9 U.S.C. § 3 or dismiss the litigation entirely. See Sparling v. Hoffman Constr. Co., 864 F.2d 635, 638 (9th Cir.1988); see also Hopkins & Carley, 2011 WL 1327359, at *7, 2011 U.S. Dist. LEXIS 38396, at *28 ("Where an arbitration clause is broad enough to cover all of a plaintiff's claims, the court may compel arbitration and dismiss the action."). Fujitsu has requested either dismissal of Farrow's claims or an order compelling arbitration and staying the litigation, but the parties provide no guidance as to which option is more appropriate here. This Court has previously stayed litigation pending arbitration—instead of dismissing—by agreement of the parties in light of potential concerns about statutes of limitation. See id. at *7-8, 2011 U.S. Dist. LEXIS 38396, at *28-29. Because the parties have identified no such concerns here, and dismissal would render this decision immediately appealable (see MediVas, LLC v. Marubeni Corp., 741 F.3d 4, 7 (9th Cir.2014) ("[A]n order compelling arbitration may be appealed if the district court dismisses all the underlying claims, but may not be appealed if the court stays the action pending arbitration.")), the Court concludes that dismissal is appropriate.
For the foregoing reasons, the Court GRANTS Fujitsu's motion to dismiss all of Farrow's claims. The Clerk shall close the case file.