938 F. Supp. 2d 602
E.D. Va.2013Background
- Defendant Aegis Defense Services LLC is a Delaware corporation providing security services to clients including the U.S. Department of State.
- Plaintiffs Boatright, Chapman, Le, and Marshall allege six claims: DWPCA wage payment, breach of contract, quantum meruit, unjust enrichment, breach of the covenant of good faith and fair dealing, and promissory estoppel.
- Each Plaintiff signed an identical International Assignment Employment Agreement with a dispute resolution provision requiring mediation and, if unresolved, arbitration at Aegis's option.
- The arbitration clause allows Aegis to compel arbitration of all or part of a dispute, with arbitration administered by AAA or similar providers under AAA rules, and makes the FAA govern arbitral opt-in.
- After the complaint, Aegis elected to arbitrate Plaintiffs’ individual claims and filed to compel arbitration; the court must decide whether to compel arbitration and how to handle class claims.
- Virginia choice-of-law governs the interpretation of the agreements, and Delaware law governs the enforceability of the arbitration provisions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether arbitration must be compelled under the FAA | Arbitration provisions are unenforceable due to lack of consideration and unconscionability. | Arbitration clause is valid under Delaware law and enforceable under the FAA for the individual claims. | Arbitration compelled for Plaintiffs' individual claims; stay granted. |
| Whether the arbitration provisions lack consideration | Arbitration requires independent consideration separate from the underlying contract. | Under Delaware law, the underlying contract's consideration suffices; no separate consideration needed for the clause. | Arbitration provisions are enforceable despite lack of independent consideration; underlying agreement had adequate consideration. |
| Whether the arbitration provisions are unconscionable | The structure is one-sided and the confidentiality requirement is unconscionable. | Structure is not substantively unconscionable and confidentiality is permissible; AAA default rules mitigate concerns. | Arbitration clause not unconscionable under Delaware law; valid and enforceable. |
| Whether the class claims can be compelled or must be dismissed | Court should retain or send class claims to arbitration if individual claims are arbitrated. | FAA allows arbitration of only the individuals claims; class claims cannot be compelled and may be moot. | Court will not compel class arbitration; class claims are dismissed as moot. |
| How to treat the remaining claims given arbitration of individuals | None beyond arbitration of individual claims; class action status remains unresolved. | Proceed with arbitration of individual claims; retain jurisdiction for related issues if necessary. | Case stayed; individual claims ordered to arbitration; class claims dismissed as moot. |
Key Cases Cited
- Adkins v. Labor Ready, Inc., 303 F.3d 496 (4th Cir. 2002) (mandatory arbitration analysis under FAA)
- Volt Info. Sciences, Inc. v. Bd. of Trustees of Leland Stanford Junior Univ., 489 U.S. 468 (1989) (FAA stay-and-arbitrate mandate; consent-based arbitration)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) (savings clause allows contract defenses but not arbitration-specific defenses)
- Gonzalez v. Citigroup, 2009 WL 2340678 (Del. 2009) (no substantive unconscionability finding based on structure where both parties bound)
- Hooters of America, Inc. v. Phillips, 173 F.3d 933 (4th Cir. 1999) (one-sided arbitration clauses not inherently unconscionable)
- Graham v. State Farm Mut. Auto. Ins. Co., 565 A.2d 908 (Del. 1989) (no inherent unfairness where both parties bound by arbitration outcome)
- Nationwide Mut. Ins. Co. v. Marsh, 472 N.E.2d 1061 (Ohio 1984) (one-sided arbitration considerations discussed in comparative context)
- Asplundh Tree Expert Co. v. N.L.R.B., 365 F.3d 168 (3d Cir. 2004) (extraterritorial applicability of NLRA; arbitration considerations)
- Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487 (Supreme Court 1941) (choice-of-law rules in federal courts)
- Noohi v. Toll Bros., Inc., 708 F.3d 599 (4th Cir. 2013) (state-law governing arbitration clauses analysis)