Gabriel v. Island Pacific Academy, Inc.
140 Haw. 325
| Haw. | 2017Background
- Gabriel taught at IPA from 2006 to 2014; the 2014-2015 employment agreement included an arbitration clause and Hawaii law; IPA did not sign the agreement.
- Gabriel alleged retaliation for a prior sexual-harassment report and claimed IPA refused to hire her for the 2014-2015 year; she sought back/front pay and other damages.
- DPR arbitration rules in the record contemplated cost-splitting; Gabriel showed she could not pay up-front fees; IPA argued arbitration costs were governed by HRS § 658A-21(d).
- The circuit court granted arbitration but required IPA to pay all arbitrator fees; it found Gabriel’s costs potentially prohibitive and unconscionable.
- The circuit court held the cost-splitting provision unconscionable but compelled arbitration by IPA paying all costs, and declined to rule on severability.
- This court held (on appeal) that the cost-splitting provision is unconscionable and the circuit court erred by reforming the contract to have IPA pay all costs; instead, the entire arbitration clause must be invalidated.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Gabriel’s claims are arbitrable under the agreement | Gabriel contends the 2014-2015 agreement wasn’t validly formed for arbitration or scope did not cover civil rights. | IPA argues a valid arbitration agreement existed and covered retaliation claims. | The court held the arbitration agreement valid and its scope includes Gabriel's retaliation claim. |
| Whether the cost-splitting/arbitration-fee provisions are unconscionable | Gabriel argues cost-splitting would render arbitration prohibitively expensive and violate public policy. | IPA contends costs are uncertain and the agreement silent on costs; severability could cure unconscionability. | The court held the cost-splitting provision is unconscionable and unenforceable as applied. |
| Whether the circuit court could reform or sever the arbitration provision | Gabriel maintains the agreement should be kept intact or entirely invalidated; no modification to require IPA to pay all costs. | IPA argues severability or reform to require IPA to pay all arbitration costs is permissible. | The court held the circuit court improperly reformed the agreement to require IPA pay all costs; severance/remand appropriate, but entire agreement invalidated. |
| Whether Green Tree analysis applies to state-law rights and costs in this case | Gabriel relies on Green Tree to show cost risks could invalidate arbitration. | IPA argues Green Tree applies to federal rights; state rights are different and may not be governed the same way. | The court found Gabriel carried her burden under Green Tree-like reasoning and held costs may prohibit arbitration for state rights as applied here. |
Key Cases Cited
- Brown v. KFC Nat’l Mgmt. Co., 82 Haw. 226 (Haw. 1996) (arbitration agreements require bilateral consideration and are enforceable when signed)
- Green Tree Fin. Corp.-Alabama v. Randolph, 531 U.S. 79 (U.S. 2000) (costs in arbitration must be shown to be prohibitively expensive to void arbitration)
- UNIDEV, LLC v. County of Hawaii, 301 P.3d 591 (Haw. 2013) (general 'broad arbitration clause' interpreted to cover disputes under the agreement)
- Cole v. Burns Int’l Sec. Servs., 105 F.3d 1465 (D.C. Cir. 1997) (costs may be shifted to employer when silence on fee provision; central to enforceability concerns)