Soto v. STATE INDUSTRIAL PRODUCTS, INC.
642 F.3d 67
1st Cir.2011Background
- Soto alleged discrimination under the ADA and Puerto Rico law, naming State Industrial Products Corp. and State Chemical Sales Co. as defendants and asserting related entities and insurers as parties.
- State Chemical moved to dismiss and compel arbitration under the FAA based on an arbitration agreement embedded in multiple documents.
- The district court dismissed Soto's complaint without prejudice and granted a motion to compel arbitration in March 2010, which Soto timely appealed.
- The four State Chemical documents include an ADR acknowledgement, an attendance acknowledgment, a Sales Associate Employment Agreement, and a copy of the ADR Program describing a three-step dispute resolution process (negotiation, mediation, arbitration).
- The ADR Program provisions include mutuality of obligation, location at the Company’s choice with employee travel cost coverage, and a carve-out for certain claims; it also preserves access to governmental regulators.
- The First Circuit reviews the district court’s decision de novo on arbitration validity, focusing on (1) consideration, (2) consent, and (3) unconscionability, given Puerto Rico contract law governs.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether continued employment constitutes valid consideration | Soto argues continued employment is inadequate under Puerto Rico law. | State Chemical contends continued employment is valid consideration for arbitration. | Continued employment constitutes valid consideration. |
| Whether there is mutual consideration to arbitrate | Soto contends mutuality is lacking because only employee signs to arbitrate. | State Chemical argues mutuality exists as both parties forgo a judicial forum and are bound by arbitral results if stipulated. | Mutual consideration exists; arbitration is supported by bilateral obligations. |
| Whether consent was void due to threat, Language, or Law 80 | Soto claims coercion/threats and language barriers render consent void; Law 80 limits such coercion. | State Chemical asserts no void consent; Law 80 does not render arbitration unlawful for signing under coercion. | Consent not void; neither coercion nor Law 80 invalidates the arbitration agreement. |
| Whether the arbitration clause is unconscionable | Soto argues excessive/arbitration costs would deter pursuit of claims. | State Chemical points to disclosure of fee sharing and localization to Puerto Rico; costs are not unconscionable. | Unconscionability waived and not established; costs are not shown to be prohibitive. |
Key Cases Cited
- Dialysis Access Ctr., LLC v. RMS Lifeline, Inc., 638 F.3d 367 (1st Cir. 2011) (arbitration as a matter of contract; enforceability depends on valid agreement)
- Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (U.S. 1991) (ADA claims subject to compulsory arbitration)
- Rosenberg v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 170 F.3d 1 (1st Cir. 1999) (Title VII claim subject to arbitration)
- Casarotto v. Doctors' Assocs., Inc., 517 U.S. 681 (U.S. 1996) (FAA preemption; states cannot single out arbitration provisions for suspect status)
- Arthur Young & Co. v. Vega III, 136 D.P.R. 157 (1994) (Puerto Rico noncompete consideration rules; limited applicability to arbitrate agreements)
- Adria Int'l Grp., Inc. v. Ferre Dev., Inc., 241 F.3d 103 (1st Cir. 2001) (mutual consideration under Puerto Rico contract law supports arbitration)
- Tinder v. Pinkerton Sec., 305 F.3d 728 (7th Cir. 2002) (arbitration consideration may be mutual even without identical remedies)
- Campbell v. Gen. Dynamics Gov't Sys. Corp., 407 F.3d 546 (1st Cir. 2005) (Puerto Rico contract-law controls arbitration validity; consent requirements apply)