SHANNON ARNOLD v. BURGER KING, ET AL.
No. 101465
Court of Appeals of Ohio, EIGHTH APPELLATE DISTRICT, COUNTY OF CUYAHOGA
April 30, 2015
[Cite as Arnold v. Burger King, 2015-Ohio-1639.]
BEFORE: Laster Mays, J., E.A. Gallagher, P.J., and E.T. Gallagher, J.
Civil Appeal from the Cuyahoga County Court of Common Pleas Case No. CV-14-823609
JUDGMENT: AFFIRMED
For Carrols, L.L.C.
Carl H. Gluek
Franz Ward, L.L.P.
200 Public Square, Suite 3000
Cleveland, Ohio 44114
Jeffrey J. Mayer
Akerman L.L.P.
71 South Wacker Drive, 46th Floor
Chicago, Illinois 60606
ATTORNEYS FOR APPELLEE
William Craig Bashein
Anthony N. Palombo
Bashein & Bashein Co., L.P.A.
Terminal Tower, 35th Floor
50 Public Square
Cleveland, Ohio 44113
Paul W. Flowers
Paul W. Flowers Co., L.P.A.
Terminal Tower, 35th Floor
50 Public Square
Cleveland, Ohio 44113
For Terry Matthews
Terry Matthews
4088 Dartford Road
South Euclid, Ohio 44121
{¶1} Defendant-appellant Carrols L.L.C. (“Carrols“), which owns and operates Burger King restaurant franchises, appeals from the trial court order that denied its motion to either compel arbitration and to dismiss the complaint or to stay the proceedings filed against it by plaintiff-appellee, its former employee, Shannon Arnold (“Arnold“).
{¶2} Upon a review of the record, we disagree with Carrols’ assertions. Consequently, the trial court order is affirmed, and this case is remanded for further proceedings consistent with this opinion.
{¶3} This employment dispute arises from an incident where Arnold was raped by her supervisor in the men‘s bathroom at a Burger King restaurant during working hours. As a term of her employment, Arnold executed a mandatory arbitration agreement (“MAA“) in which she agreed to submit to JAMS, Inc. (“JAMS“), a national arbitration association, “any and all disputes, claims or controversies for monetary or equitable relief arising out of or relating to [Arnold‘s] employment.” The agreement also stated that it covered “claims or controversies relating to events outside the scope of your employment.” (Emphasis added.)
{¶4} Arnold filed her complaint against Burger King, Carrols, and an individual, Terry Matthews (“Matthews“), on March 13, 2014. She alleged that she had been employed by Burger King and Carrols from May 2012 until August 2012 and that
{¶5} In lieu of an answer, Carrols filed a motion to compel arbitration, pursuant to the MAA. It argued that the Federal Arbitration Act (“FAA“) governed the dispute because Carrols is engaged in interstate commerce. It also asserted that the Burger King restaurant where Arnold was raped is one of over 500 franchises owned and operated by Carrols entities, which operates in 13 different states. Carrols further argued that the plain language of the MAA dictates that Arnold‘s claims be resolved in arbitration.
{¶6} In Arnold‘s response brief, she conceded that she signed the MAA but argued she was unaware that she was agreeing to arbitrate with anyone other than Carrols Corporation (“Corporation“). She asserted that because Carrols was not a party to the MAA, Carrols could not enforce it. She further argued that her claims fell outside the scope of the MAA agreement and that the agreement was unenforceable because it is overly broad and unconscionable.
{¶7} The trial court denied the motion to compel arbitration without opinion. Carrols now appeals and raises two assignments of error.
{¶9} Questions of whether a party has agreed to submit an issue to arbitration and whether the arbitration agreement is unconscionable are reviewed under a de novo standard. Hedeen v. Autos Direct Online, Inc., 8th Dist. Cuyahoga No. 100582, 2014-Ohio-4200, ¶ 9, citing McCaskey v. Sanford-Brown College, 8th Dist. Cuyahoga No. 97261, 2012-Ohio-1543, ¶ 7, and Taylor Bldg. Corp. Of Am. v. Benfield, 117 Ohio St.3d 352, 2008-Ohio-938, 884 N.E.2d 12. Under a de novo standard of review, we give no deference to a trial court‘s decision. Hedeen at ¶ 9, citing Brownlee v. Cleveland Clinic Found., 8th Dist. Cuyahoga No. 97707, 2012-Ohio-2212, ¶ 9. Akron v. Frazier, 142 Ohio App.3d 718, 721, 756 N.E.2d 1258 (9th Dist.2001).
{¶10} Carrols attached to its motion to compel arbitration the affidavit of Gerald DiGenova (“DiGenova“), Vice President of the Human Resources Department of Carrols Restaurant Group, Inc., and copies of several documents. DiGenova explained the
{¶11} Arnold responded to Carrols’ motion with an opposition brief. Arnold did not dispute that she had signed the MAA. Rather, she argued that Carrols could not enforce the MAA against her, that her claims did not fall under the scope of the MAA, and that the MAA was unconscionable.
{¶12} Arnold‘s arbitration agreement states, in plain language:
My agreement to arbitrate Claims extends to Claims against Carrols’ officers, directors, managers, employees, owners, attorneys and agents, as well as to any dispute you have with any entity owned, controlled or operated by Carrols Corporation.
(Emphasis added.)
{¶13} DiGenova‘s affidavit states that the Corporation is the sole member of Carrols. Therefore, although Carrols is not “a signatory” to the agreement, we agree that it may enforce the agreement as an owner or agent of the Corporation, unless there exists some common law justification to void the contract. Javitch v. First Union Secs., 315 F.3d 619, 629 (6th Dist. 2003).
{¶15} In reversing the West Virginia Supreme Court decision, the U.S. Supreme Court, quoting the FAA, explained:
The FAA provides that a “written provision in * * * a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction * * * shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.
{¶16} It is important to note that although the Marmet court found that the plaintiffs’ claims fell within the scope of the arbitration agreement, it specifically stated that the West Virginia court had to “consider whether, absent th[e] general policy, the arbitration clauses in [plaintiff‘s cases] are unenforceable under state common law principles that are not specific to arbitration and pre-empted by the FAA.” Id. In other words, the West Virginia Court was free to find the arbitration agreement unenforceable for common law reasons, such as invalid formation of the contract or unconscionability.
{¶17} Generally speaking, Ohio‘s public policy encourages arbitration as a method to settle disputes. Schaefer v. Allstate Ins. Co., 63 Ohio St.3d 708, 711-712, 590 N.E.2d 1242 (1992).
{¶18} In this case, the MAA stated in pertinent part as follows:
* * * Carrols and you agree that any and all disputes, claims or controversies for monetary and equitable relief arising out of or relating to your employment, even disputes, claims or controversies relating to events occurring outside the scope of your employment (“Claims“) shall be arbitrated before JAMS, a national arbitration association, and conducted under the then current JAMS rules on employment arbitration. Carrols * * * agrees that any arbitration will satisfy JAMS’ minimum standards of procedural fairness for employment arbitrations * * * , including the selection of a neutral arbitrator.
Claims subject to arbitration shall include, without limitation, disputes, claims, or controversies relating or referring in any manner, directly or indirectly, to Title VII of the Civil Rights Act of 1964 and similar state statutes, * * * the Federal Fair Labor Standards Act or similar state statutes, * * * personal or emotional injury to you or your family * * * injuries you believe are attributable to Carrols under theories of * * * intentional wrongdoing, gross negligence, negligence, or respondent superior, [and] actions * * * of third parties you attribute to Carrols * * *.
Carrols or you may commence arbitration by providing a written request for arbitration, setting for the subject of the dispute and the relief requested, and an appropriate filing fee to JAMS at 620 Eighth Avenue 34th Floor, New York, New York 10018. A copy of the written request for arbitration must be sent to the Carrols Corporation Legal Department * * * via U.S. mail or reputable overnight delivery service * * * Additionally, to the extent permitted by the Procedural Standards [that are not attached to the two page MAA], you agree that any action you bring shall be on an individual and not class or aggregate basis and that you must join all known claims together * * *.
In furtherance of this arbitration program, Carrols will reimburse you 50% of any JAMS filing fee, if within two weeks after your request for
arbitration, proof of payment is delivered to and received by Carrols at the above address.
(Emphasis added.)
{¶19} Arbitration agreements are “valid, irrevocable, and enforceable, except upon grounds that exist at law or in equity for the revocation of any contract.” Taylor Bldg. Corp. Of Am. v. Benfield, 117 Ohio St.3d 352, 2008-Ohio-938, 884 N.E.2d 12, ¶ 33, quoting
{¶20} Unconscionability embodies two separate concepts (1) unfair and unreasonable contract terms, i.e., substantive unconscionability, and (2) an absence of meaningful choice on the part of one of the parties, i.e., procedural unconscionability. Taylor Bldg. at ¶ 34. A party asserting the unconscionabilty of a contract must prove a quantum of both substantive and procedural unconscionability. Hayes v. Oakridge Home, 122 Ohio St.3d 63, 2009-Ohio-2054, 908 N.E.2d 408, ¶ 30; Taylor Bldg. at ¶ 34. In other words, these two concepts create a two-prong conjunctive test for unconscionability. Gates v. Ohio Sav. Assn., 11th Dist. Geauga No. 2009-G-2881, 2009-Ohio-6230, ¶ 47; Strack v. Pelton, 70 Ohio St.3d 172, 637 N.E.2d 914 (1994).
{¶21} In determining whether an agreement is procedurally unconscionable, courts consider the relative bargaining positions of the parties including each party‘s age, education, intelligence, experience, and who drafted the contract. Taylor Bldg. at ¶ 44. “Procedural unconscionability concerns the formation of the agreement and occurs when
{¶22} An important consideration is “whether each party to the contract, considering his obvious education or lack of it, [had] a reasonable opportunity to understand the terms of the contract, or were the important terms hidden in a maze of fine print?” Blackburn v. Ronald Kluchin Architects, Inc., 8th Dist. Cuyahoga No. 89203, 2007-Ohio-6647, ¶ 29, quoting Vanyo v. Clear Channel Worldwide, 156 Ohio App.3d 706, 2004-Ohio-1793, 808 N.E.2d 482 (8th Dist.), ¶ 18.
{¶23} There was clearly a “disparity in bargaining power” between Carrols and Arnold. Carrols wrote the MAA as well as the Policy Notice (“Policy Notice“) poster regarding the MAA that was posted at the Burger King location. The Policy Notice states that arbitration is “quicker and less expensive for both sides.”
{¶24} Typically, employment attorneys represent plaintiffs on a contingency basis so there is often no cost to the employee until success or settlement. Certain federal and state statutes also provide for attorney fees. Arbitration is generally beneficial for employers because it is, as opposed to litigation, less expensive due to brevity and lack of appeal rights. It is also advantageous where, as in this case, the agreement limits the
{¶25} To file a request for arbitration, an employee must send the request to the listed JAMS New York City office with a copy to the Legal Department in Syracuse, New York address with an explanation of the issue. The request must be sent via “U.S. mail or a reputable overnight delivery service.” There is no mention of registered or certified mail to verify timeliness.
{¶26} The MAA also states, reassuring the employee of the minimal cost and promoting the cooperative effort that, “Carrols will reimburse you 50% of any JAMS filing fee, if within two weeks after your request for arbitration, proof of payment is delivered to and received by Carrols at the above address.” (Emphasis added.) What constitutes proof of payment is not described.
{¶27} The Policy Notice is also misleading because it contradicts the terms of the MAA. The Policy Notice states, “employment related disputes that cannot be resolved internally will proceed to arbitration rather than in a lawsuit.” The Policy Notice does not say that disputes arising outside the scope of employment are also required to proceed to arbitration. One may be willing to arbitrate disputes that arise in the course of employment. It is an entirely different scenario when one agrees to arbitrate claims that
{¶28} We do not attempt to elaborate on every provision of the MAA that is overly broad in scope and difficult, if not impossible, for a lay person to understand.
{¶29} Courts will also consider, on the issue of procedural unconscionability, “whether alterations in the printed terms were possible,” Oakridge Home at ¶ 23, and whether the parties had alternatives to entering into the contract. Rupert v. Macy‘s Inc., N.D. Ohio No. 1:09CV2763, 2010 U.S. Dist. LEXIS 54050 (June 2, 2010). No single factor alone determines whether a contract is procedurally unconscionable; a court must consider the totality of the circumstances. Oakridge Home at ¶ 29-30.
{¶30} In Rupert, the district court determined that, under Ohio law, an arbitration program formed a valid contract between the corporate employer and the employee because the employee failed to affirmatively opt out of the program and the agreement was supported by consideration. Id. at ¶ 17. According to that court, the consideration was the employee‘s continued employment and the employer‘s agreement to pay the costs of arbitration. Id. at ¶ 23. The court thus affirmed the validity of the arbitration agreement.
{¶31} This court is not persuaded by Rupert‘s reasoning. In this case, Carrols drafted the MAA and presented it to Arnold as a condition for hiring her at a Burger King restaurant. As for Arnold‘s bargaining power, the choice was either sign it or remain unemployed. There is no evidence that Arnold could alter any of its terms. Under these
{¶32} If Arnold refused to sign the agreement, Arnold would not be employed. There was no other alternative. Thus, Carrols had significantly greater bargaining power. This difference in bargaining power, by itself, would not be sufficient to rescind the MAA. However, Carrols also drafted the MAA and the Policy Notice, which were misleading and would give an ordinary reasonable person a false sense of security.
{¶33} The MAA‘s terms were not only procedurally unconscionable but also were substantively unconscionable as they applied to:
* * * any and all disputes, claims or controversies for monetary and equitable relief arising out of or relating to your employment * * *[, including,] * * * without limitation, disputes, claims, or controversies relating or referring in any manner, directly or indirectly, to Title VII of the Civil Rights Act of 1964 and similar state statutes, * * * the Federal Fair Labor Standards Act or similar state statutes, * * * personal or emotional injury to you or your family * * * injuries you believe are attributable to Carrols under theories of * * * intentional wrongdoing, gross negligence, negligence, or respondent superior, [and] actions * * * of third parties you attribute to Carrols * * *. Any agreement to arbitrate Claims extends to Claims against Carrols’ officers, directors, managers, employees, owners, attorneys and agents, as well as to any dispute you have with any entity owned, controlled or operated by Carrols Corporation.
(Emphasis added.)
{¶34} Inasmuch as the MAA sought to include every possible situation that might arise in an employee‘s life, the clause is substantively unconscionable as the arbitrator would be resolving disputes unrelated to employment. See, e.g., Drake v. Barclay‘s Bank Del. Inc., 8th Dist. Cuyahoga No. 96451, 2011-Ohio-5275. It is ordinarily not
{¶35} Thus, Arnold established both prongs of the conjunctive two-part unconscionability test. The trial court consequently appropriately denied Carrols’ motion to either compel arbitration and dismiss the case or stay litigation pending arbitration. Carrols’ assignments of error are overruled.
{¶36} The trial court‘s order is affirmed, and this case is remanded for further proceedings consistent with this opinion.
It is ordered that appellee recover from appellant costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate be sent to said court to carry this judgment into execution.
A certified copy of this entry shall constitute the mandate pursuant to
ANITA LASTER MAYS, JUDGE
EILEEN A. GALLAGHER, P.J., and
EILEEN T. GALLAGHER, J., CONCUR