Case Information
THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS EL PASO DIVISION
BLANCA CARRILLO, §
Plaintiff, §
§ v. § EP-20-CV-00147-PRM-ATB
§
ROICOM USA, LLC, §
Defendant, § ORDER DENYING MOTION TO COMPEL ARBITRATION AND TO STAY PROCEEDINGS PENDING ARBITRATION
On this day, the Court considered Defendant’s Motion to Compel Arbitration and to Stay Proceedings Pending Arbitration (“Defendant’s Motion”), filed by Defendant ROICOM USA, LLC (“ROICOM”). On July 29, 2020, this matter was referred to this Court by United States District Judge Philip Martinez for Determination pursuant to 28 U.S.C. § 636(b)(1)(A) and Rule 1(c) of Appendix C of the Local Court Rules of the United States District Court for the Western District of Texas. (ECF. No. 9).
For the reasons set forth below, IT IS HEREBY ORDERED that Defendant’s Motion to Compel Arbitration and to Stay Proceedings Pending Arbitration is DENIED .
I. BACKGROUND
a. Procedural Background
“Plaintiff’s Original Complaint” (“Complaint”) was filed in the United States District Court for the Western District of Texas, El Paso Division, on May 21, 2020, by Plaintiff Blanca Carrillo (“Carrillo”), alleging claims of retaliation under the False Claims Act pursuant to Title 31 U.S.C. §3730(h). (ECF No. 1). On July 27, 2020, ROICOM filed Defendant’s Motion seeking to stay the proceedings and to immediately refer it to binding arbitration pursuant to an arbitration agreement. (ECF No. 8, p. 3).
After being granted an extension of time to file her response (Text Order dated July 31, 2020), Carrillo filed her “Plaintiff’s Response in Opposition to Defendant’s Motion for Stay and to Compel Arbitration” (“Plaintiff’s Response”) on August 10, 2020. (ECF No. 13). Thereafter, ROICOM filed “Defendant’s Reply to Plaintiff’s Response in Opposition to Defendant’s Motion to Compel Arbitration” (“Defendant’s Reply”) on August 17, 2020. (ECF No. 15).
After being granted leave to file her surreply (Text Order dated August 24, 2020), Carrillo filed her “Plaintiff’s Surreply in Response to Defendant’s Reply to Plaintiff’s Response to Defendant’s Motion for Stay and to Compel Arbitration” (“Plaintiff’s Surreply”) on August 24, 2020. (ECF Nо. 19). After being granted leave to file its surreply (Text Order dated August 31, 2020), ROICOM filed its “Defendant’s Surreply to Plaintiff’s Surreply in Opposition to Defendant’s Motion to Compel Arbitration” (“Defendant’s Surreply”) on August 31, 2020. (ECF No. 21).
b. Factual Background [1]
The undisputed facts of this case are as follows, unless otherwise noted: In the fall of 2017, Carrillo was hired by ROICOM to conduct quality control. (ECF No.
13-1, p. 2); (ECF No. 13, p. 1). ROICOM is a company which creates equipment and uniforms for United States military personnel. (ECF No. 1, p. 2 ⁋ 7); (ECF No. 5, p. 2 ⁋ 7). ROICOM is a related company of ReadyOne Industries, Inc. (“ReadyOne”). (ECF No. 1, p. 2 ⁋ 6) (“ROICOM is the for-profit sister company to ReadyOne Industries, Inc.”); (ECF No. 5, p. 2 ⁋ 6) (ROICOM “is a wholly – owned [sic] subsidiary of ReadyOne Industries, Inc.”).
When Carrillo was hired by ROICOM, a company representative (“Representative”) [2] handed Carrillo a one-page document “Receipt and Arbitration Acknowledgement” (“Acknowledgement Form”) for her signature, along with numerous other forms. (ECF No. 13-1, p. 2). According to Carrillo, the ROICOM Representative knew that Carrillo did not speak or read English, and the two spoke with each other exclusively in Spanish. [3] ( Id. ). When presenting the Acknowledgement Form to Carrillo, the ROICOM Representative informed Carrillo that she “had to sign this document to be able to register and be put on payroll with ROICOM.” ( Id. ). The ROICOM Representative also told Carrillo that she “had to sign the document to be able to work at the company.” ( Id. at p. 3).
Attached to Defendant’s Motion in the initial affidavit of Ronaldo Alvarеz (“Alvarez”), the Director of Human Resources and Compliance for ReadyOne, ROICOM provides the Acknowledgement Form, written exclusively in English, with Carrillo’s signature on it. (ECF No. 8-1, p. 13). The Acknowledgement Form states that by signing the document, “[the employee] acknowledge[s] that [they] have received ad [sic] read (or had the opportunity to read) the Mutual Agreement to Arbitrate Claims, effective October 01, 2007.” ( Id. ) [4]
In Plaintiff’s Response, Carrillo asserts that the Acknowledgement Form she received was only in English. (ECF No. 13, p. 5). However, in Alvarez’s amended and supplemental affidavit attached to Defendant’s Reply, Alvarez asserts that the Acknowledgement Form is “a two — sided [sic] document in English on one side and Spanish on the other. Ms. Carrillo signed the English side . . . . [T]he document signed by Ms. Carrillo contained both an English side and a Spanish side.” (ECF No. 15-1, p . 3) (emphasis added). The Spanish-language Acknowledgement Form, however, is unsigned and does not contain any of Carrillo’s identifying information. ( Id. ).
Even with the newly produced Spanish-language Acknowledgement Form, “Carrillo stands behind her affidavit testimony that she was only provided the ‘Acknowledgement Form’ in English – not in Spanish.” (ECF No. 19, p. 6). According to Carrillo, she only signed the English version of the Acknowledgement Form because she relied upon the ROICOM Representative’s representations about the Acknowledgement Form and thus believed it was “necessary to make sure that [she] was going to be registered on the company’s payroll.” (ECF No. 13-1, p. 3).
ReadyOne keeps, in its regular course of business, English and Spanish-language versions of the “Mutual Agreement to Arbitrate” (“Arbitration Agreement”), which is the “arbitration program adopted by ReadyOne on October 1, 2007, for all employees, including affiliated companies of ReadyOne such as ROICOM.” (ECF No. 15-1, p. 3). ROICOM has never provided Carrillo with an English or Spanish-language copy of the Arbitration Agreement, nor has Carrillo ever seen or been given the opportunity to review the Arbitration Agreement in English or in Spanish. (ECF No. 13, p. 2); see (ECF No. 15-1, p. 2-3).
II. LEGAL STANDARDS
a. Motion to Compel Arbitration
Section 2 of the Federal Arbitration Act (“FAA”) provides that agreements to arbitrate are
“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. Under the FAA, the court must perform a two-step
inquiry to determine whether to compel a party to arbitrate.
Dealer Computer Services, Inc. v. Old
Colony Motors, Inc.
,
Courts divide the first step of the analysis—whether the parties agreed to arbitrate the
dispute in question—into two separate determinations: “(1) whether there is a valid agreement to
arbitrate between the parties; and (2) whether the dispute in question falls within the scope of that
arbitration agreement.”
Title v. Enron Corp.
,
The Supreme Court has held that, since the FAA is merely a “policy guaranteeing the
enforcement of private contractual arrangements, [courts should] look first to whеther the parties
agreed to arbitrate a dispute, not to general policy goals, to determine the scope of the agreement.”
E.E.O.C. v. Waffle House
,
b. Magistrate Judge Authority
When a court considers a motion to compel arbitration and there is “a challenge to contract
enforcement or validity [of the arbitration agreement’s contents], the argument is properly heard
by the arbitrator . . . [but if there] is a question of contract formation, the court may hear it.”
Maravilla v. Gruma Corporation
, 783 F. App’x 392, 395 (5th Cir. 2019);
Dealer Computer
Services
,
Section 3 of the FAA provides in relevant part:
[i]f any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement . . . .
9 U.S.C. § 3 (emphasis added).
Section 636(b)(1) of Title 28 of the United States Code grants magistrate judges the authority to consider and handle both non-dispositive and dispositive pretrial matters, subject to different standards of review by a district court judge. Section 636(b)(1)(A) permits a district judge to “designate a magistrate judge to hear and determine any pretrial matter before the court,” except for:
a motion for injunctive relief, for judgment on the pleadings, for summary judgment, to dismiss or quash an indictment or information made by the defendant, to suppress evidence in a criminal case, to dismiss or to permit maintenance of a class action, to dismiss for failure to state a claim upon which relief can be granted, and to involuntarily dismiss an action.
28 U.S.C. 636(b)(1)(A). The district judge may review and reconsider any pretrial matter decided by a magistrate judge under the authority of subparagraph (A) when “it has been shown that the magistrate judge’s order is clearly erroneous or contrary to law.” Id.
In addition to Section 636, Federal Rule оf Civil Procedure 72 outlines a magistrate judge’s authority regarding pretrial matters while distinguishing between dispositive and non-dispositive matters. It provides that “[w]hen a pretrial matter not dispositive of a party’s claim or defense is referred to a magistrate judge to hear and decide, the magistrate judge must . . . when appropriate, issue a written order stating the decision.” Fed. R. Civ. P. 72(a). Further, “[t]he district judge in the case must consider timely objections [to the magistrate judge’s order] and modify or set aside any part of the order that is clearly erroneous or is contrary to law.” Id. However, for dispositive motions, “[t]he magistrate judge must enter a recommended disposition, including, if appropriate, proposed findings of fact.” Fed. R. Civ. P. 72(b)(1).
The Supreme Court has held that the Constitution requires that Article III judges exercise
final decision-making authority.
U.S. v. Raddatz
, 447 U.S. 667, 682-83 (1980). Given the
constitutional concerns regarding magistrate judges making dispositive rulings, courts do not
confine application of Section 636(b)(1)(B) to the eight “exceptional motions” listed in Section
636(b)(1)(A); rather, “they instead key their review to the underlying considerations of the
dispositive-nondispositive dichotomy.”
Tige Boats, Inc. v. Interplastic Corp.
, No. 1:15-CV-0114-
P-BL,
The Fifth Circuit has not directly ruled on whether a motion to compel arbitration is a
dispositive or non-dispositive motion for purposes of 28 U.S.C. § 636.
Lee v. Plantation of
Louisiana, L.L.C.
,
Additionally, all four federal judicial districts in Texas have held motions to compel
arbitration to be non-dispositive matters.
See
,
e.g.
,
Campanile Investments LLC v. Westmoreland
Equity Fund LLC
, No. SA-17-CV-00337-FB,
Finally, no circuit court has held that a motion to compel arbitration is a dispositive motion outside the jurisdiction of a magistrate judge. Like the Fifth Circuit, the Eleventh Circuit recently declined the opportunity to hold that magistrate judges do not have the authority to issue orders regarding motions to compel arbitration. Getz v. ViaSat Inc. , No. 19-11117-FF, 2019 WL 2613183, at *1 (11th Cir. May 13, 2019) (holding that the Eleventh Circuit lacked jurisdiction to hear direct appeal of magistrate judge’s order denying a party’s motion to compel arbitration and to stay or dismiss proceedings while not addressing the issue of whether the magistrate judge’s order was dispositive or nondispositive).
III. ANALYSIS
In Plaintiff’s Response to Defendant’s Motion, Carrillo makes two arguments: (1) that Defendant’s Motion must be denied because ROICOM failed to establish that an arbitration agreement exists between Carrillo and ROICOM; and (2) that Defendant’s Motion must be denied because the Arbitration Agreement is procedurally unconscionable.
a. An Arbitration Agreement Facially Exists Between Carrillo and ROICOM Carrillo first argues that Defendant’s Motion should be denied because ROICOM fails to establish that an arbitration agreement exists between ROICOM and Carrillo. (ECF No. 13, p. 3).
The question of “whether there is a valid agreement to arbitrate between the parties” is
determined according to state law.
Banc One Acceptance Corp. v. Hill
,
Under Texas state law, “the party seeking to compel arbitration bears the burden of
establishing the existence of an agreement to arbitrate.”
Trujillo v. Volt Management Corp.
, EP-
19-CV-00337-DCG,
Carrillo argues that ROICOM has not met its burden to establish that an arbitration agreement exists between Carrillo and ROICOM because “[t]he Arbitration Agreement does not contain Carrillo’s signature and [it] references only one Company – ReadyOne Industries, Inc. [– ] . . . [and] does not reference Defendant, ROICOM, Inc.” (ECF No. 13, p. 3) (citing ECF No. 8- 1, p. 7). Finally, Carrillo argues that ROICOM “has failed to show that Carrillo worked for or had any relationship with ReadyOne Industries, Inc. – the only Company to which the Arbitration Agreement refers.” (ECF No. 13, p. 3). Thus, Carrillo claims that “the Arbitration Agreement does not establish an agreement between [the parties].” (ECF No. 13, p. 3).
First, the Court addresses the issue of whether the Arbitration Agreement binds ROICOM.
The Supreme Court of Texas has held that “arbitration agreements generally do not apply to all
corporate affiliates.”
In re Merrill Lynch Trust Co. FSB
,
Unlike
Merrill Lynch Trust
, the Court finds that the Arbitration Agreement binds ROICOM
as an affiliated company of ReadyOne. First, the Arbitration Agreement defines “Company” as
ReadyOne as well as “
affiliates or related companies
” of ReadyOne.
Compare
(ECF No. 15-1, p.
4) (emphasis added),
with Merrill Lynch Trust
,
Carrillo argues that the Supreme Court of Texas has found that “corporate affiliates are generally created to separate the businesses, liаbilities, and contracts of each. Thus, a contract with one corporation – including a contract to arbitrate disputes – is generally not a contract with any other corporate affiliates.” (ECF No. 13, p. 3) (quoting Merrill Lynch Trust , 235 S.W.3d at 191) (internal citations omitted). However, this general principle is not applicable in the instant case since the Arbitration Agreement specifically referred to “all . . . affiliated or related companies of [ReadyOne].” (ECF No. 15, p. 4). Consequently, the Court finds that ROICOM has met its burden in establishing that ROICOM was a party to the Arbitration Agreement.
Next, the Court addresses the issue of whether the Arbitration Agreement applies to Carrillo. “Arbitration is a matter of contract and, generally, it cannot be compelled for an issue involving a non-signatory to the arbitration agreement.” Elkjer v. Scheef & Stone, L.L.P. , 8 F. Supp.3d 845, 851 (N.D. Tex. 2014); see also Grigson v. Creative Artists Agency L.L.C. , 210 F.3d 524, 528 (5th Cir. 2000). Neither Carrillo’s name nor signature appear anywhere on the English version or Spanish version of the Arbitration Agreement. See (ECF No. 15-1, p. 4-13). Instead, ROICOM has produced the Acknowledgement Form, signed by Carrillo, which states in pertinent part: “[b]y [the employee’s] signature below, [the employee] acknowledge[s] that [the employee] received ad [sic] read (or had the opportunity to read) the [Arbitration Agreement] . . . .” (ECF No. 15-1, p. 14). Additionally, the Acknowledgement Form states in pertinent part that the employee “acknowledge[s] that [the Acknowledgement Form] includes a mandatory company policy requiring that certain claims or disputes (that cannot otherwise be resolved between the Company and [the employee]) must be submitted to an arbitrator, rather than a judge and jury in court.” (ECF No. 15-1, p. 14).
Given that Carrillo began working at ROICOM in the fall of 2017, the Arbitration Agreement, which was adopted by ReadyOne and ROICOM continually since October 1, 2007, was in effect at the beginning and throughout the time of Carrillo’s employment. (ECF No. 1, p. 2 ⁋ 8) (“Carrillo started working at ROICOM in or around October 2017 . . .”); (ECF No. 5, p. 2 ⁋ 8) (“[ROICOM] admits [Carrillo] started working at ROICOM in or around November 2017 . . .”); see (ECF No. 15-1, p. 3) (the Arbitration Agreement was “adopted by ReadyOne on October 1, 2007, for all employees, including affiliated companies of ReadyOne such as ROICOM.”). Even after Carrillo’s termination from ROICOM, the Arbitration Agreement is still applicable to Carrillo as the Arbitration Agreement provides that the “Agreement shall survive the employer- employee relationship between the Company and the Claimant and shall apply to any Covered Claim whether it arises or is asserted during or after termination of the Claimant’s employment with the Company . . . .” See ( Id. at 7). Assuming, arguendo , that the Acknowledgement Form is a valid contract between Carrillo and ROICOM, the Court finds that the Acknowledgement Form provides sufficient support for ROICOM’s assertion that Carrillo was a signed party to the arbitration agreement.
Finally, the Court addresses the issue of whether there was an agreеment
between
ROICOM and Carrillo. “Although a party may argue a contract was never formed, by signing a
contract, he is presumed to have read it and grasped its contents and legal effects.”
ReadyOne
Industries, Inc. v. Casillas
,
Assuming, arguendo , that the Acknowledgement Form is a valid contract, the Court finds that ROICOM has met its initial burden in establishing that there was an arbitration agreement between Carrillo and ROICOM. [6]
b. The Arbitration Agreement is Procedurally Unconscionable
Carrillo argues that Defendant’s Motion should be denied because the Arbitration
Agreement is procedurally unconscionable. (ECF No. 13, p. 4). ROICOM has met its initial
burden of showing that an agreement to arbitrate exists, and Carrillo has not argued that her claim
falls outside of its scope. Consequently, the presumption favoring arbitration has attached and the
burden now shifts to Carrillo to establish her defense of procedural unconscionability.
See Carter
,
“In determining the contractual validity of an arbitration agreement, courts apply ordinary
state-law principles that govern the formation of contracts.”
Carter
,
“Under Texas
law, unconscionability
includes
two aspects: (1) procedural
unconscionability, which refers to the circumstances surrounding the adoption of the arbitration
provision, and (2) substantive unconscionability, which refers to the fairness of the arbitration
provision itself.”
Id.
(citing
In re Halliburton Co.
,
“‘Unconscionability’ has no precise legal definition because it is not a concept but a
determination made in light of a variety of factors.”
Delfingen US-Texas, L.P. v. Valenzuela
, 407
S.W.3d 791, 798 (Tex. App. 2013) (citing
Southwestern Bell Telephone Company v. DeLanney
,
(1) the ‘entire atmosphere’ in which the agrеement was made; (2) the alternatives, if any, available to the parties at the time the contract was made; (3) the ‘non- bargaining ability’ of one party; (4) whether the contract was illegal or against public policy; and (5) whether the contract is oppressive or unreasonable.
Delfingen
,
1. Acknowledgement Form
A. Carrillo was unable to read the Acknowledgement Form Carrillo first argues that the Arbitration Agreement was procedurally unconscionable because she does not speak or read English and, therefore, could not understand the English version of the Acknowledgement Form’s contents.
The Fifth Circuit has noted that “[t]he only cases under Texas law in which an agreement
was found procedurally unconscionable involve situations in which one of the parties appears to
have been incapable of understanding the agreement.”
Fleetwood Enterprises
,
In Carrillo’s affidavit attached to Plaintiff’s Response, Carrillo asserts that she “do[es] not speak or read English.” (ECF 13-1, p. 2). ROICOM does not dispute that Carrillo could not read or speak English. See generally (ECF No. 21, p. 9) (ROICOM’s counsel acknowledged that he “was not made aware of Ms. Carrillo’s contention that she did not speak English until [Plaintiff’s Response containing Carrillo’s affidavit.]”). Further, Carrillo asserts that because she “cannot read English” and the Acknowledgement Form’s contents were written in English, Carrillo “[did] not know what the [Acknowledgement Form said].” (ECF 13-1, p. 3). As these claims are well supported and undisputed, the Court finds that Carrillo was incapable of understanding the contents of the English-language Acknowledgement Fоrm.
B. ROICOM’s Representative misrepresented the contents of the Acknowledgement Form to Carrillo
Carrillo next argues that ROICOM’s Representative misrepresented the contents of the Acknowledgement Form when the Representative “affirmatively told Carrillo that the documents she was signing were simply ‘to register and be put on payroll.’” (ECF No. 13, p. 5) (citing ECF No. 13-1, p 2). Carrillo asserts that she “believed the representative and relied on these statements to sign the Acknowledgement Form with the purpose of registering with the company – not to waive her right to a jury trial.” (ECF No. 13, p. 5).
For procedural unconscionability, the misrepresentation must rise to the level of an
affirmative misrepresentation, constituting more than possession of superior bargaining power or
evidence of an adhesion contract.
See
,
e.g.
,
Carter
,
Contrary to the evidence before the Court, ROICOM asserts that “. . . [Carrillo] does not state that the Defendant’s employee [7] actually misrepresented any terms contained in the documents . . . and that there is no evidence presented in [Carrillo’s affidavit] that states Defendant affirmatively misrepresented the contents of the documents presented.” (ECF No. 15, p. 4, 6) (first emphasis added) (second emphasis in original). ROICOM goes on to state that “[a]t most, [Carrillo’s affidavit] states she needed to sign the documents ‘to be able to register and be put on the payroll,’ and ‘to be able to work at [the] company,’ ‘at the beginning of employment.’” ( Id. at p. 6).
Despite Defendant’s conclusory contentions, it is clear to the Court that Carrillo was misled by the ROICOM Representative as to the contents of the English version of the Acknowledgement Form. According to the following undisputed facts by Carrillo:
1) the ROICOM Representative knew Carrillo did not speak or read English; 2) the ROICOM Representative informed Carrillo that “ . . . she had to sign [the] document to be able to register and be put on payroll with ROICOM . . . [and] to be able to work at the company;”
3) the ROICOM Representative made no attempt to inform Carrillo that by signing the document she was agreeing to arbitrate and waive her right to jury trial; 4) the ROICOM Representative never gave or offered to give Carrillo a copy of the Acknowledgement Form or the Arbitration Agreement, either in English or in Spanish, despite the apparent existence of both; and
5) the ROICOM Representative never informed Carrillo that an Arbitration Agreement even existed so that Carrillo could have the opportunity to read it and ask questions about it.
(ECF No. 13-1, p. 2-3); see (ECF No. 15-1, 4-15).
Furthermore, ROICOM contends that there are
several
cases that the Texas Court of
Appeals has reviewed with “language similar” to Carrillo’s assertion, “and that the court has held
that such evidence is insufficient to avoid the obligation to arbitrate.” (ECF 15, p. 4) (citing
In re
ReadyOne Industries, Inc.
,
In the first case relied on by ROICOM,
ReadyOne 2
, the Texas Court of Appeals rejected
an employee’s assertion that an arbitration agreement was misrepresented when he “just [didn’t]
recall,” he “didn’t know anything about this,” “he didn’t even know what arbitration is,” “he
doesn’t speak English,” and he was given “lots of documents to sign and that he signed them.”
In
re ReadyOne Industries, Inc.
,
In the next case relied on by ROICOM,
ReadyOne 3
, the Texas Court of Appeals rejected
an employee’s assertion that an arbitration agreement was fraudulently induced when she “was
given a few documents to sign during her brief orientation,” “was only given signature pages and
was not explained what the documents related to,” and that she “assumed the documents related
to her W-2 tax forms.”
In re ReadyOne Industries, Inc.
,
The Court finds that the assertions in ReadyOne 2 and ReadyOne 3 do not constitute “language similar” to Carrillo’s assertions. The Court further finds ReadyOne 2 and ReadyOne 3 distinguishable for the reason that in both of those cases, the employer made no misrepresentation regarding the document’s contents. Rather, in each case, the plaintiff employee was simply unaware or assumed the contents of a document which the plaintiff employee had the opportunity and ability to reаd. In contrast, here, ROICOM’s Representative misrepresented the contents of the Acknowledgement Form to Carrillo by telling her it was “to register for payroll” when in fact the document referred to a contract which waived her right to a jury trial, and that Carrillo was unable to read and understand. Accordingly, the Court finds ReadyOne 2 and ReadyOne 3 distinguishable from the facts at issue here.
Instead, the Court finds that the ROICOM Representative’s statements are much like the
misrepresentation found in
Delfingen US-Texas, L.P. v. Valenzuela
.
Similarly, here, the ROICOM Representative’s statement to Carrillo that the
Acknowledgement Form was “to register for payroll” and not an arbitration agreement is nearly
identical to the representative in
Delfingen
’s misrepresentation that the arbitration agreement was
“the attendance policy” and not a waiver of the employee’s right to a jury trial.
Compare
(ECF
No. 15, p. 6),
with Delfingen
,
C. ROICOM failed to providе the actual Arbitration Agreement to Carrillo Carrillo asserts that she was “not provided with” and has “never seen” the actual Arbitration Agreement “in English or in Spanish.” (ECF No. 13-1, p. 3). Although an English and Spanish copy of the Arbitration Agreement was produced in Defendant’s Motion, ROICOM does not assert that either document was ever provided or shown to Carrillo. (ECF No. 8-1, p. 3- 12); see (ECF No. 15). Rather, Carrillo has only seen an English version of the Acknowledgement Form. (ECF No. 13-1, p. 3). Accordingly, the Court finds that the evidence establishes that Carrillo was never provided or shown an English or Spanish-language copy of the actual Arbitration Agreement.
D.
The totality of the circumstances in which ROICOM presented the
Acknowledgement Form to Carrillo demonstrate procedural unconscionability
The Court notes that, when taken alone, neither the ROICOM Representative’s affirmative
misrepresentation
to Carrillo nor Carrillo’s
inability
to read
the English-language
Acknowledgement Form can form the basis for finding procedural unconscionability and denying
the motion to compel arbitration.
See Ridge Natural Resources
,
Instead, the Court must assess “[t]he totality of the circumstances . . . [at] the time the
contract was formed” to determine if “the circumstances surrounding the negotiations [were]
shocking.”
Delfingen
,
Carrillo argues that the totality of the circumstances, which include the Representative’s
misrepresentation of the contents of the Acknowledgement Form, Carrillo’s reliance on the
misrepresentation when signing the Aсknowledgement Form, and ROICOM’s failure to provide
Carrillo with an English or Spanish version of the Arbitration Agreement, supports finding that
the Arbitration Agreement is procedurally unconscionable. (ECF No. 13, p. 5). In Plaintiff’s
Response, Carrillo relies on
Delfingen
as being instructive because, similar to the facts here, the
arbitration agreement in that case “. . . was signed based on an affirmative misrepresentation.” (
Id.
at 4) (citing
Delfingen
,
In Defendant’s Reply, ROICOM argues that the facts in Delfingen are distinguishable, because “there is no evidence . . . [the ROICOM Representative] affirmatively misrepresented the contents of the documents presented” [10] and the ROICOM Representative “furnished [Carrillo] with a Spanish-language versions [sic] of [the Acknowledgement Form], which was located on the reverse side of the same document [Carrillo] signed.” [11] (ECF No. 15, p. 5-6) (emphasis in original).
In
Delfingen
, the Spanish-speaking employee was “illiterate as to the English language.”
Similar to
Delfingen
, in
Prevot
, the district court held that the English-language arbitration
agreements signed by the non-English-speaking employees were procedurally unconscionable
because the employees “were not given a translation of the agreements” and “were pressured into
signing them.”
The facts underlying
Prevot
and
Delfingen
closely parallel the instant case. Similar to the
facts underlying the instant case, in
Prevot
and
Delfingen
: (1) the employees were illiterate in
English; (2) they were given documents to sign in English; (3) they were never given a Spanish
translation of the arbitration agreement; (4) the employer’s representatives misrepresented the
importance or contents of the English documents to the employees; and (5) the representatives
knew the employees did not understand English.
Prevot
, 133 F. Supp. 2d at 940 (where the
employee’s supеriors told them “not to worry about [the arbitration agreement] and to quickly sign
the documents so they could get back to work”);
Delfingen
,
Further, while the employees in
Prevot
and
Delfingen
signed a copy of an English version
of their arbitration agreements, Carrillo never saw or received a copy of the Arbitration Agreement
in either English or Spanish.
Compare Prevot
,
In sum, Carrillo’s inability to read the English-language Acknowledgement Form, the ROICOM Representative’s misrepresentation as to the Acknowledgement Form’s contents, and ROICOM’s failure to provide Carrillo with a copy of the Arbitration Agreement in Spanish or English, all support the conclusion that the Arbitration Agreement was procedurally unconscionable.
In Defendant’s Reply, ROICOM argues that
ReadyOne Industries, Inc. v. Lopez
[hereinafter
ReadyOne 5
] supports its argument that the Arbitration Agreement should be enforced.
(ECF No. 15, p. 5) (citing
ReadyOne Industries, Inc. v. Lopez
,
Therefore, based on the totality of the circumstances, which include Carrillo’s inability to read the English-language Acknowledgement Form, the ROICOM Representative’s misrepresentation as to the Acknowledgement Form’s contents, and ROICOM’s failure to provide Carrillo with a copy of the Arbitration Agreement in Spanish or English, the Court finds that there is sufficient evidence that Carrillo has met her burden of proving that the Arbitration Agreement was procedurally unconscionable.
2. Acknowledgement Form with Attached Spanish Version
ROICOM asserts for the first time in Defendant’s Reply that ROICOM “furnished
[Carrillo] with a Spanish-language versions [sic] of [the Acknowledgement Form], which was
located on the reverse side of the same document she signed.” (ECF No. 15, p. 5);
see also
(ECF
No. 15-1, p. 3) (“[The Acknowledgement Form] is a two – sided [sic] document in English on one
side and Spanish on the other. Ms. Carrillo signed the English side . . . . However, the document
signed by Ms. Carrillo contained both an English side and a Spanish side.”).
[13]
“[T]he failure to read a contract does not ordinarily void a contract absent fraud or
misrepresentations.”
In re Green Tree Servicing LLC
,
It is clear that a misrepresentation alone does not equate to a “trick or artifice” that prevents
a party from reading or understanding a contract.
See
,
e.g.
,
Harvey v. Elder
,
found no evidence that the representative “did anything to mislead [the laborers] who signed,” and the representative “turn[ing] back . . . sheets for [the laborers’] convenience” did not constitute a “trick or artifice [used] to induce them to sign without reading” when the laborers “could plainly see that . . . sheets had been folded back and could have examined such . . . sheets by turning them down or asking [the representative] to do so . . . [in fact, one of the laborers] sometimes turned them back himself”). As such, the Court finds that the misrepresentation of the Acknowledgement Form’s contents by ROICOM’s Representative alone is not enough to establish a “trick or artifice.”
Even so, the Court now considers the alternative factual scenario raised in Defendant’s Reply: namely, that Carrillo was handed a two-sided Acknowledgement Form by ROICOM’s Representative, the back side of which was in Spanish. For the reasons set forth below, the Court finds that the combination of (1) the Representative’s conduct, (2) the format in which the Acknowledgement Form was drafted, and (3) ROICOM’s failure to provide Carrillo with a copy of the Arbitration Agreement, constitutes a “trick or artifice” that prevented Carrillo from reading or having the opportunity to read the Spanish-language Acknowledgement Form.
A. The ROICOM Representative’s conduct and misrepresentation prevented Carrillo from reading the Spanish-language Acknowledgement Form ROICOM argues in Defendant’s Reply that “there is no evidence [Carrillo] was prevented by trick or artifice from reading [the Sрanish version on the back of the Acknowledgement Form] and that “[t]here is no evidence that a coercive environment existed.” (ECF No. 15, p. 6). ROICOM argues that Carrillo’s affidavit is insufficient to establish procedural unconscionability since Carrillo “was provided with an English and Spanish version of the Acknowledgement that she signed” [15] and that, “therefore Plaintiff is presumed to have read and understood the documents given to her.” (ECF No. 15, p. 6).
Despite ROICOM’s conclusory contentions, it is clear to the Court that not only did the ROICOM Representative never inform Carrillo that a Spanish version of the Acknowledgement Form existed on the backside of the English version, the ROICOM Representative affirmatively misled Carrillo as to the nature and the contents of the Acknowledgement Form. Although a misrepresentation alone does not equate to a “trick or artifice” that prevents a party from reading a contract, it is undisputed that Carrillo did not see, read, or was even made aware of the Spanish backside of the Acknowledgement Form. See (ECF No. 13-1); (ECF No. 15).
The ROICOM Representative’s statements and conduct prevented Carrillo from reviewing the Spanish-language Acknowledgement Form. The Representative knew Carrillo only spoke and understood Spanish and knew that the Acknowledgement Form was a two-sided document with a Spanish side, but the Representative chose to only present and obtain Carrillo’s signature on the English side. See (ECF No. 15-1, p. 14-15).
Further, knowing Carrillo could not read or understand the English side of the Acknowledgement Form, the ROICOM Representative told Carrillo in Spanish that Carrillo had to sign the document “to be able to register and be put on payroll with ROICOM.” (ECF No. 13- 1, p. 2). ROICOM does not provide any evidence that the Representative alerted Carrillo to the existence of a Spanish-language backside or that the Representative gave Carrillo an opportunity to review it. See generally (ECF No. 15-1, 2-3). In fact, Carrillo never contends that she chose not to read the Spanish-language Acknowledgement Form at the time of signing; rather, she argues that she was never given the Spanish-language Acknowledgement Form in the first place, nor informed of its existence. (ECF No. 13-1, p. 2-3); see Forshey v. Del , No. 01-19-00421-CV, 2020 WL 1856214, at *4 (Tex. App. Apr. 14, 2020) (“[I]n contrast, [the employee] does not argue that she was not aware of the arbitration provision because it was on another page. Rather, she argues that she was never given the page containing the arbitration provision in the first place .”) (emphasis added).
Finally, the Court notes that the Acknowledgement Form produced by ROICOM in Defendant’s Reply was kept as a record “in the course of ReadyOne’s regularly conducted business activity,” and ROICOM provides no evidence that Carrillo was given a copy of the signed Acknowledgement Form to keep for her records. See ( id. ). Thus, the meeting with the ROICOM Rеpresentative was apparently Carrillo’s only opportunity to review the Acknowledgement Form.
Based on the facts outlined above, the Court finds that the ROICOM Representative’s conduct and misrepresentation prevented Carrillo from reading the Spanish backside of the Acknowledgement Form.
B. The format of the Acknowledgement Form prevented Carrillo from reading the Spanish version of the Acknowledgement Form and gave credibility to the ROICOM Representative’s misrepresentation
Next, the Court finds that the format of the Acknowledgement Form: (1) prevented Carrillo from reading or having the opportunity to read the Spanish version of the Acknowledgement Form; and (2) gave credibility to the ROICOM Representative’s misrepresentation.
First, the Court notes that the presence of the Spanish-language version on the back side of
the Acknowledgement Form is not, by itself, enough to prevent an employee from reading and
understanding it. Texas state courts have found that contract language on the back side of a page
alone is not inherently “hidden” as to constitute a “trick or artifice.”
See
,
e.g.
,
Cantella & Co., Inc.
v. Goodwin
,
In previous cases where the failure to read an agreement did not excuse a party from
arbitration, courts have noted that the pertinent documents contained some clear reference to other
pages or paragraphs of the contract. In
Innova Hosp. San Antonio, L.P. v. Blue Cross and Blue
Shield of Georgia, Inc.
, the District Court for the Northern District of Texas rejected plaintiff’s
lack of mutual assent defense to an arbitration agreement where the signature block stated “I
acknowledge by my signature that I have read and understand the
front and back
of this application
to agree to binding arbitration as described on
the back of this page
.”
Unlike
Innova Hosp.
, the Court finds that the Acknowledgement Form here does not
contain any clear reference that a Spanish version of the Acknowledgement Form, or that any text,
was located on the backside of the Acknowledgement Form. (ECF No. 15-1, p. 14-15). There is
no language on the Acknowledgement Form indicating that the signer should review the “front
and back” or the language “on the reverse side” of the Acknowledgement Form.
Compare
(
id.
),
with Innova Hosp.
,
Absent a clear reference to other pages or paragraphs, courts have held that “the failure to
read a contract does not [] void a contract” when the format of the contract “put[s] a reasonable
person on notice that there were additional terms on the back of the signature page.”
In re Green
Tree
,
Unlike
In re Green Tree
, here, there is nothing on the face of the English side of the
Acknowledgement Form that would have given Carrillo notice that a Spanish-language
Acknowledgement Form, or that any text, was on the backside.
See
(ECF No. 15-1, 14-15). There
is no indication of “Page 1 of 2” or an arrow directing the reader to turn the page over.
Compare
(
id.
),
with In re Green Tree
,
Further, unlike the party in
In re Green Tree
, Carrillo was incapable оf reading the English
version of the Acknowledgement Form and relied upon the ROICOM Representative’s
misrepresentation that the contents of the document pertained to registering for payroll and not to
an arbitration agreement.
Compare In re Green Tree
,
The Court next finds that the Acknowledgement Form was drafted in a manner that gave credibility to the ROICOM Representative’s misrepresentation thаt the document was to “register for payroll,” which strengthened Carrillo’s reliance on the misrepresentation. The Acknowledgement Form was a single sheet of paper with roughly half of a page of substance while the other half of the page contained the signature block. (ECF 15-1, p. 3, 14). In contrast, arbitration agreements are typically longer than half of a page. Compare ( id. at p. 14), with ( id. at p. 4-8) (showing the Arbitration Agreement being five pages, at least 3 pages if printed front and back, with four of the pages completely full of substantive text).
Additionally, there are no significant variations in the font of the text in the Acknowledgement Form to alert an employee that the document is of greater importance than routine registering for payroll. ( Id. at p. 14). Excluding the titles and headings, the substantive body of the Acknowledgement Form has no text that is in all capital letters or underlined, and only part of one sentence is bolded. ( Id. ). Further, the signature block, which covers roughly half of the page, contains Carrillo’s signature, the date of her signature (11-15-2017), her name, her Social Security Number, her work location (ROICOM), the Department (RC), the signature of a witness from Human Resources, and the date of the witness’s signature (11-15-2017). ( Id. ). Requiring an employee to provide their name, signature, Social Security number, work location, and department is more indicative of a document necessary for payroll than a document agreeing to arbitration and waiving an employee’s right to jury trial. ( Id. ). Therefore, the Court finds that the contents of the signature block, in combination with the brevity of the document and the lack of any variation in the font to draw attention to the importance of the language in the body of the Acknowledgement Form, all support the conclusion that the Acknowledgement Form was drafted in a manner consistent with the ROICOM Representative’s statement that the document was related only to payroll. See (ECF 13-1, p. 2).
C. ROICOM’s failure to provide Carrillo with the actual Arbitration Agreement denied her the opportunity to verify its contents
Finally, ROICOM did not provide the actual Arbitration Agreement to Carrillo despite the
fact that ROICOM had both an English and Spanish version of the Arbitration Agreement
available. (ECF No. 15-1, p 3-13). ROICOM chose not to provide Carrillo with a copy of the
actual Arbitration Agreement in
either
language. (ECF No. 13-1, p. 3). Instead, ROICOM elected
to have Carrillo sign an English version of the Acknowledgement Form and not the Arbitration
Agreement itself.
Compare
(ECF No. 15-1, p. 14),
with
(
id.
at p. 4-13). Not only was Carrillo not
informed that an Arbitration Agreement existed, the Court finds that Carrillo had no reason to
inquire into the contents of the Arbitration Agreement that was never presented to her. By not
providing a copy of the actual Arbitration Agreement, ROICOM denied Carrillo the opportunity
to verify whether the terms of the Arbitration Agreement were consistent or inconsistent with the
Representative’s statement regarding the contents of the Acknowledgement Form.
See Ridge
Natural
,
D. The combined effect of ROICOM’s actions prevented Carrillo from reading the Spanish version of the Acknowledgement Form
In sum, the combined effect of the ROICOM Representative’s conduct and
misrepresentation of the contents of the Acknowledgement Form, the format of the
Acknowledgement Form that substantiated the misrepresentation, and ROICOM’s failure to
provide a copy of the Arbitration Agreement, rises to the level of a “trick or artifice” that prevented
Carrillo from reading or understanding the Spanish-language version of the Acknowledgement
Form.
See Delfingen
,
Further, the circumstances here suggest that “overreaching [and] sharp” practices were used by ROICOM to obtain a signature from an employee with a total lack of knowledge, or “ignorance,” of the language used in their Acknowledgement Form, which ROICOM сould later use to attempt to compel arbitration from that employee. See American Stone Diamond , 934 F. Supp. at 844 (“A court may find procedural unconscionability if the plaintiff presents evidence of the [company’s] overreaching or sharp practices’ combined with the [employee’s] ignorance or inexperience.”) (internal quotes omitted). Based on the totality of the uncontroverted evidence surrounding the signing of the Acknowledgement Form, the Court finds the circumstances shocking such that the Acknowledgement Form and Arbitration Agreement were procedurally unconscionable, even if the Acknowledgement Form contained a Spanish-language version on the back.
3. Summary
The totality of the circumstances, including Carrillo’s inability as a Spanish-speaker to read and understand English, Carrillo never receiving a Spanish or English copy of the Arbitration Agreement, and the Representative presenting the Acknowledgement Form to Carrillo only in English while misrepresenting it as a document to register for payroll, support the finding that the Acknowledgement Form is procedurally unconscionable. Assuming, arguendo , that the Acknowledgement Form had a Spanish-language version on the backside, the Court finds that Carrillo was still prevented from reading or noticing the Spanish-language version due to the “trick or artifice” of ROICOM and the ROICOM Representative. Accordingly, the Court further finds that thе Arbitration Agreement between ROICOM and Carrillo is procedurally unconscionable.
IV. CONCLUSION
For the foregoing reasons, although the Court finds that ROICOM met its initial burden of proof that the Arbitration Agreement on its face establishes an agreement between ROICOM and Carrillo, the Court finds that the Acknowledgement Form and, by extension, the Arbitration Agreement, are procedurally unconscionable. Because the Arbitration Agreement between Carrillo and ROICOM is procedurally unconscionable, the Court finds that ROICOM’s Motion to Compel Arbitration should be denied.
Accordingly, IT IS HEREBY ORDERED that Defendant’s Motion to Compel Arbitration and to Stay Proceedings Pending Arbitration is DENIED.
SIGNED and ENTERED this 14th day of September, 2020.
ANNE T. BERTON
UNITED STATES MAGISTRATE JUDGE
Notes
[1] While recounting the factual background, the Court addresses only the facts relevant to this Order.
[2] Carrillo indicates the Representative was “a person named ‘Kristy’ from Human Resources of ROICOM.” (ECF No. 13-1, p.2). ROICOM does not provide any evidence regarding the identity or actions of the Representative. See (ECF No. 15).
[3] Carrillo states in her affidavit that she “do[es] not speak or read English[, and she] only speak[s] or read[s] Spanish.” (ECF No. 13-1, p. 2).
[4] Although the Acknowledgement Form misidentifies the title of the arbitration agreement as “Mutual Agreement to Arbitrate Claims” instead of “Mutual Agreement to Arbitrate,” neither party asserts this misidentification is material to the legal status of the arbitration agreement.
[5] Even if the Arbitration Agreement is not directly between Carrillo and ROICOM, ROICOM would still be able to
comрel arbitration as a third-party beneficiary.
In re Palm Harbor Homes, Inc.
,
[6] Since Carrillo does not argue that her claims fall outside the scope of the Arbitration Agreement, the Court finds that the scope of the Arbitration Agreement is not at issue in the instant case, and thus will not be addressed. (ECF No. 15, p. 3 n. 1); see (ECF No. 13).
[7] The Court assumes ROICOM is referring to the ROICOM Representative from Human Resources.
[8] There are several relevant cases in which ReadyOne is a party. Although these cases are not directly related to each other, the Court will refer to the cases using more descriptive names for ease of reading.
[9] Further, these two cases do not even address the issue of procedural unconscionability, but rather discuss fraudulent
inducement in a different procedural context.
See In re ReadyOne
,
[10] The Court finds that the ROICOM Representative did affirmatively misrepresent the contents of the Acknowledgement Form for the reasons outlined supra in Section III(b)(1)(B).
[11] The Court finds that Carrillo was prevented from reading and understanding the Spanish version of the Acknowledgement for the reasons outlined infra in Section III(b)(2).
[12] In reaching its conclusion, the district court relied upon the plaintiff’s testimony through sworn affidavits, which
were not disputed by the defendant.
[13] Carrillo asserts in Plaintiff’s Surreply that the evidence of the Spanish version of the Acknowledgement Form should be stricken, since it was improperly raised for the first time in Defendant’s Reply. (ECF No. 19, p. 2). In the alternative, Carrillo asks that the Court find that the evidence of the Spanish version of the Acknowledgement Form is not credible or reliable to support a finding that Carrillo was presented with the Acknowledgement Form in Spanish. ( Id. at p. 4). Carrillo asserts in Plaintiff’s Surreply that ROICOM’s counsel sent the same English Acknowledgement Form found in Defendant’s Motion filed on July 27, 2020, to Carrillo’s counsel by email on July 14, 2020. ( Id. at p. 6) (Carrillo’s counsel also contends that ROICOM’s counsel provided in the same email a one-sided English acknowledgement form of ROICOM in an unrelated case). Carrillo alleges that ROICOM “miraculously found an Acknowledgement Form that was two-sided” “only after Carrillo addressed the impropriety of [ROICOM’s] use of an English Acknowledgement Form and misleading statements about the same.” ( Id. ). ROICOM counters Carrillo’s allegations by asserting it “is not clairvoyant” and that “[i]t was impossible for [ROICOM] to anticipate and respond to [Carrillo’s affirmative defense of procedural unconscionability] in [Defendant’s Motion] and include all the evidence possible in rebuttal to a defense not yet raised.” (ECF No. 21, p. 4-5). ROICOM asserts that it was only after Plaintiff’s Response that ROICOM’s counsel “learned the Spanish — language [sic] version of the Acknowledgement Form was located on the reverse side of the English — language [sic] version that [Carrillo] had signed.” ( Id. at p. 4). ROICOM’s counsel did not previously produce the Spanish-language version in his prior emails or Defendant’s Motion because the Acknowledgement Form was “copied and electronically transmitted to [ROICOM’s counsel] as one page [sic] documents, then stored electronically in PDF format as such.” (ECF No. 21, p. 8). Further, ROICOM’s counsel asserts that he “was not made aware of Ms. Carrillo’s contention that she did not speak English until [Plaintiff’s Response containing Carrillo’s affidavit],” and “[i]t was only thereafter that [ROICOM’s counsel] came to learn that the original Acknowledgement [Form] was a two-sided document.” ( Id . at p. 2). The Court notes that ROICOM provides no explanation as to how it learned of the Spanish-language Acknowledgement Form’s existence after the Plaintiff’s Response. See ( Id. at p. 2). Further, ROICOM provides no explanation as to why Alvarez, the “custodian of records for personnel files of ROICOM . . . and for documents pertaining to Blanca Carrillo,” made no reference in his original affidavit to a Spanish-language Acknowledgement Form or that the Acknowledgement Form was two-sided. See (ECF No. 21); (ECF No. 8-1, p. 1-2, 13) (“Exhibit ‘2’ is a true and correct copy of a Receipt and Arbitration Acknowledgement dated May 20, 2019, with what appears to be the signature of Blanca Carrillo.”); cf. (ECF No. 15-1, p. 3) (Alvarez asserting in his supplemental affidavit that the Spanish side was not produced in his previous affidavit because “[t]here was a copying error and the Spanish side was inadvertently not included.”). Although Alvarez explains how the Spanish-language Acknowledgement Form was not physically included inadvertently due to a “copying error,” Alvarez does not explain why his description of the Acknowledgement Form did not mention a Spanish-language version. Further, ROICOM’s counsel does not explain why the Spanish-language Arbitration Agreement was included in Alvarez’s initial affidavit when ROICOM’s counsel was purportedly unaware that Carrillo “did not speak English” until Plaintiff’s Response. See (ECF No. 21). Finally, there is no indication on the face of the English side or Spanish side of the Acknowledgement Form, either
[15] Contrary to ROICOM’s statement here, Carrillo only signed the English version of the Acknowledgement Form. See (ECF No. 15-1, p. 14).
[16] In fact, ROICOM’s own counsel filed Defendant’s Motion without “know[ing] the original forms were two-sided documents,” even though ROICOM’s counsel had a distinct advantage over Carrillo insofar as he could read the English contents of the Acknowledgement Form while Carrillo could not. (ECF No. 21, p. 9) (“It was only thereafter [reading Carrillo’s affidavit] that I came to learn that the original Acknowledgement [Form] was a two-sided document.”).