Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_07-cv-02309/USCOURTS-cand-3_07-cv-02309-2/pdf.json

Nature of Suit Code: 445
Nature of Suit: Americans with Disabilities Act - Employment
Cause of Action: 42:12101 Americans w/ Disabilities Act (ADA)

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

MATTHEW DWYER,

Plaintiff,

 v.

DYNETECH CORP.,

Defendant. /

No. C 07-02309 JSW

ORDER GRANTING IN PART

AND DENYING AS MOOT IN

PART MOTION TO DISMISS

INTRODUCTION

This matter comes before the Court upon consideration of the motion to dismiss or, in

the alternative, to stay filed by Defendants Dynetech Corp., Dynetech Services Corp., and

Telegenix Corporation (formerly known as Life Skills Corporation) (collectively

“Defendants”). Having considered the parties’ pleadings, relevant legal authority, the record in

this case, and having had the benefit of oral argument, the Court HEREBY GRANTS IN PART

AND DENIES AS MOOT IN PART Defendants’ motion for the reasons set forth in the

remainder of this Order.

BACKGROUND

In February 2006, Plaintiff Matthew Dwyer (“Plaintiff”) applied for an Instructor In

Training Program with Defendant Dynetech Corp. (First Amended Complaint (“FAC”), ¶ 8.) 

Plaintiff and Defendants went through a phone interview and an in-person interview in late

February and early March 2006. (Id. ¶¶ 9-10.) Plaintiff has multiple sclerosis and, as a result of

his condition, has some mobility restrictions. (Id., ¶¶ 7, 9.) 

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For the Northern District of California

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28 1 Paragraph 3 of the Agreement is a non-competition provision and a provision

pertaining to the protection of Defendants’ intellectual property.

2

On or about March 26, 2006, Plaintiff signed a letter agreement, entitled “Independent 

Contractor Agreement Between Life Skills Corporation and Matthew Dwyer as an Instructor in

Training for CSF” (hereinafter the “Letter Agreement”). (Id., ¶ 11; Declaration of Linda

Metcalf in Support of Defendant’s Motion to Dismiss or Stay Plaintiff’s First Amended

Complaint (“Metcalf Decl.”), Ex. D.) As is pertinent to this motion, Paragraph 5 of the Letter

Agreement (hereinafter “the Arbitration Agreement”) provides:

5. Any controversy or claim arising out of or relating to this contract, or the breach

of it, with the exception of those related to Paragraph 3, shall be settled by

mandatory arbitration and judgment upon the award rendered by the arbitrator(s)

shall be entered in any court having jurisdiction. You consent to the exclusive

jurisdiction and venue of an appropriate court and a situs for arbitration located in

Orange County, State of Florida.

a. In any arbitration proceeding, each party shall have the right to obtain

reasonable discovery from the other party, including depositions on oral

examination or by written questions, production and inspection of

documents, or otherwise, in order to discover matters not privileged and

relevant to the subject matter of the controversy. The award entered in any

such proceeding may grant any remedy or relief that the arbitrator deems

just and equitable, including, but not limited to, any remedy or relief that

would have been available to the parties had the matter been heard in court.

b. In the event litigation or any other action results from or arises out of the

provisions set out in this Agreement, or the performance thereof, both

parties content to the exclusive jurisdiction and venue of an appropriate

court located in Orange County, Florida and agree to reimburse the

prevailing party’s reasonable attorney’s fees, court costs, and any and all

expenses, taxable by the court as costs, in addition to any other relief which

the prevailing party may be entitled. This agreement and all transactions

contemplated hereby, shall be governed by, construed and enforced in

accordance with the laws of the State of Florida, except for its laws

regarding conflict of laws. Nothing in this paragraph shall override the

arbitration provisions of paragraph five (5) of this Agreement.

c. As to Paragraph 3, and to the extent cognizable at law, we may obtain, in the

event of a breach or threatened breach and in addition to any and all other

remedies available to us, injunctive relief, regardless of whether we, as the

injured party, can demonstrate irreparable injury or no adequate remedy

exists at law. For that purpose, you acknowledge without reservation that

we have a legitimate business interest to protect and have fairly and

reasonably done so under the provisions of Paragraph 3.

(Id. at p. 4.)1

 

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2 The Court, therefore, does not reach the remainder of the Defendants’

arguments in favor of dismissal, and the motion is DENIED AS MOOT as to those

arguments.

3

Plaintiff’s First Amended Complaint consists primarily of claims for relief directed to

alleged discrimination. However, Plaintiff also seeks a declaration that the Arbitration

Agreement is invalid on the ground that it is unconscionable and seeks a declaration that the

forum selection clause and choice of law provisions within the Arbitration Agreement are

invalid because “they are unreasonable and unconscionable in their own right.” (FAC, ¶¶ 47-

54.) 

ANALYSIS

Defendants move to dismiss the FAC on three bases: (1) Plaintiff filed this action in an

improper venue in light of the forum selection clause; (2) the parties agreed to arbitrate their

claims in Florida; and (3) Plaintiff fails to state a claim because he is an independent contractor.

As an alternative to dismissal, Defendants request that the Court stay the action. Neither party,

however, has asked the Court to compel arbitration. The Court concludes that it is appropriate

to resolve this motion on the question of whether the Arbitration Agreement is enforceable.2

A. Applicable Legal Standards.

Pursuant to the Federal Arbitration Act (“FAA”), arbitration agreements “shall be valid,

irrevocable, and enforceable, save upon such grounds that exist at law or in equity for the

revocation of any contract.” 9 U.S.C. § 2. Once the Court has determined that an arbitration

agreement involves a transaction involving interstate commerce, thereby falling under the FAA,

the Court’s only role is to determine whether a valid arbitration agreement exists and whether

the scope of the parties’ dispute falls within that agreement. 9 U.S.C. § 4; Chiron Corp. v.

Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000). Because there is no dispute

that Plaintiffs’ discrimination claims fall within the scope of the Arbitration Agreement, the

only issue is whether the Arbitration Agreement is enforceable, which is the subject of the

declaratory relief claim.

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The FAA represents the “liberal federal policy favoring arbitration agreements” and

“any doubts concerning the scope of arbitrable issues should be resolved in favor of

arbitration.” Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1,

24-25 (1983). Under the FAA, “once [the Court] is satisfied that an agreement for arbitration

has been made and has not been honored,” and the dispute falls within the scope of that

agreement, the Court must order arbitration. Prima Paint Corp. v. Flood & Conklin Mfg. Co.,

388 U.S. 395, 400 (1967). Notwithstanding the liberal policy favoring arbitration, by entering

into an arbitration agreement, two parties are entering into a contract. See Volt Information

Sciences, Inc. v. Board of Trustees of Leland Stanford Junior University, 489 U.S. 468, 479

(1989) (noting that arbitration “is a matter of consent, not coercion”). Thus, as with any

contract an arbitration agreement is “subject to all defenses to enforcement that apply to

contracts generally.” Ingle v. Circuit City Stores, Inc., 328 F.3d 1165, 1170 (9th Cir. 2003.) 

Where, as here, a litigant sues to enforce statutory claims, that fact alone will not

necessarily preclude arbitration. The Supreme Court has “recognized that federal statutory

claims can be appropriately resolved through arbitration, and [it has] enforced agreements to

arbitrate that involve such claims.” Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 89

(2000). If statutory claims are involved and an arbitration agreement exists, the agreement

should be enforced if the litigant can effectively vindicate his or her statutory claim for relief in

arbitration, “unless Congress itself has evinced an intention to preclude waiver of judicial

remedies for the statutory rights at issue.” Gilmer v. Interstate Johnson/Lane Corp., 500 U.S.

20, 26-28 (1991) (emphasis added); see also Armendariz v. Foundation Health Psychcare

Servs., Inc., 24 Cal. 4th 83, 99-102 (2000) (noting that claims under California’s Fair Housing

and Employment Act may be arbitrated, so long as a party may vindicate his or her statutory

rights and setting forth procedural protections required); Romano ex Rel. Romano, 861 So. 2d

59, 62 (2003) (“Although parties may agree to arbitrate statutory claims, ... arbitration must

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3 Although the Arbitration Agreement provides that it will be governed by

Florida law, the Defendants do not address Florida law in their opening brief and do not

suggest in reply that the Court should analyze this question using Florida law. 

5

provide the prospective litigant with an effective way to vindicate his or her statutory cause of

action in the arbitral forum.”).3

1. The Arbitration Agreement Is Enforceable.

The analysis of whether the Arbitration Agreement is unconcscionable “begins with an

inquiry into whether the contract is one of adhesion.” Armendariz, 24 Cal. 4th at 113. The

Court’s focus in this case is on the Arbitration Agreement, rather than on the Letter Agreement

in its entirety. See Buckeye Check Cashing, Inc. v. Cardegna, __ U.S. __, 126 S.Ct. 1204, 1209

(2006); Nagrampa v. MailCoups, Inc., 469 F.3d 1257, 1268 (9th Cir. 2006).

As the Armendariz court explained, a contract of adhesion “‘signifies a standardized

contract, which, imposed and drafted by the party of superior bargaining strength, relegates to

the subscribing party only the opportunity to adhere to the contract or reject it.’” Id. (quoting

Neal v. State Farm Ins. Co., 188 Cal. App. 2d 690, 694 (1961)). When a party challenges an

arbitration agreement on the basis of unconscionability, that party must demonstrate that the

arbitration agreement is both procedurally and substantively unconscionable. See id. at 114; 

Romano, 861 So. 2d at 62 (“To decline to enforce a contract as unconscionable, the contract

must be both procedurally unconscionable and substantively unconscionable.”) Although a

party must establish both elements, those elements exist on a sliding scale. Id.; see also

Romano, 861 So. 2d at 62. “In other words, the more substantively oppressive the contract

term, the less evidence of procedural unconscionability is required to come to the conclusion

that the term is unenforceable, and vice versa.” Armendariz, 24 Cal. 4th at 114.

a. Plaintiff has met his burden to show that the Arbitration Agreement

is procedurally unconscionable.

“Procedural unconscionability addresses the manner in which agreement to the disputed

term was sought or obtained, such as unequal bargaining power between the parties and hidden

terms included in contracts of adhesion.” Szetela v. Discover Bank, 97 Cal. App. 4th 1094,

1099 (2002); cf. Armendariz, 24 Cal. 4th at 114 (procedural element focuses on “oppression” or

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“surprise”); cf. Romano, 861 So. 2d at 62 (“Procedural unconscionability refers to the

individualized circumstances under which the contract is entered, while substantive

unconscionability deals with the unreasonableness and unfairness of the contractual terms

themselves.”). “When a weaker party is presented the clause and told to ‘take it or leave it’

without the opportunity for meaningful negotiation, oppression, and therefore procedural

unconscionability” will be present. Szetela, 97 Cal. App. 4th at 1100. Defendants contend that

Plaintiff presented himself to them as a sophisticated business person. That fact, however, is

not dispositive. See Nagrampa, 469 F.3d at 1283 (“the sophistication of a party, alone, cannot

defeat a procedural unconscionability claim”).

In this case, the Arbitration Agreement is found on page four of the seven page Letter

Agreement, and it is set the same typesize and font as the remainder of the provisions of the

Letter Agreement. Defendants argue that Plaintiff had ample time to review the Arbitration

Agreement, which was sent to him on March 24, 2006 by Federal Express and returned on

March 28, 2006. Defendants also note that the Letter Agreement concludes with the following

language: “[I]f the above meets with your approval and understanding of the conditions of

engagement, I would ask you to please initial each page, sign both copies of this letter,

returning both to us, so we can countersign them. ... Should you have any questions pertaining

to this letter, please feel free to contact us directly.” (Fernandez Decl., Ex. D at p. 7 (emphasis

added).) Plaintiff did initial each page, signed and dated the letter, and based on the record

before the Court, had no questions for the Defendants. These facts weigh against a finding of

procedural unconscionability. See Davis v. O’Melveny and Meyers, 485 F.3d 1066, 1073 (9th

Cir. 2007) (arbitration clause was not hidden from employees and noting that employer gave

ample notice of dispute resolution procedure, had persons available with whom employees

could consult, and that there was no evidence of undue pressure on employees); cf. Gainesville

Health Care Center v. Weston, 857 So. 2d 278, 285 (Fla. App. 2003) (reversing finding of

procedural unconscionability where record demonstrated plaintiff had time to review terms of

arbitration clause, asked no questions, and where clause was not hidden). 

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4 The Court expresses no opinion on whether Plaintiff was an employee or an

independent contractor and believes that is an issue that would be addressed more

appropriately by an arbitrator. However, for purposes of resolving this motion, the Court

assumes that the rationale of Armendariz should apply to determine whether the Arbitration

Agreement is or is not enforceable.

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Plaintiff primarily argues that the Arbitration Agreement is procedurally unconscionable

because Defendants presented to him on a “take it or leave it” basis. In his declaration in

opposition to Defendants’ motion, Plaintiff attests that he “believed that [he] could not negotiate

any portion of the [Letter] Agreement ... [and] believed that if [he] negotiated any portion of the

[Letter] Agreement, [he] would forego a job opportunity with Defendants.” (Declaration of

Matthew Dwyer (“Dwyer Decl.”), ¶ 14.) Defendants have not rebutted this contention. Thus,

on the record before the Court, it is undisputed that Defendants drafted the Arbitration

Agreement and presented it to Plaintiff as part of the Letter Agreement without a meaningful

opportunity to opt out of its terms and still obtain employment with Defendants.4

Although the showing may be minimal, the Court concludes that Plaintiff has met his

burden to show that the Arbitration Agreement is procedurally unconscionable. See, e.g.,

Davis, 485 F.3d at 1073 (“if an employee has a meaningful opportunity to opt out of the

arbitration provision when signing the agreement and still preserve his or her job, then it is not

procedurally unconscionable”); Ingle, 328 F.3d at 1172-73 (finding arbitration clause presented

to employee, without meaningful opportunity to opt-out and retain employment, was

procedurally unconscionable). 

b. Plaintiff has not met his burden to show the Arbitration Agreement

is substantively unconscionable.

Plaintiff first asserts that the Arbitration Agreement is substantively unconscionable

because it requires Plaintiff to arbitrate all of his claims but permits Defendants to litigate those

claims that it would be most likely to bring against Plaintiff. In Armendariz, the California

Supreme Court stated that arbitration agreements require a “modicum of bilaterality” to be

enforceable. Armendariz, 24 Cal. 4th at 117. Although the Armendariz court found the

agreement in question to be lacking in mutuality, the court recognized that in some cases an

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employer might be able to demonstrate that business realities required the exclusion of certain

types of claims from the arbitration process. Id. at 117-18. 

In this case, the Arbitration Agreement provides that “[a]ny controversy or claim arising

out of or relating to this contract, or the breach of it, with the exception of those related to

Paragraph 3, shall be settled by mandatory arbitration ... .” (Metcalf Decl, Ex. D.) By its terms

that language applies both to the Plaintiff and to the Defendants. This fact distinguishes the

Arbitration Agreement in this case from, by way of example, the arbitration clause in

Nagrampa, which provided that the arbitration clause “shall not be construed to limit

[defendant’s] right to obtain any provisional remedy, including, without limitation, injunctive

relief ... as may be necessary in [defendant’s] sole subjective judgment, to protect its Service

Marks and proprietary information.” Nagrampa, 469 F.3d at 1265. 

Rather, the plain language of the Arbitration Agreement suggests that if Plaintiff wished

to bring a declaratory relief claim against the Defendants with respect to the provisions

Paragraph 3, he would not be required to arbitrate that claim. Similarly, the plain language of

the Arbitration Agreement suggests that Defendants would be required to arbitrate any claim

arising out of a breach of Paragraph 9, which details a list of activities and statements that

employees are prohibited from making or taking. Accordingly, the Court concludes that the

Arbitration Agreement satisfies the “modicum of bilaterality” required by Armendariz.

Plaintiff also argues that the arbitration clause is substantively unconscionable because it

omits the procedural protections required by Armendariz, namely: (1) provisions for a neutral

arbitrator; (2) “more than minimal discovery;” (3) that an award will be in writing; (4) the

availability of all remedies “that would otherwise be available [to Plaintiff] in court;” and (5)

the assurance that Plaintiff will not be required to pay “either unreasonable costs or any

arbitrator’s fees or expenses.” See Armendariz, 24 Cal. 4th at 102. The Court concludes that

Plaintiff’s arguments on this point are not well taken. 

The Arbitration Agreement is silent on the question of a neutral arbitrator, but the Court

does not take that silence to mean a biased arbitrator is the default conclusion. Moreover, the

Arbitration Agreement expressly provides that Plaintiff will be able to take depositions and

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5 Although the Court issued a tentative ruling in which it noted that it was

inclined to grant Defendants’ motion and to compel arbitration to occur within this judicial

district, the Court is satisfied that Defendants have not actually petitioned the Court to

compel arbitration. Thus, the Court concludes this case is factually distinct from Continental

Grain Co. v. Dant & Russell, 118 F.2d 967, 968-69 (9th Cir. 1941).

9

written discovery. Furthermore, the Arbitration Agreement does not expressly exclude any

remedies, unlike the arbitration clause at issue in Armendariz, which set forth express

limitations on the remedies available in arbitration. Cf. Romano, 861 So. 2d at 62-63

(concluding arbitration clause was substantively unconscionable because it expressly limited the

plaintiff to certain remedies and, thus, precluded statutory remedies). Further, there is “nothing

in [the Arbitration Agreement] that precludes ... written findings,” and under Armendariz, to the

extent Plaintiff’s claims are brought under FEHA, “the agreement must be interpreted to

provide for such findings.” Armendariz, 24 F.3d at 107. Finally, with respect to the issue of

fees and costs, the Arbitration Clause is silent. Again, under Armendariz, “a mandatory

employment arbitration agreement that contains within its scope the arbitration of FEHA claims

impliedly obliges the employer to pay all types of costs that are unique to arbitration.” Id. at

113; cf. Flyer Printing Co. v. Hill, 805 So. 2d 829, 833 (Fla. App. 2001) (refusing to enforce

arbitration agreement where agreement expressly required plaintiff to bear half the fees and

costs associated with arbitration). Thus, if either party goes forward with arbitration,

Defendants will be obliged to pay any costs uniquely associated with arbitration. 

Accordingly, for the reasons set forth above, the Court concludes that Plaintiff has not

met his burden to show that the Arbitration Agreement is substantively unconscionable. It is,

therefore, enforceable. The only issue that remains is whether the Court should dismiss or stay

the action.5

 

Defendants have moved in the first instance to dismiss this action and ask for a stay as

an alternative. It is within the Court’s discretion to determine whether dismissal is appropriate. 

See Sparling v. Hoffman Construction Co., 864 F.2d 635, 637-638 (9th Cir. 1988). Where, as

here, the remainder of Plaintiff’s claims are arbitrable, the Ninth Circuit has approved dismissal

in lieu of a stay. Id.; see also Johnston v. Beazer Homes, 2007 WL 708555 at * 4 (N.D. Cal.

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Mar. 2, 2007) (granting motion to dismiss based on agreement to arbitrate and finding venue

issues moot).

CONCLUSION

For the reasons set forth herein, Defendants’ motion is GRANTED IN PART AND

DENIED AS MOOT IN PART. A separate judgment shall issue, and the Clerk is directed to

close the file.

IT IS SO ORDERED.

Dated: September 17, 2007 

JEFFREY S. WHITE

UNITED STATES DISTRICT JUDGE

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