Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_16-cv-00581/USCOURTS-azd-2_16-cv-00581-0/pdf.json

Nature of Suit Code: 445
Nature of Suit: Americans with Disabilities Act - Employment
Cause of Action: 42:12101 Americans with Disabilities Act

---

WO IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA 

KENTON V. McCARTHY, )

)

 Plaintiff, )

)

vs. )

)

STIFEL, NICOLAUS & COMPANY )

INCORPORATED, )

) No. 2:16-cv-0581-HRH

 Defendant. ) 

__________________________________________) 

O R D E R

Motion to Compel Arbitration

Defendant moves to compel arbitration.1 This motion is opposed.2 Oral argument

was not requested and is not deemed necessary. 

Facts

Plaintiff is Kenton V. McCarthy. Defendant is Stifel, Nicolaus & Company,

Incorporated. 

Plaintiff began working for Stone & Youngberg (S&Y), “a regional, privately-held

investment banking firm based in San Francisco, California, in or about 2002 as a Vice

1Docket No. 12. 

2Docket No. 13. 

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Case 2:16-cv-00581-HRH Document 18 Filed 08/29/16 Page 1 of 19
President/Institutional Fixed-Income Broker.”3

In 2011, defendant, “a national, publically

traded brokerage firm, based in St. Louis Missouri, acquired S&Y.”4 Defendant retained

some S&Y employees, including plaintiff.5 

On August 22, 2011, plaintiff “signedaContinuationLetter agreeing to continue [his]

employment with S&Y during the acquisition and to continue [his] employment with Stifel

according to the terms and conditions of th[e] letter once the acquisition was complete.”6

The Continuation Letter provided that plaintiff would 

receive $87,500.00 in the form of a Demand Promissory Note.... 

The promissory note will be forgiven over four years in

accordance with the terms set forth in the attached promissory

note, which you will sign on the effective date of the acquisition

of Stone & Youngberg LLC by Stifel, Nicolaus & Company,

Incorporated.[7]

The Continuation Letter also provided that plaintiff would “receive $87,500.00 in the form

of stock units under the Stifel Wealth Accumulative Plan.... These units will have a base

3Complaint at 1, ¶ 7, Docket No. 1. 

4

Id. at 2, ¶ 8. 

5

Id. at ¶¶ 9-10. 

6

Julie Flynn’s Declaration in Support of Defendant’s Motion to Compel Arbitration

at 2, ¶ 7 and Exhibit 1 thereto, Exhibit A, Motion to Compel Arbitration, Docket No. 12. 

7Continuation Letter at 1, ¶ B, Exhibit 1, Flynn’s Declaration, Exhibit A, Motion to

Compel Arbitration, Docket No. 12. 

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Case 2:16-cv-00581-HRH Document 18 Filed 08/29/16 Page 2 of 19
year of 2011, will cliff vest after completing the fourth year and will be distributed in

January 2016.”8

 The Continuation Letter contained an arbitration clause that provided:

This letter agreement shall be governed by and construed in

accordance with the laws of the State of Missouri without

giving effect to any choice of law or conflicts of law principles.

Any controversy or dispute arising between you and the Firm

regarding your employment or separation there from, including any and all statutory claims or claims at common law, shall

be submitted for arbitration before the Financial Industry

Regulatory Authority (‘FINRA’) or successor agency, as the

Firm chooses, in accordance with the applicable provisions of

the arbitration rules of such organizations. A copy of the

current rules is available at: 

www.finra.org/ArbitrationMediation/Rules/CodeofArbitration

Procedure

You further acknowledge that you have freely and voluntarily

agreed to arbitrate all of your claims as a freely negotiated term

and condition of your employment with the Firm, and that you

have read and reviewed the applicable arbitration rules.[9

]

On September 29, 2011, plaintiff signed the promissory note.10 The promissory note

also contained an arbitration clause, which provided: 

Employee agrees that any controversy or dispute arising under

this Note, or out of Employee’s employment by Stifel (including, but not limited to, claims arising underthe CivilRights Act

8

Id. at ¶ C. 

9

Id. at 2, ¶ F. 

10Exhibit 2, Flynn’s Declaration, Exhibit A, Motion to Compel Arbitration, Docket

No. 12. 

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Case 2:16-cv-00581-HRH Document 18 Filed 08/29/16 Page 3 of 19
of 1964, the Civil Rights Act of 1991, the Age Discrimination in

Employment Act of 1967, the Age Discrimination in Employment Act, the Family Medical Leave Act and analogous state

statutes) shall be submitted for arbitration upon demand of

either party in St. Louis County, Missouri, in accordance with

the rules of FINRA Dispute Resolution or its successor. 

Employee agrees that arbitration shall be the exclusive remedy

and that the results of such arbitration shall be final and

binding upon him. Judgment upon any award rendered by an

arbitration panel may be entered in any state orfederal court of

competent jurisdiction.[11]

Plaintiff alleges that while employed by defendant, he “suffered from medical

impairments related to his heart, including Atrial Fibrillation (‘A-Fib’), which substantially

limits his ability to perform numerous life activities.”12 Plaintiff alleges that he requested

reasonable accommodations,13

but that defendant failed to provide the requested

accommodations;14that defendant “failed to engage in the interactive process to discuss

potential reasonable accommodations[,]”15

that defendant put him on a performance

improvement plan after he requested reasonable accommodations,16thatdefendanttreated

11

Id. at 3. 

12Complaint at 2, ¶ 16, Docket No. 1. 

13

Id. at 2, ¶ 19; 3, ¶ 23 & 4, ¶ 38. 

14

Id. at 2, ¶ 20; 3, ¶ 25 & 4, ¶ 39. 

15

Id. at 3, ¶ 21; see also 3, ¶ 25 & 4, ¶ 39. 

16

Id. at 4, ¶ 40. 

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Case 2:16-cv-00581-HRH Document 18 Filed 08/29/16 Page 4 of 19
him differently than similarly situated non-disabled employees,17

and that defendant

ultimately terminated him because of his disability.18 Based on these allegations, plaintiff

asserts three claims underthe Americans with Disabilities Act: 1) a failure to accommodate

claim, 2) a discrimination claim, and 3) a retaliation claim. 

Defendant now moves to compel plaintiff to arbitrate his claims. 

Discussion

“With limited exceptions, the Federal Arbitration Act (FAA) governs the

enforceability of arbitration agreements in contracts involving interstate commerce.”

Kramer v. Toyota Motor Corp., 705 F.3d 1122, 1126 (9th Cir. 2013). Under the 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. 

“Accordingly, while the Supreme Court has emphasized that the FAA clearly enunciates

a congressional intention to favor arbitration, general contract defenses such as ...

unconscionability, grounded in state contract law, may operate to invalidate arbitration

agreements[.]” Kam-Ko Bio-Pharm Trading Co. Ltd-Australasia v. Mayne Pharma (USA)

Inc., 560 F.3d 935, 940 (9th Cir. 2009) (internal citations omitted). “In determining whether

an arbitration clause is unenforceable, a federal court sitting in diversity must apply the

17

Id. at 6, ¶ 52. 

18

Id. at 5, ¶ 42. 

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Case 2:16-cv-00581-HRH Document 18 Filed 08/29/16 Page 5 of 19
relevant state law.” Id. “If the court finds that an arbitration clause is valid and

enforceable, the court should stay or dismiss the action to allow the arbitration to proceed.” 

Id.

“‘A motion to compel arbitration is decided according to the standard used by

district courts in resolving summary judgment motions pursuant to Rule 56, Fed. R. Civ.

P.’” Longnecker v. American Exp. Co., 23 F. Supp. 3d 1099, 1105 (D. Ariz. 2014) (quoting

Coup v. Scottsdale Plaza Resort, LLC, 823 F. Supp. 2d 931, 939 (D. Ariz. 2011)). “Where, as

here, a party attempts to litigate claims covered by a commercial contract containing an

arbitration agreement subject to the FAA, the court must determine ‘(1) whether a valid

agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the

dispute at issue.’” Lowden v. T-Mobile USA, Inc., 512 F.3d 1213, 1217 (9th Cir. 2008)

(quoting Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000)). 

Here, there is no dispute that the two arbitration agreements cover plaintiff’s ADA claims. 

Rather, the dispute focuses on whether the arbitration agreements are valid and

enforceable.

Plaintiff argues that the arbitration agreements are unenforceable because they are

unconscionable. See A.R.S. § 47-2302(A) (“If the court as a matter of law finds the contract

or any clause of the contract to have been unconscionable at the time it was made the court

may refuse to enforce the contract”). “Because [p]laintiff [is an] Arizona resident[], w[as]

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Case 2:16-cv-00581-HRH Document 18 Filed 08/29/16 Page 6 of 19
employed in Arizona, and the parties do not dispute that Arizona law applies,[19

] Arizona

law determines whether the subject arbitration agreement[s are] valid” and enforceable. 

Coup 823 F. Supp. 2d at 941.

“Arizona courts have held that unconscionability can be either procedural or

substantive.” Batory v. Sears, Roebuck and Co., 456 F. Supp. 2d 1137, 1139 (D. Ariz. 2006). 

“Either doctrine can provide an independent defense to enforceability.” Duenas v. Life

Care Centers of Amer., Inc., 336 P.3d 763, 768 (Ariz. Ct. App. 2014). A plaintiff has “‘a high

bar to meet in demonstrating that an arbitration agreement is unconscionable.’”

Longnecker, 23 F. Supp. 3d at 1108 (quoting Coup, 823 F. Supp. 2d at 947). 

“‘Procedural unconscionability addresses the fairness of the bargaining process,

which is concerned with unfair surprise, fine print clauses, mistakes or ignorance of

important facts or other things that mean bargaining did not proceed as it should.’” 

Duenas, 336 P.3d at 768 (quoting Clark v. Renaissance West, L.L.C., 307 P.3d 77, 79 (Ariz.

Ct. App. 2013)). Plaintiff argues that the arbitration agreements are procedurally

unconscionable because they were provided to him on a “take-it-or-leave” basis. Plaintiff

avers that he “did not negotiate the terms” of the arbitration agreements and that agreeing

19The Continuation Letter provides that Missouri law governs that agreement, but

defendant contends, and plaintiff does not dispute, that there is no difference between the

relevant Missouri and Arizona law. 

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to the terms of the agreements “was a condition of [his] employment with Stifel.”20 Plaintiff

cites to two California cases in support of his argument.21

In Chavarria v. Ralphs Grocery

Co., 733 F.3d 916, 923 (9th Cir. 2013), the court found an arbitration agreement procedurally

unconscionable under California law, in part, because it had been offered on a “take-it-orleave” basis, such that “Chavarria could only agree to be bound by the policy or seek work

elsewhere.” Similarly, inFerguson v. Countrywide Credit Industries, Inc., 298 F.3d 778, 784

(9th Cir. 2002), the court found an arbitration agreement unconscionable under California

law, inpart, because “the arbitration agreement was imposed as a condition of employment

and was non-negotiable.”

Plaintiff is basically arguing that the arbitration agreements were contracts of

adhesion, but “‘[t]here is [no] Arizona law supporting the assertion that a finding of

adhesion equates to a finding of procedural unconscionability.’” Longnecker, 23 F. Supp.

3d at 1109 (quoting R & L Ltd. Investments, Inc. v. Cabot Inv. Properties, LLC, 729 F. Supp.

2d 1110, 1115 (D. Ariz. 2010)). Under Arizona law, “[c]ontracts of adhesion are not per se

unenforceable.” Id. “A contract of adhesion is only unenforceable if it does not fall within

the reasonable expectations of the weaker party and if the contract is unconscionable.” Id. 

20Declaration of Kenton V. McCarthy at 1, ¶¶ 10-11, Exhibit 1, Plaintiff’s Response

to Defendant’s Motion to Compel Arbitration, Docket No. 13. 

21Plaintiff cites to California law throughout his opposition because he contends that

A.R.S. § 47-2302 is identical to California Civil Code § 1670.5. 

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Because “[p]laintiff advances no reasonable expectations arguments, the [substantive]

unconscionability analysis below would ... be the dispositive inquiry.” Jones v. General

Motors Corp., 640 F. Supp. 2d 1124, 1130 (D. Ariz. 2009). 

But if the court were to do a reasonable expectations analysis, the court would

conclude thatthe arbitration agreements fall within the reasonable expectations of plaintiff. 

In a reasonable expectations analysis “in the employment context, a court must ... consider

whether the employer had ‘reason to believe that [plaintiff] would not have accepted the

agreement if [he] had known that the agreement contained the particular [arbitration]

term.’” Coup, 823 F. Supp. 2d at 945 (quoting Harrington v. Pulte Home Corp., 119 P.3d

1044, 1050 (Az. Ct. App. 2005)).

A reason to believe:

may be (1) shown “by the prior negotiations,” (2) “inferred

from the circumstances,” (3) “inferred from the fact that the

term is bizarre or oppressive,” (4) proved because the term

“eviscerates the non-standardterms explicitly agreed to,” or(5)

provided if the term “eliminates the dominant purpose of the

transaction.”

Id. (quoting Harrington, 119 P.3d at 1050). “Additionally, the doctrine of reasonable

expectations ‘(6) requires drafting of provisions which can be understood ifthe [employee]

does attempt to check on his rights’ and consideration of ‘(7) any other facts relevant to the

issue of what [the party] reasonably expected in this contract.’” Id. (quoting Harrington,

119 P.3d at 1051). 

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First of all, plaintiff surely knew that the Continuation Letter and the promissory

note contained arbitration clauses. This is not a case of an unwary consumer signing a

standard agreement in which an arbitration clause is buried somewhere in pages and pages

of fine print. Rather, in this case, plaintiff, who had been employed in the financial services

industry for nearly a decade, was signing documents that provided him with a substantial

benefit, in the form of $87,500 in loan forgiveness and $87,500 in stock options. The

documents in question were relatively short (the Continuation Letter was 2 pages and the

promissory note was 4 pages) and the arbitration clause in each agreement was prominently displayed. In light of these facts, it would not be reasonable to inferthat plaintiff did

not know that the agreements contained arbitration clauses. 

But even if plaintiff did not know that the agreements contained arbitration clauses,

there is no evidence to support a conclusion that defendant had reason to believe that

plaintiff would not have signed the Continuation Letter and the promissory note if he had

known about the arbitration clauses. There is no evidence of any prior negotiations

between plaintiff and defendant, the arbitration terms are not bizarre or oppressive, the

arbitration clauses did not eviscerate any non-standard terms, and the arbitration clauses

did not eliminate the dominant purpose of the transaction, which was to provide plaintiff

with $87,500 in loan forgiveness and $87,500 in stock units for becoming a Stifel employee. 

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Thus, even if the arbitration agreements were contracts of adhesion, they are not

procedurally unconscionable.

But even if the arbitration agreements are not procedurally unconscionable, which

they are not, plaintiff argues that they still cannot be enforced because they are substantively unconscionable. “Substantive unconscionability addresses ‘the actual terms of the

contract and ... the relative fairness of the obligations assumed.’” Duenas, 336 P.3d at 769

(quoting Maxwell v. Fidelity Financial Srvcs., Inc., 907 P.2d 51, 58 (Ariz. 1995)). “Relevant

factors include whether the contract terms are so one-sided as to oppress or unfairly

surprise an innocent party, whether there is an overall imbalance in the obligations and

rights imposed, and whether there is a significant cost-price disparity.” Id.

Plaintifffirst argues that the arbitration agreements are substantivelyunconscionable

because they do not allow for adequate discovery. Plaintiff relies on authority from

California in support of this argument. California courts have held that an arbitration

agreement is substantively unconscionable if it does not allow for adequate discovery,

particularly in cases involving statutory claims. For example, in Fitz v. NCR Corp., 118 Cal.

App. 4th 702, 709 (Cal. Ct. App. 2004), the plaintiff asserted a Fair Employment and

Housing Act age discrimination claim along with common law claims. The arbitration

agreement in question “limit[ed] discovery to the sworn deposition statements of two

individuals and any expert witnesses expected to testify at the arbitration hearing.” Id. at

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716. “No other discovery [was] allowed unless the arbitrator f[ound] a compelling need to

allow it. The [agreement] require[d] the arbitrator to limit discovery as specified in the

agreement unless the parties c[ould] demonstrate that a fair hearing would be impossible

without additional discovery.” Id. The court held that these limitations “fail[ed] to ensure

that Fitz is entitled to discovery sufficient to adequately arbitrate her claims.” Id. at 719. 

Arizona courts, however, have rejected the argument that arbitration agreements

that limit discovery are substantively unconscionable. For example, in Wernett v. Service

Phoenix, LLC, Case No. CIV 09–168–TUC–CKJ, 2009 WL 1955612, at *6 (D. Ariz. July 6,

2009), the plaintiff argued that “the failure of the [Arbitration] Agreement to incorporate

the relevant rules of civil procedure, the Agreement’s limitation of depositions, and the

Agreement’s requirement of subpoenas to obtain documents and depose a representative

of Service exhibits the unconscionability of the Agreement.” The court rejected this

argument based on Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 31 (1991), in which

the Court found that 

“there ha[d] been no showing ... that the ... discovery provisions, which allow for document production, information

requests, depositions, and subpoenas, will prove insufficient to

allow [plaintiff] ... a fair opportunity to present [her] claims.

Although those procedures might not be as extensive as in the

federal courts, by agreeing to arbitrate, a party trades the

procedures and opportunity for review of the courtroom for

the simplicity, informality, and expedition of arbitration.”

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Case 2:16-cv-00581-HRH Document 18 Filed 08/29/16 Page 12 of 19
Id. (quoting Gilmer, 500 U.S. at 31). Similarly, the Wernett court found that “[a]lthough

discovery is limited pursuant to the terms of the Agreement, it is not precluded. Indeed,

although the parties are limited in the number of depositions, they are not limited in the

number of interviews they are permitted. This provision is cost-saving to all parties and

the [c]ourt finds this term is not unconscionable.” Id. at *7. 

Here too, plaintiff has failed to make a showing that the discovery permitted under

the FINRA rules would be inadequate. As for depositions, FINRA Rule 13510 provides that

“[d]epositions are strongly discouraged in arbitration. Upon motion of a party, the panel

may permit depositions, but only under very limited circumstances[.]”22 Plaintiff argues

that this limitation on depositions is even more restrictive than that in Fitz, where the

plaintiff was allowed to take two fact witness depositions as well as depositions of experts. 

But here, underthe FINRA rules, plaintiff can only take depositions if the arbitration panel

allows him to do so, which plaintiff suggests is unlikely. 

However, one of the limited circumstances listed in FINRA Rule 13510 is “in cases

involving claims of statutory employment discrimination, if necessary and consistent with

the expedited nature of arbitration[.]”23 This indicates that it is much more likely that

plaintiff would be permitted to take depositions, if he so requested, than he contends.

22A copy of FINRA Rule 13510 is attached as Exhibit 2 to Plaintiff’s Response to

Defendant’s Motion to Compel Arbitration, Docket No. 13. 

23

Id.

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Plaintiff also argues that the written discovery provided for under the FINRA rules

is inadequate. FINRA Rule 13506 provides: 

Parties may request documents or information from any party

by serving a written request directly on the party. Requests for

information are generally limited to identification of individuals, entities, and time periods related to the dispute; such

requests should be reasonable in number and not require

narrative answers orfact finding. Standard interrogatories are

generally not permitted in arbitration.[24]

Plaintiff contends that this limited ability to obtain written discovery will not allow him to

adequately litigate his claims. Plaintiff avers that he does not know which individuals were

involvedor whomade the final decision to 1) not provide him with reasonable accommodations, 2) not engage in the interactive process, 3) take away many of his long-time, revenue

producing clients, 4) take him off potential matters in which he had had substantial

communications with prospective clients, 5) deny his request to lead sales efforts in the

college and university market, 6) pull him off several large California accounts, 7) put him

on a performance improvement plan, 8) terminate his employment, and 9) state on an

internal form that he was discharged for failure to meet performance expectations.25

Plaintiff suggests that he will not be able to obtain this information underthe FINRA rules. 

24A copy of FINRA Rule 13506 is attached as Exhibit 3 to Plaintiff’s Response to

Defendant’s Motion to Compel Arbitration, Docket No. 13. 

25McCarthy Declaration at 1-2, ¶¶ 12-19 & 21, Exhibit 1, Plaintiff’s Response to

Defendant’s Motion to Compel Arbitration, Docket No. 13. 

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Case 2:16-cv-00581-HRH Document 18 Filed 08/29/16 Page 14 of 19
Plaintiff has averred that he does not know the identity of the persons involved in

certain decisions. FINRA Rule 13506 plainly states that requests forinformation can ask for

the identity of individuals. There is no reason why, underthe FINRA rules, plaintiff could

not get the information he avers he needs.

Plaintiff also avers that he has reason to believe that there were 23 other employees

who had performance metrics lower than his but that these employees were not

terminated.26 Plaintiff argues that because of the limited scope of discovery allowed under

FINRA Rule 13506, he will not be able to obtain the information that he needs to show that

these employees were similarly situated and that he was treated differently from them. 

But, FINRA Rule 13506 allows plaintiff to request documents that “relate to the

matter in controversy.”27 There is no reason why, under the FINRA rules, plaintiff could

not obtain documents and information about the 23 other employees.

Plaintiff also avers that he “complied with all of Stifel’s policies and procedures

regarding refraining from storing corporate documentation/information on anything other

than corporate hardware and refraining from taking corporatedocumentation/information

out of [his] office.”28 Plaintiff thus argues that he has even less documentation/information

26

Id. at 2, ¶ 20. 

27Exhibit 3, Plaintiff’s Response to Defendant’s Motion to Compel, Docket No. 13.

28McCarthy Declaration at 3, ¶ 25, Exhibit 1, Plaintiff’s Response to Defendant’s

(continued...)

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Case 2:16-cv-00581-HRH Document 18 Filed 08/29/16 Page 15 of 19
in his possession than a typical former employee and the limitations on discovery will

prevent him from adequately pursuing his claims. But, as discussed above, under FINRA

Rule 13506, plaintiff can obtain documents and other information related to the matters in

controversy. The fact that he has complied with defendant’s policies and procedures

regarding corporate documents and information does not mean that he will lack sufficient

opportunity to present his claims during arbitration. Plaintiff also makes reference to the

Initial DiscoveryProtocols for employment cases alleging adverse actions that courts in this

district use.29 The Protocols call for the early production of discovery in employment

discrimination cases. The discovery that must be produced under the Protocols is “[t]he

information and documents identified as those most likely to be requested automatically

by experienced counsel” in adverse employment actions.30 These documents and

information differfrom “initial disclosures pursuant to F.R.C.P. 26(a)(2) because they focus

on the type of information most likely to be used in narrowing issues for employment

discrimination cases.”31 The Protocols require the defendant to produce, among other

28

(...continued)

Motion to Compel, Docket No. 13. 

29A copy of the Standing Orderfor Certain Employment Cases is attached as Exhibit

4 to Plaintiff’s Response to Defendant’s Motion to Compel Arbitration, Docket No. 13. 

30

Id. at 4. 

31

Id.

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Case 2:16-cv-00581-HRH Document 18 Filed 08/29/16 Page 16 of 19
things, documents containing communications concerning the factual allegations of the

plaintiff’s complaint, documents concerning the formation and termination of the

employment relationship, and documents relied on to make the employment decisions at

issue.32 The defendant must also identify the persons involved in any of the adverse

employment actions and any other persons believed to have “knowledge of the facts

concerning the claims or defenses at issue” and provide “a brief description of that

knowledge.”33 Plaintiff argues that he will not have access to any of this information if he

has to arbitrate his claims. 

The FINRA rules allow plaintiff to obtain all the documents and information that he

would receive under the Initial Discovery Protocols. The discovery that plaintiff may take

under the FINRA rules is adequate. Plaintiff will not be deprived of a fair opportunity to

present his claims during arbitration. 

Second, plaintiff argues that the arbitration agreements are substantively

unconscionable because they require him to incur costs that he would not incur if he

litigates his claims in court. Plaintiff cites to Armendariz v. Foundation Health Psychcare

Services, Inc., 6 P.3d 669 (Cal. 2000), in support of this argument. There, the court 

conclude[d] that when an employer imposes mandatory

arbitration as a condition of employment, the arbitration

32

Id. at 6-8. 

33

Id. at 8. 

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Case 2:16-cv-00581-HRH Document 18 Filed 08/29/16 Page 17 of 19
agreement or arbitration process cannot generally require the

employee to bear any type of expense that the employee would

not be required to bearif he or she were free to bring the action

in court.

Id. at 687. 

Under FINRA Rule 13802(d)(2), plaintiff may be assessed any of the following: 1)

costs for recording a prehearing conference, 2) subpoena costs, 3) reasonable costs of

appearances of witnesses and production of documents without subpoenas, 4) costs

associated with an “explained decision”, 5) fees imposed forrequesting a postponement of

a hearing, and 6) costs of obtaining a transcription and/or stenographic record of a

hearing.34 Plaintiff argues that with the exception of the costs associated with taking a

deposition, the foregoing costs and fees are not costs that he would have to bear if he

litigates this matter in court. 

UnderArizona law, “‘[a]n arbitration agreement may be substantively unconscionable if the fees and costs to arbitrate are so excessive as to ‘deny a potential litigant the

opportunity to vindicate his or her rights.’” Duenas, 336 P.2d at 769 (quoting Clark, 307

P.3d at 79). “To show this type of unconscionability, the party challenging the arbitration

agreement must present specific, non-speculative evidence regarding several factors.” Id. 

“First, the party must present reasonably certain evidence regarding the probable costs of

34Copies of the relevant FINRA Rules are attached as Exhibits 5-11 to Plaintiff’s

Response to Defendant’s Motion to Compel Arbitration, Docket No. 13. 

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Case 2:16-cv-00581-HRH Document 18 Filed 08/29/16 Page 18 of 19
arbitration; second, []he must present individualized evidence regarding h[is] inability to

pay those costs.” Id. at 769-70. “The court also must consider whether the arbitration

agreement or relevant arbitration rules allow for waiver or reduction of costs based on

financial hardship.” Id. at 770. 

All plaintiff has presented here is speculation. He has submitted no specific facts to

establish actual costs or his inability to pay such costs. Moreover, some of the fees that

plaintiff contends he may incur in arbitration are also fees that he might incurif he were to

litigate his claims in court. Besides deposition costs, plaintiff may also have to pay

subpoena costs and transcription costs. Because plaintiff has not shown that the costs of

arbitrating his claims are excessive, this is not a ground for finding the arbitration clauses

substantively unconscionable. 

Conclusion

Because the arbitration agreements are not procedurally or substantively

unconscionable, defendant’s motion to compel arbitration35is granted. The clerk of court

shall enter judgment dismissing plaintiff’s complaint without prejudice. 

DATED at Anchorage, Alaska, this 29th day of August, 2016. 

/s/ H. Russel Holland 

United States District Judge

35Docket No. 12. 

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