Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_06-cv-01400/USCOURTS-casd-3_06-cv-01400-0/pdf.json

Nature of Suit Code: 790
Nature of Suit: Other Labor Litigation
Cause of Action: 38:2011 - Veteran's Readjustment Assistance Act of 1974

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

CHAD ELSNER, M.D.,

Plaintiff,

CASE NO. 06CV01400 JM(RBB)

ORDER GRANTING MOTION TO

COMPEL ARBITRATION;

STAYING ACTION

vs.

SOUTHERN CALIFORNIA

PERMANENTE MEDICAL GROUP,

Defendant.

Southern California Permanente Medical Group (“Medical Group”) moves to

compel arbitration of all claims alleged in the discrimination complaint filed by Plaintiff

Chad Elsner, M.D. Plaintiff opposes the motion. Pursuant to Local Rule 7.1(d), this

matter is appropriate for decision without oral argument. For the reasons set forth

below, the motion to compel arbitration is granted and the action stayed pending

arbitration.

BACKGROUND

On July 11, 2006 Plaintiff, a licensed medical doctor in California, commenced

the present action alleging that Medical Group violated the Uniform Services

Employment and Re-employment Rights Act (“USERRA”) and California Military and

Veterans Code §3394. Pursuant to the terms of a Partnership Agreement, Plaintiff

became a partner in Medical Group in July 2001. (Compl. ¶8; Motion Exh. A). From

January 22, 2002 through September 30, 2004 Plaintiff was in active duty in the United

Case 3:06-cv-01400-JM-RBB Document 13 Filed 09/20/06 Page 1 of 7
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States military. (Compl. ¶9). He remains in military service as a Commander in the

Naval Reserves.

Plaintiff alleges that upon his return from active duty he was discriminated

against in violation of USERRA and Military and Veterans Code §3394 in the

following ways: he was provided with only two weeks notice of schedule changes

instead of the typical three months advance notice: he did not receive full merit pay

increases; he was subject to “unjustified verbal reprisals and discriminatory treatment;”

and he “received more severe treatment and standards as applied to [his] performance

than to those of other similarly situated who did not serve in the military.” (Compl.

¶12). Plaintiff seeks compensatory damages in the form of lost wages and liquidated

damages pursuant to USERRA.

The Partnership Agreement contains a detailed Dispute Resolution Procedure

(“DRP”) that incorporates an arbitration process to resolve any disputes between the

partners and Medical Group. The DRP applies to “any dispute involving a Physician

and [Medical Group] that would otherwise be cognizable in a court of law, including,

without limitation, any dispute related to a Physician’s relationship with [Medical

Group].” (Motion, Exh.B). The DRP sets forth a multi-level review process whereby

the claimant is given the opportunity to have the complaint reviewed at various levels.

If the claimant is not satisfied after completing Processes I through III, the claimant may

either bring the dispute to a Dispute and Request Committee (Process IV), or proceed

directing to binding arbitration before a single arbitrator in accordance with the rules

of the American Arbitration Association. (Motion, Exh. B). The DRP also identifies

numerous examples of disputes subject to arbitration. The provision specifically notes

that claims of “retaliation [or] discrimination” are subject to the procedures set forth in

the DRP. Id.

Based upon the arbitration provision contained in the DRP, Medical Group

moves to compel arbitration. Plaintiff opposes the motion.

/ / / 

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DISCUSSION

Legal Standards

The Federal Arbitration Act (“FAA”) provides that

a written provision in . . . a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising . . . shall be valid, irrevocable and enforceable, save upon such grounds as exist at law or equity for the revocation of any contract.

9 U.S.C. §2. The FAA establishes federal policy favoring arbitration of disputes.

Federal courts are required to “rigorously” enforce the parties agreement to arbitrate.

Shearson/American Express, Inc. v. McMahon, 482 U.S. 220 (1987). Indeed, “any

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

arbitration, whether the problem at hand is the construction of the contract language or

an allegation of waiver, delay, or a like defense to arbitrability.” Moses H. Cone

Memorial Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24 (1983).

[W]here a contract contains an arbitration clause, there is a presumption of arbitrability in a sense that `[a]n order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. Doubts should be resolved in favor of

coverage.

A.T.&T. Tech. Inc. v. Communications Workers of America, 475 U.S. 643, 650 (1986)

(citations omitted).

The FAA creates “a body of federal substantive law of arbitrability,” enforceable

in both state and federal courts and preempting any state laws or policies to the

contrary. Moses H. Cone, 460 U.S. at 24. “The availability and validity of defenses

against arbitration are therefore to be governed by application of federal standards.”

Cohen v. Wedbush, Noble, Cooke, Inc., 841 F.2d 282, 285 (9th Cir. 1988). This body

of federal law also requires that federal courts apply state law, “whether of legislative

or judicial origin [] if that law arose to govern issues concerning the validity,

revocability and enforceability of contracts generally.” Perry v. Thomas, 482 U.S. 483,

493, fn. 9 (1987). Thus, state law applies to interpret arbitration agreements as long as

those state laws are generally applicable to all contracts, and not just agreements to

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Plaintiff contends that “Defendant has not proved that this dispute involves interstate or

foreign commerce.” (Oppo. at p.7:7-8). The court notes that the burden is on Plaintiff, not Defendant.

See Gilmer, 500 U.S. at 26-27.

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arbitrate. With these general principles in mind, the court turns to the issues raised by

the parties.

Applicability of the Federal Arbitration Act

The DRP demonstrates that the parties agreed to arbitrate the discrimination

claims at issue. The arbitration provision is enforceable unless Plaintiff can

demonstrate that Congress intended to preclude arbitration. See Mitsubishi Motors

Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626-27 (1985). Plaintiff bears

the burden of demonstrating that Congress intended to preclude a waiver of a judicial

forum for USERRA claims. See Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20,

26 (1991); Garret v. Circuit City Stores, Inc., 449 F.3d 672, 674 (5th Cir. 2006). 

Plaintiff raises two main arguments in opposition to the motion to compel

arbitration. First, he contends that the arbitration provision does not apply to the

present case because the contract at issue does not involve commerce as required by 9

U.S.C. § 2. Second, he contends that the claims are not subject to arbitration because

of the exclusive federal jurisdictional provision of USERRA. Neither argument is

persuasive.

The threshold issue under §2 of the FAA court is whether the arbitration

provision contained in the parties agreement, “involving commerce,” is enforceable.

The parties do not seriously dispute that a contract for the provision of medical services

has a sufficient connection with commerce to satisfy the interstate commerce

requirement of the FAA.1

 See Allied Bruce v. Terminix v. Corp., 513 U.S. 265, 272

(1995). Here, there can be no genuine dispute that the provision of medical services in

fact affects interstate commerce (i.e. medications, medical supplies, provisions,

equipment, reporting requirements, insurance, processing of claims, licenses, etc. all

impact and affect interstate commerce). As emphasized by the Supreme Court, the

phrase “involving commerce” is to be construed broadly, coextensive with the phrase

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“affecting commerce” under the Commerce Clause. Id. at 273. Consequently, the

provision of medical services satisfies the “involving commerce” requirement of the

FAA.

Plaintiff also contends that USERRA preempts the FAA because USERRA

“supersedes any state law, contract, agreement, policy, plan, practice, or other matter

that reduces, limits, or eliminates in any manner any right or benefit provided by this

chapter.” 38 U.S.C. §4302(b). Plaintiff acknowledges that there is no Ninth Circuit or

Supreme Court authority supporting his position but nonetheless concludes that

“USERRA supercedes the arbitration agreement signed by the parties, because

USERRA intends to protect those in the uniformed service.” (Oppo. at p.9:15-17).

This argument is not persuasive.

In Garrett, the Fifth Circuit directly addressed the issue of whether §4302(b)

preempted an arbitration provision. The Fifth Circuit noted that the terms “right or

benefit” in §4302(b) only “relate to compensation and working conditions, not to

affording a particular forum for dispute resolution.” 449 F.3d at 681. After reviewing

USERRA’s legislative history and pertinent authorities, the Fifth Circuit concluded that

“arbitration is not inconsistent with effective vindication of [Plaintiff’s] USERRA right

to be free from unlawful discrimination.” Id. at 681. The Fifth Circuit compelled

arbitration of the USERRA claims.

Further, Plaintiff cites no authority in support of the proposition that the mere

existence of an exclusive federal jurisdiction provision invalidates an otherwise valid

agreement to arbitrate. Indeed, courts routinely compel arbitration of actions involving

exclusive federal jurisdiction provisions. For example, claims under the Securities

Exchange Act of 1934, 15 U.S.C. §78aa, which provides for exclusive federal

jurisdiction, are subject to arbitration, see Shearson/American Express, Inc. v.

McMahon, 482 U.S. 220, 227-28 (1987), as are antitrust claims which are similarly

within the federal court’s exclusive jurisdiction. See Mitsubishi Motors Corp. v. Soler

Chrysler-Plymouth, Inc., 473 U.S. 614 (1985). 

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 The parties also dispute whether Plaintiff is or is not an employee for purposes of USERRA.

This issue, as well as any other merits-based argument, must be brought before the arbitrator, and not

this court.

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Finally, the court concludes that FAA’s strong policy favoring arbitration, see

Gilmer, 500 U.S. 20 (holding that federal policy favors arbitration), coupled with the

Supreme Court’s instruction that “any doubts concerning the scope of arbitrable issues

should be resolved in favor of arbitration,” Cone Memorial, 460 U.S. at 24, further tips

the scales in favor of arbitration. In Gilmer, the plaintiff brought an age discrimination

under the Age Discrimination in Employment Act of 1967 (“ADEA”) and argued that

his claims were not subject to compulsory arbitration pursuant to an arbitration

agreement contained in a securities registration application. Gilmer argued, like

Plaintiff does here, that arbitration panels are biased towards employers, discovery is

limited in arbitration, arbitrators do not issue written decisions, and arbitration

procedures cannot adequately further the purposes of the ADEA because they do not

provide for broad equitable relief and class actions. In resoundingly rejecting each of

these arguments, the Supreme Court observed that “[s]uch generalized attacks on

arbitration ‘res[t] on suspicion of arbitration as a method of weakening the protections

afforded in the substantive law to would-be complainants,’ and as such, they are ‘far out

of step with our current strong endorsement of the federal statutes favoring this method

of resolving disputes.” Id. at 30. The denial of the motion to compel arbitration at issue

would severely undermine the pro-arbitration policies of the FAA. As repeatedly

emphasized by the Supreme Court, “the basic purpose of the Federal Arbitration Act

is to overcome courts’ refusals to enforce agreements to arbitrate.” Terminix, 513 U.S.

at 270. Accordingly, the court grants the motion to compel arbitration.2

 

In sum, the court grants the motion to compel arbitration and stays this action

pending arbitration of Plaintiff’s claims. The parties are instructed to file a joint status

report by January 15, 2007, informing the court of the status of the arbitration

/ / /

proceedings, if any. The parties are advised that the failure to timely file the requested

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status report may result in the dismissal of the complaint without prejudice.

IT IS SO ORDERED.

DATED: September 20, 2006

 Hon. Jeffrey T. Miller United States District Judge

cc: All parties 

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