Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_12-cv-03072/USCOURTS-casd-3_12-cv-03072-0/pdf.json

Nature of Suit Code: 442
Nature of Suit: Civil Rights Employment
Cause of Action: 28:1331 Fed. Question

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

KELTON WILLIAMS,

Plaintiff,

CASE NO. 12-CV-3072- IEG (BLM)

ORDER:

1. GRANTING MOTION TO

COMPEL ARBITRATION; AND

2. STAYING ALL CLAIMS

PENDING ARBITRATION.

[Doc. No. 26]

vs.

AMERICAN SPECIALTY HEALTH

GROUP, INC., et al.

Defendants.

Before the Court is Defendants’ motion to compel arbitration and dismiss or stay pending

arbitration. [Doc. No. 26.] For the reasons and to the extent below, the motion is GRANTED and

Plaintiff Kelton Williams’s claims in this action against American Specialty are hereby STAYED

pending arbitration.

BACKGROUND

Plaintiff, proceeding pro se, filed this employment action against his former employer

American Specialty Health Group, Inc. (“American Specialty”) and three individual American

Specialty employees, alleging discrimination and retaliation in violation of Plaintiff’s civil rights. 

[Doc. No. 1.] Plaintiff signed an arbitration agreement on his first day of employment with

American Specialty, which agreement states:

All disputes of any nature concerning the employment of [Williams by American

Specialty] . . . including all claims for wages or compensation, all termination claims,

alleged claims of discrimination or harassment, or other employment-related disputes shall

be settled by final, binding arbitration before a single neutral arbitrator.

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[See Doc. No. 19, Ex. A at 1 §C(2) (the “Agreement”).]1 By the present motion, Defendants seek

to enforce the agreement, compel arbitration thereunder, and request that the Court dismiss or stay

Plaintiff’s claims pending arbitration. Plaintiff disputes neither the existence of the arbitration

agreement nor that it encompasses his claims in this action, but argues that the arbitration

agreement is invalid as unconscionable.

DISCUSSION

“The Federal Arbitration Act (“FAA” or the “Act”) declares written provisions for

arbitration ‘valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity

for the revocation of any contract.’” Doctor’s Associates, Inc. v. Casarotto, 517 U.S. 681, 683

(1996) (quoting 9 U.S.C. § 2). “By its terms, the Act leaves no place for the exercise of discretion

by a district court, but instead mandates that district courts shall direct the parties to proceed to

arbitration on issues as to which an arbitration agreement has been signed.” Dean Witter

Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985) (citing 9 U.S.C. §§ 3, 4).2

 “Because the FAA

mandates that district courts shall direct the parties to proceed to arbitration on issues as to which

an arbitration agreement has been signed, the FAA limits courts’ involvement to determining (1)

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

encompasses the dispute at issue.” Cox v. Ocean View Hotel Corp., 533 F.3d 1114, 1119 (9th Cir.

2008) (emphasis in original). “If the response is affirmative on both counts, then the [FAA]

requires the court to enforce the arbitration agreement in accordance with its terms.” Chiron Corp.

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

Here, there is no dispute that a signed, written arbitration agreement exists, which by its

terms encompasses the claims at issue; the only dispute is whether that arbitration agreement is

1 The arbitration agreement expressly covers all persons “affiliated” with American

Specialty, [Agreement at §C(2), (3)], and thus applies to the individual defendants even though they

are not signatories. See 24 Hour Fitness, Inc. v. Superior Court, 66 Cal.App.4th 1199, 1210-12 (1998)

(“It is well established that a nonsignatory beneficiary of an arbitration clause is entitled to require

arbitration.”). 

2 “§3 requires courts to stay litigation of arbitral claims pending arbitration of those

claims . . . §4 requires courts to compel arbitration . . . upon the motion of either party to the

agreement.” AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740, 1748 (2011) (internal quotation

omitted).

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invalid as unconscionable. [See Doc. Nos. 19 at 3-4, 26 at 11-14.] “In determining the validity of

an agreement to arbitrate, federal courts should apply ordinary state-law principles that govern the

formation of contracts.” Circuit City Stores, Inc. v. Adams, 279 F.3d 889, 892 (9th Cir. 2002). 

Under applicable California contract law, an arbitration agreement will be invalidated as

unconscionable only “if it is both procedurally and substantively unconscionable.” Id. at 893

(citing Armendariz v. Found. Health Psychcare Servs., Inc., 24 Cal.4th 83, 99 (2000)). 

“[P]rocedural unconscionability [] consider[s] the equilibrium of bargaining power between the

parties and the extent to which the contract clearly discloses its terms.” Id. “[S]ubstantive

unconscionability . . . involves whether the terms of the contract are unduly harsh or oppressive.” 

Id. Courts use a “sliding scale” in analyzing these two elements: “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.” Nagrampa v. MailCoups, Inc.,

469 F.3d 1257, 1280 (9th Cir. 2006) (quoting Armendariz, 24 Cal.4th at 99). No matter how

heavily one side of the scale tips, however, showings of both procedural and substantive

unconscionability are required to hold an arbitration agreement invalid as unconscionable. Id.; see

also Davis v. O’Melveny & Myers, 485 F.3d 1066, 1072 (9th Cir. 2007) (“both must be present in

order for a court to exercise its discretion to refuse to enforce a contract or clause under the

doctrine of unconscionability.”) (internal quotation omitted).

As to procedurally unconscionability, Plaintiff makes two arguments: (1) the arbitration

agreement is a contract of adhesion; and (2) the JAMS arbitration rules applicable under the

agreement were never provided. [Doc. No. 26 at 11-12.] That an arbitration agreement is, or is

included within, a contract of adhesion supports procedural unconscionability. See, e.g.,

Armendariz, 24 Cal.4th at 113; see also Nagrampa, 469 F.3d at 1281; Adams, 279 F.3d 889, 893. 

Likewise, that a party to an arbitration agreement never received the arbitration rules applicable

thereunder supports procedural unconscionability. See Zullo v. Superior Court, 197 Cal. App. 4th

477, 485 (2011) (“The absence of the . . . arbitration rules adds a bit to the procedural

unconscionability.”); Trivedi v. Curexo Technology Corp., 189 Cal. App. 4th 387, 393 (2010)

(holding that failure to attach arbitration rules added to the procedural unconscionability). 

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Defendants concede both the adhesive nature of the arbitration agreement and that Plaintiff never

received the applicable JAMS rules. [Doc. No. 19-1 at 14 (Where, as here, . . . the contract is one

of adhesion . . .”), 13 (“Plaintiff’s . . . failure to obtain the JAMS rules . . . does not render the

agreement unenforceable.”).] Thus, the Court finds the arbitration agreement, at least to some

degree, procedurally unconscionable. 

But to be rendered invalid as unconscionable, the agreement must also be to some degree

substantively unconscionable. Davis, 485 F.3d at 1072. Plaintiff’s arguments as to substantive

unconscionability reduce to concerns that arbitration may prove more costly that proceeding in

court. [Doc. No. at 26 at 12-14.] Though the imposition of costs beyond those required in court

can, under certain circumstances, support substantive unconscionability, see Armendariz, 24

Cal.4th at 110-11, the arbitration agreement here explicitly allocates all such costs to American

Specialty alone. [Agreement at §C(2) (any cost “greater that an action in [Court]” allocated to

American Specialty).] Plaintiff’s concerns thus appear unwarranted and fail to support a finding of

substantive unconscionability. Moreover, many of the agreement’s terms weigh against a finding

of substantive unconscionability. The obligation to arbitrate under the agreement is wholly

bilateral; both parties are bound to settle any dispute via arbitration. [Agreement at §C(2).] And

selection of a neutral arbitrator under the agreement requires participation by both Plaintiff and

American Specialty pursuant to well-known and widely-endorsed JAMS procedure. [Id. at 1.] No

statutory remedies are precluded, and any arbitration award must be written to explain essential

findings, reasoning, and conclusions. [Id.] These terms belie any suggestion of unequal or

oppressive burden, and thus the Court cannot find the agreement substantively unconscionable to

any degree. 

Notwithstanding the apparent procedural unconscionability referenced supra, the absence

of any degree of substantive unconscionability prevents a finding that the arbitration agreement is

invalid as unconscionable. Davis, 485 F.3d at 1072. Thus, as the arbitration agreement is both

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valid and encompasses Plaintiff’s claims, those claims are to be arbitrated per the terms of the

agreement.3

CONCLUSION

For the foregoing reasons, Defendants’ motion to compel arbitration is GRANTED. 

Plaintiff’s claims in this action are hereby STAYED pending arbitration in accordance with the

terms of the arbitration agreement. The parties shall cooperate to initiate the arbitration

proceedings forthwith. Counsel for Defendants shall provide the Court with a letter report

regarding the status of the arbitration on or before August 5, 2013.

IT IS SO ORDERED.

DATED: April 16, 2013 ______________________________

IRMA E. GONZALEZ

United States District Judge

3 Defendants are not entitled to dismissal pending arbitration. See AT&T Mobility, 131

S. Ct. at 1748 (2011) (“§3 [of the FAA] requires courts to stay litigation of arbitral claims pending

arbitration of those claims”); see also Epic Advertising v. Asis Internet Services, 2011 WL 6182180,

at *1 (N.D. Cal. Dec. 13, 2011) (“pursuant to Section 3 of the FAA, the court is required to stay, not

dismiss, the action pending arbitration . . . Defendants are not entitled to dismissal of the instant

action.”).

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