2009 D e c i sion s O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit 1-9-2009 

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w . vi ll anova . e du . Re c omme nde d C it at ion " Luc ey v . F e dEx Gr ound P kg Sys " (2009). 2009 D e cisio n s . P ape r 2061. http://d i git alc ommon s .l a

w . vi ll anova . e du/thir dc ir c uit_2009/20611 NOT P RE CE DE NT I AL UN I TED STATES CO UR T OF A PP EALS F O R T H E T H IR D C IR C U IT N o. 07- 4372 RI CH AR D L UC E Y; F RA NC I S DE NNI S L YNC H; DAVI D M CMAHON; J AM E S HOUGH ; M I CH AEL M CK ENZI E; FRAN K C UC I NO TTI

v. F E DE X GR OUND P AC KAGE S Y S T E M S , IN C ., A ppel l ant O n A p p ea l from the U n it ed S tat es D istri ct C o u rt

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N e w J e r s e y D i s t r i ctC our tN o. 06- cv- 03738 D i s t r i ctJ udge: T he H onor abl e R enee M . B um b Subm i t t ed Pur s uantt o T hi r d C i r cui tL . A . R . 34. 1( a)

D ece m ber12, 2008 B e f o re : M C K E E , S M IT H , a n d R O T H , C i rcui tJud ges ( Fi l ed: J anuary08, 2009) OP I NI ON S M IT H , C i r cui tJudge.FedE x not es t hati tw as i m pr oper l ypl ed as FedE x G r ound Package 1 Sy s t ems, I nc. T h e D is tr ic t C o u rt e x e rc is e d d iv e rs ity ju ri s d ic tio n p u rs u a n t to 2 8 U .S .C . §

2 1 3 3 2 (a). T h is C o u rth as ju ri sd ict ion p u rsua n t t o 9 U . S . C . § 1 6 . W e e x erc ise p lena ry re v ie w o v e r q u e s tio n s re g a rd in g th e e n f o rc e a b ility o f

th e a g re e m e n t to a rb itr a te . Ll oyd v. Ho v e n s a , L L C, 369 F. 3d 263, 273 ( 3d C i r . 2004) . W e r evi ew anyfi ndi ngs of fa ct , on w h ic h th e D is tr ic t C o u rt p re d ic a te d its d e c is io n , p u rs u a n t to a c le a rl ye rr o n e o u s s ta n d a rd . I d. ( quot i ng Me d tr o n ic A V E, In c . v . A dv a n c e d

C a r d io v a s c u la rS

y s ., In c ., 247 F. 3d 44, 5 3

– 5 4 (3d C ir . 2 0 0 1 )). 2 F e d E x G r o u n d P a c k a g e S ys t e m , I n c . ( “ F e d E x ” ) c o n t r a c t e d w i t h R i c h a r d L u c e y, 1 Fr anci s D enni s L ynch, D avi d M cM ahon, M i chae l M cK enzi e, Fr ank C uci not t i , and J ames H ou gh (col l ect i vely , t he “P l ai nti ffs”) t o serve as pack age d el i verydri vers. A n O per at i ng 2 A gr eements i gned byeac h i ndi vi dual dr i verand FedEx gover ned the r el at i ons hi p. T he O p e ra tin g A g re e m e n t c o n ta in e d , in tera lia , a p ro v isio n re q u irin g th e d riv e r-s ig n a to ryto s u b mi ta l l c l a i ms a r i s i n g f r o m t h e t e r mi n a t i o n o f

th e r e l a t i o n s h i p t o a rb i t r a t i o n . Fe d Ex t erm i nat ed the contr act s of ea ch dr i verbetw een 2004–2005. W hi l e thr ee of the Pl ai nt i ffs began a rbi t r at i on pr ocee di ngs , al l s i x Pl ai nt i ffs fi l ed s ui tt o chal l enge the arbi t r at i on p ro v is io n b e f

o re a n a rb itr a to r d e c id e d a n yc la im . A n arbi t r at i on agr eementw i l l be uphel d unl es s ther e i s a l egal orequi t abl e gr ound th a t w o u ld in v a lid a te a c o n tra c t. 9 U .S .C . § 2 ; 4 2 P a . C o n s. S tat. § 7 3 0 3 . T o m a k e th is d e te rm in a tio n , c o u rt s lo o k to s ta te la w . B l ai rv. Scot tSpeci al t y G as es , 283 F. 3d 595, 603 ( 3d C i r . 2002) . Pl ai nt i ffs her e ar gue thatthe arbi t r at i on pr ovi s i on i n t he O per at i ngT h e D istric t C o u rt c o rre c tlyn o ted th a t “F e d e ra l co u rts s itt in g in d iv e rsity 3 l ook t o t he l aw of the forum s t at e i n m aki ng a choi ce of l aw det erm i nat i on. ” N ew J er s ey law sta tes th a t a c o n tra c tu a l ch o ice o f law p ro v isio n w ill b e u p h e ld u n les s d o in g so w o u ld vi ol at e i t s publ i c pol i cy . I n t hi s cas e, the O per at i ng A gr eementcont ai ned a pr ovi s i on t hat Penns y l vani a l aw governs t he agr eement . B eca us e ther e i s no evi dence orar gum entt hat t he appl i cat i on of Penns y l vani a l aw w oul d offe nd the publ i c pol i cyof N ew J er s ey , the D is tr ic t C o u rt a p p ro p ri a te ly ap p lie d P e n n s y lv a n ia la w . 3 A g re e m e n t is u n c o n sc io n a b le. U n d e r P e n n sy lv a n ia la w , a n a rb itratio n p ro v isio n is 3 unenfor cea bl e on the gr ounds of uncons ci onabi l i t yi f tw o el ement s ar e met : ( 1) “the contr actual t erm s ar e unr eas onabl yfavor abl e t o t he dr aft er , ” and ( 2) “ther e i s no m eani ngful choi ce on the partof the otherpart yr egar di ng acc ept ance of the pr ovi s i ons . ” W or ldw i de U

nder w r i t ers I

ns . C o. v. B r ady , 973 F. 2d 192, 196 ( 3d C i r . 1992) ( ci t i ng Koval v. Li ber t y Mut . I ns . C o. , 53 1 A . 2d 48 7, 49 1 (Pa. Sup er. C t . 19 87 )) . T he fir st el ementi s r efe r r ed t o as s ubs t ant i ve uncons ci onabi l i t y , w hi l e the s econd i s know n as pr ocedur al uncons ci onabi l i t y . T he D i s t r i ctC our tfound thatboth el ement s w er e met , and h e ld th a t th e a rb itr a tio n a g re e m e n t w a s u n c o n s c io n a b le a s a re s u lt. T he D i s t r i ctC our tfound thatthe Pl ai nt i ffs l acke d a meani ngful choi ce t o ent er i nt o t he arbi t r at i on pr ovi s i on of the O per at i ng A gr eement . I tnot ed thatFedE x pr es ent ed t he O per at i ng A gr eementt o t he Pl ai nt i ffs s hor t l ybefor e theybegan thei rj obs , atw hi ch poi nteac h dr i verhad l eas ed a de l i verytruck and w as fi nanci al l ycomm i t t ed t o t he pos i t i on, and thatPl ai nt i ffs di d nothave a n oppor tuni t yt o r ead, r evi ew , ornegot i at e the t erm s of the agr eement . W hi l e FedEx does notcont es tthatthe Pl ai nt i ffs w er e pr es ent ed w i t h t he O per at i ng A gr eementonl yaft ereac h dr i verl eas ed a de l i verytruck, i tar gues t hat t he Pl ai nt i ffs di d nott ake “ r eas onabl e s t eps t o obt ai n a copyof the arbi t r at i on agr eement4

orr eas onabl yavai l [] t hemsel ves of the oppor tuni t yt o i nqui r e and l earn aboutthe p ro v is io n s o f

th e a rb itr a tio n a g re e m e n t” p ri o r t o u n d e rt a k in g th is f in a n c ia l c o m m itm e n t. I tar gues t hatt hi s C our t ’ s deci s i on i n Zi m m erv. C ooper nef f A dvis ors , I

nc. , 523 F. 3d 224 (3d C ir . 2 0 0 8 ), pr ohi bi t s par t i es fr om s i t t i ng on t hei rhands pr i ort o t he ena ctm entof an agr eementand i ns t ead r equi r es t hatt heyact i vel ys eek t o obt ai n and negot i at e the a g re e m e n t. T h is a rg u m e n t is u n a v a ilin g . T hi s C our t ’ s deci s i on i n Zi m m erw a s p re m is e d o n its f a c tu a l b a c k g ro u n d . Zi m m er conce r ned an e m pl oym entcontr actbetw een St even Zi m m er , a H arvar d- educa t ed e c o n o m is t, a n d a tr a d in g a n d in v e s tm e n t f ir m . I d. at225. Z i m m erar gued thathe di d not m ake a m eani ngful choi ce t o ent eri nt o t he agr eementbeca us e the agr eementw as p re s e n te d to h im o n ly af te r h e b e g a n w o rk in g f

o r t h e f ir m . Id . at 22 6

– 2 7 . T h is C o u rt re jec ted th is a rg u m e n t, no tin g th a t Z im m e r h a d sig n if ica n t b a rg a in in g p o w e r, n o t o n ly b e c a u s e h e w a s h ig h ly ed u c a te d , b u t a ls o b e c a u s e h e h a d n u m e ro u s jo b o p p o rt u n itie s . I d. a t 2 2 9 . O u r d e c isio n w a s a lso p re m ise d o n th e f a c t th a t Z im m e r w a s a w a re th a t h is empl oym entw as cont i ngenton t he negot i at i on of an e m pl oym entagr eementand that e ith e r p a rt yc o u ld te rm in a te th o s e n e g o tia tio n s . I d. W e sp e c if

ica llyd istin g u ish e d th is cas e fr om one i n w hi ch a pa r t yw i t h a l i m i t ed educ at i onal backgr ound, narr ow opt i ons for em p loym en t, an d li tt le ba rga ining p o w er is pre sen ted w ith an ag ree m en t on a tak e-it -orle a v e it b a s is . I

d. O n t he fa ct s of the pr es entcas e, w her e FedEx dra ft ed the arbi t r at i on p rov isi o n an d p rese n ted it t o P lai n ti ff s w ith li tt le t o n o b arg ainin g p o w er o n a tak e-it -orl eave i tbas i s , w e ca nnotequat e an opportuni t yt o r evi ew the agr eementw i t h a meani ngful5

c h o ic e to a c c e p t its te rm s . B eca us e FedEx concede s t hati thas notpl ace d s ubs t ant i ve uncons ci onabi l i t yat i s s ue i n i t s appea l , t hi s ar gum enti s deemed w ai ved. A ccor di ngl y , beca us e w e do notfi nd e rro r in th e D istric t C o u rt’s c o n c lu sio n th a t th e a g re e m e n t is p ro c e d u ra llyu n c o n sc io n a b le and ther e i s no ar gum entas t o s ubs t ant i ve uncons ci onabl i t y , w e w i l l aff i r m the D i s t r i ct C o u rt ’s c o n c lu s io n th a t b o th e le m e n ts o f u n c o n s c io n a b ility a re m e t. FedE x al s o ar gues t hatt he D i s t r i ctC our terr ed bynotconfi r m i ng an arbi t r at i on a w a rd a g a in st M c M a h o n . M c M a h o n su b m itt e d h is c laim to a rb itratio n in 2 0 0 5 . In A p ril 2006, M cM ahon and FedEx par t i ci pat ed i n an arbi t r at i on pr el i m i narys t atus hear i ng, at w hi ch poi ntt heyagr eed t o an arbi t r at i on hear i ng i n J ul y2006. I n M ay2006, M cM ahon s oughta s t ayi n t he arbi t r at i on pr ocee di ng, not i fy i ng the arbi t r at orthathe w as s eeki ng a ju d icia l d e ter m in a tio n re g a rd in g th e v a lid ityo f th e a g re e m e n t. F e d E x o p p o se d th is r eques t , and the arbi t r at ordeni ed the s t ayi n l i ghtof the part i es ’ fai l ur e t o agr ee. T he arbi t r at orpr ocee ded ac cor di ng t o t he s chedul e appr oved dur i ng the pr el i m i narys t atus hear i ng. FedE x s ubs equent l yfi l ed a mot i on t o di s m i s s M cM ahon’ s arbi t r at i on cl ai m on t he gr ound t hati tw as unt i m el y , and M cM ahon di d notr es pond. O n J une 6, 2006, the Pl ai nt i ffs , i ncl udi ng M cM ahon, fi l ed the pr es entfede r al act i on ar gui ng thatthe arbi t r at i on p rov isi o n w as u n co n scio n ab le. T h ree d ay s lat er, th e a rbitrator d ism issed M cM ah o n ’s claim . F ed E x arg u es th at M cM ah o n ’s fa il u re to f il e a m o ti o n to v ac ate the arb itrator’s d e c is io n re s u lts in th e w a iv e r o f h is u n c o n s c io n a b ility c la im . T h is a rg u m e n t m u s t f a il.6

In c a se s c h a llen g in g w h e th e r a n iss u e is s u b jec t to a rb itratio n , w e h a v e h e ld th a t a “part y[w ho] vol unt ar i l ys ubm i t s an i s s ue t o arbi t r at i on w i t houtchal l engi ng the a rb itr a b ility o f

th a t is s u e ” m a yb e d e e m e d to h a v e w a iv e d ju d ic ia l r e v ie w . P a. P ow erC o. v. L oca l27 2, Int ’l

B hd . of Elec. W

orkers , 886 F. 2d 46, 50 ( 3d C i r . 1989) . I n t hi s cas e, how ever , M cM ahon cl ear l yr ai s ed hi s obj ect i on t o arbi t r at i on and the val i di t y— and thus arbi t r abi l i t y— of the agr eement . A ccor di ngl y , “w her e a pa r t yobj ect s t o arbi t r abi l i t ybut nevert hel es s vol unt ar i l ypar t i ci pat es i n t he arbi t r at i on pr ocee di ngs , w ai verof the chal l enge t o arbi t r al j ur i s di ct i on w i l l notbe i nferr ed. ” Kapl an v. F i rs tO pt i ons of C hi cago, I

nc. , 1 9 F . 3 d 1 5 0 3 , 1 5 1 0 (3d C ir . 1 9 9 4 ). F inally , F ed E x arg u es th at th e D istri ct C o u rterred b yn o t dism issi n g M cK en zie’s claim . In M arc h 2 0 0 7 , P lai n ti ff s’ att o rne y s n o ti fied the D istri ct C o u rto f M cK en zie’s death. Pl ai nt i ffs have notfi l ed a mot i on fors ubs t i tut i on, and FedEx ar gues that M c K e n z ie ’s c la im m u s t b e d is m is s e d a s a re s u lt. T he Feder al R ul es of C i vi l Pr ocedur e s t at e that“[i ] f a mot i on [forthe s ubs t i tut i on of a de cea s ed part y ] i s notm ade w i thi n 90 day s aft ers ervi ce of a s t at ementnot i ng the d e a th , th e a c tio n b yo r a g a in s t th e d e c e d e n t m u s t b e d is m is s e d .” F e d . R . C iv . P . 2 5 (a )( 1 ). T ho ug h F edE x d i d n ot r ai se this i ssue i n it s m oti on s t o the D i stri ctC ou rt , i tfi l ed those m ot i ons dur i ng t he pende ncyof the 90- dayper i od fors ubs t i tut i on. B eca us e the Pl ai nt i ffs not i fi ed the D i s t r i ctC our ton M ar ch 13, 2007 of M cK enzi e’ s death and ther e has notbeen a mot i on fors ubs t i tut i on as r equi r ed byR ul e 25( a) , w e w i l l r ever s e the por t i on of the D is tr ic t C o u rt ’s o rd e r a s it r e la te s to M c K e n z ie ’s c la im .7

F o r th e re a so n s d isc u ss e d a b o v e , w e w ill a f f irm th e D istric t C o u rt’s ju d g m e n t w ith r egar d t o t he uncons ci onabi l i t yof the arbi t r at i on pr ocee di ng and M cM ahon’ s cl ai m , but we wi l l r e v e r s e i t s d e c i s i o n a s i ta p p l i e s t o M c Ke n z i e ’ s c l a i m.