Adler v. Fred Lind Manor

• Decision Date: 23 December 2004
• Docket Number: No. 74701-6.,74701-6.
• Court: Washington Supreme Court
• Parties: Gerard ADLER, Petitioner, v. FRED LIND MANOR, a corporation Mark Mullen, an individual and Jane Doe Mullen, and the marital community composed thereof, Respondents.

103 P.3d 773

153 Wn.2d 331

153 Wash.2d 331

Gerard ADLER, Petitioner, v. FRED LIND MANOR, a corporation Mark Mullen, an individual and Jane Doe Mullen, and the marital community composed thereof, Respondents.

No. 74701-6.

Supreme Court of Washington, En Banc.

Argued June 8, 2004.

Decided December 23, 2004.

As Corrected January 7, 2005.

Reba Weiss, Law Office of Reba Weiss, Marianne Meeker, Blair & Meeker LLP, Seattle, for Petitioner.

Jeffrey Paul Downer, Alan Michael Singer, Lee Smart Cook Martin & Patterson PS, Seattle, for Respondents.

Gregory Mann Miller, Seattle, Robin S. Conrad, Stephanie A. Martz, Nat'l Chamber Litigation Center, Charles Cooper, David H. Thompson, Elisebeth C. Cook, Cooper & Kirk, PLLC, Washington DC, for Amicus Curiae Chamber of Commerce of the United States.

Rex Darrell Berry, Berry & Block LLP, Sacramento, for Amicus Curiae Circuit City Stores Inc.

Stewart Andrew Estes, Keating Bucklin & McCormack, Michael Barr King, Ralph Crockett Pond, Sarah Elyse Haushild, Lane Powell Spears Lubersky LLP, Seattle, for Amicus Curiae Washington Defense Trial Lawyers.

Jeffrey Lowell Needle, Jesse Andrew Wing, MacDonald Hoague & Bayless, Seattle, for Amicus Curiae Washington Employment Lawyers Association.

Debra Leigh Williams Stephens, Bryan Patrick Harnetiaux, Spokane, for Amicus Curiae Washington State Trial Lawyers Association Foundation.

BRIDGE, J.

Like its companion case, Zuver v. Airtouch Communications, Inc., No. 74156-5, ___ Wash.2d ___, 103 P.3d 753, 2004 WL 3016484 (Wash. Dec. 23, 2004), this case requires us to consider the enforceability of a predispute employment arbitration agreement in the context of employment discrimination litigation. Here, after employee Gerald Adler sued his employer Fred Lind Manor, the trial court granted Fred Lind Manor's motion to compel arbitration under the arbitration agreement. Adler asserts that the arbitration agreement is unenforceable because it violates his right to a jury trial, because the Washington Law Against Discrimination (WLAD), chapter 49.60 RCW, entitles him to a judicial forum, and because the arbitration agreement is both procedurally and substantively unconscionable. He also claims that Fred Lind Manor waived its right to arbitration and/or should be equitably estopped from demanding arbitration. We agree with Adler that the agreement's attorney fees and 180- day limitations provisions unreasonably favor Fred Lind Manor and are thus substantively unconscionable. We further conclude that factual disputes preclude resolution of Adler's claims of procedural unconscionability, the substantive conscionability of the fee-splitting provision, and whether his right to a jury trial was violated. We therefore remand these claims to the trial court for further proceedings consistent with this opinion.

I STATEMENT OF FACTS

Gerald Adler immigrated to the United States from Poland in 1990. On June 4, 1992, Fred Lind Manor, a business that provides housing and services to senior citizens, hired Adler for a maintenance personnel position. Two months later, Fred Lind Manor promoted Adler to maintenance and housekeeper supervisor.

In 1995, Paradigm Senior Living assumed management of Fred Lind Manor and required all current employees to sign an arbitration agreement as a condition of their continued employment. The arbitration agreement provided:

Arbitration Agreement

I hereby agree that any dispute related to my employment relationship shall be resolved exclusively through binding arbitration in Seattle, Washington under the American Arbitration Association's Commercial Arbitration Rules, except as other wise [sic] provided here.

I agree to the following terms of arbitration as part of this agreement to arbitration. The aggrieved party must deliver to the other party a written notice of his/her/its intention to seek arbitration no later than 180 days after the event that first gives rise to the dispute. Otherwise his/her/its rights shall be irrevocably waived. The dispute shall be decided by one arbitrator selected by mutual agreement of the parties, or absent agreement, in accordance with the Rules. The arbitrator's fee and other expenses of the arbitration process shall be shared equally. The parties shall bear their own respective costs and attorneys fees. Washington law, to the extent permitted, shall govern all substantive aspects of the dispute and all procedural issues not covered by the Rules.

Clerk's Papers (CP) at 22. Adler signed the agreement as did general manager, Christine Serold.

Adler received another promotion to maintenance and housekeeper director in May 1998. Then on January 16, 2001, general manager Mark Mullen ordered him to move a commercial dryer, and while moving the dryer, Adler hurt his hip and back. On January 17, 2001, Adler visited his doctor who diagnosed him with hip osteoarthritis and advised him to perform "light duty." Id. at 5. On that same day, Adler filed his first claim with the Department of Labor and Industries (DLI).¹ He sustained additional injuries on June 1, 2001, and January 14, 2002, and filed claims with DLI for these injuries.² On June 11, 2002, Mullen fired Adler for "`inability to operate all aspects of [the] maintenance department.'" CP at 6. Fred Lind Manor replaced Adler with a younger employee.

On October 2, 2002, Adler filed a complaint with the Equal Employment Opportunity Commission (EEOC) alleging that Fred Lind Manor and Mullen violated the Americans with Disabilities Act, 42 U.S.C. § 12101, the Age Discrimination in Employment Act of 1967, 29 U.S.C. § 623, and Title VII of the Civil Rights Act of 1964 (Title VII), as amended, 42 U.S.C. § 2000e. In December 2002, Fred Lind Manor responded asserting that it had discharged Adler because of poor attendance, failure to meet productivity standards, Adler's sexual harassment of another employee, unauthorized use of Fred Lind Manor's facilities, and failure to respect residents' rights. Fred Lind Manor did not mention the existence of the arbitration agreement.

On January 9, 2003, the parties attended EEOC mediation. Neither party made reference to the arbitration agreement. Approximately four months after mediation, the EEOC dismissed Adler's complaint stating that "the EEOC is unable to conclude that the information obtained establishes violations of the statutes." Fred Lind Manor's Answer to Mot. for Discretionary Review, Ex. 8.

On May 20, 2003, Adler filed a complaint in superior court alleging that Fred Lind Manor violated the WLAD by discriminating against him for his disability, age, and national origin; discharged him for pursuing worker's benefits in violation of Title 51 RCW; committed the tort of wrongful discharge in violation of public policy; committed the tort of intentional infliction of emotional distress; and created a hostile work environment. Fred Lind Manor filed its answer on August 1, 2003, claiming for the first time that Adler must submit his claims to arbitration. Fourteen days later, Fred Lind Manor moved to compel arbitration and stay proceedings. During a telephone conversation with Adler's attorney, Fred Lind Manor indicated that at arbitration, it planned to seek dismissal of Adler's claims pursuant to the 180-day statute of limitations provision of the arbitration agreement.

In response to Fred Lind Manor's motion to compel arbitration, Adler claimed he did not understand that the 1995 agreement required him to arbitrate his future claims nor was he given a copy of the agreement.³ He requested that the court declare the agreement void as unconscionable or alternatively, find that Fred Lind Manor had waived arbitration. Without holding a hearing, the trial court granted Fred Lind Manor's motion to compel arbitration and stay proceedings.

Pursuant to RAP 2.3(b)(2), Adler filed a motion for discretionary review to this court asserting that (1) the trial court's order granting Fred Lind Manor's motion to compel arbitration violated his right to a jury trial under article I, section 21 of the state constitution; (2) the WLAD mandates a judicial forum; (3) the arbitration agreement is both procedurally and substantively unconscionable and/or its provisions violate public policy; (4) Fred Lind Manor waived its right to arbitration by failing to raise it as a defense in a timely manner; and (5) Fred Lind Manor should be equitably estopped from compelling arbitration. He also requested attorney fees and costs under RAP 18.1(a), RAP 14.2, and RCW 49.60.030(2). We granted review.

II ANALYSIS

The Federal Arbitration Act (FAA), 9 U.S.C. §§ 1-16, applies to all employment contracts except for employment contracts of certain transportation workers. Circuit City Stores, Inc., v. Adams, 532 U.S. 105, 119, 121 S.Ct. 1302, 149 L.Ed.2d 234 (2001). Section 2 of the FAA provides that written arbitration agreements "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2 (emphasis added.) The United States Supreme Court has stated that "[s]ection 2 is a congressional declaration of a liberal federal policy favoring arbitration agreements, notwithstanding any state substantive or procedural policies to the contrary."⁴ Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983) (citing Prima Paint Corp. v. Flood & Conklin Mfg. Corp., 388 U.S. 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967)). "The effect of the section is to create a body of federal substantive law of arbitrability applicable to any arbitration agreement within the coverage of the Act." Id. Both state and federal courts must enforce this body of substantive arbitrability law. Perry v. Thomas, 482 U.S. 483, 489, 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987) (citing Southland Corp. v. Keating, 465 U.S. 1, 11-12, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984)); see also Garmo v. Dean, Witter, Reynolds, Inc., 101 Wash.2d 585, 590, 681 P.2d 253 (...