Falls v. 1CI, Inc.

• Decision Date: 19 December 2012
• Docket Number: Sept. Term, 2010.,No. 02747,02747
• Citation: 208 Md.App. 643,57 A.3d 521
• Parties: Anthony FALLS v. 1CI, INC, et al.
• Court: Court of Special Appeals of Maryland

208 Md.App. 643

57 A.3d 521

Anthony FALLS

v.1CI, INC, et al.

No. 02747, Sept. Term, 2010.

Court of Special Appeals of Maryland.

Dec. 19, 2012.

Meredith S. Campbell (Christine P. Hsu, Shulman, Rogers, Gandal, Pordy & Ecker, PA, on the brief) Potomac, MD, for appellant.

Daniel M. Press (Angela L. Hart, Chung & Press, PC, on the brief) McLean, VA, for appellee.

Panel: EYLER, JAMES R.,^*HOTTEN, JAMES P. SALMON (Retired, Specially Assigned), JJ.

JAMES P. SALMON (Retired, Specially Assigned), J.

This case requires us to examine the breadth of an arbitration agreement and to consider whether the agreement to arbitrate was unconscionable.

At the beginning of 2009, Anthony Falls (“Falls”) was an employee of 1CI, Inc., a wholly owned subsidiary of Cape Fox Corporation (“Cape Fox”). At all times when Falls was employed as the CEO of 1CI, he worked out of the 1CI's Gaithersburg, Maryland office. 1CI is a Delaware Corporation. Cape Fox is an Alaskan Native Corporation and serves as a holding company for several subsidiary corporations. The principal office of Cape Fox is located in Saxman, Alaska.¹

On January 1, 2009, Falls signed an employment agreement (the “Agreement”) with 1CI. The Agreement provided that Falls would serve as Chief Executive Officer (“CEO”) of 1CI and would be paid $120,000 annually. In addition, under the Agreement, Falls was entitled to an incentive bonus equal to “40% of the sum total of [1CI's] profits before taxes but after payment of” compensation to Falls. The Agreement provided that “[a]ny dispute, claim, or controversy arising out of or relating to this Agreement shall be settled by arbitration by a single arbitrator.” In the event that the parties could not mutually agree on an arbitrator, an arbitrator would be selected from a list provided by the Seattle Washington office of JAMS (Judicial Arbitration & Mediation Services, Inc.). Also, the parties agreed that the arbitration hearing would take place in Seattle, Washington, that arbitration fees would be divided 50–50 between the parties and, that the law of Alaska would govern the resolution of all disputes. In addition, according to the Agreement, the decision of the arbitrator would be “final, binding, and non appealable.” Lastly, the Agreement provided that if any court of competent jurisdiction were to hold that any provision of the Agreement was “invalid, unenforceable, or void” the remaining provisions would remain “in full force and effect.”

Falls's employment with 1CI was terminated in January 2010. Approximately six months later, Falls filed suit in the Circuit Court for Montgomery County against 1CI and Cape Fox. In his one count complaint, Falls alleged: 1) that the defendants were employers within the meaning of the Maryland Wage Payment and Collection Law as codified in MarylandCode (2008 Repl. Volume), Labor & Employment Article [“LE”], Section 3–501 through 3–509 (hereinafter “ the MWPCL”); 2) that his employers had failed to pay him the 40% bonus he was entitled to under the Agreement; 3) that the defendants had no legitimate reason for not paying him his bonus; and 4) as of December 31, 2009, he was owed a bonus “in excess of $400,000.” Invoking Section 3–507.1 of the MWPCL, Falls asked the court to award him treble damages [i.e. three times the amount of the bonus due] plus attorney's fees and costs.

1CI filed a “motion to dismiss [the Complaint] and/or to compel arbitration,” which Falls opposed. Cape Fox filed a separate motion to dismiss the complaint based on its assertion that the Circuit Court for Montgomery County did not have personal jurisdiction over it. The Circuit Court, after considering Falls's opposition, denied Cape Fox's motion to dismiss insofar as the motion was based on the allegation of no personal jurisdiction. The Court, however, ordered that Falls submit his claims against both 1CI and Cape Fox to arbitration. The judge further ordered that the complaint filed against both defendants be dismissed.²

Falls filed a timely appeal from the trial judges decision to order arbitration.³ He presents four questions for our review:

1. Did the circuit court err in compelling arbitration where Mr. Falls asserted a statutory claim for wages under the Maryland Wage Payment and Collection Law?

[208 Md.App. 648]2. Did the circuit court err in compelling arbitration in Seattle, Washington, a forum with no connection to any of the litigants or any interest in enforcing the

Maryland Wage Payment and Collection Law?

3. Did the circuit court err in compelling arbitration under the factual circumstances presented, where the arbitration agreement would mandate fee-splitting between the employer and the appellee?

4. Did the circuit court err in compelling arbitration under the factual circumstances presented, where the arbitration agreement provides that the decision would not be judicially appealable?

I.Background.

Up until the summer of 2008, Falls was the sole owner and CEO of 1CI. Cape Fox bought 1CI from Falls in August 2008. As part of the purchase agreement, Falls was hired as an employee by Cape Fox to continue to manage and operate 1CI. At the time of the negotiations for the purchase of his company, according to a Declaration later signed by Falls, Cape Fox promised him that he would be entitled to receive incentive compensation, over and above his salary, for acting as 1CI's CEO. Falls began performing work for both the defendants in the fall of 2008.

The Agreement, which was signed in January 2009, was presented to Falls by counsel for Cape Fox and it was Falls's “understanding” that Cape Fox's counsel drafted the agreement. All of Falls's discussions regarding the employment contract were with Cape Fox's counsel. Falls was not represented by an attorney when he negotiated the Agreement.

At the beginning of the Agreement, the following “recital” is found:

A. 1CI is an Alaska Native Corporation—owned Delaware Corporation, owned by Cape Fox Corporation, the ANCSA Village Corporation for the Native Village of Saxman. 1CI is organized under the laws of the State of Delaware, and is a participant in the SBA 8a business development program[.]

According to the Agreement, 1CI was formed as a for profit corporation to provide construction related services “as a commercial and Government contractor.”

Paragraph 10(a) of the Agreement stated:

Governing Law. This Agreement shall be governed by and construed according to the laws of the State of Alaska.

The arbitration clause in the Agreement that the trial judge enforced was set forth in paragraph 10b, which reads as follows:

Arbitration. Any dispute, claim or controversy arising out of or relating to this Agreement shall be settled by arbitration by a single arbitrator. The parties will attempt to agree on a single arbitrator. If they are unable to do so, the arbitration will be referred to the Seattle, Washington office of Judicial Arbitration & Mediation Services, Inc. (JAMS). That office will provide a list and resumes of available arbitrators, numbering one or more than there are parties. Each party may then strike one name, leaving the remaining as the arbitrator. If more than one name remains, the designated arbitrator shall be selected by the JAMS administrator. Each party shall have the right to conduct discovery proceedings in the manner and within the scope provided for in the Federal Rules of Civil Procedure. The arbitrator shall be authorized to issue subpoenas for the purpose of requiring attendance of witnesses at depositions. At least twenty days before the arbitration, the parties shall exchange lists of all witnesses (including experts) and copies of all exhibits they intend to use at the arbitration. The arbitration shall take place in Seattle, Washington. The arbitration shall take place no later than 90 days after the service of the notice of intent to arbitrate, unless extended by mutual agreement. The arbitrator shall have the authority and power to proceed ex parte in the event that either party shall fail, after reasonable notice, to attend the arbitration. The arbitrator may grant any remedy or relief that the arbitrator deems just and equitable and within the scope of this Agreement, except that the arbitrator shall have no authority to grant injunctive relief, orders for specific performance or punitive or exemplary damages. The arbitrator shall determine which is the prevailing party and shall determine and include in the award that party's reasonable attorney fees, costs and expert witness expenses as provided in Section 10c. Each party shall share equally in payment of the costs and fees of the arbitrator. The award rendered by arbitration shall be final, binding and nonappealable. Judgment upon the award may be entered in any court of competent jurisdiction in the United States.

(Emphasis added).

Paragraph 10c of the Agreement provided:

Attorney's fees. In the event any suit or arbitration proceeding is instituted by one party against the other arising out of this Agreement, the prevailing party shall be entitled to recover its reasonable attorney's fees and expenses of litigation or arbitration.

II.Statutory Background.

Falls contends that under the Agreement, he did not consent to arbitration of his right to a bonus under the MWPCL. To decide whether Falls is correct, it is useful to review two statutes and the manner in which those statutes have been interpreted, i.e., the Federal Arbitration Act (“the FAA”), which is set forth at 9 U.S.C., § 1 et. seq., and the Maryland Uniform Arbitration Act (“the MUAA”), found in Maryland Code (1974, 2002 Repl. Volume”) § 3–201 et seq. of the Courts and Judicial Proceedings Article.⁴

In Walther v. Sovereign Bank, 386 Md. 412, 872 A.2d 735 (2005), the Court said:

The FAA applies to nearly all arbitration agreements, and, like all federal law, it preempts inconsistent state law. See Southland Corp. v. Keating, 465 U.S. 1, 16, 104 S.Ct. 852, 861, 79 L.Ed.2d 1 (1984) (United States Supreme...