Fitz v. Islands Mech. Contractor, Inc.

Decision Date09 June 2010
Docket NumberCiv. No. 08–cv–00060.
PartiesHumphries FITZ and Pius Jay Hubert, Plaintiffs, v. ISLANDS MECHANICAL CONTRACTOR, INC., Defendant.
CourtU.S. District Court — Virgin Islands


Lee J. Rohn, Law Offices of Rohn & Carpenter, St. Croix, VI, for Plaintiffs.

Andrew C. Simpson, Law Offices of Andrew Simpson, St. Croix, VI, for Defendant.


FINCH, Senior Judge.

THIS MATTER comes before the Court on Defendant Islands Mechanical Contractor Inc.'s Motion to Compel Arbitration and to Stay Proceedings Pending Arbitration (Motion to Compel). By this motion, Defendant seeks to compel Plaintiffs to arbitrate their claims and stay this case in the District Court under the Federal Arbitration Act (“FAA”). Plaintiffs resist arbitration on the grounds that 1) the arbitration agreements are unsigned by the Defendant; 2) Plaintiffs did not knowingly and voluntarily agree to arbitrate their claims; 3) the arbitration agreements are unconscionable; and 4) they were fraudulently induced into signing them. After reviewing the briefs and the documents filed by the parties, the Court finds that Plaintiffs have raised a material issue of fact regarding whether they were fraudulently induced into signing the arbitration agreements. Accordingly, the Court denies Defendant's Motion to Compel and orders that this case proceed to trial on the issue of fraudulent inducement of the arbitration agreements.

I. Background

In their complaint, plaintiffs Humphries Fitz and Pius Jay Hubert (Plaintiffs) allege that, during their brief employment at Defendant Islands Mechanical Contractor Inc., (Defendant), they were subject to discrimination on the basis of their race, color and national origin in violation of Title VII of the Civil Rights Act of 1964, 42 U.S.C. §§ 2000e et seq. and the Virgin Islands Civil Right Act, Titles 10 and 24 of the Virgin Islands Code. ( See Compl., Doc. No. 1.) Specifically, they allege that Defendant treated them disparately on the basis of their race, did not give them the same pay and benefits as white workers, disciplined them more harshly than white workers, discriminatorily cut their pay and then fired them. ( Id. ¶¶ 6–45.) Relying on an arbitration clause contained in Plaintiffs' Employment Agreements, Defendant moves to compel arbitration of all of Plaintiffs' claims.1

As part of Defendant's hiring process, each Plaintiff was given a nearly identical Employment Agreement. ( See Employment Agreements ¶ 3, Doc. Nos. 3–1 (Fitz Agreement) and 3–2 (Hubert Agreement).) Paragraph 3 of the Employment Agreement is entitled “Compensation” and states that:

During the period of employment, the Employer agrees to compensate the Employee for services rendered under this Agreement as follows:

Employee shall initial one of the following:

_______I elect to resolve disputes with Employer by arbitration in accordance with Paragraph 8 of this Agreement, and agree to accept $25.00 per hour as my initial, normal rate of compensation.

_______I elect to resolve disputes with Employer through the Virgin Islands courts in accordance with Paragraph 9 of this Agreement, and agree to accept $23.00 per hour as my initial, normal rate of compensation.2

Note: If you fail to initial either of the above provisions and you sign this agreement, then you will be deemed to have elected to resolve disputes by arbitration as set forth above.

(Employment Agreements ¶ 3) (emphasis in original).

Paragraph 7 of the Employment Agreements is entitled “Arbitration” and states that:

If Employee has so elected in paragraph 3 of this Agreement, the parties agree that any dispute or claim concerning:

a. this agreement,

b. the terms or conditions or employment (including, without limitation, claims relating to benefits; payments; allegations of discrimination, retaliation and/or “whistleblowing”; or termination);

c. any claims for personal injury or property damage in any way related to my employment, or arising out of my presence on or about the premises of the Virgin Islands Water and Power Authority property(ies) in the U.S. Virgin Islands; or

d. whether any dispute is arbitrable;

will be settled by arbitration.

(Employment Agreements ¶ 7.)

Plaintiffs Fitz and Hubert initialed each page of their Employment Agreements and signed the last pages. ( See Employment Agreements 5.) Even though there is a signature block for “Islands Mechanical Contractor, Inc. on the last page of the Agreements, Defendant did not sign either Employment Agreement. ( Id.) Plaintiffs do not contest that they signed these Employment Agreements or that they initialed each page, including the pages containing the arbitration clauses. Indeed, both Plaintiffs acknowledge that they “opted to elect to resolve disputes with the company through arbitration in exchange for the $25 rate I was offered, believing that the company would honor that bargain throughout the duration of my employment.” (Fitz Aff. ¶ 7, Doc. No. 6–5; Hubert Aff. ¶ 10, Doc. No. 6–6.)

Plaintiffs claim that they worked at Islands Mechanical Contractor for a short period of time before they began to experience racial discrimination. (Fitz Aff. ¶¶ 13–21; Hubert Aff. ¶¶ 14–23.) Of particular relevance to this motion, Plaintiffs claim that, shortly after being hired, they were unjustifiably disciplined and asked to take significant pay cuts from their $25 an hour pay rate. (Hubert Aff. ¶¶ 17, 23; Fitz Aff. ¶¶ 16, 18–21.) Hubert avers that, within two weeks of being hired, Defendant demoted him, and cut his pay from $25 an hour to $16 an hour. (Hubert Aff. ¶¶ 23, 25–29.) Fitz claims that, within four to eight weeks after being hired, Defendant requested that he take a $7 an hour pay cut for “safety” reasons.3 When Fitz refused, Defendant fired him. (Fitz.Aff.¶¶ 18–20.) Both Plaintiffs claim that the justifications given by Defendant for their pay cuts were pretextual.4

II. Discussiona. Plaintiffs' Challenges to the Formation of the Arbitration Agreements are Reviewed Under the Summary Judgment Standard

The FAA “provides that a court should not order arbitration unless it is satisfied that the making of the agreement for arbitration ... is not in issue.” Par–Knit Mills, Inc. v. Stockbridge Fabrics Co., Ltd., 636 F.2d 51, 54 (3d Cir.1980) (internal quotations omitted) (citing 9 U.S.C. § 4). Indeed, a court “must find that there is a valid agreement to arbitrate” before it compels arbitration. Century Indem. Co. v. Certain Underwriters at Lloyd's, London, subscribing to Retrocessional Agreement Nos. 950548, 950549, 950646, 584 F.3d 513, 523 (3d Cir.2009); see also Kaplan v. First Options of Chicago, Inc., 19 F.3d 1503, 1512 (3d Cir.1994)aff'd514 U.S. 938, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995) (“There must be evidence sufficient to establish the parties' consent to arbitration .” (citations and internal quotations omitted)). To determine whether the parties have agreed to arbitrate, the Court applies “ordinary state-law principles that govern the formation of contracts.” Kirleis v. Dickie, McCamey & Chilcote, P.C., 560 F.3d 156, 160 (3d Cir.2009) (quoting First Options of Chic., Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995)).

A court may “compel[ ] arbitration only where there is no genuine issue of fact concerning the formation of the agreement to arbitrate.” Id. at 159 (citing Par–Knit Mills, 636 F.2d at 54). In other words, a party moving to compel arbitration is akin to a party seeking summary judgment; it must show that there is no genuine issue of material fact regarding the existence of the arbitration agreement. Id.; see also Century Indem. Co., 584 F.3d at 528 ([T]the district court's order compelling arbitration is in effect a summary disposition of the issue of whether or not there had been a meeting of the minds on the agreement to arbitrate.” (citation omitted)).

Pursuant to the summary judgment standard, [o]nce the moving party points to evidence demonstrating no issue of material fact exists, the non-moving party has the duty to set forth specific facts showing that a genuine issue of material fact exists and that a reasonable factfinder could rule in its favor.” Ridgewood Bd. of Educ. v. N.E. ex rel. M.E., 172 F.3d 238, 252 (3d Cir.1999) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)). “In making this determination, the party opposing arbitration is entitled to the benefit of all reasonable doubts and inferences that may arise.” Kirleis, 560 F.3d at 159. A factual dispute is deemed genuine if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

Here, Plaintiffs contend that the arbitration agreements in question are unenforceable because they lack Defendant's signature, were not knowing and voluntary waivers of Plaintiffs' constitutional rights to a jury trial, are unconscionable, and were fraudulently induced. (Pls.' Opp. at 5, 8, 10, 15, Doc. No. 6.) These are challenges to the formation of the arbitration agreement themselves, not the Employment Agreements in general. See Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 403–404, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967) (“If the claim is fraud in the inducement of the arbitration clause itself-an issue which goes to the ‘making’ of the agreement to arbitrate-the federal court may proceed to adjudicate it.”); Gay v. CreditInform, 511 F.3d 369, 388 (3d Cir.2007) ([G]enerally applicable contract defenses, such as fraud, duress, or unconscionability, may be applied to invalidate arbitration agreements.” (citing Doctor's Associates, Inc. v. Casarotto, 517 U.S. 681, 687, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996))). Accordingly, the Court must apply the summary judgment standard to determine whether there is an agreement to arbitrate. While Defendant carries the...

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