Geiger v. Ryan's Family Steak Houses, Inc.

Decision Date21 March 2001
Docket NumberNo. IP 99-1335-C-B/S.,IP 99-1335-C-B/S.
Citation134 F.Supp.2d 985
PartiesFrederica GEIGER and Deborah Sadler, Plaintiffs, v. RYAN'S FAMILY STEAK HOUSES, INC., Dan Johnson, individually and in his Representative Capacity, and Employment Dispute Services, Inc., Defendants.
CourtU.S. District Court — Southern District of Indiana

Lisa L. Schneider, Lisa L. Schneider and Associates, Fishers, IN, for plaintiffs.

Stephen F. Fisher, Jackson Lewis Schnitzler & Krupman, Greenville, SC, Melvin Hutson, Melvin Hutson PA, Greenville, SC, Byron L. Myers, Indianapolis, IN, for defendants.


BARKER, District Judge.

Plaintiffs, Frederica Geiger ("Geiger") and Deborah Sadler ("Sadler"), allege that the manager of the restaurant where they worked, Defendant, Dan Johnson ("Johnson"), sexually assaulted and battered them. Plaintiffs further allege that their employer, Defendant, Ryan's Family Steak Houses, Inc. ("Ryan's"), created a hostile environment by allowing Johnson's actions to continue, thereby discriminating against them on account of their sex, and retaliated against them for complaining about Johnson's conduct, all in violation of Title VII of the Civil Rights Act of 1964 ("Title VII"), 42 U.S.C. §§ 2000 et seq. In addition to these federal claims, Plaintiffs raise a number of state-law tort claims against both Johnson and Ryan's. Johnson and Ryan's now move for dismissal of this action, pursuant to Federal Rule of Civil Procedure 12(b)(6), or, alternatively, for a stay of these proceedings and an order compelling the Plaintiffs to submit their claims to arbitration, pursuant to the Federal Arbitration Act, 9 U.S.C. §§ 1 et seq.. Johnson and Ryan's contend that as a part of their employment contract the Plaintiffs agreed to arbitrate all employment-related disputes in a forum provided by Defendant, Employment Dispute Services, Inc. ("EDSI"). Plaintiffs respond that the alleged arbitration agreement is not valid and that Ryan's and EDSI committed both actual and constructive fraud in obtaining Plaintiffs' signatures on said agreement. For the reasons explicated below, we DENY Defendants' motion.1

Factual Background

Due to the procedural posture of this case, the only relevant facts relate to the manner in which the Plaintiffs applied for, and were hired for, their employment with Ryan's; we need not recite the factual allegations relating to the treatment of Geiger and Sadler after they began working for Ryan's. Geiger and Sadler allege that they were first employed by Ryan's as servers in October, 1996; Geiger was interviewed and hired by Jeff Theil ("Theil"), a Ryan's General Manager, and Sadler by Johnson, a Ryan's restaurant Manager. Compl. ¶ 17.

Prior to their interviews, both Geiger and Sadler were required to fill out Ryan's standard employment application packets. Id. ¶ 110, 121. The application packets contained an "Agreement to Arbitration Form" ("Arbitration Agreement" or "Agreement"), a Ryan's application for employment, and the "EDSI Rules and Procedures" ("EDSI Rules" or "Rules"). Aff. of James Randolph Hart ("Hart Aff."), Ex. A, Ryan's Application Packet; Compl. Exs. A (Arbitration Agreement signed by Geiger) and B (Arbitration Agreement signed by Sadler). The second page of the application packet contains a conspicuous notice to applicants, stating:


In order for you to be considered for employment at Ryan's Family Steak Houses, Inc., you must agree to the terms and conditions in the attached Job Applicant Agreement to Arbitration of Employment Related Services ("Arbitration Agreement"). Your failure to sign and accept the Arbitration Agreement and its related EDSI Rules and Procedures will terminate the job application process. A copy of the EDSI Rules and Procedures is provided to you with this application package. Should you have any questions regarding the Arbitration Agreement and how it works, please ask the manager conducting your interview.

Hart Aff., Ex. A. The employment application itself is not distinctive, except that it includes at the top the following statement: "THE ENTIRE APPLICATION FORM MUST BE COMPLETED AS WELL AS THE ATTACHED ARBITRATION AGREEMENT PRIOR TO BEING CONSIDERED FOR HIRE!" Hart Aff., Ex. B. The bulk of the parties' dispute at this stage involves the interrelationship of these two documents, so we discuss below their provisions in detail.

A. The Arbitration Agreement

The Arbitration Agreement purports to be a contract between the job applicant and EDSI and must be signed by the applicant. E.g., Compl. Ex. A, Arbitration Agreement. The Agreement informs Ryan's applicants that Ryan's (unnamed, but referred to as "Your potential Employer (`signatory company' or `Company')"):

has entered into an agreement with Employment Dispute Services, Inc. [EDSI] to arbitrate and resolve any and all employment-related disputes between the Company's employees (and job applicants) and the Company. The purpose of this agreement is to provide You and the Company a forum in which claims or disputes with the Company and any other signatories may be resolved by arbitration rather than litigation.

Id. at 1. The specifics of the Arbitration Agreement are as follows:

1. Any employment-related dispute between the Company, Me, and/or other signatories which would otherwise be brought in ... court will be brought ONLY in the [EDSI] arbitration forum and under [EDSI] Rules and Procedures, as modified and amended from time to time. (Other signatories to the same Agreement with [EDSI] may be, for example, supervisors, managers, and agents of the Company.)

2. In consideration of the agreement by EDSI to provide an arbitration forum, Rules and Procedures, and a hearing and decision based on any claim or dispute, I (employee/job applicant) may file or defend, I understand and agree to the following

A. Except as to [state or federal administrative proceedings], any and all disputes I may have with the Company, its supervisors, managers or other agents of the Company, or that the Company its supervisors, managers or other agents may have with Me which would otherwise be decided in court, shall be resolved only through arbitration in the [EDSI] forum and NOT THROUGH LITIGATION IN STATE OR FEDERAL COURT.

B. The decision of an [EDSI] arbitration panel is final and binding on all parties....

C. This agreement is with EDSI, not with the Company....

D. The Company and any successor or assign, its signatory supervisors, managers and other agents, are "third party beneficiaries" of My agreement with [EDSI], and I am a "third party beneficiary" of others' agreements with [EDSI]....

E. I absolutely must use the [EDSI] forum for any and all employment-related disputes and/or claims and/or related tort claims I may have against the Company and all other signatories to this Agreement which would otherwise be brought in court, even if this Agreement has been terminated since the date of the claim....

. . . . .

G. My Agreement shall continue for the period of My employment with the Company unless mutually terminated in writing by EDSI and Me

. . . . .

I. The Agreement is effective immediately. "I understand I have the right to consult with an attorney of my choice."

J. I have read the Agreement carefully and have been given the opportunity to read and consider the full [EDSI] Rules and Procedures. I knowingly and voluntarily agree to be bound by the terms and conditions of the Agreement and [EDSI] Rules and Procedures, as modified and/or amended from time to time.

Id. at 1-2.

B. EDSI Rules and Procedures

The application packet also included a copy of the EDSI Rules, which did not require the job applicant's signature to evidence knowledge or agreement with them. At the time that Geiger and Sadler applied for positions with Ryan's, the Rules stated that "[t]he signing of an [EDSI] Agreement constitutes agreement to comply with the applicable Rules and Procedures of [EDSI] then in effect...." Pls.' Br. in Opp'n to Def.'s [sic] Mot. to Dismiss ("Pls.' Opp'n Br."), Ex. 3a, EDSI Rules, Art. III, sec. 2. These Rules contained the following relevant provisions:

1. Panel of Adjudicators

The Rules called for a panel of three adjudicators to be chosen by the parties from pools of potential arbitrators selected by EDSI alone. EDSI Rules, Art. IX, secs. 1, 2. The first selection pool consisted of "[s]upervisors or managers of an employer signatory to [EDSI] Agreements;" the second pool was composed of "[n]onexempt employees (Non exempt as defined by the federal Wage and Hour Law) who are signatory to [EDSI] agreements;" and the third pool was made up of "[a]ttorneys, retired judges, or other competent professional persons not associated with either party," except that the third member of any panel "shall be a licensed attorney," if the claimed amount in controversy exceeds twenty thousand dollars. Id. Art. IX, secs. 1, 4.

EDSI provided the parties with a list of three names of potential adjudicators chosen from each selection pool. Id., Art. IX, sec. 2. Each party was to strike a potential adjudicator from that list "for cause" by filing a motion with EDSI (and we presume that the name would be replaced so that three members of each pool remained on the list). Id., Art. IX, sec. 3. After all strikes for cause were completed, each party struck one name from each pool (starting with the complainant and alternating thereafter) until only one name remained from each of the three selection pools. Id., Art. IX, sec. 2.

2. General Provisions Governing Depositions, Subpoenas, Production of Documents, etc.

The Rules allowed any party to request the production of documents from any other party. EDSI Rules, Art. XII, sec. 1. However, each party was permitted one deposition as of right, and additional depositions were allowed only upon request of the panel with the forewarning that "such requests are...

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