Kelly v. Uhc Management Co., Inc., CV 96-B-1047-S.

Citation967 F.Supp. 1240
Decision Date09 May 1997
Docket NumberNo. CV 96-B-1047-S.,CV 96-B-1047-S.
PartiesRonald KELLY, et al., Plaintiffs, v. UHC MANAGEMENT COMPANY, INC., et al., Defendants.
CourtUnited States District Courts. 11th Circuit. United States District Court of Northern District of Alabama
967 F.Supp. 1240
Ronald KELLY, et al., Plaintiffs,
UHC MANAGEMENT COMPANY, INC., et al., Defendants.
No. CV 96-B-1047-S.
United States District Court, N.D. Alabama, Southern Division.
May 9, 1997.
As Amended May 12, 1997.

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Robert F. Childs, Jr., Byron R. Perkins, Alan Howard Garber, Gordon Silberman Wiggins & Childs, Birmingham, AL, for Ronald Kelly, Angelena R. Bell, Sharon B. Blue, Cecelia Bryant, Pamela L. Felder, Tomeka Felder, Bridget R. Hines, Tunja G. Sanders, Brenda Smith, Brenda Spencer, Ronn Summerville, Minnie Trusser, Darryl Tucker and Samuel Wyatt.

Edward S. Allen, Marcel L. Debruge, Balch & Bingham, Birmingham, AL, for Complete Health Inc. and United HealthCare.

Byron R. Perkins, Gordon Silberman Wiggins & Childs, Birmingham, AL, for Ronald Kelly, Roderick Jones and Lloyd Balfour.

Edward S. Allen, Marcel L. Debruge, Douglas B. Kauffman, Balch & Bingham, Birmingham, AL, for UHC Management Co. Inc.


BLACKBURN, District Judge.

Currently before the court is defendants' Motion to Stay Further Proceedings Pursuant to the Federal Arbitration Act. Plaintiffs, African-American men and women, filed the present action as a putative class action, alleging race discrimination in compensation, advancement opportunities and the terms and conditions of employment and alleging discriminatory breach of the defendants' affirmative action plan. Defendants seek a stay in accordance with the Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 1-15 (1994), as to eleven of the named plaintiffs who defendants contend have signed arbitration agreements obligating them to arbitrate all employment disputes, including claims under Title VII and 42 U.S.C. § 1981. Plaintiffs contend that they are not bound to arbitrate these disputes. As bases for this contention, plaintiffs argue that the FAA is not applicable to the employment contracts in

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issue here, that a prior EEOC charge which included class allegations forecloses sending these plaintiffs to arbitration, and that the agreements to arbitrate were not made in a knowing and voluntary manner, were induced by fraud, are contracts of adhesion, and lack mutuality of obligation. Upon careful consideration of the record, the submissions of the parties, the argument of counsel, and the relevant law, the court is of the opinion that the Motion to Stay is due to be granted.


Plaintiffs are African-American men and women who bring the present action under Title VII of the Civil Rights Act of 1964, as amended, and 42 U.S.C. § 1981 alleging that they have been discriminated against by defendants on the basis of their race. (3d Am. Compl. ¶¶ 21, 25-30, 31-34). Defendants have moved the court to stay the present action with regard to certain of the named plaintiffs who defendants argue have signed valid and enforceable agreements to arbitrate disputes such as the present action.

Angelena Bell, Sharon Blue, Pamela Felder, Bridget Hines, Tunja Sanders, Brenda Smith, Brenda Spencer, Ronn Summerville, Minnie Trusser, Darryl Tucker and Samuel Wyatt (collectively, the "arbitration plaintiffs") are all named plaintiffs in the present action. Each of these plaintiffs has signed a "Code of Conduct and Employee Handbook Acknowledgement" form of United HealthCare Corporation (UHC). (See Ex. B to Defs.' Motion to Stay). The forms signed by these plaintiffs are all the same. They are two page documents and begin with this statement:

I acknowledge that I have received a copy of the United HealthCare Corporation (UHC) Code of Conduct and the Employee Handbook. I understand that these documents contain important information on UHC's general personnel policies and on my obligations as an employee. I will remain familiar with, and agree to abide by these policies.

(Id.) Under the heading "Employee Handbook" and the subheading "At-Will Employment," the forms state:

I understand that the provisions in this Handbook are guidelines and, except for the provisions of the Employment Arbitration Policy, do not establish a contract or any particular terms or condition of employment between myself and UHC. None of the policies constitute or are intended to constitute a promise of employment. I further understand that UHC may periodically, at its discretion, change, rescind, or add to any policies, benefits or practices with or without prior notice.

(Id. (emphasis added)). Finally, under the subheading "Specific Acknowledgements" and at the top of the second page (at the bottom of which the employees signed), is a paragraph about UHC's "Internal Dispute Resolution/Employment Arbitration Policy." That paragraph states:

These policies provide the opportunity for prompt and objective review of employment concerns. I understand that arbitration is the final, exclusive and required forum for the resolution of all employment related disputes which are based on a legal claim. I agree to submit all employment related disputes based on a legal claim to arbitration under UHC's policy.

(Emphasis added).

UHC's Employee Handbook is a multipage document that contains specifics on the various policies of the company. Section A-5 of that handbook explains in greater detail the company's dispute resolution and arbitration policy. Under the heading "Scope of Policy," the handbook states, in part:

Arbitration is the final, exclusive and required forum for the resolution of all employment related disputes which are based on a legal claim. If an employment related dispute is not resolved through the IDR [Internal Dispute Resolution] process and the matter is based on a legal claim, any party to the dispute may initiate the arbitration process.

A dispute is based on a legal claim and is subject to this Policy if it arises or involves a claim under any federal, state or local statute, regulation or common law doctrine regarding or relating to employment discrimination, terms and conditions of employment,

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or termination of employment including, but not limited to, the following: Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1866, the Civil Rights Act of 1991, the Age Discrimination in Employment Act.... The Policy covers any dispute subject to arbitration which is brought on or after the applicable effective date, even if the alleged act or omission occurred prior to the applicable effective date.

(Defs.' Ex. A to Motion to Stay ("Employee Handbook") at A5-3). Finally, the Handbook also states: "UHC reserves the right to alter, amend, modify, or revoke the Policy at its sole and absolute discretion at any time with or without notice. The senior executive of Human Resources has the sole authority to alter, amend, modify or revoke the Policy." (Id.)

As part of their opposition to defendants' Motion to Stay, the arbitration plaintiffs challenge the validity of their signing of the acknowledgment forms. Thus, a fairly exhaustive recitation of the facts surrounding the introduction of the arbitration policy and the actual signing of the acknowledgments is necessary.

In October 1995, UHC began paving the way for the implementation of its new arbitration policy in Birmingham, Alabama. Blair Suellentrop, the Chief Executive Officer of United HealthCare South, wrote a letter to all of the employees of UHC in Birmingham, informing them of the upcoming arbitration policy. (Suellentrop Aff. ¶ 3; Ex. A to Suellentrop Aff.). In November 1995, Gerriann Fagan1 sent a memorandum to all employees of UHC in Birmingham. (Fagan Aff. of Feb. 4, 1997 ("Fagan Aff. III"2) ¶ 4). That memorandum explained the effect of the then-soon-to-be-implemented arbitration policy: "In the unusual situation when the use of IDR does not fully resolve your employment concern you and UHC will submit any remaining legal issues to an independent, neutral arbitrator provided by the American Arbitration Association. Arbitration decisions will be binding on both you and UHC." (Ex. B (Tab A) to Defs.' Reply Br. filed Dec. 17, 1996 ("Fagan Memo.")). The IDR Policy and Arbitration Policy Summary were both attached to this memorandum, (Fagan Aff. III ¶ 4), and the memorandum stated:

[T]he IDR policy and a summary of the Arbitration policy are attached for your review. If you would like more information, you may obtain a complete Arbitration policy from me or your Human Resources Representative. If you have further questions about this policy or would like more information, feel free to give us a call.

(Fagan Memo.). Although some of the arbitration plaintiffs state that they do not recall receiving Ms. Fagan's memorandum of November 1995, none of the arbitration plaintiffs specifically denies receiving the memorandum. (See, e.g., Aff. of Angelena Bell of January 16, 1997 ("Bell Aff. I") ¶ 9).3 Finally, on November 9, 1996, all supervisors and managers received training regarding the IDR and arbitration policies. (Fagan Aff. III ¶ 7).

Additionally, in November 1995, UHC began training its employees in the IDR and arbitration policies. (Id. ¶ 5). Ms. Fagan conducted the training for the accounting (including enrollment, billing, accounts payable, client reporting and financial reporting), marketing, and sales administration departments. (Id. ¶ 6). According to Ms. Fagan, at these departmental meetings she told the employees that "as a condition of employment they were expected to resolve employment concerns and/or disputes through the IDR and Arbitration Process." (Id.) Ada

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Pritchett, a Human Resources Representative in the Human Resources Department of United HealthCare in Birmingham conducted the IDR and arbitration policies training for the customer service department on November 21, 1995. (Pritchett Aff. ¶ 3).

In February 1996 UHC began distributing the new employee handbooks and having employees sign the acknowledgment forms. On February 6, 1996, Shannon Moore, who was then the Payroll Processor in the Human Resources...

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