Khosravi-Babadi v. Hawaiian Telcom, Inc.

• Decision Date: 21 December 2018
• Docket Number: Civ. No. 17-00405 ACK-KJM
• Parties: SAEED KHOSRAVI-BABADI, Plaintiff, v. HAWAIIAN TELCOM, INC., a Hawaii corporation; JOHN DOES 1-10; JANE DOES 1-10; DOE CORPORATIONS 1-10; DOE PARTNERSHIPS 1-10; DOE GOVERNMENTAL ENTITIES 1-10, Defendants.
• Court: U.S. District Court — District of Hawaii

SAEED KHOSRAVI-BABADI, Plaintiff, v. HAWAIIAN TELCOM, INC., a Hawaii corporation;JOHN DOES 1-10; JANE DOES 1-10; DOE CORPORATIONS 1-10;DOE PARTNERSHIPS 1-10; DOE GOVERNMENTAL ENTITIES 1-10, Defendants.

Civ. No. 17-00405 ACK-KJM

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF HAWAII

December 21, 2018

ORDER DENYING DEFENDANT'S MOTION TO COMPEL ARBITRATION

For the reasons set forth below, the Court DENIES Defendant Hawaiian Telcom, Inc.'s Motion to Compel Arbitration, ECF No. 54.

BACKGROUND

Only those facts pertinent to the resolution of the instant Motion are set forth herein.

On August 15, 2017, Plaintiff Saeed Khosravi-Babadi ("Plaintiff") filed a Complaint against Hawaiian Telcom, Inc. ("Defendant"), as well as Hawaiian Telcom Communications, Inc., Vito Nozza, and a number of Doe defendants. ECF No. 1. The Complaint asserted claims arising out of Title VII, 42 U.S.C. § 1981, and Hawai`i state law, stemming from the unlawful discrimination Plaintiff allegedly suffered while he was employed by Defendant. See generally id.

Defendant, Hawaiian Telcom Communications, Inc., and Vito Nozza filed a motion to partially dismiss ("MTPD") on October 16, 2017. ECF No. 10. On January 19, 2018, while the MTPD was pending, the parties stipulated to the dismissal from the action, with prejudice, of Hawaiian Telcom Communications, Inc. and Vito Nozza, as well as of Plaintiff's claim for adverse impact. ECF No. 21. In its January 22, 2018 Order on the MTPD, the Court dismissed Plaintiff's claim for national origin discrimination under 42 U.S.C. § 1981 (insofar as he was asserting one), but otherwise left Plaintiff's § 1981 claim, and his other claims, intact. ECF No. 25 at 16.

Defendant filed its Answer to the Complaint on February 5, 2018, wherein it did not assert the existence of an arbitration agreement between the parties as an affirmative defense. See generally ECF No. 26.

On September 11, 2018, Defendant for the first time produced to Plaintiff an arbitration agreement ("Arbitration Agreement" or "Agreement") signed by Plaintiff on July 30, 2012, wherein Plaintiff agreed, inter alia, that "any legal claim [he] may have arising out of or relating to [his] employment shall be resolved through final and binding arbitration." Second Declaration of Richard M. Rand ("Second Rand Decl."), ECF No.79-1 ¶ 3; Arbitration Agreement, ECF No. 79-3 at 1001¹; Second Rand Decl. ¶ 2; Plaintiff's Deposition Excerpt ("Pl.'s Dep. Excerpt"), ECF No. 79-2 at 991 (Plaintiff verified that the arbitration agreement bore his signature). The Arbitration Agreement was "Exhibit B" to an offer letter ("Offer Letter"), ECF No. 79-3 at 993-95, which also included as "Exhibit A" a "Business Protection Agreement" that provided for, inter alia, the protection of confidential information, ECF No. 79-3 at 996-1000. Plaintiff signed all three documents on July 30, 2012. See ECF No. 79-3 at 995, 1000, 1001; Pl.'s Dep. Excerpt at 990-91 (confirming that the documents bear Plaintiff's signature). In response to Defendant's repeated inquiries as to whether Plaintiff would stipulate to arbitration, Plaintiff asserted that Defendant had waived the right to arbitration. First Declaration of Richard M. Rand ("First Rand Decl."), ECF No. 54-4 ¶¶ 1-3.

On September 20, 2018, Defendant moved for leave to amend its Answer to include, inter alia, its eighth affirmative defense: that "Plaintiff's claims are subject to arbitration." ECF No. 49-7 at 5; see also First Amended Answer, ECF No. 80 at 5. That motion was granted on November 30, 2018, see ECF No.75, and Defendant filed its First Amended Answer on December 7, 2018, ECF No. 80.

Defendant filed the instant Motion to Compel Arbitration ("Motion") on September 27, 2018, ECF No. 54, together with a memorandum in support ("MCA"), ECF No. 54-1. Plaintiff filed his Opposition to the Motion on November 29, 2018. ECF No. 73. Defendant filed its Reply on December 6, 2018. ECF No. 79. The Court held a hearing on Defendant's Motion on Thursday, December 20, 2018.

STANDARD

As provided in the Federal Arbitration Act ("FAA"), written arbitration agreements "evidencing a transaction involving commerce . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or equity for the revocation of any contract." 9 U.S.C. § 2. "The FAA embodies a clear federal policy in favor of arbitration." Simula, Inc. v. Autoliv, Inc., 175 F.3d 716, 719 (9th Cir. 1999). "[A]ny doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability." Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983). "The standard for demonstrating arbitrability is not high," and arbitrationagreements "are to be rigorously enforced." Simula, Inc., 175 F.3d at 719. "Employment contracts, except for those covering workers engaged in transportation, are covered by the FAA." E.E.O.C. v. Waffle House, Inc., 534 U.S. 279, 289 (2002) (citation omitted).

"Federal substantive law governs the question of arbitrability." Simula, Inc., 175 F.3d at 719. Under the FAA, a district court considering a motion to compel arbitration must consider "(1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue." Lee v. Intelius Inc., 737 F.3d 1254, 1261 (9th Cir. 2013) (citation and internal quotation marks omitted).

To determine whether the parties have agreed to arbitration, a district court must apply "ordinary state-law principles that govern the formation of contracts." Norcia v. Samsung Telecomms. Am., 845 F.3d 1279, 1283 (9th Cir. 2017) (quoting First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1995)). Under Hawai`i law,² a valid arbitration agreement: (1) must be in writing; (2) must be unambiguous as to the intent to submit disputes or controversies to arbitration; and (3) requires bilateral consideration. Gabriel v. Island Pac. Acad.,Inc., 140 Haw. 325, 334, 400 P.3d 526, 535 (2017) (citing Douglass v. Pflueger Haw., Inc., 110 Haw. 520, 531, 135 P.3d 129, 140 (2006)). "The party seeking to compel arbitration carries the initial burden of establishing that an arbitration agreement exists between the parties." Siopes v. Kaiser Found. Health Plan, Inc., 130 Haw. 437, 446, 312 P.3d 869, 878 (2013) (citation omitted). "If this initial burden is met, the burden then shifts to the opposing party to present evidence on its defenses to the arbitration agreement." Id. (citation and internal quotation marks omitted); see also S. Glazer's Wine and Spirits, LLC v. Denyer, Civ. No. 17-00407 JMS-RLP, 2017 WL 6417810, at *3 (D. Haw. Dec. 15, 2017).

"For purposes of deciding a motion to compel arbitration, the Court may properly consider documents outside the pleadings." Xinhua Holdings Ltd. v. Elec. Recyclers Int'l, Inc., No. 1:13-CV-1409 AWI SKO, 2013 WL 6844270, at *5 (E.D. Cal. Dec. 26, 2013) (collecting cases), aff'd sub nom. Clean Tech Partners, LLC v. Elec. Recyclers Int'l, Inc., 627 F. App'x 621 (9th Cir. 2015).

DISCUSSION

I. Whether a Valid Arbitration Agreement Exists

Defendant, as the party seeking to compel arbitration, bears the burden of establishing the existence of a valid arbitration agreement. See Siopes, 130 Haw. at 446, 312 P.3d at878; see also Gabriel, 140 Haw. at 334, 400 P.3d at 535 ("In order to be valid and enforceable, an arbitration agreement must have the following three elements: (1) it must be in writing; (2) it must be unambiguous as to the intent to submit disputes or controversies to arbitration; and (3) there must be bilateral consideration." (citation and internal quotation marks omitted)). Here, Defendant has not carried its burden.

a. The Arbitration Agreement Is in Writing

As Defendant points out, "[t]he fact that there is a written agreement to arbitrate cannot reasonably be disputed." MCA at 11; see also Arbitration Agreement, ECF No. 54-3 at 282. And Plaintiff does not dispute this point. See generally Opp. This element is thus established.

b. The Arbitration Agreement Is Ambiguous as to the Intent to Submit Disputes or Controversies to Arbitration, and There Was No Bilateral Consideration

The Arbitration Agreement, which Plaintiff signed on July 30, 2012,³ provides, in relevant part: "In consideration formy employment with Hawaiian Telcom, Inc. or its subsidiary or affiliate, I agree that any legal claim that I may have arising out of or relating to my employment shall be resolved through final and binding arbitration." Arbitration Agreement at 1001. Defendant argues that the Arbitration Agreement unambiguously shows "the parties' intent to arbitrate all disputes arising out of Plaintiff's employment" with Defendant. MCA at 12; see also Reply at 11-15. Defendant also contends that the Agreement is supported by bilateral consideration, both because Plaintiff received the benefit of employment with Defendant, MCA at 13, and because Defendant was bound to the arbitration process as a party to the Agreement, Reply at 8-11. Plaintiff, on the other hand, alleges that the Arbitration Agreement "is unenforceable for lack of bilateral consideration," Opp. at 10, because the Business Protection Agreement provided that any claim that arose thereunder would be filed in "a court of competent jurisdiction in Honolulu, Hawaii," Business Protection Agreement at 999, which is evidence of a lack of mutuality of obligation, Opp. at 13. In so arguing, Plaintiff also asserts that, when the Offer Letter, the Business Protection Agreement, and the Arbitration Agreement are read together, the result is a "document with inconsistent and ambiguous terms that render [the Arbitration Agreement] unenforceable." Opp. at 11; see also id. at 12-13.

i. There is Ambiguity as to the Intent to Submit Disputes or Controversies to Arbitration

"A contract is ambiguous when the terms of the contract...