Penn v. Ryan's Family Steakhouses, Inc.

• Decision Date: 03 May 2000
• Docket Number: No. 1:99-CV-0530.,1:99-CV-0530.
• Citation: 95 F.Supp.2d 940
• Parties: Craig PENN, Plaintiff, v. RYAN'S FAMILY STEAKHOUSES, INC. Defendant.
• Court: U.S. District Court — Northern District of Indiana

Page 940

95 F.Supp.2d 940

Craig PENN, Plaintiff, v. RYAN'S FAMILY STEAKHOUSES, INC. Defendant.

No. 1:99-CV-0530.

United States District Court, N.D. Indiana, Fort Wayne Division.

May 3, 2000.

Christopher C. Myers, Lori W. Jansen, Christopher Myers and Associates, Fort Wayne, IN, for Craig Penn, Plaintiff.

Michael T. Graham, Jackson Lewis Schnitzler and Krupman, Chicago, IL, Stephen F. Fisher, Jackson Lewis Schnitzler & Krupman, Greenville, SC, for Ryan's Family Steak House Inc, Defendant.

ORDER

WILLIAM C. LEE, Chief Judge.

Currently before the court is the defendant's, Ryan's Family Steakhouses, Inc. (hereinafter "Ryan's") Motion to Dismiss and Petition to Compel Arbitration and Stay Proceedings, filed on January 21, 2000. Mr. Penn filed his Response on March 3, 2000, and Ryan's Reply was filed on March 13, 2000. Mr. Penn's Sur Reply then followed on March 21, 2000. For the following reasons, the court will DENY the defendant's Motion to Dismiss and Petition to Compel Arbitration and Stay Proceedings.

FACTS¹ AND PROCEDURAL HISTORY

Plaintiff, Mr. Craig Penn, applied for a job at Ryan's in Fort Wayne, Indiana, on June 4, 1996. The application included a "Job Applicant Agreement to Arbitration Of Employment-Related Disputes" (hereinafter "Agreement"). The Agreement, between the applicant and Employment Dispute Services, Inc. (hereinafter "EDS"), explained that:

Your potential Employer ("signatory company" or "Company") has entered into an agreement with Employment Dispute Services, Inc. ("EDS") to arbitrate and resolve any and all employment-related disputes between the Company's employees (and job applicants) and the Company.

. . . . .

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

Agreement, at introductory paragraph & B(1). In signing the Agreement, the applicant forfeited any appeal: "The decision of an EDS arbitration panel is final and binding on all parties. There is no appeal by any party on the merits of the dispute either to State or Federal court." Id. at B(2)(B).

The cover page of the application packet given to Mr. Penn on June 4th explained that

[i]n 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 EDS Rules and Procedures will terminate the application process. A Copy of the EDS 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.

Application to Employment, Notice to All Applicants, exhibit A to Affidavit of James Randolph Hart² ("Hart Affidavit").

Mr. Penn signed the Agreement, and was eventually hired by Ryan's in July of 1996 as a server. There was no employment contract entered into between Ryan's and Mr. Penn. Mr. Penn filed a charge with the EEOC on December 17, 1998, alleging discrimination and retaliation under the Americans with Disabilities Act of 1990 ("ADA"), 42 U.S.C. § 12111 et seq. The details of Mr. Penn's claims are unnecessary to the court's analysis at this juncture. Mr. Penn received a Notice-of-Right-to-Sue Letter on September 30, 1999, and then filed his complaint with this court on December 29, 1999.

APPLICATION OF THE LAW

The crux of the problem in this case is the enforceability of an arbitration agreement requiring an individual employee to use arbitration as a condition of employment in the place of judicial resolution of his statutory claims arising under the ADA.³ In support of arbitration, Congress passed the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq. "It's purpose was to reverse the longstanding judicial hostility to arbitration agreements that had existed at English common law and has been adopted by American courts, and to place arbitration agreements upon the same footing as other contracts." Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24, 111 S.Ct. 1647, 1647, 114 L.Ed.2d 26 (1991). The FAA manifests "a liberal federal policy favoring arbitration agreements." Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). When a valid agreement to arbitrate exists between the parties and covers the matter in dispute, the FAA requires the federal courts to stay any ongoing judicial proceedings, 9 U.S.C. § 3, and to compel arbitration, id. at § 4.

The threshold question for this court is whether ADA claims such as Mr. Penn's are even arbitrable. In Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991), the United States Supreme Court held that in certain circumstances statutory claims could be subject to binding, compulsory arbitration:

[i]t is by now clear that statutory claims may be the subject of an arbitration agreement, enforceable pursuant to the FAA. Indeed, in recent years we have held enforceable arbitration agreements relating to claims arising under the Sherman Act, 15 U.S.C. §§ 1-7; § 10(b) of the Securities Act of 1934, 15 U.S.C. § 78j(b); the civil provisions of the Racketeer Influenced Corrupt Organizations Act (RICO), 18 U.S.C. § 1961 et seq.; and § 12(2) of the Securities Act of 1933, 15 U.S.C. § 77l(2).... In these cases we recognized that "[b]y agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by that statue; it only submits their resolution in an arbitral, rather than judicial, forum."

Id. at 26, 111 S.Ct. at 1652. While Gilmer dealt with the ADEA, several circuits have held that ADA claims are also subject to arbitration. See Bercovitch v. Baldwin School, Inc., 133 F.3d 141, 148-51 (1st Cir.1998) ("In the end, this case is not distinct enough from Gilmer to persuade us that the ADA precludes a waiver of a judicial forum through a voluntary prospective agreement to arbitrate."); Miller v. Public Storage Management, Inc., 121 F.3d 215, 218 (5th Cir.1997) ("Congress did not intend to exclude the ADA from the scope of the FAA"); see also 42 U.S.C. § 12212 (revealing that the text of the ADA itself is arbitration friendly: "Where appropriate and to the extend authorized by law, the use of alternative means of dispute resolution, including ... arbitration, is encouraged to resolve disputes arising under this chapter."). The Seventh Circuit has not expressly stated that ADA claims such as Mr. Penn's are arbitrable. However, in Gibson v. Neighborhood Health Clinics, Inc., the Seventh Circuit impliedly approved of this proposition when it jumped from the threshold question of the arbitrability of ADA claims and reached the controlling issue of whether the arbitration agreement at issue were valid. See Gibson v. Neighborhood Health Clinics, Inc., 121 F.3d 1126, 1130 (7th Cir. 1997) ("The parties agree that an employee and employer may contractually agree to submit federal claims, including Title VII and ADA claims, to arbitration. See Gilmer, 500 U.S. at 35, 111 S.Ct. at 1656.").

With that by way of explanation, this court, too, reaches the remaining (and controlling) issue: whether a binding arbitration agreement exists and compels Mr. Penn to submit his ADA claims to arbitration. The FAA provides that agreements "to settle by arbitration a controversy thereafter arising out of such contract or transaction ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. The Seventh Circuit explained in Gibson v. Neighborhood Health Clinics, Inc. that

[a]n agreement to arbitrate is treated like any other contract. Kresock v. Bankers Trust Co., 21 F.3d 176, 178 (7th Cir.1994). If there is no contract there is to be no forced arbitration. Matthews v. Rollins Hudig Hall Co., 72 F.3d 50, 53 (7th Cir.1995); Farrand v. Lutheran Bhd., 993 F.2d 1253, 1255 (7th Cir.1993) (citing AT & T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986)); Adamovic v. METME Corp., 961 F.2d 652, 654 (7th Cir.1992). In determining whether a valid arbitration agreement arose between the parties, a federal court should look to the state law that ordinarily governs the formation of contracts. 9 U.S.C. § 2; First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943, 115 S.Ct. 1920, 1924, 131 L.Ed.2d 985 (1995). In the present case, because Indiana was the situs of all relevant events in this dispute, we look to the contract law of that state. First Options of Chicago, 514 U.S. at 944, 115 S.Ct. at 1924.

Indiana courts apply ordinary contract principles to arbitration agreements. St. John Sanitary Dist. v. Schererville, 621 N.E.2d 1160, 1162 (Ind.Ct.App. 1993); see also Gateway Coal Co. v. United Mine Workers of America, 414 U.S. 368, 374, 94 S.Ct. 629, 635, 38 L.E.2d 583 (1974); International Union of Oper. Engineers v. Indiana Constr. Co., 910 F.2d 450, 453 (7th Cir.1990). Under Indiana contract law, the party seeking to compel arbitration has the burden of demonstrating the existence of an enforceable arbitration agreement. Wilson Fertilizer & Grain v. ADM Milling Co., 654 N.E.2d 848, 849 (Ind. Ct.App.1995). We also note that where, as here, the contract issue can be determined without resort to extrinsic evidence, the question is for the court and not a jury. Kokomo Veterans, Inc. v. Schick, 439 N.E.2d 639, 643 (Ind.Ct.App. 1982); see also Coplay Cement Co., Inc. v. Willis & Paul Group, 983 F.2d 1435, 1438 (7th Cir.1993) (...