Wallace v. Red Bull Distrib. Co., Case No. 5:12–CV–02431.

• Decision Date: 23 July 2013
• Docket Number: Case No. 5:12–CV–02431.
• Parties: Jeffrey J. WALLACE, Plaintiff, v. RED BULL DISTRIBUTING COMPANY, et al., Defendants.
• Court: U.S. District Court — Northern District of Ohio

958 F.Supp.2d 811

Jeffrey J. WALLACE, Plaintiff,

v.RED BULL DISTRIBUTING COMPANY, et al., Defendants.

Case No. 5:12–CV–02431.

United States District Court,

N.D. Ohio,

Eastern Division.

July 23, 2013.

Edward L. Gilbert, Akron, OH, for Plaintiff.

Adam Levin, Mitchell, Silberberg & Knupp, Los Angeles, CA, Karyn D. Jefferson, Mitchell, Silberberg & Knupp, New York, NY, David L. Drechsler, Buckingham, Doolittle & Burroughs, Cleveland, OH, for Defendants.

MEMORANDUM OPINION AND ORDER

SARA LIOI, District Judge.

This matter is before the Court upon the motion (Doc No. 10) of defendants Red Bull Distribution Company (“RBDC”) ¹ and Jeff Barta (“Barta”) to dismiss the action or, alternatively, to stay the proceedings, and to compel arbitration. Plaintiff Jeffrey J. Wallace (“Wallace” or “plaintiff”) has filed an opposition (Doc. No. 11), and defendants have submitted a brief in reply (Doc. No. 12). The matter is ripe for determination. For the following reasons, defendants' motion to dismiss and compel arbitration is GRANTED.²

I. FACTUAL AND PROCEDURAL BACKGROUND

RBDC is a Sacramento, California-based subsidiary of Red Bull GmbH and an affiliate of Red Bull North America, Inc. (“RBNA”). RBDC is the largest distributor in North America of Red Bull products, including Red Bull Energy Drink. (Hernandez Decl. I, Doc. No. 10–2 at ¶ 2.) On January 6, 2011, Wallace met with RBDC representatives in Cleveland, Ohio as part of RBDC's hiring process in connection with the launching of new facilities in Ohio and Michigan. (Hernandez Decl. II, Doc. No. 13, at ¶ 3.) At the meeting, Wallace first completed RBDC's Application for Employment (the “Application”). (Doc. No. 13–2). As a condition of his employment, Wallace signed an agreement with RBDC attached to the Application entitled “Mutual Agreement for Employment At–Will and Mediation/Arbitration in California” (the “RBDC Agreement”) (Doc. No. 13–2 at 125), which contained various mediation and arbitration provisions. (Doc. No. 10–2 at ¶ 5; Doc. No. 11–1 at ¶¶ 2–3; Doc. No. 13 at ¶ 6.)

After submitting the Application, Wallace was immediately interviewed by RBDC representatives. (Doc. No. 13 at ¶ 8.) After further consideration of Wallace's candidacy, RBDC extended Wallace a written offer of employment for the position of District Sales Manager, Columbus, Ohio. (Doc. No. 13 at ¶ 8; Doc. No. 13–4.) When Wallace indicated his desire to accept the offered position, he was given additional new hire paperwork, most of which Wallace signed that same day, including an agreement with RBNA entitled “Mutual Arbitration Agreement” (the “RBNA Agreement”). The RBNA Agreement also contained mediation and arbitration provisions, some of which differed from those of the RBDC agreement. (Doc. No. 10–2 at ¶ 6; Doc. No. 13 at ¶ 9; Doc. No. 11–1 at ¶ 2.) Wallace's offer letter made his employment explicitly subject to the execution of various documents, including the RBNA Agreement. (Doc. No. 13–4 at 140.) Wallace was also given RBDC's Employee Handbook, which provided that “[t]he specifics of the arbitration policy are set forth in the Mutual Agreement to Arbitrate that you signed when you were hired,” referring to the RBNA Agreement. (Doc. No. 11–2 at 96; Doc. No. 13 at ¶ 12.)

Wallace began work at RBDC on January 9, 2011. (Doc. No. 1 at ¶ 5.) On November22, 2011, defendant Barta, an RBDC Branch Manager, informed Wallace that his employment had been terminated. (Doc. No. 1 at ¶ 7.) On September 27, 2012, Wallace filed suit against defendants, alleging racial discrimination under federal law against RBDC and racial discrimination and defamation under Ohio law against both defendants. (Doc. No. 1.) Defendants brought the subject motion seeking to dismiss or stay the case and compel arbitration.

II. LEGAL STANDARD

The standard for ruling on defendants' motion is dictated by the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1, et seq., which provides that “[a] party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition” for an order compelling arbitration. 9 U.S.C. § 4. “[U]pon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement,” a court “shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement....” Id. § 3.

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); see9 U.S.C. §§ 1–16; see also Shearson/Am. Express, Inc. v. McMahon, 482 U.S. 220, 226, 107 S.Ct. 2332, 96 L.Ed.2d 185 (1987); Stachurski v. DirecTV, Inc., 642 F.Supp.2d 758, 764 (N.D.Ohio 2009). “To enforce this dictate, [the FAA] provides for a stay of proceedings when an issue is referable to arbitration and for orders compelling arbitration when one party has failed or refused to comply with an arbitration agreement.” Javitch v. First Union Sec., Inc., 315 F.3d 619, 624 (6th Cir.2003) (citing 9 U.S.C. §§ 3–4). In cases where all claims are referred to arbitration, however, the litigation may be dismissed rather than merely stayed. See Hensel v. Cargill, Inc., No. 99–3199, 198 F.3d 245 (table), at *4 (6th Cir. Oct. 19, 1999); see also Alford v. Dean Witter Reynolds Inc., 975 F.2d 1161, 1164 (5th Cir.1992) (holding that dismissal is proper where all claims must be submitted to arbitration); Sparling v. Hoffman Const. Co., Inc., 864 F.2d 635, 638 (9th Cir.1988) (holding that 9 U.S.C. § 3 does not preclude dismissal).

If the validity of an arbitration agreement is “in issue,” the court must hold a trial to resolve the question. Id. § 4. “In order to show that the validity of the agreement is ‘in issue,’ the party opposing arbitration must show a genuine issue of material fact as to the validity of the agreement to arbitrate.” Great Earth Cos. v. Simons, 288 F.3d 878, 889 (6th Cir.2002). “The required showing mirrors that required to withstand summary judgment in a civil suit.” Id. A district court, therefore, must view all facts and inferences in the light most favorable to the party opposing arbitration and determine “whether the evidence presented is such that a reasonable finder of fact could conclude that no valid agreement to arbitrate exists.” Id.

The Sixth Circuit applies a four-pronged test to evaluate a motion to dismiss or stay the proceedings and compel arbitration:

(1) The Court must determine whether the parties agreed to arbitrate;

(2) The Court must determine the scope of the agreement;

(3) If federal statutory claims are asserted, the Court must consider whether Congress intended those claims to be non-arbitrable; and

(4) If the Court concludes that some, but not all, of the claims in the action are subject to arbitration, it must determine whether to stay the remainder of the proceedings pending arbitration.

Stout v. J.D. Byrider, 228 F.3d 709, 714 (6th Cir.2000). In applying this test, “doubt regarding the applicability of an arbitration clause should be resolved in favor of arbitration.” Id. at 715.

III. ANALYSIS

Wallace agrees that his claims fall within the scope of both the RBDC Agreement and the RBNA Agreement and does not argue that Congress intended his federal statutory claim to be non-arbitrable. (Doc. No. 11 at 84.) The Court's task is thus narrowed to the first prong of the Stout test: determination of whether the parties agreed to arbitrate. Wallace claims they did not, because (1) it cannot be determined whether the RBDC Agreement, the RBNA Agreement, or both should govern; and (2) in any event, the agreements are unconscionable.

A. The Governing Agreement

At the outset, the Court must examine which of the two documents, if either, applies. Wallace signed two different arbitration agreements on January 6, 2011. It is undisputed, however, that Wallace signed the RBNA Agreement after he signed the RBDC Agreement. (Doc. No. 13 at ¶¶ 7–9; Doc. No. 11–1 at ¶ 7.) It is also undisputed that, between the time that Wallace signed the RBDC Agreement and the time he was presented with the RBNA Agreement, Wallace was interviewed, RBDC considered his application, and RBDC ultimately extended him an offer of employment. (Doc. No. 13 at ¶ 8.) Moreover, the RBNA Agreement contains a section entitled “Entire Agreement,” which states the following:

This Agreement constitutes the entire understanding between the parties and supersedes all prior agreements, arrangements, representations and communications (whether oral or written) regarding the subject matter contained herein and the transactions contemplated hereby, and contains the entire agreement of the parties regarding the subject of arbitration of Claims, except for any arbitration agreement in connection with Company's benefit plans. Neither party is relying or shall rely on any representations (whether oral or written) on the subject of the effect, enforceability or meaning of this Agreement, except as specifically set forth in this Agreement.

(Doc. No. 10–4 at 74).

Defendants argue in their motion as though both agreements could apply. Then, in their reply, they commit to the RBNA Agreement for the stated reason that it was signed after the RBDC Agreement.

In Wallace's opposition, he challenges the validity of the agreements for various reasons, one of which is that RBDC could allegedly pick and choose differing terms from either agreement in a way that would be prejudicial to him. Additionally, Wallace states that the Court must apply the parol evidence rule, and that it is impossible, under the rule, to determine which of the two agreements is binding. But Wallace does not define the parol evidence rule or cite to any source of law to support his conclusion.

The parol evidence rule states that “absent fraud, mistake or other invalidating cause, the parties' final written integration of their...