Zuver v. Airtouch Communications, Inc., No. 74156-5.

• Court: United States State Supreme Court of Washington
• Writing for the Court: BRIDGE, J.
• Citation: 103 P.3d 753,153 Wn.2d 293,153 Wash.2d 293
• Parties: Therese R. ZUVER, Petitioner, v. AIRTOUCH COMMUNICATIONS, INC., a foreign corporation; and Cellco Partnership, d/b/a/ Verizon Wireless; and Seattle SMSA Limited Partnership, d/b/a Verizon Wireless, a foreign partnership; and Verizon Wireless (VAW) LLC, d/b/a Verizon Wireless; and Verizon Communications, Inc.; and Vodafone Americas Asia, Inc., Respondents.
• Decision Date: 23 December 2004
• Docket Number: No. 74156-5.

103 P.3d 753
153 Wn.2d 293
153 Wash.2d 293

Therese R. ZUVER, Petitioner,
v.
AIRTOUCH COMMUNICATIONS, INC., a foreign corporation; and Cellco Partnership, d/b/a/ Verizon Wireless; and Seattle SMSA Limited Partnership, d/b/a Verizon Wireless, a foreign partnership; and Verizon Wireless (VAW) LLC, d/b/a Verizon Wireless; and Verizon Communications, Inc.; and Vodafone Americas Asia, Inc., Respondents

No. 74156-5.

Supreme Court of Washington, En Banc.

Argued June 8, 2004.

Decided December 23, 2004.

103 P.3d 756

Mitchell Alan Riese, Craig Patrick Barnes, Seattle, for Petitioner

Elizabeth Anne Hawkins, Gregory Evans, Howard M. Ullman, Orrick Herrington & Sutcliffe LLP, San Francisco, for Respondents.

Timothy J. O'Connell, Molly Margaret Daily, Seattle, Kristopher Ian Tefft, Association of Washington Business, Olympia, for Amicus Curiae Association of Washington Business.

Rex Darrell Berry, Berry & Block LLP, Sacramento, for Amicus Curiae Circuit City Stores Inc.

Stewart Andrew Estes, Keating Bucklin & McCormack, Michael Barr King, Ralph Crockett Pond, Lane Powell Spears Lubersky LLP, Seattle, for Amicus Curiae Washington Defense Trial Lawyers.

Jeffrey Lowell Needle, Seattle, for Amicus Curiae Washington Employment Lawyers Association.

Debra Leigh Williams Stephens, Bryan Patrick Harnetiaux, Spokane, for Amicus Curiae

103 P.3d 757

Washington State Trial Lawyers Association Foundation

BRIDGE, J.

This case requires us to consider the enforceability of a predispute arbitration agreement between an employer, Airtouch Communications, Inc. (Airtouch), and its employee, Therese R. Zuver. Zuver appeals a superior court order granting Airtouch's motion to compel arbitration and stay proceedings. She principally argues that the arbitration agreement is both procedurally and substantively unconscionable, and thus, this court should strike down the entire arbitration agreement. Conversely, Airtouch claims that the arbitration agreement is neither procedurally nor substantively unconscionable; however, in the event that we find any of the agreement's provisions substantively unconscionable, Airtouch asserts that the agreement's severability clause requires this court to sever the offending provisions and enforce the remainder. We hold that the provisions of the agreement pertaining to confidentiality and limitation of remedies are substantively unconscionable but agree with Airtouch that the agreement's severability clause requires us to sever these provisions and enforce the remainder of the agreement.

I

STATEMENT OF FACTS

On April 10, 1997, Airtouch offered Zuver employment as a sales support representative at the yearly salary of $21,000. As part of its offer of employment, Airtouch required that Zuver accept certain conditions. One of these conditions was that Zuver sign an agreement to arbitrate her disputes.

The arbitration agreement states in relevant part:

AGREEMENT FOR ARBITRATION

Any claim, controversy or dispute between you and U S West,[¹] unless otherwise covered by a collective bargaining agreement, whether sounding in contract, statute, tort, fraud, misrepresentation, discrimination or any other legal theory, including, but not limited to, disputes relating to the interpretation of this Attachment; ... whenever brought shall be resolved by arbitration.... You hereby waive and release all rights to recover punitive or exemplary damages in connection with any common law claims, including claims arising in tort or contract, against U S West. By signing this Attachment, you voluntarily, knowingly, and intelligently waive any right you may otherwise have to seek remedies in court or other forums, including the right to a jury trial and the right to seek punitive damages on common law claims. The Federal Arbitration Act, 9 U.S.C. §§ 1-16 ("FAA") shall govern the arbitrability of all claims, provided that they are enforceable under the Federal Arbitration Act.... Additionally, the substantive law of Colorado, only to the extent it is consistent with the terms stated in this Agreement for Arbitration, shall apply to any common law claims.

A single arbitrator engaged in the practice of law shall conduct the arbitration under the applicable rules and procedures of the American Arbitration Association ("AAA"). Any dispute that relates to your employment with U S West or to the termination of your employment will be conducted under the AAA Employment Dispute Resolution Rules.... All arbitration proceedings, including settlements and awards, under the Agreement will be confidential. The parties shall share equally the hourly fees of the arbitrator. U S West shall pay the expenses (including travel and lodging) of the arbitrator. The prevailing party in any arbitration may be entitled to receive reasonable attorney's fees.... If any party hereto files a judicial or administrative action asserting claims subject to this arbitration provision, and another party successfully stays such action and/or compels arbitration of such claims, the party filing said action shall pay

103 P.3d 758

the other party's costs and expenses incurred in seeking such stay and/or compelling arbitration, including reasonable attorney's fees.

SEVERABILITY AND SURVIVAL OF TERMS

In case any one or more of the provisions of this Attachment shall be found to be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained in this Attachment will not be affected.... The provisions of this Attachment regarding trade secrets and confidential information and arbitration shall survive the termination of your employment by U S West.

Clerk's Papers (CP) at 36-37. Zuver signed the arbitration agreement on April 25, 1997. She claims that she was not offered an option to negotiate the terms of the agreement.

Zuver had been diagnosed with fibromyalgia in November 1996. After she accepted Airtouch's offer of employment, her condition worsened. As a result of her increasing fatigue and chronic pain, she requested accommodation from Airtouch in March 1999. Specifically, she requested that "she be allowed to work part-time and to telecommute, working at home." Id. at 14. Although Airtouch allegedly permitted other similarly situated employees to telecommute, it denied Zuver's request but permitted her to work part-time beginning in June 1999. Zuver began her part-time work schedule in June 1999, but by July 1999, she could no longer work even part-time because of her disability. Consequently, she went on medical leave until April 6, 2000, when Airtouch terminated her employment.

On June 3, 2002, Zuver filed a complaint in superior court alleging that Airtouch violated the Washington Law Against Discrimination (WLAD), chapter 49.60 RCW, by discriminating against her because of her disability and by failing to accommodate her disability. Airtouch answered Zuver's complaint on June 24, 2002, denying her allegations, but failing to mention the arbitration agreement. Both Zuver and Airtouch first learned of the arbitration agreement in April 2003 after Zuver had contacted Verizon Wireless, who, after acquiring Airtouch, now controlled Airtouch's former employees' personnel files, to request a copy of her file. After learning of the agreement, Airtouch informed Zuver of its discovery, and on May 21, 2003, moved to compel arbitration. On May 30, 2003, the superior court granted Airtouch's motion to compel arbitration and stayed further proceedings.

Pursuant to RAP 2.3(b)(2), Zuver filed a motion for discretionary review to this court asserting that the arbitration agreement is unenforceable because it is both procedurally and substantively unconscionable. We granted review.

II

ANALYSIS

The Federal Arbitration Act (FAA), 9 U.S.C. §§ 1-16, applies to all employment contracts except for employment contracts of certain transportation workers. Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 119, 121 S.Ct. 1302, 149 L.Ed.2d 234 (2001). Section 2 of the FAA provides that written arbitration agreements "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 (emphasis added.). The United States Supreme Court has stated that "[s]ection 2 is a congressional declaration of a liberal federal policy favoring arbitration agreements, notwithstanding any state substantive or procedural policies to the contrary."² 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) (citing Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967)). "The effect of the section is to create a body of federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage

103 P.3d 759

of the Act." Id. Both state and federal courts must enforce this body of substantive arbitrability law. Perry v. Thomas, 482 U.S. 483, 489, 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987) (citing Southland Corp. v. Keating, 465 U.S. 1, 11-12, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984)); see also Garmo v. Dean, Witter, Reynolds, Inc., 101 Wash.2d 585, 590, 681 P.2d 253 (1984). Courts must indulge every presumption "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'l Hosp., 460 U.S. at 25, 103 S.Ct. 927

Although federal and state courts presume arbitrability, "generally applicable contract defenses, such as fraud, duress, or unconscionability, may be applied to invalidate arbitration agreements without contravening § 2." Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 687, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996); see also Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 281, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995). However, courts may not refuse to enforce arbitration agreements under state laws...