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NELSON v. INSIGNIA/ESG

August 12, 2002

MELENA NELSON, PLAINTIFF,
V.
INSIGNIA/ESG, INC., DEFENDANT.



The opinion of the court was delivered by: Walton, District Judge.

MEMORANDUM OPINION

I. Factual Background

A brief recitation of the facts of this case is a necessary prelude to the Court's analysis of the legal challenges raised in the parties' pleadings. The events that preceded the filing of this action commenced when the defendant hired the plaintiff as an Assistant Controller for its office located in the District of Columbia. Compl. ¶ 4; Def.'s Mot. Ex. 1. The employment contract was executed on July 22, 2000, and the two and a half page written agreement contained the following arbitration clause:

ARBITRATION

Any dispute arising out of or relating to this Agreement, your performance or the Company's performance thereunder, the terms and conditions of your employment by the Company, and/or the termination of such employment which has not been resolved by non-binding mediation under the auspices of J-A-M-S/Endispute within 90 days of being submitted to the Company in writing shall be resolved by binding arbitration in New York, New York (or such other location as may be mutually agreed upon) through the offices of, and in accordance with the arbitration rules of, J-A-M-S/Endispute applicable to employment arbitration (the "Rules") as then in effect. Other than with respect to provisional equitable relief sought at the outset of the dispute, neither party shall be entitled to commence or maintain any action in a court of law with respect to any matter in dispute or relief requested until such matter or request for relief shall have been submitted to and decided by the chosen arbitrator and then only for the enforcement of the award of such arbitrator. The decision of the arbitrator shall be final and binding upon the parties and all persons claiming under and through them. All fees and expenses of the arbitrator shall be borne equally by the Company and Employee.

Def.'s Mot. Ex. 1. The plaintiffs employment ended when she was terminated by the defendant.*fn1 Compl. ¶ 12.

The plaintiff alleges that prior to her termination she had complained to the defendant's "upper management" regarding race and gender discrimination by her immediate supervisor and that she was subsequently promised an increased annual performance bonus for working under "intolerable conditions." Compl. ¶¶ 6-7. After her termination, the plaintiff did not receive the increased bonus and proceeded to file a civil complaint in the Superior Court of the District of Columbia alleging: (1) intentional racial discrimination in violation of 1 D.C.Code § 2512 (2001); (2) intentional sexual discrimination in violation of 1 D.C.Code § 2512 (2001); (3) retaliatory discharge in violation of 1 D.C.Code § 2525 (2001); and (4) breach of implied contract. Compl. ¶¶ 15-21.

The defendant contends that the plaintiffs claims arise out of her employment, are therefore subject to mandatory arbitration, and accordingly cannot be pursued in this Court. Def.'s Mot. at 2. The plaintiff counters, arguing that the arbitration agreement is invalid because "it is unclear" whether she understood the full scope of the agreement. Pl.'s Opp'n at 2. The plaintiff also asserts that "should Plaintiff be able to show that she was under duress to agree to binding arbitration, this would negate the contract agreement with Defendant." Id.

II. Jurisdiction

On the defendant's motion, the case was removed to this Court pursuant to this Court's original jurisdiction created by 28 U.S.C. § 1332 (2000) (diversity of citizenship).*fn2 Notice of Removal of a Civil Action ("Removal Notice") ¶ 5. In its removal notice, the defendant asserted, without challenge, that the plaintiff is domiciled in Maryland, and that the defendant is incorporated in Delaware, with its principal place of business in New York. The defendant's assertion that the amount in controversy exceeds the statutory minimum of $75,000 that is required for this Court to exercise diversity jurisdiction is also undisputed. Removal Notice 115. Therefore, this Court has subject-matter jurisdiction over this matter pursuant to 28 U.S.C. § 1332.

Despite the fact that this Court has subject-matter jurisdiction pursuant to diversity, the defendant asserts that under the circumstances of this case, where the parties have entered into a binding arbitration agreement, the Court lacks subject-matter jurisdiction as a result of the Federal Arbitration Act ("FAA" or the "Act"), 9 U.S.C. § 1-16 (2000), and requests that this action be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(1). The FAA requires that "upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement." 9 U.S.C. § 4. However, the FAA states that "[i]f the making of the arbitration agreement or the failure, neglect, or refusal to perform the same be in issue, the court shall proceed summarily to the trial thereof." Id. Therefore, this Court finds that the FAA statutory scheme for assessing whether parties must submit their claims to arbitration necessarily confers jurisdiction on the Court to determine the enforceability of the agreement when "the making of the arbitration agreement or the failure, neglect, or refusal to perform the same be in issue . . ." Id. In this case, the plaintiff has placed the arbitration agreement in issue for this Court's determination and, thus, rather than divesting the Court of jurisdiction, the filing of this action actually conferred to the Court the obligation, pursuant to the FAA, to determine the enforceability of the agreement and decide whether arbitration should be compelled. Dismissal under Rule 12(b)(1) is therefore inappropriate.

III. Standard of Review

Having concluded that this matter is not subject to dismissal under Rule 12(b)(1), the Court must consider whether the defendant is entitled to have its motion for summary judgment entertained by the Court. As part of its examination into whether the arbitration agreement is enforceable, the Court, in addition to considering the plaintiffs allegations on the subject, has also conducted its own independent inquiry of the enforceability of the fee-splitting provision contained in the arbitration agreement. This inquiry has required the Court to evaluate whether the party seeking to avoid arbitration (the plaintiff) has adequately demonstrated that the arbitration fees will effectively prohibit her from vindicating her claims against the party seeking arbitration (the defendant). See Green Tree Fin. Corp.-Alabama v. Randolph, 531 U.S. 79, 91-92, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000). This analysis necessarily required the Court to look outside the four corners of the complaint, namely, the review of the arbitration agreement itself and the feesplitting provision of the agreement, which is attached as an exhibit to the defendant's Motion to Dismiss and/or for Summary Judgment, and a letter from defendant's counsel to plaintiffs counsel provisionally offering to pay for the arbitration expenses, which is attached as an exhibit to the defendant's Reply.*fn3 As more thoroughly discussed below, the Supreme Court in Green Tree announced a burden-shifting test designed to elicit whether arbitration fees assessed to a party seeking to avoid arbitration will be prohibitive of that party's ability to seek vindication of her claims in an arbitral forum. Id. Circuit Courts that have considered Green Tree's burden-shifting test have chosen to conduct summary judgment analyses because the very nature of the Green Tree test will usually require reviewing courts to look beyond the complaint and conduct an independent fact-finding determination of whether prohibitive expenses will preclude a party from pursuing arbitration. See Blair v. Scott Specialty Gases, 283 F.3d 595, 607-09 (3d Cir. 2002) (defendant filed a motion to dismiss, or in the alternative for summary judgment and court granted summary judgment); Bradford v. Rockwell Semiconductor Sys., Inc., 238 F.3d 549, 556 (4th Cir. 2001) (court granted defendant's summary judgment motion). Consistent with how other courts have resolved disputes of this nature, this Court concludes that summary judgment is the proper procedural mechanism to use in evaluating whether the plaintiff must submit her claims to arbitration.*fn4

Summary Judgment is generally appropriate when the pleadings "show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). To prevail under Rule 56, the moving party for summary judgment must show that the non-moving party "has failed to make a sufficient showing on an essential element of her case with respect to which she has the burden of proof." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The Court must determine "whether a fair-minded jury could return a verdict for the plaintiff on the evidence presented." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). While it is generally understood that when considering a motion for summary judgment a court must "draw all justifiable inferences in the nonmoving party's favor and accept the nonmoving party's evidence as true," Greene v. Amritsar Auto Servs. Co., 206 F. Supp.2d 4, 7 (D.C. 2002) (citing Anderson, 477 U.S. at 255, 106 S.Ct. 2505), the non-moving party must establish more than "[t]he mere existence of a scintilla of evidence in support of the plaintiffs position." Anderson, 477 U.S. at 252, 106 S.Ct. 2505. The District of Columbia Circuit has stated that ...


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