South Carolina Cases October 19, 2022: Bethea v. Universal Prot. Serv.

Case Description

1

REPORT AND RECOMMENDATION

MARY GORDON BAKER UNITED STATES MAGISTRATE JUDGE

Plaintiff, through counsel, filed the instant employment action on August 19, 2022. (Dkt. No. 1.) Now before the court is a Motion to Compel Arbitration and Dismiss or, in the alternative, Stay the Current Action, filed by Defendant Universal Protection Service, LLC d/b/a Allied Universal Security Services (“Allied Universal”). (Dkt. No. 9.) Pursuant to the provisions of Title 28, United States Code, Section 636(b)(1)(A), and Local Rule 73.02(B)(2)(g), D.S.C., all pretrial matters in employment discrimination cases are referred to a United States Magistrate Judge. For the reasons stated herein, the undersigned recommends that the court grant Defendant Allied Universal's motion and compel arbitration.

BACKGROUND

Plaintiff, who is African American, alleges that he began working for Defendants as the Charleston Branch Operations Manager in October 2020. (Dkt. No. 1 at 2.) Plaintiff claims that he

2

“was informed that Roper St. Frances Hospital, Moncks Corner's supervisor's position was coming open as the current supervisor resigned.” ( Id .) Plaintiff claims that he discussed this opportunity with his manager, Robert Hill. ( Id .) According to Plaintiff, Hill agreed that Plaintiff should apply for the position. ( Id .)

Plaintiff alleges that he applied for the Hospital Supervisor position on January 21, 2021, and that he was interviewed for the position on January 28, 2021. ( Id .) Plaintiff claims that his interviewer told him he was the most qualified candidate for the position and offered him the job. ( Id .) Plaintiff claims that he accepted the job and informed Hill of the same later that day. ( Id .) According to Plaintiff, Hill told him that the position was given to Officer Robert Orton, a Caucasian male, instead of Plaintiff. ( Id .) Plaintiff claims that Orton had not applied for the position and was not qualified for it. ( Id .) As such, Plaintiff asked why Orton had received the position. ( Id .) Plaintiff claims that “he was informed that the hospital was partial to the officer because they had already been working together.” ( Id .)

Plaintiff alleges that he spoke with Hill via telephone on February 1, 2021 and that Hill asked him whether he would resign from his current position if he did not receive the Hospital Supervisor position. ( Id .) Plaintiff claims that Hill called Plaintiff into his office on February 3, 2021 to inform him that the Hospital Supervisor position was given to Orton. ( Id . at 3.) Plaintiff claims that “[t]he reason given for Mr. Orton obtaining the job [was] that the Defendants were attempting to salvage the account by accommodating the hospital and their request for Mr. Orton to be placed in the Supervisor position.” ( Id .) Accordingly, Plaintiff filed the instant civil action alleging race discrimination and failure to promote in violation of Title VII of the Civil Rights Act of 1964 (“Title VII”).

3

On September 19, 2022, Defendant Allied Universal filed a Motion to Compel Arbitration and Dismiss or, in the alternative, Stay the Current Action. (Dkt. No. 9.) Plaintiff responded in opposition to the motion on October 3, 2022. (Dkt. No. 15.) Defendant Allied Universal replied to Plaintiff's response on October 11, 2022. (Dkt. No. 16.) Thus, the motion before the court has been fully briefed and is ripe for disposition.

DISCUSSION

Defendant claims that “Plaintiff executed a valid and enforceable arbitration agreement in which he agreed that any and all claims or causes of action he may have against Allied Universal would be resolved by final and binding arbitration in accordance with the agreement. Notwithstanding the provisions of the arbitration agreement, Plaintiff brought this lawsuit alleging exactly the types [of] claims he agreed to arbitrate.” (Dkt. No. 9-1 at 1-2.) As such, Defendant requests that the court compel arbitration pursuant to the parties' agreement. ( Id . at 2.) In response, Plaintiff argues that the arbitration agreement at issue is invalid because: (1) the arbitration agreement is not supported by mutual consideration; (2) the agreement is unconscionable; and (3) the agreement is a contract of adhesion. (Dkt. No. 15 at 4-5.) Plaintiff claims it would therefore be fundamentally unfair to enforce the arbitration agreement. The undersigned considers these arguments, below.

I. Relevant Law

The Federal Arbitration Act (“FAA”) governs the arbitrability of this dispute. Section 4 of the FAA, provides, in part, that a “party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court . . . for an order directing that such arbitration proceed in the manner provided for in such agreement.” 9 U.S.C. § 4. “[Q]uestions of arbitrability must be addressed with a healthy regard for

4

the federal policy favoring arbitration . . . [and] any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.” Moses H. Cone Mem'l Hosp. v. Mercury Const. Corp. , 460 U.S. 1, 25-26 (1983). “In the Fourth Circuit, a litigant can compel arbitration under the FAA if he can demonstrate ‘(1) the existence of a dispute between the parties, (2) a written agreement that includes an arbitration provision which purports to cover the dispute, (3) the relationship of the transaction, which is evidenced by the agreement, to interstate or foreign commerce, and (4) the failure, neglect or refusal of the defendant to arbitrate the dispute.'” Adkins v. Lab. Ready, Inc. , 303 F.3d 496, 500-01 (4th Cir. 2002) (citing Whiteside v. Teltech Corp. , 940 F.2d 99, 102 (4th Cir. 1991)). Plaintiff makes no arguments relating to elements one, three, and four. ( See generally Dkt. No. 15.) Rather, Plaintiff contends only that the arbitration provision in the parties' agreement is invalid and unenforceable. ( Id .)

The FAA states that a written arbitration agreement “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. Although federal law governs the arbitrability of disputes, state law principles apply when considering whether parties have an enforceable agreement to arbitrate. First Options of Chicago, Inc. v. Kaplan , 514 U.S. 938, 944 (1995); Am. Gen. Life & Accident Ins. Co. v. Wood , 429 F.3d 83, 87 (4th Cir. 2005). “Thus, generally applicable contract defenses, such as fraud, duress, or unconscionability, may be applied to invalidate arbitration agreements without contravening [the FAA].” Dr.'s Assocs., Inc. v. Casarotto , 517 U.S. 681, 687 (1996).

II. Analysis

As noted, Plaintiff contends that the court should decline to compel arbitration because the agreement at issue lacks mutual consideration and is an unconscionable contract of adhesion. (Dkt.No. 15 at 3-5.)

5

For the reasons set forth below, the undersigned finds these arguments unconvincing.

With respect to Plaintiff's first argument, this court has held that “[a] mutual promise to arbitrate constitutes sufficient consideration to underpin an arbitration agreement.” Bautista v. Ruiz Food Prod., Inc. , No. 4:20-cv-3868-SAL-TER, 2022 WL 4181078, at *3 (D.S.C. July 7, 2022), adopted as modified , 2022 WL 3699633 (D.S.C. Aug. 26, 2022) (citing O'Neil v. Hilton Head Hosp. , 115 F.3d 272, 275 (4th Cir. 1997); Rickborn v. Liberty Life Ins. Co. , 321 S.C. 291, 304 (1996)). The arbitration agreement at issue here clearly contains such a mutual promise. (Dkt. No. 9-2 at 9, stating “the Parties mutually agree to the resolution by binding arbitration of all claims or causes of action that the Employee may have against the Company, or the Company against the Employee ....”) (emphasis added). Thus, Plaintiff's contention that the agreement contains no mutual promise is plainly incorrect. (Dkt. No. 15 at 7.)

The undersigned finds Plaintiff's remaining arguments regarding unconscionability similarly faulty. Plaintiff first contends that the arbitration agreement is unconscionable because it was “buried among work training documents” and no one explained it to him. (Dkt. No. 15 at 6.) Plaintiff further argues that the arbitration agreement is “subject to greater scrutiny” because it is a contract of adhesion. ( Id . at 8.)

Defendant counters that “a person who signs a contract cannot avoid the effect of the document by claiming he did not read it first.” (Dkt. No. 16 at 3.) Defendant notes that Plaintiff

6

“acknowledged that he had a sufficient opportunity to read the Agreement [], had an opportunity to ask any questions he had about it, and understood its terms[.]” ( Id . at 4.) Defendant also explains that adhesion contracts are not per se unconscionable and that, even assuming arguendo that all the facts Plaintiff alleges in support of his unconscionability argument are true, he still cannot show that the arbitration agreement is unconscionable and, therefore, invalid. ( Id . at 7.)

To prove that an arbitration provision is unconscionable, a plaintiff must show that (1) he lacked a meaningful choice as to whether to arbitrate because the arbitration agreement's provisions were one sided, and (2) the terms were so oppressive no reasonable person would make them, and no fair and honest person would accept them. Simpson v. MSA of Myrtle Beach, Inc. , 373 S.C. 14, 24-25 (2007). When determining whether a contract is unconscionable, courts tend to view adhesive contracts-those presented in “take-it-or-leave-it” form-with considerable skepticism. Id . at 26; Smith v. D.R. Horton, Inc. , 417 S.C. 42, 49 (2016). By their nature, contracts of adhesion are non-negotiable; parties thus often claim that they lack a meaningful choice when a contract of adhesion is involved. Id .

Nonetheless, a take-it-or-leave-it contract of adhesion is not necessarily unconscionable. See id .; see also Damico v. Lennar Carolinas, LLC , No. 2020-001048, 2022 WL 4231032, at *6 (S.C. Sept. 14, 2022). Indeed, “adhesive contracts are not unconscionable in and of themselves so long as the terms are even-handed .” Damico , 2022 WL 4231032, at *6 (emphasis in original). The South Carolina supreme court recently clarified: “unconscionability requires a finding of a lack of meaningful choice coupled with unreasonably oppressive terms. Thus, an adhesion contract with fair terms is certainly not unconscionable, and the mere fact a contract is one of adhesion does not doom the contract-drafter's case.” Id . (emphasis in original).

7

The terms of the arbitration agreement at issue here cannot be defined as unreasonably oppressive. (Dkt. No. 9-2 at 8-14.) As noted, the arbitration agreement contained a mutual obligation to arbitrate. ( Id . at 9.) It also included an “opt-out” provision allowing Plaintiff thirty (30) days to opt out of arbitration and clearly outlining the steps to do so. ( Id . at 8.) Plaintiff declined to avail himself of the opportunity to “opt-out” that was outlined for him in the arbitration agreement, yet he provides the court with no explanation as to why he failed to opt out of arbitration. ( See generally Dkt. No. 15.) Instead, he claims that he should now be excused from his obligation to arbitrate because “no one explained the Agreement to him.” ( Id . at 6.)

However, “an elementary principle of contract law is that a party signing a written contract has a duty to inform himself of its contents before executing it, . . . and in the absence of fraud or overreaching he will not be allowed to impeach the effect of the instrument by showing that he was ignorant of its contents or failed to read it.” Sydnor v. Conseco Fin. Servicing Corp. , 252 F.3d 302, 306 (4th Cir. 2001). Indeed, “South Carolina law ‘does not impose a duty to explain a document's contents to an individual when the individual can learn the contents from simply reading the document.'” Pitt v. Wells Fargo Bank, Nat'l Assoc. , No. 3:21-cv-3428-JFA-TER, 2022 WL 2068851, at *4 (D.S.C. Apr. 1, 2022), adopted , 2022 WL 1421120 (D.S.C. May 4, 2022) (quoting Towles v. United HealthCare Corp. , 338 S.C. 29, 39 (Ct. App. 1999)). Accordingly, courts in this district have consistently rejected arguments similar to Plaintiff's. See, e.g. , id . (“Plaintiff's argument that the Arbitration Agreement is unenforceable because no one explained it to her is unavailing.”); Gourdine v. Redstone Mod. Dentistry , No. 0:21-cv-2656-MGL-SVH, 2021 WL 5333012, at *4 (D.S.C. Oct. 21, 2021), adopted , 2021 WL 5330619 (D.S.C. Nov. 16,2021)

8

(enforcing arbitration agreement where plaintiff argued that the agreement was not explained to her); Lincoln v. G2 Secure Staff, LLC , No. 2:20-cv-1954-DCN-MHC, 2020 WL 12772535, at *4 (D.S.C. Nov. 18, 2020), adopted , 2021 WL 5936391 (D.S.C. Jan. 7, 2021) (enforcing arbitration agreement where the plaintiff argued that no one explained the agreement to her and the agreement was mandatory); Hamlin v. Dollar Tree Stores, Inc. , No. 2:17-cv-2648-PMD, 2017 WL 6034325, at *1 (D.S.C. Dec. 6, 2017) (enforcing arbitration agreement where the plaintiff claimed that the agreement was “buried among other work training documents,” no one explained the agreement to her, and the agreement was mandatory).

Based on the foregoing, the undersigned simply cannot conclude that the arbitration agreement is an unconscionable contract of adhesion, as Plaintiff contends. “The Fourth Circuit instructs courts to focus on whether the arbitration clause is geared towards achieving an unbiased decision by a neutral decision maker.” Low Country Rural Health Educ. v. Greenway Medical Technologies, Inc. , No. 9:14-cv-874-DCN, 2014 WL 5771850 (D.S.C. Nov. 5, 2014) (citing Hooters of Am., Inc. v. Phillips , 173 F.3d 933, 938 (4th Cir. 1999)). This appears to be the goal of the agreement at issue. (Dkt. No. 9-2 at 8-14.) The undersigned therefore recommends that Defendant's motion be granted and that the parties be compelled to arbitrate.

CONCLUSION

Based on the foregoing, it is RECOMMENDED that Defendant Allied Universal's Motion to Compel Arbitration and Dismiss, or, in the alternative, Stay the Current Action (Dkt. No. 9) be GRANTED. The undersigned RECOMMENDS that the parties be compelled to arbitrate and that this case be DISMISSED in full.

9

IT IS SO RECOMMENDED.

10

Notice of Right to File Objections to Report and Recommendation

The parties are advised that they may file specific written objections to this Report and Recommendation with the District Judge. Objections must specifically identify the portions of the Report and Recommendation to which objections are made and the basis for such objections. “[I]n the absence of a timely filed objection, a district court need not conduct a de novo review, but instead must ‘only satisfy itself that there is no clear error on the face of the record in order to accept the recommendation.'” Diamond v. Colonial Life & Acc. Ins. Co. , 416 F.3d 310 (4 Cir. 2005) (quoting Fed.R.Civ.P. 72 advisory committee's note).

Specific written objections must be filed within fourteen (14) days of the date of service of this Report and Recommendation. 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72(b); see Fed.R.Civ.P. 6(a), (d). Filing by mail pursuant to Federal Rule of Civil Procedure 5 may be accomplished by mailing objections to:

Robin L. Blume, Clerk

United States District Court

Post Office Box 835

Charleston, South Carolina 29402

Failure to timely file specific written objections to this Report and Recommendation will result in waiver of the right to appeal from a judgment of the District Court based upon such Recommendation. 28 U.S.C. § 636(b)(1); Thomas v. Arn , 474 U.S. 140 (1985); Wright v. Collins , 766 F.2d 841 (4th Cir. 1985); United States v. Schronce , 727 F.2d 91 (4th Cir. 1984).