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Date: 05-31-2020
Case Style:
SHANNON THOMAS v. HYUNDAI OF BEDFORD, ET AL.
Case Number: 108212
Judge: KATHLEEN ANN KEOUGH
Court: COURT OF APPEALS OF OHIO EIGHTH APPELLATE DISTRICT COUNTY OF CUYAHOGA
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On December 15, 2017, Thomas signed an arbitration agreement with
his then-employer, Migdal 1, L.L.C. The arbitration agreement provided that
[a]s the exclusive means of initiating adversarial proceedings to resolve
any Covered Dispute, and pursuant to the Federal Arbitration Act (9
U.S.C. §1, either Migdal or Employee may demand that the dispute be
resolved by final and binding arbitration using the procedures
described in this Agreement, and each party hereby consents to all
Covered Disputes being so resolved.
The agreement defined “Covered Disputes” as
any actual or alleged claim or liability, regardless of its nature, that
Migdal or its owners, managers, members, officers, employees, agents,
or insurers may wish to bring against Employee, or that Employee may
wish to bring against Migdal or any of Migdal’s owners, managers,
members, officers, employees, agents, or insurers.
The agreement excluded from consideration as a “Covered Dispute” any claim by an
employee for unemployment compensation or workers’ compensation benefits, any
claim relating to a violation of the National Labor Relations Act, or any other claim
that under law cannot be the subject of a pre-dispute arbitration agreement.
The agreement provided that in any arbitration conducted pursuant
to the agreement, either Migdal or the employee “may seek and recover any amount
or type of damages or other legal or equitable relief that could have been recovered
had the action been brought in a court.” The agreement further provided that the
arbitrator’s award would be “final and binding forever” on both the employee and
Migdal, and neither Migdal nor the employee could appeal the arbitrator’s decision.
In September 2018, Thomas filed a two-count complaint against
Migdal, Pisani, and Delguidice. Thomas’s complaint asserted claims for race
discrimination (Count 1) and retaliation (Count 2) under Ohio Revised Code
Chapter 4112. Count 1 alleged that Thomas was discriminated against on the basis
of his race while he was employed by Migdal,2 and Count 2 alleged that Migdal,
Pisani, and Delguidice retaliated against Thomas by demoting him and not paying
him in the same manner as white employees when he complained about the
discrimination.
Appellees answered the complaint and then filed a motion to stay
proceedings pending arbitration and for costs and sanctions. Thomas filed a brief
opposing the motion. The trial court subsequently granted the motion to stay
proceedings pending arbitration and denied the motion for costs and sanctions.
This appeal followed.
2 Thomas, an African-American male, alleged in his complaint that employees
regularly used the “N-word” around him; one employee used a water balloon to act as if
he were spraying urine on Thomas; Thomas was paid half the pay of white managers;
Thomas’s pay was reduced even though white managers’ pay remained the same; white
managers were allowed to take a car from the lot home at night but Thomas was not
afforded the same privilege; white employees were paid a revenue bonus but Thomas was
not; management took no action when an employee told Thomas “I don’t fight n---ers, I
kill them”; and management did not discipline the same employee when he brought a gun
to work and was overheard threatening to shoot Thomas.
II. Law and Analysis
In his sole assignment of error, Thomas contends that the trial court
erred in granting appellees’ motion to stay proceedings pending arbitration. He
asserts that he cannot be compelled to arbitrate his discrimination and retaliation
claims because Ohio’s public policy commitment to challenging racial bias in the
workplace, as codified in R.C. Chapter 4112, “is so strong * * * that it permits direct
access to the courts without any administrative prerequisite.” (Appellant’s Brief, p.
10). He further contends that the arbitration agreement cannot be enforced because
it is unconscionable.
This court reviews a trial court’s decision to grant a motion to stay
litigation pending arbitration for an abuse of discretion. Avery v. Acad. Invest.,
L.L.C., 8th Dist. Cuyahoga No. 107550, 2019-Ohio-3509, ¶ 9.
Ohio courts recognize a presumption favoring arbitration that arises
when the claim in dispute falls within the scope of the arbitration provision. Wallace
v. Ganley Auto Group, 8th Dist. Cuyahoga No. 95081, 2011-Ohio-2909, ¶ 13.
Indeed, Ohio law requires a stay of proceedings when an arbitrable dispute has been
improperly brought before a court. See, e.g., McGuffey v. LensCrafters, Inc., 141
Ohio App.3d 44, 50, 749 N.E.2d 825 (12th Dist.2001) (noting that a trial court
“shall” stay proceedings pending arbitration once it is satisfied that an issue is
arbitrable); Sasaki v. McKinnon, 124 Ohio App.3d 613, 618, 707 N.E.2d 9 (8th
Dist.1997) (“The Ohio Arbitration Act, which strongly favors arbitration, compels
the court to review the arbitration clause at issue and, if the court is satisfied that
the dispute or claim is covered by the arbitration clause, give effect to the clause and
stay the proceedings pursuant to R.C. 2711.02.”). In light of this strong presumption
favoring arbitration, any doubts regarding arbitration should be resolved in its favor.
Ignazio v. Clear Channel Broadcasting, Inc., 113 Ohio St.3d 276, 2007-Ohio-1947,
865 N.E.2d 18, ¶ 18.
Despite this strong policy favoring arbitration, Thomas contends that
he should not be compelled to arbitrate his race discrimination and retaliation
claims. As support for his argument, Thomas first directs us to Justice Ruth Bader
Ginsburg’s dissent in Epic Sys. Corp. v. Lewis, 584 U.S. __, 138 S.Ct. 1612, 200
L.Ed.2d 889 (2018), wherein Justice Ginsburg stated:
It would be grossly exorbitant to read the FAA [Federal Arbitration Act]
to devastate Title VII of the Civil Rights Act of 1964 * * * and other laws
enacted to eliminate, root and branch, class-based employment
discrimination * * *. With fidelity to the Legislature’s will, the Court
could hardly hold otherwise.
Id. at 1648. Thomas suggests that this statement by Justice Ginsburg stands for the
proposition that after Epic Sys., individual, non-class action claims brought
pursuant to R.C. Chapter 4112 are not arbitrable.
We fail to see any connection between Epic Systems and this case.
The issue decided in Epic Systems was whether the Federal Arbitration Act permits
employers to include class-action waivers in arbitration agreements with their
employees, even though the National Labor Relations Act allows employees to
engage in “concerted activities” for their “mutual aid and protection.” Id. at 1633.
The majority held that class-action waivers in arbitration agreements are
enforceable; Justice Ginsburg would have answered the question with a “resounding
no.” Id. As aptly stated in Thomas’s brief, “Epic Systems had nothing to do with
individual, non-class action cases like Shannon Thomas’s case.” (Appellant’s Brief,
p. 9).
The excerpt Thomas quotes from Justice Ginsburg’s dissent does not
support his argument that after Epic Systems, non-class action discrimination
claims are immune from arbitration. To the contrary, reading the paragraph as a
whole, it explains Justice Ginsburg’s belief that the majority’s holding in Epic
Systems does not threaten an individual litigant’s ability to pursue disparate impact
or pattern-or-practice claims, even though such claims may require proof on a
group-wide basis.
We also find no merit to Thomas’s assertion that this is a case of “first
impression” after Epic Systems involving non-class action claims for workplace
discrimination subject to an arbitration agreement. In Jones v. Carrols, L.L.C., 9th
Dist. Summit No. 28918, 2019-Ohio-211, Jones argued that the arbitration
agreement he had signed requiring him to arbitrate claims against his employer was
against public policy because it contained a class-action waiver. The Ninth District
disagreed, noting that in Epic Systems, the Supreme Court held that arbitration
agreements requiring individualized arbitration instead of class or collective
proceedings did not violate the National Labor Relations Act, and that the Federal
Arbitration Act required enforcement of the agreements. Id. at ¶ 27, citing Epic
Systems, __ U.S. __, 138 S.Ct. at 1616, 200 L.Ed.2d 889. Notably, as relevant to
Thomas’s argument, the Ninth District also rejected Jones’s other arguments
regarding the enforceability of the arbitration agreement, and held, even after Epic
Systems, that Jones’s individual, non-class action claims for, among other things,
race and age discrimination, were subject to arbitration under the arbitration
agreement. Id. at ¶ 47.
Thomas next contends the trial court erred in staying proceedings
pending arbitration because there is “Ohio precedent which affords Ohio workers
the choice to go to arbitration or to the court of common pleas under O.R.C. Section
4112.” (Appellant’s Brief, p. 9.) But Thomas’s citations to Thomas v. GE Co., 131
Ohio App.3d 825, 723 N.E.2d 1139 (1st Dist.1999), and Luginbihl v. Milcor L.P., 3d
Dist. Allen No. 1-01-162, 2002-Ohio-2188, as support for this argument are not on
point. Both Thomas and Luginbihl stand for the proposition that a union cannot, in
a collective bargaining agreement, prospectively waive a member’s right to select a
judicial forum for the resolution of the member’s statutory claims, even if the
collective bargaining agreement contains a grievance procedure that culminates in
binding arbitration. Thomas at 831; Luginbihl at ¶ 28. That is so because statutory
discrimination rights are distinct from contractual collective bargaining rights and
are independent of the arbitration process. Haynes v. Ohio Turnpike Comm., 177
Ohio App.3d 1, 2008-Ohio-133, 893 N.E.2d 850, ¶ 17-18 (8th Dist.); Luginbihl at
¶ 29. Thus, the employee is not required to proceed to arbitration under the
collective bargaining agreement and may proceed in state court with his or her
discrimination and retaliation claims. Thomas at 831.
This case does not involve a collective bargaining agreement,
however, or a union acting on Thomas’s behalf. Instead, it involves an arbitration
agreement that Thomas signed on his own behalf in which he agreed to submit his
claims to arbitration. Despite Thomas’s failure to so acknowledge, there are
numerous cases from Ohio courts holding that an employee’s race discrimination
and retaliation claims brought pursuant to R.C. Chapter 4112 are arbitrable where
the employee has signed an arbitration agreement. See, e.g., Doe v. Contemporary
Servs. Corp., 8th Dist. Cuyahoga No. 107229, 2019-Ohio-635; Jones, 9th Dist.
Summit No. 28918, 2019-Ohio-211; Wolfe v. J.C. Penney Corp., 10th Dist. Franklin
No. 18AP-70, 2018-Ohio-3881; Hay v. Summit Funding, Inc., 4th Dist. Ross No.
16CA3577, 2017-Ohio-8261; Rivera v. Rent A Ctr., Inc., 8th Dist. Cuyahoga No.
101959, 2015-Ohio-3765; Melia v. OfficeMax N. Am., Inc., 8th Dist. Cuyahoga No.
87249, 2006-Ohio-4765; Butcher v. Bally Total Fitness Corp., 8th Dist. Cuyahoga
No. 81593, 2003-Ohio-1734.
In short, Thomas’s argument that his race discrimination and
retaliation claims are not arbitrable is without merit. Thomas correctly asserts that
Ohio has a strong public policy against workplace discrimination. However,
consistent with the case law cited above and Ohio’s public policy in favor of
arbitration, it is apparent that claims asserting workplace discrimination and
retaliation, such as Thomas’s, are subject to arbitration when the claims fall with the
scope of the arbitration agreement, which they do here.
The dissent, relying on this court’s decision in Arnold v. Burger King,
8th Dist. Cuyahoga No. 101465, 2015-Ohio-4485, finds that the arbitration
agreement is not enforceable because Thomas’s claims “are outside the scope of the
arbitration agreement,” and arbitration of his claims would be against public policy.
In Arnold, an employee asserted claims against her employer and her
supervisor for sexual harassment, negligent retention, emotional distress, assault,
intentional tort, and discrimination, all of which arose out of a workplace rape by
the supervisor. Id. at ¶ 5. The defendants moved to compel arbitration, which the
trial court denied. Id. at ¶ 8. This court affirmed on appeal, finding that the
plaintiff’s claims were outside the scope of the arbitration agreement and, for many
reasons, the agreement was also procedurally and substantively unconscionable. Id.
at ¶ 35, 74-77, and 85-103.
Arnold is distinguishable from this case, however. The Arnold court
began its analysis regarding the scope of the arbitration agreement by noting that
“principles of equity require that greater scrutiny be given to arbitration provisions
that do not involve parties of equal sophistication and bargaining power.” Id. at
¶ 25. The Arnold court concluded that increased scrutiny of the arbitration
agreement in that case was necessary because the plaintiff was an “entry-level
employee,” as opposed to the corporate defendant, which owned and operated
numerous Burger King franchises. Id. at ¶ 1. Such a pronounced disparity in
bargaining power is not the situation in this case, however. Thomas was the Finance
Manager at Migdal; thus, he was a professional with a management position who,
unlike an entry-level employee, may be assumed to well understand the implications
of signing an arbitration agreement.
Continuing its analysis, the Arnold court found that in determining
whether a cause of action is within the scope of an arbitration agreement, the Ohio
Supreme Court has adopted the method articulated in Fazio v. Lehman Bros., Inc.,
340 F.3d 386 (6thCir.2003). Arnold at ¶ 30. “A proper method of analysis is to ask
if an action could be maintained without reference to the contract or relationship at
issue. If it could, it is likely outside the scope of the arbitration agreement.” Fazio
at ¶ 395. Nevertheless, “even real torts can be covered by arbitration clauses ‘[i]f the
allegations underlying the claims “touch matters” covered by the [agreement].’”
(Brackets sic.) Id., quoting Genesco, Inc. v. T. Kakiuchi & Co., Ltd., 815 F.2d 840,
846 (2d Cir.1987).
Thus, we must examine the factual allegations of Thomas’s
complaint, instead of just the causes of action, to determine whether his claims may
be independently maintained without reference to the employment relationship.
We conclude they cannot because, in fact, they arise directly out of that relationship.
Thomas brings his claims pursuant to R.C. 4112.02, which prohibits discriminatory
employment practices. Thus, Thomas’s employment with Migdal is the predicate
upon which his claims are based; they cannot arise under R.C. 4112.02 absent his
employment by Migdal and therefore, cannot be maintained without reference to
the employment relationship. It is simply not true, as posited by the dissent, that
“any individual” could assert the same claims against Migdal based upon the same
facts because the claims are dependent upon that individual being employed by
Migdal.
Furthermore, this case is factually distinguishable from Arnold. The
factual allegations of the complaint are unsupported by any police report or criminal
investigation and rest entirely upon the assertions of the plaintiff. Moreover, the
facts supporting the Arnold court’s conclusion that the plaintiff’s claims were
outside the scope of the arbitration agreement because they were not a foreseeable
result of her employment with Burger King are not present in this case. In Arnold,
the court concluded that it was not “reasonably foreseeable that the arbitration
contract encompassed the conduct in question” because (1) the plaintiff was not a
professional whose education, experience, and marketability gave her an option to
seek employment elsewhere instead of accepting employment that required
arbitration; (2) the employer “possessed unique and superior knowledge of the
employment environment when the [employment agreement] was executed,”
including a class-action suit for hostile work environment and sexual harassment
against the employer that had been ongoing for over ten years when the plaintiff was
raped; and (3) the arbitration agreement was ambiguous. Arnold, 8th Dist.
Cuyahoga No. 10145, 2015-Ohio-4485 at ¶ 45-47, and 57.
None of those factors apply here. As discussed earlier, Thomas was
an educated professional who understood the ramifications of signing an arbitration
agreement and who could have sought employment elsewhere if he did not wish to
sign the agreement. Furthermore, there is nothing in the record indicating that
Migdal had unique knowledge of a racist work environment at Hyundai of Bedford.
In fact, although the dissent concludes that Thomas had worked at Hyundai for
seven months before signing the arbitration agreement, at oral argument, defense
counsel asserted, and counsel for Thomas did not dispute, that Thomas worked at
Hyundai for some months, left, and then signed the arbitration agreement when he
was rehired. Thus, Thomas would have been very aware of the work environment
at Hyundai when he signed the agreement. Finally, the agreement is not ambiguous;
it specifically defines “Covered Disputes” such that a signatory to the agreement
would easily understand the claims he was agreeing to arbitrate. Accordingly, unlike
the dissent, we find Arnold distinguishable from this case.
We next consider whether the agreement is unconscionable so as to
prevent its enforcement. Although arbitration is encouraged as a way to settle
disputes, an arbitration clause is not enforceable if it is unconscionable. Felix v.
Ganley Chevrolet, Inc., 8th Dist. Cuyahoga Nos. 86990 and 86991, 2006-Ohio4500, ¶ 15. Questions of unconscionability are reviewed under a de novo standard
of review. McCaskey v. Sanford-Brown College, 8th Dist. Cuyahoga No. 97261,
2012-Ohio-1543, ¶ 8. Under a de novo standard, we give no deference to the trial
court’s decision. Brownlee v. Cleveland Clinic Found., 8th Dist. Cuyahoga No.
97707, 2012-Ohio-2212, ¶ 9.
Unconscionability includes both an absence of meaningful choice on
the part of one of the parties to a contract, together with contract terms that are
unreasonably favorable to the other party. Hayes v. Oakridge Homes, 122 Ohio
St.3d 63, 2009-Ohio-2054, 908 N.E.2d 408, ¶ 20; Collins v. Click Camera & Video,
Inc., 86 Ohio App.3d 826, 834, 621 N.E.2d 1294 (2d Dist.1993). It consists of two
separate concepts: (1) substantive unconscionability; and (2) procedural
unconscionability. Olah v. Ganley Chevrolet, Inc., 8th Dist. Cuyahoga No. 86132,
2006-Ohio-694, ¶ 14.
Substantive unconscionability goes to the unfairness or
unreasonableness of the contractual terms. Featherstone v. Merrill Lynch, Pierce,
Fenner & Smith, Inc., 159 Ohio App.3d 27, 2004-Ohio-5953, 822 N.E.2d 841, ¶ 13
(9th Dist.). When a contractual term is “so one-sided as to oppress or unfairly
surprise” a party, the contractual term is said to be substantively unconscionable.
Neubrander v. Dean Witter Reynolds, Inc., 81 Ohio App.3d 308, 311-312, 610
N.E.2d 1089 (9th Dist.1992).
Procedural unconscionability, on the other hand, concerns the
formation of the agreement, and occurs when one party has such superior
bargaining power that the other party lacks a “meaningful choice” to enter into the
contract. DeVito v. Autos Direct Online, Inc., 2015-Ohio-3336, 37 N.E.3d 194, ¶ 19
(8th Dist.), citing Taylor Bldg. Corp. of Am. v. Benfield, 117 Ohio St.3d 352, 2008-
Ohio-938, 884 N.E.2d 12, ¶ 33. Courts have also characterized it as a lack of
voluntary meeting of the minds due to the circumstances surrounding the execution
of the contract. Collins at 834. In determining procedural unconscionability, courts
should consider factors relating to the bargaining power of each party, “such as age,
education, intelligence, business acumen and experience, relative bargaining power,
who drafted the contract, whether the terms were explained to the weaker party, and
whether alterations in the printed terms were possible.” Id. Generally, no one factor
alone determines whether a contract is procedurally unconscionable. Hayes at ¶ 29.
Instead, a court must consider the totality of the circumstances. Id. at ¶ 30.
A finding of unconscionability requires both procedural and
substantive unconscionability, although procedural and substantive aspects of
unconscionability are often integrally related. DeVito at ¶ 20. Most cases of
unconscionability involve a combination of procedural and substantive
unconscionability, and if more of one is present, then less of the other is required.
Id. “The more substantively oppressive the contract term, the less evidence of
procedural unconscionability is required.” Id., citing 1 E. Allan Farnsworth,
Farnsworth on Contracts, § 4.28, at 585 (3d Ed.2004).
Thomas contends that the arbitration agreement is procedurally
unconscionable because he was “forced” to sign the agreement months after he
began his employment with Migdal, and that Migdal had him “sign off [his] rights
as if there were some bargaining relationship, when there was not.” (Appellant’s
Brief, p. 12.) In short, Thomas contends that he had no “meaningful choice” but to
sign the agreement because he could not reasonably be expected to quit his job and
find new employment.
In its reply to Thomas’s brief in opposition to Migdal’s motion to stay
proceedings pending arbitration, Migdal admitted that Thomas’s continued
employment was conditioned upon his signing the arbitration agreement. (Reply
Brief, p. 7.) Thus we find disingenuous appellees’ repeated assertions to this court
that Thomas was not forced to sign the agreement because he could have revoked
his signature under paragraph 22 of the agreement within seven days of signing.
Nevertheless, the case law is clear that in an at-will employment
situation, Ohio employers may condition employment on the employee’s agreement
to arbitrate disputes. Dacres v. Setjo, 8th Dist. Cuyahoga No. 107638, 2019-Ohio2914, ¶ 36; Ignazio v. Clear Channel Broadcasting, Inc., 113 Ohio St.3d 276, 2007-
Ohio-1947, 865 N.E.2d 18 (enforcing arbitration agreement that conditioned
continued employment upon signing the agreement); Overman v. Ganley Ford W.,
Inc., N.D. Ohio No. 1:15 CV 1581, 2015 U.S. Dist. LEXIS 169601, 3-4 (Dec. 17, 2015)
(rejecting plaintiff’s argument that the arbitration agreement should not be enforced
because, among other reasons, “he was forced to sign the Arbitration Agreement to
keep his job”). Thus, Thomas’s argument that the agreement is procedurally
unconscionable because he had no choice but to sign the agreement in order to keep
his job is without merit.
Thomas also contends that the agreement is procedurally
unconscionable because he did not have an opportunity to understand its terms
before signing it. Thomas’s argument is not persuasive. He cites to no evidence to
support this assertion, and our review of the agreement reveals that Thomas signed
the agreement directly below a paragraph, written in bold lettering and all capital
letters, that stated:
I UNDERSTAND THAT, BY SIGNING THIS AGREEMENT, AND
EXCEPT WHERE PROHIBITED BY LAW, I AM GIVING UP
FOREVER MY RIGHT TO HAVE A COURT AND A JURY DECIDE
CLAIMS THAT I MIGHT WANT TO BRING AGAINST THE OTHER
PARTY, IF THOSE CLAIMS ARE COVERED BY THIS AGREEMENT.
I ALSO UNDERSTAND THAT I SHOULD CONSULT A LAWYER OF
MY CHOICE BEFORE SIGNING THIS AGREEMENT.
In light of the bolded, all-caps admonition that Thomas should consult a lawyer
before signing the agreement, we cannot conclude that Thomas did not have a
reasonable opportunity to understand the terms of the arbitration agreement before
he signed it.
Thomas also claims that the agreement is procedurally
unconscionable because it provides that the arbitrator’s award is final and binding
and not subject to appeal. Thomas cites no legal authority for this argument, but
claims that the “final and binding” nature of the arbitration award makes the
agreement unconscionable because he would have no ability to appeal if he
experienced any bias from the arbitrator. Under this logic, however, almost all
arbitration agreements would be unconscionable, given the ubiquity of agreements
that provide for final and binding arbitration.
Having determined that Thomas failed to establish the procedural
unconscionability of the agreement, we need not examine whether it is substantively
unconscionable. Jones, 9th Dist. Summit No. 28918, 2019-Ohio-211 at ¶ 21.
Accordingly, because Thomas’s claims are arbitrable and he failed to demonstrate
the agreement was unconscionable, the trial court did not abuse its discretion by
staying the proceedings pending arbitration.3 Despite the dissent’s conclusion that
it is against public policy to arbitrate claims such as Thomas’s, we note again that
Ohio has a strong public policy in favor of arbitration, including arbitration of claims
asserting workplace racial discrimination and unlawful retaliatory actions as a result
of the plaintiff’s complaints about such discrimination.
Outcome: Judgment affirmed.
It is ordered that appellee recover from appellant costs herein taxed.
The court finds there were reasonable grounds for this appeal.
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