United States District Court, D. Oregon
AMENDED OPINION AND ORDER
JOHN V. ACOSTA, Magistrate Judge.
This case arises out of an employment agreement ("Employment Agreement") between Thom Jensen ("Jensen") and his former employers, Fisher Communications, Inc., Fisher Broadcasting Company, and Fisher Broadcasting - Portland TV, LLC (collectively "Fisher"). Jensen filed this suit in January 2014 stating ten employment-related claims for relief. Fisher now moves to dismiss or stay this case, and compel arbitration pursuant to an arbitration clause governing disputes arising out of the Employment Agreement. Jensen opposes arbitration. He argues the arbitration clause is unconscionable and unenforceable under Oregon and federal law, and that Fisher has waived its right to compel arbitration.
In October 2006, Fisher hired Jensen to serve as an investigative reporter on a news program broadcast on KATU-TV, a television station in Portland, Oregon. (Declaration of John Tamerlano in Support of Motion to Compel Arbitration ("Tamerlano Deer) Ex. B at 1, 8.) Jensen served for seven years at KATU-TV. (Tamerlano Decl. Exs. C, D.) After he completed his three-year contract signed in 2006, he subsequently signed two-year extensions in 2009 and 2011. The three employment agreements are largely identical, the primary difference being Jensen's yearly salary, which increased from $75, 000 to $88, 000 during his seven years with KATU-TV. (Id.)
Included in each of Jensen's three contracts is a section entitled "Resolution of Disputes, Fees and Costs." (Tamerlano Decl Exs. B, C, D.) That section provides that, for any controversy or claim "arising out of, or relating to, [Jensen's] employment or termination of employment" with Fisher, the parties will first attempt to negotiate the matter. (Tamerlano Decl, Ex B, C, D at 6-7.) If the parties cannot successfully negotiate a mutually agreeable resolution, the contract calls for a nonbinding mediation. (Tamerlano Decl. Ex. D at 7.) If the dispute persists after mediation, then:
[t]he dispute shall be settled by final and binding arbitration in Seattle, Washington, in accordance with the national rules for the resolution of employment disputes of the American Arbitration Association. The arbitrator shall have the power to award monetary damages, costs, and reasonable attorneys' fees to the prevailing party. The only disputes not covered by this Agreement shall be worker's compensation claims, claims for unemployment compensation, and claims for injunctive relief and/or equitable relief by the Company for violation of Section 6 above. The parties agree to abide by and perform in accordance with any award rendered by the arbitrator, and agree that judgment upon the award may be entered by the prevailing party in any court having jurisdiction thereof. The arbitrator's fees and costs of arbitration shall be borne equally by the parties, subject to the authority above of the arbitrator to award costs and reasonable attorneys' fees to the prevailing party; provided, however, that arbitration costs which are prohibitively expensive for the Employee may be borne by the company, including such costs as the arbitration filing fee and the arbitrator's expenses.
Should either party file a judicial or administrative action asserting claims which are subject to this arbitration provision, and the other party successfully stays such action and/or succeeds in compelling arbitration of such claims, the party which filed the action shall pay the other party's costs and expenses incurred in seeking a stay or compelling arbitration, including its reasonable attorneys' fees.
(Tamerlano Decl. Exs. B, C, D at 7.)
In March 2013, Jensen filed a claim for Declaratory Judgment in Multnomah County Circuit Court. (Declaration of Aaron W. Baker ("Baker Decl.") Ex. A.) In his complaint, Jensen asked the court to declare the non-compete provisions of the Employment Agreement void and award him attorney fees and costs pursuant to OR. REV. STAT. § 28.100. (Baker Decl. Ex. A at 3.) Fisher filed an answer followed by a motion for summary judgment. Neither of Fisher's documents mentioned the arbitration clause or asserted that the matter was improperly before the Multnomah County Court, The record does not reflect if, when, or how Jensen's Multnomah County Court case resolved.
In January 2014, Jensen filed the present class-action suit in the U.S. District Court for the District of Oregon. (Dkt. No. 1.) Fisher answered Jensen's complaint, this time asserting the arbitration agreement as an affirmative defense. (Dkt. No. 10 at 11.) On June 5, 2014, Fisher filed a Motion to Compel Arbitration. (Dkt. No. 15.) In it, Fisher asks the court to dismiss, or alternatively, stay the present suit and order Jensen to participate in a binding arbitration in Seattle, Washington pursuant to the Employment Agreement. ( Id. )
The Federal Arbitration Act ("the FAA") establishes the validity and enforceability of agreements to arbitrate disputes arising out of contract, "save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. As a general principle, the Supreme Court has held that arbitration agreements in employment contracts are valid and enforceable. See Circuit City Stores v. Saint Clair Adams, 532 U.S. 105, 119 (2001) (the exemption in the FAA for employment contracts extends only to those of transportation workers). The FAA expresses the strong federal policy in favor of arbitration. Moses H. Cone Mem'l Hosp. V. MercuryConstr. Corp., 460 U.S. 1, 24 (1983).
"Evaluating a motion to compel arbitration requires a court to determine: (1) whether a valid agreement exists, and if it does, (2) whether the agreement encompasses the dispute at issue.'" Simpson v. Lifestyles, LLC, Civil No. 07-1251-HA, 2008 WL 1882838, at *2 (D. Or. Apr. 24, 2008), quoting Chiron Corp. v. Ortho Diagnostic Sys., 207 F.3d 1126, 1130 (9th Cir.2000). If the agreement is valid and encompasses the dispute, the court must "enforce the arbitration agreement in accordance with its terms." Id. Furthermore, there is "a presumption in favor of arbitrability." Livingston v. Metropolitan Pediatrics, LLC, 234 Or.App. 137, 147 (2010).
An otherwise valid arbitration clause may be found unconscionable and, thus, unenforceable. This is a question of law to be determined by the court and is "based on the facts in existence at the time the contract was made." Id. at 151, citing Best v. U.S. National Bank 303 Or. 557, 560 (1987). Contract terms are evaluated for both procedural and substantive unconscionability, and the party asserting it bears the burden of demonstrating unconscionability. Simpson, 2008 WL 1882838, at *9.
I. Applicability of the Federal Arbitration Act
Before reaching the merits of Fisher's motion, the court must make first determine the applicable law. Federal courts siting in diversity must apply state substantive law and federal procedural law. Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 427 (1996). However, the distinction between the procedural and substantive is not always clear. Id. In parsing the procedural from the substantive, courts analyze whether the law in question has "so important an effect upon the fortunes of one or both of the litigants that failure to apply it" would lead to inconsistent results or judicial forum shopping. Hanna v. Plummer, 380 U.S. 460, 468 n.9 (1965). More recently, the Supreme Court held that a state statute is substantive if it "significantly affects the result of a litigation" on the merits. Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 559 U.S. 393, 406 (2010).
The Federal Arbitration Act ("FAA") "was enacted in 1925 in response to widespread judicial hostility to arbitration agreements." AT&T Mobility LLC v. Conception, ___ U.S. ___, 131 S.Ct. 1740, 1745 (2011). It expresses a "liberal federal policy favoring arbitration" and shows an "unmistakably clear congressional purpose that the arbitration procedure, when selected by the parties to a contract, be speedy and not subject to delay and obstruction in the courts." Id .; Prima Paint Corp. v. Flood & Conclin Mfg. Co., 388 U.S. 395, 404 (1967). The Supreme Court has held that the FAA is "substantive law" for Erie analysis purposes, but nonetheless applies it in diversity cases. Id. The court explained:
[t]he question in this case is not whether Congress may fashion federal substantive rules to govern questions arising in simple diversity cases. Rather the question is whether Congress may prescribe how federal courts are to conduct themselves with respect to subject matter over which Congress plainly has power to legislate. The answer to that can only be in the affirmative. And it is clear beyond dispute that the federal arbitration statute is based ...