United States Court of Appeals
For the First Circuit
No. 10-1626
VIDALINA SOTO,
Plaintiff, Appellant,
v.
STATE INDUSTRIAL PRODUCTS, INC., ET AL.,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Jaime Pieras, Jr., U.S. District Judge]
Before
Lynch, Chief Judge,
Souter, Associate Justice,*
and Stahl, Circuit Judge.
Carlos R. Paula, with whom Melissa Figueroa Del Valle and
Labor Counsels were on brief, for appellant.
William A. Barnett, with whom Jeffrey M. Williams, Seth A.
Erbe, and Indiano & Williams, P.S.C. were on brief, for appellees.
April 15, 2011
*
The Hon. David H. Souter, Associate Justice (Ret.) of the
Supreme Court of the United States, sitting by designation.
LYNCH, Chief Judge. In March 2009, Vidalina Soto filed
this employment discrimination suit in federal court, alleging
violations of the Americans with Disabilities Act, 42 U.S.C.
§ 12101 et seq., and Puerto Rico law. Soto named as defendants
State Industrial Products Corp. and State Chemical Sales Company
International, Inc. (together "State Chemical"), which have
employed Soto since 1992, their insurance companies, and associated
individuals. State Chemical moved to dismiss and compel
arbitration pursuant to the Federal Arbitration Act ("FAA"), 9
U.S.C. § 1 et seq., on the grounds that the dispute was covered by
an arbitration agreement.
Soto argued that the arbitration agreement was
unenforceable due to a lack of consideration and consent. The
district court rejected these arguments and dismissed Soto's
complaint without prejudice on March 24, 2010. Soto v. State Chem.
Sales Co. Int'l, 719 F. Supp. 2d 189 (D.P.R. 2010). Soto filed a
timely appeal.
We affirm the judgment of the district court. We reject
Soto's claims that she did not receive valid consideration for
signing the arbitration agreement, that her consent was rendered
void by the conditions under which she signed the agreement, and
that the arbitral costs imposed by the agreement are
unconscionable.
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I.
We begin by describing the four documents that State
Chemical submitted to the district court with its motion to dismiss
and compel arbitration.1
The first document, titled "Acknowledgment," states:
I have received and read the alternative
dispute resolution program of State Industrial
Products ("ADR Program").
I understand that it is a three-step program
consisting of:
1. Internal negotiation;
2. Mediation conducted by an
independent, neutral third party; and
3. Arbitration before an independent,
neutral third party.
I understand that if, I am employed by State
Industrial Products prior to January 1, 1996,
I will retain all my rights to go to court if
I so desire at the conclusion of the ADR
program.
Soto signed and dated this document on June 15, 1996.
The second document, titled "Acknowledgment of Attendance
and Receipt," states:
1
State Chemical's initial motion to dismiss for lack of
jurisdiction did not ask the district court to compel arbitration,
but its reply memo clarified that it sought such relief. The
district court's Opinion and Order stated that it granted relief
compelling arbitration, but the court's Judgment did not. Soto
presents no arguments as to these anomalies. In any event, we may
treat a motion to dismiss based on an arbitration clause as a
request to compel arbitration when the facts of the case make it
clear that the party intended to invoke arbitration. See IOM Corp.
v. Brown Forman Corp., 627 F.3d 440, 449 n.10 (1st Cir. 2010); Fit
Tech, Inc. v. Bally Total Fitness Holding Corp., 374 F.3d 1, 6 (1st
Cir. 2004).
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I acknowledge that on June 15, 1996, I
attended a meeting in which State Industrial
Product's Dispute Resolution Program was
described. I also acknowledge that on this
date I received a copy of the State Industrial
Products Dispute Resolution Program.
Soto signed and dated this document on June 15, 1996.
The third document, titled "Sales Associate's Employment
Agreement," is a written employment contract. It states in two
places that Soto's employment is on an "at-will" basis. The
contract recites that it is supported by consideration in the form
of "the terms and conditions and the mutual covenants herein set
forth and such other good and valuable consideration, the receipt
of which is hereby acknowledged."
The contract contains an arbitration clause, which is not
listed in either the "Company Obligations and Covenants" section or
the "Associate Obligations and Covenants" section, but rather is
listed in an independent section, titled "Alternative Dispute
Resolution," that states a mutual obligation:
I understand that the Company has a three-step
Alternative Dispute Resolution Program for its
employees consisting of 1. negotiation, 2.
mediation, and 3. final and binding
arbitration. In consideration for my
employment or continued employment by the
Company, I agree that this will be my
exclusive means of making any employment-
related claim against the Company, as set
forth in more detail in the State Industrial
Products Dispute Resolution Program, a copy of
which I have been provided.
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Soto signed this contract on March 1, 2001. It bears Soto's
initials on every page, and includes a separately initialed clause
in bold stating: "I HAVE READ AND I FULLY UNDERSTAND EACH AND EVERY
PROVISION OF THE FOREGOING AND DO HEREBY ACCEPT AND AGREE TO THE
SAME." The contract is also initialed and signed by a
representative from human resources.
The fourth document is a copy of the ADR Program that is
referenced in the documents that Soto signed. This document states
that the program has an effective date of January 1, 1996, and that
"[c]ontinued employment by the Company after this date is
consideration for and constitutes acceptance of this alternative
dispute resolution program."
The Program sets out a three-step process. The first
step is negotiation. If the parties do not reach a settlement
within 30 working days, they proceed to mediation before the
American Arbitration Association. If the claim remains unresolved
after mediation, the parties go to arbitration under the
arbitration clause:
If the Employment Claim remains unresolved
following MEDIATION, the Complainant agrees to
promptly submit the Employment Claim to
ARBITRATION administered by the American
Arbitration Association in Cleveland, Ohio
under its Employment Dispute Resolution Rules.
. . . The Company agrees to pay one-half of
the filing fee and the Complainant agrees to
pay one-half of the filing fee to the American
Arbitration Association (current filing fee is
$500.00). The Company agrees to pay the
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arbitrator's fee over and above the filing fee
(approximately $750.00/day).
Other relevant provisions of this clause are as follows:
1. Procedure
The ARBITRATION shall take place in a location
to be determined by the Company, and the
Company shall pay reasonable out-of-pocket
travel expenses if any are incurred by the
Complainant as a result of the Company's
choice of location. . . .
2. Remedies
The arbitrator shall have the authority to
award whatever remedies would have been
available to the employee through a federal
court or the courts of the state in which the
hearing is held and which he/she determines to
be supported by credible, relevant evidence.
Employees who were employed before the effective date of
January 1, 1996 do "not waive their right to go into court if they
are dissatisfied at the conclusion of the three step program,"
while those employed after that date waive "the right to take such
disputes to court." This aspect of the agreement is explained in
a section titled "Effect of Findings," which states:
If an individual was employed prior to January
1, 1996, the arbitrator's decision shall be
final and binding only if both parties so
stipulate. If the parties do stipulate that
the decision is final and binding, it may be
entered in any court having jurisdiction
thereof. If the decision is not mutually
stipulated to be final and binding, and a
court proceeding is instituted, the decision
shall be admissible in that proceeding.
If a person is employed on or after January 1,
1996, the arbitrator's decision shall be final
and binding, and may be entered in any court
having jurisdiction thereof.
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Although it is only employees who are initially bound to
submit their claims under this Program, the obligations imposed by
the Program are mutual. When an employee submits a complaint,
State Chemical must comply with the three-phase procedure outlined
above, which includes the possibility of a binding arbitral
decision.
The only carve-outs are contained in the clause titled
"What Disputes Are Covered By This Program," which states that the
following claims are not covered: "Worker's compensation claims;
Unemployment compensation claims; and Claims by the company for
injunctive relief and/or damages including but not limited to
unfair competition, trade secrets, or confidential information
claims."
The Program expressly preserves the right of an employee
to take a complaint to "the appropriate Human Rights Commission,
the [Equal Employment Opportunity Commission] or any other
government regulatory body."
II.
Because there is no dispute as to the authenticity of the
documents submitted by State Chemical, and "abstract questions as
to whether particular disputes do (or do not) come within the four
corners of an expressly limited arbitration provision are legal in
nature," we review the district court's judgment de novo. Paul
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Revere Variable Annuity Ins. Co. v. Kirschhofer, 226 F.3d 15, 18-19
(1st Cir. 2000).2
"The FAA reflects the fundamental principle that
arbitration is a matter of contract." Dialysis Access Ctr., LLC
v. RMS Lifeline, Inc., No. 10-1872, 2011 WL 1139144, at *4 (1st
Cir. Mar. 30, 2011) (quoting Rent–A–Center, West, Inc. v. Jackson,
130 S. Ct. 2772, 2776 (2010)) (internal quotation marks omitted).
Employers and employees may contractually agree to submit federal
claims, including claims under the ADA, to arbitration. Bercovitch
v. Baldwin Sch., Inc., 133 F.3d 141, 149-51 (1st Cir. 1998); see
also Gilmer v. Interstate/Johnson Lane Corp, 500 U.S. 20, 35 (1991)
(holding that age discrimination claim was subject to compulsory
arbitration); Rosenberg v. Merrill Lynch, Pierce, Fenner & Smith,
Inc., 170 F.3d 1, 7 (1st Cir. 1999) (holding that Title VII claim
was subject to compulsory arbitration).
2
Soto argues that the district court improperly relied on
the arbitration agreement documents, which were outside the scope
of her complaint, without treating State Chemical's motion as a
Rule 56 motion for summary judgment. However, State Chemical's
motion was not based on Rule 12(b)(6) or Rule 12(c), which might
have triggered this requirement, but rather was made pursuant to
the FAA, 9 U.S.C. § 4. Also, although Soto claims she put material
facts into dispute, "a party cannot avoid compelled arbitration by
generally denying the facts upon which the right to arbitration
rests; the party must identify specific evidence in the record
demonstrating a material factual dispute for trial." Tinder v.
Pinkerton Sec., 305 F.3d 728, 735 (7th Cir. 2002). Soto's only
evidence, her unsworn declaration, did not raise a genuine issue of
material fact. Cf. id. at 736 (holding that employee's affidavit
that she never saw arbitration program documents did not raise
triable issue of fact as to existence of agreement to arbitrate
that would preclude compelled arbitration).
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"A party seeking to compel arbitration under the FAA must
demonstrate 'that a valid agreement to arbitrate exists, that the
movant is entitled to invoke the arbitration clause, that the other
party is bound by that clause, and that the claim asserted comes
within the clause's scope.'" Dialysis Access Ctr., 2011 WL
1139144, at *4 (quoting InterGen N.V. v. Grina, 344 F.3d 134, 142
(1st Cir. 2003)). This case turns on the first of these
requirements--the validity of the agreement.
The contract law of Puerto Rico "control[s] the
determination of whether a valid agreement to arbitrate exists."
Campbell v. Gen. Dynamics Gov't Sys. Corp., 407 F.3d 546, 552 (1st
Cir. 2005). Under Puerto Rico law, there are three elements to a
valid contract: "(1) The consent of the contracting parties. (2) A
definite object which may be the subject of the contract. (3) The
cause for the obligation which may be established." P.R. Laws Ann.
tit. 31, § 3391. "Consent given by error, under violence, by
intimidation, or deceit shall be void." Id. § 3404; see also
Dialysis Access Ctr., 2011 WL 1139144, at *7 (discussing
requirements of consent).
The central question in this case is whether the
arbitration agreement signed by Soto is invalid for lack of
consideration (what the quoted statute refers to as "cause for the
obligation") or consent. Soto claims that she did not receive
adequate consideration for entering into the agreement, and that
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the district court's conclusion otherwise is (1) inconsistent with
established Puerto Rico law on consideration for noncompetition
agreements, and (2) inconsistent with Puerto Rico Law 80, P.R. Laws
Ann. tit. 29, § 185a et seq. ("Law 80"). Soto claims that her
consent to the arbitration agreement is void because (1) she signed
the documents under threat of losing her continued employment, and
(2) she is not fluent in English and did not "fully understand" the
content of the documents that she signed. We address these
arguments in turn.
A. Consideration
1. Continued Employment
The parties have not cited to us any cases by Puerto Rico
courts deciding whether continued employment--which is expressly
invoked by the arbitration agreement as consideration for signing
it--is valid consideration under Puerto Rico law. Soto advances
two arguments as to why it is not.
Her first argument is based on an analogy to Puerto Rico
law on noncompetition covenants and the Puerto Rico Supreme Court's
decision in Arthur Young & Co. v. Vega III, 136 D.P.R. 157, 1994
P.R.-Eng. 909,262 (1994). That decision, by now Chief Justice
Hernández Denton, specified the conditions of validity for
noncompetition covenants that place restrictions on an employee's
post-employment work. Addressing the issue of consideration, the
court stated:
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[T]he employer shall offer a consideration in
exchange for the employee signing the
noncompetition covenant. This consideration
could consist, for example, of a promotion,
additional employment benefits, or the
enjoyment of substantial changes of a similar
nature in the employment conditions. Adequate
consideration could even be that a candidate
gets the position he wished for in the
company. Mere job tenure, however, will not
be admitted as a consideration of the
noncompetition agreement.
Id. Soto relies on this statement to argue that continued
employment is inadequate consideration for signing an arbitration
agreement.3 We reject this argument for two reasons.
First, Arthur Young does not opine on the consideration
needed to support an agreement to arbitrate employment disputes,
and its statement about the consideration required for a
noncompetition agreement was part of a broader set of requirements
that do not apply to other contract clauses.4 Likewise, the
3
The Arthur Young decision did not specify what was meant
by "job tenure" or elaborate on this point, as it held that Vega's
promotion was valid consideration for the noncompetition covenant.
4
For example, the court held that an employer can only
impose a noncompetition agreement if its absence would "seriously
affect[]" the employer's interests, and that the existence of such
interests "depend[s] on whether the employee's position in the
company enables him to effectively compete with his employer in the
future." Arthur Young & Co. v. Vega III, 136 D.P.R. 157, 1994
P.R.-Eng. 909,262 (1994). The court also held that "the scope of
the prohibition must fit the employer's interest, insofar as
object, time, and place of the restriction or clients involved is
concerned." Id. Specifically, the court held that the
"noncompetition term should not exceed twelve months" and "the
contract must specify the geographic limits or the clients
involved," which "must be strictly limited to that necessary to
prevent an actual competition between employer and employee." Id.
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motivations for these restrictions, which have been recognized by
many jurisdictions, see generally Ferdinand S. Tinio, Annotation,
Sufficiency of Consideration for Employee's Covenant Not to
Compete, Entered into After Inception of Employment, 51 A.L.R.3d
825, § 4(a) (2010) (listing cases), are not necessarily applicable
to arbitration agreements, see Pine River State Bank v. Mettille,
333 N.W.2d 622, 630 n.5 (Minn. 1983) (stating that the requirements
of consideration for noncompetition clauses are different than
those for other contract clauses).
Second, while Puerto Rico may impose special restrictions
on noncompetition agreements, it is preempted from imposing special
restrictions on arbitration agreements. As the Supreme Court has
explained, arbitration agreements may not be invalidated "under
state laws applicable only to arbitration provisions. . . .
Congress precluded States from singling out arbitration provisions
for suspect status, requiring instead that such provisions be
placed 'upon the same footing as other contracts.'" Doctor's
Assocs., Inc. v. Casarotto, 517 U.S. 681, 687 (1996) (quoting
Scherk v. Alberto-Culver Co., 417 U.S. 506, 511 (1974)) (citations
omitted); see also KKW Enters., Inc. v. Gloria Jean's Gourmet
Coffees, 184 F.3d 42, 50-52 (1st Cir. 1999).
For these reasons, we reject Soto's invitation to expand
the scope of Arthur Young to hold that continued employment cannot
constitute valid consideration for an arbitration agreement. Cf.
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Cherena v. Coors Brewing Co., 20 F. Supp. 2d 282 (D.P.R. 1998)
(holding that although a non-competition clause failed to satisfy
Puerto Rico's requirements of consideration under Arthur Young, a
severable non-disclosure clause was enforceable); see also Jimenez
v. Island Oasis Frozen Cocktail Co., Inc., No. 09-1748, 2010 WL
3719216 (D.P.R. Sept. 14, 2010) (same).
Soto's second argument, which she raises for the first
time on appeal, is that the requirements imposed on employers by
Law 80 precludes a finding that continued employment can constitute
valid consideration. We bypass her waiver, to evaluate her
argument and its underlying premise that Law 80 creates a right to
continued employment.
In Puerto Rico, there are specialized statutes that
create a right to continued employment in certain contexts. See,
e.g., P.R. Laws Ann. tit. 21, § 4560 ("Every regular career
employee recruited according to the provisions of this subtitle,
who meets the criteria of productivity, efficiency, order and
discipline . . . , shall be entitled to permanent employment
status."). But Soto is mistaken in characterizing Law 80 as one of
them.
Law 80, a statute of general application, applies to
"[e]very employee in commerce, industry, or any other business or
work place . . . , contracted without a fixed term, who is
discharged from his/her employment without just cause." P.R. Laws
-13-
Ann. tit. 29, § 185a. Under Law 80, these employees are entitled
to a form of severance pay known as a "mesada," which is calculated
using a formula based on the employee's salary and years of
service.5 See Otero-Burgos v. Inter Am. Univ., 558 F.3d 1, 7-9
(1st Cir. 2009) (providing overview of content and purpose of
Law 80).
Any claim that Law 80 does more than create a right to
severance pay for covered employees is foreclosed by our precedent.
See Rodriguez v. E. Air Lines, Inc., 816 F.2d 24 (1st Cir. 1987)
(rejecting district court's holding that Law 80 imposed a duty on
employers to retain employees with greater seniority when lay-offs
became necessary, id. at 25, 28, and holding that "severance pay is
the only remedy available under Law 80," id. at 29).
5
The discharged employee is entitled to:
(a) The salary corresponding to two (2)
months, as indemnity, if discharged within the
first five (5) years of service; the salary
corresponding to three (3) months if
discharged after five years (5) and up to
fifteen (15) years of service; the salary
corresponding to six (6) months if discharged
after fifteen (15) years of service.
(b) An additional progressive compensation
equal to one (1) week for each year of
service, if discharged within the first five
(5) years of service; to two (2) weeks for
each year of service, if discharged after five
(5) years and up to fifteen (15) years of
service; to three (3) weeks for each year of
service if discharged after fifteen (15) years
of service.
P.R. Laws Ann. tit. 29, § 185a.
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Soto concedes that new employment is valid consideration
for the execution of an arbitration agreement, see Hadnot v. Bay,
Ltd., 344 F.3d 474, 477 (5th Cir. 2003) (holding that offer of
at-will employment is valid consideration to support an arbitration
agreement), but argues that continued employment is different. For
at-will employees, it is hard to see why.
In exchange for Soto's agreement to arbitrate, State
Chemical did not invoke its right to terminate her employment--a
right that it could have exercised, even without cause, subject to
Law 80 remedies. The continued employment of Soto by State
Chemical under the new arrangement, which was not obligatory on the
part of State Chemical, was sufficient consideration to render the
agreement enforceable. Accord Tinder v. Pinkerton Sec., 305 F.3d
728, 734-35 (7th Cir. 2002) (Wis. law); Pomposi v. GameStop, Inc.,
No. 3:09-cv-340, 2010 WL 147196, at *6 (D. Conn. Jan. 11, 2010)
(Conn. law); Baumann v. The Finish Line, Inc., No. 1:08-cv-1385,
2009 WL 2750094, at *4 (S.D. Ind. Aug. 26, 2009) (Ind. law); Heath
v. Travelers Cos., No. 08-6055, 2009 WL 1921661, at *5 (D. Minn.
July 1, 2009) (Minn. law); Ellerbee v. GameStop, Inc., 604 F. Supp.
2d 349, 354 (D. Mass. 2009) (Mass. law); Fontaine v. Rent-a-Center
West, Inc., No. 05-1485, 2006 WL 141606, at *3 (D. Or. Jan. 13,
2006) (Or. law); Durkin v. CIGNA Property & Cas. Corp., 942 F.
Supp. 481, 488 (D. Kan. 1996) (Kan. law); Ex parte McNaughton, 728
So. 2d 592, 595-96 (Ala. 1998) (Ala. law); Towles v. United
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HealthCare Corp., 524 S.E.2d 839, 845 n.4 (S.C. App. 1999) (S.C.
law).6
The fact that State Chemical stated that Soto's continued
employment was conditional on her signing of the agreement dispels
any possible doubt over whether the consideration received was
real. Cf. Gibson v. Neighborhood Health Clinics, Inc., 121 F.3d
1126, 1132 (7th Cir. 1997) (finding that continued employment did
not constitute consideration for arbitration agreement when
employer had neither promised to continue employment nor stated
that employee's status would be uncertain if she did not sign);
Advanced Copy Prods., Inc. v. Cool, 363 N.E.2d 1070, 1071 (Ind.
App. 1977) (finding that because there was no evidence that an
employee's continued employment was dependent upon his signing a
noncompetition agreement, continued employment did not constitute
consideration to support the covenant).
Absent specific support from the case law of Puerto Rico,
we reject Soto's argument that her continued employment did not
constitute valid consideration for her signing of the arbitration
agreement. But as we explain below, even if Soto were correct on
this point, the arbitration agreement would still be enforceable,
as it was supported by independent valid consideration.
6
We are not convinced by those cases that have held
otherwise. See, e.g., Morrow v. Hallmark Cards, Inc., 273 S.W.3d
15, 27-29 (Mo. App. 2008); Piano v. Premier Distrib. Co., 107 P.3d
11, 14-15 (N.M. App. 2004); J.M. Davidson, Inc. v. Webster, 128
S.W.3d 223, 228 (Tex. 2003).
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2. Bilateral Obligation to Arbitrate
Soto also received, in exchange for her promise to adhere
to and be bound by the terms of an ADR Plan that included
arbitration, State Chemical's promise to do the same.
"Puerto Rican law provides that 'a bilateral obligation
assumed by each one of the parties to the contract, has, as its
consideration, the promise offered in exchange.' Both parties must
be bound based on 'mutual consideration' that yields either a
benefit or a detriment to each party." Adria Int'l Grp., Inc. v.
Ferre Dev., Inc., 241 F.3d 103, 107 (1st Cir. 2001) (citations
omitted) (quoting United States v. Perez, 528 F. Supp. 206, 209
(D.P.R. 1981)). Although the parties have not cited to us any
cases by Puerto Rico courts applying this basic principle of
contract law to agreements to arbitrate, other courts applying the
principle have held that the equal obligation of an employee and
employer to arbitrate disputes falling in the coverage of an ADR
plan "is enough to ensure mutuality of obligation and thus
constitute consideration." Seawright v. Am. Gen. Fin. Servs., 507
F.3d 967, 974 (6th Cir. 2007) (Tenn. law); accord Blair v. Scott
Specialty Gases, 283 F.3d 595, 603-04 (3rd Cir. 2002) (Pa. law);
Michalski v. Circuit City Stores, Inc., 177 F.3d 634, 637 (7th Cir.
1999) (Wis. law); Koveleskie v. SBC Capital Markets, Inc., 167 F.3d
361, 368 (7th Cir. 1999) (Ill. law); O'Neil v. Hilton Head Hosp.,
115 F.3d 272, 274-75 (4th Cir. 1997) (S.C. law).
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In the case before us, the arbitration clause is
supported by this type of mutual consideration. Soto was employed
prior to January 1, 1996, so an arbitral decision will be "final
and binding" and entered in court "only if both parties so
stipulate." Because both Soto and State Chemical promise only to
forgo a judicial forum in the first instance, and to be bound by
the result only if they so stipulate, their promises to arbitrate
constitute valid mutual consideration. See Ramirez-Lebron v. Int'l
Shipping Agency, Inc., 593 F.3d 124, 132 n.4 (1st Cir. 2010).
The fact that it is the complainant who must submit to
arbitrate claims unresolved by mediation does not make the
consideration provided by State Chemical illusory. Most
jurisdictions do not require that both parties to a contract have
identical remedies to satisfy the general requirement of mutuality
of obligation, see, e.g., Restatement (Second) of Contracts § 363
cmt. c (1981); 25 Richard A. Lord, Williston on Contracts § 67:40
(4th ed. 2010), and we are aware of nothing in Puerto Rico
statutory or case law that requires otherwise, see, e.g., P.R. Laws
Ann. tit. 31, § 3391. Further, as we noted earlier, the FAA
preempts Puerto Rico from imposing such a requirement applicable
only to arbitration provisions. Casarotto, 517 U.S. at 687;
Southeastern Stud & Components, Inc. v. Am. Eagle Design Build
Studios, LLC, 588 F.3d 963, 966-67 (8th Cir. 2009) (discussing FAA
preemption of mutuality requirements for arbitration clauses).
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We will not impose mutuality of remedy as a requirement
of consideration for arbitration agreements under Puerto Rico law.
Accord Circuit City Stores, Inc. v. Najd, 294 F.3d 1104, 1108 (9th
Cir. 2002) (Cal. law); Blair, 283 F.3d at 604 (Pa. law); Harris v.
Green Tree Fin. Corp., 183 F.3d 173, 181 (3d Cir. 1999) (Pa. law);
Michalski, 177 F.3d at 636 (Wis. law); Barker v. Golf U.S.A., Inc.,
154 F.3d 788, 791-92 (8th Cir. 1998) (Okla. law); Johnson v.
Circuit City, 148 F.3d 373, 378 (4th Cir. 1998) (Md. law); Willis
Flooring, Inc. v. Howard S. Lease Constr. Co. & Assocs., 656 P.2d
1184, 1185 (Alaska 1983).
We agree with the district court that Soto's agreement to
arbitrate was supported by valid consideration.
B. Consent
We also agree with the district court that the agreement
is not unenforceable for lack of consent. Under Puerto Rico law,
"[c]onsent given by error, under violence, by intimidation, or
deceit shall be void." P.R. Laws Ann. tit. 31, § 3404.
Soto stated in an unsworn declaration that she was told
that she would be fired if she did not sign the "Acknowledgment,"
"Acknowledgment of Attendance and Receipt," and "Sales Associate
Employment Agreement;" that she is not fluent in English and did
not fully understand the documents; that she requested and was
denied the opportunity to meet with a lawyer before signing them;
and that she was not provided with copies or translations of the
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documents, even though she requested them.7 Soto also stated that
she never attended any meeting in which the ADR Program was
discussed, and that the first time she saw the program document was
in State Chemical's motion to dismiss. On the basis of this
declaration, Soto advances two arguments as to why her consent to
the agreement is void.
Soto first argues that her consent to the agreement was
induced by threat of job loss, and that this threat constituted
intimidation that rendered her consent void. State Chemical
acknowledges that signing the arbitration agreement was a condition
of continued employment. The only question is whether this
constitutes intimidation as a matter of law.
As defined under Puerto Rico law, "[i]ntimidation exists
when one of the contracting parties is inspired with a reasonable
and well-grounded fear of suffering an imminent and serious injury
to his person or property, or to the person or property of the
spouse, descendants, or ascendants." Id. § 3406. Because Soto
does not claim that State Chemical made any threat of injury to her
7
This declaration was roughly made pursuant to 28 U.S.C.
§ 1746, which states: "Wherever . . . any matter is required or
permitted to be supported, evidenced, established, or proved by the
sworn declaration, verification, certificate, statement, oath, or
affidavit, in writing of the person making the same (other than a
deposition, or an oath of office, or an oath required to be taken
before a specified official other than a notary public), such
matter may, with like force and effect, be supported, evidenced,
established, or proved by the unsworn declaration, certificate,
verification, or statement, in writing of such person which is
subscribed by him, as true under penalty of perjury . . . ." Id.
-20-
person, and she has made no showing that she had a property
interest in her at-will employment, she can make no viable claim
that she was intimidated under the meaning of Puerto Rico law. Cf.
Stereo Gema, Inc. v. Magnadyne Corp., 941 F. Supp. 271, 276 (D.P.R.
1996) (finding that consent was not rendered void by the fact that
party did not speak English or understand the contract, which was
written in English; that he declared that he would not have signed
agreement if he had been aware of the disputed clause; and that he
was told that if he did not sign the agreement, he would lose the
contract).
Soto's next argument is that Law 80 makes it illegal for
State Chemical to threaten to fire her for refusing to sign the
agreement. She argues that because refusal to sign does not
constitute "just cause" for dismissal under the law, it was illegal
for State Chemical to make her continued employment conditional on
her signing of the agreement. But as we have already explained,
Law 80 does not make it illegal for State Chemical to fire Soto
without just cause. As such, an arbitration agreement is not made
unenforceable by Law 80 merely because signing it was a condition
of continued employment. Cf. Rosenberg, 170 F.3d at 17 (holding
that although signing arbitration agreement was condition of
employment, agreement was not void for unconscionability).
Soto's final argument is that her consent was void
because she is not fluent in English and did not "fully" understand
-21-
the contents of the documents that she signed. This amounts to an
argument that she consented in error under P.R. Laws Ann. tit. 31,
§ 3404. However, an error can only invalidate consent if it is
excusable, which it is not "when the ignorance of the true state of
things is due to negligence or fault of the one who invokes it."
Citibank Global Markets, Inc. v. Rodriguez Santana, 573 F.3d 17, 24
(1st Cir. 2009) (quoting Capo Caballero v. Ramos, 83 D.P.R. 650
(1961)) (internal quotation marks omitted).
Here, the facts alleged by Soto make it clear that any
error in her understanding of the contract is not excusable. In
1996, Soto signed two documents acknowledging that she had been
given a copy of the ADR Program document, that she understood it,
and that she agreed to it. And in 2001, she again signed a
contract agreeing to the terms of the Program. She now alleges
that she never received a copy of the Program. Under Puerto Rico
law, "the onus was on her" to obtain and read a copy before signing
it. Rodriguez-Bird v. Santander Sec. Corp., No. 09-2238, 2010 WL
2541708, at *2 (D.P.R. June 17, 2010).
Further, it is a general and well established principle
of contract law that "one who is ignorant of the language in which
a document is written, or who is illiterate," may be bound to a
contract by negligently failing to learn its contents. 1 Richard
A. Lord, Williston on Contracts § 4:19 (4th ed. 2010) (footnote
omitted); see also N.Y. Life Ins. Co. v. Kwetkauskas, 63 F.2d 890,
-22-
891 (3d Cir. 1933) (recognizing principle); Stern v. Moneyweight
Scale Co., 42 App. D.C. 162, 165 (D.C. Cir. 1914) (same); Chicago,
St. P., M. & O. Ry. Co. v. Belliwith, 83 F. 437, 439-40 (8th Cir.
1897) (same). "In the absence of fraud, the fact that an offeree
cannot read, write, speak, or understand the English language is
immaterial to whether an English-language agreement the offeree
executes is enforceable." Morales v. Sun Constructors, Inc., 541
F.3d 218, 222 (3d Cir. 2008); see also id. 222-23 (listing cases).
The fact that Soto did not "fully" understand the
agreements that she signed because of her lack of fluency in
English, of which she was aware, does not render void her consent
to arbitrate. Cf. Herman v. Hogar Praderas de Amor, Inc., 130 F.
Supp. 2d 257, 262-63 (D.P.R. 2001) (rejecting challenge to the
validity of a waiver even though the document was written in
English, which the signing party did not understand, and the other
party did not explain its contents in the meeting at which it was
signed); see also Sanchez-Santiago v. Guess, Inc., 512 F. Supp. 2d
75, 79-80 (D.P.R. 2007).
C. Unconscionability
Soto makes an argument to this court on appeal, which was
not made to the district court, that the terms of the arbitration
agreement are so unreasonable that they should not be enforced. We
bypass, in part, her waiver and reject this claim.
-23-
Soto argues that the agreement imposes excessive
arbitration fees that will have the effect of preventing her from
making any claims against State Chemical. There is nothing in the
record that supports this argument. The filing fee that Soto paid
to file this federal court action in 2009 was $350. By contrast,
the Program states that if a claim proceeds to arbitration, the
employee "agrees to pay one-half of the filing fee to the American
Arbitration Association (current filing fee is $500.00)." And
under the current AAA rules for disputes arising out of employer-
promulgated plans, the fees would be even less: "In cases before a
single arbitrator, a nonrefundable filing fee capped in the amount
of $175 is payable in full by the employee when a claim is filed,
unless the plan provides that the employee pay less. A
nonrefundable fee in the amount of $925 is payable in full by the
employer, unless the plan provides that the employer pay more."
The arbitration scheme does not require Soto to pay for
the time spent by the decision maker. The Program clearly states
that the "Company agrees to pay the arbitrator's fee over and above
the filing fee (approximately $750.00/day)." Soto claims that this
language is ambiguous and may be read as requiring that she pay the
arbitrator's daily fee up to an amount equal to the filing fee. We
are not persuaded by this reading of the clause, and in any event,
State Chemical is bound by its representations to this court that
Soto would pay no more than one-half of the AAA filing fee.
-24-
Soto also argues that State Chemical could choose to have
the arbitration located in Cleveland, Ohio, which would also impose
prohibitive costs and prevent her from making a claim. Although it
is true that the Program states that the arbitration "shall take
place in a location to be determined by the Company," it also
states that "the Company shall pay reasonable out-of-pocket travel
expenses if any are incurred by the Complainant as a result of the
Company's choice of location." Further, State Chemical is bound by
its representation to this court at oral argument that Puerto Rican
employment disputes would be arbitrated in Puerto Rico, and that if
the arbitration occurred outside of Puerto Rico, State Chemical
would pay not only Soto's reasonable expenses, but also those of
any witnesses that she needed to bring from Puerto Rico.
Soto presents other arguments to us on appeal that were
not presented to the district court. They are waived.
III.
We affirm the judgment of the district court.
-25-
Soto v. STATE INDUSTRIAL PRODUCTS, INC.
Court: Court of Appeals for the First Circuit
Date filed: 2011-04-15
Citations: 642 F.3d 67
Copy Citations