UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
C.J. MERCADANTE, et al.,
Plaintiffs
v. Civil Action No. 11-1044 (CKK)
XE SERVICES, LLC, et al.,
Defendant
MEMORANDUM OPINION
(January 15, 2015)
Plaintiffs C.J. Mercadante, Robert Biddle, Johnny Jefferson, and Phillip W. OHara
(collectively “Plaintiffs”) brought this action on their own behalf and on behalf of a putative
class against Defendants XE Services, LLC; U.S. Training Center, Inc.; USTC Security
Consulting, LLC f/k/a Blackwater Security Consulting, LLC; and Blackwater Worldwide Trust,
Health and Welfare Plan and Trustees (collectively, “Defendants” or “Blackwater”). Plaintiffs
assert a series of claims—including breach of contract, fraud, and breach of fiduciary duty under
the Employment Retirement Income Security Act of 1974—and allege, among other things, that
they were misclassified as independent contractors and denied various employment benefits. See
First Am. Compl. for Damages & Declaratory & Injunctive Relief & Class Relief (“First Am.
Compl.”), ECF No. 11. Presently before the Court is Defendants’ [24] Second Renewed Motion
to Compel Arbitration. Upon consideration of the pleadings, 1 the relevant legal authorities, and
1
The Court’s consideration has focused on the following documents:
• Defs.’ Statement of Points and Authorities in Support of Their Second Renewed Motion
to Compel Arbitration, ECF No. 24 (“Defs.’ Second Renewed Mot. to Compel”);
• Pls.’ Response and Opposition to Defendants’ Second Renewed Motion to Compel
Arbitration and Dismiss, ECF Nos. 25 (“Pls.’ Opp’n to Second Renewed Mot.”);
• Defs.’ Reply Memorandum in Support of their Second Renewed Motion to Compel
Arbitration, ECF No. 28 (“Defs.’ Reply re: Second Renewed Mot.”);
1
the record as a whole, the Court GRANTS Defendants’ motion. The Court concludes that the
parties have delegated the authority to determine questions of arbitrability to an arbitrator and
that the delegation agreement survives Plaintiffs’ challenges to its validity. Having resolved this
gateway question, the remainder of Plaintiffs’ arguments are for an arbitrator—not the Court—to
consider. Accordingly, this action is STAYED during the pendency of the arbitration.
I. BACKGROUND
The question before the Court is whether the parties have delegated to an arbitrator—
through a valid delegation agreement—the question of whether the underlying claims brought by
Plaintiffs are arbitrable. Because the Court resolves that gateway question in the affirmative,
concluding that the parties have validly delegated questions of arbitrability to an arbitrator, the
Court recites only the background that informs the Court’s answer to that gateway question.
A. Factual Background
Between 2006 and 2009, each plaintiff served as a security contractor in Iraq or
Afghanistan under contracts that Blackwater held with the U.S. Department of State. See
• Defs.’ Supplemental Brief in Support of Defs.’ Motion to Compel Arbitration, ECF No.
38 (“Defs.’ Supp. Br.”);
• Pls.’ Response and Opposition to Defendants’ Second Renewed Motion to Compel
Arbitration and Dismiss, ECF No. 42 (“Pls.’ Supp. Response”);
• Pls.’ Mem. in Support of Pls.’ Supp. Opp’n, ECF No. 42-1 (“Pls.’ Supp. Mem.”);
• Defs.’ Supplemental Reply Brief in Support of Defs.’ Motion to Compel Arbitration, ECF
No. 48 (“Defs.’ Supp. Reply”);
• Pls.’ Supp. Response Based on Minute Order, ECF No. 60 (“Pls.’ Torrence Supp.”);
• Defs.’ Supp. Br. in Support of Motion to Compel Arbitration, ECF No. 61 (“Defs.’
Torrence Supp.”); and
• Pls.’ Mem. in Reply to Defs.’ Torrence Supp., ECF No. 62 (“Pls.’ Torrence Reply”).
In an exercise of its discretion, the Court finds that holding oral argument in this action would
not be of assistance in rendering a decision. See LCvR 7(f).
2
Mercadante Decl. ¶ 2; Biddle Decl. ¶ 2; OHara Decl. ¶ 2; Jefferson Decl. ¶ 2; Defs.’ Supp.
Statement ¶¶ 62, 108, 144, 194. Each plaintiff signed an Independent Contractor Service
Agreement (ICSA) with Blackwater. See Defs.’ Statement of Undisputed Material Facts in
Support of Defs.’ Supp. Br., ECF No. 38-1 (“Defs.’ Supp. Statement”), ¶ 31 (Plaintiff
Mercadante); id. ¶ 77 (Plaintiff Biddle); id. ¶ 119 (Plaintiff OHara); id. ¶ 154 (Plaintiff
Jefferson). Plaintiffs’ claims pertain to their work for Blackwater in this period and primarily
revolve around their argument that they were inappropriately categorized as independent
contractors rather than as employees. See First Am. Compl, ¶¶ 12, 21.
Each ICSA includes an identical arbitration clause. See Pls.’ Response to Defs.’ Statement
of Undisputed Material Facts (“Pls.’ Response Facts”), ¶¶ 41 (Mercadante), 76 (Biddle), 125
(OHara), 157 (Jefferson’s first ICSA); 163 (Jefferson’s second ICSA). The clause reads in full:
[ 2] Law/Exclusive Venue/Arbitration. This Agreement shall be governed by and
construed in accordance with the laws of the State of North Carolina, applicable
to contracts made and to be fully performed therein, excluding its conflict of laws
principles; provided, however, to the extent that BSC [Blackwater Security
Consulting, LLC] provides DBA Insurance[3] to Contractor and Contractor’s
Group, Contractor and Contractor’s Group hereby agree that the remedies and
benefits provided by the United States Department of Labor shall be the sole and
exclusive remedies in place of all other liability of BSC; provided further, that to
the extent an action is brought on behalf of Contractor or Contractor’s Group,
regardless of what is plead in any complaint, Contractor waives the right to any
venue other than the United States Department of Labor or a federal court with
2
The arbitration clauses are numbered differently in the various agreements. In Mercadante’s
agreement, the clause is numbered 20.1; in Biddle’s agreement, it is numbered 20.5; in OHara’s
agreement it is numbered 19.5; in Jefferson’s first agreement, it is numbered 20.1; and in
Jefferson’s second agreement, it is numbered 19.5. See Pls.’ Response Facts ¶¶ 41, 76, 125, 157,
163.
3
“DBA Insurance” refers to insurance pursuant to the worker’s compensation scheme of the
Defense Base Act, codified at 42 U.S.C. §§ 1651-1655. See Brink v. XE Holding, LLC, 910 F.
Supp. 2d 242, 245 (D.D.C. 2012) (“The Defense Base Act (“DBA”), 42 U.S.C. § 1651 et seq.,
establishes a uniform, federal compensation scheme for civilian contractors and their employees
for injuries sustained while providing functions under contracts with the United States outside its
borders.”); cf. Defs.’ Supp. Statement, Ex. A at *21, XE000676.
3
jurisdiction to review such matters. Contractor and BSC hereby agree that any
dispute regarding interpretation or enforcement of any of the parties’ rights or
obligations under this Agreement shall be resolved by binding arbitration
according to the rules of the American Arbitration Association. Proceeding to
arbitration and obtaining an award thereunder shall be a condition precedent to
the bringing or maintaining of any action in any court with respect to any dispute
arising under this Agreement, except for the institution of a civil action of a
summary nature where the relief sought is predicated on there being no dispute
with respect to any fact or relief of an injunctive nature. Contractor hereby waives
any rights to seek removal of any dispute to the state or federal courts.
Id. (emphasis added). The rules of the American Arbitration Association (“AAA”) provide for an
arbitrator to decide questions of arbitrability. See AAA Employment Arbitration Rules and
Mediation Procedures, Rule 6. Three of the plaintiffs—Mercadante, OHara, and Jefferson—
acknowledge that the initials on the pages that include the arbitration clause are theirs; Plaintiff
Biddle stated that he did not know whether the initials on those pages were his. Defs.’ Supp.
Statement ¶ 32 (Mercadante); id. ¶ 120 (OHara); id. ¶¶ 155, 165 (Jefferson); id. ¶ 78 (Biddle).
The parties dispute the circumstances that surround the signing of ICSAs, including the dates on
which the ICSAs were signed. See, e.g., Pls.’ Response Facts ¶ 10.
Each plaintiff also signed one or more additional “schedules” providing further details
about each plaintiff’s assignment, which were dated after the ICSAs. Each schedule includes the
following language:
This Schedule [] is incorporated into and made part of that certain agreement
entitled “Independent Contractor Service Agreement” between Blackwater and
Contractor. All other terms and conditions of the Independent Contractor Service
Agreement shall remain unchanged.
Defs.’ Supp. Statement ¶ 47-48 (Mercadante’s Schedule 3.1 – Compensation Policy). See id.
¶¶ 52, 55 (Mercadante’s Schedule A – Engagement Specific Information); id. ¶¶ 94-95 (Biddle’s
Schedule 3.1; id. ¶¶ 98-99 (Biddle’s second Schedule 3.1); id. ¶ 104 (Biddle’s Schedule A); id.
¶ 134 (OHara’s first Schedule A); id. ¶ 143 (OHara’s second Schedule A); id. ¶¶ 174, 178
(Jefferson’s Schedule 3.1); id. ¶¶ 183-84 (Jefferson’s first Schedule A); id. ¶¶ 188-89 (Jefferson’s
4
second Schedule A). While some of the plaintiffs acknowledge having read this statement
regarding incorporation in the ICSA when signing the schedules, others deny having read it. See
Defs.’ Supp. Statement ¶¶ 47, 50, 55, 94, 135, 141, 179, 184, 189.
B. Procedural History
Plaintiffs filed a Complaint for Damages and Injunctive and Class Relief. Defs.’
Statement of Undisputed Material Facts in Support of Defs.’ Supp. Br., ECF No. 38-1 (“Defs.’
Supp. Statement”), ¶¶ 1-2. Defendants moved to compel arbitration. Id. ¶ 3. On May 22, 2012,
the Court denied that motion without prejudice. See Memorandum Opinion and Order, ECF No.
20 (“2012 Mem. Op. & Order”), at 1. The Court reasoned that, because Defendants had argued
for the first time in their reply brief that the parties had delegated the question of arbitrability to
an arbitrator, “Defendants deprived Plaintiffs of an opportunity to render a meaningful response.”
Id. at 5. The Court denied the motion to compel arbitration without prejudice in order to be able
to consider a renewed motion to compel with the benefit of additional briefing “on the question
of whether Defendants may invoke the delegation agreement in this case in order to compel the
arbitration on gateway questions of arbitrability.” Id. The Court also ordered the parties not to
incorporate arguments from prior submissions. Id. at 5-6.
After considering the parties’ additional briefing with respect to Defendants’ [24] Second
Renewed Motion to Compel Arbitration, 4 the Court concluded that “additional fact development
on the narrow question of contract formation is appropriate.” Order, dated April 22, 2013, ECF
No. 29 (“2013 Order”), at 7. Accordingly, the Court ordered limited discovery on that narrow
question and set a schedule for subsequent additional briefing. Id. at 8. The Court once again
4
The Court previously struck Defendants’ first [22] Renewed Motion to Compel Arbitration
because it failed to comport with a previous order of the Court. See Order, ECF No. 23, at 1.
5
ordered the parties not to incorporate by reference arguments from previous submissions. See id.
at 9. The Court is now considering that briefing. On November 17, 2014, the Court asked the
parties for additional briefing limited to the impact of Torrence v. Nationwide Budget Finance,
753 S.E.2d 802 (N.C. App. 2014), on the unconscionability analysis that the Court must conduct.
The Court will consider the briefing in response to that request, as well.
II. LEGAL STANDARD
A. Motion to Compel
A motion to compel arbitration is treated as “a request for summary disposition of the
issue of whether or not there had been a meeting of the minds on the agreement to arbitrate.”
Aliron Int’l, Inc. v. Cherokee Nation Indus., Inc., 531 F.3d 863, 865 (D.C. Cir. 2008); see also
Haire v. Smith, Curie & Hancock LLP, 925 F.Supp.2d 126, 129 (D.D.C. 2013). “Under Rule
56(c), summary judgment is appropriate only if ‘there is no genuine issue as to any material fact
and ... the moving party is entitled to a judgment as a matter of law.’ ” Aliron Int’l, 531 F.2d at
865 (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986)). “The party seeking to
compel arbitration must ‘present evidence sufficient to demonstrate an enforceable agreement to
arbitrate.’ ” Haire, 925 F.Supp.2d at 129 (quoting Hill v. Wackenhut Servs. Int’l, 865 F.Supp.2d
84, 89 (D.D.C. 2012)). “The burden then shifts to plaintiffs to show that there is a genuine issue
of material fact as to the making of the agreement.” Id. “The Court will compel arbitration if the
pleadings and the evidence show that there is no genuine issue as to any material fact and that the
moving party is entitled to judgment as a matter of law.” Id. (quoting Fox v. Computer World
Servs. Corp., 920 F.Supp.2d 90, 96 (D.D.C. 2013)).
6
B. Challenges to Arbitrations Clauses
“[P]arties can agree to arbitrate ‘gateway’ questions of ‘arbitrability,’ such as whether the
parties have agreed to arbitrate or whether their agreement covers a particular controversy.”
Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63, 68-69 (2010). “[T]he question ‘who has the
primary power to decide arbitrability’ turns upon what the parties agreed about that matter. Did
the parties agree to submit the arbitrability question itself to arbitration?” First Options of
Chicago, Inc. v. Kaplan, 514 U.S. 938, 943 (1995). “The question whether the parties have
submitted a particular dispute to arbitration, i.e., the ‘question of arbitrability,’ is ‘an issue for
judicial determination [u]nless the parties clearly and unmistakably provide otherwise.’ ”
Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002) (quoting AT & T Technologies,
Inc. v. Communications Workers, 475 U.S. 643, 649 (1986); First Options, 514 U.S. at 944)
(emphasis in original)).
Section 2 of the Federal Arbitration Act (“FAA”) “create[s] a body of federal substantive
law of arbitrability, applicable to any arbitration agreement within the coverage of the Act.” 5
Moses H. Cone Memorial Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24 (U.S. 1983). “To the
extent there are conflicts between state arbitration law and the FAA that would contravene the
pro-arbitration policies embodied in the FAA, the FAA applies and preempts such state laws.”
5
In its entirety, section 2 of the FAA is as follows:
A written provision in any maritime transaction or a contract evidencing a
transaction involving commerce to settle by arbitration a controversy thereafter
arising out of such contract or transaction, or the refusal to perform the whole or
any part thereof, or an agreement in writing to submit to arbitration an existing
controversy arising out of such a contract, transaction, or refusal, 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.
7
Haire, 925 F.2d at 130 (citing Preston v. Ferrer, 552 U.S. 346, 360-63 (2008)). “An agreement to
arbitrate a gateway issue is simply an additional, antecedent agreement the party seeking
arbitration asks the federal court to enforce, and the FAA operates on this additional arbitration
agreement just as it does on any other.” Rent-A-Center, 561 U.S. at 70. Under section 2, such an
agreement is valid “save upon such grounds as exist at law or in equity for the revocation of any
contract.” 9 U.S.C. § 2.
“ ‘[A]s a matter of substantive federal arbitration law, an arbitration provision is
severable from the remainder of the contract.’ ” Rent-A-Center, 561 U.S. at 70-71 (quoting
Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 445 (2006)). “[A] a party’s challenge to
another provision of the contract, or to the contract as a whole, does not prevent a court from
enforcing a specific agreement to arbitrate.” Id. at 70. Similarly, a challenge to the validity of an
arbitration provision rather than to a delegation provision does not prevent a court from
enforcing a specific agreement to delegate questions of arbitrability to an arbitrator. See id. at 71-
72; accord Brennan v. Opus Bank, No. 2:13-CV-00094-RSM, 2013 WL 2445430, at *6-7 (W.D.
Wash. June 5, 2013) (“It is only when a party challenges the delegation provision itself that the
district court intervenes.”) However, before an arbitrator can determine the question of
arbitrability, the Court must consider any challenges to the validity of the delegation provision.
See Rent-A-Center, 561 U.S. at 71–75; cf. id. at 71 (“If a party challenges the validity under § 2
of the precise agreement to arbitrate at issue, the federal court must consider the challenge before
ordering compliance with that agreement under § 4.”). Such challenges, pursuant to the
applicable state law, include contract defenses such as fraud in the inducement, duress, and
unconscionability. See id. at 68, 70, 73.
8
III. DISCUSSION
The Court first considers whether the parties have agreed to delegate to an arbitrator
questions of arbitrability. The Court concludes that they have done so. The Court then considers
Plaintiffs’ challenges to the validity of those delegation agreements. The Court evaluates these
challenges pursuant to North Carolina law, 6 and concludes that none of them succeed.
Accordingly, the Court compels the arbitration of the question of arbitrability.
A. Delegation of Arbitrability
“The question whether the parties have submitted a particular dispute to arbitration, i.e.,
the ‘question of arbitrability,’ is ‘an issue for judicial determination [u]nless the parties clearly
and unmistakably provide otherwise.’ ” Howsam, 537 U.S. at 83 (quoting AT & T Technologies,
Inc., 475 U.S. at 649; First Options, 514 U.S. at 944). Defendants argue that the parties have
clearly and unmistakably submitted questions of arbitrability to an arbitrator by virtue of the
incorporation of the rules of the American Arbitration Association in the ICSAs. Plaintiffs argue
that the incorporation of these rules is insufficient to satisfy the “clear and unmistakable”
standard. The Court agrees with Defendants that the parties have “clearly and unmistakably”
submitted questions of arbitrability to an arbitrator.
The arbitration provision in each plaintiff’s ICSA states that “any dispute regarding
interpretation or enforcement of any of the parties’ rights or obligations under this Agreement
shall be resolved by binding arbitration according to the rules of the American Arbitration
Association.” Pls.’ Response Facts ¶¶ 41 (Mercadante), 76 (Biddle), 125 (OHara), 157
6
The parties do not contest the applicability of North Carolina law. Each ICSA included a choice
of law provisions selecting North Carolina law. Pls.’ Response Facts ¶¶ 41, 76, 125, 157, 163.
Given the rule of severability imposed by the Federal Arbitration Act, the Court must consider
that provision to be valid when evaluating the validity of the delegation provision. See Buckeye,
546 U.S. at 445.
9
(Jefferson’s first ICSA); 163 (Jefferson’s second ICSA). The AAA Employment Arbitration
Rules and Mediation Procedures, in turn, provide for the arbitrator to rule on questions of
arbitrability. See AAA Employment Arbitration Rules and Mediation Procedures, Rule 6. 7
Although the D.C. Circuit Court of Appeals has not yet directly addressed the question of
whether the incorporation of the AAA rules constitutes clear and unmistakable evidence of the
parties’ intent to delegate questions of arbitrability to an arbitrator, see Haire, 925 F.Supp.2d at
132, numerous other circuits have done so and have concluded that “incorporation of the AAA
rules constitutes clear and unmistakable evidence that the parties intended the question of
arbitrability be answered by an arbitrator.” Id.; see, e.g., Awuah v. Coverall N. Am., Inc., 554 F.3d
7, 11-12 (1st Cir. 2009); Agere Sys., Inc. v. Samsung Elec. Ltd., 560 F.3d 337, 339-40 (5th Cir.
2009); Fallo v. High-Tech Inst., 559 F.3d 874, 877-78 (8th Cir. 2009); Qualcomm Inc. v. Nokia
Corp., 466 F.3d 1366, 1372-73 (Fed. Cir. 2006); Contec Corp. v. Remote Solution Co., Ltd., 398
F.3d 205, 208 (2d Cir. 2005); Terminix Int’l Co., LP v. Palmer Ranch Ltd., 432 F.3d 1327, 1332-
7
Rule 6 of the AAA Employment Arbitration Rules and Mediation Procedures states:
a. The arbitrator shall have the power to rule on his or her own jurisdiction,
including any objections with respect to the existence, scope or validity of the
arbitration agreement.
b. The arbitrator shall have the power to determine the existence or validity of a
contract of which an arbitration clause forms a part. Such an arbitration clause
shall be treated as an agreement independent of the other terms of the contract. A
decision by the arbitrator that the contract is null and void shall not for that reason
alone render invalid the arbitration clause.
c. A party must object to the jurisdiction of the arbitrator or to the arbitrability of a
claim or counterclaim no later than the filing of the answering statement to the
claim or counterclaim that gives rise to the objection. The arbitrator may rule on
such objections as a preliminary matter or as part of the final award.
See AAA Employment Arbitration Rules and Mediation Procedures, Rule 6.
10
33 (11th Cir. 2005). Indeed, a “recent D.C. Circuit opinion strongly suggests that the D.C. Circuit
would view incorporation of the AAA Rules as satisfying the requisite standard.” Haire, 925
F.Supp.2d at 132 (citing Rep. of Argentina v. BG Group PLC, 665 F.3d 1363, 1371 (D.C. Cir.
2012)). Others courts in this district have also concluded that the incorporation of the AAA rules
is clear and unmistakable evidence of an agreement to delegate questions of arbitrability to an
arbitrator. See, e.g., id. at 133; Oehme, van Sweden & Assocs., Inc. v. Maypaul Trading & Servs.,
902 F.Supp.2d 87, 97 (D.D.C. 2012); Grynberg v. BP P.L.C., 585 F.Supp.2d 50, 54 (D.D.C.
2008). Accordingly, the Court concludes that the incorporation of the AAA rules constitutes clear
and unmistakable evidence of the delegation of questions of arbitrability to an arbitrator.
Plaintiffs also argue that “Plaintiff-Contractors may bring an action in federal court
regardless of what is plead in any complaint,” relying on the phrase “regardless of what is
plead in any complaint” in the sentence preceding the arbitration provision in the ICSAs. Pls.’
Supp. Mem. at 15 (emphasis in original). The Court addresses this argument here because, if
Plaintiffs were correct, this language would undermine the clear and unmistakable evidence of
the parties’ delegation of questions of arbitrability to an arbitrator. In fact, however, the cited
phrase has no relevance to the question of arbitrability; it only pertains to the provision in the
ICSA stating that disputes pertaining to DBA insurance, the workers compensation scheme
pursuant to the Defense Base Act (“DBA”), must be adjudicated in the “the United States
Department of Labor or a federal court with jurisdiction to review such matters.” Pls.’ Response
Facts ¶¶ 41, 76, 125, 157, 163. In other words, “regardless of what is plead in any complaint,”
the DBA scheme is the sole avenue for adjudicating workers compensation disputes emerging
out of the ICSAs. But the issues in this action do not pertain to workers compensation claims,
and Plaintiffs are not seeking review pursuant to the Defense Base Act. While the arbitration
11
provision follows immediately after the sentence describing the DBA scheme, it is wholly
independent of it. Notwithstanding Plaintiffs’ repeated references to the phrase “regardless of
what is plead,” the parties have clearly and unmistakably delegated questions of arbitrability to
an arbitrator. The Court next considers challenges to the validity of these delegation agreements.
B. Validity Challenges to the Delegation Agreement
Even though the agreement itself provides clear and unmistakable evidence of the parties’
intent to delegate questions of arbitrability to an arbitrator, the Court will only compel arbitration
of those questions if the delegation agreement survives challenges to its validity. “An agreement
to arbitrate a gateway issue is simply an additional, antecedent agreement the party seeking
arbitration asks the federal court to enforce, and the FAA operates on this additional arbitration
agreement just as it does on any other.” Rent-A-Center, 561 U.S. 70 (2010). A delegation
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. If a party challenges the validity of
a delegation agreement, the district court “must consider the challenge before ordering
compliance.” Rent-A-Center, 561 U.S. at 70. The challenge, however, must be directed
specifically at the delegation agreement and not at “another provision of the contract, or to the
contract as a whole.” 8 Id. Indeed, earlier in the proceedings in this case, the Court denied
Defendants’ first motion to compel arbitration, without prejudice, in order to allow Plaintiffs to
8
This calculus remains the same where the delegation agreement exists by virtue of the
incorporation of the AAA rules. See Brennan v. Opus Bank, No. 2:13-CV-00094-RSM, 2013 WL
2445430, at *6-7 (W.D. Wash. June 5, 2013); Getzelman v. Trustwave Holdings, Inc., No. 13-
CV-02987-CMA-KMT, 2014 WL 3809736, at *5 (D. Colo. Aug. 1, 2014); Fox v. Career Educ.
Corp., No. 4:11 CV 1584 DDN, 2012 WL 1205155, at *4 (E.D. Mo. Apr. 11, 2012); U.S. ex rel.
Beauchamp v. Academi Training Ctr., Inc., No. 1:11CV371, 2013 WL 1332028, at *5 (E.D. Va.
Mar. 29, 2013); but see Paduano v. Express Scripts, Inc., No. 14-CV-5376 ADS ARL, 2014 WL
5431320, at *25, --- F.Supp.3d --- (E.D.N.Y. Oct. 27, 2014).
12
address the enforceability of the delegation agreement specifically. See Mem. Op. and Order,
ECF No. 20, at 4-5.
Although Plaintiffs’ briefing is not a model of clarity and precision, 9 Plaintiffs raise four
contract defenses to the validity of the agreement: fraud in the inducement, duress, unilateral
mistake, and unconscionability. Plaintiffs also argue that there was no meeting of the minds with
respect to the agreement. However, Plaintiffs’ claim that the agreement is invalid due to the
absence of a meeting of the minds encompasses the other contract validity challenges rather than
posing an independent challenge. 10 See, e.g., Pls.’ Supp. Response, at 2 ¶¶ 4-5. Yet, each of
Plaintiffs’ arguments fails either because it does not specifically address the delegation
agreement itself as required by Rent-A-Center or because the challenge fails on the merits as a
matter of law. Even after several rounds of briefing, Plaintiffs have failed to successfully
challenge the enforceability of the delegation agreement. 11 The Court addresses these challenges
in turn.
9
The Court notes that Plaintiffs continue to ignore the Court’s repeated warnings not to
incorporate arguments from prior submissions. Compare Minute Order, dated May 1, 2013 (“The
parties may not incorporate arguments in prior submissions.”) with Pls.’ Supp. Mem. at 13
(“Plaintiffs direct the Court to the original arguments and authorities it already submitted”).
10
Insofar as Plaintiffs “would direct the Court to its original arguments on lack of meeting of the
minds, as well as authorities set out in their original Memorandum on no meeting of the minds
between the parties, and no contract (or delegation clause) to enforce,” Pls.’ Supp. Mem. at 13,
the Court notes again that the Court had previously warned Plaintiffs not to incorporate previous
arguments by reference. Moreover, because the original arguments did not address the delegation
agreement, even if those arguments were incorporated, those arguments could not pose a
successful challenge to the validity of the delegation agreement.
11
The Court notes at the outset that Plaintiffs’ sole reference to delegation in the briefing
submitted before discovery does not satisfy Rent-A-Center’s requirement. See Pls.’ Mem. In
Supp. of Their Opp’n to Defs.’ Mot. to Compel Arbitration, ECF no. [26] at 23 (emphasis
added). That reference only points the Court to an argument in still earlier briefing, which does
not pertain to the validity of the delegation clause.
13
1. Fraud
Plaintiffs argue that the agreements between Plaintiffs and Blackwater were invalid
because of fraud. 12 In particular, Plaintiffs argue they were misled to believe that the ICSA was
“just Security matters, or basic terms saying you understand you are going into a war zone and
can’t sue for what happens there” and because they were not given an opportunity to read the
agreements. Pls.’ Response at 17. Plaintiffs imply—but do not state—that they signed the
agreements because of this purportedly fraudulent representation. While fraud is an available
contract defense pursuant to North Carolina law, see Massey v. Duke Univ., 503 S.E.2d 155, 158
(1998), this argument fails at the outset because Plaintiffs do not claim that the purported fraud
invalidated the delegation agreement, as they must pursuant to Rent-A-Center. See 561 U.S. at
73. In their fraud argument, Plaintiffs only mention the arbitration agreement once and never
reference the delegation provision. See Pls.’ Response at 16-18. It is significant that, by contrast,
Plaintiffs explicitly argue that the defenses of mistake and unconscionability apply to the
delegation agreement. See Pls.’ Supp. Mem. at 20 (“The mistake concerned a key issue … . This
would apply equally to delegation clauses as to arbitration clauses.”); id. at 21 (“Plaintiffs
believe procedural and substantive unconscionability exist on both the question of any agreement
to enter into arbitration and on the question of delegation.”) Plaintiffs’ arguments as to fraud
“clearly [did] not go to the validity of the delegation provision.” Rent-A-Center, 561 U.S. at 74.
Therefore, the Court “must treat it as valid under § 2, and must enforce it under §§ 3 and 4,
12
The Court notes the portion of Plaintiffs’ brief pertaining to fraud contains no specific
references to material in the record and no citations to applicable law that could support a
conclusion that the agreement in question was fraudulently induced. See Pls.’ Supp. Mem. at
16-18. Plaintiffs’ sole citation is a quotation stating the general proposition that “arbitration is a
matter of contract and a party cannot be required to submit to arbitration any dispute which he
has not agreed so to submit.” Id. at 17-18 (quoting United Steelworkers of America v. Warrior &
Gulf Nav. Co., 363 U.S. 574, 582 (1960)).
14
leaving any challenge to the validity of the Agreement as a whole for the arbitrator.” Rent-A-
Center, 561 U.S. at 72.
2. Duress
Plaintiffs also argue that the ICSAs are unenforceable because they signed those
agreements under duress. 13 Specifically, Plaintiffs argue that the detrimental economic impact of
refusing to sign the agreement and the disparity in power between Plaintiffs and Defendants’
agents “caused them to sign under duress.” Pls.’ Supp. Mem. at 19. This argument fails because
it does not target the delegation agreement as Rent-A-Center requires. The argument is directed
at the signing of the ICSA overall, with no references to the delegation provision. See id. at 18-
20. The Court once again finds the absence of a reference to the delegation provision in the
duress argument significant given that Plaintiffs reference the delegation provision in their
mistake and unconscionability arguments. See id. at 20-21. Because Plaintiffs have not
challenged the validity of the delegation provision in their duress argument, the Court “must treat
it as valid under § 2.” Rent-A-Center, 561 U.S. at 72.
3. Unilateral Mistake 14
Unlike Plaintiffs’ arguments on duress and fraud, Plaintiffs assert that their unilateral
mistake argument “would apply equally to delegation clauses as to arbitration clauses.” Pls.’
Supp. Mem. at 20. By arguing that the delegation agreement is not valid, Plaintiffs satisfy the
threshold requirement established by Rent-A-Center, see 561 U.S. at 72. Plaintiffs argue that the
13
Like Plaintiffs’ fraud argument, Plaintiffs’ duress argument contains no specific references to
facts from the record that could provide support for the argument. See Pls.’ Supp. Mem. at 19-20.
14
Plaintiffs’ arguments with respect to this contract defense, too, contain no citations to facts
from the record. Nor do they contain any citations relevant to North Carolina law, the body of
law that governs the validity of the delegation agreement at issue.
15
“mistake concerned a key issue that Blackwater knew they were concealing, that the employees
would have wanted to know, and were given the mistaken impression the agreement was only
about National Security/Confidentiality.” Pls.’ Supp. Mem. at 20. Plaintiffs further argue,
“Plaintiffs mistakenly believed this was not an arbitration agreement but instead had to do with
National Security, and general matters related to Blackwater not being liable due to going into a
war zone.” Id. Even assuming that Plaintiffs’ assertions are adequately supported by the record,
this argument fails as a matter of law.
Pursuant to North Carolina law, “[t]he mistake of one party is sufficient to avoid a
contract when the other party had reason to know of the mistake or caused the mistake.” Creech
v. Melnik, 495 S.E.2d 907, 912 (N.C. 1998) (quoting Howell v. Waters, 347 S.E.2d 65, 69 (N.C.
App. 1986), disc. rev. denied, 351 S.E.2d 747 (1987)). Plaintiffs’ argument, on its face, satisfies
this initial requirement by claiming that Plaintiffs were mistaken about the nature of the
agreement and that this mistake was caused by Blackwater’s agents. However, North Carolina
law requires more:
To afford relief, the mistake must be of a certain nature. The fact about which the
parties are mistaken must be “an existing or past fact.” The mistaken fact must
also be material, which has been described to mean the following: “[I]t must be as
to a fact which enters into and forms the basis of the contract, or in other words it
must be of the essence of the agreement, the sine qua non, or, as is sometimes
said, the efficient cause of the agreement, and must be such that it animates and
controls the conduct of the parties.”
Roberts v. Century Contractors, Inc., 592 S.E.2d 215, 219 (N.C. App. 2004) (quoting Howell,
347 S.E.2d at 69) (citations omitted). The mistake to which Plaintiffs point—about the nature of
the contract and its contents—is not a mistake about an “existing or past fact” that could satisfy
this standard. Plaintiffs do not cite any North Carolina case standing for the proposition that a
qualifying mistake could be one about the contract itself. Instead, this term appears to be limited
to mistakes outside of the four corners of the contract—facts about the world as it existed at the
16
time of the contract or at an earlier time. See, e.g., Roberts, 592 S.E.2d at 218 (mistaken medical
diagnosis); Howell, 347 S.E.2d at 72 (mistake concerning property boundaries); Creech, 495
S.E.2d at 912 (mistake concerning past medical treatment); Deans v. Layton, 366 S.E.2d 560,
564 (N.C. App. 1988) (mistake concerning percentage of land that would drain properly). This
pattern is consistent with the North Carolina Court of Appeals’ definition of a mistake as “the
efficient cause of the agreement.” Roberts, 592 S.E.2d at 219. A fact can only be the cause of the
agreement if it exists outside of and independent of the agreement; by contrast, neither the
agreement nor its description can be its own cause. Therefore, the purported mistake as to the
nature of the contract is not one that qualifies for the invalidation of a contract pursuant to North
Carolina law.
Furthermore, Plaintiffs do not show how this mistake is material to the agreement whose
validity is currently before the Court: the delegation agreement. Rent-A-Center allows Plaintiffs
to challenge a delegation provision by arguing that a feature in common with the entire
agreement—here, the purported mistake about the nature of the ICSA agreement and its
contents—renders the delegation provision invalid because of that mistake. See Rent-A-Center,
561 U.S. at 74 (“It may be that had Jackson challenged the delegation provision by arguing that
these common procedures as applied to the delegation provision rendered that provision
unconscionable, the challenge should have been considered by the court.”) However, Plaintiffs’
argument is missing a necessary link: Plaintiffs do not show how the mistake regarding the
nature of the entire contract affects the validity of the delegation provision specifically.
Moreover, given that only a material mistake can provide grounds to void an agreement, see
Roberts, 592 S.E.2d at 519, Plaintiffs must show that the mistake in question is material to the
delegation agreement, and Plaintiffs have not even attempted to do so. Indeed, insofar as
17
Plaintiffs argue that the mistake was concealment of the fact that there was an arbitration clause
in the contract, this mistake cannot logically be the cause of the delegation agreement.
Accordingly, Plaintiffs do not lodge a successful challenge to the delegation agreement based on
the doctrine of unilateral mistake.
4. Unconscionability
Plaintiffs’ unconscionability argument survives the threshold inquiry of Rent-A-Center
because they assert that the delegation agreement is unconscionable. 15 See Pls.’ Supp. Mem. at
21 (“Plaintiffs believe procedural and substantive unconscionability exist both on the question of
any agreement to enter into arbitration and on the question of delegation.”); cf. Rent-A-Center,
561 U.S. at 74 (“It may be that had Jackson challenged the delegation provision by arguing that
these common procedures as applied to the delegation provision rendered that provision
unconscionable, the challenge should have been considered by the court.”). The Court, here,
considers Plaintiffs’ arguments only insofar as Plaintiffs argue that the delegation agreement was
unconscionable; insofar as Plaintiffs claim that the agreement as a whole was unconscionable or
even that the arbitration provision was unconscionable, the Court cannot consider those
arguments at this stage of the proceedings.
To demonstrate unconscionability pursuant to North Carolina law, “a party must
demonstrate both procedural unconscionability and substantive unconscionability.” Torrence v.
15
The Court notes, however, that Plaintiffs did not reference the delegation agreement in the
additional briefing that the Court requested with respect to the impact of Torrence v. Nationwide
Budget Finance, 753 S.E.2d 802, 807 (N.C. App. 2014), on the unconscionability analysis. See
Pls.’ Torrence Supp. at 1-10; Pls.’ Torrence Reply at 1-8. While Plaintiffs present several bases
for finding the agreement as a whole unconscionable—such as the illusory nature of the
arbitration agreement and the one-sidedness of the arbitration clause—Plaintiffs do not link these
bases to unconscionability regarding the delegation agreement. See, e.g., Pls.’ Torrence Supp.
at 8.
18
Nationwide Budget Finance, 753 S.E.2d 802, 807 (N.C. App. 2014) (citing Tillman v.
Commercial Credit Loans, Inc., 655 S.E.2d 363, 370 (N.C. 2008)). “While both elements of
unconscionability must be present, a court may rule that a contract is unconscionable ‘when [the]
contract presents pronounced substantive unfairness and a minimal degree of procedural
unfairness, or vice versa.’ ” Id. (quoting Tillman, 655 S.E.2d at 370) (emendations in original).
The Court considers substantive unconscionability first. Because the Court concludes that there
is no substantive unconscionability with respect to the delegation agreement, the Court does not
consider whether or not procedural unconscionability exists with respect to that agreement.
Plaintiffs only point to one feature of the delegation agreement that is substantively
unconscionable: the shifting of attorneys’ fees and expenses from Defendants to Plaintiffs. See
Pls.’ Supp. Mem. at 23. But this is precisely the sort of provision that the North Carolina Court of
Appeals determined could not support an unconscionability claim. See Torrence, 753 S.E.2d at
811-12 (“We can only construe this language as eliminating the type of cost analysis applied by
the North Carolina Supreme Court in Tillman.”). In Torrence, the North Carolina Court of
Appeals analyzed the impact of the Supreme Court’s decisions in A T & T Mobility LLC v.
Concepcion, 131 S.Ct. 1740 (2011), and American Express Co. v. Italian Colors Restaurant, 133
S.Ct. 2304 (2013), on Tillman, “[t]he leading case in North Carolina dealing with
unconscionability in the context of an agreement to arbitrate.” 753 S.E.2d at 807. In Concepcion,
the Supreme Court concluded that arbitration agreements could not be invalidated “by defenses
that apply only to arbitration or that derive their meaning from the fact that an agreement to
arbitrate is at issue.” 131 S.Ct. at 1746. See Italian Colors, 133 S.Ct. at 2311 (holding that “FAA
does not sanction such a judicially created superstructure” that requires judicial analysis of
individual claims before compelling arbitration). The Torrence court concluded that “underlying
19
those decisions was a broader theme that unconscionability attacks that are directed at the
arbitration process itself will no longer be tolerated.” Id. at 811. The Torrence court then
concluded that the bases for substantive unconscionability found by the North Carolina Supreme
Court in Tillman had been undermined by Concepcion and Italian Colors. Id. at 812. Indeed, the
Torrence court specifically concluded that high arbitration costs—the only basis on which
Plaintiffs argue that there is substantive unconscionability with respect to the delegation
agreement—could no longer be a basis for substantive unconscionability. See id.; see also Italian
Colors, 133 S.Ct. at 2311 (“But the fact that it is not worth the expense involved in proving a
statutory remedy does not constitute the elimination of the right to pursue that remedy.”). The
shifting of arbitration costs to Plaintiffs does not constitute substantive unconscionability. 16
Plaintiffs’ reliance on King v. Bryant, 763 S.E.2d 338, 2014 WL 3510481 (N.C. App. July
15, 2014) (unpublished disposition), review allowed, No. 294PA14, 2014 WL 7227976 (N.C.
Dec. 18, 2014), in order to distinguish Torrence is unavailing. See Pls.’ Torrence Supp. at 5-9;
Pls.’ Torrence Reply at 3-5. In King v. Bryant, in an unpublished disposition, the North Carolina
Court of Appeals held that, in the “limited factual circumstances presented,” an arbitration
agreement between a medical practice and a patient was unconscionable. 763 S.E.2d 338, 2014
WL 3510481 at *11. The King panel located sufficient substantive unconscionability in, first, the
fact that “[t]he agreement does not mention that [the patient] is forfeiting his right to a jury or a
16
Elsewhere in Plaintiffs’ brief, Plaintiffs reference various ways in which the ICSA is one-sided.
Although Plaintiffs do not cite this as a basis for unconscionability, the Court notes that, insofar
as Plaintiffs argue that any one-sidedness of the arbitration agreement makes it unconscionable,
this argument is similarly unavailable as a result of the Supreme Court’s decision in Concepcion.
See Torrence, 753 S.E.2d. at 812 (“the one-sided nature qualify of an arbitration agreement is not
sufficient to find it substantively unconscionable.”). Moreover, the only question before the
Court is whether the delegation agreement is unconscionable. But the delegation agreement itself
is not one sided—it delegates all questions of arbitrability to an arbitrator, with no distinction
among the parties.
20
judge” and, second, that it did not intelligibly communicate that the patient was not required to
accept the agreement to see his physician. Id. at *10. Neither of these circumstances are present
here. First, in the present case, each ICSA included a warning that the Plaintiffs were waiving
their right to a judge or jury. See Merc. Dep., Ex. 3 ¶ 20.10 (waiver of jury trial); Biddle Dep.,
Ex. 2 ¶ 20.6 (same); Jefferson Dep. Ex. 3, ¶ 20.10 (same); OHara Dep., Ex. 4 ¶ 19.6 (same).
Second, Plaintiffs neither pointed to authority for the proposition that an employment
relationship, such as the one at issue here, could not be lawfully contingent on the signing of an
arbitration agreement, nor have Plaintiffs argued that the ICSAs are unconscionable because of
such a condition. Even if King were precedential, it would not support the conclusion that the
delegation agreement before the Court is substantively unconscionable. Indeed, citing Torrence,
the King panel confirmed that “the cost of arbitration … is not relevant to the issue of substantive
unconscionability.” King, 2014 WL 3510481 at *10. Given that arbitration costs are the only
basis for unconscionability that Plaintiffs present with respect to the delegation agreement, King
undermines Plaintiffs’ arguments. Finally, Plaintiffs emphasize the nature of the war-related
employment in which they engaged in order to analogize this case to King. However, an
agreement establishing an employment relationship, even a relationship that is colored by the
military context of that employment, does not resemble the circumstances in King, where a
“confidential, physician-patient, fiduciary relationship” created heightened requirements for
notice and disclosure by the medical practice presenting the agreement. Id. at *11. Insofar as
King shows that there are some circumstances in which an arbitration agreement is
unconscionable, it does not suggest that this action presents those circumstances; in particular,
King does not suggest that this is a situation where the delegation agreements at issue are
unconscionable.
21
While it is not clear the extent to which Plaintiffs continue to rely on Winston v. Academi
Training Center, Inc., 2013 WL 989999 (E.D.Va. Mar 13. 2013), an unpublished decision from
the Eastern District of Virginia issued prior to the issuance of Torrence, any such reliance in
unavailing. 17 Winston does not address the unconscionability of a delegation agreement as this
case does. In Winston, the court found that the federal and state claims in that action were not
arbitrable. Id. at *2-3. Indeed, it may yet be true that the claims in this action are not arbitrable.
However, the Court today is only called on to decide whether the agreement delegating the
question of arbitrability is enforceable, and Winston says nothing about the enforceability of a
delegation agreement like the one before the Court. Moreover, Winston was issued prior to
Torrence, the most recent North Carolina precedent regarding unconscionability challenges to
arbitration agreements. Insofar as Winston is inconsistent with Torrence, Winston must yield to
this more recent precedent of the North Carolina Court of Appeals.
In sum, because the Court concludes that no substantive unconscionability exists with
respect to the delegation agreement, the Court need not evaluate whether or not procedural
unconscionability exists. See Torrence, 753 S.E.2d at 807 (at a minimum, some substantive
unconscionability is necessary for a successful unconscionability claim).
* * *
The Court concludes that none of the contract defenses that Plaintiffs present—fraud,
duress, unilateral mistake, and unconscionability—invalidate the arbitration delegation
17
Plaintiffs’ sole reference to Winston in the supplemental briefing that the Court ordered with
respect to Torrence is to show that Plaintiffs provided additional evidence of procedural
unconscionability, evidence that originated in Winston. Pls.’ Torrence Reply at 6-7. However,
because the Court concludes that Plaintiffs have not shown any evidence of substantive
unconscionability with respect to the delegation agreement, the Court does not address the
question of procedural unconscionability. Therefore, any such evidence of procedural
unconscionability is not relevant to the Court’s conclusions.
22
agreements in their respective ICSAs. Accordingly, the Court need not consider Defendants’
argument that, even if the delegation clauses in the ICSAs were invalid, that the delegation
agreement remains valid due to its purported incorporation in the subsequent schedules that the
Plaintiffs signed. 18 The Court concludes that the arbitration delegation provision is valid, and all
questions of arbitrability must be decided by an arbitrator in the first instance, including “any
challenge to the validity of the Agreement as a whole.” 19 Rent-A-Center, 561 U.S. at 72.
C. Staying This Action
The only question remaining is whether the Court should stay this action or dismiss it
upon granting the motion to compel arbitration. Because the Court presently only decides that an
arbitrator must decide the gateway questions of arbitrability and does not now compel the
arbitration of the substantive claims in this action, the Court concludes that it is appropriate to
stay the action during the pendency of the arbitration.
18
The Courts notes, however, that the Defendants appear to misconstrue the nature of any
incorporation that is occurring. Each subsequent schedule states, “This Schedule [] is
incorporated into and made part of that certain agreement entitled ‘Independent Contractor
Service Agreement’ between Blackwater and Contractor.” Defs.’ Supp. Statement ¶ 47-48, 52,
55, 94-95, 98-99, 104, 134, 143, 174, 178, 183-84, 188-89 (emphasis added). Despite
Defendants’ repeated claims that the ICSA is incorporated into the subsequently-signed
schedules, see, e.g., Defs.’ Supp. Reply at 4, the reverse is true: by the plain language of the
schedules, they are incorporated into the previously-signed ICSA. Therefore, this is not a case
where a subsequent agreement incorporates the language of a previous agreement and thereby
binds the parties to that earlier language. Contrast Booker v. Everhart, 240 S.E.2d 360, 363 (N.C.
1978) (contract incorporating language of earlier agreement construed as repeating the earlier
language incorporated therein).
19
While challenges as to “whether any agreement … was ever concluded” must be resolved by
the Court rather than by an arbitrator, Buckeye, 546 U.S. at 444 n.1, the challenges that Plaintiffs
bring—based on fraud, duress, mistake, and unconscionability—do not fit into this narrow
category. See Rent-A-Center, 561 U.S. at 69-71; Three Valleys Mun. Water Dist. v. E.F. Hutton &
Co., 925 F.2d 1136, 1140 (9th Cir. 1991).
23
The Court need not resolve the question of whether the Court would dismiss the case if it
were compelling arbitration on all of the substantive claims in this action. Compare White v.
Four Seasons Hotels & Resorts, 999 F. Supp. 2d 250, 261-62 (D.D.C. 2013) (staying case), with
Ryan v. BuckleySandler, LLP, No. CV 13-01816, --- F.Supp.3d ---, 2014 WL 4748241, at *7
(D.D.C. Sept. 25, 2014) (dismissing case). Nor does the Court need to address the circuit split
regarding the question whether district courts have the discretion to dismiss an action upon
compelling arbitration on all claims. See BuckleySandler, 2014 WL 4748241, at *5 (noting that
the D.C. Circuit Court of Appeals has not yet definitively resolved this issue). Because the Court
compels arbitration with respect to the question of arbitrability, it remains plausible that the
Court may yet be required to consider some or all of the claims in this action on the merits.
Therefore, dismissing this action would be premature. See, e.g., Boateng v. Gen. Dynamics
Corp., 473 F. Supp. 2d 241, 252 (D. Mass. 2007) (staying action upon compelling arbitration
with respect to arbitrability).
The language used by several of the Circuits that permit dismissal of an action upon
compelling arbitration suggests that such discretion may not extend to circumstances where a
district court compels arbitration on arbitrability. See Choice Hotels Int’l, Inc. v. BSR Tropicana
Resort, Inc., 252 F.3d 707, 709-10 (4th Cir. 2001) (“BSR’s motion to dismiss was not a proper
§ 3 motion because the sole remedy available under § 3 is a stay. Notwithstanding the terms of
§ 3, however, dismissal is a proper remedy when all of the issues presented in a lawsuit are
arbitrable.”) (emphasis added); Alford v. Dean Witter Reynolds, Inc., 975 F.2d 1161, 1164 (5th
Cir. 1992) (“The weight of authority clearly supports dismissal of the case when all of the issues
raised in the district court must be submitted to arbitration.”) (emphasis in original); Sparling v.
Hoffman Const. Co., 864 F.2d 635, 638 (9th Cir. 1988) (“This court held that 9 U.S.C. section 3
24
… does not preclude summary judgment when all claims are barred by an arbitration clause.”)
(emphasis added); see also Sher v. Goldman Sachs, No. CIV. CCB-11-2796, 2012 WL 1377066,
at *6 (D. Md. Apr. 19, 2012) (“Importantly, Choice Hotels prescribes the dismissal of actions
where the district court finds all claims to be arbitrable. In this case, the court has found that the
arbitrator should decide whether TMST's claims are arbitrable. Therefore, the court will stay the
action rather than dismiss it while the arbitrator makes that determination.”) (emphasis in
original). But see Innospec Ltd. v. Ethyl Corp., No. 3:14-CV-158-JAG, 2014 WL 5460413, at *4
(E.D. Va. Oct. 27, 2014) (applying Choice Hotels International and dismissing without prejudice
upon compelling arbitration on arbitrability). In this action, the Court has not yet decided that
any of the individual claims brought by Plaintiffs are arbitrable—let alone all of those claims; the
Court has only decided that an arbitrator must decide whether Plaintiffs’ claims are arbitrable.
Accordingly, the Court concludes that dismissal at this point is not appropriate.
However, the Court’s conclusion that a stay is warranted at this time does not prevent
Defendants from seeking dismissal of this action if an arbitrator determines that all the issues in
this case are, indeed, arbitrable. See Visibility Corp. v. Schilling Robotics, LLC, No. CIV.A. 10-
12280-JGD, 2011 WL 5075816, at *6 (D. Mass. Oct. 25, 2011). In order to facilitate the Court’s
evaluation of the appropriateness of dismissal at the appropriate time, the parties shall file a
notice—after an arbitrator determines the question of arbitrability—informing the Court whether
any claims remain for the Court to address.
IV. CONCLUSION
For the foregoing reasons, Defendants’ [24] Second Renewed Motion to Compel
Arbitration is GRANTED. In accordance with the parties’ “clear and unmistakable” delegation of
questions of arbitrability to an arbitrator, the parties must address their arguments as to whether
25
the claims in this dispute are arbitrable to an arbitrator. Accordingly, this action is STAYED
during the pendency of the arbitration. An appropriate Order accompanies this Memorandum
Opinion.
Dated: January 15, 2015
/s/
COLLEEN KOLLAR-KOTELLY
United States District Judge
26