Western Rim Property Services Inc. v. Paula Bazan-Garcia ( 2014 )

ACCEPTED
04-14-00829-cv
FOURTH COURT OF APPEALS
SAN ANTONIO, TEXAS
12/24/2014 9:16:08 AM
KEITH HOTTLE
CLERK
ORAL ARGUMENT REQUESTED
FILED IN
No. 04-14-00829-CV 4th COURT OF APPEALS
SAN ANTONIO, TEXAS
12/24/2014 9:16:08 AM
IN THE COURT OF APPEALS KEITH E. HOTTLE
Clerk
FOR THE FOURTH JUDICIAL DISTRICT OF TEXAS
AT SAN ANTONIO
RECEIVED IN
4th COURT OF APPEALS
Western Rim Property Services, Inc., SAN ANTONIO, TEXAS
12/29/2014 1:40:00 PM
Appellant,
KEITH E. HOTTLE
Clerk
v.
Paula Bazan-Garcia,
Appellee.
ON APPEAL FROM THE COUNTY COURT AT LAW NO. CC# 03 OF
BEXAR COUNTY, TEXAS, CAUSE NO. 2014CV01064
APPELLANT’S OPENING BRIEF
BAKER BOTTS L.L.P. BAKER BOTTS L.L.P.
Jennifer M. Trulock Stephanie F. Cagniart
State Bar No. 90001515 State Bar No. 24079786
jennifer.trulock@bakerbotts.com stephanie.cagniart@bakerbotts.com
2001 Ross Avenue, Suite 600 98 San Jacinto Boulevard, Suite 1500
Dallas, Texas 75201-2980 Austin, Texas 78701-4078
(214) 953-6500 (512) 322-2500
(214) 953-6503 (Facsimile) (512) 322-2501 (Facsimile)
Attorneys for Appellant Western Rim Property Services, Inc.
Identity of Parties and Counsel
Appellant Western Rim Property Services
Counsel for Appellant BAKER BOTTS L.L.P.
Jennifer M. Trulock
State Bar No. 90001515
2001 Ross Avenue
Suite 600
Dallas, Texas 75201
Stephanie F. Cagniart
State Bar No. 24079786
98 San Jacinto Blvd
Suite 1500
Austin, Texas 78701
Appellee Paula Bazan-Garcia
Counsel for Appellee The Espinoza Law Firm, PLLC
Javier Espinoza
State Bar No. 24036534
Josue Garza
State Bar No. 24072737
503 E. Ramsay
Suite 103
San Antonio, Texas 78216
i
Table of Contents
Page
Identity of Parties and Counsel .................................................................................. i
Table of Authorities ................................................................................................. iv
Statement of the Case.............................................................................................. vii
Issue Presented ....................................................................................................... viii
Statement of Facts ......................................................................................................1
I. Bazan-Garcia agreed to arbitrate her disputes with WRPS. ................. 1
II. Despite the parties’ agreement to arbitrate their disputes,
Bazan-Garcia files a lawsuit against WRPS in state court.................... 3
Standard of Review ....................................................................................................4
Summary of the Argument.........................................................................................6
Argument....................................................................................................................7
I. The trial court erred in refusing to compel arbitration because
Bazan-Garcia agreed to arbitrate her disputes with WRPS. ................. 7
A. WRPS proved that Bazan-Garcia agreed to arbitrate her
disputes with WRPS. .................................................................. 8
B. WRPS proved that Bazan-Garcia’s claims fall within the
scope of her agreement to arbitrate. .......................................... 10
II. The trial court abused its discretion by denying WRPS’s motion
to compel arbitration on the grounds that the parties’ agreement
was unconscionable, because that defense is itself subject to
arbitration. ........................................................................................... 12
A. The parties’ arbitration agreement clearly and
unmistakably delegated issues of arbitrability to the
arbitrator. ................................................................................... 13
ii
B. Bazan-Garcia is bound to arbitrate her unconscionability
defense because she failed to prove that the delegation
clause was invalid. .................................................................... 17
III. In the alternative, the trial court erred in denying WRPS’s
motion to compel arbitration because Bazan-Garcia did not
prove that the parties’ arbitration agreement is unconscionable. ........ 20
A. Legal Standard .......................................................................... 20
B. Bazan-Garcia failed to prove that arbitration under the
parties’ agreement would be more expensive than
litigation, and effectively prevent her from vindicating
her statutory rights. ................................................................... 22
1. Bazan-Garcia failed to prove that arbitrating her
claims is likely to cost upwards of $20,000. .................. 23
2. Under the parties’ agreement, WRPS will bear
almost all of the costs of arbitration. .............................. 26
C. An arbitration agreement cannot be found
unconscionable based on provisions that the arbitrator is
empowered to modify. .............................................................. 28
IV. If any provision of the arbitration agreement is unconscionable,
this Court should sever it and enforce the remainder of the
agreement. ........................................................................................... 32
Conclusion and Prayer for Relief.............................................................................33
Certificate of Compliance ........................................................................................35
Certificate of Service ...............................................................................................35
Index to Appendix ....................................................................................................36
iii
Table of Authorities
Page(s)
CASES
Aspen Tech., Inc. v. Shasha,
253 S.W.3d 857 (Tex. App.—Houston [14th Dist.] 2008, no pet.) .............23, 24
Burlington Res. Oil & Gas Co. LP v. San Juan Basin Royalty Trust,
249 S.W.3d 34 (Tex. App.—Houston [1st Dist.] 2007, pet. denied) ................. 16
Cantella & Co., Inc. v. Goodwin,
924 S.W.2d 943 (Tex. 1996) .......................................................................... 5, 10
Contec Corp. v. Remote Solution, Co., Ltd.,
398 F.3d 205 (2d Cir. 2005) ............................................................................... 15
D.R. Horton-Tex., Ltd. v. Dragseth,
02-12-000435, 2013 WL 3377121 (Tex. App.—Fort Worth July 3, 2013,
no pet.) .................................................................................................................. 5
Ernst & Young LLP v. Martin,
278 S.W.3d 497 (Tex. App.—Houston [14th Dist.] 2009, no pet.) .............13, 17
Forest Oil Corp. v. McAllen,
268 S.W.3d 51 (Tex. 2008).............................................................6, 8, 12, 13, 20
Garcia v. Huerta,
340 S.W.3d 864 (Tex. App.—San Antonio 2011, pet. denied)............................ 5
Gilmer v. Interstate/Johnson Lane Corp.,
500 U.S. 20 (1991) .............................................................................................. 28
Green Tree Fin. Corp.-Ala. v. Randolph,
531 U.S. 79 (2000) ..................................................................................22, 23, 24
Haddock v. Quinn,
287 S.W.3d 158 (Tex. App.—Fort Worth 2009, pet. denied) ............................ 16
Hoover Slovacek LLP v. Walton,
206 S.W.3d 557 (Tex. 2006) .............................................................................. 20
iv
Howsam v. Dean Witter Reynolds, Inc.,
537 U.S. 79 (2002) .............................................................................................. 13
IHS Acquisition No. 171, Inc. v. Beatty-Ortiz,
387 S.W.3d 799 (Tex. App.—El Paso 2012, no pet.) ........................................ 19
In re Dallas Peterbilt, L.L.P.,
196 S.W.3d 161 (Tex. 2006) .............................................................................. 10
In re FirstMerit Bank, N.A.,
52 S.W.3d 749 (Tex. 2001).................................................................8, 23, 29, 31
In re Halliburton Co.,
80 S.W.3d 566 (Tex. 2002)............................................................................. 8, 10
In re J.D. Edwards World Solutions Co.,
87 S.W.3d 546 (Tex. 2002)............................................................................... 5, 8
In re Olshan Found. Repair Co., LLC,
328 S.W.3d 883 (Tex. 2010) ..................................... 6, 20, 21, 22, 23, 25, 27, 28
In re Palm Harbor Homes, Inc.,
195 S.W.3d 672 (Tex. 2006) ................................................................................ 9
In re Poly-America, L.P.,
262 S.W.3d 337 (Tex. 2008) ......................... 5, 20, 21, 22, 28, 29, 30, 31, 32, 33
In re Rubiola,
334 S.W.3d 220 (Tex. 2011) .............................................................................. 10
In re Weekley Homes, L.P.,
180 S.W.3d 127 (Tex. 2005) .............................................................................. 13
J.M. Davidson, Inc. v. Webster,
128 S.W.3d 223 (Tex. 2003) ................................................................................ 4
Jack B. Anglin Co., Inc. v. Tipps,
842 S.W.2d 266 (Tex. 1992) .......................................................................... 8, 27
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.,
473 U.S. 614 (1985) ............................................................................................ 21
v
Palm Harbor Homes, Inc. v. McCoy,
944 S.W.2d 716 (Tex. App.—Fort Worth 1997, no writ) .................................... 5
Petrofac, Inc. v. Dyn McDermott Petroleum Operations Co.,
687 F.3d 671 (5th Cir. 2012) .............................................................................. 15
Prudential Sec. Inc. v. Marshall,
909 S.W.2d 896 (Tex. 1995) .............................................................................. 10
Rent-A-Center, West v. Jackson,
561 U.S. 63 (2010) ......................................................................13, 17, 18, 19, 20
Saxa Inc. v. DFD Architecture Inc.,
312 S.W.3d 224 (Tex. App.—Dallas 2010, pet. denied)..............................14, 15
Ski River Dev., Inc. v. McCalla,
167 S.W.3d 121 (Tex. App.—Waco 2005, pet. denied) .................................... 31
Venture Cotton Co-op v. Freeman,
435 S.W.3d 222 (Tex. 2014) ............................................................21, 22, 32, 33
STATUTES
9 U.S.C. § 2 .............................................................................................................. 13
Tex. Civ. Prac. & Rem. Code § 171.001 ................................................................... 8
Tex. Civ. Prac. & Rem. Code § 171.001(b)......................................................... 5, 13
Tex. Civ. Prac. & Rem. Code § 171.002(a)(4) ........................................................ 16
Tex. Civ. Prac. & Rem. Code § 171.021(c) ......................................................... 5, 12
Tex. Civ. Prac. & Rem. Code § 171.025(a) ............................................................... 8
OTHER AUTHORITIES
AAA Employment Rules ..................................................................................passim
Restatement (Second) of Contracts § 208 (1981) .................................................... 32
Tex. R. App. P. 9.4 ................................................................................................... 35
vi
Statement of the case
This is an accelerated interlocutory appeal from denial of a motion to
compel arbitration. Plaintiff-Appellee Paula Bazan-Garcia (“Bazan-Garcia”), who
worked as an at-will employee for Defendant-Appellant Western Rim Property
Services (“WRPS”), agreed in and after her initial employment agreement that any
dispute between her and WRPS would be resolved by binding arbitration. Bazan-
Garcia also agreed that any dispute over the validity and enforceability of the
parties’ arbitration agreement would be decided by the arbitrator, not by the court.
Despite these promises, Bazan-Garcia sued WRPS on various claims arising from
her employment and termination, see CR 9–13, all of which fall within the scope
of the parties’ arbitration agreement, see App. 3–13.1
After Bazan-Garcia refused to submit her claims to arbitration in
accordance with the agreement, WRPS moved to compel arbitration in the trial
court. CR 16–70. The trial court denied WRPS’s motion on November 17, 2014.
App. 1. WRPS timely filed its notice of accelerated interlocutory appeal on
November 24, 2014. CR 156–57. On December 3, 2014, this Court granted
WRPS’s Emergency Motion to Stay Proceedings in the trial court pending
resolution of this appeal.
1
The Clerk’s Record is referred to herein as “CR,” the Supplemental Clerk’s Record as
“Supp. CR,” the Reporter’s Record as “RR,” and the Appendix as “App.”
vii
Issue Presented
Did the trial court err by denying WRPS’s motion to compel
arbitration, where it was undisputed that Bazan-Garcia agreed to arbitrate her
disputes with WRPS, where Bazan-Garcia’s only challenge to the arbitration
agreement was based on an unconscionability defense that the parties also agreed
would be decided by the arbitrator rather than the court, and where Bazan-Garcia
failed to prove that she would not be able to vindicate her statutory rights in the
forum of arbitration?
viii
Statement of Facts
I. Bazan-Garcia agreed to arbitrate her disputes with WRPS.
Paula Bazan-Garcia was employed as a housekeeper by WRPS from
September 26, 2011 until October 22, 2013. CR 32. Both upon hire and during
her employment with WRPS, Bazan-Garcia signed and assented to several written
agreements. See CR 32–33. Among these agreements were an Employee
Acknowledgement Form (“Acknowledgement”) and an Arbitration Agreement
(“Arbitration Agreement”), both of which contained mandatory and binding
arbitration provisions. App. 3, 4.
The Acknowledgement stated that Bazan-Garcia had received a copy
of WRPS’s Employee Handbook, and that she understood that “it [was her]
responsibility to read and comply with the policies contained in this handbook and
any revisions made to it.” App. 4. The Employee Handbook included a section
entitled “Problem Resolution.” App. 12. It had an arbitration provision stating:
Problems, disputes, or claims not resolved through
[voluntary internal dispute] resolution steps are subject to
final and binding arbitration. The arbitration proceeding
will be conducted under the Employment Dispute
Resolution Rules of the American Arbitration
Association [(the “AAA Rules”)].
App. 13. This same provision was included in every version of the Employee
Handbook in place during Bazan-Garcia’s employment. See CR 33, 53, 63, 70.
Bazan-Garcia signed the Acknowledgement on September 20, 2011. App. 4.
1
Bazan-Garcia signed the Arbitration Agreement on September 27,
2011. App. 3. The agreement was clearly entitled “Arbitration Agreement,” and
also stated that disputes between Bazan-Garcia and WRPS would be decided by
binding arbitration under the AAA Rules:
[O]ther than a worker’s compensation claim covered by
insurance, no dispute between [WRPS] and the
undersigned which is in any way related to the
employment of the undersigned, including but not limited
to a claim for wrongful termination, discrimination
and/or harassment, and worker’s compensation not
covered by insurance, shall be the subject of a lawsuit
filed in any state or federal court. Instead, any such
dispute shall be submitted to arbitration in accordance
with the rules of the American Arbitration Association
(“AAA”).
Id. Under the AAA Rules, “[t]he 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.” AAA Rule 6(a) (App. 30).2 The
Arbitration Agreement also specified that “[e]ach party to arbitration shall be
entitled to take only one deposition,” and that “[a]ny arbitration relating to any
dispute covered by this Agreement shall be arbitrated in Dallas County, Texas.”
App. 3.
2
AAA Employment Rules are available online at
https://www.adr.org/aaa/ShowProperty?nodeId=/UCM/ADRSTG_004362.
2
On October 22, 2013, WRPS terminated Bazan-Garcia’s employment.
CR 32. Because Bazan-Garcia’s employment was “at-will,” WRPS could
terminate it “at any time without a cause or reason.” CR 35.
II. Despite the parties’ agreement to arbitrate their disputes, Bazan-Garcia
files a lawsuit against WRPS in state court.
More than eight months after her termination, on July 1, 2014, Bazan-
Garcia initiated this lawsuit in Bexar County Court at Law. CR 9. In her Original
Petition, Bazan-Garcia alleged that WRPS’s stated reasons for terminating her
employment were pretextual. CR 11. The real reason for her discharge, she
claimed, was that she had sustained and notified WRPS of an “on-the-job injury
and/or initiated the filing of a workers’ compensation claim.” CR 11. WRPS
answered with a general denial on September 12, 2014. CR 14–15. Bazan-Garcia
then served her initial discovery requests on WRPS, including 72 requests for
production, 23 interrogatories, and 13 requests for admission. Supp. CR 10–35.
Shortly after receiving Bazan-Garcia’s discovery requests, WRPS sent
a copy of Bazan-Garcia’s signed arbitration agreement to Bazan-Garcia’s counsel
and demanded that Bazan-Garcia submit her claims to arbitration in accordance
with her agreement. CR 30. Bazan-Garcia refused, and WRPS filed a Motion to
Compel Arbitration on October 16, 2014. CR 16. WRPS also filed a Motion for
Protective Order from Discovery, asking the trial court for relief from the
obligation to respond to Bazan-Garcia’s burdensome discovery requests until the
3
court decided whether arbitration was required. Supp. CR 4–8. In her response
brief and supporting affidavits, Bazan-Garcia did not dispute that she had agreed to
arbitrate her disputes with WRPS. Instead, she claimed that the arbitration
agreement was unconscionable and therefore unenforceable. CR 72–97.
The trial court held a hearing on WRPS’s motion to compel
arbitration and motion for a protective order, found the arbitration agreement was
unconscionable, see RR 18, and denied WRPS’s motions on November 17, 2014
on that ground, see App. 1. On November 19, 2014, Bazan-Garcia filed her First
Amended Petition, alleging for the first time that WRPS interfered with Bazan-
Garcia’s attempts to exercise her rights under the Family Medical Leave Act
(“FMLA”), and/or terminated her employment in retaliation for invoking those
rights. CR 150.
WRPS timely filed this accelerated interlocutory appeal on November
24, 2014. CR 156–57. On December 3, 2014, this Court stayed all proceedings
pending in the trial court “until further order of this court.”
Standard of Review
Arbitration agreements are contracts and “interpreted under traditional
contract principles.” J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex.
2003). “[O]n appeals of orders denying arbitration under the Texas Arbitration Act
(“TAA”), [the court] appl[ies] a no-evidence standard to the trial court’s factual
4
determinations and a de novo standard to legal determinations.” Garcia v. Huerta,
340 S.W.3d 864, 868 (Tex. App.—San Antonio 2011, pet. denied). Because “a
presumption exists in favor of agreements to arbitrate . . . [c]ourts must resolve any
doubts about an agreement to arbitrate in favor of arbitration.” Cantella & Co.,
Inc. v. Goodwin, 924 S.W.2d 943, 944 (Tex. 1996) (internal citations omitted).
If a claim is subject to an arbitration agreement, then “the trial court
has no discretion but to compel arbitration and stay its own proceedings” until
arbitration is complete. In re J.D. Edwards World Solutions Co., 87 S.W.3d 546,
549 (Tex. 2002); see also Tex. Civ. Prac. & Rem. Code § 171.021(c) (App. 67).
The party opposing arbitration has the heavy burden of proving that “grounds exist
at law or equity for [the arbitration agreement’s] revocation . . . such as fraud or
unconscionability.” Palm Harbor Homes, Inc. v. McCoy, 944 S.W.2d 716, 721
(Tex. App.—Fort Worth 1997, no writ); see also Tex. Civ. Prac. & Rem. Code §
171.001(b) (App. 66). “Because a trial court has no discretion to determine what
the law is or to apply the law incorrectly, its clear failure to properly analyze or
apply the law of unconscionability constitutes an abuse of discretion.” D.R.
Horton-Tex., Ltd. v. Dragseth, 02-12-000435, 2013 WL 3377121, at *3 (Tex.
App.—Fort Worth July 3, 2013, no pet.) (citing In re Poly-America, L.P., 262
S.W.3d 337, 348 (Tex. 2008)).
5
Generally, the trial court is empowered to decide challenges to the
validity of an arbitration agreement. Forest Oil Corp. v. McAllen, 268 S.W.3d 51,
61 (Tex. 2008). However, if the parties’ arbitration agreement clearly and
unmistakably delegates questions regarding the agreement’s validity and
enforceability to the arbitrator, the court must enforce that provision. Id. If the
trial court refuses to do so, the court of appeals has “no discretion but to direct the
trial court to compel arbitration [of that issue] and stay [the] litigation.” Id.
Summary of the Argument
Arbitration agreements are favored by Texas public policy and must
be enforced by the courts. In re Olshan Found. Repair Co., LLC, 328 S.W.3d 883,
892 (Tex. 2010). The evidence is uncontroverted that Bazan-Garcia agreed to
arbitrate her disputes with WRPS. In addition, the parties expressly agreed that the
arbitrator rather than the court would decide any question regarding the validity of
their arbitration agreement—including the unconscionability defense that Bazan-
Garcia raised before the trial court. Under these circumstances, the trial court had
no discretion but to grant WRPS’s motion to compel arbitration and stay the
litigation. Its failure to do so here is clear error.
Additionally, even if Bazan-Garcia’s unconscionability defense to
arbitration could have been considered by the trial court, it was without merit.
Bazan-Garcia claimed that under the parties’ agreement, arbitration would be
6
prohibitively costly and prevent her from vindicating her statutory rights. In
making her case, Bazan-Garcia entirely disregarded provisions of the contract that
contradicted her interpretation, as well as the fact that the arbitrator can modify the
complained-of provisions. Her arguments have already been rejected in similar
cases by the Texas Supreme Court and Texas courts of appeals, and should have
been rejected by the trial court. Finally, even if this Court concludes that it has the
authority to consider Bazan-Garcia’s defense and finds that one or more of the
agreement’s provisions is unconscionable, it is required to sever that provision so
that the remainder of the arbitration agreement can be enforced.
Because WRPS met its burden of proving that the parties agreed to
arbitrate this dispute, and because Bazan-Garcia failed to prove any valid defense
to arbitration, this Court must reverse the judgment of the trial court and order it to
compel arbitration of Bazan-Garcia’s claims.
Argument
I. The trial court erred in refusing to compel arbitration because Bazan-
Garcia agreed to arbitrate her disputes with WRPS.
WRPS presented uncontroverted evidence to the trial court that (1)
Bazan-Garcia agreed to arbitrate her disputes with WRPS, and (2) all of Bazan-
Garcia’s claims fell within the scope of this agreement. See infra at 7–12. Bazan-
Garcia did not contest any of this evidence, or deny that she signed and assented to
the written arbitration agreements. Under the TAA, the trial court therefore had no
7
discretion to refuse to compel arbitration in this case. See J.D. Edwards World
Solutions, 87 S.W.3d at 549; Tex. Civ. Prac. & Rem. Code § 171.001 (App. 66).
Its refusal to do so denied WRPS the benefit of its bargain, and was error as a
matter of law. See Jack B. Anglin Co., Inc. v. Tipps, 842 S.W.2d 266, 271 (Tex.
1992).
A. WRPS proved that Bazan-Garcia agreed to arbitrate her disputes
with WRPS.
Texas and federal policy strongly favor arbitration agreements. Tipps,
842 S.W.2d at 268. Under the TAA, if the party seeking to compel arbitration
shows that the parties entered into a written and valid arbitration agreement and
that their dispute falls within the scope of the agreement, “the ‘[trial] court has no
discretion but to compel arbitration and stay its own proceedings.’” Forest Oil,
268 S.W.3d at 56 n.14 (quoting In re FirstMerit Bank, N.A., 52 S.W.3d 749, 753–
54 (Tex. 2001)); Tex. Civ. Prac. & Rem. Code § 171.025(a) (App. 68) (“The court
shall stay a proceeding that involves an issue subject to arbitration if an order for
arbitration or an application for that order is made under this subchapter.”). This
rule extends to arbitration provisions that are incorporated by reference into the
agreement. See In re Halliburton Co., 80 S.W.3d 566, 569 (Tex. 2002).
It is undisputed that Bazan-Garcia agreed to the written arbitration
provisions contained in the Arbitration Agreement and incorporated by reference
in the Acknowledgement. Bazan-Garcia signed the Arbitration Agreement on
8
September 27, 2011. App. 3. The contract was clearly entitled “Arbitration
Agreement,” and contained an express provision stating that, other than a worker’s
compensation claim covered by insurance, all disputes between WRPS and Bazan-
Garcia “shall be submitted to arbitration in accordance with the rules of the
American Arbitration Association.” Id. By presenting a signed copy of the
Arbitration Agreement to the trial court, WRPS proved the existence of an
arbitration agreement between the parties. In re Palm Harbor Homes, Inc., 195
S.W.3d 672, 676 (Tex. 2006) (“Because the [defendant] presented a signed
arbitration agreement to the court . . . and the [plaintiffs] have presented no
evidence that they did not sign the agreement, we conclude that, as a matter of law,
the existence of an arbitration agreement among the parties was established.”).
WRPS also presented a signed and uncontroverted copy of the
Acknowledgement to the trial court. See App. 4. The Acknowledgement was
signed by Bazan-Garcia on September 20, 2011, and represented that she had
received the Employee Handbook and “underst[oo]d that it [was her] responsibility
to read and comply with the policies contained in this handbook and any revisions
made to it.” Id. The Employee Handbook contained an arbitration provision
stating that any “[p]roblems, disputes, or claims not resolved through [voluntary
internal dispute] resolution steps are subject to final and binding arbitration.” App.
13. By signing the Acknowledgement that incorporated by reference the
9
Employee Handbook’s policies, Bazan-Garcia accepted the Handbook’s arbitration
provision. See In re Dallas Peterbilt, L.L.P., 196 S.W.3d 161, 163 (Tex. 2006)
(holding that an at-will employee who signed an acknowledgement form stating he
had “received and carefully read or been given the opportunity to read” a summary
of the employer’s arbitration policy had assented to arbitration); Halliburton, 80
S.W.3d at 569 (holding that an at-will employee who accepted an agreement that
incorporated an arbitration provision by reference had assented to arbitrate his
disputes with his employer).
B. WRPS proved that Bazan-Garcia’s claims fall within the scope of
her agreement to arbitrate.
WRPS also proved, and Bazan-Garcia did not dispute, that all of
Bazan-Garcia’s claims in this litigation fall within the scope of the arbitration
provisions contained in the Arbitration Agreement and Acknowledgement.
“When deciding whether claims fall within an arbitration agreement,
courts employ a strong presumption in favor of arbitration.” In re Rubiola, 334
S.W.3d 220, 225 (Tex. 2011) (citing Cantella & Co, 924 S.W.2d at 944). “The
policy in favor of arbitration agreements is so compelling that a court should not
deny arbitration unless it can be said with positive assurance that an arbitration
clause is not susceptible of an interpretation which would cover the dispute at
issue. Id. (quoting Prudential Sec. Inc. v. Marshall, 909 S.W.2d 896, 899 (Tex.
1995)) (emphasis in original).
10
In her Original Petition, Bazan-Garcia alleged that she was wrongfully
discharged by WRPS after she notified WRPS of an “on-the-job injury and/or
initiated the filing of a workers’ compensation claim.” CR 11. In her Amended
Petition, filed after the trial court denied WRPS’s motion to compel arbitration,
Bazan-Garcia also alleged that WRPS prevented her from exercising her FMLA
rights and/or “terminated her [employment] in retaliation for invoking her FMLA
rights.” CR 150.
The arbitration provision in the parties’ Arbitration Agreement clearly
encompasses these disputes. It states that “other than a worker’s compensation
claim covered by insurance, no dispute between [WRPS] and [Bazan-Garcia]
which is in any way related to the employment of [Bazan-Garcia], including but
not limited to a claim for wrongful termination . . . shall be the subject of a lawsuit
filed in any state or federal court.” App. 3. Both of Bazan-Garcia’s claims are
related to her employment and expressly allege she was wrongfully terminated,
and neither are a “worker’s compensation claim covered by insurance.” These
claims must therefore be submitted to arbitration under the express terms of the
Arbitration Agreement.
Bazan-Garcia’s claims are also within the scope of the Employee
Handbook’s arbitration provision, incorporated by reference into the
Acknowledgement. Pursuant to that provision, Bazan-Garcia agreed that she
11
would arbitrate any “[p]roblems, disputes, or claims not resolved through
[voluntary internal dispute] resolution steps.” App. 13. None of the claims alleged
by Bazan-Garcia in this litigation have been resolved through WRPS’s voluntary
internal dispute resolution process.
WRPS met its burden before the trial court by proving that the parties
agreed to arbitrate their disputes, and that all of Bazan-Garcia’s claims are within
the scope of that agreement. Under the TAA, this Court must therefore reverse and
remand this case for the trial court to compel arbitration of Bazan-Garcia’s claims.
See Forest Oil, 268 S.W.3d at 56, 61; Tex. Civ. Prac. & Rem. Code § 171.021(c)
(App. 67).
II. The trial court abused its discretion by denying WRPS’s motion to
compel arbitration on the grounds that the parties’ agreement was
unconscionable, because that defense is itself subject to arbitration.
Bazan-Garcia raised a single challenge against arbitration: she argued
that the parties’ agreement is substantively unconscionable because it limits
discovery, requires both parties to pay some arbitration costs, and requires
arbitration to take place in Dallas County, Texas. CR 72. At the hearing the trial
court agreed with Bazan-Garcia, see RR 18, and subsequently denied WRPS’s
motion to compel arbitration on this ground, see App. 1. But the parties’
arbitration agreement clearly and unmistakably empowered the arbitrator—not the
court—to decide any issues of arbitrability, including whether the arbitration
12
agreement is unconscionable. The trial court was therefore required under the
TAA to compel arbitration of Bazan-Garcia’s unconscionability defense, and
abused its discretion by denying WRPS’s motion on this ground. See Ernst &
Young LLP v. Martin, 278 S.W.3d 497, 500 (Tex. App.—Houston [14th Dist.]
2009, no pet.) (“[A]n arbitration clause that reallocates traditional court functions
to the arbitrator is enforceable and cannot serve as a basis for denying a motion to
compel arbitration.”).
A. The parties’ arbitration agreement clearly and unmistakably
delegated issues of arbitrability to the arbitrator.
Under the TAA, like under the FAA, a party may revoke a written
arbitration agreement “only on a ground that exists at law or in equity for the
revocation of a contract,” such as fraud or unconscionability. Tex. Civ. Prac. &
Rem. Code § 171.001(b) (App. 66); see also Forest Oil, 268 S.W.3d at 56 n.12; 9
U.S.C. § 2 (FAA savings clause). The default rule is that the court decides such
“gateway questions of arbitrability.” Rent-A-Center, West v. Jackson, 561 U.S. 63,
68–69 (2010) (internal quotation marks omitted). However, the parties can
delegate these issues to the arbitrator rather than the court, so long as the
agreement “clearly and unmistakably” demonstrates that this was the parties’
intent. Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 79 (2002); see also In
re Weekley Homes, L.P., 180 S.W.3d 127, 130 (Tex. 2005). Because “[t]he issue
of arbitrability is subject to virtually identical analysis under either the FAA or the
13
TAA,” courts may rely on authorities applying either statute in evaluating an
agreement. Saxa Inc. v. DFD Architecture Inc., 312 S.W.3d 224, 229 n.4 (Tex.
App.—Dallas 2010, pet. denied).
“When, as here, parties agree to a broad arbitration clause and
explicitly incorporate rules that empower an arbitrator to decide issues of
arbitrability, the incorporation serves as clear and unmistakable evidence of the
parties’ intent to delegate such issues to an arbitrator.” Saxa, 312 S.W.3d at 230.
In Saxa, for example, the parties agreed to arbitrate “any claim, dispute or other
matter” related to their contract, “in accordance with the Construction Industry
Arbitration Rules of the American Arbitration Association.” Id. at 226
(modification omitted). The AAA Construction Rules contain a delegation clause
empowering the arbitrator “to rule on his or her own jurisdiction, including any
objections with respect to the existence, scope or validity of the arbitration
agreement.” Id. at 228–29.
Because the parties’ broad arbitration agreement incorporated the
AAA Rules, the court of appeals held that the parties’ arbitrability dispute—in that
case, whether joinder was permissible—had to be decided by the arbitrator rather
than the court. Id. at 230. It emphasized that a majority of courts have reached
this same conclusion. Id. (collecting cases); see also Aspri Inv., LLC, 04-10-
00573-CV, 2011 WL 3849487, at *9 (Tex. App.—San Antonio 2011, pet. dism’d)
14
(enforcing the AAA Rules’ delegation clause because incorporating the Rules into
an agreement to arbitrate all disputes related to the parties’ lease “constitutes clear
and unmistakable evidence of the parties’ intent to delegate issues of arbitration to
the arbitrator”); Petrofac, Inc. v. Dyn McDermott Petroleum Operations Co., 687
F.3d 671, 675 (5th Cir. 2012) (“We agree with most of our sister circuits that the
express adoption of the [AAA] rules presents clear and unmistakable evidence that
the parties agreed to arbitrate arbitrability.”).
The same result is required here. The AAA Employment Rules
contain a delegation clause that is identical to the one enforced in Saxa: “[t]he
arbitrator shall have the power to rule on his or her own jurisdiction, including any
objections to the existence, scope or validity of the arbitration agreement.” AAA
Rule 6(a) (App. 30). The Employee Handbook, incorporated by reference into the
Acknowledgement, states that all “[p]roblems, disputes, or claims not resolved
through [voluntary internal dispute] resolution steps are subject to final and
binding arbitration . . . conducted under the Employment Dispute Resolution Rules
of the American Arbitration Association.” App. 13. See Contec Corp. v. Remote
Solution, Co., Ltd., 398 F.3d 205, 208 (2d Cir. 2005) (agreement clearly and
unmistakably delegated issues of arbitrability to the arbitrator by requiring parties
to use “best efforts” to resolve their dispute or submit it to arbitration under the
AAA Rules). The Arbitration Agreement provides that “to resolve in a speedy and
15
inexpensive way any legal controversy which may arise,” the parties must arbitrate
any dispute “which is in any way related to the employment of [Bazan-Garcia] . . .
in accordance with the rules of the American Arbitration Association.” App 3.
Only a “worker’s compensation claim covered by insurance” is exempt, see id., as
such claims cannot be the subject of an arbitration agreement under state law. See
Tex. Civ. Prac. & Rem. Code § 171.002(a)(4).
Bazan-Garcia and WRPS entered into agreements with broad
arbitration provisions that incorporated all of the AAA Employment Rules,
including the delegation clause. The parties did not reserve the right to seek
judicial relief for a broad array of claims, or specify that the AAA Rules would
only apply to their agreement in a limited manner. Compare with Burlington Res.
Oil & Gas Co. LP v. San Juan Basin Royalty Trust, 249 S.W.3d 34, 42–43 (Tex.
App.—Houston [1st Dist.] 2007, pet. denied) (holding agreement did not
incorporate delegation clause where parties agreed to arbitrate only certain “audit
disputes” and specified the agreement’s terms controlled over the AAA Rules in
the event of a conflict); Haddock v. Quinn, 287 S.W.3d 158, 174–75 (Tex. App.—
Fort Worth 2009, pet. denied) (holding agreement did not delegate arbitrability to
arbitrator because it only incorporated the AAA Rules “to the extent not
inconsistent” with the agreement and specified in detail the procedures and scope
of arbitration (internal quotation marks omitted)). Consequently, Bazan-Garcia
16
and WRPS clearly and unmistakably agreed that the arbitrator rather than the court
would decide any arbitrability disputes between them, and the trial court abused its
discretion by refusing to enforce that bargain. See Ernst & Young LLP, 278
S.W.3d at 501 (granting mandamus relief where trial court failed to enforce an
unchallenged delegation clause).
B. Bazan-Garcia is bound to arbitrate her unconscionability defense
because she failed to prove that the delegation clause was invalid.
Because she agreed to delegate issues of arbitrability to the arbitrator,
Bazan-Garcia could only have the trial court decide her unconscionability defense
if she proved that the delegation clause itself was invalid and unenforceable. Rent-
A-Center, 561 U.S. 63. Instead, Bazan-Garcia focused on proving the merits of her
unconscionability defense, see CR 72–82, and erroneously claimed that the trial
court could decide that issue because her petition alleged a statutory cause of
action, see RR 13. Neither of these grounds allows Bazan-Garcia to avoid the
delegation clause in her agreements.
Bazan-Garcia’s unconscionability defense is nearly identical to one
raised by the plaintiff in Rent-A-Center, which the U.S. Supreme Court held had to
be decided by the arbitrator rather than the court. See 561 U.S. 63. The plaintiff in
Rent-A-Center filed a statutory employment-discrimination lawsuit against his
former employer, and opposed arbitration on the grounds that the agreement was
unconscionable because it limited discovery and required the parties to split the
17
costs of arbitration. Id. at 74. The parties’ arbitration agreement included a
provision delegating issues of arbitrability to the arbitrator. Id. at 66. Despite this
provision, the U.S. Court of Appeals for the Ninth Circuit held that “the threshold
question of unconscionability [was] for the court” to decide. Id. at 67.
The Supreme Court reversed. Id. at 74–76. Because a “delegation
provision is an agreement to arbitrate threshold issues concerning the arbitration
agreement” and must be enforced like any other contract, the plaintiff could only
avoid it by proving that the clause itself was invalid. Id. at 69–70. Before the trial
court, however, the plaintiff focused solely on proving the merits of his
unconscionability defense. Id. at 73–74 (explaining that plaintiff “did not make
any arguments specific to the delegation provision; [instead] he argued that the fee-
sharing and discovery procedures rendered the entire Agreement invalid”)
(emphasis in original). Consequently, the Supreme Court held that the trial court
was required to compel arbitration of the plaintiff’s unconscionability defense. Id.
at 75. It refused to consider a challenge to the delegation provision that the
plaintiff raised for the first time in his brief to the Supreme Court, on the grounds
that it was “too late.” Id. at 75–76.
Like the plaintiff in Rent-A-Center, Bazan-Garcia opposed WRPS’s
motion to compel arbitration on the grounds that the agreement limited the parties’
access to discovery and required them to split arbitration costs, and is therefore
18
unconscionable. See CR 72. But even though WRPS’s motion discussed and
analyzed the delegation clause that was incorporated into the parties’ arbitration
agreement, see CR 25–28, Bazan-Garcia’s response did not address that clause at
all. Instead, Bazan-Garcia focused solely on the merits of her unconscionability
defense. See CR 72–82. Because Bazan-Garcia failed to prove that the delegation
clause is invalid, she is bound to that agreement. See Rent-A-Center, 561 U.S. at
74.
In addition, Bazan-Garcia cannot avoid arbitration based on the
statutory nature of her claims. At the hearing, Bazan-Garcia suggested that the
trial court was not required to enforce the delegation clause because her asserted
causes of action are based on a statute. See RR 13. But Bazan-Garcia has failed to
identify any case in which a court refused to enforce a delegation clause on the
grounds that the party opposing arbitration was asserting statutory claims, and
WRPS is aware of no such authority. To the contrary, the claims that the plaintiff
filed against his employer in Rent-A-Center were statutory in nature, and that fact
had no bearing on the Court’s decision to enforce the delegation clause. See 561
U.S. at 74–75; see also IHS Acquisition No. 171, Inc. v. Beatty-Ortiz, 387 S.W.3d
799, 808 (Tex. App.—El Paso 2012, no pet.) (enforcing delegation clause in
arbitration agreement in case where plaintiff alleged gender-discrimination claims
against employer).
19
“[A] trial court has no discretion to determine what the law is or to
apply the law incorrectly.” Poly-America, 262 S.W.3d at 349. The law in this
area is clear: a court has no discretion to refuse to enforce an unchallenged
delegation clause. See Rent-A-Center, 561 U.S. at 75–76; Forest Oil, 268 S.W.3d
at 61 (holding that because the arbitration agreement’s delegation clause was “not
challenged on any legal or public policy grounds,” the Court had “no discretion but
to direct the court to compel arbitration and stay [this] litigation”). If Bazan-
Garcia believes that the arbitration agreement is unconscionable, she can still make
that argument. In accordance with her agreements, however, she must do so in the
forum of arbitration.
III. In the alternative, the trial court erred in denying WRPS’s motion to
compel arbitration because Bazan-Garcia did not prove that the
parties’ arbitration agreement is unconscionable.
A party opposing arbitration on the grounds of unconscionability
bears the heavy burden of proving this defense. In re Olshan Found. Repair Co.,
LLC, 328 S.W.3d 883, 893 (Tex. 2010). Bazan-Garcia failed to meet that rigorous
standard. Arbitration of her claims was therefore required, even if the trial court
had authority to consider the merits of this defense.
A. Legal Standard
“Whether a contract is . . . unconscionable at the time it is formed is a
question of law.” Poly-America, 262 S.W.3d at 349 (citing Hoover Slovacek LLP
20
v. Walton, 206 S.W.3d 557, 562 (Tex. 2006)). “In general, a contract will be found
unconscionable if it is grossly one-sided.” Id. at 348; see also Venture Cotton Co-
op v. Freeman, 435 S.W.3d 222, 228 (Tex. 2014) (“One of the earliest decisions to
apply the defense described an unconscionable contract as one that ‘no man in his
senses and not under delusion would make on the one hand, and as no honest and
fair man would accept on the other.’”) (internal citation omitted). Because
arbitration is a favored method of dispute resolution, the Texas Supreme Court has
cautioned that courts “‘should be wary of setting the bar for holding arbitration
clauses unconscionable too low’ as that would undermine the ‘liberal federal
policy favoring arbitration agreements.’” Venture Cotton, 435 S.W.3d at 232
(quoting Olshan, 328 S.W.3d at 893).
“Agreements to arbitrate disputes between employers and employees
are generally enforceable under Texas law; there is nothing per se unconscionable
about an agreement to arbitrate employment disputes and, in fact, Texas law has
historically favored agreements to resolve such disputes by arbitration.” Poly-
America, 262 S.W.3d at 348. Nor is there anything inherently unconscionable
about an agreement to arbitrate a statutory claim. “When parties agree to arbitrate
a statutory claim, ‘a party does not forego the substantive rights afforded by the
statute; it only submits to their resolution in an arbitral, rather than a judicial,
forum.’” Venture Cotton, 435 S.W.3d at 229 (quoting Mitsubishi Motors Corp. v.
21
Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628 (1985)). Thus, “an arbitration
agreement covering statutory claims is valid so long as the arbitration agreement
does not waive substantive rights and remedies of the statute and the arbitration
procedures are fair so that the employee may effectively vindicate his statutory
right.” Id. (quoting Poly-America, 262 S.W.3d at 352).
B. Bazan-Garcia failed to prove that arbitration under the parties’
agreement would be more expensive than litigation, and
effectively prevent her from vindicating her statutory rights.
Bazan-Garcia claims that the parties’ agreement requires her to split
the costs of arbitration equally with WRPS, and that AAA arbitration of her claims
could cost upward of $20,000. CR 77–78. She contends that this would
effectively force her to abandon these claims, because she cannot “risk incurring a
substantial debt exceeding $10,000.00 in arbitrator fees.” CR 81.
In assessing whether an arbitration agreement is unconscionable, the
court must determine whether the cost of arbitration would effectively prevent the
claimant from pursuing and vindicating her statutory rights. Poly-America, 262
S.W.3d at 356. The agreement may be “unconscionable if ‘the existence of large
arbitration costs could preclude a litigant from effectively vindicating his or her
federal [or state] statutory rights in the arbitral forum.’” Olshan, 328 S.W.3d at
892 (quoting Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 90 (2000))
(internal modifications omitted). Because arbitration is favored, it is not enough
22
for the claimant to show there is a “risk” that arbitration will be prohibitively
expensive. Id. at 892. Instead, “[t]he party opposing arbitration bears the burden
to show that the costs of arbitration render it unconscionable . . . [by] ‘showing the
likelihood of incurring such costs.’” Id. at 893 (quoting Green Tree, 531 U.S. at
92); see also FirstMerit Bank, 52 S.W.3d at 757 (“Because the record contains no
specific evidence that the [plaintiffs] will actually be charged excessive arbitration
fees, we conclude that there is legally insufficient evidence that the plaintiffs
would be denied access to arbitration based on excessive costs.”). In making this
determination, “a comparison of the total cost of [arbitration and litigation] is the
most important factor.” Olshan, 328 S.W.3d at 894–95.
1. Bazan-Garcia failed to prove that arbitrating her claims is
likely to cost upwards of $20,000.
Bazan-Garcia estimated that arbitration in this case would cost more
than $20,000, based on the costs of three allegedly similar arbitrations that were
conducted through the AAA. CR 85–94. The parties’ agreement, however, does
not require them to pursue arbitration through the AAA; it only states that
arbitration will be conducted “in accordance with” and “under” the AAA Rules.
App. 3, 13. “Under this language, the AAA may administer the arbitration, but the
parties are not required to have the arbitration administered by the AAA.” Aspen
Tech., Inc. v. Shasha, 253 S.W.3d 857, 864 (Tex. App.—Houston [14th Dist.]
2008, no pet.). Moreover, evidence of what costs were incurred by other parties in
23
other arbitrations is, by itself, legally insufficient to meet Bazan-Garcia’s burden of
proving what arbitration will cost her in this particular case.
In Shasha, the parties entered into an arbitration agreement stating
that arbitration would be “in accordance with the [AAA] Rules.” 253 S.W.3d at
864. In support of its argument that arbitration would prohibitively expensive, the
plaintiff presented evidence showing what amounts were likely to be charged by
the AAA and AAA arbitrators. Id. The court of appeals found that this evidence
was “legally insufficient to support the trial court’s implied finding that [the
plaintiff] satisfied his burden of providing specific evidence showing a likelihood
that he would be denied access to arbitration based on excessive arbitration costs,”
since the parties were not obligated to arbitrate through the AAA. Id. The court of
appeals held the trial court had abused its discretion by denying the defendant’s
motion to compel arbitration on this basis. Id. at 865. Bazan-Garcia’s evidence in
support of her unconscionability defense is also “legally insufficient,” as it
similarly presumes that arbitration will take place through the AAA. See also
Green Tree, 531 U.S. at 91 n.6 (holding that plaintiff failed to provide any “basis
on which to ascertain the actual costs and fees to which she would be subject in
arbitration” because she “failed to make any factual showing that the [AAA] would
conduct the arbitration, or that, if it did, she would be charged the filing fee or
arbitrator’s fee that she identified”).
24
In addition, Bazan-Garcia’s evidence was inadequate because it relied
entirely on fees that other parties have incurred. In Olshan, the plaintiffs argued
that arbitration would be prohibitively costly, and in support of this claim
“provided two invoices from the AAA for arbitration in, as the [plaintiffs] allege,
‘similar cases’ to show the likelihood of excessive litigation costs.” 328 S.W.3d at
897. The Supreme Court held that “[m]erely showing that other claimants have
incurred arbitration costs of some amount falls well short of specific evidence that
these particular parties will be charged excessive fees.” Id. The Court also noted
that there was no evidence that the plaintiffs had “made any effort to reduce the
likely charges through requests for fee waivers, pro bono, arbitrators, or even
simply requesting a one arbitrator panel.” Id. Because “[s]ubstantive
unconscionability threatens to become the exception that swallows the rule if all
that must be done to avoid arbitration is to assume the most expensive possible
scenario,” the Court concluded that “there is no legally sufficient evidence that [the
arbitration] fees prevent the [plaintiffs] from effectively pursuing their claim in the
arbitral forum.” Id. at 897. Like the plaintiffs in Olshan, Bazan-Garcia’s evidence
consisted entirely of invoices from other arbitrations, see CR 85–95, and therefore
did not support the trial court’s finding that the parties’ agreement was
unconscionable.
25
2. Under the parties’ agreement, WRPS will bear almost all of
the costs of arbitration.
Regardless of what the overall cost of arbitrating her claims may be,
Bazan-Garcia’s contention that she will be forced to bear half of these costs is
directly contradicted by the terms of the parties’ agreement. The Employee
Handbook, on which Bazan-Garcia relies, states that “[e]mployees who choose to
use the arbitration process to resolve a problem will be expected to share the cost
of the arbitration proceeding with WRPS, LP.” App. 13. This provision does not
require the parties to equally split the costs of arbitration, and Bazan-Garcia
provides no authority in support of her interpretation of this language.
Moreover, pursuant to the AAA Rules that the parties agreed to,
arbitration costs under an employer-promulgated plan such as the one at issue in
this case are almost entirely borne by the employer, rather than divided evenly
between the parties. See App. 45–47. Bazan-Garcia is only required to pay an
initial filing fee—$200 if she files with the AAA—and may also have to pay
additional fees if she postpones or cancels a scheduled hearing, as well as bear any
expenses for witnesses that she chooses to produce at the hearing. AAA Rule 45
(App. 43); AAA Rule 48(i) (App. 45); AAA Rule 48(iii) (App. 47). These
administrative fees may be “defer[red] or reduce[d]” if Bazan-Garcia shows that
they would cause her “extreme hardship.” AAA Rule 43 (App. 43). WRPS, in
contrast, will be responsible for paying a non-refundable filing fee in the amount of
26
$1,350. WRPS must also pay all fees associated with the hearings, and all of the
arbitrator’s fees and expenses. AAA Rule 48(i)–(iii) (App. 45–47).
The AAA Rules are controlling over any allegedly contrary provision
in the parties’ arbitration agreement, and would therefore defeat Bazan-Garcia’s
unconscionability argument even if her reading of the Employee Handbook’s cost-
sharing clause was correct. See AAA Rule 1 (App. 28) (arbitrator must apply
AAA Rules if “an adverse material inconsistency exists between the arbitration
agreement and these rules”). Far from causing Bazan-Garcia to “risk incurring a
substantial debt exceeding $10,000.00,” CR 82, therefore, the agreement only
requires Bazan-Garcia to pay a filing fee of $200.00—less than the fee she paid to
file this lawsuit in state court, see id. at 81 (stating that Bazan-Garcia paid 280.00
in expenses to file her lawsuit in state court). Even that small fee could be avoided
or reduced if Bazan-Garcia shows that it would be overly burdensome, see AAA
Rule 43 (App. 43), or files the arbitration outside of the AAA. Furthermore, by
pursuing her claims in arbitration rather than litigation, Bazan-Garcia could
decrease her overall expenses by avoiding lengthy and expensive discovery and
appeals. See Olshan, 328 S.W.3d at 894 (“The desire to avoid steep litigation
expenses—including the costs of longer proceedings, more complicated appeals on
the merits, discovery, investigations, fees, and expert witnesses—is the purpose of
arbitration in the first place.” (citing Tipps, 842 S.W.2d at 272–73)).
27
Because Bazan-Garcia failed to prove that arbitration will be more
costly than litigation and thereby prevent her from vindicating her statutory rights,
she failed to show that the arbitration agreement is unconscionable. See Olshan,
328 S.W.3d at 894–95.
C. An arbitration agreement cannot be found unconscionable based
on provisions that the arbitrator is empowered to modify.
Bazan-Garcia took issue with three provisions in the parties’
agreement: (1) the requirement that the parties “share” some costs of arbitration,
(2) the prohibition on either party taking more than one deposition; and (3)
conducting the arbitration hearing in Dallas County, Texas. CR 72. None of these
provisions is inherently unconscionable, and Bazan-Garcia does not claim they are.
See, e.g., Poly-America, 262 S.W.3d at 355–56 (holding that “fee-splitting
provisions that operate to prohibit an employee from fully and effectively
vindicating statutory rights are not enforceable,” but declining to hold that fee-
splitting or fee-sharing agreements are “unenforceable per se”); see also id. at 357
(enforcing an arbitration agreement limiting the parties to one deposition each
because the plaintiff failed to prove it was “insufficient to allow [him] a fair
opportunity to present his claims” (quoting Gilmer v. Interstate/Johnson Lane
Corp., 500 U.S. 20, 31 (1991)). Moreover, if circumstances cause any of these
provisions to become unconscionable, the arbitrator has the power to modify them.
28
The trial court therefore abused its discretion by finding that the arbitration is
unconscionable.
As a matter of law, an agreement is not unconscionable if its
potentially objectionable provisions can be modified by the arbitrator. In Poly-
America, for example, the parties entered into an agreement that required them to
equally split the costs of arbitration up to a particular amount, and limited the
amount of discovery that each party could pursue, including only allowing each
side to take “one oral deposition of no more than six hours.” 262 S.W.3d at 344.
Like Bazan-Garcia, the plaintiff in Poly-America alleged that his employer had
wrongfully discharged him in retaliation for filing a workers’ compensation claim,
and opposed arbitration on the grounds that the agreement’s cost-splitting
provisions and discovery limitations would effectively prevent him from
vindicating his statutory rights. Id.
The Supreme Court rejected both of these challenges. The parties’
agreement “specifically provide[d] that the arbitrator may modify unconscionable
terms.” Id. at 357. As a result, at this stage of the proceedings the plaintiff could
not show a likelihood that he would be forced to pay the complained-of costs, or
unable to obtain necessary discovery. Id. at 357–58 (describing the plaintiff’s
arguments as “speculative”); see also FirstMerit Bank, N.A., 52 S.W.3d at 757
(holding plaintiffs failed to prove arbitration agreement was unconscionable
29
because “the AAA may, in the event of extreme hardship on the part of any party,
defer or reduce the administrative fees”). The Court also emphasized that the
arbitrator, rather than the court, “is better situated to assess” whether the cost or
discovery provisions in the agreement would hinder the plaintiff’s ability to
vindicate his statutory rights, and “to modify the contract’s terms accordingly.”
Poly-America, 262 S.W.3d at 357–58.
For the reasons given by the Supreme Court in Poly-America, Bazan-
Garcia cannot prove that any of the provisions she complains of make the
arbitration agreement unconscionable. Under the AAA Rules, Bazan-Garcia is
only required to pay an initial filing fee, while WRPS must pay virtually all other
expenses of arbitration. See App. 45–47. If paying the $200 filing fee would
cause Bazan-Garcia “extreme hardship,” then the AAA may “defer or reduce” it.
AAA Rule 43 (App. 43). Likewise, limiting each party to taking one deposition is
not unconscionable, since “[t]he arbitrator shall have the authority to order such
discovery, by way of deposition, interrogatory, document production, or otherwise,
as the arbitrator considers necessary to a full and fair exploration of the issues in
dispute, consistent with the expedited nature of arbitration.” AAA Rule 9 (App.
32). Finally, the agreement’s venue provision is not unconscionable because the
arbitrator may ultimately decide the locale of the arbitration, “having regard for the
30
contentions of the parties and the circumstances of the arbitration.” AAA Rule 10
(App. 32).3
An arbitration agreement is unconscionable only if it is “so one-sided
that it is unconscionable under the circumstances existing when the parties made
the contract,” FirstMerit Bank, 52 S.W.3d at 757, and “sufficiently shocking or
gross to compel the court to intercede.” Ski River Dev., Inc. v. McCalla, 167
S.W.3d 121, 136 (Tex. App.—Waco 2005, pet. denied). The agreements between
Bazan-Garcia and WRPS do not meet this standard. They incorporate the AAA
Rules and are typical for arbitration agreements between employers and their
employees, as well as similar to those upheld by the Supreme Court in Poly-
America. Indeed, it will be less expensive for Bazan-Garcia to arbitrate her claims
than to try (and appeal) those claims in state court, see infra at Part III.B., and she
will also have the opportunity to ask the arbitrator to change any objectionable
cost, discovery, and venue provisions, see infra at Part III.C. By finding such an
agreement unconscionable, the trial court abused its discretion, and its judgment
must be reversed. See Poly-America, 262 S.W.3d at 349.
3
In addition, none of these provisions is “one-sided,” which is generally required for a
provision to be deemed unconscionable. See In re FirstMerit Bank, N.A., 52 S.W.3d 749, 757
(Tex. 2001).
31
IV. If any provision of the arbitration agreement is unconscionable, this
Court should sever it and enforce the remainder of the agreement.
Finally, if this Court concludes that any of the arbitration agreement’s
terms is unconscionable, then it should sever that term and remand the case for the
trial court to compel arbitration under the remainder of the agreement.
“[W]here a term rather than the entire contract is unconscionable, the
appropriate remedy is ordinarily to deny effect to the unconscionable term.”
Venture Cotton, 435 S.W.3d at 230 (quoting Restatement (Second) of Contracts §
208 cmt. g (1981)) (internal modification omitted); see also Poly-America, 262
S.W.3d at 360 (“An illegal or unconscionable provision of a contract may
generally be severed so long as it does not constitute the essential purpose of the
agreement.”). In Venture Cotton, the issue was whether a provision in an
arbitration agreement that prohibited the plaintiff from recovering attorneys’ fees
under the Texas Deceptive Trade Practices Act was unconscionable. The Texas
Supreme Court held that if the provision was unconscionable, then the court of
appeals should have severed it and enforced the remainder of the agreement, even
though the defendant had not requested this remedy from the trial court. 435
S.W.3d at 230 (explaining that on interlocutory appeal, “[c]onservation of time and
resources recommend that we consider the issue now because nothing prevents [the
defendant] from urging severance in the trial court and, if denied, from renewing
its complaint in yet another interlocutory appeal”).
32
Bazan-Garcia claims that three provisions in the parties’ arbitration
agreement are unconscionable: the cost-sharing provision, the limitation on
depositions, and the venue clause. None of these provisions constitutes the
“essential purpose of the agreement,” Poly-America, 262 S.W.3d at 360, which is
“to resolve in a speedy and inexpensive way, any legal controversy that may arise,”
App. 3. Consequently, if any or all of these provisions is found to be
unconscionable, it must be severed so that the remainder of the arbitration
agreement can be enforced. See Venture Cotton, 435 S.W.3d at 230–31 (holding
that “the court of appeals erred in declining to sever the objectionable limitation”
from the arbitration agreement).
Conclusion and Prayer for Relief
For the reasons set forth above, WRPS respectfully requests the Court
reverse the trial court’s Order denying WRPS’s motion to compel arbitration, and
direct the trial court to compel arbitration of all of Bazan-Garcia’s claims and abate
this litigation.
33
Respectfully submitted,
BAKER BOTTS L.L.P.
By: /s/ Jennifer M. Trulock
Jennifer M. Trulock
State Bar No. 90001515
2001 Ross Avenue, Suite 600
Dallas, Texas 75201
(214) 953-6500 Telephone
(214) 953-6503 Facsimile
jennifer.trulock@bakerbotts.com
Stephanie F. Cagniart
State Bar No. 24079786
98 San Jacinto Boulevard, Suite 1500
Austin, Texas 78701-4078
(512) 322-2500 Telephone
(512) 322-2501 Facsimile
stephanie.cagniart@bakerbotts.com
ATTORNEYS FOR APPELLANT
WESTERN RIM PROPERTY
SERVICES, INC.
34
Certificate of Compliance
This brief complies with the type-volume limitations of Tex. R. App.
P. 9.4, as it contains 7,637 words, excluding the parts of the brief exempted by
Rule 9.4(i)(1).
/s/ Stephanie F. Cagniart
Stephanie F. Cagniart
Certificate of Service
I hereby certify that on December 24, 2014, a copy of the foregoing
was served by the Court’s CM/ECF electronic service and by electronic mail on
the following parties:
Javier Espinoza
Josue F. Garza
The Espinoza Law Firm, PLLC
503 E. Ramsey, Ste. 103
San Antonio, Texas 78216
210-229-1302 (Facsimile)
josue@espinozafirm.com
/s/ Stephanie F. Cagniart
Stephanie F. Cagniart
35
Index to Appendix
A. Trial Court’s Order Concerning Defendant’s Motion to Compel Arbitration
and Motion for Protective Order (App. 1–2)
B. Arbitration Agreement (App. 3)
C. Employee Acknowledgement Form (App. 4)
D. Employee Handbook, WRPS, LP (App. 5–13)
E. Employment Arbitration Rules and Mediation Procedures, American
Arbitration Association (App. 14–65)
F. Tex. Civ. Prac. & Rem. Code §§ 171.001, 171.021 and 171.025 (App. 66–
68)
36
APPENDIX
EXHIBIT A
, ..
E-FILED
20 14CVO 1064 Bexar County, County Clerk
Gerard Rickhoff
Accepted Date:11/10/2014 9:10:58 AM
CAUSE NO. 2014CV01064 Accepted By: Leticia Silva
Leticia Silva
PAULA BAZAN-GARCIA, § IN THE COUNTY COUR'Peputy Clerk
§
Pli!intiff. §
§
v. § ATLAWN0.03
§
WESTERN RIM PROPERTY SERVICES, §
nNC. §
§
Defendant § BEXAR COUNI'YJ TEXAS
OROER OONCERN£NG DEFENDANT'S MOTION TO COMPID.tARBITRATlON
AND MOT!ON FQR PROTJ}CTIY~ .ORDER
On this the 61h day of November 2014 <;ame to be he!l!d Defendant's Motion to Compel
Arbitration and M~tion for P.totectlve Otder. The Court having considered the Motions :md all
applicable 11rB'lments, case law and evidence is of the opinion thl\t the arbitxation policy contained in
Defendant's dispute tesolution policy is unconscionable and unenf().J:ceab1e.
1T IS THEREFORE ORDERED, ADJUDGED AND DECREED that Defendant's
Motion ro Compel Arbitration is heteby in all t:h.ings DENIED.
lT IS FURTI-IER ORDERED, ADJUDGED AND DECREED that Defendant's Motion
for P1ote<:.tive O.tdet is heJ:eby in all things DENIED. /f /
this~day of._ __,/~~~___;;,(]"'
1
SIGNED 2nd ENTERED _ _ ___, 2014.
BON. JUDGE PRESIDING
APPROVED AS 'I'O FORM:
13
144
Submit Date:11/10/2014 9:09:081 AM
App.001
....
JOSUE F. '-I£1JllL1
Espinoza Law Firm, PLLC
Atto1ueys fo.t: Plaintiff
503 E. R:unsey, Ste. 103
San An xas 7B216
JENNIFER . 'f_,.....~'""'"'·
STEPHANIE F. CAGNIART
98 Slm J~clnto 'Boulev:ud. Suite 1500
Austin, Texas 78701-4078
14
145
2
App.002
EXHIBIT B
ARBITRATION AGREEMENT
lt is in the interest of WRPS ill, LP and their employees to resolve in a speedy and
inex.pens.ive way, any legal controversy that may arise. Therefore, other than a worker's _
compensation claim covered by insurance, no dispute between the companies and the
undersigned which is ir. any way related to tbe empJoyment of the undersigned, including ·-
but not limited to a clllim for wrongtJI termination, discrimination and/or harassment,
and worker's compensation not covered by insurance, shall be the subject of a Ja~suit
filed in. any state or federal court. Instead, any such dispute Shall be submitted to ...
arbitration in accordance with the roles of the American Arbitration A3sociation
("AAA"). Prior to the filing of any such proceeding, the filing party shall give twenty _
(20) days prior written notice:
Each party to arbitration shall be entitled to tab only one deposition. Any arbitration _
relating to any dispute covered by this Agreement shall be arbitrated in Dallas County,
Texas.
N the conclusion of the arbitration. the arbitrator shall make such findings of fact and
state tho evidentiary basis of such finding. The Arbitrator shall also issue a ruling and
explain how the findings of fact justify his ruling. Any court of competent jurisdiction
shall enter judgment on the arbitration award and soan review che award as permitted by
law.
BY:
39
1
App.003
EXHIBIT C
II
WilPS 111, LP
En.ployee Handbook WRPS lll, LP
EM'LOYEE ACKNOWLEDGEMENT FORM
Tht employee handbook describes important information about WR.PS III, LP, and J understand that I
sboold consult the Human Resources Department regarding any questions not answered in the bimdbook.
I have entered into my employment relationship with WRPS In, LP voluntarily and acknowledge that
ti;teJC is no specified length of employment. Accordingly, either I or WRPS III, LP can terminate the
relationship at will, with or without cause, at any time, so long as there is no violation of applicable
federal or state law.
Since the information, policies, and benefits described here are necessarily subject to change, I
acknowledge that revisions to the handbook may occur, except to WRPS Ill, LP's policy of employment·
at-will. All such changes will be communicated through official notices, and I understand that revised
lnfamation may supersede, modify, or eliminate existing policies. Only the chief executive officer of
WRPS IU, LP has the ability to adopt any revisions to the policies in this handbook..
Punhermore, I acknowledge that this handbook is neither a contract of employment nor a legal document.
I have received tho handbook, and I understand that it is my responsibility to read and comply with the
policies contained in this handbook and any revisions made to it.
EMPLOYEE'S NAME (printed~/a Q.J~::DZEtJ.:·~a._y ("~---­
SfGNAn.JR~(!. 4~ ~
EMPLOYEE'S
DATE,~ ?Q,'ZtJlL.~---
37
1
App.004
EXHIBIT D
WR
p s
Employee Handbook
WRPS,LP
10/01/2011
45
App.005
IIIli
1111
WRPSI LP
Table of Contents
No. Polley Effective Revision Page
Date: J2!!!i
INTRODUCTION
020 Employee Welcome Message 1211/1999 11112006 1
030 Organization Description 1211/1999 1/1/2006 2
040 Introductory Statement 12/111999 1/1/2006 3
051 Employee Acknowledgement Form 121111999 1/112006 4
EMPLOYMENI'
101 Nature of Employment 1211/1999 1/1/2000 5
102 Employee Relations 1211/1999 1/1/2006 6
103 Equal Employment Opportunity 12/1/1999 111/2006 7
104 Business Ethics and Conduct 12/1/1999 111/2006 8
107 Immigration Law Compliance 12/1/1999 11112000 9
108 Conflicts oflnterest 12/111999 1/112006 10
110 Outside Employment 12/111999 1/112006 11
112 Non-Disclosure 12/1/1999 1/1/2006 12
114 Disability Accommodation 12/1/1999 1/112006 13
180 Personal Relationships in the Workplace 11/19/2004 1/1/2006 14
EMPLOYMENT STATUS & RECORDS
201 Employment Categories 12/1/1999 1/1/2006 16
202 Access to Personnel Files 12/1/1999 111/2006 18
203 Employment Reference Checks 12/1/1999 1/1/2000 19
204 Personnel Data Changes 12/111999 111/2006 20
205 Introductory Period 12/1/1999 1/1/2006 21
208 Employment Applications 12/111999 1/1/2006 22
209 Perfonnan.ce Evaluation 1211/1999 1/1/2006 23
210 Job Descriptions 12/1/1999 1/1/2006 24
280 Confidentiality of Salary 12/111999 1/1/2006 25
EMPLOYEE BENEFIT PROGRAMS
301 Employee Benefits 12/1/1999 1/112006 26
303 Vacation Benefits 12/1/1999 10/1/2009 27
304. Child Care Benefits 12/1/1999 111/2006 29
305 Holidays 12/111999 1/1/2006 30
46
App.006
WRPS, LP
307 Sick Leave Benefits 12/l/1999 10/1/2009 31
308 Time Off to Vote 12/1/1999 1/1/2006 33
309 Bereavement Leave 12/111999 1/112006 34
310 Relocation Benefits 12/1/1999 1/1/2006 35
311 Jury Duty 12/1/1999 1/112006 36
312 Witness Duty 12/111999 1/1/2006 37
313 Benefits Continuation (COBRA) 12/1/1999 1/1/2006 38
314 Educational Assistance 1211/1999 1/112006 39
316 Health Insurance 12/1/1999 1/112006 40
317 Life Insurance 12/1/1999 1/1/2006 41
320 401 (k) Savings Plan 12/1/1999 111/2006 42
326 Flexible Spending Account (FSA) 12/1/1999 1/1/2006 43
328 Partnership Participation Units 1211/1999 1/1/2006 44
330 Annual Incentive Trip 12/1/1999 1/112006 45
TIMEKEEPING/PAYR.OLL
401 Timekeeping 12/1/1999 1/1/2000 46
403 Paydays 12/1/1999 1/1/2000 47
405 Employment Termination 12/111999 1/112006 48
407 Severance Pay 12/1/1999 1/1/2006 49
409 Administrative Pay Corrections 12/111999 1/1/2006 so
410 Pay Deductions and Setoffs 12/111999 111/2006 Sl
WORK CONDITIONS & HOURS
502 Work Schedules 1211/1999 1/1/2006 52
504 Use of Phone and Mail Systems 12/1/1999 1/1/2006 53
505 Smoking 12/1/1999 111/2006 54
506 Rest and Meal Periods 12/1/1999 1/1/2006 55
507 Overtime 121111999 1/1/2006 56
512 Business Travel Expenses 12/111999 1/1/2009 57
514 Visitors in the Workplace 121111999 1/1/2006 58
516 Computer and Email Usage 12/1/1999 1/112006 60
517 Internet Usage 1211/1999 111/2006 61
522 Workplace Violence Prevention 1211/1999 l/1/2006 63
526 Cell Phone Usage 12/111999 11112006 65
LEAVES OF ABSENCE
60 l Medical Leave 1211/1999 1/1/2006 66
47
App.007
II
WRPS., LP
602 Family Leave 12/1/1999 1/1/2006 68
605 Military Leave 1/1/2006 111/2000 70
EMPLOYEE CONDUCT & DISCIPLINARY ACTION
701 Employee Conduct and Work Rules 12/1/1999 111/2006 71
702 Drug and Alcohol Use 1211/1999 111/2000 73
703 Sexual and Other Unlawful Harassment 12/1/1999 111/2006 74
704 Attendance and Punctuality 12/1/1999 11112000 76
705 Personal Appearance 12/1/1999 1/1/2000 77
706 Return of Property 12/1/1999 1/112000 78
708 Resignation 12/1/1999 1/1/2000 79
714 Drug Testing 12/1/1999 1/1/2006 80
716 Progressive Discipline 12/1/1999 1/1/2006 81
718 Problem Resolution 12/111999 111/2006 83
720 Casual Days 12/1/1999 1/1/2006 85
MISCELLANEOUS
800 Life·Tbreatening Illnesses in the Workplace 12/1/1999 111/2006 87
806 Suggestion Program 12/1/1999 111/2006 88
48
App.008
WRPS,LP
WRPS,LP
Welcome new employee!
On behalf of your colleagues, I welcome you to WRPS, LP and wish you every success here.
We believe that each employee contributes directly to WR.PS, LP's growth and success, and we hope you
will take pride in being a member of our team.
This handbook was developed to describe some of the expectations of our employees and to outline the
policies, programs, and benefits available to eligible employees. Employees should familiarize themselves
with the contents of the employee handbook as soon as possible, for it will answer many questions about ·
employment with WRPS, LP.
We hope that your experience here will be challenging, enjoyable, and rewarding. Again, welcome!
Sincerely,
Marcus D. Hiles
Chairman and CEO
1
49
App.009
1111
1111
WRPS,LP
WRPS,LP
ORGANIZATION DESCRIPTION
Western Rim Property Services currently manages over 6,000 apartment homes in Texas. These
apartment homes include luxury, moderate, and affordable housing communities. Currently
Western Rim has in excess of 1,200 LIHTC apartments with its major growth emphasis
consisting of luxury AAA properties. Whatever your needs, Western Riin has a home to satisfy
your requirements.
The Mansion trademark is the brand name for its AAA luxury units. These properties are
unmatched in their amenities such as attached garages, marble baths with Jacuzzi tubs, granite
kitchens, Berber carpet,. and upgraded kitchen appliances. The most spectacular clubhouses in
the industry, which include full impact aerobics floors, free weight and exercise room, stadiwn
seating theater rooms, pool tables, tanning beds, saunas and an outside pool area that is beyond
belief. Our philosophy is not that we are renting living space but are instead marketing a life
style.
Western Rim Properties are on the cutting edge of design. Mariy are regularly referenced in the
industry publications and are finalist for national awards such as the 1998 National Award
"Pillars of the Industry" for best signage (Mansions by Vineyard) and 1999 National Apartment
Association's "Pillars of the Industry" for best brochure (Mansions by the Lake).
2
50
App.010
II
WRPS,LP
WRPS,LP
INTRODUCTORY STATEMENT
This handbook is designed to acquaint you with WRPS, LP and provide you with infonnation about
working conditions, employee benefits, and some of the policies affecting your employment. You should
read, understand, and comply with all provisions of the handbook. It describes many of your
responsibilities as an employee and outlines the programs developed by WRPS, LP to benefit employees.
One of our objectives is to provide a work environment that is conducive to both personal and
professional growth.
No employee handbook can anticipate every circumstance or question about policy. As WRPS, LP
continues to grow, the need may arise and WRPS, LP reserves the right to revise, supplement, or rescind
any policies or portion of the handbook from time to time as it deems appropriate, in its sole and absolute
discretion. The only exception to any changes is our employment-at-wiU policy pennitting you or WRPS,
LP to end our relationship for any reason at any time. Employees will, of course, be notified of such
changes to the handbook as they occur.
3
51
App.011
1111
1111
WRPS,LP
WRPS,LP
718 Problem Resolution
Effective Date: 12/1/1999
Revision Date: 8/1/2006
WRPS, LP is committed to providing the best possible working conditions for its employees. Part of this
commitment is encouraging an open and frank atmosphere in which any problem, complaint, suggestion,
or question receives a timely response from WRPS, LP supervisors and management.
WRPS, LP strives to ensure fair and honest treatment of all employees. Supervisors, managers, and
employees are expected to treat each other with mutual respect. Employees are encouraged to offer
positive and constructive criticism.
If employees disagree with established rules of conduct, policies, or practices, they can express their
concern through the problem resolution procedure. No employee will be penalized, formally or
informally, for voicing a complaint with WRPS, LP in a reasonable, business-like manner, or for using
the problem resolution procedure. ·
If a situation occurs when employees believe that -a condition of employment or a decision affecting them
is unjust or inequitable, they are encouraged to make use of the following steps. The employee may
discontinue the procedure at any step.
1. Employee presents problem promptly to immediate supervisor within 3 calendar days, after incident
occurs. If supervisor is unavailable or employee believes it would be inappropriate to contact that person,
employee may present problem to the Human Resources Department or any other member of
management
2. Supervisor responds to problem during discussion or within 3 calendar days, after consulting with
appropriate management, when necessary. Supervisor documents discussion.
3. Employee presents problem to the Human Resources Department within 3 calendar days, if problem is
unresolved.
4. Human Resources Department counsels and advises employee, assists in putting problem in writing,
visits with employee's managet\s), if necessary, and directs employee to the President for review of
problem. ·
5. Employee presents problem to the President in writing.
83
52
App.012
1111
1111
WRPS,LP
WRPS,LP
6. The President reviews and considers problem. The President infonns employee of decision within 3
calendar days, and forwards copy of written response to the Human Resources Department for employee's
file. The President has full authority to make any adjustment deemed appropriate to resolve the problem.
This decision is final and binding on all parties and may not be discussed or complained about again.
Problems, disputes, or claims not resolved through the preceding problem resolution steps are subject to
final and binding arbitration. The arbitration proceeding will be conducted under the Employment Dispute
Resolution Rules of the American Arbitration Association. The decision or award of the Arbitrator made
under these rules is exclusive, final, and binding on parties, their beneficiaries, executors, administrators,
successors, and assigns. ~ employee must sign the attached Arbitration Agreement. This is an
absolute requirement.
Employees who choose to use the arbitration proeess to resolve a problem will be expected to share the
cost of the arbitration proceeding with WRPS, LP. A complete description of the arbitration procedure is
available from the Human Resources Department for review.
Not every problem can be resolved to everyone's total satisfaction, but only through understanding and
discussion of mutual problems can employees and management develop confidence in each other. This
confiden~ is important to the operation of an efficient and luUmonious work environment, and helps to
ensure everyone's job security.
84
53
App.013
EXHIBIT E
Employment
Arbitration Rules & Mediation Procedures
Available online at adr.org/employment
Rules Amended and Effective November 1, 2009
Fee Schedule Amended and Effective May 15, 2013
1
App.014
Regional Vice Presidents and Directors
States: Delaware, District of Columbia, Maryland, States: Alaska, Arizona, California, Colorado,
New Jersey, Pennsylvania, West Virginia Hawaii, Idaho, Montana, Nevada, Oregon, Utah,
Kenneth Egger Washington, Wyoming
Vice President John English
Phone: 215.731.2281 Vice President
Email: EggerK@adr.org Phone: 619.239.3051
Email: EnglishJ@adr.org
States: Connecticut, Maine, Massachusetts,
New Hampshire, New York, Vermont States: Rhode Island
Ann Lesser, Esq. Heather Santo
Vice President Director
Phone: 212.484.4084 Phone: 866.293.4053
Email: LesserA@adr.org Email: SantoH@adr.org
States: Alabama, Arkansas, Florida, Georgia, States: Louisiana, New Mexico, Oklahoma, Texas
Mississippi, North Carolina, South Carolina, Molly Bargenquest
Virginia Vice President
Charles Dorsey Phone: 972.702.8222
Director Email: BargenquestM@adr.org
Phone: 866.686.6024
Email: DorseyC@adr.org
States: Illinois, Indiana, Iowa, Kansas, Kentucky,
Michigan, Minnesota, Missouri, Nebraska,
North Dakota, Ohio, South Dakota, Tennessee,
Wisconsin
Jan Holdinski
Vice President
Phone: 248.352.5509
Email: HoldinskiJ@adr.org
Case Management Vice Presidents and Directors
Molly Bargenquest Charles Dorsey
Vice President Director
Phone: 972.702.8222 Phone: 866.686.6024
Email: BargenquestM@adr.org Email: DorseyC@adr.org
Administers cases in AR, IL, IA, KS, LA, MN, MS, Administers cases in FL, GA
MO, NE, ND, OK, SD, TX, WI
Heather Santo
Patrick Tatum Director
Director Phone: 866.293.4053
Phone: 559.490.1905 Email: SantoH@adr.org
Email: TatumP@adr.org Administers cases in AL, CT, DC, DE,
Administers cases in AK, AZ, CA, CO, HI, ID, MT, IN, KY, MA, MD, ME, MI, NC, NH, NJ,
NV, NM, OR, UT, WA, WY NY, OH, PA, RI, SC, TN, VA, VT, WV
2 RULES AND MEDIATION PROCEDURES American Arbitration Association
2
App.015
Table of Contents
Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Role of the American Arbitration Association®. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Legal Basis of Employment ADR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
The Fairness Issue: The Due Process Protocol . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
AAA’s Employment ADR Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
AAA’s Policy on Employment ADR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Notification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Costs of Employment Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Designing an ADR Program. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Alternative Dispute Resolution Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Open Door Policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Ombuds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Peer Review. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Internal Mediation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Fact-Finding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Types of Disputes Covered. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Employment Arbitration Rules and Mediation Procedures. . . . . . . . . . . . . . . . . . . . . 15
1. Applicable Rules of Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2. Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3. AAA as Administrator of the Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4. Initiation of Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5. Changes of Claim. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6. Jurisdiction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7. Administrative and Mediation Conferences. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8. Arbitration Management Conference. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
9. Discovery. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
10. Fixing of Locale (the city, county, state, territory, and/or country of the Arbitration).19
11. Date, Time and Place (the physical site of the hearing within the designated locale)
of Hearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
12. Number, Qualifications and Appointment of Neutral Arbitrators . . . . . . . . . . . . . . . 20
13. Party Appointed Arbitrators. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Rules Amended and Effective November 1, 2009. Fee Schedule Amended and Effective May 15, 2013. EMPLOYMENT RULES 3
3
App.016
14. Appointment of Chairperson by Party-Appointed Arbitrators or Parties. . . . . . . . . . 21
15. Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
16. Disqualification of Arbitrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
17. Communication with Arbitrator. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
18. Vacancies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
19. Representation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
20. Stenographic Record . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
21. Interpreters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
22. Attendance at Hearings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
23. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
24. Postponements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
25. Oaths . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
26. Majority Decision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
27. Dispositive Motions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
28. Order of Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
29. Arbitration in the Absence of a Party or Representative. . . . . . . . . . . . . . . . . . . . . . . 25
30. Evidence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
31. Inspection. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
32. Interim Measures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
33. Closing of Hearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
34. Reopening of Hearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
35. Waiver of Oral Hearing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
36. Waiver of Objection/Lack of Compliance with These Rules. . . . . . . . . . . . . . . . . . . . 28
37. Extensions of Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
38. Serving of Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
39. The Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
40. Modification of Award. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
41. Release of Documents for Judicial Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
42. Applications to Court. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
43. Administrative Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
44. Neutral Arbitrator’s Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
45. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
46. Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
47. Suspension for Non-Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
48. Interpretation and Application of Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Costs of Arbitration (including AAA Administrative Fees). . . . . . . . . . . . . . . . . . . . . . . . . 31
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For Disputes Arising Out of Employer-Promulgated Plans*: . . . . . . . . . . . . . . . . . . . 32
(i) Filing Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(ii) Hearing Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(iii) Postponement/Cancellation Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(iv) Hearing Room Rental. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(v) Abeyance Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(vi) Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
For Disputes Arising Out of Individually-Negotiated Employment Agreements
and Contracts:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Administrative Fee Schedules (Standard and Flexible Fees) . . . . . . . . . . . . . . . . . . . 35
(i) Standard Fee Schedule. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(ii) Refund Schedule for Standard Fee Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(iii) Flexible Fee Schedule. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(iv) Hearing Room Rental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(v) Abeyance Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(vi) Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
For Disputes Proceeding Under the Supplementary Rules for Class Action
Arbitration (“Supplementary Rules”):. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Optional Rules for Emergency Measures of Protection. . . . . . . . . . . . . . . . . . . . . . . . 42
O-1. Applicability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
O-2. Appointment of Emergency Arbitrator. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
O-3. Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
O-4. Interim Award. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
O-5. Constitution of the Panel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
O-6. Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
O-7. Special Master. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
O-8. Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
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Employment Mediation Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
M-1. Agreement of Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
M-2. Initiation of Mediation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
M-3. Fixing of Locale (the city, county, state, territory and, if applicable, country of
the mediation) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
M-4. Representation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
M-5. Appointment of the Mediator. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
M-6. Mediator’s Impartiality and Duty to Disclose. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
M-7. Vacancies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
M-8. Duties and Responsibilities of the Mediator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
M-9. Responsibilities of the Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
M-10. Privacy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
M-11. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
M-12. No Stenographic Record. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
M-13. Termination of Mediation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
M-14. Exclusion of Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
M-15. Interpretation and Application of Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
M-16. Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
M-17. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
M-18. Cost of the Mediation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
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Employment Arbitration
Rules and Mediation Procedures
Introduction
Federal and state laws reflecting societal intolerance for certain workplace
conduct, as well as court decisions interpreting and applying those statutes,
have redefined responsible corporate practice and employee relations.
Increasingly, employers and employees face workplace disputes involving
alleged wrongful termination, sexual harassment, or discrimination based on
race, color, religion, sex, national origin, age and disability.
As courts and administrative agencies become less accessible to civil litigants,
employers and their employees now see alternative dispute resolution (“ADR”)
as a way to promptly and effectively resolve workplace disputes. ADR procedures
are becoming more common in contracts of employment, personnel manuals,
and employee handbooks.
Increasingly, corporations and their employees look to the American Arbitration
Association® as a resource in developing prompt and effective employment
procedures for employment-related disputes.
These Rules have been developed for employers and employees who wish
to use a private alternative to resolve their disputes, enabling them to have
complaints heard by an impartial person with expertise in the employment
field. These procedures benefit both the employer and the individual employee
by making it possible to resolve disputes without extensive litigation.
Role of the American Arbitration Association
The American Arbitration Association, founded in 1926, is a not-for-profit, public
service organization dedicated to the resolution of disputes through mediation,
arbitration, elections and other voluntary dispute resolution procedures. Millions
of workers are now covered by employment ADR plans administered by the AAA®.
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In addition, the AAA provides education and training, specialized publications,
and research on all forms of dispute settlement. With 30 offices worldwide
and cooperative agreements with arbitral institutions in 63 other nations, the
American Arbitration Association is the nation’s largest private provider of
ADR services.
For over 80 years, the American Arbitration Association has set the standards
for the development of fair and equitable dispute resolution procedures. The
development of the Employment Arbitration Rules and Mediation Procedures
and the reconstitution of a select and diverse roster of expert neutrals to hear
and resolve disputes, are the most recent initiatives of the Association to provide
private, efficient, and cost-effective procedures for out-of-court settlement of
workplace disputes.
Legal Basis of Employment ADR
Since 1990, Congress has twice re-affirmed the important role of ADR in the
area of employment discrimination — in the Americans with Disabilities Act in
1990, and a year later in Section 118 of the Civil Rights Act of 1991.
The United States Supreme Court has also spoken on the importance of ADR
in the employment context. In Gilmer v. Interstate/Johnson Lane, 500 U.S. 20,
111 S. Ct. 1647 (1991), the Supreme Court refused to invalidate Gilmer’s agreement
with the New York Stock Exchange that he would arbitrate disputes with his
employer (Interstate/Johnson Lane) simply because he was obliged to sign it in
order to work as a securities dealer whose trades were executed on the Exchange.
Although the Gilmer Court found that the Age Discrimination in Employment Act
did not preclude arbitration of age discrimination claims, it specifically declined
to decide whether employment arbitration agreements were “contracts of
employment” excluded under the Federal Arbitration Act.
The specific issue left open by Gilmer was decided 10 years later by the United
States Supreme Court in Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 121 S.
Ct. 1302, 149 L. Ed. 2d 234 (2001). In Circuit City, the Supreme Court concluded
that except for transportation workers such as seamen or railroad workers, the
FAA covers all contracts of employment and that the Act may be used to compel
arbitration of employment-related claims. While Circuit City involved only state
law claims, the Supreme Court had determined previously in Gilmer that federal
age discrimination claims (and presumably other federal civil rights claims) were
arbitrable under the FAA.
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The Fairness Issue: The Due Process Protocol
The Due Process Protocol for Mediation and Arbitration of Statutory Disputes
Arising Out of the Employment Relationship was developed in 1995 by a special
task force composed of individuals representing management, labor, employment,
civil rights organizations, private administrative agencies, government, and the
American Arbitration Association. The Due Process Protocol, which was endorsed
by the Association in 1995, seeks to ensure fairness and equity in resolving
workplace disputes. The Due Process Protocol encourages mediation and
arbitration of statutory disputes, provided there are due process safeguards. It
conveys the hope that ADR will reduce delays caused by the huge backlog of
cases pending before administrative agencies and the courts. The Due Process
Protocol “recognizes the dilemma inherent in the timing of an agreement to
mediate and/or arbitrate statutory disputes” but does not take a position on
whether an employer can require a pre-dispute, binding arbitration program as
a condition of employment.
The Due Process Protocol has been endorsed by organizations representing a
broad range of constituencies. They include the American Arbitration Association,
the American Bar Association Labor and Employment Section, the American
Civil Liberties Union, the Federal Mediation and Conciliation Service, the National
Academy of Arbitrators, and the National Society of Professionals in Dispute
Resolution. The National Employment Lawyers Association has endorsed the
substantive provisions of the Due Process Protocol.
It has been incorporated into the Report of the United States Secretary of Labor’s
Task Force in Excellence in State and Local Government and cited with approval
in numerous court opinions.
AAA’s Employment ADR Rules
On June 1, 1996, the Association issued National Rules for the Resolution of
Employment Disputes (now known as the Employment Arbitration Rules and
Mediation Procedures). The rules reflected the guidelines outlined in the
Due Process Protocol and were based upon the AAA’s California Employment
Dispute Resolution Rules, which were developed by a committee of employment
management and plaintiff attorneys, retired judges and arbitrators, in addition
to Association executives. The revised rules were developed for employers and
employees who wish to use a private alternative to resolve their disputes.
The rules enabled parties to have complaints heard by an impartial person of
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their joint selection, with expertise in the employment field. Both employers and
individual employees benefit by having experts resolve their disputes without the
costs and delay of litigation. The rules included procedures which ensure due
process in both the mediation and arbitration of employment disputes. After a
year of use, the rules were amended to address technical issues.
AAA’s Policy on Employment ADR
The AAA’s policy on employment ADR is guided by the state of existing law, as
well as its obligation to act in an impartial manner. In following the law, and in
the interest of providing an appropriate forum for the resolution of employment
disputes, the Association administers dispute resolution programs which meet
the due process standards as outlined in its Employment Arbitration Rules
and Mediation Procedures and the Due Process Protocol. If the Association
determines that a dispute resolution program on its face substantially and
materially deviates from the minimum due process standards of the Employment
Arbitration Rules and Mediation Procedures and the Due Process Protocol, the
Association may decline to administer cases under that program. Other issues
will be presented to the arbitrator for determination.
Notification
If an employer intends to utilize the dispute resolution services of the Association
in an employment ADR plan, it shall, at least 30 days prior to the planned effective
date of the program: (1) notify the Association of its intention to do so; and (2)
provide the Association with a copy of the employment dispute resolution plan.
If an employer does not comply with this requirement, the Association reserves
the right to decline its administrative services. Copies of all plans should be sent
to the American Arbitration Association, 725 South Figueroa Street, Suite 2400,
Los Angeles, CA 90017; FAX: 213.622.6199.
Costs of Employment Arbitration
These Rules contain two separate and distinct arbitration costs sections; one
for disputes arising out of employer-promulgated plans and the other for
disputes arising out of individually-negotiated employment agreements and
contracts. When the arbitration is filed, the AAA makes an initial administrative
determination as to whether the dispute arises from an employer-promulgated
plan or an individually-negotiated employment agreement or contract. This
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determination is made by reviewing the documentation provided to the AAA
by the parties, including, but not limited to, the demand for arbitration, the
parties’ arbitration program or agreement, and any employment agreements
or contracts between the parties.
When making its determination on the applicable costs of arbitration section in
a given arbitration, the AAA’s review is focused on two primary issues. The first
component of the review focuses on whether the arbitration program and/or
agreement between the individual employee and the employer is one in which
it appears that the employer has drafted a standardized arbitration clause with
its employees. The second aspect of the review focuses on the ability of the
parties to negotiate the terms and conditions of the parties’ agreement.
If a party disagrees with the AAA’s initial determination, the parties may bring
the issue to the attention of the arbitrator for a final determination.
Designing an ADR Program
The guiding principle in designing a successful employment ADR system is
that it must be fair in fact and perception. The American Arbitration Association
has considerable experience in administering and assisting in the design of
employment ADR plans, which gives it an informed perspective on how to
effectively design ADR systems, as well as the problems to avoid. Its guidance
to those designing employment ADR systems is summarized as follows:
» The American Arbitration Association encourages employers to consider the
wide range of legally-available options to resolve workplace disputes outside the
courtroom.
» A special emphasis is placed by the Association on encouraging the development
of in-house dispute resolution procedures, such as open door policies, ombuds,
peer review and internal mediation.
» The Association recommends an external mediation component to resolve disputes
not settled by the internal dispute resolution process.
» Programs which use arbitration as a final step may employ:
• pre-dispute, voluntary final and binding arbitration;
• pre-dispute, mandatory nonbinding arbitration;
• pre-dispute, mandatory final and binding arbitration; or
• post-dispute, voluntary final and binding arbitration.
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» Although the AAA administers binding arbitration systems that have been required
as a condition of initial or continued employment, such programs must be consistent
with the Association’s Employment Arbitration Rules and Mediation Procedures.
Specific guidance on the responsible development and design of employment
ADR systems is contained in the Association’s publication, Resolving Employment
Disputes: A Practical Guide, which is available from the AAA’s website,
www.adr.org.
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Alternative Dispute Resolution Options
Open Door Policy
Employees are encouraged to meet with their immediate manager or supervisor
to discuss problems arising out of the workplace environment. In some systems,
the employee is free to approach anyone in the chain of command.
Ombuds
A neutral third party (either from within or outside the company) is designated
to confidentially investigate and propose settlement of employment complaints
brought by employees.
Peer Review
A panel of employees (or employees and managers) works together to resolve
employment complaints. Peer review panel members are trained in the handling
of sensitive issues.
Internal Mediation
A process for resolving disputes in which a neutral third person from within the
company, trained in mediation techniques, helps the disputing parties negotiate
a mutually acceptable settlement. Mediation is a nonbinding process in which
the parties discuss their disputes with an impartial person who assists them in
reaching a settlement. The mediator may suggest ways of resolving the dispute
but may not impose a settlement on the parties.
Fact-Finding
The investigation of a complaint by an impartial third person (or team) who
examines the complaint and the facts and issues a nonbinding report. Fact-finding
is particularly helpful for allegations of sexual harassment, where a fact-finding
team, composed of one male and one female neutral, investigates the
allegations and presents its findings to the employer and the employee.
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Arbitration
Arbitration is generally defined as the submission of disputes to one or more
impartial persons for final and binding determination. It can be the final step in
a workplace program that includes other dispute resolution methods. There are
many possibilities for designing this final step.
They include:
» Pre-Dispute, Voluntary Final and Binding Arbitration
The parties agree in advance, on a voluntary basis, to use arbitration to
resolve disputes and they are bound by the outcome.
» Pre-Dispute, Mandatory Nonbinding Arbitration
The parties must use the arbitration process to resolve disputes, but they
are not bound by the outcome.
» Pre-Dispute, Mandatory Final and Binding Arbitration
The parties must arbitrate unresolved disputes and they are bound by
the outcome.
» Post-Dispute, Voluntary Final and Binding Arbitration
The parties have the option of deciding whether to use final and binding
arbitration after a dispute arises.
Types of Disputes Covered
The dispute resolution procedures contained in this booklet were developed
for arbitration agreements contained in employee personnel manuals, an
employment application of an individual employment agreement, other types
of employment agreements, or can be used for a specific dispute. They do not
apply to disputes arising out of collective bargaining agreements or independent
contractor agreements.
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Employment Arbitration Rules and Mediation Procedures
1. Applicable Rules of Arbitration
The parties shall be deemed to have made these rules a part of their arbitration
agreement whenever they have provided for arbitration by the American
Arbitration Association (hereinafter “AAA”) or under its Employment Arbitration
Rules and Mediation Procedures or for arbitration by the AAA of an employment
dispute without specifying particular rules*. If a party establishes that an adverse
material inconsistency exists between the arbitration agreement and these rules,
the arbitrator shall apply these rules.
If, within 30 days after the AAA’s commencement of administration, a party
seeks judicial intervention with respect to a pending arbitration and provides the
AAA with documentation that judicial intervention has been sought, the AAA
will suspend administration for 60 days to permit the party to obtain a stay of
arbitration from the court.These rules, and any amendment of them, shall apply
in the form in effect at the time the demand for arbitration or submission is
received by the AAA.
*
The National Rules for the Resolution of Employment Disputes have been re-named the Employment Arbitration
Rules and Mediation Procedures. Any arbitration agreements providing for arbitration under its National Rules for
the Resolution of Employment Disputes shall be administered pursuant to these Employment Arbitration Rules and
Mediation Procedures.
2. Notification
An employer intending to incorporate these rules or to refer to the dispute
resolution services of the AAA in an employment ADR plan, shall, at least 30 days
prior to the planned effective date of the program:
a. notify the Association of its intention to do so and,
b. provide the Association with a copy of the employment dispute resolution plan.
Compliance with this requirement shall not preclude an arbitrator from
entertaining challenges as provided in Section 1. If an employer does not
comply with this requirement, the Association reserves the right to decline its
administrative services.
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3. AAA as Administrator of the Arbitration
When parties agree to arbitrate under these rules, or when they provide for
arbitration by the AAA and an arbitration is initiated under these rules, they
thereby authorize the AAA to administer the arbitration. The authority and duties
of the AAA are prescribed in these rules, and may be carried out through such of
the AAA’s representatives as it may direct. The AAA may, in its discretion, assign
the administration of an arbitration to any of its offices.
4. Initiation of Arbitration
Arbitration shall be initiated in the following manner.
a. The parties may submit a joint request for arbitration.
b. In the absence of a joint request for arbitration:
(i) The initiating party (hereinafter “Claimant[s]”) shall:
(1) File a written notice (hereinafter “Demand”) of its intention to arbitrate at any
office of the AAA, within the time limit established by the applicable statute
of limitations. Any dispute over the timeliness of the demand shall be referred
to the arbitrator. The filing shall be made in duplicate, and each copy shall
include the applicable arbitration agreement. The Demand shall set forth the
names, addresses, and telephone numbers of the parties; a brief statement
of the nature of the dispute; the amount in controversy, if any; the remedy
sought; and requested hearing location.
(2) Simultaneously provide a copy of the Demand to the other party (hereinafter
“Respondent[s]”).
(3) Include with its Demand the applicable filing fee, unless the parties agree to
some other method of fee advancement.
(ii) The Respondent(s) may file an Answer with the AAA within 15 days after the
date of the letter from the AAA acknowledging receipt of the Demand. The
Answer shall provide the Respondent’s brief response to the claim and the issues
presented. The Respondent(s) shall make its filing in duplicate with the AAA, and
simultaneously shall send a copy of the Answer to the Claimant. If no answering
statement is filed within the stated time, Respondent will be deemed to deny the
claim. Failure to file an answering statement shall not operate to delay the
arbitration.
(iii) The Respondent(s):
(1) May file a counterclaim with the AAA within 15 days after the date of the
letter from the AAA acknowledging receipt of the Demand. The filing shall
be made in duplicate. The counterclaim shall set forth the nature of the claim,
the amount in controversy, if any, and the remedy sought.
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(2) Simultaneously shall send a copy of any counterclaim to the Claimant.
(3) Shall include with its filing the applicable filing fee provided for by these rules.
(iv) The Claimant may file an Answer to the counterclaim with the AAA within
15 days after the date of the letter from the AAA acknowledging receipt of
the counterclaim. The Answer shall provide Claimant’s brief response to the
counterclaim and the issues presented. The Claimant shall make its filing in
duplicate with the AAA, and simultaneously shall send a copy of the Answer to
the Respondent(s). If no answering statement is filed within the stated time,
Claimant will be deemed to deny the counterclaim. Failure to file an answering
statement shall not operate to delay the arbitration.
c. The form of any filing in these rules shall not be subject to technical pleading
requirements.
5. Changes of Claim
Before the appointment of the arbitrator, if either party desires to offer a new or
different claim or counterclaim, such party must do so in writing by filing a written
statement with the AAA and simultaneously provide a copy to the other party(s),
who shall have 15 days from the date of such transmittal within which to file an
answer with the AAA. After the appointment of the arbitrator, a party may offer
a new or different claim or counterclaim only at the discretion of the arbitrator.
6. Jurisdiction
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.
7. Administrative and Mediation Conferences
Before the appointment of the arbitrator, any party may request, or the AAA, in
its discretion, may schedule an administrative conference with a representative
of the AAA and the parties and/or their representatives. The purpose of the
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administrative conference is to organize and expedite the arbitration, explore
its administrative aspects, establish the most efficient means of selecting an
arbitrator, and to consider mediation as a dispute resolution option. There is
no administrative fee for this service.
At any time after the filing of the Demand, with the consent of the parties, the
AAA will arrange a mediation conference under its Mediation Procedures to
facilitate settlement. The mediator shall not be any arbitrator appointed to the
case, except by mutual written agreement of the parties. There is no additional
filing fee for initiating a mediation under the AAA Mediation Procedures for
parties to a pending arbitration.
8. Arbitration Management Conference
As promptly as practicable after the selection of the arbitrator(s), but not later than
60 days thereafter, an arbitration management conference shall be held among
the parties and/or their attorneys or other representatives and the arbitrator(s).
Unless the parties agree otherwise, the Arbitration Management Conference
will be conducted by telephone conference call rather than in person. At the
Arbitration Management Conference the matters to be considered shall include,
without limitation:
a. the issues to be arbitrated;
b. the date, time, place, and estimated duration of the hearing;
c. the resolution of outstanding discovery issues and establishment of discovery
parameters;
d. the law, standards, rules of evidence and burdens of proof that are to apply to the
proceeding;
e. the exchange of stipulations and declarations regarding facts, exhibits, witnesses,
and other issues;
f. the names of witnesses (including expert witnesses), the scope of witness testimony,
and witness exclusion;
g. the value of bifurcating the arbitration into a liability phase and damages phase;
h. the need for a stenographic record;
i. whether the parties will summarize their arguments orally or in writing;
j. the form of the award;
k. any other issues relating to the subject or conduct of the arbitration;
l. the allocation of attorney’s fees and costs;
m. the specification of undisclosed claims;
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n. the extent to which documentary evidence may be submitted at the hearing;
o. the extent to which testimony may be admitted at the hearing telephonically, over the
internet, by written or video-taped deposition, by affidavit, or by any other means;
p. any disputes over the AAA’s determination regarding whether the dispute arose
from an individually-negotiated employment agreement or contract, or from an
employer-promulgated plan (see Costs of Arbitration section).
The arbitrator shall issue oral or written orders reflecting his or her decision on the
above matters and may conduct additional conferences when the need arises.
There is no AAA administrative fee for an Arbitration Management Conference.
9. Discovery
The arbitrator shall have the authority to order such discovery, by way of
deposition, interrogatory, document production, or otherwise, as the arbitrator
considers necessary to a full and fair exploration of the issues in dispute,
consistent with the expedited nature of arbitration.
The AAA does not require notice of discovery related matters and
communications unless a dispute arises. At that time, the parties should notify
the AAA of the dispute so that it may be presented to the arbitrator for
determination.
10. Fixing of Locale (the city, county, state, territory, and/or country of the
Arbitration)
If the parties disagree as to the locale, the AAA may initially determine the place
of arbitration, subject to the power of the arbitrator(s), after their appointment to
make a final determination on the locale. All such determinations shall be made
having regard for the contentions of the parties and the circumstances of the
arbitration.
11. Date, Time and Place (the physical site of the hearing within the designated
locale) of Hearing
The arbitrator shall set the date, time, and place for each hearing. The parties
shall respond to requests for hearing dates in a timely manner, be cooperative in
scheduling the earliest practicable date, and adhere to the established hearing
schedule. The AAA shall send a notice of hearing to the parties at least 10 days
in advance of the hearing date, unless otherwise agreed by the parties.
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12. Number, Qualifications and Appointment of Neutral Arbitrators
a. If the arbitration agreement does not specify the number of arbitrators or the parties
do not agree otherwise, the dispute shall be heard and determined by one arbitrator.
b. Qualifications
i. Neutral arbitrators serving under these rules shall be experienced in the field of
employment law.
ii. Neutral arbitrators serving under these rules shall have no personal or financial
interest in the results of the proceeding in which they are appointed and shall
have no relation to the underlying dispute or to the parties or their counsel
that may create an appearance of bias.
iii. The roster of available arbitrators will be established on a non-discriminatory
basis, diverse by gender, ethnicity, background, and qualifications.
iv. The AAA may, upon request of a party within the time set to return their list or
upon its own initiative, supplement the list of proposed arbitrators in disputes
arising out of individually-negotiated employment contracts with persons from
the Commercial Roster, to allow the AAA to respond to the particular need of
the dispute. In multi-arbitrator disputes, at least one of the arbitrators shall be
experienced in the field of employment law.
c. If the parties have not appointed an arbitrator and have not provided any method of
appointment, the arbitrator shall be appointed in the following manner:
i. Shortly after it receives the Demand, the AAA shall send simultaneously to each
party a letter containing an identical list of names of persons chosen from the
Employment Dispute Resolution Roster. The parties are encouraged to agree to
an arbitrator from the submitted list and to advise the AAA of their agreement.
ii. If the parties are unable to agree upon an arbitrator, each party to the dispute
shall have 15 days from the transmittal date in which to strike names objected
to, number the remaining names in order of preference, and return the list to
the AAA. If a party does not return the list within the time specified, all persons
named therein shall be deemed acceptable.
iii. From among the persons who have been approved on both lists, and in
accordance with the designated order of mutual preference, the AAA shall invite
the acceptance of an arbitrator to serve. If the parties fail to agree on any of the
persons named, or if acceptable arbitrators are unable to act, or if for any other
reason the appointment cannot be made from the submitted list, the AAA shall
have the power to make the appointment from among other members of the
panel without the submission of additional lists.
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13. Party Appointed Arbitrators
a. If the agreement of the parties names an arbitrator or specifies a method of appointing
an arbitrator, that designation or method shall be followed.
b. Where the parties have agreed that each party is to name one arbitrator, the arbitrators
so named must meet the standards of Section R-16 with respect to impartiality and
independence unless the parties have specifically agreed pursuant to Section R-16(a)
that the party-appointed arbitrators are to be non-neutral and need not meet those
standards. The notice of appointment, with the name, address, and contact information
of the arbitrator, shall be filed with the AAA by the appointing party. Upon the request
of any appointing party, the AAA shall submit a list of membersof the National Roster
from which the party may, if it so desires, make the appointment.
c. If the agreement specifies a period of time within which an arbitrator shall be
appointed and any party fails to make the appointment within that period, the AAA
shall make the appointment.
d. If no period of time is specified in the agreement, the AAA shall notify the party to
make the appointment. If within 15 days after such notice has been sent, an arbitrator
has not been appointed by a party, the AAA shall make the appointment.
14. Appointment of Chairperson by Party-Appointed Arbitrators or Parties
a. If, pursuant to Section R-13, either the parties have directly appointed arbitrators, or
the arbitrators have been appointed by the AAA, and the parties have authorized
them to appoint a chairperson within a specified time and no appointment is made
within that time or any agreed extension, the AAA may appoint the chairperson.
b. If no period of time is specified for appointment of the chairperson and the
party-appointed arbitrators or the parties do not make the appointment within
15 days from the date of the appointment of the last party-appointed arbitrator,
the AAA may appoint the chairperson.
c. If the parties have agreed that their party-appointed arbitrators shall appoint the
chairperson from the National Roster, the AAA shall furnish to the party-appointed
arbitrators, in the manner provided in Section R-12, a list selected from the National
Roster, and the appointment of the chairperson shall be made as provided in
that Section.
15. Disclosure
a. Any person appointed or to be appointed as an arbitrator shall disclose to the AAA
any circumstance likely to give rise to justifiable doubt as to the arbitrator’s impartiality
or independence, including any bias or any financial or personal interest in the
result of the arbitration or any past or present relationship with the parties or their
representatives. Such obligation shall remain in effect throughout the arbitration.
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b. Upon receipt of such information from the arbitrator or another source, the AAA shall
communicate the information to the parties and, if it deems it appropriate to do so,
to the arbitrator and others.
c. In order to encourage disclosure by arbitrators, disclosure of information pursuant to
this Section R-15 is not to be construed as an indication that the arbitrator considers
that the disclosed circumstance is likely to affect impartiality or independence.
16. Disqualification of Arbitrator
a. Any arbitrator shall be impartial and independent and shall perform his or her duties
with diligence and in good faith, and shall be subject to disqualification for:
i. partiality or lack of independence,
ii. inability or refusal to perform his or her duties with diligence and in good faith,
and
iii. any grounds for disqualification provided by applicable law. The parties may
agree in writing, however, that arbitrators directly appointed by a party pursuant
to Section R-13 shall be nonneutral, in which case such arbitrators need not be
impartial or independent and shall not be subject to disqualification for partiality
or lack of independence.
b. Upon objection of a party to the continued service of an arbitrator, or on its own
initiative, the AAA shall determine whether the arbitrator should be disqualified under
the grounds set out above, and shall inform the parties of its decision, which decision
shall be conclusive.
17. Communication with Arbitrator
a. No party and no one acting on behalf of any party shall communicate ex parte with
an arbitrator or a candidate for arbitrator concerning the arbitration, except that a
party, or someone acting on behalf of a party, may communicate ex parte with a
candidate for direct appointment pursuant to Section R-13 in order to advise the
candidate of the general nature of the controversy and of the anticipated proceedings
and to discuss the candidate’s qualifications, availability, or independence in relation
to the parties or to discuss the suitability of candidates for selection as a third arbitrator
where the parties or party-designated arbitrators are to participate in that selection.
b. Section R-17(a) does not apply to arbitrators directly appointed by the parties who,
pursuant to Section R-16(a), the parties have agreed in writing are non-neutral. Where
the parties have so agreed under Section R-16(a), the AAA shall as an administrative
practice suggest to the parties that they agree further that Section R-17(a) should
nonetheless apply prospectively.
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18. Vacancies
If for any reason an arbitrator is unable to perform the duties of the office, the
AAA may, on proof satisfactory to it, declare the office vacant. Vacancies shall be
filled in accordance with applicable provisions of these Rules.
In the event of a vacancy in a panel of neutral arbitrators after the hearings have
commenced, the remaining arbitrator or arbitrators may continue with the hearing
and determination of the controversy, unless the parties agree otherwise.
In the event of the appointment of a substitute arbitrator, the panel of arbitrators
shall determine in its sole discretion whether it is necessary to repeat all or part
of any prior hearings.
19. Representation
Any party may be represented by counsel or other authorized representatives.
For parties without representation, the AAA will, upon request, provide
reference to institutions which might offer assistance. A party who intends to be
represented shall notify the other party and the AAA of the name and address
of the representative at least 10 days prior to the date set for the hearing or
conference at which that person is first to appear. If a representative files a
Demand or an Answer, the obligation to give notice of representative status is
deemed satisfied.
20. Stenographic Record
Any party desiring a stenographic record shall make arrangements directly with
a stenographer and shall notify the other parties of these arrangements at least
three days in advance of the hearing. The requesting party or parties shall pay
the cost of the record. If the transcriptis agreed by the parties, or determined by
the arbitrator to be the official record of the proceeding, it must be provided to
the arbitrator and made available to the other parties for inspection, at a date,
time, and place determined by the arbitrator.
21. Interpreters
Any party wishing an interpreter shall make all arrangements directly with the
interpreter and shall assume the costs of the service.
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22. Attendance at Hearings
The arbitrator shall have the authority to exclude witnesses, other than a party,
from the hearing during the testimony of any other witness. The arbitrator also
shall have the authority to decide whether any person who is not a witness may
attend the hearing.
23. Confidentiality
The arbitrator shall maintain the confidentiality of the arbitration and shall have
the authority to make appropriate rulings to safeguard that confidentiality, unless
the parties agree otherwise or the law provides to the contrary.
24. Postponements
The arbitrator: (1) may postpone any hearing upon the request of a party for
good cause shown; (2) must postpone any hearing upon the mutual agreement
of the parties; and (3) may postpone any hearing on his or her own initiative.
25. Oaths
Before proceeding with the first hearing, each arbitrator shall take an oath of office.
The oath shall be provided to the parties prior to the first hearing. The arbitrator
may require witnesses to testify under oath administered by any duly qualified
person and, if it is required by law or requested by any party, shall do so.
26. Majority Decision
All decisions and awards of the arbitrators must be by a majority, unless the
unanimous decision of all arbitrators is expressly required by the arbitration
agreement or by law.
27. Dispositive Motions
The arbitrator may allow the filing of a dispositive motion if the arbitrator
determines that the moving party has shown substantial cause that the motion
is likely to succeed and dispose of or narrow the issues in the case.
28. Order of Proceedings
A hearing may be opened by: (1) recording the date, time, and place of the
hearing; (2) recording the presence of the arbitrator, the parties, and their
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representatives, if any; and (3) receiving into the record the Demand and the
Answer, if any. The arbitrator may, at the beginning of the hearing, ask for
statements clarifying the issues involved.
The parties shall bear the same burdens of proof and burdens of producing
evidence as would apply if their claims and counterclaims had been brought
in court.
Witnesses for each party shall submit to direct and cross examination.
With the exception of the rules regarding the allocation of the burdens of proof
and going forward with the evidence, the arbitrator has the authority to set the
rules for the conduct of the proceedings and shall exercise that authority to
afford a full and equal opportunity to all parties to present any evidence that
the arbitrator deems material and relevant to the resolution of the dispute.
When deemed appropriate, the arbitrator may also allow for the presentation
of evidence by alternative means including web conferencing, internet
communication, telephonic conferences and means other than an in-person
presentation of evidence. Such alternative means must still afford a full and
equal opportunity to all parties to present any evidence that the arbitrator
deems material and relevant to the resolution of the dispute and when involving
witnesses, provide that such witness submit to direct and cross-examination.
The arbitrator, in exercising his or her discretion, shall conduct the proceedings
with a view toward expediting the resolution of the dispute, may direct the order
of proof, bifurcate proceedings, and direct the parties to focus their presentations
on issues the decision of which could dispose of all or part of the case.
Documentary and other forms of physical evidence, when offered by either party,
may be received in evidence by the arbitrator.
The names and addresses of all witnesses and a description of the exhibits in the
order received shall be made a part of the record.
29. Arbitration in the Absence of a Party or Representative
Unless the law provides to the contrary, the arbitration may proceed in the
absence of any party or representative who, after due notice, fails to be present
or fails to obtain a postponement. An award shall not be based solely on the
default of a party. The arbitrator shall require the party who is in attendance to
present such evidence as the arbitrator may require for the making of the award.
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30. Evidence
The parties may offer such evidence as is relevant and material to the dispute
and shall produce such evidence as the arbitrator deems necessary to an
understanding and determination of the dispute. All evidence shall be taken
in the presence of all of the arbitrators and all of the parties, except where
any party or arbitrator is absent, in default, or has waived the right to be
present, however “presence” should not be construed to mandate that the
parties and arbitrators must be physically present in the same location.
An arbitrator or other person authorized by law to subpoena witnesses or
documents may do so upon the request of any party or independently.
The arbitrator shall be the judge of the relevance and materiality of the evidence
offered, and conformity to legal rules of evidence shall not be necessary. The
arbitrator may in his or her discretion direct the order of proof, bifurcate
proceedings, exclude cumulative or irrelevant testimony or other evidence,
and direct the parties to focus their presentations on issues the decision of
which could dispose of all or part of the case. All evidence shall be taken in the
presence of all of the arbitrators and all of the parties, except where any party
is absent, in default, or has waived the right to be present.
If the parties agree or the arbitrator directs that documents or other evidence
may be submitted to the arbitrator after the hearing, the documents or other
evidence shall be filed with the AAA for transmission to the arbitrator, unless the
parties agree to a different method of distribution. All parties shall be afforded
an opportunity to examine such documents or other evidence and to lodge
appropriate objections, if any.
31. Inspection
Upon the request of a party, the arbitrator may make an inspection in connection
with the arbitration. The arbitrator shall set the date and time, and the AAA shall
notify the parties. In the event that one or all parties are not present during the
inspection, the arbitrator shall make an oral or written report to the parties and
afford them an opportunity to comment.
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32. Interim Measures
At the request of any party, the arbitrator may grant any remedy or relief that
would have been available to the parties had the matter been heard in court,
as stated in Rule 39(d), Award.
A request for interim measures addressed by a party to a judicial authority shall
not be deemed incompatible with the agreement to arbitrate or a waiver of the
right to arbitrate.
33. Closing of Hearing
The arbitrator shall specifically inquire of all parties whether they have any
further proofs to offer or witnesses to be heard. Upon receiving negative replies
or if satisfied that the record is complete, the arbitrator shall declare the hearing
closed.
If briefs are to be filed, the hearing shall be declared closed as of the final
date set by the arbitrator for the receipt of briefs. If documents are to be filed as
provided in Rule 30 and the date set for their receipt is later than that set for the
receipt of briefs, the later date shall be the date of closing the hearing. The time
limit within which the arbitrator is required to make the award shall commence
to run, in the absence of other agreements by the parties, upon closing of
the hearing.
34. Reopening of Hearing
The hearing may be reopened by the arbitrator upon the arbitrator’s initiative,
or upon application of a party for good cause shown, at any time before the
award is made. If reopening the hearing would prevent the making of the award
within the specific time agreed on by the parties in the contract(s) out of which
the controversy has arisen, the matter may not be reopened unless the parties
agree on an extension of time. When no specific date is fixed in the contract, the
arbitrator may reopen the hearing and shall have 30 days from the closing of the
reopened hearing within which to make an award.
35. Waiver of Oral Hearing
The parties may provide, by written agreement, for the waiver of oral hearings.
If the parties are unable to agree as to the procedure, upon the appointment of
the arbitrator, the arbitrator shall specify a fair and equitable procedure.
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36. Waiver of Objection/Lack of Compliance with These Rules
Any party who proceeds with the arbitration after knowledge that any provision
or requirement of these rules has not been complied with, and who fails to state
objections thereto in writing or in a transcribed record, shall be deemed to have
waived the right to object.
37. Extensions of Time
The parties may modify any period of time by mutual agreement. The AAA or the
arbitrator may for good cause extend any period of time established by these
Rules, except the time for making the award. The AAA shall notify the parties of
any extension.
38. Serving of Notice
a. Any papers, notices, or process necessary or proper for the initiation or continuation
of an arbitration under these rules, for any court action in connection therewith, or for
the entry of judgment on any award made under these rules may be served on a party
by mail addressed to the party, or its representative at the last known address or by
personal service, in or outside the state where the arbitration is to be held, provided
that reasonable opportunity to be heard with regard to the dispute is or has been
granted to the party.
b. The AAA, the arbitrator, and the parties may also use overnight delivery or electronic
facsimile transmission (fax), to give the notices required by these rules. Where all
parties and the arbitrator agree, notices may be transmitted by electronic mail (e-mail),
or other methods of communication.
c. Unless otherwise instructed by the AAA or by the arbitrator, any documents submitted
by any party to the AAA or to the arbitrator shall simultaneously be provided to the
other party or parties to the arbitration.
39. The Award
a. The award shall be made promptly by the arbitrator and, unless otherwise agreed by
the parties or specified by law, no later than 30 days from the date of closing of the
hearing or, if oral hearings have been waived, from the date of the AAA’s transmittal
of the final statements and proofs to the arbitrator. Three additional days are provided
if briefs are to be filed or other documents are to be transmitted pursuant to Rule 30.
b. An award issued under these rules shall be publicly available, on a cost basis.
The names of the parties and witnesses will not be publicly available, unless a party
expressly agrees to have its name made public in the award.
c. The award shall be in writing and shall be signed by a majority of the arbitrators and
shall provide the written reasons for the award unless the parties agree otherwise.
It shall be executed in the manner required by law.
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d. The arbitrator may grant any remedy or relief that would have been available to
the parties had the matter been heard in court including awards of attorney’s fees
and costs, in accordance with applicable law. The arbitrator shall, in the award, assess
arbitration fees, expenses, and compensation as provided in Rules 43, 44, and 45 in
favor of any party and, in the event any administrative fees or expenses are due the
AAA, in favor of the AAA, subject to the provisions contained in the Costs of
Arbitration section.
e. If the parties settle their dispute during the course of the arbitration and mutually
request, the arbitrator may set forth the terms of the settlement in a consent award.
f. The parties shall accept as legal delivery of the award the placing of the award or a
true copy thereof in the mail, addressed to a party or its representative at the last
known address, personal service of the award, or the filing of the award in any manner
that may be required by law.
g. The arbitrator’s award shall be final and binding.
40. Modification of Award
Within 20 days after the transmittal of an award, any party, upon notice to the
other parties, may request the arbitrator to correct any clerical, typographical,
technical, or computational errors in the award. The arbitrator is not empowered
to redetermine the merits of any claim already decided. The other parties shall
be given 10 days to respond to the request. The arbitrator shall dispose of the
request within 20 days after transmittal by the AAA to the arbitrator of the request
and any response thereto. If applicable law requires a different procedural time
frame, that procedure shall be followed.
41. Release of Documents for Judicial Proceedings
The AAA shall, upon the written request of a party, furnish to the party, at that
party’s expense, certified copies of any papers in the AAA’s case file that may
be required in judicial proceedings relating to the arbitration.
42. Applications to Court
a. No judicial proceeding by a party relating to the subject matter of the arbitration shall
be deemed a waiver of the party’s right to arbitrate.
b. Neither the AAA nor any arbitrator in a proceeding under these rules is or shall
be considered a necessary or proper party in judicial proceedings relating to the
arbitration.
c. Parties to these procedures shall be deemed to have consented that judgment upon
the arbitration award may be entered in any federal or state court having jurisdiction.
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d. Parties to an arbitration under these rules shall be deemed to have consented
that neither the AAA nor any arbitrator shall be liable to any party in any action for
damages or injunctive relief for any act or omission in connection with any arbitration
under these rules.
43. Administrative Fees
As a not-for-profit organization, the AAA shall prescribe filing and other
administrative fees to compensate it for the cost of providing administrative
services. The AAA administrative fee schedule in effect at the time the demand
for arbitration or submission agreement is received shall be applicable.
AAA fees shall be paid in accordance with the Costs of Arbitration Section
(see page 33-43).
The AAA may, in the event of extreme hardship on any party, defer or reduce the
administrative fees. (To ensure that you have the most current information, see
our website at www.adr.org).
44. Neutral Arbitrator’s Compensation
Arbitrators shall charge a rate consistent with the arbitrator’s stated rate of
compensation. If there is disagreement concerning the terms of compensation,
an appropriate rate shall be established with the arbitrator by the AAA and
confirmed to the parties.
Any arrangement for the compensation of a neutral arbitrator shall be made
through the AAA and not directly between the parties and the arbitrator.
Payment of the arbitrator’s fees and expenses shall be made by the AAA from
the fees and moneys collected by the AAA for this purpose.
Arbitrator compensation shall be borne in accordance with the Costs of
Arbitration section.
45. Expenses
Unless otherwise agreed by the parties or as provided under applicable law, the
expenses of witnesses for either side shall be borne by the party producing such
witnesses.
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All expenses of the arbitrator, including required travel and other expenses, and
any AAA expenses, as well as the costs relating to proof and witnesses produced
at the direction of the arbitrator shall be borne in accordance with the Costs of
Arbitration section.
46. Deposits
The AAA may require deposits in advance of any hearings such sums of money
as it deems necessary to cover the expenses of the arbitration, including the
arbitrator’s fee, if any, and shall render an accounting and return any unexpended
balance at the conclusion of the case.
47. Suspension for Non-Payment
If arbitrator compensation or administrative charges have not been paid in full,
the AAA may so inform the parties in order that one of them may advance the
required payment. If such payments are not made, the arbitrator may order the
suspension or termination of the proceedings. If no arbitrator has yet been
appointed, the AAA may suspend or terminate the proceedings.
48. Interpretation and Application of Rules
The arbitrator shall interpret and apply these rules as they relate to the arbitrator’s
powers and duties. When there is more than one arbitrator and a difference arises
among them concerning the meaning or application of these Rules, it shall be
resolved by a majority vote. If that is not possible, either an arbitrator or a party
may refer the question to the AAA for final decision. All other procedures shall
be interpreted and applied by the AAA.
Costs of Arbitration (including AAA Administrative Fees)
This Costs of Arbitration section contains two separate and distinct sub-sections.
Initially, the AAA shall make an administrative determination as to whether the
dispute arises from an employer-promulgated plan or an individually-negotiated
employment agreement or contract.
If a party disagrees with the AAA’s determination, the parties may bring the
issue to the attention of the arbitrator for a final determination. The arbitrator’s
determination will be made on documents only, unless the arbitrator deems a
hearing is necessary.
Rules Amended and Effective November 1, 2009. Fee Schedule Amended and Effective May 15, 2013. EMPLOYMENT RULES 31
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For Disputes Arising Out of Employer-Promulgated Plans*:
Arbitrator compensation is not included as part of the administrative fees charged
by the AAA. Arbitrator compensation is based on the most recent biography
sent to the parties prior to appointment. The employer shall pay the arbitrator’s
compensation unless the employee, post dispute, voluntarily elects to pay a
portion of the arbitrator’s compensation. Arbitrator compensation, expenses as
defined in section (iv) below, and administrative fees are not subject to reallocation
by the arbitrator(s) except upon the arbitrator’s determination that a claim or
counterclaim was filed for purposes of harassment or is patently frivolous.
*
Pursuant to Section 1284.3 of the California Code of Civil Procedure, consumers with a gross monthly income of
less than 300% of the federal poverty guidelines are entitled to a waiver of arbitration fees and costs, exclusive
of arbitrator fees. This law applies to all consumer agreements subject to the California Arbitration Act, and to all
consumer arbitrations conducted in California. If you believe that you meet these requirements, you must submit to
the AAA a declaration under oath regarding your monthly income and the number of persons in your household.
Please contact Case Filing Services at 877-495-4185 if you have any questions regarding the waiver of administrative
fees. (Effective January 1, 2003.)
A party making a demand for treatment of a claim, counterclaim, or additional
claim as a collective action arbitration will be subject to the administrative
fees as outlined in the standard and flexible fee schedules below. Arbitrator
compensation is not included as a part of the administrative fees charged by
the AAA. Arbitrator compensation in cases involving a collective action claim
will be charged in accordance with the determination as to whether the dispute
arises from an employer-promulgated plan or an individually negotiated
employment agreement or contract.
(i) Filing Fees
Cases Filed by Employee Against Employer
In cases before a single arbitrator, a non-refundable filing fee capped in the
amount of $200 is payable in full by the employee when a claim is filed, unless
the plan provides that the employee pay less. A non-refundable fee in the
amount of $1350 is payable in full by the employer, unless the plan provides
that the employer pay more.
In cases before three or more arbitrators, a non-refundable filing fee capped
in the amount of $200 is payable in full by the employee when a claim is filed,
unless the plan provides that the employee pay less. A non-refundable fee in
the amount of $1,800 is payable in full by the employer, unless the plan provides
that the employer pay more.
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The employer’s share is due as soon as the employee meets his or her filing
requirements, even if the matter settles.
There shall be no filing fee charged for a counterclaim. If a determination is
made that the dispute arises out of an individually-negotiated employment
agreement, the filing fee for a counterclaim will be charged in accordance with
the fee schedules below for disputes arising out of individually negotiated
employment agreements.
The above fee schedule will also apply where the employer files on behalf of
the employee pursuant to the terms of the employer promulgated plan.
Cases Filed by Employer Against Employee
In cases before a single arbitrator, a non-refundable fee in the amount of $1,550
is payable in full by the employer.
In cases before three or more arbitrators, a non-refundable fee in the amount
of $2,000 is payable in full by the employer.
There shall be no filing fee charged for a counterclaim. If a determination is
made that the dispute arises out of an individually-negotiated employment
agreement, the filing fee for a counterclaim will be charged in accordance with
the fee schedules below for disputes arising out of individually-negotiated
employment agreements.
(ii) Hearing Fees
For each day of hearing held before a single arbitrator, an administrative fee of
$350 is payable by the employer.
For each day of hearing held before a multi-arbitrator panel, an administrative
fee of $500 is payable by the employer.
There is no AAA hearing fee for the initial Arbitration Management Conference.
Rules Amended and Effective November 1, 2009. Fee Schedule Amended and Effective May 15, 2013. EMPLOYMENT RULES 33
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(iii) Postponement/Cancellation Fees
A fee of $150 is payable by a party causing a postponement of any hearing
scheduled before a single arbitrator.
A fee of $250 is payable by a party causing a postponement of any hearing
scheduled before a multi-arbitrator panel.
(iv) Hearing Room Rental
The hearing fees described above do not cover the rental of hearing rooms.
The AAA maintains hearing rooms in most offices for the convenience of the
parties. Check with the administrator for availability and rates. Hearing room
rental fees will be borne by the employer.
(v) Abeyance Fee
Parties on cases held in abeyance for one year will be assessed an annual
abeyance fee of $300. A case may only be held in abeyance after the initial filing
fees have been paid. If a party refuses to pay the assessed fee, the other party
or parties may pay the entire fee on behalf of all parties, otherwise the matter
will be administratively closed.
(vi) Expenses
All expenses of the arbitrator, including required travel and other expenses, and
any AAA expenses, as well as the costs relating to proof and witnesses produced
at the direction of the arbitrator, shall be borne by the employer.
For Disputes Arising Out of Individually-Negotiated Employment
Agreements and Contracts:
The AAA’s Fee Schedule, as modified below, will apply to disputes arising out
of individually-negotiated employment agreements and contracts, even if such
agreements and contracts reference or incorporate an employer-promulgated
plan. Arbitrator compensation is not included as part of the administrative fees
charged by the AAA. Arbitrator compensation is based on the most recent
biography sent to the parties prior to appointment.
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Administrative Fee Schedules (Standard and Flexible Fee)
The AAA has two administrative fee options for parties filing claims or
counterclaims, the Standard Fee Schedule and Flexible Fee Schedule. The
Standard Fee Schedule has a two-payment schedule, and the Flexible Fee
Schedule has a three-payment schedule which offers lower initial filing fees, but
potentially higher total administrative fees of approximately 12% to 19% for cases
that proceed to a hearing. The administrative fees of the AAA are based on the
amount of the claim or counterclaim. Arbitrator compensation is not included in
this schedule. Unless the parties agree otherwise, arbitrator compensation and
administrative fees are subject to allocation by the arbitrator in the award.
In an effort to make arbitration costs reasonable for consumers, the AAA has a
separate fee schedule for consumer-related disputes. Please refer to Section C-8
of the Supplementary Procedures for Consumer-Related Disputes when filing a
consumer-related claim. Note that the Flexible Fee Schedule is not available on
cases administered under these supplementary procedures.
The AAA applies the Supplementary Procedures for Consumer-Related Disputes
to arbitration clauses in agreements between individual consumers and businesses
where the business has a standardized, systematic application of arbitration
clauses with customers and where the terms and conditions of the purchase of
standardized, consumable goods or services are non-negotiable or primarily
non-negotiable in most or all of its terms, conditions, features, or choices.
The product or service must be for personal or household use. The AAA will
have the discretion to apply or not to apply the Supplementary Procedures and
the parties will be able to bring any disputes concerning the application or
non-application to the attention of the arbitrator. Consumers are not prohibited
from seeking relief in a small claims court for disputes or claims within the scope
of its jurisdiction, even in consumer arbitration cases filed by the business.
Fees for incomplete or deficient filings: Where the applicable arbitration
agreement does not reference the AAA, the AAA will attempt to obtain the
agreement of the other parties to the dispute to have the arbitration administered
by the AAA. However, where the AAA is unable to obtain the agreement of the
parties to have the AAA administer the arbitration, the AAA will administratively
close the case and will not proceed with the administration of the arbitration. In
these cases, the AAA will return the filing fees to the filing party, less the amount
specified in the fee schedule below for deficient filings.
Rules Amended and Effective November 1, 2009. Fee Schedule Amended and Effective May 15, 2013. EMPLOYMENT RULES 35
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Parties that file demands for arbitration that are incomplete or otherwise do not
meet the filing requirements contained in these Rules shall also be charged the
amount specified below for deficient filings if they fail or are unable to respond
to the AAA’s request to correct the deficiency.
Fees for additional services: The AAA reserves the right to assess additional
administrative fees for services performed by the AAA beyond those provided for
in these Rules which may be required by the parties’ agreement or stipulation.
(i) Standard Fee Schedule
An Initial Filing Fee is payable in full by a filing party when a claim, counterclaim,
or additional claim is filed. A Final Fee will be incurred for all cases that proceed
to their first hearing. This fee will be payable in advance at the time that the first
hearing is scheduled. This fee will be refunded at the conclusion of the case if
no hearings have occurred. However, if the Association is not notified at least
24 hours before the time of the scheduled hearing, the Final Fee will remain
due and will not be refunded.
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These fees will be billed in accordance with the following schedule:
AMOUNT OF CLAIM INITIAL FILING FEE FINAL FEE
Above $0 to $10,000 $775 $200
Above $10,000 to $75,000 $975 $300
Above $75,000 to $150,000 $1,850 $750
Above $150,000 to $300,000 $2,800 $1,250
Above to $300,000 to $500,000 $4,350 $1,750
Above to $500,000 to $1,000,000 $6,200 $2,500
Above $1,000,000 to $5,000,000 $8,200 $3,250
Above $5,000,000 to $10,000,000 $10,200 $4,000
Base fee of $12,800 plus .01% of the
Above $10,000,000 amount above $10,000,000 $6,000
Fee Capped at $65,000
Nonmonetary claims1 $3,350 $1,250
Collective Action Claims2 $3,350 $1,250
Deficient Claim Filing Fee3 $350
Additional Services4
1
This fee is applicable when a claim or counterclaim is not for a monetary amount. Where a
monetary claim amount is not known, parties will be required to state a range of claims or be
subject to a filing fee of $10,200.
2
This fee is applicable where a party makes a demand for treatment of a claim, counterclaim, or
additional claim as a collective action arbitration.
3
The Deficient Claim Filing Fee shall not be charged in cases filed by a consumer in an arbitration
governed by the Supplementary Procedures for the Resolution of Consumer-Related Disputes, or
in cases filed by an Employee who is submitting their dispute to arbitration pursuant to an employer
promulgated plan.
4
The AAA may assess additional fees where procedures or services outside the Rules sections are
required under the parties’ agreement or by stipulation.
Rules Amended and Effective November 1, 2009. Fee Schedule Amended and Effective May 15, 2013. EMPLOYMENT RULES 37
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Fees are subject to increase if the amount of a claim or counterclaim is modified
after the initial filing date. Fees are subject to decrease if the amount of a claim
or counterclaim is modified before the first hearing.
The minimum fees for any case having three or more arbitrators are $2,800 for
the Initial Filing Fee, plus a $1,250 Final Fee. Expedited Procedures are applied in
any case where no disclosed claim or counterclaim exceeds $75,000, exclusive of
interest and arbitration costs.
Parties on cases filed under either the Flexible Fee Schedule or the Standard
Fee Schedule that are held in abeyance for one year will be assessed an annual
abeyance fee of $300. A case may only be held in abeyance after the filing fees
have been paid. If a party refuses to pay the assessed fee, the other party or
parties may pay the entire fee on behalf of all parties, otherwise the matter will
be administratively closed.
For more information, please contact your local AAA office, case management
center, or our Customer Service desk at 1-800-778-7879.
(ii) Refund Schedule for Standard Fee Schedule
The AAA offers a refund schedule on filing fees connected with the Standard Fee
Schedule. For cases with claims up to $75,000, a minimum filing fee of $350 will
not be refunded. For all other cases, a minimum fee of $600 will not be refunded.
Subject to the minimum fee requirements, refunds will be calculated as follows:
> 100% of the filing fee, above the minimum fee, will be refunded if the case is
settled or withdrawn within five calendar days of filing.
> 50% of the filing fee, will be refunded if the case is settled or withdrawn between
six and 30 calendar days of filing.
> 25% of the filing fee will be refunded if the case is settled or withdrawn between
31 and 60 calendar days of filing.
No refund will be made once an arbitrator has been appointed (this includes
one arbitrator or a three-arbitrator panel). No refunds will be granted on
awarded cases.
Note: The date of receipt of the demand for arbitration with the AAA will be
used to calculate refunds of filing fees for both claims and counterclaims.
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(iii) Flexible Fee Schedule
A non-refundable Initial Filing Fee is payable in full by a filing party when a
claim, counterclaim, or additional claim is filed. Upon receipt of the Demand for
Arbitration, the AAA will promptly initiate the case and notify all parties as well as
establish the due date for filing of an Answer, which may include a Counterclaim.
In order to proceed with the further administration of the arbitration and
appointment of the arbitrator(s), the appropriate, non-refundable Proceed Fee
outlined below must be paid.
If a Proceed Fee is not submitted within ninety (90) days of the filing of the
Claimant’s Demand for Arbitration, the Association will administratively close
the file and notify all parties.
No refunds or refund schedule will apply to the Filing or Proceed Fees once
received.
The Flexible Fee Schedule below also may be utilized for the filing of
counterclaims. However, as with the Claimant’s claim, the counterclaim will not
be presented to the arbitrator until the Proceed Fee is paid.
A Final Fee will be incurred for all claims and/or counterclaims that proceed to
their first hearing. This fee will be payable in advance when the first hearing is
scheduled, but will be refunded at the conclusion of the case if no hearings
have occurred. However, if the Association is not notified of a cancellation at
least 24 hours before the time of the scheduled hearing, the Final Fee will remain
due and will not be refunded.
Rules Amended and Effective November 1, 2009. Fee Schedule Amended and Effective May 15, 2013. EMPLOYMENT RULES 39
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All fees will be billed in accordance with the following schedule:
AMOUNT OF CLAIM INITIAL FILING FEE PROCEED FEE FINAL FEE
Above $0 to $10,000 $400 $475 $200
Above $10,000 to $75,000 $625 $500 $300
Above $75,000 to $150,000 $850 $1,250 $750
Above $150,000 to $300,000 $1,000 $2,125 $1,250
Above to $300,000 to $500,000 $1,500 $3,400 $1,750
Above to $500,000 to $1,000,000 $2,500 $4,500 $2,500
Above $1,000,000 to $5,000,000 $2,500 $6,700 $3,250
Above $5,000,000 to $10,000,000 $3,500 $8,200 $4,000
$10,300 plus .01%
Above $10,000,000 $4,500 of claim amount over $6,000
$10,000,000 up to $65,000
Nonmonetary 1 $2,000 $2,000 $1,250
Collective Action Claims2 $2,000 $2,000 $1,250
Deficient Claim Filing Fee $350
Additional Services3
1
This fee is applicable when a claim or counterclaim is not for a monetary amount. Where a monetary
claim amount is not known, parties will be required to state a range of claims or be subject to a filing
fee of $3,500 and a proceed fee of $8,200.
2
This fee is applicable where a party makes a demand for treatment of a claim, counterclaim, or
additional claim as a collective action arbitration.
3
The AAA reserves the right to assess additional administrative fees for services performed by the
AAA beyond those provided for in these Rules and which may be required by the parties’ agreement
or stipulation.
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For more information, please contact your local AAA office, case management
center, or our Customer Service desk at 1-800-778-7879. All fees are subject to
increase if the amount of a claim or counterclaim is modified after the initial filing
date. Fees are subject to decrease if the amount of a claim or counterclaim is
modified before the first hearing.
The minimum fees for any case having three or more arbitrators are $1,000 for
the Initial Filing Fee; $2,125 for the Proceed Fee; and $1,250 for the Final Fee.
Under the Flexible Fee Schedule, a party’s obligation to pay the Proceed Fee
shall remain in effect regardless of any agreement of the parties to stay,
postpone or otherwise modify the arbitration proceedings. Parties that, through
mutual agreement, have held their case in abeyance for one year will be assessed
an annual abeyance fee of $300. If a party refuses to pay the assessed fee, the
other party or parties may pay the entire fee on behalf of all parties, otherwise
the matter will be closed.
Note: The date of receipt by the AAA of the demand for arbitration will be used
to calculate the ninety (90) day time limit for payment of the Proceed Fee.
There is no Refund Schedule in the Flexible Fee Schedule.
(iv) Hearing Room Rental
The fees described above do not cover the cost of hearing rooms, which are
available on a rental basis. Check with the AAA for availability and rates.
(v) Abeyance Fee
Parties on cases filed under the Standard Fee Schedule that are held in abeyance
for one year will be assessed an annual abeyance fee of $300. A case may only
be held in abeyance after the filing fees have been paid. If a party refuses to pay
the assessed fee, the other party or parties may pay the entire fee on behalf of all
parties, otherwise the matter will be administratively closed.
(vi) Expenses
All expenses of the arbitrator, including required travel and other expenses, and
any AAA expenses, as well as the costs relating to proof and witnesses produced
at the direction of the arbitrator, shall be borne equally by the parties.
Rules Amended and Effective November 1, 2009. Fee Schedule Amended and Effective May 15, 2013. EMPLOYMENT RULES 41
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For Disputes Proceeding Under the Supplementary Rules for Class
Action Arbitration (“Supplementary Rules”):
The AAA’s Administered Fee Schedule, as listed in Section 11 of the
Supplementary Rules for Class Action Arbitration, shall apply to disputes
proceeding under the Supplementary Rules.
Optional Rules for Emergency Measures of Protection
O-1. Applicability
Where parties by special agreement or in their arbitration clause have adopted
these rules for emergency measures of protection, a party in need of emergency
relief prior to the constitution of the panel shall notify the AAA and all other
parties in writing of the nature of the relief sought and the reasons why such
relief is required on an emergency basis. The application shall also set forth the
reasons why the party is entitled to such relief. Such notice may be given by
facsimile transmission, or other reliable means, but must include a statement
certifying that all other parties have been notified or an explanation of the
steps taken in good faith to notify other parties.
O-2. Appointment of Emergency Arbitrator
Within one business day of receipt of notice as provided in Section O-1, the
AAA shall appoint a single emergency arbitrator from a special AAA panel of
emergency arbitrators designated to rule on emergency applications. The
emergency arbitrator shall immediately disclose any circumstance likely, on
the basis of the facts disclosed in the application, to affect such arbitrator’s
impartiality or independence. Any challenge to the appointment of the emergency
arbitrator must be made within one business day of the communication by the
AAA to the parties of the appointment of the emergency arbitrator and the
circumstances disclosed.
O-3. Schedule
The emergency arbitrator shall as soon as possible, but in any event within
two business days of appointment, establish a schedule for consideration of the
application for emergency relief. Such schedule shall provide a reasonable
opportunity to all parties to be heard, but may provide for proceeding by
telephone conference or on written submissions as alternatives to a formal hearing.
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O-4. Interim Award
If after consideration the emergency arbitrator is satisfied that the party seeking
the emergency relief has shown that immediate and irreparable loss or damage
will result in the absence of emergency relief, and that such party is entitled to
such relief, the emergency arbitrator may enter an interim award granting the
relief and stating the reasons therefore.
O-5. Constitution of the Panel
Any application to modify an interim award of emergency relief must be based
on changed circumstances and may be made to the emergency arbitrator until
the panel is constituted; thereafter such a request shall be addressed to the
panel. The emergency arbitrator shall have no further power to act after the
panel is constituted unless the parties agree that the emergency arbitrator is
named as a member of the panel.
O-6. Security
Any interim award of emergency relief may be conditioned on provision by the
party seeking such relief of appropriate security.
O-7. Special Master
A request for interim measures addressed by a party to a judicial authority shall
not be deemed incompatible with the agreement to arbitrate or a waiver of the
right to arbitrate. If the AAA is directed by a judicial authority to nominate a
special master to consider and report on an application for emergency relief, the
AAA shall proceed as provided in Section O-1 of this article and the references
to the emergency arbitrator shall be read to mean the special master, except that
the special master shall issue a report rather than an interim award.
O-8. Costs
The costs associated with applications for emergency relief shall be apportioned
in the same manner as set forth in the Costs of Arbitration section.
Rules Amended and Effective November 1, 2009. Fee Schedule Amended and Effective May 15, 2013. EMPLOYMENT RULES 43
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Employment Mediation Procedures
M-1. Agreement of Parties
Whenever, by stipulation or in their contract, the parties have provided for
mediation or conciliation of existing or future disputes under the auspices of the
American Arbitration Association (AAA) or under these procedures, the parties
and their representatives, unless agreed otherwise in writing, shall be deemed to
have made these procedures, as amended and in effect as of the date of filing of
a request for mediation, a part of their agreement and designate the AAA as the
administrator of their mediation.
The parties by mutual agreement may vary any part of these procedures
including, but not limited to, agreeing to conduct the mediation via telephone
or other electronic or technical means.
M-2. Initiation of Mediation
Any party or parties to a dispute may initiate mediation under the AAA’s auspices
by making a Request for Mediation to any of the AAA’s regional offices or case
management centers via telephone, email, regular mail or fax. Requests for
Mediation may also be filed online via AAA WebFile at www.adr.org.
The party initiating the mediation shall simultaneously notify the other party or
parties of the request. The initiating party shall provide the following information
to the AAA and the other party or parties as applicable:
i. A copy of the mediation provision of the parties’ contract or the parties’
stipulation to mediate.
ii. The names, regular mail addresses, email addresses (if available), and telephone
numbers of all parties to the dispute and representatives, if any, in the mediation.
iii. A brief statement of the nature of the dispute and the relief requested.
iv. Any specific qualifications the mediator should possess.
Where there is no preexisting stipulation or contract by which the parties have
provided for mediation of existing or future disputes under the auspices of the
AAA, a party may request the AAA to invite another party to participate in
“mediation by voluntary submission”. Upon receipt of such a request, the AAA
will contact the other party or parties involved in the dispute and attempt to
obtain a submission to mediation.
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M-3. Fixing of Locale (the city, county, state, territory and, if applicable, country of
the mediation)
i. When the parties’ agreement to mediate is silent with respect to locale and the
parties are unable to agree upon a locale, the AAA shall have the authority to
consider the parties’ arguments and determine the locale.
ii. When the parties’ agreement to mediate requires a specific locale, absent the
parties’ agreement to change it, the locale shall be that specified in the
agreement to mediate.
iii. If the reference to a locale in the agreement to mediate is ambiguous, the
AAA shall have the authority to consider the parties’ arguments and determine
the locale.
M-4. Representation
Any party may participate without representation (pro-se), or by any representative
of that party’s choosing, or by counsel, unless such choice is prohibited by
applicable law. A party intending to have representation shall notify the other
party and the AAA of the name, telephone number and address, and email
address if available of the representative.
M-5. Appointment of the Mediator
Parties may search the online profiles of the AAA’s Panel of Mediators at
www.adr.org/mediation in an effort to agree on a mediator. If the parties have
not agreed to the appointment of a mediator and have not provided any other
method of appointment, the mediator shall be appointed in the following manner:
i. Upon receipt of a request for mediation, the AAA will send to each party a list
of mediators from the AAA’s Panel of Mediators. The parties are encouraged to
agree to a mediator from the submitted list and to advise the AAA of their
agreement.
ii. If the parties are unable to agree upon a mediator, each party shall strike
unacceptable names from the list, number the remaining names in order of
preference, and return the list to the AAA. If a party does not return the list within
the time specified, all mediators on the list shall be deemed acceptable to that
party. From among the mediators who have been mutually approved by the
parties, and in accordance with the designated order of mutual preference, the
AAA shall invite a mediator to serve.
iii. If the parties fail to agree on any of the mediators listed, or if acceptable
mediators are unable to serve, or if for any other reason the appointment cannot
be made from the submitted list, the AAA shall have the authority to make the
appointment from among other members of the Panel of Mediators without the
submission of additional lists.
Rules Amended and Effective November 1, 2009. Fee Schedule Amended and Effective May 15, 2013. EMPLOYMENT RULES 45
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M-6. Mediator’s Impartiality and Duty to Disclose
AAA mediators are required to abide by the Model Standards of Conduct for
Mediators in effect at the time a mediator is appointed to a case. Where there
is a conflict between the Model Standards and any provision of these Mediation
Procedures, these Mediation Procedures shall govern. The Standards require
mediators to (i) decline a mediation if the mediator cannot conduct it in an
impartial manner, and (ii) disclose, as soon as practicable, all actual and potential
conflicts of interest that are reasonably known to the mediator and could
reasonably be seen as raising a question about the mediator’s impartiality.
Prior to accepting an appointment, AAA mediators are required to make a
reasonable inquiry to determine whether there are any facts that a reasonable
individual would consider likely to create a potential or actual conflict of interest
for the mediator. AAA mediators are required to disclose any circumstance likely
to create a presumption of bias or prevent a resolution of the parties’ dispute
within the time-frame desired by the parties. Upon receipt of such disclosures,
the AAA shall immediately communicate the disclosures to the parties for their
comments.
The parties may, upon receiving disclosure of actual or potential conflicts of
interest of the mediator, waive such conflicts and proceed with the mediation.
In the event that a party disagrees as to whether the mediator shall serve, or in
the event that the mediator’s conflict of interest might reasonably be viewed as
undermining the integrity of the mediation, the mediator shall be replaced.
M-7. Vacancies
If any mediator shall become unwilling or unable to serve, the AAA will appoint
another mediator, unless the parties agree otherwise, in accordance with
section M-5.
M-8. Duties and Responsibilities of the Mediator
i. The mediator shall conduct the mediation based on the principle of party
self-determination. Self-determination is the act of coming to a voluntary,
uncoerced decision in which each party makes free and informed choices as to
process and outcome.
ii. The mediator is authorized to conduct separate or ex parte meetings and other
communications with the parties and/or their representatives, before, during, and
after any scheduled mediation conference. Such communications may be
conducted via telephone, in writing, via email, online, in person or otherwise.
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iii. The parties are encouraged to exchange all documents pertinent to the relief
requested. The mediator may request the exchange of memoranda on issues,
including the underlying interests and the history of the parties’ negotiations.
Information that a party wishes to keep confidential may be sent to the mediator,
as necessary, in a separate communication with the mediator.
iv. The mediator does not have the authority to impose a settlement on the parties
but will attempt to help them reach a satisfactory resolution of their dispute.
Subject to the discretion of the mediator, the mediator may make oral or written
recommendations for settlement to a party privately or, if the parties agree, to all
parties jointly.
v. In the event a complete settlement of all or some issues in dispute is not
achieved within the scheduled mediation session(s), the mediator may continue
to communicate with the parties, for a period of time, in an ongoing effort to
facilitate a complete settlement.
vi. The mediator is not a legal representative of any party and has no fiduciary duty
to any party.
vii. The mediator shall set the date, time, and place for each session of the mediation
conference. The parties shall respond to requests for conference dates in a timely
manner, be cooperative in scheduling the earliest practicable date, and adhere
to the established conference schedule. The AAA shall provide notice of the
conference to the parties in advance of the conference date, when timing permits.
M-9. Responsibilities of the Parties
The parties shall ensure that appropriate representatives of each party, having
authority to consummate a settlement, attend the mediation conference.
Prior to and during the scheduled mediation conference session(s) the parties
and their representatives shall, as appropriate to each party’s circumstances,
exercise their best efforts to prepare for and engage in a meaningful and
productive mediation.
M-10. Privacy
Mediation sessions and related mediation communications are private
proceedings. The parties and their representatives may attend mediation
sessions. Other persons may attend only with the permission of the parties and
with the consent of the mediator.
Rules Amended and Effective November 1, 2009. Fee Schedule Amended and Effective May 15, 2013. EMPLOYMENT RULES 47
47
App.060
M-11. Confidentiality
Subject to applicable law or the parties’ agreement, confidential information
disclosed to a mediator by the parties or by other participants (witnesses) in the
course of the mediation shall not be divulged by the mediator. The mediator
shall maintain the confidentiality of all information obtained in the mediation,
and all records, reports, or other documents received by a mediator while serving
in that capacity shall be confidential.
The mediator shall not be compelled to divulge such records or to testify in
regard to the mediation in any adversary proceeding or judicial forum.
The parties shall maintain the confidentiality of the mediation and shall not rely
on, or introduce as evidence in any arbitral, judicial, or other proceeding the
following, unless agreed to by the parties or required by applicable law:
i. Views expressed or suggestions made by a party or other participant with respect
to a possible settlement of the dispute;
ii. Admissions made by a party or other participant in the course of the mediation
proceedings;
iii. Proposals made or views expressed by the mediator; or
iv. The fact that a party had or had not indicated willingness to accept a proposal
for settlement made by the mediator.
M-12. No Stenographic Record
There shall be no stenographic record of the mediation process.
M-13. Termination of Mediation
The mediation shall be terminated:
i. By the execution of a settlement agreement by the parties; or
ii. By a written or verbal declaration of the mediator to the effect that further efforts
at mediation would not contribute to a resolution of the parties’ dispute; or
iii. By a written or verbal declaration of all parties to the effect that the mediation
proceedings are terminated; or
iv. When there has been no communication between the mediator and any party
or party’s representative for 21 days following the conclusion of the mediation
conference.
48 RULES AND MEDIATION PROCEDURES American Arbitration Association
48
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M-14. Exclusion of Liability
Neither the AAA nor any mediator is a necessary party in judicial proceedings
relating to the mediation. Neither the AAA nor any mediator shall be liable to any
party for any error, act or omission in connection with any mediation conducted
under these procedures. Parties to a mediation under these procedures may not
call the mediator, the AAA or AAA employees as a witness in litigation or any
other proceeding relating to the mediation. The mediator, the AAA and AAA
employees are not competent to testify as witnesses in any such proceeding.
M-15. Interpretation and Application of Procedures
The mediator shall interpret and apply these procedures insofar as they relate
to the mediator’s duties and responsibilities. All other procedures shall be
interpreted and applied by the AAA.
M-16. Deposits
Unless otherwise directed by the mediator, the AAA will require the parties
to deposit in advance of the mediation conference such sums of money as it,
in consultation with the mediator, deems necessary to cover the costs and
expenses of the mediation and shall render an accounting to the parties and
return any unexpended balance at the conclusion of the mediation.
M-17. Expenses
All expenses of the mediation, including required traveling and other expenses
or charges of the mediator, shall be borne equally by the parties unless they
agree otherwise. The expenses of participants for either side shall be paid by
the party requesting the attendance of such participants.
M-18. Cost of the Mediation
There is no filing fee to initiate a mediation or a fee to request the AAA to invite
parties to mediate.
The cost of mediation is based on the hourly or daily mediation rate published
on the mediator’s AAA profile. This rate covers both mediator compensation
and an allocated portion for the AAA’s services. There is a four-hour or one
half-day minimum charge for a mediation conference. Expenses referenced in
Section M-17 may also apply.
Rules Amended and Effective November 1, 2009. Fee Schedule Amended and Effective May 15, 2013. EMPLOYMENT RULES 49
49
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If a matter submitted for mediation is withdrawn or cancelled or results in a
settlement after the request to initiate mediation is filed but prior to the
mediation conference the cost is $200 plus any mediator time and charges
incurred. These costs shall be borne by the initiating party unless the parties
agree otherwise.
If you have questions about mediation costs or services visit
www.adr.org/mediation or contact your local AAA office.
50 RULES AND MEDIATION PROCEDURES American Arbitration Association
50
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© 2013 American Arbitration Association, Inc. All rights reserved. These Rules are the copyrighted property of the
American Arbitration Association (AAA) and are intended to be used in conjunction with the AAA’s administrative services.
Any unauthorized use or modification of these Rules may violate copyright laws and other applicable laws.
Please contact 800.778.7879 or websitemail@adr.org for additional information.
51
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Regional Vice Presidents and Directors
States: Delaware, District of Columbia, Maryland, States: Alaska, Arizona, California, Colorado,
New Jersey, Pennsylvania, West Virginia Hawaii, Idaho, Montana, Nevada, Oregon, Utah,
Kenneth Egger Washington, Wyoming
Vice President John English
Phone: 215.731.2281 Vice President
Email: EggerK@adr.org Phone: 619.239.3051
Email: EnglishJ@adr.org
States: Connecticut, Maine, Massachusetts,
New Hampshire, New York, Vermont States: Rhode Island
Ann Lesser, Esq. Heather Santo
Vice President Director
Phone: 212.484.4084 Phone: 866.293.4053
Email: LesserA@adr.org Email: SantoH@adr.org
States: Alabama, Arkansas, Florida, Georgia, States: Louisiana, New Mexico, Oklahoma, Texas
Mississippi, North Carolina, South Carolina, Molly Bargenquest
Virginia Vice President
Charles Dorsey Phone: 972.702.8222
Director Email: BargenquestM@adr.org
Phone: 866.686.6024
Email: DorseyC@adr.org
States: Illinois, Indiana, Iowa, Kansas, Kentucky,
Michigan, Minnesota, Missouri, Nebraska,
North Dakota, Ohio, South Dakota, Tennessee,
Wisconsin
Jan Holdinski
Vice President
Phone: 248.352.5509
Email: HoldinskiJ@adr.org
Case Management Vice Presidents and Directors
Molly Bargenquest Charles Dorsey
Vice President Director
Phone: 972.702.8222 Phone: 866.686.6024
Email: BargenquestM@adr.org Email: DorseyC@adr.org
Administers cases in AR, IL, IA, KS, LA, MN, Administers cases in FL, GA
MS, MO, NE, ND, OK, SD, TX, WI
Heather Santo
Patrick Tatum Director
Director Phone: 866.293.4053
Phone: 559.490.1905 Email: SantoH@adr.org
Email: TatumP@adr.org Administers cases in AL, CT, DC, DE,
Administers cases in AK, AZ, CA, CO, HI, ID, IN, KY, MA, MD, ME, MI, NC, NH, NJ,
MT, NV, NM, OR, UT, WA, WY NY, OH, PA, RI, SC, TN, VA, VT, WV
800.778.7879 | websitemail@adr.org | adr.org
52
App.065
EXHIBIT F
§ 171.001. Arbitration Agreements Valid, TX CIV PRAC & REM§ 171.001
Vernon's Texas Statutes and Codes Annotated
Civil Practice and Remedies Code (Refs & Annas)
Title 7. Alternate Methods of Dispute Resolution (Refs & Annas)
Chapter 171. General Arbitration (Refs & Annos)
Subchapter A. General Provisions (Refs & Annas)
V.T.C.A., Civil Practice & Remedies Code § 171.001
§ 171.001. Arbitration Agreements Valid
Currentness
(a) A written agreement to arbitrate is valid and enforceable if the agreement is to arbitrate a controversy that:
(I) exists at the time of the agreement; or
(2) arises between the parties after the date of the agreement.
(b) A party may revoke the agreement only on a ground that exists at law or in equity for the revocation of a contract.
Credits
Amended by Acts 1997, 75th Leg., ch. 165, § 5.01, eff. Sept. I, 1997.
Notes of Decisions (636)
V. T. C. A., Civil Practice & Remedies Code§ 171.001, TX CIV PRAC & REM§ 171.001
Current through the end of the 2013 Third Called Session of the 83rd Legislature
Next ' l • I J 111 ) "\
App.066
§ 171.021. Proceeding to Compel Arbitration, TX CIV PRAC & REM § 171.021
Vernon's Texas Statutes and Codes Annotated
Civil Practice and Remedies Code (Refs & Annos)
Title 7. Alternate Methods of Dispute Resolution (Refs & Annos)
Chapter 171. General Arbitration (Refs & Annos)
Subchapter B. Proceedings to Compel or Stay Arbitrations (Refs & Annos)
V.T.C.A., Civil Practice & Remedies Code§ 171.021
§ 171.021. Proceeding to Compel Arbitration
Currentness
(a) A court shall order the parties to arbitrate on application of a party showing:
(I) an agreement to arbitrate; and
(2) the opposing party's refusal to arbitrate.
(b) If a party opposing an application made under Subsection (a) denies the existence of the agreement, the court shall summarily
determine that issue. The court shall order the arbitration if it finds for the party that made the application. If the court does
not find for that party, the court shall deny the application.
(c) An order compelling arbitration must include a stay of any proceeding subject to Section 171.025.
Credits
Added by Acts 1997, 75th Leg., ch. 165, § 5.01, eff. Sept. 1, 1997.
Notes of Decisions (138)
V. T . C. A., Civil Practice & Remedies Code§ 171.021, TX CIV PRAC & REM§ 171.021
Current through the end of the 2013 Third Called Session of the 83rd Legislature
Cnd ,,r Oonun<:ut
Next I I , t .. II, 1 IJ VG 11
App.067
§ 171.025. Stay of Related Proceeding, TX CIV PRAC & REM§ 171.025
Vernon's Texas Statutes and Codes Annotated
Civil Practice and Remedies Code (Refs & Annos)
Title 7. Alternate Methods of Dispute Resolution (Refs & Annos)
Chapter 171. General Arbitration (Refs & Annos)
Subchapter B. Proceedings to Compel or Stay Arbitrations (Refs & Annos)
V.T.C.A., Civil Practice & Remedies Code§ 171.025
§ 171.025. Stay of Related Proceeding
Currentness
(a) The court shall stay a proceeding that involves an issue subject to arbitration if an order for arbitration or an application
for that order is made under this subchapter.
(b) The stay applies only to the issue subject to arbitration if that issue is severable from the remainder of the proceeding,
Credits
Added by Acts 1997, 75th Leg., ch. 165, § 5.01, eff. Sept. 1, 1997.
Notes of Decisions (5)
V. T. C. A., Civil Practice & Remedies Code§ 171.025, TX CIV PRAC & REM§ 171.025
Current through the end of the 2013 Third Called Session of the 83rd Legislature
End of l)ocnnwut
tJ S. Govemrnont VVorks
App.068