United States District Court, D. Nevada
ORDER DENYING MOTION TO DISMISS OR TO COMPEL ARBITRATION (Dkt. #11)
ANDREW P. GORDON, District Judge.
Plaintiff contends that Defendants subjected her to sexual harassment and discrimination, that her work environment was hostile, that Defendants retaliated against her for filing a discrimination charge with the EEOC, and that she suffered assault, battery and intentional infliction of emotional distress. Before commencing work, Plaintiff signed an Employee Acknowledgment and Agreement (the "Agreement") that contains an arbitration provision. Defendants The Light Group, Club Jungle Management LLC (the "Company"), and Mustafa Abdi filed a motion to either dismiss this case or compel Plaintiff to arbitrate her dispute pursuant to the Agreement. First, I must determine whether the arbitration provision can be unilaterally altered by Plaintiff's employer. If so, the provision is unenforceable. Second, if it cannot be unilaterally altered, I must determine whether it is substantively and procedurally unconscionable.
I find that the provision allows the Company to unilaterally alter the arbitration provision. Accordingly, it is unenforceable and the motion must be denied.
On April 3, 2013, Plaintiff signed the Agreement, which contains the following provision:
both the Company and I agree that any claim, dispute and/or controversy... that either I or the Company (or its owners, directors, officers, managers, employees, agents, and parties affiliated with its employee benefit and health plans) may have against the other... arising from, related to, or having any relationship or connection whatsoever with my... employment by, or other association with the company shall be submitted to and determined exclusively by binding arbitration under the Uniform Arbitration Act of 2000, in conformity with the procedures of the Nevada Revised Statutes § 38.206 et seq.
(Dkt. #11-1 at 5.) The Agreement also contains the following:
I understand that this handbook represents the current policies, regulations, and benefits, and that except for employment at-will status and the Arbitration Agreement, any and all policies or practices can be changed at any time by the Company. The Company retains the right to add, change or delete wages, benefits, policies and all other working conditions at any time ( except the policy of "at-will employment" and Arbitration Agreement, which may not be changed, altered, revised or modified without a writing signed by the Chief Executive Officer of the Company ). The Company reserves the right to manage, schedule, make decisions; and operate based on the best course of action for the company. Any and all policy, systems, and procedures may be changed or eliminated if the officers of the company feel it is of benefit to the company.
( Id. ) (emphasis added).
Plaintiff contends that this language gives the Company the unilateral right to change, alter, revise or modify the arbitration provision, so long as that change is signed by the CEO. (Dkt. #14 at 3:19-22.) Defendants contend that the language "simply means that those two policies [at-will employment and arbitration] cannot be changed (or waived) and be binding on the company without a writing signed by the CEO." (Dkt. #17 at 3:6-9.) Defendants argue that this language prohibits both unilateral changes by either party and bilateral changes not signed by the CEO.
Whether the arbitration provision can be unilaterally altered is a critical factor in its enforceability. "Most federal courts that have considered this issue have held that if a party retains the unilateral, unrestricted right to terminate the arbitration agreement, it is illusory and unenforceable, especially where there is no obligation to receive consent from, or even notify, the other parties to the contract." In re Zappos.com, Inc., Customer Data Sec. Breach Litig., 893 F.Supp.2d 1058, 1065-66 (D. Nev. 2012) (numerous citations omitted).
The subject provision is, at least, ambiguous. I initially read the provision the way Plaintiff interprets it: the Company can unilaterally change the arbitration provision. After reviewing Defendants' Reply brief (particularly pages 2-3), I re-read the provision the way Defendant posits. However, Defendant's interpretation requires a somewhat strained reading, while the more natural reading favors Plaintiff's position. "A contract is ambiguous when it is subject to more than one reasonable interpretation. Any ambiguity, moreover, should be construed against the drafter." Anvui, LLC v. G.L. Dragon, LLC, 123 Nev. 212, 215-16 (2007). The drafter here was the Company. To the extent the language is susceptible to more than one reasonable interpretation, it must be interpreted against the Company.
My conclusion is bolstered by the holding of the Tenth Circuit Court of Appeals in Dumais v. American Golf Corp., 299 F.3d 1216 (10th Cir. 2002). There, the court reviewed a very similar (albeit not identical) arbitration provision. The court cited to the "well-accepted rule that ambiguities in contracts are construed against the drafter" ( Id. at 1219), but noted that here it had a twist.
In the unusual posture of this case, the issue becomes whether we construe the ambiguity against the drafter generally or within the confines of the particular litigation before us. If construed generally against [the employer], the ambiguity would prohibit [it] from modifying the arbitration agreement. If we construe the ambiguity against [the employer] within the specific confines of this dispute, the ambiguity would permit ...