By Tim Faith
The court held that the arbitration provision within the employment agreement between Plaintiff James D. Brown and Defendant Brown’s Maryland Motors, Inc. was enforceable as to Plaintiff under Maryland law.
Memorandum Opinion By: J. Bredar
Plaintiff was a department manager of Defendant’s car dealership. In 2015, Plaintiff signed an employment agreement that contained a broad arbitration agreement clause, and was subsequently terminated in 2019 from his employment for allegedly raising complaints about ongoing sexual harassment of several employees by a senior manager at the dealership. Plaintiff filed a charge of discrimination with the EEOC and was issued a right to sue letter. After filing of his timely federal lawsuit, Defendant moved to compel arbitration of the dispute.
Plaintiff challenged the enforceability of the arbitration agreement on several grounds, including invalidity under Maryland law and that the agreement would foreclose him from effectively vindicating federal statutory rights.
The Court, in particular, evaluated whether the arbitration clause was unconscionable under Maryland law. To demonstrate unconscionability, the Plaintiff has the burden to show that the arbitration provision is both procedurally and substantively unconscionable. As to the former, such clause must be shown to be extremely unfair to the Plaintiff because of a lack of meaningful choice and contractual terms that unreasonably favor the other party. Walther v. Sovereign Bank, 872 A.2d 735, 743 (Md. 2005). As to the latter, such clause must be shown to either unreasonably favor the dominant party, impair the bargaining process or otherwise violate public policy, attempt to alter fundamental duties otherwise imposed by law, or are otherwise unreasonably and unexpectedly harsh. Id. at 744.
As to procedural unconscionability, the Court found that the Plaintiff failed to allege facts sufficient to establish that Plaintiff lacked sufficient choice or the ability to negotiate with his employer. Instead, relying on Falls, the Court found that Plaintiff was in a similar position to a CEO who was highly compensated and a sophisticated employee that made high value contributions to the company. Falls v. 1CL, Inc., 67 A.3d 521, 535 (Md. 2012). As a result, the Court found that Plaintiff failed to demonstrate procedural unconscionability of the arbitration agreement.
As to substantive unconscionability, the Court found that the Plaintiff’s allegations were insufficient to support a finding of substantive unconscionability, even if such terms operated to the perceived detriment of the weaker party.
Alternatively, the Court evaluated whether the arbitration clause would prevent Plaintiff to be able to vindicate his federal statutory rights on the grounds that the cost of arbitration would be too and the arbitrator would not permit sufficient discovery for Plaintiff to make his case. The Court found as to the former that Plaintiff had merely speculated as to the cost of the case when the Plaintiff could have actually obtained an estimate of the arbitration fee from the arbitrator, and that even accepting Plaintiff’s high estimate of $31,000, the Court found that such costs were not prohibitive in light of Plaintiff’s value of his claim at over two million dollars. As to the issue of discovery, the Court found that the rules of the arbitrator may require limited discovery, but that the Plaintiff’s conclusions that discovery would be inadequate was “factually inaccurate and procedurally premature.”
As a result, the Court granted Defendant’s motion to compel arbitration.
Tim Faith is a practicing business law and estates planning attorney, and also an associate professor at The Community College of Baltimore County, where he teaches business law, legal writing, and torts. Tim also serves as the chair of the Maryland Business Law Developments blog, a service of the Business Law Section of the Maryland State Bar Association.