Omnitech Inst., Inc. v. Norwood

360 Ga.App. 272

861 S.E.2d 145

OMNITECH INSTITUTE, INC. et al.

v.NORWOOD.

A21A02942

Court of Appeals of Georgia.

June 28, 2021

Regina Sledge Molden, Atlanta, Todd Orlando Pearson, for Appellant.

Amelia Anne Ragan, Atlanta, Steven Eric Wolfe, for Appellee.

Rickman, Presiding Judge.

Omnitech Institute, Inc. and its president, Charleton Lester, (collectively "Omnitech") seek interlocutory review of the trial court's order denying their motion to compel the arbitration of Jasmine Norwood's employment discrimination claims. Omnitech contends that the trial court erred by accepting Norwood's argument that enforcement of the arbitration provision would prohibit her from effectively vindicating her claims because she could not afford the arbitration costs. Because the issue of arbitration costs is not ripe at this stage of the proceedings, we reverse.

On appeal from a denial of a motion to compel arbitration, we "review[ ] the record de novo to determine whether the trial court's denial of the motion to compel arbitration is correct as a matter of law. However, we defer to the trial court's findings of fact upon which its denial was based unless those findings are clearly erroneous." (Citations and punctuation omitted.) Schinazi v. Eden , 351 Ga. App. 151, 156, 830 S.E.2d 531 (2019).

So viewed, Omnitech hired Norwood in April 2019 to work as a substitute teacher. Her employment contract contained an arbitration clause stating that any claim arising out of her employment would be settled by binding arbitration before a panel of three arbitrators in accordance with the commercial arbitration rules of the American Arbitration Association ("AAA").

Approximately five months after she had been hired, Norwood sued Omnitech. In her complaint, Norwood alleged that Lester had made multiple unwanted sexual advances toward her, including grabbing and rubbing against her, and that when she complained to her supervisor, she was told that the only way to avoid interacting with Lester was to quit, which she ultimately did. Norwood's complaint asserted state law tort claims and federal Title VII sexual harassment and retaliation claims. In response, Omnitech filed a motion to compel arbitration and dismiss the complaint. Norwood opposed the motion, acknowledging that she had agreed to the arbitration clause and that it covered her claims, but asserting that it was nonetheless unenforceable. Specifically, Norwood argued that she could not effectively vindicate her rights through arbitration because she could not afford the arbitration fees.

The trial court denied Omnitech's motion to compel arbitration, finding that "enforcing the [arbitration] agreement will preclude [Norwood's] effective vindication of her federal statutory rights."

Omnitech contends that the trial court erred by accepting Norwood's argument that enforcement of the arbitration provision would prohibit her from effectively vindicating her claims because she could not afford the arbitration costs.

The Federal Arbitration Act ("FAA") provides that arbitration agreements "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U. S. C. § 2. This preference for enforcing arbitration agreements "requires a liberal reading of [such] agreements," and any doubts concerning the arbitrability of an issue should be resolved in favor of arbitration. Krut v. Whitecap Housing Group , 268 Ga. App. 436, 441 (2) (a), 602 S.E.2d 201 (2004) (citing Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp. , 460 U. S. 1, 23, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983) ). Indeed, even federal statutory claims, such as the employment discrimination claims Norwood asserts here, may be resolved through arbitration – "so long as the prospective litigant effectively may vindicate his or her statutory cause of action in the arbitral forum[.]" (Citation and punctuation omitteed.) Gilmer v. Interstate/Johnson Lane Corp. , 500 U. S. 20, 28 (III) (A), 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991).

In Green Tree Financial Corp.-Ala. v. Randolph , 531 U. S. 79, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000), the Supreme Court recognized that "[i]t may well be that the existence of large arbitration costs could preclude a litigant ... from effectively vindicating her federal statutory rights in the arbitral forum." Id. at 90 (III), 121 S.Ct. 513. Because, the record, however, had no information about such costs or who would bear them, the Supreme Court held that "[t]he ‘risk’ that [the plaintiff] will be saddled with prohibitive costs is too speculative to justify the invalidation of an arbitration agreement." Id. at 91 (III), 121 S.Ct. 513.

The circumstances under which the effective vindication defense would invalidate an arbitration agreement is an issue of first impression in Georgia. The Eleventh Circuit has addressed the defense several times in the wake of Green Tree , but so far has rejected it as too speculative in every case. In Musnick v. King Motor Co. of Ft. Lauderdale , 325 F.3d 1255 (11th Cir. 2003), the court held that "[u]nder Green Tree , [the plaintiff] has an obligation to offer evidence of the amount of fees he is likely to incur, as well as of his inability to pay those fees." Id. at 1260 (II). Noting that other circuits have taken a case-by-case approach in evaluating the sufficiency of a plaintiff's proof, the Musnick court rejected as "wholly inadequate" the plaintiff's affidavit stating that he was "fearful of a potential attorney's fee award against [him that he] will be unable to pay." Id. (punctuation omitted). Thus, Musnick established that a plaintiff resisting arbitration cannot traffic in generalities, but must instead present specific, dollar-amount evidence of arbitration costs.

Even specific dollar amounts, however, are insufficient unless the plaintiff can show that she will actually be required to pay them. Further, the plaintiff must show that she is required to pay arbitration costs at the outset, not just that they may be assessed later. In Anders v. Hometown Mtg. Svcs. , 346 F.3d 1024 (11th Cir. 2003), the plaintiff, who had borrowed money from the defendant to buy a home, sued the defendant for violations of federal real estate and lending law. The loan agreement contained an arbitration clause much like the one here, requiring arbitration of disputes in accordance with AAA's commercial dispute rules. Id. at 1026-1027 (I), 1028 (II). The plaintiff argued that he "simply [could] not afford to pay the $3,500.00 to $6,000.00 that [he had] determined w[ould] be required to arbitrate [his] claims." Id. at 1028 (II). The Eleventh Circuit rejected this argument, noting that the AAA rules provide that administrative fees may be reduced or deferred in the event of extreme hardship on the part of either party and that while other costs are generally borne equally by the parties, the arbitrator is authorized to rule otherwise. Id. at 1028 (II).¹

Here, it is undisputed that Norwood's employment contract contained an arbitration clause which stated that any claim arising out of or relating to the contract or the services provided pursuant to the contract would be settled by binding arbitration in accordance with the commercial arbitration rules of the AAA. To support her argument that she could not afford the costs of arbitration, Norwood submitted a copy of AAA's commercial arbitration rules, which include a general fee schedule that outlines the initial administrative filing fees based on the amount of the plaintiff's claim. These fees are to be advanced by the party filing the claim, however, Norwood also submitted a copy of the commercial arbitration rules which specifically provide that "[t]he AAA may, in the event of extreme hardship on the part of any party, defer or reduce the administrative fees." In addition, the parties are required to split the costs and expenses of arbitrators, AAA representatives, and witnesses, "unless they agree otherwise or unless the arbitrator in the award assesses such expenses or any part thereof against any specified party or parties."

Although the trial court concluded that the fees cited by Norwood were not too speculative, the court failed to consider the AAA rules providing that administrative fees may be reduced or deferred in case of extreme financial hardship and that arbitrators may choose to apportion remaining expenses in a manner other than simple cost-splitting and what impact those rules would have on Norwood's claim that arbitration would be cost prohibitive for her. At present, Norwood has not established that she will actually be required to pay these fees and thus, the trial court erred by applying the effective vindication defense at this stage of the proceedings. See Anders , 346 F.3d at 1028 (II).²

Judgment reversed.

Senior Appellate Judge Herbert E. Phipps, concurs and McFadden, C. J. dissents.

McFadden, Chief Judge, dissenting.

The question before the superior court was whether in "seek[ing] to invalidate [the] arbitration agreement on the ground that arbitration would be prohibitively expensive," Jasmine Norwood met her "burden of showing the likelihood of incurring such costs." See Green Tree Financial Corp.-Ala. v. Randolph , 531 U. S. 79, 92 (III), 121 S.Ct. 513, 148 L.Ed.2d 373 (2000) (emphasis added). The court found that she had. The question before us on appeal is whether there is any evidence to support that finding. There is.

That evidence established that, under the fee schedule for the vendor specified in the arbitration agreement, AAA, and for the commercial arbitration program specified in the agreement, Norwood would have to pay administrative fees of nearly 75% of her annual income to initiate arbitration. There is evidence of other very substantial fees and expenses that would subsequently accrue. But the evidence of that initiation fee was sufficient by itself to sustain the trial court's finding.

The majority opinion usurps the trial court's role...