Thomerson v. Covercraft Indus.

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JOHN A. THOMERSON, ERIK GULDAGER, PHALA E. VELARDE, and ELIZABETH WHITE, Plaintiffs, v. COVERCRAFT INDUSTRIES, LLC and JASBIR PATEL, Defendants.

Civil Action No. 2:23-cv-2225-DCN-TER

United States District Court, D. South Carolina, Charleston Division

January 22, 2024

REPORT AND RECOMMENDATION

Thomas E. Rogers, III United States Magistrate Judge

I. INTRODUCTION

This case arises from Plaintiffs' employment with Defendant Covercraft Industries, LLC. Plaintiffs assert causes of action for violation of the Age Discrimination in Employment Act (ADEA), 29 U.S.C. § 621, et seq., Title VII of the Civil Rights Act of 1964 (Title VII), 42 U.S.C. § 2000(e) et seq., and the Worker Adjustment and Retraining Notification Act (WARN), 29 U.S.C. § 2101, et seq. Plaintiffs also assert state law causes of action for breach of contract, breach of contract accompanied by fraudulent act, promissory estoppel, and defamation. Presently before the court is Defendants' Motion to Dismiss the Case and Compel Arbitration or, in the Alternative, to Transfer (ECF No. 15). All pretrial proceedings in this case were referred to the undersigned pursuant to the provisions of 28 U.S.C. 636(b)(1)(A) and (B) and Local Rule 73.02 (B)(2)(g), DSC. This report and recommendation is entered for review by the district judge.

II. RELEVANT FACTS

Plaintiffs John A. Thomerson, Erik Guldager, Phala E. Velarde, and Elizabeth White are, respectively, citizens and residents of South Carolina, Florida, California, and Texas. Compl. ¶ 1 (ECF No. 1). At all times relevant to this action, they were employed by Defendant Covercraft Industries, LLC as sales management employees. Compl. ¶ 1. Covercraft is a California LLC with its headquarters and principal place of business in Oklahoma and it operates a manufacturing facility in South Carolina. Compl. ¶¶ 2, 4. Defendant Jasbir Patel, the CEO of Covercraft, is a citizen and resident of Illinois. Compl. ¶ 3.

In March of 2023, Plaintiffs were notified that their positions had been eliminated and their employment with Covercraft was terminated. Compl. ¶ 11. At the time of their termination, Thomerson was 66 years old, Guldager was 63 years old, and Velarde was 64 years old. Compl. ¶ 12. Velarde and White are female. Compl. ¶ 13. Plaintiffs allege that Defendant Patel, who was approximately 50 years old at the time of their termination, made a disparaging comment about Guldager's age and was dismissive of female employees. Compl. ¶¶ 14, 18.

Defendants assert that in 2016, Covercraft began requiring all of its employees to agree to the terms of its Arbitration Agreement and Dispute Resolution Policy (“the Arbitration Agreement”). Defendants have produced signed Arbitration Agreements for Plaintiffs Guldager, Thomerson, and White. Arbitration Agreements (ECF Nos. 15-2, 15-3, 15-4). Defendants assert that, while they cannot locate a signed Arbitration Agreement for Plaintiff Velarde, Covercraft required every employee to sign the agreement and would have terminated any employee who refused to sign it. Klause Aff. ¶ 4-6 (ECF No. 15-5). Denise Klause was Covercraft's Director of Human Resources at the time the Arbitration Agreement was implemented. Klause Aff. ¶ 1. She avers that she has no recollection of any employee refusing to sign the Arbitration Agreement and, in turn, does not remember needing to terminate any employee's employment based on their refusal to comply with Covercraft's directive. Klause Aff. ¶¶ 7-8. Klause specifically recalls that Plaintiff Velarde was employed at Covercraft in its California operations at the time the Arbitration Agreement was rolled out, and Klause made a specific effort to ensure that all California employees signed and returned the arbitration agreement. Klause Aff. ¶¶ 9-10. Velarde avers that she never signed any arbitration agreement with Covercraft Industries Inc. or Jasbir Patel. Velarde Aff. ¶¶ 1-2 (ECF No. 17-4).

In addition, Thomerson avers that he did not sign the Arbitration Agreement attached to Defendants' motion, nor has he ever signed any arbitration agreement with either of the Defendants. Thomerson Aff. ¶¶ 1-3 (ECF No. 17-2). He avers that he was out of town and not at his home office when Elaine Upton with Covercraft Human Resources contacted him to tell him it was “code red imperative” that their employment documents be returned immediately. Thomerson Aff. ¶ 4. As a result, Thomerson's wife signed the Arbitration Agreement so that it could be returned as demanded. Thomerson Aff. ¶ 5. He avers that he never read, reviewed, or studied the Arbitration Agreement because he was out of town and Upton demanded that it be returned before he had an opportunity to do so. Thomerson Aff. ¶ 7. He attached to his affidavit some other employment documents with his signature to show that should have been easy for Covercraft to determine that the signature on the Arbitration Agreement was not his. Thomerson Aff. ¶ 6.

Guldager avers that he was rushed into to signing a number of documents, including the Arbitration Agreement, during a company meeting and he was not given the opportunity to read it prior to signing it. Guldager Aff. ¶¶ 3-5 (ECF No. 17-3). White avers that she signed the Arbitration Agreement while living in California but was not given a copy of the agreement when she requested it and, thus, Defendants should not be able to rely on it. White Aff. ¶¶ 1, 3, 5 (ECF No. 17-5). All Plaintiffs aver that they never entered into any agreements to arbitrate with Defendant Patel. Velarde Aff. ¶ 2; Thomerson Aff. ¶ 3; Guldager Aff. ¶ 2; White Aff. ¶ 6.

The Arbitration Agreement states that the “Employee acknowledges that the Company has a mandatory Dispute Resolution Policy (DRP) which requires binding arbitration to resolve all disputes between the Employee and the Company including any such disputes which may arise out of or relate to employment (see also paragraph 5 below).” Arbitration Agreement ¶ 2. It provides the DRP covers “any claim or dispute between the Employee and the Company, including any claim or dispute in any way related to or arising out of his/her employment with the Company” and lists specific claims including, among others, claims of discrimination, harassment, or retaliation under the ADEA and Title VII, claims under the WARN Act, and claims or disputes with the “Company's owners, directors, managers, [and] other employees.” Arbitration Agreement ¶ 5. The Arbitration Agreement further provides that the “Employee understands and acknowledges that by accepting and/or continuing employment with the Company, and thereby agreeing to the terms of the DRP, that both Employee and the Company give up the right to trial by jury in a court of law for all employment-related disputes.” Arbitration Agreement ¶ 4. The Arbitration Agreement requires that arbitration occur in Oklahoma City, Oklahoma. Arbitration Agreement ¶ 16.

III. STANDARD OF REVIEW

The Fourth Circuit has found that a motion to dismiss and compel arbitration is most properly considered under Rule 12(b)(3) for improper venue, noting that the Supreme Court has characterized an arbitration clause as “a specialized kind of forum-selection clause.” Aggarao v. MOL Ship Mgmt. Co., 675 F.3d 355, 365 n.9 (4th Cir. 2012) (citing Scherk v. Alberto-Culver Co., 417 U.S. 506, 519, 94 S.Ct. 2449, 41 L.Ed.2d 270 (1974)); Sucampo Pharm., Inc. v. Astellas Pharma, Inc., 471 F.3d 544, 550 (4th Cir.2006) (“A motion to dismiss based on a forum-selection clause should be properly treated under Rule 12(b)(3) as a motion to dismiss on the basis of improper venue.”); see also Brown v. Five Star Quality Care, Inc., No. 2:15-CV-4105-RMG, 2016 WL 8710474, at *2 (D.S.C. Jan. 8, 2016) (applying Rule 12(b)(3)). “The party seeking to compel arbitration bears the burden of establishing the existence of an arbitration provision that purports to cover the dispute.” Scales v. SSC Winston-Salem Operating, Co., LLC, No. 1:17CV539, 2017 WL 4467278, at *2 (M.D. N.C. Oct. 5, 2017) (internal quotation marks and citation omitted). “If the party makes this evidentiary showing, the party opposing arbitration must come forward with sufficient facts to place the entitlement to arbitration in dispute.” Id. (citing Chorley Enters., Inc. v. Dickey's Barbecue Rests., Inc., 807 F.3d 553, 564 (4th Cir. 2015)). When considering a motion under Rule 12(b)(3), the Court may consider evidence outside the pleadings, but the facts are viewed in the light most favorable to the plaintiff because a plaintiff need only make a prima facie showing of proper venue to survive a motion to dismiss. Id. at 365-66.

IV. DISCUSSION

Defendants argue that Plaintiff's claim are subject to mandatory arbitration pursuant to the Arbitration Agreement to which Plaintiffs consented. They also argue that this case should be transferred to the Western District of Oklahoma to compel the parties to arbitration. Plaintiffs argue Defendants waived arbitration by failing to mention it when Plaintiffs first notified them of the case prior to filing their complaint and inviting them to file it, that the Arbitration Agreements lack consideration and are unconscionable, that Velarde never signed the Arbitration Agreement, that the Arbitration Agreement with Thomerson's signature was signed by his wife and not him, and no arbitration agreement exists between any of the Plaintiffs and Defendant Patel.

In deciding whether to compel arbitration, the trial court is tasked with determining two gateway issues. Howsam v Dean Witter Reynolds, 537 U.S. 79, 83-84 (2002). Courts should “engage in a limited review to ensure that the dispute is arbitrable - i.e., that a valid agreement to arbitrate exists between the parties and that the specific dispute falls within the substantive scope of that...