TRG Customer Solutions, Inc. v. Smith, No. 17–CV–787

226 A.3d 751

TRG CUSTOMER SOLUTIONS, INC. d/b/a IBEX Global Solutions, Appellant,

v.Theodore SMITH, Appellee.

No. 17–CV–787

District of Columbia Court of Appeals.

Argued October 16, 2018

Decided April 30, 2020

Nicholas T. Solosky, Fox Rothschild, LLP, Washington, with whom Rachel M. Severance, and Alexander Hernaez, Fox Rothschild, LLP, San Francisco, CA, were on brief, for appellant.

Mark G. Chalplin for appellee.

Before Thompson and McLeese, Associate Judges, and Edelman, Associate Judge of the Superior Court of the District of Columbia.^*

Edelman, Associate Judge:

This case comes before the court on appeal of the Superior Court’s denial of Appellant’s Motion to Compel Arbitration. The Appellant, TRG Customer Solutions, Inc. d/b/a IBEX Global Solutions ("TRG"), claims that the trial court erred in denying its motion to stay Plaintiff Theodore Smith’s employment discrimination lawsuit and to enforce an arbitration clause in the parties’ employment agreement. We find, however, that TRG waived its right to arbitrate through its unexplained delay in asserting its arbitration rights and through its active participation in Smith’s lawsuit. Accordingly, we affirm.

I. Factual and Procedural Background

On November 28, 2016, Theodore Smith filed suit against his former employer, TRG, alleging violations of the District of Columbia Human Rights Act. Smith claimed that his termination in February 2016 resulted from discrimination on the basis of his religion, as a member of the Church of Jesus Christ of Latter-Day Saints, and on the basis of his weight and appearance.

Smith began working for IBEX Global USA on March 5, 2012. As part of the hiring process, Smith signed a Direct Dialogue Program and Mutual Agreement to Mediate/Arbitrate. In 2013, Smith transferred to the Philippines at the request of IBEX. On June 15, 2013, IBEX asked Smith to sign two new employment agreements – one for his employment with IBEX Global USA and another for his employment with IBEX’s entity in the Philippines, TRG Global Solutions Philippines (d/b/a IBEX Global PH). The agreements included a mandatory arbitration clause and the same Direct Dialogue Program and Mutual Agreement to Mediate/Arbitrate that Smith had signed in 2012. The arbitration agreement stated, in part:

The Company and Employee mutually consent to the resolution, by final and binding arbitration, of any and all claims or controversies ("claim") that the Company may have against Employee or that Employee may have against the Company or its officers, directors, partners, owners, employees or agents in their capacity as such or otherwise, whether or not arising out of the employment relationship (or its termination), including but not limited to, any claims arising out of or related to this Agreement to Arbitrate (this "Agreement") or the breach thereof.

Mr. Smith was terminated from his position on February 3, 2016. Thereafter, he filed a complaint with the Equal Employment Opportunity Commission ("EEOC"), alleging that his termination resulted from discrimination on the basis of religion and on the basis of his weight and appearance. On August 30, 2016, the EEOC closed its investigation and issued a Right to Sue letter to Smith, though TRG evidently did not receive notice or a copy of the letter. In response, Smith filed this lawsuit in Superior Court.

TRG responded to Smith’s lawsuit by filing two motions to dismiss. On January 10, 2017, TRG filed its initial Motion to Dismiss, arguing that Smith’s pending EEOC complaint divested the Superior Court of jurisdiction. While TRG’s Motion to Dismiss referenced Smith’s employment agreements, it did not ask the court to compel arbitration or mention the arbitration clause in any way. Smith filed a written opposition on January 25, 2017. The trial court ultimately denied TRG’s motion on January 31, 2017, noting that the EEOC had ceased processing Smith’s administrative claim and had provided him a Right to Sue letter authorizing the lawsuit.

On February 21, 2017 – three weeks after the court’s denial of its first motion to dismiss – TRG filed a Motion to Dismiss for Forum Non Conveniens. This renewed effort to dismiss the case asked the Superior Court to dismiss Smith’s lawsuit so that the parties could instead litigate the matter in the Philippines. In a Memorandum of Points and Authorities appended to this Motion, TRG focused on the substance of Smith’s claims and the facts underlying his employment to argue that the relevant public and private interests favored resolution of this dispute in the Philippines, a nation that TRG contended had "an incredibly strong interest in adjudicating the claims [Smith] asserted in this matter." TRG cited specific provisions of Philippine labor and employment law to argue that that country constituted an adequate alternative forum for litigation. While TRG attached a portion of one of Smith’s employment contracts to its Memorandum of Points and Authorities, it once again failed to demand arbitration or even make mention of the arbitration clause. After Smith filed a written opposition (supported by an affidavit and several dozen pages of exhibits), the trial court denied TRG’s forum non conveniens motion on March 10, 2017.

Its two motions to dismiss having been denied, TRG filed its Answer to Smith’s Complaint on March 23, 2017. Although the Answer denied the bulk of the factual assertions made in the Complaint, it admitted that Mr. Smith had signed two employment agreements. TRG’s answer also pleaded twenty-three affirmative defenses. None of these affirmative defenses asserted that the contractual arbitration clause barred Smith’s lawsuit or otherwise referenced arbitration in any fashion.

The day after TRG filed its Answer, the parties appeared before the trial court for an initial scheduling conference. At that hearing, TRG agreed to a "Track 3" Scheduling Order. Track 3 Orders set forth the lengthiest discovery period permitted in the Superior Court Civil Division, and are thus reserved for complex cases involving extensive discovery. See, e.g. , Forti v. Ashcraft & Gerel , 864 A.2d 133, 135 (D.C. 2004). This Order scheduled discovery throughout the remainder of the 2017 calendar year, with further dispositive motions to be filed in October 2017 and a mediation session to occur in November or December.

On May 3, 2017 – over five months after the filing of the Complaint – TRG filed a Motion to Compel Arbitration. The Motion claimed for the first time that the arbitration provision in Smith’s employment contract encompassed this dispute, and requested that the Superior Court stay the lawsuit and instead compel arbitration. TRG’s Motion did not attempt to explain or justify the five-month delay in asserting its putative right to arbitration.

The trial court denied TRG’s Motion to Compel in a written order issued on June 9, 2017. The Order concluded that TRG’s "active litigation of the case constitute[d] an implicit waiver of any rights the defendant may have had to enforce the [arbitration] provisions." The trial judge noted that in the five months that passed between the filing of the lawsuit and the assertion of the right to arbitration, TRG had been "a very active participant in the litigation" and "the driving force behind all of the early motions practice in the case," while Smith had "been forced to go toe-to-toe with [TRG] in the judicial arena for many months and almost certainly at significant expense." TRG timely appealed the Superior Court decision.¹

II. Legal Framework

On appeal, TRG argues that the trial judge erred in finding that it waived its contractual right to arbitrate through its participation in this litigation.² Whether a party has waived its right to arbitration constitutes a question of law that this court considers de novo . Hercules & Co. v. Beltway Carpet Servs. Inc. , 592 A.2d 1069, 1073 (D.C. 1991).

As codified in the District of Columbia Revised Uniform Arbitration Act ("RUAA"), D.C. Code §§ 16-4401 to 16-4432 (2012 Repl.), and the Federal Arbitration Act, 9 U.S.C. §§ 1 - 16 (1996), District of Columbia and federal law broadly protect the right of a party to contract for the use of arbitration as an alternative dispute-resolution mechanism. The RUAA provides that "[a]n agreement contained in a record to submit to arbitration any existing or subsequent controversy arising between the parties to the agreement is valid, enforceable, and irrevocable," D.C. Code § 16-4406, and permits judicial enforcement of agreement to arbitrate, § 4407. Our case law has expressed a strong preference favoring arbitration when a contract contains an arbitration clause. See, e.g. , Carter v. Cathedral Ave. Coop., Inc. , 566 A.2d 716, 717 (D.C. 1989) (describing a "presumption of arbitrability" when a contract contains a clause that covers the asserted dispute); see also Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp. , 460 U.S. 1, 24-25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983) ("as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration"). Thus, "[a] motion to compel arbitration invokes the well-established preference for arbitration when the parties have expressed a willingness to arbitrate." Friend v. Friend , 609 A.2d 1137, 1139 (D.C. 1992).

However, like any contract right, the right to arbitrate may be waived – either expressly or by implication. See Hercules , 592 A.2d at 1073 ; see also Nat’l Found. for Cancer Research v. A.G. Edwards & Sons, Inc. , 821 F.2d 772, 774 (D.C. Cir. 1987) (hereinafter " NFCR "). In evaluating whether such a waiver has occurred, "[t]he essential question is whether, under the totality of the circumstances, the defaulting party has acted inconsistently with the arbitration right." NCFR, 821 F.2d at 774 ; see also Hercules , 592 A.2d at 1073 (citing cases). A party to a lawsuit can effect such a waiver by actively participating in the litigation or by taking other actions inconsistent with the...