Vlad v. DGI Trucking Inc.

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ADRIAN VLAD, ET AL., Plaintiffs, v. DGI TRUCKING, INC., Defendant.

No. 1:19CV2024

United States District Court, N.D. Ohio, Eastern Division

November 24, 2021

OPINION AND ORDER

CHRISTOPHER A. BOYKO SENIOR UNITED STATES DISTRICT JUDGE

This matter is before the Court on the Motion to Stay Pending Arbitration (ECF # 5) by Defendant DGI Trucking, Inc. The Court found the parties' arbitration clauses were not substantively unconscionable due to arbitration costs but held that there were issues of fact regarding whether the parties agreed to delegate to the arbitrator questions of arbitrability. The Court then referred the issue to the Magistrate Judge to hold an evidentiary hearing and issue a Report and Recommendation. The Magistrate Judge has completed the hearing and has issued his Report, recommending the Court find that the parties agreed to delegate questions of arbitrability to the arbitrator. Plaintiffs have objected to the Magistrate Judge's recommendation. For the following reasons, the Court adopts the Magistrate Judge's Report and Recommendation, finds the parties agreed to delegate issues of arbitrability for the arbitrator, and stays the case to allow the parties to arbitrate their disputes.

Factual Background

According to Plaintiffs' Complaint, Plaintiffs Adrian Vlad (“Vlad”) Lucian Solomon (“Solomon”) Daniel Varvaruc (“Varvaruc”) and Daniel Tarog (“Tarog”) are owner-operator, independent truck drivers who entered into Lease Agreements with Defendant DGI Trucking, Inc. (“DGI”), an authorized carrier. Under federal regulations, authorized carriers like DGI may transport interstate using equipment it does not own so long as the equipment is covered by a written lease that conforms to the requirements of 49 CFR § 376.

Plaintiffs entered into multiple Lease Agreements with DGI. According to Plaintiffs, DGI failed to include several provisions in the Lease Agreements required under law. Plaintiffs further contend DGI breached these Lease Agreements, causing injury to Plaintiffs.

Defendant moved to stay the action to allow the parties the opportunity to arbitrate their disputes per arbitration clauses in their Lease Agreements. Plaintiffs opposed the motion, contending that the arbitration agreements were substantively unconscionable and that the parties never clearly and unmistakably agreed to delegate questions of arbitrability to the arbitrator.

In its ruling, in part on the Motion, the Court determined Plaintiffs had failed to offer sufficient evidence to show that the arbitration clause was substantively unconscionable due to the costs of arbitration. However, the Court determined there were issues of fact concerning whether the Plaintiffs understood they were delegating questions of arbitrability to an arbitrator based on their alleged limited understanding of English and AAA Commercial Arbitration rules.

Magistrate Judge's Report and Recommendation

The Magistrate Judge conducted an evidentiary hearing and recommends that the Court find the parties clearly and unmistakably agreed to delegate questions of arbitrability to the arbitrator. In reaching this conclusion, the Magistrate Judge first considered the language of the arbitration clauses found in each Plaintiff's Lease Agreement. Each of the Plainiff's arbitration clauses are identical and read as follows:

Any controversy or claim arising out of this lease, or the breach thereof, shall be settled by arbitration to be held in Cleveland, Ohio or other mutually acceptable location in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and a judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof.

In addition, Section 5(B) of the Lease Agreements reads “[t]his lease shall be governed by Federal Law and regulations where applicable, and wherever there is not applicable Federal Law this lease shall be governed by the laws of the state of Ohio.”

The Magistrate Judge noted that no one disputes the Lease Agreements contain arbitration clauses. Rather, Plaintiffs dispute the enforceability of the same due to their limited English language comprehension, inability to negotiate the terms of the lease agreements and lack of sufficient time to review the terms of the Lease Agreements before signing.

The Magistrate Judge and parties all agree that Ohio substantive law on contracts governs disputes over whether the parties agreed to delegate arbitrability issues to an arbitrator.

The Magistrate Judge considered the arbitration clause and found that it contains no express language delegating issues of arbitrability to the arbitrator. However, it does expressly state that the arbitration will be governed by the Commercial Arbitration Rules of the American Arbitration Association. Rule 7 of the AAA Commercial Arbitration Rules reads:

R-7. Jurisdiction-

(a) The arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement or to the arbitrability of any claim or counterclaim.

(b) The arbitrator shall have the power to determine the existence or validity of a contract of which an arbitration clause forms a part. Such an arbitration clause shall be treated as an agreement independent of the other terms of the contract. A decision by the arbitrator that the contract is null and void shall not for that reason alone render invalid the arbitration clause.

(c) A party must object to the jurisdiction of the arbitrator or to the arbitrability of a claim or counterclaim no later than the filing of the answering statement to the claim or counterclaim that gives rise to the objection. The arbitrator may rule on such objections as a preliminary matter or as part of the final award.

Thus, the Rules themselves expressly reserve the authority to determine issues of arbitrability for the arbitrator. Moreover, the Magistrate Judge determined that “ Ohio law provides that incorporation by reference of industry-wide rules for arbitration that include delegation language is evidence that the parties clearly and unmistakably vested the arbitrator with the authority to decide the issue of arbitrability.” (R & R pg. 8.). The Magistrate Judge noted that eleven out of twelve Circuit Courts agree that incorporation of arbitration rules clearly an unmistakably demonstrate agreement of the parties to delegate.

The Magistrate Judge then considered the evidence produced at the hearing before him.^[1]All four Plaintiffs testified at the hearing as did a representative of Defendant. The testimony revealed that the Lease Agreements were drafted in standard size print and each required a signature on the last page. No. Romanian translation was provided nor was any requested by Plaintiffs. The arbitration clause is written in plain English. Defendant did not pressure Plaintiffs to sign the Lease Agreements before they had a chance to review them and Defendant made its representatives available to Plaintiffs to discuss any questions they had prior to signing. Defendant did not prevent Plaintiffs from consulting anyone on the Lease Agreements prior to signing and no Plaintiff indicated a desire to consult with an attorney prior to signing.

Each Plaintiff testified to a lack of fluency in English but acknowledged they understood basic English and further understood the basics of the Lease Agreements. However, the Magistrate Judge found that the evidence supported Defendant's argument that the four Plaintiffs have a greater understanding of English than their testimony would indicate. Three completed high school in Romania and one completed a three year professional school in Romania. Two went on to complete undergraduate studies in Romania. Perhaps most tellingly, all four Plaintiffs formed their own limited liability companies to protect themselves and their assets. All testified that when they did not understand a particular legal term they consulted with someone whose English was superior to their own. Each passed the English language Commercial Driver's License exam.

Further evidence showed the drivers all used the internet, including social media, Google Maps and Mail, Youtube and Facebook. At least one of the Plaintiffs also used Google translate. Thus, each Plaintiff possessed the knowledge and ability to look up the AAA arbitration rules and translate any terms they did not understand.

All four Plaintiffs did not read the entire Lease Agreement before signing but instead, relied on Defendant's owners Alina and Daniel Sacu to give them fair terms. The Magistrate Judge found the parties had the opportunity to negotiate the terms; in fact, they could have leased their services to another trucking company but chose to sign with Defendant because of the relationship they had with Defendant's owners, including their shared Romanian heritage.

Because the evidence in the case demonstrates Plaintiffs had the opportunity to negotiate the terms of the Lease Agreement, possessed proficiency in English sufficient to understand what they were signing, chose not to read the entire Lease Agreement, were not pressured to sign the Lease Agreements and could have consulted with an attorney before signing, the Magistrate Judge found no procedural unconscionability. The Magistrate Judge recommends the Court find that there was a meeting of the minds that the parties agreed to delegate questions of arbitrability to an arbitrator and therefore, the Court should enforce the arbitration clause.

Objections

Plaintiffs object to the Magistrate Judge's Report and Recommendation, contending that the Magistrate Judge gave undue weight to the testimony of Defendant's witnesses while undervaluing or...