United States District Court, D. Hawaii
ORDER GRANTING DEFENDANTS' MOTION TO COMPEL
ARBITRATION, ECF NO. 14, AND DISMISSING ACTION
Michael Seabright Chief United States District Judge
Mydatt Services, Inc., d.b.a. Block by Block; SMS Holdings
Co.; and Block by Block (collectively “Mydatt” or
“Defendants”) move pursuant to 9 U.S.C. § 4 of
the Federal Arbitration Act (“FAA”) to compel
arbitration of this action. They base their motion on an
arbitration agreement that Plaintiff Stephen Broom
(“Plaintiff” or “Broom”) entered into
with Mydatt on September 28, 2015. As explained to follow,
the Motion to Compel Arbitration is GRANTED. Further, because
the entire dispute is subject to arbitration, the court
DISMISSES the action (rather than staying it under 9 U.S.C.
The Federal Arbitration Act
arbitration agreement within the scope of the FAA
“shall be valid, irrevocable and enforceable, ”
except “upon such grounds as exist at law or in equity
for the revocation of any contract.” 9 U.S.C. § 2.
And any party “aggrieved by the alleged . . . refusal
of another to arbitrate” may petition a district court
for an order compelling arbitration in the matter provided
for in the agreement. 9 U.S.C. § 4. “The FAA
‘mandates that district courts shall direct
the parties to proceed to arbitration on issues as to which
an arbitration agreement has been signed.'”
Kilgore v. KeyBank, Nat. Ass'n, 718 F.3d 1052,
1058 (9th Cir. 2013) (en banc) (quoting Dean Witter
Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985)).
“[T]he FAA limits courts' involvement to
‘determining (1) whether a valid agreement to arbitrate
exists and, if it does, (2) whether the agreement encompasses
the dispute at issue.'” Cox v. Ocean View Hotel
Corp., 533 F.3d 1114, 1119 (9th Cir. 2008) (quoting
Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207
F.3d 1126, 1130 (9th Cir. 2000)).
determine whether a valid agreement to arbitrate exists, a
court applies “ordinary state-law principles that
govern the formation of contracts.” First Options
of Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1995).
“[A]greements to arbitrate [may] be invalidated by
generally applicable [state-law] contract defenses” to
enforceability such as “fraud, duress, or
unconscionability.” AT&T Mobility LLC v.
Concepcion, 563 U.S. 333, 339 (2001) (citations and
quotation marks omitted); see Lowden v. T-Mobile USA,
Inc., 512 F.3d 1213, 1217 (9th Cir. 2008) (“This
requires [a court] to consider what is unconscionable and
unenforceable under . . . state law.”). “The
party seeking to compel arbitration carries the initial
burden of establishing that an arbitration agreement exists,
” and if met, the burden then “shifts to the
opposing party to present evidence on its defenses to the
arbitration agreement.” Siopes v. Kaiser Found.
Health Plan, Inc., 130 Haw. 437, 446, 312 P.3d 869, 878
(2013) (citations and quotation marks omitted).
it is undisputed that Plaintiff entered into an arbitration
agreement with Mydatt, obligating the parties to arbitrate
“disputes or controversies arising out of or relating
to . . . your employment with the Company, and/or the
termination of your employment.” Defs.' Ex. 1, ECF
No. 14-4; Defs.' Ex. 8, ECF No. 20-5. It is also
undisputed that this action arises out of or relates to
Plaintiff's termination of employment. The only question
is whether the agreement is unconscionable and unenforceable.
when Plaintiff applied online for employment with Mydatt in
September of 2015, he selected the option “I have read
and accept the terms of the agreement” at the bottom of
an “Arbitration Agreement, ” which is required
for all of Mydatt's employees. See Defs.'
Ex. A at 6, ECF No. 18-1 at 6; Scott McClish Decl. (Jan. 3,
2019) ¶ 10, ECF No. 14-2 at 5 ¶ 10. Further, on
November 17, 2015, Plaintiff acknowledged receipt of (and an
obligation to read and comply with) a Mydatt employee
handbook, which includes the following paragraph:
Block & Block does enter into arbitration agreements with
employees . . . and those agreements are intended to be
binding contracts between Block & Block and its
employees. Any policies or policy statements related to the
resolution of disputes by arbitration should be interpreted
in accordance with the parties' intent that the
arbitration agreement is a binding and enforceable contract
pursuant to the Federal Arbitration Act and to applicable
state and local laws.
Defs.' Ex. 3, ECF No. 14-6; Defs.' Ex. 4 at 3, ECF
No. 14-7 at 3.
contends, however, that the arbitration agreement is
unconscionable and unenforceable. He argues that it is
written in a “very small print, ” with a print
size “smaller than the print size in other
documents” he completed in his application process.
Pl.'s Opp'n at 6, ECF No. 19 at 6. He also originally
argued that the agreement “requires cost and fee
splitting between the parties, ” id. at 7, and
that sharing in the costs of arbitration would create a
financial hardship for him because his only income consists
of worker's compensation benefits of approximately $1,
060 every two weeks, id. at 4.
The Arbitration Agreement is Enforceable and is not
Hawaii law, “[u]nconscionability encompasses two
principles: one-sidedness (substantive unconscionability) and
unfair surprise (procedural unconscionability).”
Gabriel v. Island Pac. Acad., Inc., 140 Haw. 325,
337, 400 P.3d 526, 538 (2017) (citing Balogh v.
Balogh, 134 Haw. 29, 41, 332 P.3d 631, 643 (2014)).
“‘Generally, a determination of unconscionability
requires a showing that the contract was both
procedurally and substantively unconscionable when
made,' but an impermissibly one-sided contract can be