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Stamp v. General Electric Capital Corporation

United States District Court, Ninth Circuit

September 26, 2013

NICOLE STAMP, Plaintiff,


KEITH STRONG, Magistrate Judge.


Plaintiff Nicole Stamp brings this action for wrongful discharge against her former employer, Defendant General Electric Capital Corporation ("GECC"). Stamp alleges she was terminated without good cause, in retaliation for reporting violations of public policy, and in contravention of GECC's written personnel policies after she uncovered a title skipping scheme in her work as a Title Associate. CD 3. Pending before the Court is GECC's Rule 60(b) motion (CD 17) for relief from this Court's Order (CD 11) denying GECC's motion to compel arbitration (the "Order Denying Arbitration"). After a thorough review, the Court concludes the motion to compel arbitration was erroneously denied because the arbitration procedure employed by GECC does provide for third-party discovery and will therefore provide Stamp an appropriate forum to prosecute her wrongful discharge claim. GECC's motion to compel arbitration should be granted.


Ms. Stamp filed this action in Montana's Thirteenth Judicial District Court, but GECC properly removed to this Court on diversity grounds. CD 1, 4. The Court has personal jurisdiction over the parties, all of whom are found in Montana. Fed.R.Civ.P. 4(k)(1)(A); Mont. R. Civ. P. 4(b). The case was initially assigned to District Judge Richard Cebull, but was reassigned to Chief Judge Dana Christensen upon Judge Cebull's retirement and referred to this Court in compliance with Local Rule 72.2(b). CD 12. Although GECC filed its Rule 60(b) motion simultaneously with its appeal of the Order Denying Arbitration, the Rule 60(b) motion is properly considered because the Court of Appeals has held its proceedings in abeyance pending this Court's ruling on the motion. Order, Stamp v. General Electric Capital Corporation, No.13-35446 (9th Cir. June 4, 2013), citing Leader Nat'l Ins. Co. v. Indus. Indem. Ins. Co. , 19 F.3d 444, 445 (9th Cir. 1994) ("notice of appeal filed while a Fed.R.Civ.P. 59 motion is pending is no longer a nullity, but, rather, is merely held in abeyance until the motion is resolved").

The Ninth Circuit has not decided whether a motion to compel arbitration is properly decided by a magistrate judge without consent of the parties and district courts are split on the issue. District Council 16 International Union of Painters and Allied Trades, Painters Local No. 3 v. LML Enterprises, 2013 WL 3802837, (N.D. Cal., June 14, 2013). In any event, since a motion to compel arbitration is analogous to a motion to a remand or a motion to dismiss for improper venue, the best practice is for this Court to submit findings and recommendations on the motion pursuant to 28 U.S.C. § 636(b)(1)(B). Id.


Pending before the Court is GECC's Motion for Relief from Order Denying Motion to Dismiss or Compel Arbitration Pursuant to Rule 60(b). CD 17. Soon after removal, GECC filed its Motion to Dismiss, or In the Alterative, to Stay Proceedings and Compel Arbitration. CD 6. GECC's motion was denied on the grounds that the arbitration procedure did not allow Stamp to depose necessary third-parties and Stamp's suit was therefore not the type of claim subject to the arbitration agreement. CD 11. Although Stamp had argued the arbitration agreement was unenforceable because it was unconscionable and GECC had waived its right to arbitrate, the Order Denying Arbitration did not consider these arguments because it concluded the arbitration agreement did not "encompass the dispute at issue." See Kilgore v. KeyBank, Nat. Ass'n , 718 F.3d 1052, 1058 (9th Cir. 2013).

In the instant motion, GECC argues that the arbitration procedure required by the arbitration agreement does allow for third-party discovery and that the Order Denying Arbitration erred in concluding otherwise. It further argues that recent authority from the Ninth Circuit and the Supreme Court leave this Court no choice but to enforce the arbitration agreement. For the following reasons, this Court concludes Solutions does provide for third-party discovery and the arbitration agreement must be enforced.


Rule 60(b)(1) Fed.R.Civ.P. authorizes the Court, on a motion and upon such terms as are just, to relieve a party from a final judgment or order for the following mistake, inadvertence, surprise, or excusable neglect. Rule 60(b)(1) grants courts the authority to correct its own mistakes, Kingvision Pay-Per-View Ltd. v. Lake Alice Bar , 168 F.3d 347, 350 (9th Cir. 1999), and has been invoked to seek relief from a district court's ruling on a motion to compel arbitration. See, e.g., Thiele v. Merrill Lynch, Pierce, Fenner & Smith , 59 F.Supp.2d 1060 (S.D. Cal. 1999).

The Federal Arbitration Act ("FAA") facilitates private dispute resolution by making arbitration agreements in contracts involving interstate commerce presumptively "valid, irrevocable, and enforceable." Mortensen v. Bresnan Communications, LLC, 722 F.3d 1151, 1157 (9th Cir. 2013), citing Kilgore, 722 F.3d at 1057, quoting 9 U.S.C. § 2. The law was enacted in response to prevalent judicial refusal to enforce arbitration agreements and embodies "a liberal federal policy favoring arbitration." Id., citing AT&T Mobility LLC v. Concepcion , 131 S.Ct. 1740, 1745 (2011) Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp. , 460 U.S. 1, 24 (1983). 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." Id., citing Kilgore, 722 F.3d at 1058. In determining whether to compel arbitration, courts must determine (1) whether there was a valid agreement to arbitrate between the parties and (2) whether the arbitration agreement covers the dispute at issue. Kilgore , 718 F.3d at 1058.

With regard to the first issue, the Supremacy Clause ensures that because it is substantive federal law, the FAA preempts contrary state law, although the FAA savings clause does not require the enforcement of arbitration agreements on "such grounds as exist at law or in equity for the revocation of any contract." Mortensen, 722 F.3d at 1158, quoting 9 U.S.C. § 2. Since the savings clause preserves generally applicable contract defenses, including fraud, duress, and unconscionability, parties commonly invoke the savings clause to evade arbitration. But recent cases from the Supreme Court have condemned this practice and made clear that state law rules that stand as obstacles to arbitration are preempted. Id., citing Concepcion, and Marmet Health Care Center, Inc. v. Brown, ___ U.S. ___ , 132 S.Ct. 1201, 1203 (2012) ("When state law prohibits... the arbitration of a particular type of claim, the analysis is straightforward: The conflicting rule is displaced by the FAA."). It is now firmly established that the FAA favors arbitration, rather than merely affording it equal footing, and that state laws that are unfavorable to arbitration are preempted, regardless of the savings clause. Id . In sum, any "general state-law contract defense, based in unconscionability or otherwise, that has a disproportionate effect on arbitration is displaced by the FAA." Id.

When considering whether a particular claim is subject to the arbitration agreement, courts look to the "language of the contract that defines the scope of claims subject to arbitration." ...

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