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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Gibson v. Nye Frontier Ford, Inc. (04/03/2009) sp-6355
Notice: This opinion is subject to correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
| LARRY GIBSON, | ) |
| ) Supreme Court No. S- 13064 | |
| Petitioner, | ) |
| ) Superior Court No. 3AN-07- 09717 CI | |
| v. | ) |
| ) O P I N I O N | |
| NYE FRONTIER FORD, INC., and | ) |
| NYE FRONTIER LINCOLN | ) No. 6355 April 3, 2009 |
| MERCURY, INC., | ) |
| ) | |
| Respondents. | ) |
| ) | |
Petition for Review from the Superior Court
of the State of Alaska, Third Judicial
District, Anchorage, John Suddock, Judge.
Appearances: Kenneth W. Legacki, Kenneth W.
Legacki, P.C., Anchorage, F. Paul Bland, Jr.,
Public Justice, P.C., Washington, D.C., for
Petitioner. Jeffrey A. Friedman, Friedman,
Rubin & White, Anchorage, for Respondents.
Lee Holen, Lee Holen Law Office, Anchorage,
Stefano G. Moscato, National Employment
Lawyers Association, San Francisco, for
Amicus Curiae National Employment Lawyers
Association.
Before: Fabe, Chief Justice, Matthews,
Eastaugh, Carpeneti, and Winfree, Justices.
MATTHEWS, Justice.
An employee was ordered by the superior court to
arbitrate his Alaska Wage and Hour Act claim under an arbitration
agreement that is governed by the Federal Arbitration Act. He
contends that the arbitration agreement is unconscionable for
three reasons: (1) it is subject to unilateral change by the
employer; (2) it has a $50,000 appellate threshold that favors
the employer; and (3) it requires the employee to pay arbitration
costs that he would not have to pay if his claim were prosecuted
in superior court. We conclude that (1) the agreement is not
subject to unilateral change; (2) the $50,000 appellate threshold
clause is unconscionable but severable from the agreement; and
(3) arbitration costs may not be imposed on the employee. As a
consequence of these conclusions, we hold that arbitration may be
required under the agreement only if the employer agrees to pay
the arbitration costs.
I. FACTS AND PROCEEDINGS
Larry Gibson filed suit against his former employers,
Nye Frontier Ford, Inc., and Nye Frontier Lincoln Mercury, Inc.
(collectively Nye), in the superior court seeking to recover
unpaid overtime compensation and liquidated damages under the
Alaska Wage and Hour Act (AWHA). Gibson alleged he was owed in
excess of $100,000 in unpaid overtime compensation for work
performed between 2005 and 2007. He sought compensatory damages
plus an equal amount of liquidated damages, as well as costs and
attorneys fees allowed under the AWHA.
Nye answered and interposed three affirmative defenses.
Nye claimed that Gibson was exempt from the overtime provisions
of the AWHA because he held an executive, managerial, or
administrative position; that part of his claim was barred by the
statute of limitations; and that his claim was subject to an
arbitration agreement.
Nye moved to stay the superior court proceedings
pending arbitration. Gibson opposed this motion, arguing in part
that the arbitration agreement between the parties was not
enforceable because it was unconscionable and would potentially
require him to pay part of the arbitration costs, contrary to the
policy of the AWHA. Nye responded that the arbitration agreement
was not unconscionable and acknowledged that Gibson would likely
be asked to pay one half of the arbitration costs, but argued
that these would be relatively modest and that Gibson had not met
his burden of showing that this requirement would preclude him
from vindicating his rights under the AWHA. The superior court
entered an order staying proceedings pending arbitration. From
this order Gibson filed a petition for review. We granted
review.
II. DISCUSSION
A. Contract Documents
The arbitration clause at issue is found on the final
two pages of the forty-five page Nye employee handbook. We set
forth the text of the last two pages, including the caption and
attestation clause, numbering each paragraph for ease of
reference:
Employee Acknowledgement and Agreement
[1] This will acknowledge that I have received my
copy of the NYE FRONTIER LINCOLN MERCURY[1]
Employee Handbook and that I will familiarize
myself with its contents.
[2] I understand that this Handbook represents
the current policies, regulations, and
benefits, and that except for employment at-
will status, any and all policies and
practices can be changed at any time by the
Dealership. The Dealership retains the right
to add, change or delete wages, benefits,
policies and all other working conditions at
any time (except the policy of at-will
employment which may not be changed, altered,
revised or modified without a writing signed
by the Owner of the Dealership).
[3] I understand that nothing in the Employee
Handbook creates or is intended to create a
promise or representation of continued
employment and that employment at Nye
Frontier Lincoln Mercury is employment At-
Will, that may be terminated at the will of
the Dealership or myself. I understand that
I have the right to terminate my employment
at any time, with or without cause or notice
and that the Dealership has a similar right.
I further understand that my status as an At-
Will employee may not be changed except in
writing signed by the Owner of the
Dealership. My signature below certifies
that I understand the foregoing agreement and
that At-Will status is the sole and entire
agreement between the Dealership and myself
concerning the duration of my employment and
the circumstances under which my employment
may be terminated. It supersedes all prior
agreements, understandings and
representations (whether written or oral)
concerning my employment with the Dealership.
[4] I agree that any claim, dispute, or
controversy which would otherwise require or
allow resort to any court or other
governmental dispute resolution forum
(including, but not limited to any and all
claims of discrimination, harassment or any
other complaint based on the employment
relationship or the termination of same),
between myself and the Dealership (or its
owners, directors, and officers, employees,
agents, and parties affiliated with its
employee benefit and health plans) arising
from, related to, or having any relationship
or connection whatsoever with my seeking
employment with, employment by, or other
association with, the Dealership, whether
based on tort, contract, statutory, or
equitable law, or otherwise, shall be
submitted to and determined exclusively by
binding arbitration under the Federal
Arbitration Act, in conformity with
applicable state laws, provided, however,
that: In addition to requirements imposed by
law, any arbitrator herein shall be a retired
Alaska Superior Court Judge and shall be
subject to disqualification on the same
grounds as would apply to a judge of such
court. It is the intent of this arbitration
clause to provide for the inexpensive, speedy
and just resolution of all such disputes. To
this end, discovery shall be limited to the
extent permissible.
[5] Resolution of the dispute shall be based
solely upon the law governing the claims and
defenses pled, and the arbitrator may not
invoke any basis other than such controlling
law to decide the dispute. As reasonably
required to allow full use and benefit of
this agreements modifications to the Acts
procedures, the arbitrator may extend the
times set by the Act for the giving of
notices and setting of hearings. Awards
exceeding $50,000.00 shall include the
arbitrators written reasoned opinion and, at
either partys written request within 10 days
after issuance of the award, shall be subject
to reversal and remand, modification, or
reduction following review of the record and
arguments of the parties by a second
arbitrator who shall, as far as practicable,
proceed according to the law and procedures
applicable to appellate review by the Alaska
Supreme Court of a civil judgment following
court trial. I understand by agreeing to
this binding arbitration provision, the
company and I give up our rights to trial by
jury.
[6] MY SIGNATURE BELOW ATTESTS TO THE FACT THAT I
HAVE READ, UNDERSTAND, AND AGREE TO BE
LEGALLY BOUND TO ALL OF THE ABOVE TERMS.
/s/ Larry Gibson
Print Full Name
/s/ Larry Gibson
Signature
8/1/05
Date
B. Contentions Under Review
Gibson raises three main points in his petition. He
contends that the arbitration agreement is unconscionable because
it may be unilaterally modified by Nye at any time. Further, he
argues that the $50,000 threshold for appellate review by a
second arbitrator is unfairly one-sided because it operates
wholly for the benefit of Nye. His third point is that the
arbitration clause conflicts with the policy of the AWHA by
subjecting him to a charge of one half of the costs of
arbitration, including the arbitrators fee.
Nye responds that it does not have the power to
unilaterally change the arbitration agreement because the
arbitration agreement is distinct from other provisions of the
handbook. With respect to the $50,000 threshold for appellate
review, Nye argues that this is not unreasonably one-sided
because Nye might have claims against employees; if so and if Nye
were awarded more than $50,000, employees would benefit from the
right to appeal. Nye argues alternatively that if this court
finds the appellate threshold unconscionable, it should be
severed and the remainder of the arbitration agreement should be
enforced. Concerning the prospect that Gibson will have to pay
half of the arbitration costs, Nye asserts that under binding
federal case law,2 Gibson had the burden to show that the
imposition of arbitration costs would be prohibitively expensive
and that he did not discharge this burden.
C. Applicable Statutes
Gibsons claim is brought under the AWHA, AS
23.10.050.150. The AWHA requires the payment of overtime
compensation for covered employees and generally allows as an
addition to unpaid overtime compensation an equal amount of
liquidated damages.3 In actions brought by private claimants the
court is required, in addition to a judgment awarded to the
plaintiff, to allow costs of the action.4 If the plaintiff
prevails, the court is also to award the plaintiff actual
attorneys fees so long as they are reasonable.5 On the other
hand, if the plaintiff does not prevail the employer is not
ordinarily entitled to an award of attorneys fees.6 All of these
rights are substantive.7 Substantive rights afforded workers
under the AWHA may neither be waived in advance by contract nor
compromised after a claim is asserted without judicial approval.8
But this does not mean that AWHA claims can only be adjudicated
in court. As the United States Supreme Court has observed:
[B]y agreeing to arbitrate a statutory claim,
a party does not forgo the substantive rights
afforded by the statute; it only submits to
their resolution in an arbitral, rather than
a judicial, forum. . . . [S]o long as the
prospective litigant effectively may
vindicate [his or her] statutory cause of
action in the arbitral forum, the statute
will continue to serve both its remedial and
deterrent function.[9]
The Federal Arbitration Act10 (FAA) also applies to this
case. The FAA applies to [a] written provision in any . . .
contract evidencing a transaction involving commerce to settle by
arbitration a controversy thereafter arising out of such contract
or transaction, and provides that covered arbitration agreements
shall be valid, irrevocable, and enforceable, save upon such
grounds as exist at law or in equity for the revocation of any
contract.11 The save upon such grounds clause has been construed
to mean that state law grounds for refusing to enforce contracts
in general will also apply to arbitration clauses, while state
law grounds particular to arbitration clauses cannot so serve.12
The FAA evinces a strong policy in favor of the
arbitration of disputes.13 Alaskas Uniform Arbitration Act and
Revised Uniform Arbitration Act reflect the same policy at the
state level.14 The state arbitration act also applies to this
case to the extent that its provisions do not contradict those of
the FAA.15
We turn then to the specific points raised by Gibson in
his petition for review. They all involve questions of law and
are therefore subject to de novo review. When applying de novo
review [w]e adopt the rule of law that is most persuasive in
light of precedent, reason, and policy. 16
D. Nye Lacks the Power To Unilaterally Change the
Arbitration Agreement.
Under Alaska law a contract term may be unconscionable
where . . . circumstances indicate a vast disparity of bargaining
power coupled with terms unreasonably favorable to the stronger
party.17 We agree with Gibson that the employment contract with
Nye was a contract of adhesion and that the disparity of
bargaining power requirement is satisfied.
Gibson contends that the unreasonably favorable
condition is also met. He argues that Nye had the power to
change the arbitration clause unilaterally. In reaching this
conclusion he relies on the second paragraph of the Employee
Acknowledgement and Agreement quoted above.18 He claims that the
arbitration agreement contained in paragraphs five and six of the
Acknowledgement and Agreement falls within the language of
paragraph two that permits Nye to change at any time any and all
policies and practices expressed in the handbook. Gibson cites
numerous authorities that hold that clauses giving one party to
an arbitration agreement the authority unilaterally to change its
terms are unconscionable and unenforceable.19
Nye does not take issue with the proposition that the
unilateral power to change an arbitration agreement would be
unconscionable. Instead, Nye argues that it does not have the
power to change the arbitration agreement unilaterally. Nye
contends that the power-to-change clause of paragraph two of the
Acknowledgement and Agreement refers to policies and practices
detailed in the first forty-three pages of the handbook and not
to the arbitration agreement that is expressed in paragraphs four
and five of the Acknowledgement and Agreement. Nye notes that
paragraph two of the Acknowledgement and Agreement asserts that
the handbook is not a contract and that this differentiates the
policies set out in the handbook from paragraphs four and five of
the Acknowledgement and Agreement, which are in the form of an
agreement. Nye also contends that to the extent that the change
clause may suggest that it applies to the arbitration agreement,
it does not do so with sufficient clarity to be effective. For
this point Nye relies on Jones v. Central Peninsula General
Hospital.20 There we held that an employers personnel policy
manual modified an employees at-will status and that a purported
disclaimer in the manual was ineffective to prevent the
modification because it did not clearly and conspicuously so
provide.21
We think that the positions of both parties are at
least reasonably arguable. In support of Gibsons position, the
arbitration agreement is contained in the handbook and is
arguably a policy within the meaning of the clause permitting Nye
to make unilateral changes. On the other hand, the arbitration
agreement is separated from the rest of the handbook and is
located under the Acknowledgement and Agreement caption. What is
acknowledged under this caption is receipt of the handbook and an
understanding of its terms, including that they may be
unilaterally changed. But what is agreed to is arguably
separate: the arbitration paragraphs and, in paragraph three,
the fact that the nature of the employment with Nye is and will
continue to be at-will unless a specific writing provides
otherwise.
Given this ambiguity, we think that the arbitration
agreement is best seen as not subject to the unilateral change
clause. Several interpretative principles support this view. An
interpretation that gives a lawful and effective meaning to the
terms of a contract is to be preferred over an interpretation
that leaves a contract or a part of a contract unlawful or of no
effect.22 Given the prevalence of the view that arbitration
clauses that may be changed unilaterally are unconscionable, this
rule of interpretation supports an interpretation that paragraph
two in the Acknowledgement and Agreement does not govern the
arbitration agreement. Similarly, given the strong public
policies favoring arbitration, an interpretation that permits
arbitration is to be preferred over one that would frustrate
arbitration.23 Further, because Nye drafted the agreement, the
interpretation of it that is most favorable to Gibson should be
adopted.24 This principle operates, if anything, more strongly in
cases of adhesive contracts.25 Finally, the approach taken by
this court in Jones indicates that only clear and conspicuous
language in an employment manual would suffice to negate a
contract created by the manual. Paragraph two of the
Acknowledgement and Agreement does not satisfy this test.
E. The $50,000 Appellate Threshold Is Unconscionable but
Severable.
Gibson contends that the clause in the arbitration
agreement that provides that [a]wards exceeding $50,000.00 . . .
shall be subject to reversal and remand, modification, or
reduction following review of the record and arguments of the
parties by a second arbitrator is unconscionable. He contends
that it is so seriously one-sided in favor of the employer as to
be unreasonable. Gibson contends that the $50,000 appellate
threshold ignores the possibility that a worker may have a claim
with a potential value of well over $50,000 yet receive either no
award or an award falling under the $50,000 threshold. In such
cases the worker would be deprived of an appeal, whereas in cases
in which an employer stands to lose $50,000 or more the employer
has a right of appeal. Gibson also cites a number of cases in
which similar appellate thresholds have been found to be
unconscionable.26
Nye argues that the $50,000 threshold provision is not
unreasonably one-sided. It contends that Nye might make claims
against employees that could result in large awards. Nye offers
as an example a case in which a management employee might
discriminate against customers to whom Nye would be legally
liable; in that event Nye might wish to seek reimbursement from
the employee.
We believe that Gibson has the better of this argument.
The case upon which Gibson places primary reliance, Little v.
Auto Stiegler, Inc.,27 seems directly on point. In Little the
employer, another auto dealer, sought to defend a provision in an
arbitration agreement that contained a $50,000 threshold
identical to the language in the threshold clause in this case.28
The court found the threshold clause unconscionable and ordered
it severed from the arbitration agreement:
From a plaintiffs perspective, the decision
to resort to arbitral appeal would be made
not according to the amount of the
arbitration award but the potential value of
the arbitration claim compared to the costs
of the appeal. If the plaintiff and his or
her attorney estimate that the potential
value of the claim is substantial, and the
arbitrator rules that the plaintiff takes
nothing because of its erroneous
understanding of a point of law, then it is
rational for the plaintiff to appeal. Thus,
the $50,000 threshold inordinately benefits
defendants. Given the fact that Auto
Stiegler was the party imposing the
arbitration agreement and the $50,000
threshold, it is reasonable to conclude it
imposed the threshold with the knowledge or
belief that it would generally be the
defendant.[29]
We agree with this rationale. We also think that the
cases in which arbitration will be sought by an employer against
an employee are so much less frequent than cases in which the
employee is pursuing a claim that this possibility does not serve
to refute Gibsons charge of unreasonable one-sidedness.
Nye alternatively argues that if the appellate
threshold clause is found to be unconscionable it can and should
be severed, leaving intact the rest of the arbitration agreement.
Gibson disagrees, arguing that doing so would permit Nye and
others to attempt to impose without penalty unconscionable
arbitration agreements on those with whom they deal. Although
this argument has some force, we reject it for the following
reasons. This is the first case decided by this court involving
an attempt to force an unconscionable arbitration remedy on an
employee. We have no reason to think that Nye and other
employers will ignore the precedent created by this opinion. If
in future cases similar unconscionable clauses are sought to be
enforced despite our ruling in this case, severance might not be
appropriate. For the present, however, the strong public policy
favoring arbitration points to imposing a severance remedy so
that arbitration may take place.
F. Requiring Gibson To Pay Arbitration Costs Is
Inconsistent with the AWHA.
Although Gibson argues that the arbitration agreement
requires him to pay half of the costs of arbitration, the
arbitration agreement is actually silent on the question of
costs. The FAA likewise does not address the question of costs.30
Alaskas Revised Uniform Arbitration Act provides that the
arbitrator shall decide how arbitration costs will be paid in the
absence of a provision in the arbitration agreement.31 Regardless
of the apparent uncertainty as to how arbitration costs might
actually be apportioned, the parties seem to have an
understanding that the expected apportionment of arbitration
costs in cases of this nature would be a fifty/fifty split. We
accept this understanding for the purposes of this case.
It is uncertain what the costs of arbitration might be.
A report to the superior court signed by Gibsons counsel
following consultation with Nyes counsel states that [t]he
parties believe they will need five (5) trial days, with 2.5 days
allocated to each party. The fee that might be charged by a
retired superior court judge acting as an arbitrator is not in
the record. But we understand that a reasonable charge would be
at least $1,000 a day. Considering the additional possibility of
room, reporter, and transcript costs, and the time spent after
the hearing for the arbitrator to analyze the evidence and write
a decision, the arbitration costs could easily exceed $6,000.
The question, then, is whether requiring Gibson to be
liable for half of these costs is inconsistent with the AWHA. We
answer this question in the affirmative. The AWHA does not
require wage and hour claimants to pay forum costs other than the
court filing fee of $150.32 This sum contrasts with the uncertain
but much greater forum costs for which Gibson would be liable in
arbitration. The stated objective underlying the AWHA is to
protect the health, efficiency, and general well-being of
workers.33 To achieve this end, the AWHA contains provisions that
are designed to deter employers from violating the act and to
encourage employees to take action to remedy violations.34
Imposing substantial forum costs would run counter to the latter
strategy.
The courts of a number of jurisdictions have reached
the same conclusion with respect to attempts to force arbitration
of claims based on remedial statutes. The leading case is Cole
v. Burns International Security Services.35 The district court in
Cole compelled the arbitration of a claim brought under Title VII
of the Civil Rights Act of 1964. On appeal, one issue was
whether the employer could require the employee to pay part of
the arbitration costs. The court of appeals answered in the
negative:
Because public law confers both substantive
rights and a reasonable right of access to a
neutral forum in which those rights can be
vindicated, we find that employees cannot be
required to pay for the services of a judge
in order to pursue their statutory
rights. . . . In our view, an employee can
never be required, as a condition of
employment, to pay an arbitrators
compensation in order to secure the
resolution of statutory claims under Title
VII (any more than an employee can be made to
pay a judges salary). If there is any risk
that an arbitration agreement can be
construed to require this result, this would
surely deter the bringing of arbitration and
constitute a de facto forfeiture of the
employees statutory rights. The only way
that an arbitration agreement of the sort at
issue here can be lawful is if the employer
assumes responsibility for the payment of the
arbitrators compensation.[36]
The California Supreme Court followed Coles lead with
respect to cost sharing in Armendariz v. Foundation Health
Psychcare Services, Inc.37 The California court ruled:
[C]onsistent with the majority of
jurisdictions to consider this issue, we
conclude that when an employer imposes
mandatory arbitration as a condition of
employment, the arbitration agreement or
arbitration process cannot generally require
the employee to bear any type of expense that
the employee would not be required to bear if
he or she were free to bring the action in
court. This rule will ensure that employees
bringing FEHA claims will not be deterred by
costs greater than the usual costs incurred
during litigation, costs that are essentially
imposed on an employee by the employer.[38]
Nye argues that a decision of the United States Supreme
Court decided after Cole and Armendariz, Green Tree Financial
Corp. Alabama v. Randolph,39 precludes a bright-line rule against
employment arbitration agreements that require employees to pay a
share of arbitration costs.40 In Green Tree the plaintiff was a
borrower who filed suit against her lender under the federal
Truth in Lending and Equal Opportunity Acts. She argued that the
arbitration clause that she had signed was not enforceable
because its silence as to the payment of arbitration costs
created an unacceptable risk that she would be made to pay high
costs and this possibility would deter her from vindicating her
federal statutory rights. The Supreme Court rejected this claim,
noting that [t]he risk that Randolph will be saddled with
prohibitive costs is too speculative to justify the invalidation
of an arbitration agreement.41 The Court held that where a party
seeks to invalidate an arbitration agreement on the ground that
arbitration would be prohibitively expensive, that party bears
the burden of showing the likelihood of incurring such costs.42
If Green Tree applied to this case, a remand would be
necessary for a preliminary evidentiary hearing as to whether
prospective arbitration costs imposed on Gibson would be so large
as to interfere with vindication of his rights under the AWHA.
But we conclude that Green Tree does not apply. That case has
been interpreted as being applicable only to the arbitration of
federal rather than state statutory claims.43 Further, the FAA,
which of course does apply to this case, permits state law
defenses to arbitration on generally applicable contract law
grounds that is, grounds not specifically hostile to
arbitration. Here, our conclusion that a contract requiring an
employee to pay arbitral costs is unenforceable because it is
contrary to the policies of the AWHA is not specific to
arbitration. Rather, any contract requiring the waiver of
substantive rights afforded by the AWHA may be declared void on
that basis.44
For these reasons we reject Nyes argument that we are
precluded from ruling that employment arbitration agreements are
per se invalid if they require employees to pay arbitration costs
greater than the court filing fee. We are not required to adopt
Green Trees case-by-case approach either by Green Tree or the
FAA. As a matter of state policy, we think a bright-line rule is
preferable to obviate litigation in every case as to the effect
of cost splitting. Arbitration is thought to be beneficial
because it is faster and cheaper than court litigation. Green
Trees case-by-case approach tends to undercut these benefits.
Having concluded that the possibility that Gibson might
be required to share substantial arbitration costs is
unacceptable, it follows that he cannot be forced to arbitrate
his claim in this case unless, on remand, Nye agrees that it will
be responsible for all of the arbitration costs. Because of the
strong public policy favoring arbitration, we think giving Nye
this option is preferable to ruling that this case may not be
arbitrated.
III. CONCLUSION
REVERSED and REMANDED for further action in accordance
with the views expressed in this opinion.
_______________________________
1 The same Employee Acknowledgement and Agreement was
used in the Nye Frontier Ford handbook.
2 Green Tree Fin. Corp. Alabama v. Randolph, 531 U.S. 79
(2000).
3 AS 23.10.060, AS 23.10.110(a).
4 AS 23.10.110(c).
5 AS 23.10.110(e); Bobich v. Stewart, 843 P.2d 1232, 1237-
38 (Alaska 1992).
6 AS 23.10.110(f). Also, nowhere in AS 23.10.110 is
there a provision allowing an award of costs of the action to a
prevailing defendant.
7 State v. Native Vill. of Nunapitchuk, 156 P.3d 389, 402-
03 (Alaska 2007) (explaining that intertwined fee-shifting
provisions are substantive because [t]hey are usually designed to
encourage suits that, in the judgment of the legislature, will
further public policy goals).
8 McKeown v. Kinney Shoe Corp., 820 P.2d 1068, 1070-71
(Alaska 1991).
9 Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20,
26-28 (1991) (quoting Mitsubishi Motors Corp. v. Soler Chrysler-
Plymouth, Inc., 473 U.S. 614, 628, 637 (1985)) (internal
quotation marks omitted).
10 9 U.S.C. 1 et seq.
11 Id. 2.
12 See Perry v. Thomas, 482 U.S. 483, 492 n.9 (1987)
(interpreting 9 U.S.C. 2) ([S]tate law, whether of legislative
or judicial origin, is applicable if that law arose to govern
issues concerning the validity, revocability, and enforceability
of contracts generally. A state-law principle that takes its
meaning precisely from the fact that a contract to arbitrate is
at issue does not comport with [the Federal Arbitration Act].)
(emphasis omitted).
13 Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460
U.S. 1 (1983).
14 AS 09.43.010.180; AS 09.43.300.595; Modern Constr.,
Inc. v. Barce, Inc., 556 P.2d 528 (Alaska 1976); see also Dept of
Pub. Safety v. Pub. Safety Emp. Assn, 732 P.2d 1090, 1093 (Alaska
1987) (The common law and statutes of Alaska evince a strong
public policy in favor of arbitration. (quoting Univ. of Alaska
v. Modern Constr., Inc., 522 P.2d 1132, 1138 (Alaska 1974))).
15 See Volt Info. Scis., Inc. v. Bd. of Trs., 489 U.S.
468, 476-79 (1989) (holding that FAA does not preempt state laws
governing arbitration where those laws do not undermine the goals
and policies of the FAA).
16 Lexington Marketing Group, Inc. v. Goldbelt Eagle, LLC,
157 P.3d 470, 472 (Alaska 2007) (quoting Guin v. Ha, 591 P.2d
1281, 1284 n.6 (Alaska 1979)) (reviewing de novo the superior
courts decision finding an arbitration clause unenforceable).
17 Municipality of Anchorage v. Locker, 723 P.2d 1261,
1265-66 (Alaska 1986).
18 See text accompanying footnote 1.
19 Among the cases cited by Gibson are Net Global
Marketing, Inc. v. Dialtone, Inc., 217 F. Appx. 598 (9th Cir.
2007); Ingle v. Circuit City Stores, Inc., 328 F.3d 1165 (9th
Cir. 2003); Brennan v. Bally Total Fitness, 198 F. Supp. 2d 377,
384 (S.D.N.Y. 2002); Armendariz v. Foundation Health Psychcare
Services., Inc., 6 P.3d 669, 694 (Cal. 2000).
20 779 P.2d 783, 787-88 (Alaska 1989).
21 Id. at 787 (quoting Leikvold v. Valley View Cmty.
Hosp., 688 P.2d 170, 174 (Ariz. 1984)).
22 See Restatement (Second) of Contracts 203(a) (1981).
23 See id. 207 (In choosing among the reasonable meanings
of a promise or agreement or a term thereof, a meaning that
serves the public interest is generally preferred.).
24 See id. 206 (In choosing among the reasonable meanings
of a promise or agreement or a term thereof, that meaning is
generally preferred which operates against the party who supplies
the words or from whom a writing otherwise proceeds.). We
interpret this principle to operate within the reasonably
possible choices of contract meaning. We do not think that this
principle goes further to prefer a choice that is so favorable to
the drafter that it may be regarded as unconscionable in cases
where a conclusion of unconscionability is sought by the non-
drafter. Contra Dumais v. Am. Golf Corp., 299 F.3d 1216, 1219
(10th Cir. 2002).
25 See Burgess Constr. Co. v. State, 614 P.2d 1380, 1384
(Alaska 1980) (Any ambiguity in an objectionable adhesive term
will be seized upon and construed most strictly against the
drafter.).
26 Gibson cites Little v. Auto Stiegler, Inc., 63 P.3d 979
(Cal. 2003); Worldwide Insurance Group v. Klopp, 603 A.2d 788
(Del. 1992); and Zak v. Prudential Property & Casualty Insurance
Co., 713 A.2d 681 (Pa. Super. 1998).
27 63 P.3d 979 (Cal. 2003).
28 Id. at 983.
29 Id. at 985.
30 9 U.S.C. 1 et seq.
31 AS 09.43.480(d) provides: An arbitrators expenses and
fees, together with other expenses, shall be paid as provided in
the award.
32 Alaska R. Admin. P. 9(b)(1) (2008).
33 AS 23.10.050(2).
34 See Bobich v. Stewart, 843 P.2d 1232, 1238 n.9 (Alaska
1992) (explaining that the purpose of the one-way fee-shifting
provision of the AWHA is to encourage employees to press wage-and-
hour claims); McKeown v. Kinney Shoe Corp., 820 P.2d 1068 (Alaska
1991) (voiding private settlement of AWHA claims because its
waiver of punitive damages violates public policy).
35 105 F.3d 1465 (D.C. Cir. 1997).
36 Id. at 1468 (footnote omitted) (alterations in
original). The court in Cole outlined five conditions that must
be satisfied if an arbitrable forum is to be substituted for a
judicial one with respect to statutory claims. The arbitration
agreement must (1) provide for neutral arbitrators, (2) provide
for more than minimal discovery, (3) require a written award, (4)
provide for all types of relief that would otherwise be available
in court, and (5) not require employees to pay either
unreasonable costs or any arbitrators fees or expenses as a
condition of access to the arbitration forum. Id. at 1482.
Under such circumstances, the court concluded, an employee who is
made to use arbitration as a condition of employment effectively
may vindicate [his or her] statutory cause of action in the
arbitral forum. Id. (quoting Gilmer v. Interstate/Johnson Lane
Corp., 500 U.S. 20, 28 (1991)).
37 6 P.3d 669 (Cal. 2000).
38 Id. at 687. The California Supreme Court in Armendariz
also generally endorsed the five conditions imposed by Cole, see
supra note 36, in the context of claims brought under Californias
Fair Employment and Housing Act:
We emphasize at the outset that our
general endorsement of the Cole requirements
occurs in the particular context of mandatory
employment arbitration agreements, in order
to ensure that such agreements are not used
as a means of effectively curtailing an
employees FEHA rights. . . . [I]t is for the
courts to ensure that the arbitration forum
imposed on an employee is sufficient to
vindicate his or her rights under the FEHA.
Armendariz, 6 P.3d at 682 n.8.
39 531 U.S. 79 (2000).
40 At oral argument Nyes counsel may have changed Nyes
position regarding Green Tree, stressing that a bright-line rule
is bad policy even if not strictly prohibited by Green Tree.
41 Id. at 91.
42 Id. at 92.
43 See Stutler v. T.K. Constructors Inc., 448 F.3d 343
(6th Cir. 2006).
44 See McKeown v. Kinney Shoe Corp., 820 P.2d 1068, 1071
(Alaska 1991) (finding private settlement of liquidated damages
claim under AWHA contrary to policy of AWHA and therefore void).
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