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Cerjanec v. FCS US LLC

United States District Court, E.D. Michigan, Southern Division

December 15, 2017

DAN CERJANEC, RODRIGO BRAVO, MARK MODLIN, and WILLIAM WINFREY, on behalf of themselves and all others similarly situated; Plaintiffs,
v.
FCA US, LLC, Defendant.

          OPINION AND ORDER DENYING DEFENDANT'S MOTION TO COMPEL ARBITRATION, AND IN PART TO DISMISS, AND/OR TO STRIKE CLASS ALLEGATIONS IN THE FIRST AMENDED COMPLAINT [17]

          LAURIE J. MICHELSON, U.S. DISTRICT JUDGE.

         Plaintiffs are current and former employees of Fiat Chrysler Automobiles (FCA). As a class, they seek relief from an employee-evaluation policy they allege has a disparate impact on employees aged 55 and older. Plaintiffs allege that as a result of this policy, they received lower evaluation scores which resulted in missed career advancements, bonuses, and other employment opportunities. Two Plaintiffs additionally bring individual claims of intentional age discrimination.

         Defendant FCA seeks to compel arbitration. FCA asserts that the Plaintiffs assented to arbitration when they continued to work at FCA after receiving notice of the arbitration policy. In the alternative, FCA moves to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6), and to strike the class allegations for failure to meet Rule 23 prerequisites.

         The parties submitted extensive briefing and the Court heard oral argument on November 8, 2017. For the reasons that follow, the Court will not compel Plaintiffs to arbitrate and will allow Plaintiffs one additional opportunity to amend their complaint to cure jurisdictional and pleading defects.

         I.

         A.

         In 1995, FCA implemented an Employment Dispute Resolution Process (EDRP). (R. 17-3, PID 168.) Under this process, non-union employees had to arbitrate most disputes arising from their employment. (R. 17-3, PID 170-76.) Shortly before implementing the EDRP, FCA sent nonunion employees a letter and brochure informing them of the new policy. (R. 17-3, PID 177-79.)

         The four named Plaintiffs are long-term employees of FCA. (R. 4, PID 22-23.) They were all hired before 1995. (R. 4.)

         Plaintiff William Winfrey, age 61, was hired around August 1984 and remains employed with FCA. (R. 4, PID 23.) He has a law degree and is classified as a Senior Professional. When he applied for a position with FCA, he signed an employment application stating that he would comply with all of FCA's “orders, rules, and regulations.” (R. 17-2, PID 156.)

         Plaintiff Mark Modlin, age 58, was hired around August 1988. (R. 4, PID 22.) When he applied for a position with Chrysler, he (like Winfrey) signed an employment application stating that he would comply with all of FCA's “orders, rules, and regulations.” (R. 17-2, PID 154.) Modlin remained employed with FCA until January 31, 2017 when he alleges he was wrongfully terminated. (R. 4, PID 22.) Modlin has a Master's Degree in Mechanical Engineering and, at the time of his termination, was classified as a Professional. (R. 4, PID 22.)

         Plaintiff Rodrigo Bravo, age 60, was hired around 1985 and remains employed with FCA as a Senior Manager. (R. 4, PID 22.) There is no information in the record about any agreements that Bravo may have signed or otherwise agreed to as part of his application process or during his employment. (R. 17-2, PID 145.)

         Plaintiff Dan Cerjanec, age 59, was hired around June 1994. (R. 4, PID 22). When he applied for a position with FCA, he signed an employment application stating that he would bring all claims or lawsuits within 180 days of the challenged action and that he would comply with all of Defendant's “orders, rules, and regulations.” (R. 17-2, PID 152.) He remained employed until February 21, 2017, when he alleges he was wrongfully terminated after receiving a low evaluation score. (R. 4, PID 22, 29.) Cerjanec has a Master's Degree in Global Finance and, at the time of his termination, was classified as a Mid-Level Professional. (R. 4, PID 22.)

         Plaintiffs' discrimination claims arise out of the manner in which FCA evaluates job performance. The evaluation process is implemented under the direction, supervision and control of senior leadership, and is used on a company-wide basis. (R. 4, PID 26.)

         While their description of the process in the amended complaint is not entirely clear, it appears that FCA evaluates employees designated from Professional to Senior Leadership in a two-step process. First, an employee's direct supervisor rates each employee's performance as “High, ” “Medium, ” or “Low.” (R. 4, PID 25.) This is known as the Performance and Leadership Management Rating (PLM Rating). (Id.) Second, management provides a numerical score, known as a Performance and Leadership Management Score (PLM Score). (Id.) During this second step, the “calibration process, ” Plaintiffs allege that employees' photos are displayed and/or used by the managers. (R. 4, PID 26.) They also allege that managers have access to employee numbers, which generally reflect how long the employee has worked for FCA. (Id.) Employees are rated on a one- to-nine scale. (Id.)[1] Scores are then adjusted according to a recommended or “forced” distribution curve. (R. 4, PID 27.) An employee who scores below a five can be placed on a Performance Improvement Program or be terminated. (R. 4, PID 26.) The higher the score, the higher the bonuses, additional pay, and chances of advancement opportunities. (R. 4, PID 27.)

         Plaintiffs assert that the Evaluation Process results in employees ages 55 and older receiving lower scores and that, in 2014, 2015, and 2016, Plaintiffs as a class received lower scores than those employees under 55. (R. 4, PID 27-29.)

         Cerjanec says FCA terminated him as a result of his low 2016 score. (R. 4, PID 29.) Modlin's lower score also contributed to him leaving his employment. (R. 4, PID 29.)

         On March 20, 2017, Plaintiffs filed their amended complaint for a class action alleging disparate impact in violation of the Age Discrimination in Employment Act of 1967 (ADEA) and the Elliot-Larsen Civil Rights Act (ELCRA), Mich. Comp. Laws § 37.2101, et seq. (R. 4.) Cerjanec also alleges wrongful termination and Modlin alleges constructive discharge in violation of the ADEA and ELCRA. (R. 4.) Plaintiffs claim that the subjective “calibration” of employees' scores, the use of photographs, the use of employee identification numbers, and the distribution curve give “less favorable and disproportionate[ly] adverse ratings” to salaried, non-union employees aged 55 and older. (R. 4, PID 30.)

         B.

         FCA has moved to preclude litigation in this Court. First, FCA moves to compel arbitration. (R. 17.) FCA contends that Plaintiffs, although hired prior to the implementation of the EDRP, are bound to arbitrate by continuing to work at FCA after being notified of the EDRP's implementation.

         Second, if the Court does not compel arbitration, FCA argues that the complaint should be dismissed on multiple grounds. (R. 17.) With respect to the individual age discrimination claims, FCA says Bravo and Winfrey have failed to assert sufficient factual support, and that Cerjanec and Modlin fail to assert a plausible claim. FCA asks the Court to dismiss Plaintiffs' ADEA class claims because, says FCA, Plaintiffs have not timely exhausted their administrative remedies, ADEA claims cannot be brought under Rule 23, and, alternatively, their proposed class of individuals ages 55 and older is impermissible under the ADEA. Next, FCA asserts that Plaintiffs have failed to properly plead class claims because they have inadequately pled disparate impact and the Rule 23 requirements, and that everyone but Modlin lacks standing. Lastly, FCA asks the Court to dismiss Cerjanec's claims as time barred.[2]

         II.

         The Court begins with FCA's motion to compel arbitration.

         The Federal Arbitration Act (FAA) provides that a written provision in a contract “to settle by arbitration a controversy thereafter arising out of such contract . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. This section of the FAA “embodies the national policy favoring arbitration and places arbitration agreements on equal footing with all other contracts.” Seawright v. Am. Gen. Fin. Servs., Inc., 507 F.3d 967, 972 (6th Cir. 2007) (internal citation and quotation omitted).

         Even so, “[a]rbitration is a ‘matter of contract' and ‘a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.'” Richmond Health Facilities v. Nichols, 811 F.3d 192, 195 (6th Cir. 2016) (quoting AT&T Techs. v. Commc'ns Workers of Am., 475 U.S. 643, 648 (1986)). Therefore, “[b]efore compelling an unwilling party to arbitrate, the court must engage in a limited review to determine whether the dispute is arbitrable; meaning that a valid agreement to arbitrate exists between the parties and that the specific dispute falls within the substantive scope of that agreement.” Javitch v. First Union Sec., Inc., 315 F.3d 619, 624 (6th Cir. 2003).

         Additionally, when, as here, a federal statutory claim is asserted, the court will consider whether Congress intended that claim to be nonarbitrable. See Stout v. J.D. Byrider, 228 F.3d 709, 714 (6th Cir. 2000). It is well-settled that employment-related statutory claims, such as ADEA claims, may validly be subject to an arbitration agreement enforceable under the FAA. Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26 (1991). Thus, the focus of this dispute is whether Plaintiffs agreed to arbitrate their claims.

         The parties first dispute whether a valid agreement to arbitrate exists between them. Because arbitrations agreements are fundamentally contracts, the court reviews the enforceability of an arbitration agreement according to the applicable state law of contract formation. See Seawright v. Am. Gen. Fin. Servs., Inc., 507 F.3d 967, 972 (6th Cir. 2007); Fazio v. Lehman Bros., Inc., 340 F.3d 386, 393 (6th Cir. 2003). Under Michigan law (which the parties agree applies), in order for a contract to be considered valid and enforceable, it must have “(1) parties competent to contract, (2) a proper subject matter, (3) a legal consideration, (4) mutuality of agreement, and (5) mutuality of contract.” Thomas v. Lejas, 468 N.W.2d 58, 60 (Mich. Ct. App. 1991).

         A.

         Cerjanec, Modlin, and Winfrey signed employment applications stating that they agreed to follow all “orders, rules, and regulations.” (R. 17-2, PID 152, 154, 156.) But FCA is not arguing that, by simply agreeing to follow all “orders, policies and regulations” when they were first hired, Cerjanec, Modlin and Winfrey were bound to arbitrate their claims once they received the letter. ...


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