Free Response in Opposition to Motion - District Court of Arizona - Arizona

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Lynn M. Laney, Jr., Arizona State Bar # 1084 934 W. McDowell Road Phoenix, Arizona 85007-1730 Tel: (602) 254-7600 Fax: (602) 252-7225 Email: [email protected] Attorney for Plaintiff

UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA Kenneth A. Batory, Plaintiff, vs. Sears, Roebuck and Co., a New York C roao,b " h G etnor" opr i da T e r Idos tn a , Defendant. NO. CV 02-2026 PHX-JWS RESPONSE IN OPPOSITION TO DEFENDANT' MOTION S FOR RECONSIDERATION

Pa tf K ne A B t y ( a r" Lynn M. Laney, Jr., his ln f ent . a r, " t y) i i, h o Bo , undersigned attorney of record, responds in opposition to Defendant Sears,

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Roebuck and Co' (" s Sears" Motion for Reconsideration, dkt. # 44, )
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pursuant to Subsequent orders of the Court, dkt. # 45 and # 47.
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1. PERTINENT PRIOR PROCEEDINGS The order that is the subject of Sears' Motion for Reconsideration (" MFR"is the order of Hon. Earl H. Carroll denying Sears' ) Motion for

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Summary Judgment (to compel arbitration) filed on October 12, 2006. Dkt. # 41. Judge Carroll had previously granted that same Motion for Summary Judgment, dkt. # 23 and 24. Batory appealed that Summary judgment to the Ninth Circuit, which reversed and remanded. Dkt # 27. Batory v. Sears, Roebuck and Co., 124 Fed. Appx. 530, 2005 WL 434457 ( 9th Cir. 2005). The Ninth Circuit held that the District Court should determine whether the Sears employee arbitration agreement (called the " DRP"was ) unconscionable under Arizona law, A.R.S. 47-2302 in particular, based upon three of the terms or provisions in the DRP: " remand, then, the district court shall consider On whether the Agreement or DRP are unconscionable because: (1) there exists an " overall imbalance in the obligations and rights imposed by the bargain" that in although Sears is obligated to arbitrate all " Covered Claims" , these Covered Claims consist only of " claims against the Company" the exclusion of claims that Sears may initiate to against its employees, Maxwell, 907 P.2d at 58: see also Armendariz v. Found Health Psychcare Services, Inc., 24 Cal 4th 83, 99 Cal. Rptr 2d 745, 6 P.3d 669 (2000): (2) although Sears " reserves the right to modify or terminate [the] DRP upon sixty (60) days notice," affords no equivalent power to its it employees, see Ingle v. Circuit City Stores, Inc. 328 F.3d 1165, 1179 (9th Cir. 2003). cert. denied, 540 U.S. 1160, 124 S. Ct. 1169, 157 L Ed .2d 1204 (2004); and (3) the fee provision, which requires employees to pay the lesser of $150 or the filing fee if the claim had been filed in court, does not provide for waiver in cases of indigence, see id. at 1177. 124 Fed. Appx. At 533. The Ninth Circuit concluded:

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" Therefore, on the appeal, we REVERSE the district court' s finding that the Agreement and DRP do not constitute an adhesion contract, and REMAND for an evidentiary hearing on unconscionability pursuant to Arizona Revised Statues § 472302." Id. at 534. After the reversal and remand, Judge Carroll directed the parties to file memoranda addressing the three issues on remand, dkt. # 31, 34-37. The Court then conducted an evidentiary hearing on July 8, 2005. (See

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docket entry for July 8, 2005.) Judge Carroll took the matter (summary
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judgment on inconsolability of the DRP) under advisement, and fifteen
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months later issued his well reasoned decision. Dkt # 41.
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2. STRICT STANDARDS FOR MOTION FOR RECONSIDERATION While Untied States District Court for Arizona LR Civ. 7.2(g) allows a party to file a motion for reconsideration, the Court has set a strict standard for such motions which must set forth two factors. In Garber v. Embry-Riddle Aeronautical University, 259 F. Supp. 2d 979, 980 (D. Ariz. 2003), this Court said: " motion for reconsideration must show two things to provide a A valid ground for reconsideration. First, it must demonstrate a credible reason why the court should reconsider it prior decisions. All Hawaii Tours Corp. v. Polynesian Cultural Ctr. 116 F.R.D. 645, 648-49 (D. Haw. 1987), aff' in part, rev' in part on other d d th grounds, 855 F.2d 860, 1988 WL 86203 (9 Cir. 1988). Second, it must set forth facts or law of a strongly convincing nature to induce the court to reverse its prior decision. Id; In re Agri. Research & Tech. Group. 916 F.2d 528, 542 (9th Cir. 1990).

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Motions for reconsideration should not be used to ask the court " rethink what the court had already thought through-rightly or to wrongly" to reiterate arguments previously raised. In re Agric. or Research & Tech. Group, 916 F.2d at 542 (" Motions for reconsideration may properly be denied where the motion fails to state new law or facts" )."

3. SYNOPSIS OF THIS REPSONSE As set forth herein, the Motion for Reconsideration presents nothing new and mis-states the record. It ignores both the " of the case" law rule and the rule against " horizontal appeals" It does not meet the requirements . set forth in Garber, quoted supra.

4. THE MOTION SEEKS A DIRECT REVERSAL OF THE PRIOR DISPOSITIVE RULING OF THIS COURT, CONTRARY TO BOTH THE " LAW OF THE CASE" O T I E A DT ER L A A N T D C RN , N H U E G I S " HORIZONTAL APPEALS" WHEN A CASE IS ASSIGNED TO A NEW JUDGE

As set forth in Section 1 supra, Judge Carroll has already denied Summary judgment (to compel arbitration) after a reversal and remand from the Ninth Circuit, the filing of memoranda by both sides on the issues to be determined on remand, and on evidentiary hearing. Judge Carroll' s dispositive order denying Summary Judgment includes both his findings of fact and conclusions of law.

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First, that order, dkt. # 41, is now the " of the case" should not law and be disturbed. In Kamakan v. City and County of Honolulu, 447 F.3d 1172, 1186 (9th Cir. 2006), the Court recently said: " Under the law of the case doctrine, a court " generally precluded Is from reconsidering an issue previously decided by the same court... in the identical case." United States v. Lummi Indian Inc. v. Selas Corp. of Am., 902 F.2d 703, 715 (9th Cir. 1990). Nonetheless, a trial judge has broad discretion to reconsider her own interlocutory, pre-trial evidentiary rulings, particularly when no jury trial is involved."(EMPHASIS ADDED) Second, Sears is attempting to get a " second bite at the apple" this on already decided dispositive Motion by re-presenting the same Motion to the

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newly assigned District Judge, Hon. John W. Sedwick, since Judge Carroll
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recused himself after denying the Motion for Summary Judgment. Sears
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remedy if they disagree with Judge Carroll'decision is to appeal to the s
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Court of Appeals, rather than trying a " horizontal appeal" with a new judge of the same Court. In U.S. v. Braughton, 520 F.2d 765, 766 (9th Cir. 1975), the Court said:

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" second judge correctly refused to entertain a " The horizontal" appeal from the warrant issued by the first judge"

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In Kern Oil and Refining Co. v. Tenneco Oil Co., 792 F 2.d 1380, 1390 (9th Cir. 1986), the Court said:

" While it is true that district courts do not normally overrule each other after a case is transferred, that rule is prudential, rather than jurisdictional. See, e.g., Wilson v. Ohio River Co., 236 F. Supp 96, 98 (S.D.W. Va. 1964) aff' 375 (4th Cir. 1967). As a d, result, Judge Real had jurisdiction to review Judge Marshall' s order. Nevertheless, Judge Marshall'ruling was entitled to s deference."

5. THE MFR MIS-STATES CERTAIN ISSUES A. the MFR states " Plaintiff also concedes that he initially invoked the arbitration agreement but, later, repudiated that agreement. " MFR, pg. 1, issues 20-2.1 Nowhere in the record does Batory make such a statement or take such a position. To the contrary the District Court granted summary judgment for Batory on that argument, dkt. # 23, and on appeal, the Ninth Circuit affirmed. Batory v. Sears, Roebuck and Co., 124 Fed. Appx. 530, 200 S WL 434457 (9th Cir. 2005). B. No Arizona case has ever held that an adhesion agreement to arbitrate an employees claims but not an employers claims is not unconscionable. This issue has not been squarely decided under Arizona Law, but the Ninth Circuit stated that (1) Arizona courts would apply A.R.S. 47-2302, Arizona'statute prohibiting enforcement of " s unconscionable contracts"and (2) that Broemmer v. Abortion Services of Phoenix, Ltd., , 173 Ariz. 148, 840 P.2d 1013 (1992) (holding that a one-sided, non-

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negotiated, doctor-patient binding arbitration of the patient'claims) was s unconscionable was the legal standard to apply. Id.

6. JUDGE CARROLL CORRECTLY RULED THAT IT WAS UNCONSCIONABLE FOR SEARTS TO REQUIRE CLAIMS BY ITS EMPLOYEES TO BE ARBITRATED WHERE NOT IMPOSING THE SAME BURDEN ON ITSELF FOR ITS CLAIMS AGAINST ITS EMPLOYEES

In his Order, dkt. # 41, Judge Carroll said: " Thus, while Defendant'employees are required to arbitrate s certain claims that they may have against Defendant, Defendant does not have to arbitrate claims it may have against its employees. On July 8, 2005, the Court held a hearing pursuant to Ariz. Rev. Stat. § 47-2302. At that hearing Defendant solicited the testimony of Tammy Lenzy, and attorney that helped draft the DRP. Lenzy testified mostly about the rights that Plaintiff retained under the DRP. Lenzy did not discuss the reason the DRP had been drafted to only cover claims that employees may have against Defendant." Dkt. # 41, pg. 3, lines 15-23 Judge Carroll then concluded that such a one sided " agreement" was unconscionable, citing both A.R.S. 47-2302 and Maxwell v. Fidelity Financial Service, Inc., 184 Ariz. 82, 907 P.2d 51 (1995). Id at pg 4, lines 18. This decision by Judge Carroll was based upon the Ninth Circuit mandate, and followed both an evidentiary hearing and legal briefing by the parties. It was in accord with decisions from other Courts holding that,

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where an employer imposes a binding arbitration procedure to be the sole remedy for claims against the employer, but not the sole remedy for its claim against an employee, such a provision is invalid and unconscionable. Ticknor v. Choice Hotels Intl. Inc., 265 F.3d 931, 940 (9th Cir. 2001) (applying Montana Law). Al-Safin v. Circuit City Stores, Inc., 279 F.3d 889, 893-894 (9th Cir. 2002) (applying California Law). Hull v.Norcom, Inc., 750 F.2d 1547 (5th Cir. 1985) ( applying New York law). Sears cites eight cases that it argues support its positions. MFR. pg. 3, line 19 to pg. 4, line 8. However, only two of those cases involve employer-employee arbitration " agreements"Johnson v. Circuit City , Stores, Inc., 148 F.3d 373, 379 (8th Cir. 1998), cert. den. 530 U.S. 1276 (1999), and Wright v. Circuit City Stores, Inc., 82 F. Supp. 2d 1279, 1284 (N.D. Ala. 2000).

In Johnson, supra, the Plaintiff argued a lack of consideration based upon a lack of mutuality, and did not raise the argument that the arbitration agreement was unconscionable or invalid because the employees claims against the employer were not also subject to arbitrating it'claims against s the employee. More important, both Johnson v. Circuit City Stores, Inc. and Wright v. Circuit City Stores, Inc. Wright v. Circuit City Stores, Inc were decided before the more recent Ninth Circuit decisions holding that same Circuit City arbitration agreement to be unconscionable, Al-Safin supra, and Adams, supra.

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7. SEARS CONFUSES THE SEPARATE ISSUES OF MUTUALITY (AN ELEMENT RQUIRED FOR CONSIDERATION IN CONTRACTS) AND UNCONSCIONABILITY

Sears MFR confuses two separate issues, both of which were addressed by the Ninth Circuit decision: 1. Whether the fact that the employees claims must be arbitrated whereas the employer is free to pursue a judicial remedy makes the arbitration agreement unconscionable, sec. 6 supra; and 2. Whether the arbitration agreement is unenforceable because it lacks mutuality of obligation (for consideration).

These are totally distinct and separate legal issues. See Batory, supra, sec. 2 (heading " lacking in Mutuality" ).

Sears MFR makes the second of these two arguments, but (1) it has already prevailed in that argument in the Ninth Circuit decision, Id, and (2) that second issue was not before Judge Carroll after the remand, while the first issue was. Id. (Note: In ruling for Sears on the second issue (mutuality for the element of consideration), the Ninth Circuit expressly followed the case of Carroll v. Lee which is the principal authority relied upon in the MFR.)

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8. JUDGE CARROLL ALSO CORRECTLY HELD THAT SEARS' UNFETTRED RIGHT TO MODIFY OR CANCEL THE ARBITRATION ARGREEMENT RENDERED IT UNCONSCIONABLE

Judge Carroll decided that: " DRP allows Defendant to modify or terminate the DRP upon The sixty (60) days notice. (Dkt. # 37, ex # 3 at 6). The employees of Defendant do not have the same right." ................................. " DRP'sixty days notice provision is insignificant because The s it does not allow the employee to negotiate any modification or termination. Defendant has effectively take away Plaintiff'ability to s consider and negotiate the terms of his contract. This is further emphasized by the fact that the DRP was a contract of adhesion in the first place. This provision effectively oppresses Plaintiff and creates an " overall imbalance of rights and obligations imposed by the bargain."Maxwell, 907 P.2d at 58. The Court therefore finds that the provision of the DRP permitting Defendant to unilaterally modify or terminate the DRP is substantively unconscionable." Dkt. # 41, pg. 4

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In this ruling, Judge Carroll was following the holding in Ingle v. Circuit City Stores, Inc., 328 F.3d 1165, 1179 (9th Cir. 2003) (citing rulings from other Circuits in footnote 22).

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9. CONCLUSION Based upon the foregoing, Batory respectfully request an order denying Sears MFR. Signed this 13th day of November, 2006 By/s Lynn M. Laney, Jr. Lynn M. Laney, Jr. Attorney for Plaintiff

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ORIGINAL document filed electronically B t nm s o t t Ce 'O f e f yr s i i o h l ks fc o a sn e r i The U.S. District Court, District of Arizona 13th day of November, 2006 and to the following CM/ECF registrants: -ANDA courtesy copy mailed this 13th day of November, 2006 to: J. Mark Ogden R. Shawn Oller Littler Mendelson, P.C. Camelback Esplanade 2425 E. Camelback Rd., Suite 900 Phoenix, Arizona 85016 Attorneys for Defendant -AND-

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A courtesy copy mailed this 13th day of November, 2006 to: Hon. John W. Sedwick U.S. District Court-Phoenix 410 W. Washington St. Phoenix, Arizona 85003 By s/Arlenea Martin

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