When Isaac Payne took a job at the Savannah College of Art and Design (“SCAD”), he signed an acknowledgement agreeing to comply with the school’s staff handbook, including its alternative dispute resolution policy. The arbitration policy provided, among other things, that the non-prevailing party in any arbitration would be required to pay the arbitrator’s fees, but that SCAD would advance those fees at the start of any arbitration, subject to later reimbursement.
Payne later sued SCAD for race discrimination and retaliation, and the school moved to dismiss the case and compel arbitration. The district court granted the motion. The Eleventh Circuit affirmed, rejecting Payne’s claims that the arbitration agreement was unconscionable and that SCAD had waived its right to insist upon arbitration. Payne v. Savannah College of Art & Design, 2023 WL 5617080 (11th Cir. Aug. 31, 2023).
The court’s opinion, written by Judge Branch, reviewed the unconscionability standard under Georgia law, observing that the standard is “hard to satisfy”: “The Supreme Court of Georgia has described an unconscionable contract as “one that no sane man not acting under a delusion would make and that no honest man would take advantage of, one that is abhorrent to good morals and conscience, and one where one of the parties takes a fraudulent advantage of another.” Payne’s primary argument with respect to alleged unconscionability was that the arbitration agreement’s cost-shifting provisions served no purpose other than to dissuade potential claimants from pursuing their rights. He had submitted to the district court declarations about the likely cost of the arbitration and the effect having to shoulder that cost would have on his family. He also argued that Musnick v. King Motor Co. of Fort Lauderdale, 325 F.3d 1255 (11th Cir. 2003), which had upheld a similar cost-shifting provision, had been abrogated by Hall Street Assoc., L.L.C. v. Mattel, Inc., 552 U.S. 576 (2008), which limits the grounds on which a party may challenge an arbitration award.
The court disagreed. The “linchpin” of Musnick’s holding is that a party must demonstrate that it is “likely to bear prohibitive costs (i.e., that [its] costs are not merely speculative)” to succeed on an argument that enforcement of an arbitration agreement would preclude the party from effectively vindicating its statutory rights. That principle was not affected by Hall Street—“post-Hall Street we have explicitly stated that the likely-to-bear-prohibitive-costs prong is still intact such that Musnick remains good law.” Payne failed to meet that standard, the court concluded, because—while he may have shown that there would be arbitration costs—he had not shown that he was likely to bear those costs: “The ‘problem’ for Payne is that he might win. And if he were to prevail, SCAD would be required to pay for the arbitration.” The court also noted that SCAD was required to advance the arbitrator’s fees, so the fees posed no barrier to Payne’s instituting arbitration in the first place. Payne’s arbitration agreement also provided for an optional appeal to a second arbitrator, rendering it even more speculative to assume that Payne would have to bear the arbitrator’s costs at the end of the day.
The court also rejected Payne’s claim that the arbitration agreement’s arbitrator selection provision, which required selection of a federal judge if one were available, and a person with five years’ experience in the relevant area of law, was unconscionable. Payne argued that the provision effectively limited the pool of arbitrators to two white men. “Aside from the fact that Payne’s estimation is questionable,” the court concluded, “he has cited absolutely no authority for his contention that it would be unconscionable for Payne’s arbitration to be conducted by a white arbitrator.” Payne’s arguments that the arbitration agreement was procedurally unconscionable because of alleged indefiniteness (in referring variously to the “vice president for human resources” and the “Vice President of Human Resources,” for example), and/or because some of the agreement’s provisions were non-mutual, also failed.
Payne also argued that SCAD waived its right to insist on arbitration of his claims when it offered to settle a potential claim by a student-athlete and requested the student sign a confidentiality agreement. According to Payne, that cut him off from effective pre-hearing discovery. The court rejected the argument, noting that Payne sought to apply the doctrine of waiver “in a novel manner.” “We have never held that a party waives its right to arbitrate based on its actions taken in a previous legal action—especially when that party did not bring the lawsuit at bar and has repeatedly insisted that arbitration is the proper dispute resolution channel.” Accordingly, the court found no abuse of discretion in the district court’s denial of Payne’s motion for discovery into SCAD’s past arbitrations with employees and former employees.