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Boettcher v. SSC Glen Burnie Operating Co., LLC

United States District Court, D. Maryland

August 18, 2016



          William M. Nickerson Senior District Judge.

         Before the Court is Defendants’ Motion to Dismiss or Stay the Case and Compel Arbitration. ECF No. 14. The motion is ripe. Upon review of the pleadings and the applicable case law, the Court determines that no hearing is necessary, Local Rule 105.6, and that Defendants’ motion will be granted.

         On December 10, 2010, Plaintiff Greg Boettcher was hired by Defendant SSC Glen Burnie as the maintenance supervisor for its health and rehabilitation facility located in Glen Burnie, Maryland. SSC Glen Burnie is one of the ten affiliated health and rehabilitation facilities that Defendant Sava Consulting, LCC owns and operates in Maryland. At the commencement of Plaintiff’s employment and as a condition thereof, Plaintiff received and signed three agreements. ECF No. 17-1 ¶ 3. First, Plaintiff signed a one page Employment Dispute Resolution Program (EDRP) Agreement which states:

both the Company and I agree to resolve all claims, controversies, or disputes relating to my application for employment, my employment and/or termination of employment with the Company exclusively through the Company’s Employment Dispute Resolution Program ... I further understand and agree that if I file a lawsuit regarding a dispute arising out of or relating to my application for employment, my employment or the termination of my employment, the Company may use this Agreement in support of its request to the court to dismiss the lawsuit and require me to use the EDR Program instead.

         ECF No. 16-1. Second, Plaintiff received the fifteen-page EDRP Booklet outlining the four-step process for dispute resolution: Open Door, Facilitation, Mediation, and Arbitration. ECF No. 16-2. That booklet reiterates that the company and its employees are bound by the EDRP. Third and finally, Plaintiff received an Employee Handbook. ECF No. 16-4. The Employee Handbook advises:

You should be aware that these policies, except for the policy of at-will employment, may be amended or revoked, and the Company’s actions may vary from the written policy. The contents of this Employee Handbook do not constitute the terms and conditions of a contract of employment. The policies, procedures and guidelines contained in this Employee Handbook supersede all other handbooks in circulation.

Id. at ii. Similarly, the Employee Handbook states “[y]ou should be aware these policies may be changed, amended, added to or deleted, except for the policy of at-will employment.” Id. at 1. The handbook includes a section regarding the EDRP and refers to the EDRP Booklet.

         Plaintiff was terminated on November 25, 2014. On December 1, 2014, SSC Glen Burnie offered Plaintiff a severance package that proposed four weeks’ pay in exchange for a complete release of claims. On or about January 9, 2015, Plaintiff mailed a letter to Tony Oglesby, President and Chief Executive Officer of Sava Consulting, LLC, rejecting the severance package. ECF No. 16-6. In that letter, Plaintiff stated that he “wish[ed] to avail [himself] of the employee dispute resolution (EDR) processes.” Id. Further, he stated that the letter was a formal grievance “that should trigger the internal processes.” Id. Plaintiff did not receive a reply “from any individual or entity associated with or employed by” Defendants. ECF No. 17-1 ¶ 7.

         A little more than a year later, on December 3, 2015, Plaintiff brought this action against SSC Glen Burnie Operating Company, LLC and SavaSeniorCare, LLC.[1] ECF No. 1. According to the Complaint, numerous acts of Plaintiff’s coworkers and supervisors formed the basis of his claims for “Abusive Discharge” (Count I), “Breach of Express and Implied Agreement” (Count II), “Violations of the Overtime Requirement of the FLSA” (Count III), and “Violations of the Wage and Hour and Recordkeeping Requirements under Maryland Law” (Count IV). Id. On April 13, 2016, Defendants filed a motion to compel arbitration. ECF No. 14. Plaintiff opposed Defendants’ motion, ECF No. 16, arguing that 1) under Maryland law, the EDRP agreement was invalid for lack of consideration, and 2) in the alternative, if the EDRP agreement was valid; Defendants waived the right to arbitrate.

         The EDRP Booklet provides that the “application, interpretation and enforcement of the EDR Program is covered by the Federal Arbitration Act.” ECF No. 16-2 at 3. Under the Federal Arbitration Act (FAA), a court must stay “any suit or proceeding” pending arbitration of “any issue referable to arbitration under an agreement in writing for such arbitration.” 9 U.S.C. § 3. Section 2 of the FAA makes agreements to arbitrate “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. When evaluating an arbitration agreement, a court must apply state law principles governing the formation of a contract and the validity of a contract in determining whether an enforceable agreement exists. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995). Under Maryland law, “[t]o be binding and enforceable, contracts ordinarily require consideration.” Cheek v. United Healthcare of Mid-Atlantic, Inc., 835 A.2d 656, 661 (Md. 2003). “A promise becomes consideration for another promise only when it constitutes a binding obligation.” Id. Unlike a binding obligation, “[a]n ‘illusory promise’ appears to be a promise, but it does not actually bind or obligate the promisor to anything.” Id. at 662. Because an illusory promise is not binding on the promisor an illusory promise cannot constitute consideration. Id.

         In this case, the question before the Court is whether retention in the Employee Handbook of the right to amend or revoke the policies in that handbook, one of which was the EDRP, rendered Defendants’[2] promise to arbitrate, found in the EDRP Agreement, illusory. There are two cases applying Maryland law that guide the Court’s consideration of this issue; Cheek v. United Healthcare of Mid-Atlantic, Inc., 835 A.2d 656 (Md. 2003) and Hill v. Peoplesoft USA, Inc., 412 F.3d 540 (4th Cir. 2005). In Cheek, the plaintiff’s offer of employment was conditioned on his acceptance of the defendant’s “Employment Arbitration Policy.” 835 A.2d at 657-658. That policy left the defendant the unilateral “right to alter, amend, modify, or revoke the Policy at its sole and absolute discretion at any time with or without notice.” Id. at 658. The plaintiff accepted a position with the defendant, was subsequently terminated, and filed suit in Maryland state court. Id. at 658-659. Thereafter, the defendant filed a “Motion to Dismiss and/or Compel Arbitration and Stay.” Id. at 659. The trial court granted that motion. Id. The Court of Appeals of Maryland (which granted certiorari prior to any proceedings in the intermediate appellate court) reversed, finding the defendant’s unfettered discretion to change the arbitration agreement rendered its promise to arbitrate illusory, and that the agreement was therefore unenforceable for lack of consideration. Id.

         This case is distinguishable from Cheek, principally because the Defendants’ alleged retention of the right to amend or revoke the EDRP is found in a separate document, the Employee Handbook. This discrepancy is outcome determinative. As stated in Hill, “[i]n examining whether an arbitration agreement is a valid contract, we examine only the language of the arbitration agreement itself.” 412 F.3d at 543, (citing Cheek, 835 A.2d at 664-665). In Hill, the United States Court of Appeals for the Fourth Circuit found that the district court erred by looking outside the arbitration agreement to the Internal Dispute Solution (IDS) program. Hill, 412 F.3d at 543-544. Unlike in the arbitration agreement, the defendant reserved the right to change the IDS program without notice.[3] Id. at 542. The Fourth Circuit concluded that because the arbitration agreement itself clearly bound both parties to arbitration, it was supported by adequate consideration. Id. at 544.

         The Fourth Circuit summarized the critical distinction between Cheek and Hill:

the reservation of rights in Cheek was contained in the arbitration policy. Looking at the four corners of the arbitration policy in Cheek, the court understandably concluded that the policy contained an illusory promise. In the instant case, by contrast, looking at the four corners of the separate Arbitration Agreement, the agreement contains no such illusory promise. To be sure, it is only when we are asked to look beyond the four corners of the Arbitration Agreement and ...

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