# Brown v. Union Pacific Railroad Company

> District Court, D. Oregon · November 21, 2023

URL: https://www.frixlaw.com/law-library/cases/10396716

## Case

- **Court:** District Court, D. Oregon
- **Decided:** November 21, 2023
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10396716

## How later opinions describe it (automated extraction)

- finding Age Discrimination in Employment Act claim subject to arbitration

## Opinion text

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF OREGON

TERRY BROWN, Case No.: 3:23-cv-00118-AN

Plaintiff,
v.
OPINION AND ORDER
UNION PACIFIC RAILROAD COMPANY, and
PORTLAND TERMINAL RAILROAD
COMPANY,

Defendants.

Plaintiff Terry Brown brings employment discrimination and retaliation claims against
defendants Union Pacific Railroad Company ("Union Pacific") and Portland Terminal Railroad Company
("PTRC") (collectively, "defendants"), generally alleging racial discrimination and retaliation. Defendant
Union Pacific filed this Motion to Compel Arbitration, ECF [22], pursuant to Federal Rules of Civil
Procedure 12(b)(1) and 12(b)(3). Defendant PTRC filed a Motion for Joinder, ECF [33], in Union Pacific's
motion. After reviewing the parties' pleadings, the Court finds that oral argument will not help resolve this
matter. Local R. 7-1(d). For the reasons set forth below, Union Pacific's motion is GRANTED, and PTRC's
motion is DENIED.
LEGAL STANDARD
In all contracts involving interstate commerce, the Federal Arbitration Act ("FAA")
specifies that "written agreements to arbitrate controversies arising out of an existing contract 'shall be valid,
irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any
contract.'" Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985) (quoting 9 U.S.C. § 2). The FAA
"leaves no place for the exercise of discretion by a district court, but instead mandates that district courts
shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been
signed." Id. (emphasis in original) (citing 9 U.S.C. §§ 3-4). The district court must limit itself "to
determining (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement
encompasses the dispute at issue." Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th
Cir. 2000).
Under the FAA, "any doubts concerning the scope of arbitrable issues should be resolved
in favor of arbitration." Moses H. Cone Mem’l Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24-25 (1983).
But the "liberal federal policy regarding the scope of arbitrable issues is inapposite" to the question of
whether a party assented to the arbitration agreement. Comer v. Micor, Inc., 436 F.3d 1098, 1104 n.11 (9th
Cir. 2006). The existence of a valid arbitration agreement remains "a matter of contract and a party cannot
be required to submit to arbitration any dispute which he has not agreed so to submit." AT & T Techs., Inc.
v. Commc’ns Workers of Am., 475 U.S. 643, 648 (1986) (internal quotation marks omitted). Because
arbitration is "a matter of contract," the FAA "places arbitration agreements on an equal footing with other
contracts and requires courts to enforce them according to their terms." Rent-A-Ctr., W., Inc. v. Jackson,
561 U.S. 63, 67 (2010) (citation omitted).
A court must decide "the threshold issue of the existence of an agreement to arbitrate."
Three Valleys Mun. Water Dist. v. E.F. Hutton & Co., 925 F.2d 1136, 1140-41 (9th Cir. 1991) (emphasis
in original). "[P]arties may delegate threshold arbitrability questions to the arbitrator, so long as the parties'
agreement does so by 'clear and unmistakable' evidence," but "before referring a dispute to an arbitrator,
the court determines whether a valid arbitration agreement exists." Henry Schein, Inc. v. Archer & White
Sales, Inc., 139 S. Ct. 524, 530 (2019) (quoting First Options of Chicago, Inc v. Kaplan, 514 U.S. 938, 944
(1995)). In deciding whether an agreement to arbitrate exists, a court should apply a summary judgment-
style standard, meaning "[o]nly when there is no genuine issue of fact concerning the formation of the
agreement should the court decide as a matter of law" that an agreement to arbitrate exists. Three Valleys,
925 F.2d at 1141 (quoting Par-Knit Mills, Inc. v. Stockbridge Fabrics Co., 636 F.2d 51, 54 (3d Cir. 1980)).
A court must give the party opposing a motion to compel arbitration "the benefit of all reasonable doubts
and inferences that may arise." Id. The party seeking to compel arbitration bears "the burden of proving
the existence of an agreement to arbitrate by a preponderance of the evidence." Knutson v. Sirius XM Radio
Inc., 771 F.3d 559, 565 (9th Cir. 2014). When "the making of the arbitration agreement" is at issue, "the
court shall proceed summarily to the trial thereof." 9 U.S.C. § 4. "The court shall hear and determine such
issue" if the party alleged to be in violation of the agreement does not demand a jury trial. Id.
BACKGROUND
Union Pacific is a Delaware corporation and railroad in interstate commerce. First
Amended Compl., ECF [21], ¶ 4. PTRC is a corporation and railroad in interstate commerce incorporated
in the state of Oregon, doing business as a railroad in interstate commerce in Portland, Oregon. Id. ¶ 5.
PTRC is owned by Union Pacific and Burlington Northern Santa Fe Railway Company. Id.
Plaintiff was employed by Union Pacific from 2004 to 2019 and was employed by Union
Pacific and PTRC from 2019 to 2021. Id. ¶ 6. From 2013 to 2021, plaintiff received various stock awards.
These stock awards were made pursuant to the Union Pacific Corporation 2013 Stock Incentive Plan ("the
Plan"), which contains Standard Terms and Conditions. Decl. of Trevor Kingston in Supp. of Union
Pacific's Mot. to Compel Arbitration ("Kingston Decl."), ECF [23], Ex. A, B, at 2-3. The Plan states that
by electronically accepting the Retentions Shares Agreement and Standard Terms and Conditions, plaintiff
acknowledged and agreed to an arbitration clause contained in the Plan.
In relevant part, plaintiff acknowledged and agreed to the following arbitration clause in
Section 14 of the Plan:
"You and the Company each agree that any controversy claim, or dispute arising
out of or relating to these Standard Terms and Conditions or arising out of or relating to
your employment relationship with the Company or any of its affiliates, the termination of
such relationship, or your conduct following the termination of such relationship, shall be
resolved by binding arbitration before a neutral arbitrator on an individual basis only, and
not in any form of class, collective, or private attorney general representative proceeding.
By way of example only, claims subject to this agreement to arbitrate include claims
litigated under federal, state and local statutory or common law, such as the Family Medical
Leave Act, the Age Discrimination in Employment Act of 1967, Older Workers Benefit
Protection Act of 1990, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of
1990, the Americans with Disabilities Act, the Federal Employers Liability Act, the Federal
Railway Safety Act, the Worker Adjustment and Retraining Notification Act, the Genetic
Information Nondiscrimination Act, the law of contract and the law of tort. You and the
Company each agree that such claims may be brought in an appropriate administrative
forum, but at the point at which you or the Company seek a judicial forum to resolve the
matter, this agreement for binding arbitration becomes effective, and you and the Company
each hereby knowingly and voluntarily waive any right to have any such dispute tried and
adjudicated by a judge or jury.
"The parties will submit the dispute, within 30 business days following service of
notice of such dispute by one party on the other, to the American Arbitration Association
(AAA) for prompt resolution in Salt Lake City, Utah, under its rules for employment
disputes. There shall be a single arbitrator, chosen in accordance with such rules, who at
such time shall be on AAA’s Judicial Panel. The decision of the arbitrator will be final
and binding upon the parties, and judgment may be entered thereon in accordance with
applicable law in any court having jurisdiction. The arbitrator shall have the authority to
make an award of monetary damages and interest thereon. The arbitrator shall have no
authority to award, and the parties hereby waive any right to seek or receive, specific
performance or an injunction, punitive or exemplary damages. The arbitrator will have no
authority to order a modification or amendment of these Standard Terms and Conditions.
The arbitrator shall have the authority to award costs of arbitration, including reasonable
attorney's fees, to the prevailing party, but in the absence of such award the parties shall
bear their own attorney and filing fees, unless otherwise agreed upon mutually by the
parties or required by law. The Company shall bear the cost of the arbitrator's fees.

"Notwithstanding the foregoing, the Company may seek injunctive relief to
enforce any one or more of the employee covenants set forth in Sections 5, 6, 7, 8, 9, 10,
11 or 131 of these Terms and Conditions, in a court of competent jurisdiction as set forth
in Section 16 below."

Id. Ex. B, at 7. Further, the Plan's Standard Terms and Conditions also contain a Severability clause:

"If any provision of these Standard Terms and Conditions is, becomes, or is
deemed to be invalid, illegal, or unenforceable in any jurisdiction, such provision shall be
construed or deemed amended or limited in scope to conform to applicable laws or, in the
discretion of the Company, it shall be stricken and the remainder of these Standard Terms
and Conditions shall remain in force and effect."

Id. at 8.

Union Pacific filed the present motion on June 2, 2023, requesting that the Court compel
plaintiff to arbitrate his claims and dismiss the case without prejudice. On July 13, 2023, PTRC filed a
Notice of Joinder in Union Pacific's Motion to Compel, which this Court construes as a Motion for Joinder,
arguing that it may enforce the arbitration provision either as an "affiliate," a third-party beneficiary, or a
nonsignatory under principles of contract law.
DISCUSSION
The arbitration clause satisfies the first two requirements for the Court to compel
enforcement of its terms. First, the parties clearly agreed to arbitrate. Each year, from 2013 to 2021,

1 Sections 5, 6, 7, 8, 9, 10, 11 or 13 concern confidentiality, trade secrets, non-solicitation, and non-competition.
Kingston Decl., Ex. B., at3-5, 6-7.
plaintiff signed the Standard Terms and Conditions, which states that by electronically accepting the
Retentions Shares Agreement and Standard Terms and Conditions, plaintiff acknowledges and agrees to an
arbitration clause. Second, the arbitration clause covers the claims that make up this dispute, as it provides
for "any controversy, claim, or dispute arising out of or relating . . . to [plaintiff's] employment relationship
with [Union Pacific]." Id. at 7. Thus, the Court must compel enforcement of the arbitration agreement
according to its terms, unless the agreement may be invalidated according to a traditional contract defense.
AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011).
A. Unconscionability
Plaintiff argues that the arbitration clause is unconscionable, and therefore invalid. The
party opposing arbitration bears the burden of proving unconscionability. Poublon v. C.H. Robinson Co.,
846 F.3d 1251, 1260 (9th Cir. 2017). Federal courts apply "ordinary state-law principles that govern the
formation of contracts" to determine whether the parties agreed to arbitrate. First Options, 514 U.S. at 944.
The parties agree that Utah law applies to the contract here. See Union Pacific's Mot. to Compel Arbitration
("Def.'s Mot.), ECF [22], at 7; Pl.'s Opp. to Def.'s Mot. ("Pl.'s Opp."), ECF [32], at 14.
The unconscionability analysis involves two parts: (1) substantive unconscionability; and
(2) procedural unconscionability. Substantive unconscionability "focuses on the contents of an agreement,
examining the relative fairness of the obligations assumed." Ryan v. Dan's Food Stores, Inc., 972 P.2d 395,
402 (Utah 1998) (internal quotation marks omitted). Procedural unconscionability "focuses on the
negotiation of the contract and the circumstances of the parties." Id. at 403 (citation omitted). Substantive
unconscionability alone may support a finding of unconscionability; however, procedural unconscionability
without any substantive imbalance will rarely render a contract unconscionable. Sosa v. Paulos, 924 P.2d
357, 361 (Utah 1996). In this case, the Court focuses on substantive unconscionability because its absence
is dispositive.2

2 While the Court does not address plaintiff's procedural unconscionability argument, it similarly fails. Plaintiff has
failed to present evidence that the negotiation of the contract and the circumstances of the parties oppressed or unfairly
surprised plaintiff. Rather, the evidence shows that plaintiff, over a seven-year period, continued to sign the agreement
and receive equity grants, which was conditioned on an arbitration agreement. Thus, plaintiff cannot succeed on
1. Substantive Unconscionability
To be substantively unconscionable under Utah law, a contractual term must be more than
"unreasonable or more advantageous to one party." Ryan, 972 P.2d at 402. The terms of a contract must
be "so one-sided as to oppress or unfairly surprise an innocent party," or "an overall imbalance in the
obligations and rights imposed by the bargain" must exist. Sosa, 924 P.2d at 361 (cleaned up).
Plaintiff claims that the arbitration clause's unilateral litigation carve-out, bilateral fee-
shifting provision, and prohibition on punitive damages and injunctive relief make it "so one-sided" that it
oppresses plaintiff and creates an "overall imbalance" between the parties. Pl.'s Opp. 18.
a. Unilateral Carve-Out
Plaintiff argues that the arbitration clause's unilateral litigation carve-out, which requires
plaintiff to arbitrate any cause of action but permits Union Pacific to litigate an array of claims, renders the
clause substantively unconscionable. Namely, the arbitration clause requires plaintiff to arbitrate:
"any controversy, claim, or dispute arising out of or relating to these Standard Terms and
conditions or arising out of or relating to your employment relationship with the Company
or any of its affiliates, the termination of such relationship, or your conduct following the
termination of such relationship."

Kingston Decl., ¶ 4, Ex. B, at 7 (emphasis added). The clause allows Union Pacific, on the other hand, to
"seek injunctive relief to enforce any one or more of the employee covenants set forth in Sections 5, 6, 7,
8, 9, 10, 11, or 13 of these Terms and Conditions, in a court of competent jurisdiction." Id. (emphasis
added). In particular, Union Pacific can protect confidential information (Sections 5-7) and trade secrets
(Sections 5-7), preclude plaintiff from working for Union Pacific competitors (Sections 8 and 11), or restrict
solicitation of Union Pacific customers (Section 9) or employees (Section 10) with an injunction, while,
under the clause, plaintiff cannot.
Plaintiff points to several cases declining to enforce arbitration clauses with unilateral
litigation carve-outs. In Owner-Operator Independent Drivers Association v. C.R. England, Inc., the
District Court of Utah observed that the employment contracts at issue "allow C.R. England to . . . bring

procedural unconscionability.
any legal actions it deems necessary regarding its claimed property" through litigation while "purport[ing]
to bind the drivers to submit any and all disputes to an expensive arbitration proceeding," rendering the
contract "so overwhelmingly favorable to C.R. England that it is effective only against the drivers." 325
F. Supp. 2d 1252, 1264-65 (D. Utah 2004) (emphasis in original).
Plaintiff also distinguishes Love v. Overstock.com, Inc., No. 2:22-cv-00118-DBB-CMR,
2022 WL 3345730 (D. Utah Aug. 12, 2022). There, arbitration was compelled despite a unilateral litigation
carve-out. The District Court of Utah held that the "carve-out does not rise to the level of substantive
unconscionability recognized in this circuit" because (1) "[t]he carve-out does not target the claims that
Love is most likely to need"; (2) the plaintiff could seek injunctive relief through the arbitrator; (3) "certain
types of unilateral carve-outs are common business practice"; and (4) the plaintiff alleged no claims that
she could not pursue through arbitration as opposed to courts. Id. at *6.
Plaintiff contends that Love should be disregarded because the court cited with approval a
case that suggests the Overstock.com carve-out is unconscionable, yet reached the opposite conclusion after
confusing the plaintiff, Love, for the defendant, Overstock.com. The Love court observed that "the carve-
out does not target the claims that Love is most likely to need,", at *6, but cited a District of New Mexico
case stating that an arbitration agreement is unconscionable if it exempts from arbitration "those judicial
remedies that the drafting party with superior bargaining power is likely to need." Love, 2022 WL 3345730,
at *6 n.72 (citing Evangelical Lutheran Good Samaritan Soc'y v. Moreno, 277 F. Supp. 3d 1191, 1236
(D.N.M. 2017)). The court's invocation of Evangelical Lutheran reveals its concern with whether the carve-
out disproportionately benefited the drafting party—Overstock.com, not Love. In plaintiff's view, the Love
carve-out did exactly what the Evangelical Lutheran court forbade—exempted from arbitration precisely
those claims that Overstock.com, the more powerful party that drafted the arbitration clause, would most
want to pursue against Love.
The Court agrees. The Love court, indeed, cited Evangelical Lutheran for the conclusion
that Overstock.com's "carve-out does not target the claims that Love is most likely to need." See Love,
2022 WL 3345730, at *6 n.72 (citing Evangelical Lutheran, 277 F. Supp. 3d at 1236 ("[A]n arbitration
agreement is substantively unconscionable if it contains a unilateral carve-out that explicitly exempts from
mandatory arbitration those judicial remedies that the drafting party with superior bargaining power is
likely to need." (Emphasis added))).
In Evangelical Lutheran, the court noted, in contrast to the above parenthetical, that "an
arbitration agreement that contains a bilateral carve-out that explicitly excludes from mandatory arbitration
a certain set of claims is not substantively unconscionable, even if the party with superior bargaining power
is more likely to assert the excluded claims in a judicial forum." Evangelical Lutheran, 277 F. Supp. 3d at
1236-37 (citing Dalton v. Santander Consumer USA, Inc., 385 P.3d 619, 624 (N.M. 2016) (holding that
arbitration agreement between lender and borrower that included bilateral exception for claims less than
$10,000 was not substantially unconscionable, "even if one party is substantially more likely to bring small
claims actions")). Ultimately, the Evangelical Lutheran court held that the arbitration agreement at issue
did not "rise to the level of substantive unconscionability, because it broadly covers 'any legal controversy,
dispute or claim of any kind arising out of or related to this Admission agreement', which would capture
claims equally by both parties." Id. at 1237.
Additionally, the Love court distinguished Patterson v. Nine Energy Serv., LLC, 330 F.
Supp. 3d 1280 (D.N.M. 2018), a case also from the District of New Mexico. In Patterson, the court
recognized that "[i]f an arbitration agreement exempts from arbitration claims that the stronger party will
likely bring, but mandates arbitration for claims that the weaker party will likely bring, then the arbitration
agreement is substantively unconscionable." Id. at 1310 (citations omitted). The court found that the
arbitration agreement at issue explicitly exempted from arbitration claims that only the stronger party, the
defendant, would bring, i.e., moving for injunctive relief to protect the defendant's trade secrets.3 Id.
The Love court, however, found that unlike Patterson, Overstock.com's carve-out applied
to only four provisions: confidential information, inventions, returning company documents, and

3 The arbitration agreement in Patterson allowed the defendant to seek injunctive relief to enforce confidentiality and
protection of trade secrets and other non-public information and enforce non-competition and non-solicitation
provisions. Patterson, 330 F. Supp. 3d at 1310.
solicitation of employees. Love, 2022 WL 3345730, at *6. Further, the arbitration agreement in Love,
again unlike Patterson, allowed the plaintiff to seek injunctive relief through the arbitrator. Id.
The cases cited and the reasoning provided by the Love court, make clear that its holding
is flawed.4 The Love court should have found that Overstock.com's carve-out targeted the claims that the
defendant was most likely to need, not the plaintiff. The carve-out in Love targeted virtually the same
claims as Patterson. The most notable difference is the plaintiff's access to injunctive relief, unlike the
plaintiff in Patterson. The Love court likely could have reached the same conclusion under that fact alone,
because the injunctive relief provision did not create "an overall imbalance in the obligations and rights
imposed by the bargain." Id.
In the present case, the arbitration agreement is nearly identical to the agreement in
Patterson. Union Pacific can seek injunctive relief to protect confidential information and trade secrets,
preclude plaintiff from working for Union Pacific's competitors, or to restrict solicitation of Union Pacific's
customers or employees, while, under the clause, plaintiff cannot. Thus, the Court finds that the unilateral
carve-out is substantively unconscionable.
b. Bilateral Fee-Shifting Provision
Plaintiff contends that the arbitration clause features another unconscionable provision: a
bilateral fee-shifting requirement. The challenged portion of the clause states:
"the arbitrator shall have the authority to award costs of arbitration, including reasonable
attorney's fees, to the prevailing party, but in the absence of such award the parties shall
bear their own attorney and filing fees, unless otherwise agreed upon mutually by parties
or required by law."

Kingston Decl., ¶ 4, Ex. B, at 7 (emphasis added).
Plaintiff makes two separate arguments: (1) that a plaintiff would never have to pay
attorney's fees in court unless the suit was "vexatious, frivolous, or brought to harass or embarrass"; and
(2) the provision violates plaintiff's right to statutory remedies.

4 The Court finds that the holding in Teske v. Paparazzi, LLC, No. 4:22-cv-00035-DN-PK, 2023 WL 2760648 (D.
Utah Apr. 3, 2023) similarly flawed.
As for plaintiff's first argument, a plaintiff is never guaranteed, unless by statute or
constitutionally, the right to attorney's fees or the right to not pay attorney's fees. The fact that arbitration
operates different than litigation is not enough to support substantive unconscionability. Indeed, in Green
Tree Financial Corporation-Alabama v. Randolph, the United States Supreme Court, in consideration of
an arbitration agreement, noted that "the existence of large arbitration costs could preclude a litigate
. . . from effectively vindicating [a plaintiff's] federal statutory rights in the arbitral forum." 531 U.S. 79,
90 (2000). However, "the 'risk' that [a plaintiff] will be saddled with prohibitive costs is too speculative to
justify the invalidation of an arbitration agreement." Id. at 91. Similarly, the first situation is too speculative
to justify the invalidation of an arbitration clause.
As for plaintiff's second argument, bilateral fee-shifting provisions are substantively
unconscionable when those agreements operate as a "prospective waiver of a party's right to pursue
statutory remedies." Am. Exp. Co. v. Italian Colors Rest., 570 U.S. 228, 236 (2013) (emphasis in original).
However, plaintiff's argument is defeated by the "or required by law" language. The arbitration agreement
guarantees remedies required by law, including statutory remedies. Accordingly, the Court finds that the
provision is not substantively unconscionable.
c. Punitive Damage and Injunctive Relief Prohibition
Finally, plaintiff argues that the arbitration clause includes the kind of sharp limitation on
remedies that courts routinely deem unconscionable. The clause allows the arbitrator to award monetary
damages plus interests, but then states, "The arbitrator shall have no authority to award, and the parties
hereby waive any right to seek or receive, specific performance, or an injunction, punitive or exemplary
damages." Kingston Decl., ¶ 4, Ex. B, at 7.
While courts applying Utah law have not yet addressed the conscionability of restrictions
on punitive damages and injunctive relief, plaintiff's argument has merit. A party who agrees to arbitrate
their statutory claims remains entitled to "the substantive rights afforded by the statute." Velez v. Robert J.
Derby & Assocs., PC, 343 P.3d 324, 327 (Utah Ct. App. 2015). Restricting plaintiff from pursuing punitive
damages and injunctive relief prevents him from vindicating statutory rights. Thus, the Court finds that
this prohibition is substantively unconscionable.
2. Severability
While the Court finds the unilateral carve-out and prohibition on punitive damages and
injunctive relief substantively unconscionable, those provisions can be severed from the rest of the
arbitration clause. "In Utah, contract provisions are severable if the parties intended severance at the time
they entered into the contract and if the primary purpose of the contract could still be accomplished
following severance." Sosa, 924 P.2d at 363 (citing Mgmt. Servs. Corp. v. Dev. Assocs., 617 P.2d 406, 408
(Utah 1980)).
Here, the Court finds that plaintiff, over the course of seven years, agreed to the following
severability provision:
"If any provision of these Standard Terms and Conditions is, becomes, or is
deemed to be invalid, illegal, or unenforceable in any jurisdiction, such provision shall be
construed or deemed amended or limited in scope to conform to applicable laws or, in the
discretion of the Company, it shall be stricken and the remainder of these Standard Terms
and Conditions shall remain in force and effect."

Kingston Decl., Ex. B, at 8. Further, the Court finds that severance of the unilateral carve-out and
prohibition on punitive damages and injunctive relief portions of the arbitration provision will not affect
plaintiff's substantive rights and will still accomplish the primary purpose of the provision—to arbitrate all
disputes. Accordingly, the Court severs the unilateral carve-out and the prohibition on punitive damages
and injunctive relief portions of the arbitration provision.
B. Federal and State Public Policies Against Employment Discrimination
Finally, plaintiff argues that, in addition to its substantive and procedural
unconscionability, the arbitration clause is unenforceable because it undermines public policy under both
Utah and Oregon law. Plaintiff points to Title VII, Section 1981, and Oregon Revised Statute ("ORS") §
569A.030(1), which each embody strong policies against employment discrimination. In turn, plaintiff
argues that the public's substantial interest in the enforcement of these policies requires that his claims be
resolved in an open forum where the integrity of the proceedings can be monitored and tested.
The FAA was enacted "to reverse the longstanding judicial hostility to arbitration
agreements." Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24 (1991). The United States Supreme
Court has concluded that the FAA demonstrates a "liberal federal policy favoring arbitration agreements."
Id. at 25 (citing Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)). Oregon
and Utah likewise favor arbitration. See Mariposa Express, Inc. v. United Shipping Sols., LLC, 295 P.3d
1173, 1177 (Utah 2013) ("Utah courts have consistently recognized Utah's policy favoring arbitration.");
Livingston v. Metro. Pediatrics, LLC, 234 Or. App. 137, 147, 227 P.3d 796 (2010) ("Oregon, like the federal
courts, recognizes a presumption in favor of arbitrability.").
Statutory claims, as well as common law claims, may be arbitrated. See Gilmer, 500 U.S.
at 24 (finding Age Discrimination in Employment Act claim subject to arbitration). Employers may require
employees to sign arbitration agreements for Title VII claims as a condition of employment, provided that
they comply with traditional principles of contract law. E.E.O.C. v. Luce, Forward, Hamilton & Scripps,
345 F.3d 742, 750 (9th Cir. 2003).
Plaintiff relies on caselaw that identifies employment discrimination as a matter of
substantial public concern. However, plaintiff has not, and cannot, identify caselaw denying arbitration
solely based on federal and state public policies against employment discrimination. Rather, arbitration
continues to be a proper forum to resolve employment discrimination claims. Thus, public policy concerns
do not render the arbitration provision unenforceable.
In sum, Union Pacific may enforce the arbitration agreement, with the exception of the
unilateral carve-out and prohibition on punitive damages and injunctive relief portions.
C. Parties to Arbitration
Having found that the arbitration provision is enforceable by Union Pacific, with the noted
limitations, the Court now turns to PTRC's Motion for Joinder. PTRC advances three separate arguments
for why it may also compel arbitration under the Standard Terms and Conditions: (1) It is an "affiliate"; (2)
it is a third-party beneficiary; or (3) it is a nonsignatory under principles of contract law. See PTRC's Reply
to Pl.'s Opp. to PTRC's Mot. for Joinder ("PTRC's Reply"), ECF [37].
1. Affiliate
First, PTRC argues that it is an intended party to the agreement because it is an "affiliate"
of Union Pacific. The arbitration clause, in relevant part, states:
"You and the Company each agree that any controversy, claim, or dispute arising
out of or relating to these Standard Terms and Conditions or arising out of or relating to
your employment relationship with the Company or any of its affiliates, the termination of
such relationship, or your conduct following the termination of such relationship, shall be
resolved by binding arbitration[.]"

Kingston Decl., Ex. B, at 7. PTRC relies on the phrase "arising out of or relating to your employment
relationship with the Company or any of its affiliates…" PTRC's Reply 3 (emphasis added). Plaintiff,
however, argues that the phrase "purports to show that Brown and the Company agree to arbitrate claims
against each other." Pl.'s Opp. to PTRC's Mot. for Joinder ("Pl.'s Opp. to Joinder"), ECF [35], at 7
(emphasis in original). The Court agrees with plaintiff. The plain language of the arbitration clause shows
that only plaintiff and the Company agreed to arbitrate claims arising out of plaintiff's employment
relationship with the Company, including claims that arise out of plaintiff's relationship with the Company's
affiliates. That is, although the scope of the arbitration clause may include claims that arose from plaintiff's
employment relationship with a Company affiliate, the only parties bound to arbitration by the clause are
the Company and plaintiff. Thus, PTRC must show that it falls under the definition of "the Company" to
compel arbitration under this reasoning.
The Standard Terms and Conditions provides that "any reference to the Company (as
defined below) shall include a reference to any Subsidiary." Id. at Ex. B, at 1. PTRC has failed to show,
or even argue, that it is a "subsidiary" of Union Pacific. Even so, it is undisputed that PTRC is an Oregon
corporation jointly owned by Union Pacific and Burlington Northern Santa Fe Railway Company. First
Amended Compl. ¶ 5. Although PTRC may be an "affiliate" of Union Pacific, it is not a subsidiary. See
Affiliate and Subsidiary Corporation Definition, Black's Law Dictionary, (11th ed. 2019), available at
Westlaw (affiliate refers to a "corporation that is related to another corporation by shareholdings or other
means of control," and subsidiary refers to a "corporation in which a parent corporation has a controlling
share"). Thus, PTRC's motion fails under this theory.
2. Third-Party Beneficiary
Next, PTRC argues that, in the alternative, it is an intended third-party beneficiary of the
contract. The Utah Supreme Court has defined third-party beneficiaries to a contract as "those 'recognized
as having enforceable rights created in them by a contract to which they are not parties and for which they
give no consideration.'" Bybee v. Abdulla, 189 P.3d 40, 49 (Utah 2008) (quoting Rio Algom Corp. v. Jimco,
Ltd., 618 P.2d 497, 506 (Utah 1980)). To determine whether a party has third-party beneficiary status, Utah
courts first look to the written contract, Wagner v. Clifton, 62 P.3d 440, 442 (Utah 2002), and find such
status only if "the parties to the contract clearly express an intention 'to confer a separate and distinct benefit'
on the third party," Bybee, 189 P.3d at 40 (quoting Rio, 618 P.2d at 506). Moreover, “[i]t is not enough
that the parties to the contract know, expect or even intend that others will benefit from the
[contract] . . . . The contract must be undertaken for the plaintiff's direct benefit and the contract itself must
affirmatively make this intention clear." Lilley v. JP Morgan Chase, 317 P.3d 470, 472 (Utah Ct. App.
2013) (alterations in original) (internal quotation marks omitted).
PTRC has failed to show, or even explain, how it is an intended third-party beneficiary.
The terms of the contract are clear: Plaintiff entered into the contract for participation in the Union Pacific
Corporation Stock Incentive Plan for Union Pacific executives. The contract has nothing to do with PTRC
or plaintiff's employment relationship with PTRC, and thus it cannot reasonably be construed as a contract
undertaken for PTRC's benefit. Indeed, the contract concerns stock awards for plaintiff, indicating that it
was undertaken for his benefit, not PTRC's. Accordingly, PTRC cannot compel arbitration as an intended
third-party beneficiary.
3. Nonsignatory
"Generally, parties who have not assented to an arbitration agreement cannot be compelled
to arbitrate under its terms." Namisnak v. Uber Techs., Inc., 971 F.3d 1088, 1094 (9th Cir. 2020). However,
"[t]he United States Supreme Court has held that a litigant who is not a party to an arbitration agreement
may invoke arbitration under the FAA if the relevant state contract law allows the litigant to enforce the
agreement." Kramer v. Toyota Motor Corp., 705 F.3d 1122, 1128 (9th Cir. 2013) (citing Arthur Andersen
LLP v. Carlisle, 556 U.S. 624, 632 (2009)). Under Utah law, in "certain circumstances, a nonsignatory to
an arbitration agreement can enforce or be bound by an agreement between other parties." Ellsworth v. Am.
Arb. Ass'n, 148 P.3d 983, 989 (Utah 2006). "[F]ive theories for binding a nonsignatory to an arbitration
agreement have been recognized: (1) incorporation by references; (2) assumption; (3) agency; (4) veil-
piercing/alter-ego; and (5) estoppel." Id. at 989 n.11.
Here, PTRC argues that it is entitled to compel arbitration because an "arbitration
agreement can be enforced by certain non-signatories under principles of agency and contract law." PTRC's
Reply 4. However, PTRC's argument seems to be aimed at estoppel theory rather than agency theory.
PTRC cites to Franklin v. Community Regional Medical Center, 998 F.3d 867 (9th Cir. 2021), for the
proposition that it may compel arbitration because plaintiff's "claims against PTRC are 'intimately founded
[in] and intertwined with' his claims against [Union Pacific]." PTRC's Reply 4-5. Plaintiff, however, argues
that Franklin stands for the proposition that a nonsignatory defendant can compel arbitration only where
the "plaintiff's claims [are] 'intimately founded in and intertwined with' the arbitration contract" itself. Pl.'s
Sur-Reply in Opp. to PTRC's Mot. for Joinder, ECF [39], at 6 (emphasis in original) (citing Franklin, 998
F.3d at 873). The Court agrees with plaintiff.
The doctrine of estoppel in Franklin and other jurisdictions, including Utah, assesses
whether the plaintiff's claims are "intimately founded in and intertwined with the underlying contract
obligations." See Franklin, 998 F.3d at 871; Reeves v. Enter. Prods. Partners, 17 F.4th 1008, 1015 (10th
Cir. 2021) (compelling arbitration where plaintiff's claims arose out of employment agreement that included
arbitration provision); I-Link Inc. v. Red Cube Int'l AG, No. 20-5020, 2001 WL 741315, at *5 (D. Utah Feb.
5, 2001) (compelling arbitration because plaintiff's claims were "intertwined with the Cooperation
Agreement" that included arbitration provision). Therefore, plaintiff's claims against PTRC must be
"founded in" or "intertwined with" the arbitration agreement itself, not with his claims against Union
Pacific.
The Court finds that plaintiff's claims are not "founded in" or "intertwined with" the
arbitration agreement, which arises out of a stock option agreement. Indeed, plaintiff's claims solely focus
on wrongful termination and retaliation due to racial discrimination. First Amended Compl. ¶¶ 25-28.
Plaintiff's stock awards have no relationship to his claims. Thus, PTRC cannot compel arbitration under
the Standard Terms and Conditions through estoppel.
CONCLUSION
Accordingly, defendant Union Pacific's Motion to Compel Arbitration, ECF [22], is
GRANTED and defendant PTRC's Motion for Joinder, ECF [33], is DENIED.

IT IS SO ORDERED.

DATED this 21st day of November, 2023.
4) / SA 4
LhMVAconme 6 fA
Adrienne Nelson
United States District Judge

16

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10396716. Public record. Not legal advice.