Quilloin v. Tenet HealthSystem Philadelphia, Inc.

PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

______

No. 11-1393

______

JANICE QUILLOIN, an individual,

on behalf of herself and others similarly situated

v.

TENET HEALTHSYSTEM PHILADELPHIA, INC.,

d/b/a HAHNEMANN UNIVERSITY HOSPITAL;

TENET HEALTHCARE CORPORATION;

TENET HEALTHSYSTEM HAHNEMANN, LLC,

Appellants

______

On Appeal from the United States District Court

for the Eastern District of Pennsylvania

(D.C. No. 2-09-cv-05781)

District Judge: Honorable Anita B. Brody

______

Argued September 21, 2011

Before: FISHER, HARDIMAN and

GREENAWAY, JR., Circuit Judges.

(Filed: March 14, 2012)

James N. Boudreau (Argued)

Christina Tellado-Winston

Greenberg Traurig

2001 Market Street

Suite 2700 Two Commerce Square

Philadelphia, PA 19103

Counsel for Appellants

Gary F. Lynch (Argued)

Carlson Lynch

36 North Jefferson Street

P.O. Box 7635

New Castle, PA 16107

Gerald D. Wells, III

Faruqi & Faruqi

101 Greenwood Avenue, Suite 600

Jenkintown, PA 19046

Counsel for Appellee

______

OPINION OF THE COURT

______

FISHER, Circuit Judge.

2

Tenet Healthcare Corporation, along with two of its

subsidiaries, appeals from the District Court’s denial without

prejudice of its motion to compel arbitration. The central

issue is whether the District Court erred in finding genuine

disputes of material fact that might render the arbitration

agreement unconscionable and unenforceable. Finding no

such disputes, we will reverse.

I.

Plaintiff and Appellee Janice Quilloin (“Quilloin”) is a

registered nurse with an associate’s degree, who began

working at Hahnemann University Hospital in October of

2006. In February 2008, Quilloin resigned to take another

job. Later that year, she reapplied for a position at

Hahnemann, and was rehired in December 2008. She

continued working at Hahnemann until November 2009.

Hahnemann University Hospital is owned by Tenet

HealthSystem Hahnemann, LLC and managed by Tenet

HealthSystem Philadelphia, both subsidiaries of Tenet

Healthcare Corporation, a health care services company with

subsidiaries operating 55 hospitals with over 14,000 beds, as

of December 31, 2008. Tenet Healthcare Corporation, Tenet

HealthSystem Hahnemann, LLC and Tenet HealthSystem

Philadelphia (collectively “Tenet”), are all Defendants and

Appellants in the present action.

On or around the time that Quilloin began her

employment, both on October 9, 2006 and on January 5,

2009, she signed the “Employee Acknowledgment” form,

which acknowledged receipt of the “Fair Treatment Process”

brochure (“FTP”). Quilloin at first claimed that she did not

3

sign a form in October 2006, but only signed in January 2009.

However, when Tenet subsequently produced an “Employee

Acknowledgement” form signed by Janice Quilloin on

October 9, 2006, Quilloin filed a supplemental submission

“‘acknowledging signing that document’ but emphasizing her

‘lack of recall’ of that act.” Quilloin v. Tenet HealthSystem

Philadelphia, Inc., 763 F. Supp. 2d 707, 712 n.4 (E.D. Pa.

2011). Quilloin does not now dispute that she signed the

Employment Acknowledgement or whether she received the

FTP.

Quilloin alleges that she was not informed that she

would have to commit to arbitration in order to be employed

by Tenet. She also alleges that when she was rehired, she did

not remember being previously required to sign the

“Employee Acknowledgement” form, and thus, was not

expecting to sign it a second time.

The “Employee Acknowledgment” forms that Quilloin

signed are only one page long. Although a few words were

altered between 2006 and 2009, the differences are minor and

not material to this case. Following three paragraphs

regarding the employee handbook and standard of conduct,

the 2009 Employee Acknowledgement reads:

“I acknowledge that I have received a copy of

the Tenet Fair Treatment Process brochure. . . .

I hereby voluntarily agree to use the Company’s

Fair Treatment Process and to submit to final

and binding arbitration any and all claims and

disputes except ‘Excluded Issues’ that are

related in any way to my employment or the

4

termination of my employment with Tenet. I

understand that final and binding arbitration

will be the sole and exclusive remedy for any

such claim or dispute against Tenet or its

parent, subsidiary or affiliated companies or

entities, and each of its and/or their employees,

officers, directors or agents, and that, by

agreeing to use arbitration to resolve my

dispute, both the Company and I agree to forego

any right we each may have had to a jury trial

on issues covered by the Fair Treatment

Process. I also agree that such arbitration will

be conducted before an experienced arbitrator

chosen by me and the Company, and will be

conducted under the Federal Arbitration Act

and the procedural rules of the American

Arbitration Association (‘AAA’).

I further acknowledge that in exchange for my

agreement to arbitrate, the Company also agrees

to submit all claims and disputes it may have

with me to final and binding arbitration, and

that the Company further agrees that if I submit

a request for binding arbitration, my maximum

out-of-pocket expenses for the arbitrator and the

administrative costs of the AAA will be an

amount equal to one day’s pay (if I am an

exempt employee) or eight times my hourly rate

of pay (if I am a non-exempt employee), and

that the Company will pay all of the remaining

fees and administrative costs of the arbitrator

5

and the AAA. I further acknowledge that this

mutual agreement to arbitrate may not be

modified or rescinded except by a written

agreement signed by both me and the

Company.”

The FTP brochure outlines the internal grievance

process culminating in arbitration, as well as the parameters

of the arbitration agreement itself. The FTP does not state

that claims regarding the validity of the arbitration agreement

itself must be arbitrated. Under “Application and Coverage”

the brochure states that “[t]he FTP . . . covers all disputes

relating to or arising out of an employee’s employment with

the company or the termination of employment. . . . [except

for] those listed in the ‘Exclusions and Restrictions’

section[.]” Notably, neither party argues that one of the

enumerated exclusions or restrictions is applicable here.

The FTP outlines the steps employees are required to

follow to resolve disputes, and explains approximately how

long Tenet would take to respond to each step in the process:

1. “Submit Dispute to Supervisor[,]” who

will “respond . . . as soon as possible,

usually within seven calendar days from

the date you raised the issue”

2. “Appeal Supervisor’s Decision to

Department Head[,]” who will

“respon[d] . . . as soon as possible,

usually within seven calendar days of the

date the Department Head receives your

6

completed FTP Dispute Resolution

Form”

3. “Appeal Department Head’s Decision to

Administration[,]” which will “respon[d]

. . . as soon as possible, usually within

seven calendar days of the date you

request review under Step 3”

4. “Appeal administration’s decision to FTP

Committee[,]” which will “meet as soon

as possible, usually within 30 days of

your request. . . . [and] promptly . . .

decide the issue(s)”

5. “Final and Binding Arbitration”

A limitations clause states that “[a]ny request for arbitration

under the FTP must be made within one year after the event

giving rise to the dispute. . . . [or], if a longer limitations

period is provided by a statute governing your claim, then

your claim will be subject to the longer limitations period

provided by the statute.”

The FTP also includes provisions for fees and

remedies. In one clause, the FTP states that “[y]ou and the

company will be responsible for the fees and costs of your

own respective legal counsel, if any, and any other expenses

and costs, such as costs associated with witnesses or

obtaining copies of hearing transcripts.” In another provision,

entitled “Authority of Arbitrator,” the FTP states that “[t]he

arbitrator has the authority to award any remedy that would

7

have been available to you had you litigated the dispute in

court under applicable law.” Elsewhere, the FTP states that

“no remedies that otherwise would be available to you or the

company in a court of law will be forfeited by virtue of the

agreement to use and be bound by the FTP.”

On December 4, 2009, Quilloin filed suit in the United

States District Court for the Eastern District of Pennsylvania,

asserting a collective action against Tenet under the Fair

Labor Standards Act of 1938, 29 U.S.C. §§ 201-19, as well as

several state-based class action and common law claims. 1 See

Quilloin, 763 F. Supp. 2d at 711. In its Answer filed on

February 19, 2010, Tenet asserted the existence of an

arbitration agreement as an affirmative defense.

On June 10, 2010, Tenet filed a motion to compel

compliance with the agreement to arbitrate. 2 On July 2, 2010,

Quilloin responded, claiming, among other things, that the

1

The details of this underlying action are not relevant

to the claims we are asked to examine on appeal, which solely

address the denial of a motion to compel arbitration.

2

Technically, Tenet filed a motion to dismiss, or, in

the alternative, to stay proceedings and compel compliance

with the agreement to arbitrate; however, as the District Court

noted, “a stay, rather than a dismissal, is the required course

of action when compelling arbitration.” Quilloin v. Tenet

HealthSystem Philadelphia, Inc., 763 F. Supp. 2d 707, 711

n.2 (E.D. Pa. 2011) (citing Lloyd v. HOVENSA, LLC, 369

F.3d 263, 269 (3d Cir. 2004).

8

agreement to arbitrate was unconscionable. Quilloin did not

file a motion to dismiss or for summary judgment. 3

The District Court issued an order on January 20,

2011, see id. at 735, finding that genuine disputes of material

fact remained as to whether the arbitration agreement was

enforceable, 4 and denying the motion to compel. On

3

We note this here because on appeal, Quilloin asks

that we affirm the District Court’s denial of the order, or in

the alternative, that we find the arbitration agreement

unconscionable and unenforceable as a matter of law. We

have no such alternative. Only “final decisions of the district

courts” are appealable, 28 U.S.C. § 1291, and because

Quilloin neither filed nor claims to have filed a motion to

dismiss or for summary judgment, the District Court issued

no corresponding order. Thus, we cannot now find that

Quilloin is entitled to a judgment finding the agreement

unenforceable as a matter of law. See also 9 U.S.C. § 16

(discussing the appealability of arbitration decisions). At

most, we would have the authority to affirm the district

court’s finding that a genuine dispute of material fact

remained.

4

Technically, the District Court found that genuine

“issues” of material fact remained. See Quilloin, 763 F.

Supp. 2d at 735. However, in 2010, the Federal Rules of

Civil Procedure were amended, and the wording for the

summary judgment standard was changed to require review

for genuine “dispute[s]” of material fact. Fed. R. Civ. P.

56(a).

9

February 9, 2011, Tenet filed a timely notice of appeal,

commencing the present action.

II.

The District Court had jurisdiction over this case

pursuant to 28 U.S.C. § 1331. We have jurisdiction under 9

U.S.C. § 16 to review the District Court’s order denying a

motion to compel arbitration.

Our jurisdiction is not affected by the fact that the

order was denied without prejudice. The Federal Arbitration

Act (“FAA”) clearly “provides for interlocutory appeals from

a District Court’s refusal to compel arbitration” regardless of

whether the appeal is from a final decision. Sandvik AB v.

Advent Int’l Corp., 220 F.3d 99, 102-03 (3d Cir. 2000)

(construing the FAA, as codified at 9 U.S.C. § 16). In

Sandvik, the district court denied a motion to compel

arbitration, “conclud[ing] that it could not order arbitration

until it determined the validity of the underlying contract.”

220 F.3d at 102. Sandvik challenged our jurisdiction,

claiming that the “refusal to order arbitration was not final[.]”

Id. However, we held that “[t]he language of [9 U.S.C.] § 16

provides for appeals of orders denying arbitration, and it

makes no distinction between orders denying arbitration and

‘final orders’ that accomplish the same end.” Id. The

structure of Section 16 is consistent with this interpretation,

because otherwise, “the provision providing for appeals from

denials of orders to arbitrate [under § 16(a)(1)] would become

surplusage in light of the more expansive language in §

16(a)(3) [providing for appeals from final decisions with

respect to arbitration].” Id. at 103. Finally, we found it

10

significant “that Congress decided to use the word ‘final’ in

one part of the statute, but declined to do so in the section that

declares that orders denying motions to compel arbitration are

indeed appealable.” Id. Under Sandvik, there can be no

doubt that we have the authority to review an appeal from the

District Court’s order denying a motion to compel arbitration,

irrespective of the fact that the order was denied without

prejudice.

“We exercise plenary review over questions regarding

the validity and enforceability of an agreement to arbitrate.”

Puleo v. Chase Bank USA, N.A., 605 F.3d 172, 177 (3d Cir.

2010). Specifically, motions to compel arbitration are

reviewed under the Federal Rules of Civil Procedure

summary judgment standard, Par-Knit Mills, Inc. v.

Stockbridge Fabrics Co., 636 F.2d 51, 54 & n.9 (3d Cir.

1980), permitting judgment where “there is no genuine

dispute as to any material fact and the movant is entitled to

judgment as a matter of law.” Fed. R. Civ. P. 56(a).

Furthermore, “[i]n reviewing the record, we are required to

view the facts and draw inferences in the light most favorable

to the nonmoving party.” Ray v. Twp. of Warren, 626 F.3d

170, 173 (3d Cir. 2010) (citation omitted).

III.

A.

Tenet argues as a threshold matter that the District

Court erred in considering Quilloin’s claim that the

arbitration agreement was unconscionable, because Quilloin

failed to direct her challenge at a specific clause within the

11

arbitration agreement. Essentially, Tenet claims that without

a challenge to some specific clause, the District Court may

not inquire into issues of arbitrability. We disagree.

“Because this is a question of arbitrability, it is

governed by the [FAA].” Khan v. Dell Inc., No. 10-3655,

2012 WL 163899, at *4 (3d Cir. Jan. 20, 2012) (citing Puleo,

605 F.3d at 180). The FAA manifests “a congressional

declaration of a liberal federal policy favoring arbitration

agreements . . . .” Moses H. Cone Mem’l Hosp. v. Mercury

Const. Corp., 460 U.S. 1, 24 (1983). However, questions of

arbitrability, including challenges to an arbitration

agreement’s validity, are presumed to be questions for

judicial determination. Puleo, 605 F.3d at 178 (quoting

Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83

(2002)). “Courts should not assume that the parties agreed to

arbitrate arbitrability unless there is ‘clea[r] and

unmistakabl[e]’ evidence that they did so.” First Options of

Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1995) (quoting

AT&T Techs., Inc. v. Commc’ns Workers, 475 U.S. 643, 649

(1986)). This is because the FAA places arbitration

agreements on “an equal footing with other contracts” and

thus, like any other contract, a plaintiff may bring a challenge

to court claiming that an agreement to arbitrate is

unenforceable based on any of the “generally applicable

contract defenses, such as fraud, duress, or unconscionability

. . . .” AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740,

1745-46 (2011) (construing the FAA as codified at 9 U.S.C.

§ 2) (citation and internal quotation marks omitted).

On the other hand, a challenge to “the validity of the

contract as a whole, as opposed to the arbitration clause in

12

particular, does not present a question of arbitrability.”

Puleo, 605 F.3d at 180 n.4 (citing Buckeye Check Cashing,

Inc. v. Cardegna, 546 U.S. 440, 445-46 (2006)); accord Rent-

A-Center v. Jackson, 130 S. Ct. 2772, 2778 (2010). This is

because regardless of whether a contract as a whole is valid,

agreements to arbitrate are severable from a larger contract,

and may therefore be separately enforced and their validity

separately determined. Rent-A-Center, 130 S. Ct. at 2778.

Thus, in order to qualify as a question of arbitrability that the

court may consider, the challenge must “relat[e] to the

making and performance of the agreement to arbitrate.”

Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S.

395, 404 (1967).

In Rent-A-Center, West, Inc. v. Jackson, the Supreme

Court found that the plaintiff failed to challenge the validity

of the arbitration agreement at issue. The contract containing

the general agreement to arbitrate disputes also contained a

specific agreement to arbitrate questions of arbitrability. 130

S. Ct. at 2777. To eliminate the confusion caused by an

agreement to arbitrate nested within another agreement to

arbitrate, the Rent-A-Center Court found it necessary to

distinguish between the overall arbitration agreement (the

“contract”), and the agreement to arbitrate arbitrability (the

“delegation clause”). Id. at 2778-79. The problem was that

the plaintiff “challenged only the validity of the contract as a

whole” rather than the validity of the delegation clause. Id. at

2779. Because the delegation clause was severable from the

contract, it was unaffected by the contract’s validity; thus, the

Supreme Court held that in accordance with the valid

delegation clause, questions of arbitrability (including the

13

arbitrability of the overall agreement to arbitrate) must go to

an arbitrator. Id. at 2778-79.

Tenet argues that, like the plaintiff in Rent-A-Center,

Quilloin should have challenged some specific clause within

the FTP and Employee Acknowledgement, rather than

challenging the arbitration agreement as a whole. However,

Rent-A-Center is inapposite. First, it is important to note that

unlike the agreement in Rent-A-Center, the FTP and

Employee Acknowledgement constitute an agreement to

arbitrate employment issues generally; they do not purport to

contain an agreement to arbitrate arbitrability. Cf. Rent-A-

Center, 130 S. Ct. at 2777. Because the parties have not

indicated otherwise, the question of arbitrability is one for the

court. See Puleo, 605 F.3d at 178.

Additionally, Rent-A-Center did not require Quilloin to

challenge a specific clause. In Rent-A-Center, identification

of a specific clause was necessary merely because there were

two arbitration agreements, and the one at issue (the

agreement to arbitrate arbitrability) was specifically located

within the “delegation clause.” Here, unlike the contract in

Rent-A-Center, the FTP and Employee Acknowledgement

contained only one agreement to arbitrate. There was no need

to distinguish between multiple agreements to arbitrate; all

that Quilloin needed to do was challenge the validity of the

only agreement to arbitrate. See Rent-A-Center, 130 S. Ct. at

2778; Prima Paint, 388 U.S. at 404.

Because Quilloin did not agree to arbitrate the issue of

arbitrability, and because she claims that the arbitration

agreement, specifically, is unconscionable, the District Court

14

did not err in addressing the validity of the agreement to

arbitrate. Thus, we turn to the merits of Quilloin’s claims to

determine whether the District Court properly denied Tenet’s

motion to compel arbitration.

B.

We generally apply state contract principles to

determine whether an arbitration agreement is

unconscionable. Concepcion, 131 S. Ct. at 1746 (construing

the FAA, as codified at 9 U.S.C. § 2). However, the FAA

preempts conflicting state rules that either prohibit arbitration

outright, id. at 1747, or that “stand[] as an obstacle to the

accomplishment and execution of the full purposes and

objectives of Congress . . . .” Id. at 1753 (quoting Hines v.

Davidowitz, 312 U.S. 52, 67 (1941)). Thus, in determining

unconscionability, we must use principles of Pennsylvania

law, to the extent that such law is not displaced by the FAA.

To prove unconscionability under Pennsylvania law, a

party must show that the contract was both substantively and

procedurally unconscionable. Salley v. Option One Mortg.

Corp., 925 A.2d 115, 119 (Pa. 2007). In examining these two

prongs, the Pennsylvania Supreme Court has indicated that it

might be appropriate to use a “sliding-scale approach” so that

“where the procedural unconscionability is very high, a lesser

degree of substantive unconscionability may be required” and

presumably, vice-versa. Id. at 125 & n.12. We turn first to

the District Court’s finding that the arbitration agreement

might be substantively unconscionable.

1. Substantive Unconscionability

15

A contract or provision is substantively

unconscionable where it “unreasonably favors the party

asserting it.” Salley, 925 A.2d at 119. Put another way,

“[s]ubstantive unconscionability refers to contractual terms

that are unreasonably or grossly favorable to one side and to

which the disfavored party does not assent.” Harris v. Green

Tree Fin. Corp., 183 F.3d 173, 181 (3d Cir. 1999) (citing

Germantown Mfg. Co. v. Rawlinson, 491 A.2d 138, 145-47

(Pa. Super. Ct. 1985); Denlinger, Inc. v. Dendler, 608 A.2d

1061, 1068 (1992)). An arbitration agreement cannot be

construed as substantively unconscionable where it “does not

alter or limit the rights and remedies available to [a] party in

the arbitral forum . . . .” Edwards v. HOVENSA, LLC, 497

F.3d 355, 364 (3d Cir. 2007) (construing Gilmer v.

Interstate/Johnson Lane Corp., 500 U.S. 20 (1991)).

In denying Tenet’s motion to compel arbitration, the

District Court found three bases on which the arbitration

agreement might be substantively unconscionable: (1) a

potential prohibition against recovery of attorneys’ fees and

costs, (2) potential inclusion of a class action waiver, and (3)

the possibility that Tenet could “run out the clock” on the

statute of limitations. We disagree with the District Court’s

conclusions, and find no basis for substantive

unconscionability.

a. Attorneys’ Fees

Provisions requiring parties to be responsible for their

own expenses, including attorneys’ fees, are generally

unconscionable because restrictions on attorneys’ fees

conflict with federal statutes providing fee-shifting as a

16

remedy. See Spinetti v. Serv. Corp. Int’l, 324 F.3d 212,

216 (3d Cir. 2003) (Where called for by statute, “arbitrators

. . . must ordinarily grant attorney fees to prevailing claimants

rather than be restricted by private contractual language.”

(internal citation and quotation marks omitted)); accord Nino

v. Jewelry Exch., Inc., 609 F.3d 191, 203 (3d Cir. 2010);

Alexander v. Anthony Int’l, L.P., 341 F.3d 256, 267 (3d Cir.

2003); Parilla v. IAP Worldwide Servs., VI, Inc., 368 F.3d

269, 278-79 (3d Cir. 2004).

Tenet and Quilloin dispute whether the arbitration

agreement allows the prevailing party to recover attorneys’

fees. The agreement contains no clear prohibition against

fee-shifting; the District Court wrote that “it is unclear

whether the contract deprives employees of the right to

recover attorney’s fees and costs.” Quilloin, 763 F. Supp. 2d

at 725. In one clause, the FTP states that “[y]ou and the

company will be responsible for the fees and costs of your

own respective legal counsel, if any, and any other expenses

and costs, such as costs associated with witnesses or

obtaining copies of hearing transcripts.” However, another

provision in the FTP could be read as giving the arbitrator

authority to grant attorneys’ fees to the prevailing party:

“Authority of Arbitrator: The arbitrator has the authority to

award any remedy that would have been available to you had

you litigated the dispute in court under applicable law.” It

also states that “no remedies that otherwise would be

available to you or the company in a court of law will be

forfeited by virtue of the agreement to use and be bound by

the FTP.”

17

We agree with the District Court that the arbitration

agreement is ambiguous regarding the award of attorneys’

fees, but find that the District Court erred in determining that

it could not compel arbitration before resolving the issue.

The Supreme Court has clearly established that ambiguities in

arbitration agreements must be interpreted by the arbitrator.

PacifiCare Health Sys., Inc. v. Book, 538 U.S. 401, 406-07

(2003); accord Puleo, 605 F.3d at 179. It explained that “we

should not, on the basis of mere speculation that an arbitrator

might interpret . . . ambiguous agreements in a manner that

casts their enforceability into doubt, take upon ourselves the

authority to decide the antecedent question of how the

ambiguity is to be resolved.” PacifiCare, 538 U.S. at 406-07

(citation and internal quotation marks omitted); see also

Alabama State Fed’n of Labor v. McAdory, 325 U.S. 450, 461

(1945) (“It has long been [our] considered practice not to

decide abstract, hypothetical or contingent questions . . . .”).

In PacifiCare Health Systems v. Book, respondents

challenged the enforceability of arbitration agreements on the

basis that the agreements could “be construed to limit the

arbitrator’s authority to award damages . . . .” 538 U.S. at

402. The United States Court of Appeals for the Eleventh

Circuit denied petitioners’ requests to compel arbitration, on

the basis that this potential limitation rendered the arbitration

agreements unenforceable. Id. at 403. The Supreme Court

reversed, noting that such a “preliminary question” is not

truly a question of arbitrability for the court to decide, id. at

407 n.2, and holding that “since we do not know how the

arbitrator will construe the remedial limitations, the questions

whether they render the parties’ agreements unenforceable

18

and whether it is for courts or arbitrators to decide

enforceability in the first instance are unusually abstract.” Id.

at 407. Rather than speculate as to whether a certain

interpretation of an ambiguity might render an arbitration

agreement unenforceable, “the proper course [in such a case]

is to compel arbitration.” Id.

The issue presented here is virtually indistinguishable

from the issue in PacifiCare. Like the PacifiCare

respondents, Quilloin challenges the enforceability of the

arbitration agreement based on speculation that the agreement

might be interpreted to limit the arbitrator’s authority to

fashion a remedy. Quilloin’s claim would require the District

Court to decide a “preliminary question” before addressing

the issue of unconscionability, and as PacifiCare noted, such

a “preliminary question” is not truly a question of

arbitrability. Id. at 407 n.2. Under PacifiCare, we are

required to find that the ambiguity regarding attorneys’ fees is

a question for the arbitrator.

b. Class Action Waiver

Under Pennsylvania law, class action waivers are

substantively unconscionable where “class action litigation is

the only effective remedy” such as when “the high cost of

arbitration compared with the minimal potential value of

individual damages denie[s] every plaintiff a meaningful

remedy.” Thibodeau v. Comcast Corp., 912 A.2d 874, 883-

84 (Pa. Super. Ct. 2006).

Here, the arbitration agreement does not contain an

express class action waiver. Silence regarding class

19

arbitration generally indicates a prohibition against class

arbitration, but the actual determination as to whether class

action is prohibited is a question of interpretation and

procedure for the arbitrator. Stolt-Nielsen, S.A. v.

AnimalFeeds Int’l Corp., 130 S. Ct. 1758, 1775 (2010). The

District Court acknowledged that the determination was for

the arbitrator, but proceeded to analyze whether a class action

waiver would render the arbitration agreement substantively

unconscionable, if the arbitrator were to determine that the

agreement contained such a waiver. Quilloin, 763 F. Supp.

2d at 727 & n.22.

As with the issue of attorneys’ fees, the District Court

erred in addressing the hypothetical situation that might or

might not arise depending on the arbitrator’s interpretation of

the arbitration agreement. See PacifiCare, 538 U.S. at 406-

07. Furthermore, even if the agreement explicitly waived

Quilloin’s right to pursue class actions, the Pennsylvania law

prohibiting class action waivers is surely preempted by the

FAA under Concepcion, 131 S. Ct. at 1740.

After the District Court denied Tenet’s motion to

compel, the Supreme Court ruled in Concepcion that a

California law deeming certain class action waivers to be

unconscionable was an “obstacle to the accomplishment and

execution” of the FAA, and was therefore “inconsistent with”

and preempted by the FAA. 131 S. Ct. at 1750-51, 1753.

Specifically, the Concepcion Court found that “[a]rbitration is

poorly suited to the higher stakes of class litigation” because:

(1) “the switch from bilateral to class arbitration sacrifices the

principal advantage of arbitration—its informality[,]” (2) it is

“at the very least odd to think that an arbitrator would be

20

entrusted with ensuring that third parties’ due process rights

are satisfied[,]” and (3) “class arbitration greatly increases

risks to defendants.” Id. at 1751-52. California’s law did not

deem class action waivers to be per se unconscionable, but

was based in part on the reasoning that “class proceedings are

necessary to prosecute small-dollar claims that might

otherwise slip through the legal system.” Id. at 1753. The

Supreme Court dismissed this reasoning, ruling that “States

cannot require a procedure that is inconsistent with the FAA,

even if it is desirable for unrelated reasons.” Id.

Following and relying on Concepcion, we found a

similar New Jersey law to be preempted. The New Jersey

law held that “a waiver of class-wide dispute resolution

would be improper in the context of either litigation or

arbitration[,]” and unconscionability thus “provide[d] a

defense against ‘all waivers of class-wide actions, not simply

those that also compel arbitration[.]’” Litman v. Cellco

P’ship, 655 F.3d 225, 229 (3d Cir. 2011) (citation and

internal quotation marks omitted) (construing Muhammad v.

County Bank of Rehoboth Beach, 912 A.2d 88 (N.J. 2006)).

Our Litman ruling is directly applicable here:

“We understand the holding of Concepcion to

be both broad and clear: a state law that seeks

to impose class arbitration despite a contractual

agreement for individualized arbitration is

inconsistent with, and therefore preempted by,

the FAA, irrespective of whether class

arbitration is desirable for unrelated reasons.”

21

Litman, 655 F.3d at 231 (internal citation and quotation marks

omitted).

The Pennsylvania law at issue here is clearly

preempted under Concepcion and Litman. 5 The Pennsylvania

law is not substantively different from the California law,

which is unquestionably preempted by the FAA. Like the

California law, Pennsylvania law does not render class action

waivers per se unconscionable. Rather, Pennsylvania finds

such waivers substantively unconscionable where “class

action litigation is the only effective remedy” such as when

“the high cost of arbitration compared with the minimal

potential value of individual damages denie[s] every plaintiff

a meaningful remedy.” Thibodeau, 912 A.2d at 883-84.

Like the law in Litman, the Pennsylvania law “seeks to

impose class arbitration despite a contractual agreement for

individualized arbitration” and is therefore preempted. See

id. at 231. In fact, the Pennsylvania law is even more

egregious than the New Jersey law. See Litman, 655 F.3d at

229 n.5. The New Jersey rule against class action waivers

applied to litigation and arbitration alike, id. at 229, while

5

On this, we agree with numerous district courts. See

Brown v. TrueBlue, Inc., No. 1:10-cv-0514, 2011 WL

5869773, at *5 (M.D. Pa. Nov. 22, 2011); King v. Advance

Am., Nos. 07-237, 07-3142, 2011 WL 3861898, at *5-6 (E.D.

Pa. Aug. 31, 2011); Black v. JP Morgan Chase & Co., No.

10-848, 2011 WL 3940236, at *70 n.25 (W.D. Pa. Aug. 25,

2011); Clerk v. Cash Central of Utah, LLC, No. 09-4964,

2011 WL 3739549, at *3-5 (E.D. Pa. Aug 25, 2011).

22

Pennsylvania law has often prohibited class action waivers

based on their arbitration-specific context. Id. at 229 n.5

(citing Gay v. CreditInform, 511 F.3d 369, 395 (3d Cir.

2007)). Thus, the Pennsylvania law presents an even greater

obstacle to the fulfillment of the FAA’s purposes than does

the New Jersey law, because it is exactly the type of law that

“single[s] out the provisions of arbitration agreements[,]”

Harris, 183 F.3d at 183, and that “derive[s] [its] meaning

from the fact that an agreement to arbitrate is at issue.”

Concepcion, 131 S. Ct. at 1746.

c. Running Out the Clock

Finally, Quilloin claims that the arbitration agreement

is unconscionable because it would permit Tenet to “run out

the clock” on the statute of limitations. The FTP requires

employees to follow several internal steps and procedures

before submitting a claim to arbitration; because the FTP only

gives Tenet approximate time limits to respond to each step in

the procedure, Quilloin argues that the FTP allows Tenet to

delay until claims have expired under the statute of

limitations.

Tenet first responds that any claim regarding the

possibility for delay has been mooted because Quilloin tolled

the statute of limitations by filing this claim. Tenet contends

that there is now no danger of delays running out the clock

because Quilloin will be able to bring her claim through

either arbitration or litigation with no danger of exceeding the

statute of limitations.

23

Mootness implicates our jurisdiction and is thus

determined based on Article III justiciability principles. St.

Paul Fire & Marine Ins. Co. v. Barry, 438 U.S. 531, 537

(1978); Jersey Cent. Power & Light Co. v. Lacey Twp., 772

F.2d 1103, 1108 n.8 (3d Cir. 1985). Under “Article III[,]

judicial power extends only to actual cases and controversies”

and “[a]n actual controversy must be extant at all stages of

review . . . .” Turner v. Rogers, 131 S. Ct. 2507, 2514 (2011)

(internal citations and quotation marks omitted).

Here, the controversy pertains to unconscionability

under Pennsylvania law, which measures unconscionability at

the time of the contract’s making. 13 Pa. Cons. Stat. Ann.

§ 2302(a). Although Tenet claims that the arbitration

agreement’s provision for delay can no longer be

unconscionable, it mistakenly measures unconscionability in

the present moment, based on what has happened since the

contract was signed, rather than based on whether the contract

was unconscionable at the time of its formation. Thus, the

fact that Quilloin has tolled the statute of limitations in the

present instance does not abrogate or in any way moot her

claim that the contract was unconscionable at its formation.

Turning to the substance of the claim, time limitations

in arbitration agreements are substantively unconscionable if

they are “clearly unreasonable and unduly favorable” to the

employer. See Nino, 609 F.3d at 202 (quoting Alexander, 341

F.3d at 266). Quilloin contends that the time limits in Nino v.

Jewelry Exchange, Inc., presented “the mirror image of the

time limits” here. However, we find Nino to be inapposite.

In Nino, the employee was provided with only a five-day

window within which to file and preserve a complaint, a

24

window which the court found substantively unconscionable

because it was “clearly unreasonable . . . .” 609 F.3d at 202-

03 (quoting Alexander, 341 F.3d at 266); see also Alexander,

341 F.3d at 266 (finding a time limit of thirty days to be

“clearly unreasonable and unduly favorable” to the

employer). These cases involved “clearly unreasonable” time

limits placed on the employee, rather than estimated time

limits placed on the employer’s response. Quilloin fails to

explain how a process allowing an employee the full amount

of time permitted under law is unconscionable, even if the

employer is given guidelines, rather than strict parameters,

within which it may respond.

Even if Tenet tried to delay and failed to move forward

with proceedings within a reasonable time, Quilloin could

have filed a motion to compel arbitration. See, e.g., Allen v.

Apollo Group, Inc., No. Civ.A.H-04-3041, 2004 WL

3119918, at *9 (S.D. Tex. Nov. 9, 2004).

Given the existence of reasonable time guidelines for

Tenet to act, paired with the fact that Tenet could not

preclude Quilloin’s claim because she always had the option

to motion to compel arbitration, the time guidelines are not

“clearly unreasonable and unduly favorable” to Tenet. See

Nino, 609 F.3d at 202 (quoting Alexander, 341 F.3d at 266).

We fail to see how, even considering the facts in the light

most favorable to Quilloin, there is any genuine dispute of

material fact regarding this claim of substantive

unconscionability.

We find that Quilloin raised no genuine dispute of

material fact regarding substantive unconscionability;

25

therefore, the District Court erred by denying Tenet’s motion

to compel arbitration.

2. Procedural Unconscionability

Even if Quilloin had raised a genuine dispute of

material fact as to substantive unconscionability, we would

nonetheless find that the District Court erred in denying

Tenet’s motion to compel arbitration because Quilloin did not

raise a genuine dispute of material fact as to whether the

arbitration agreement was procedurally unconscionable.

Quilloin argues that procedural unconscionability arises

because she was not informed that she would have to commit

to arbitrate disputes in order to be employed by Tenet, that no

one explained to her the terms of the agreement, and that she

had little time or choice but to accept its terms and sign.

A contract is procedurally unconscionable where

“there was a lack of meaningful choice in the acceptance of

the challenged provision[.]” Salley, 925 A.2d at 119. A

contract will be deemed procedurally unconscionable when

formed through “oppression and unfair surprise.” Witmer v.

Exxon Corp., 434 A.2d 1222, 1228 n.16 (Pa. 1981) (citation

and quotation marks omitted). Courts “should remain attuned

to well-supported claims that the agreement to arbitrate

resulted from the sort of fraud or overwhelming economic

power that would provide grounds for the revocation of any

contract.” Gilmer, 500 U.S. at 32-33 (internal citation and

quotation marks omitted).

Under Pennsylvania law, a contract is generally

considered to be procedurally unconscionable if it is a

26

contract of adhesion. McNulty v. H&R Block, Inc., 843 A.2d

1267, 1273 & n.6 (Pa. Super. Ct. 2004); but cf. Salley, 925

A.2d at 125-26; id. at 128 (suggesting that not all contracts of

adhesion are procedurally unconscionable). A contract of

adhesion is a “standard-form contract prepared by one party,

to be signed by the party in a weaker position, usually a

consumer, who adheres to the contract with little choice about

the terms.” Chepkevich v. Hidden Valley Resort, L.P., 2 A.3d

1174, 1190 (Pa. 2010) (internal citation and quotation marks

omitted).

However, contracts cannot be deemed unconscionable

“simply because of a disparity in bargaining power.” Witmer,

434 A.2d at 1228; accord Gilmer, 500 U.S. at 32-33. “[T]he

Supreme Court . . . made clear in Gilmer v.

Interstate/Johnson Lane Corp. [that] more than a disparity in

bargaining power is needed in order to show that an

arbitration agreement was not entered into willingly.” Great

W. Mortg. Corp. v. Peacock, 110 F.3d 222, 229 (3d Cir.

1997). Parties frequently possess varying degrees of

bargaining power, and there is a “range of ordinary and

acceptable bargaining situations[.]” Salley, 925 A.2d at 120

n.3. Our role is to distinguish acceptable bargaining

situations from those which violate “strong public policy[.]”

Id.

Factors we must consider in determining whether the

contract rises to the level of procedural unconscionability

include: “the take-it-or-leave-it nature of the standardized

form of the document[,]” “the parties’ relative bargaining

positions,” and “the degree of economic compulsion

motivating the ‘adhering’ party[.]” Salley, 925 A.2d at 125

27

(quoting Delta Funding Corp. v. Harris, 912 A.2d 104, 111

(N.J. 2006)).

In Zimmer v. CooperNeff Advisors, Inc., we considered

the plaintiff’s educational background and “the context in

which the ‘take-it-or-leave-it’ ultimatum was issued” in

determining that the contract did not rise to the level of

procedural unconscionability. 523 F.3d 224, 229 (3d Cir.

2008). Zimmer was a highly educated economist and

willingly accepted an offer of employment, knowing that the

formal employment agreement had not yet been finalized, and

further, he did not allege that he lacked an opportunity to

negotiate. Id.; see also Gilmer, 500 U.S. at 32-33 (no

procedural unconscionability where experienced businessman

was neither coerced nor defrauded when he complied with his

employer’s requirement that he register – and sign an

included arbitration agreement – with the New York Stock

Exchange).

Similarly, in Great Western Mortg. Corp. v. Peacock,

the appellant argued that she accepted the arbitration

agreement “only because she was the weaker of the two

parties to the employment contract.” Peacock, 110 F.3d at

229. Peacock was undoubtedly the weaker party. Id.

Additionally, her employer notified her that she would be

required to sign an agreement to arbitrate upon beginning her

employment, but she did not sign the actual arbitration

agreement until several weeks after she began working. Id. at

224, 228. Nevertheless, we found that the agreement was not

procedurally unconscionable because Peacock agreed to

arbitration on three different occasions, she was a college

graduate with a Business Administration degree, and she did

28

not contend that she failed to read the document containing

the arbitration agreement, or that she was coerced into signing

it. Id. at 228-30.

At the other end of the spectrum, we found procedural

unconscionability in an employment agreement where the

employee, though college educated, was told to read and sign

an employment contract, and was dependent on the employer,

one of the world’s largest jewelry retailers, for his

immigration status and his “very capacity to work in St.

Thomas[.]” Nino, 609 F.3d at 196-97, 202. Similarly, we

held unconscionable an arbitration agreement between a

multi-national business and minimally-educated crane

operators. Alexander, 341 F.3d at 266. 6

Quilloin’s situation is nothing like that of the plaintiffs

in Nino or Alexander v. Anthony Intern., L.P. The District

Court acknowledged that Tenet had less bargaining power

than the multinational corporations in both of those cases.

More importantly, Quilloin was neither a minimally-educated

crane operator as were the plaintiffs in Alexander, nor

6

Although Great Western Mortgage Corp. v. Peacock,

Nino v. Jewelry Exchange, Inc., and Alexander v. Anthony

Intern., L.P., apply New Jersey and Virgin Islands law, the

cases provide useful reference points because the principles

of procedural unconscionability are substantially similar

under the laws of those jurisdictions. See Salley, 925 A.2d at

125 (drawing procedural unconscionability principles from

New Jersey law); Zimmer, 523 F.3d at 228-29 (analogizing to

case applying Virgin Islands law).

29

dependent on her employer for her immigration status as was

the plaintiff in Nino.

Although Quilloin did not possess the same level of

education or specialized skills as the plaintiff in Zimmer, her

situation appears to be much like the plaintiff’s situation in

Peacock. Like Peacock, Quilloin argues that she was in an

unequal bargaining position because she was just an

employee signing a form agreement. Like Peacock, Quilloin

might not have seen or signed the actual arbitration agreement

until after beginning her employment. As in Peacock, we

acknowledge that the employee is the weaker party to the

agreement, Peacock, 110 F.3d at 229; however, like Peacock,

Quilloin did not lack a meaningful choice. She had a college

degree, and chose to agree to the arbitration agreement on

more than one occasion. Even if she was not initially

informed of the agreement at either time she was hired, the

fact remains that she quit her employment at Tenet to work

for another employer, and then chose to go back and work

once again for Tenet, subject to the Employment Agreement

and the FTP. When Quilloin went back to her job at Tenet,

the question of whether she actually remembered the

arbitration agreement is of no consequence; we must presume

that she was rehired knowing about the arbitration agreement

which she had already signed, because parties are presumed

to have knowledge of contracts they have signed. See, e.g.,

Morales v. Sun Constr., Inc., 541 F.3d 218, 221-22 (3d Cir.

2008); Denlinger, 608 A.2d at 1069-70.

Under such circumstances, we reject Quilloin’s

argument that there was unfair surprise or a lack of time to

consider or learn the meaning of the terms of the agreement.

30

We find that Quilloin did not lack a meaningful choice in

agreeing to arbitrate, and she thus raised no genuine dispute

of material fact with regard to procedural unconscionability.

IV.

For the foregoing reasons, we hold that the District

Court erred in denying Tenet’s motion to compel arbitration.

We will therefore reverse the order of the District Court and

remand with instructions to stay litigation proceedings and

compel arbitration.

31