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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Gibson v. Nye Frontier Ford, Inc. (04/03/2009) sp-6355

Gibson v. Nye Frontier Ford, Inc. (04/03/2009) sp-6355

     Notice:   This opinion is subject to correction  before
     publication  in  the  Pacific  Reporter.   Readers  are
     requested to bring errors to the attention of the Clerk
     of  the  Appellate  Courts, 303  K  Street,  Anchorage,
     Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
     e-mail corrections@appellate.courts.state.ak.us.


            THE SUPREME COURT OF THE STATE OF ALASKA

LARRY GIBSON, )
) Supreme Court No. S- 13064
Petitioner,)
) Superior Court No. 3AN-07- 09717 CI
v. )
) O P I N I O N
NYE FRONTIER FORD, INC., and)
NYE FRONTIER LINCOLN ) No. 6355 April 3, 2009
MERCURY, INC., )
)
Respondents. )
)
          Petition  for Review from the Superior  Court
          of   the  State  of  Alaska,  Third  Judicial
          District, Anchorage, John Suddock, Judge.

          Appearances: Kenneth W. Legacki,  Kenneth  W.
          Legacki, P.C., Anchorage, F. Paul Bland, Jr.,
          Public  Justice, P.C., Washington, D.C.,  for
          Petitioner.   Jeffrey A. Friedman,  Friedman,
          Rubin  &  White, Anchorage, for  Respondents.
          Lee  Holen,  Lee Holen Law Office, Anchorage,
          Stefano   G.   Moscato,  National  Employment
          Lawyers   Association,  San  Francisco,   for
          Amicus  Curiae  National  Employment  Lawyers
          Association.

          Before:    Fabe,  Chief  Justice,   Matthews,
          Eastaugh, Carpeneti, and Winfree, Justices.

          MATTHEWS, Justice.


          An  employee  was  ordered by  the  superior  court  to
arbitrate his Alaska Wage and Hour Act claim under an arbitration
agreement  that is governed by the Federal Arbitration  Act.   He
contends  that  the  arbitration agreement is unconscionable  for
three  reasons:  (1) it is subject to unilateral  change  by  the
employer;  (2) it has a $50,000 appellate threshold  that  favors
the employer; and (3) it requires the employee to pay arbitration
costs  that he would not have to pay if his claim were prosecuted
in  superior  court.  We conclude that (1) the agreement  is  not
subject to unilateral change; (2) the $50,000 appellate threshold
clause  is  unconscionable but severable from the agreement;  and
(3)  arbitration costs may not be imposed on the employee.  As  a
consequence of these conclusions, we hold that arbitration may be
required under the agreement only if the employer agrees  to  pay
the arbitration costs.
I.   FACTS AND PROCEEDINGS
          Larry  Gibson filed suit against his former  employers,
Nye  Frontier Ford, Inc., and Nye Frontier Lincoln Mercury,  Inc.
(collectively  Nye),  in the superior court  seeking  to  recover
unpaid  overtime  compensation and liquidated damages  under  the
Alaska  Wage and Hour Act (AWHA).  Gibson alleged he was owed  in
excess  of  $100,000  in  unpaid overtime compensation  for  work
performed between 2005 and 2007.  He sought compensatory  damages
plus an equal amount of liquidated damages, as well as costs  and
attorneys fees allowed under the AWHA.
          Nye answered and interposed three affirmative defenses.
Nye  claimed that Gibson was exempt from the overtime  provisions
of  the  AWHA  because  he  held  an  executive,  managerial,  or
administrative position; that part of his claim was barred by the
statute  of  limitations; and that his claim was  subject  to  an
arbitration agreement.
          Nye  moved  to  stay  the  superior  court  proceedings
pending arbitration. Gibson opposed this motion, arguing in  part
that  the  arbitration  agreement between  the  parties  was  not
enforceable  because it was unconscionable and would  potentially
require him to pay part of the arbitration costs, contrary to the
policy of the AWHA.  Nye responded that the arbitration agreement
was  not unconscionable and acknowledged that Gibson would likely
be  asked  to pay one half of the arbitration costs,  but  argued
that these would be relatively modest and that Gibson had not met
his  burden  of showing that this requirement would preclude  him
from  vindicating his rights under the AWHA.  The superior  court
entered  an order staying proceedings pending arbitration.   From
this  order  Gibson  filed a petition  for  review.   We  granted
review.
II.  DISCUSSION
     A.   Contract Documents
          The  arbitration clause at issue is found on the  final
two  pages of the forty-five page Nye employee handbook.  We  set
forth  the text of the last two pages, including the caption  and
attestation  clause,  numbering  each  paragraph  for   ease   of
reference:
             Employee Acknowledgement and Agreement
          
     [1]  This will acknowledge that I have received my
          copy  of  the NYE FRONTIER LINCOLN MERCURY[1]
          Employee Handbook and that I will familiarize
          myself with its contents.
          
     [2]  I  understand  that this Handbook  represents
          the   current   policies,  regulations,   and
          benefits, and that except for employment  at-
          will   status,  any  and  all  policies   and
          practices can be changed at any time  by  the
          Dealership.  The Dealership retains the right
          to  add,  change  or delete wages,  benefits,
          policies and all other working conditions  at
          any   time  (except  the  policy  of  at-will
          employment which may not be changed, altered,
          revised or modified without a writing  signed
          by the Owner of the Dealership).
          
     [3]  I  understand  that nothing in  the  Employee
          Handbook  creates or is intended to create  a
          promise   or   representation  of   continued
          employment   and  that  employment   at   Nye
          Frontier  Lincoln Mercury is  employment  At-
          Will,  that may be terminated at the will  of
          the  Dealership or myself.  I understand that
          I  have  the right to terminate my employment
          at  any time, with or without cause or notice
          and  that the Dealership has a similar right.
          I further understand that my status as an At-
          Will  employee may not be changed  except  in
          writing   signed   by  the   Owner   of   the
          Dealership.   My  signature  below  certifies
          that I understand the foregoing agreement and
          that  At-Will status is the sole  and  entire
          agreement  between the Dealership and  myself
          concerning the duration of my employment  and
          the  circumstances under which my  employment
          may  be terminated.  It supersedes all  prior
          agreements,        understandings         and
          representations  (whether  written  or  oral)
          concerning my employment with the Dealership.
          
     [4]  I   agree   that  any  claim,   dispute,   or
          controversy which would otherwise require  or
          allow   resort   to  any   court   or   other
          governmental    dispute   resolution    forum
          (including,  but not limited to any  and  all
          claims  of discrimination, harassment or  any
          other   complaint  based  on  the  employment
          relationship  or  the termination  of  same),
          between  myself  and the Dealership  (or  its
          owners,  directors, and officers,  employees,
          agents,  and  parties  affiliated  with   its
          employee  benefit and health  plans)  arising
          from,  related to, or having any relationship
          or  connection  whatsoever  with  my  seeking
          employment  with,  employment  by,  or  other
          association  with,  the  Dealership,  whether
          based   on  tort,  contract,  statutory,   or
          equitable   law,  or  otherwise,   shall   be
          submitted  to  and determined exclusively  by
          binding   arbitration   under   the   Federal
          Arbitration    Act,   in   conformity    with
          applicable  state  laws,  provided,  however,
          that: In addition to requirements imposed  by
          law, any arbitrator herein shall be a retired
          Alaska  Superior  Court Judge  and  shall  be
          subject  to  disqualification  on  the   same
          grounds  as  would apply to a judge  of  such
          court.   It is the intent of this arbitration
          clause to provide for the inexpensive, speedy
          and just resolution of all such disputes.  To
          this  end, discovery shall be limited to  the
          extent permissible.
          
     [5]  Resolution  of  the dispute  shall  be  based
          solely upon the law governing the claims  and
          defenses  pled,  and the arbitrator  may  not
          invoke  any basis other than such controlling
          law  to  decide  the dispute.  As  reasonably
          required  to  allow full use and  benefit  of
          this  agreements modifications  to  the  Acts
          procedures,  the arbitrator  may  extend  the
          times  set  by  the  Act for  the  giving  of
          notices  and  setting  of  hearings.   Awards
          exceeding   $50,000.00  shall   include   the
          arbitrators written reasoned opinion and,  at
          either partys written request within 10  days
          after issuance of the award, shall be subject
          to  reversal  and  remand,  modification,  or
          reduction following review of the record  and
          arguments   of  the  parties  by   a   second
          arbitrator  who shall, as far as practicable,
          proceed  according to the law and  procedures
          applicable to appellate review by the  Alaska
          Supreme  Court of a civil judgment  following
          court  trial.   I understand by  agreeing  to
          this   binding  arbitration  provision,   the
          company and I give up our rights to trial  by
          jury.
          
     [6]  MY SIGNATURE BELOW ATTESTS TO THE FACT THAT I
          HAVE  READ,  UNDERSTAND,  AND  AGREE  TO   BE
          LEGALLY BOUND TO ALL OF THE ABOVE TERMS.
          
          /s/ Larry Gibson
          Print Full Name
          
          /s/ Larry Gibson
          Signature
          
          8/1/05
          Date
          
     B.   Contentions Under Review
          Gibson  raises three main points in his  petition.   He
contends that the arbitration agreement is unconscionable because
it  may be unilaterally modified by Nye at any time.  Further, he
argues  that  the  $50,000 threshold for appellate  review  by  a
second  arbitrator  is  unfairly one-sided  because  it  operates
wholly  for  the  benefit of Nye.  His third point  is  that  the
arbitration  clause  conflicts with the policy  of  the  AWHA  by
subjecting  him  to  a  charge  of  one  half  of  the  costs  of
arbitration, including the arbitrators fee.
          Nye  responds  that  it  does not  have  the  power  to
unilaterally  change  the  arbitration  agreement   because   the
arbitration  agreement is distinct from other provisions  of  the
handbook.   With respect to the $50,000 threshold  for  appellate
review,  Nye  argues  that  this is  not  unreasonably  one-sided
because Nye might have claims against employees; if so and if Nye
were awarded more than $50,000, employees would benefit from  the
right  to  appeal.  Nye argues alternatively that if  this  court
finds  the  appellate  threshold  unconscionable,  it  should  be
severed and the remainder of the arbitration agreement should  be
enforced.  Concerning the prospect that Gibson will have  to  pay
half  of  the  arbitration costs, Nye asserts that under  binding
federal  case  law,2  Gibson had the  burden  to  show  that  the
imposition of arbitration costs would be prohibitively  expensive
and that he did not discharge this burden.
     C.   Applicable Statutes
          Gibsons   claim   is  brought  under   the   AWHA,   AS
23.10.050.150.   The  AWHA  requires  the  payment  of   overtime
compensation  for covered employees and generally  allows  as  an
addition  to  unpaid  overtime compensation an  equal  amount  of
liquidated damages.3  In actions brought by private claimants the
court  is  required,  in addition to a judgment  awarded  to  the
plaintiff,  to  allow  costs of the action.4   If  the  plaintiff
prevails,  the  court  is  also to  award  the  plaintiff  actual
attorneys  fees so long as they are reasonable.5   On  the  other
hand,  if  the  plaintiff does not prevail the  employer  is  not
ordinarily entitled to an award of attorneys fees.6  All of these
rights  are  substantive.7  Substantive rights  afforded  workers
under  the AWHA may neither be waived in advance by contract  nor
compromised after a claim is asserted without judicial approval.8
But  this  does not mean that AWHA claims can only be adjudicated
in court.  As the United States Supreme Court has observed:
          [B]y agreeing to arbitrate a statutory claim,
          a party does not forgo the substantive rights
          afforded  by the statute; it only submits  to
          their resolution in an arbitral, rather  than
          a  judicial,  forum. . . . [S]o long  as  the
          prospective    litigant    effectively    may
          vindicate  [his  or her] statutory  cause  of
          action  in  the arbitral forum,  the  statute
          will continue to serve both its remedial  and
          deterrent function.[9]
          
          The Federal Arbitration Act10 (FAA) also applies to this
          case.  The FAA applies to [a] written provision in any . . .
contract evidencing a transaction involving commerce to settle by
arbitration a controversy thereafter arising out of such contract
or  transaction, and provides that covered arbitration agreements
shall  be  valid, irrevocable, and enforceable,  save  upon  such
grounds  as exist at law or in equity for the revocation  of  any
contract.11  The save upon such grounds clause has been construed
to  mean that state law grounds for refusing to enforce contracts
in  general  will also apply to arbitration clauses, while  state
law grounds particular to arbitration clauses cannot so serve.12
          The  FAA  evinces  a  strong policy  in  favor  of  the
arbitration of disputes.13  Alaskas Uniform Arbitration  Act  and
Revised  Uniform Arbitration Act reflect the same policy  at  the
state  level.14  The state arbitration act also applies  to  this
case to the extent that its provisions do not contradict those of
the FAA.15
          We turn then to the specific points raised by Gibson in
his  petition for review.  They all involve questions of law  and
are  therefore subject to de novo review.  When applying de  novo
review  [w]e  adopt  the rule of law that is most  persuasive  in
light of precedent, reason, and policy. 16
     D.   Nye   Lacks  the  Power  To  Unilaterally  Change   the
          Arbitration Agreement.
          
          Under  Alaska law a contract term may be unconscionable
where . . . circumstances indicate a vast disparity of bargaining
power  coupled with terms unreasonably favorable to the  stronger
party.17  We agree with Gibson that the employment contract  with
Nye  was  a  contract  of  adhesion and  that  the  disparity  of
bargaining power requirement is satisfied.
          Gibson   contends   that  the  unreasonably   favorable
condition  is  also met.  He argues that Nye  had  the  power  to
change  the  arbitration clause unilaterally.  In  reaching  this
conclusion  he  relies on the second paragraph  of  the  Employee
Acknowledgement and Agreement quoted above.18  He claims that the
arbitration agreement contained in paragraphs five and six of the
Acknowledgement  and  Agreement  falls  within  the  language  of
paragraph two that permits Nye to change at any time any and  all
policies  and practices expressed in the handbook.  Gibson  cites
numerous  authorities that hold that clauses giving one party  to
an arbitration agreement the authority unilaterally to change its
terms are unconscionable and unenforceable.19
          Nye  does not take issue with the proposition that  the
unilateral  power  to change an arbitration  agreement  would  be
unconscionable.  Instead, Nye argues that it does  not  have  the
power  to  change  the arbitration agreement  unilaterally.   Nye
contends that the power-to-change clause of paragraph two of  the
Acknowledgement  and Agreement refers to policies  and  practices
detailed in the first forty-three pages of the handbook  and  not
to the arbitration agreement that is expressed in paragraphs four
and  five  of the Acknowledgement and Agreement.  Nye notes  that
paragraph  two of the Acknowledgement and Agreement asserts  that
the  handbook is not a contract and that this differentiates  the
policies set out in the handbook from paragraphs four and five of
          the Acknowledgement and Agreement, which are in the form of an
agreement.  Nye also contends that to the extent that the  change
clause  may suggest that it applies to the arbitration agreement,
it  does not do so with sufficient clarity to be effective.   For
this  point  Nye  relies  on Jones v. Central  Peninsula  General
Hospital.20   There  we held that an employers  personnel  policy
manual  modified an employees at-will status and that a purported
disclaimer   in  the  manual  was  ineffective  to  prevent   the
modification  because  it did not clearly  and  conspicuously  so
provide.21
          We  think  that  the positions of both parties  are  at
least  reasonably arguable. In support of Gibsons  position,  the
arbitration  agreement  is  contained  in  the  handbook  and  is
arguably a policy within the meaning of the clause permitting Nye
to  make  unilateral changes.  On the other hand, the arbitration
agreement  is  separated from the rest of  the  handbook  and  is
located under the Acknowledgement and Agreement caption.  What is
acknowledged under this caption is receipt of the handbook and an
understanding  of  its  terms,  including  that   they   may   be
unilaterally  changed.   But  what  is  agreed  to  is   arguably
separate:   the  arbitration paragraphs and, in paragraph  three,
the  fact that the nature of the employment with Nye is and  will
continue  to  be  at-will  unless  a  specific  writing  provides
otherwise.
          Given  this  ambiguity, we think that  the  arbitration
agreement  is  best seen as not subject to the unilateral  change
clause.  Several interpretative principles support this view.  An
interpretation that gives a lawful and effective meaning  to  the
terms  of  a  contract is to be preferred over an  interpretation
that leaves a contract or a part of a contract unlawful or of  no
effect.22  Given  the  prevalence of the  view  that  arbitration
clauses that may be changed unilaterally are unconscionable, this
rule  of interpretation supports an interpretation that paragraph
two  in  the  Acknowledgement and Agreement does not  govern  the
arbitration  agreement.   Similarly,  given  the  strong   public
policies  favoring  arbitration, an interpretation  that  permits
arbitration  is  to  be preferred over one that  would  frustrate
arbitration.23   Further, because Nye drafted the agreement,  the
interpretation of it that is most favorable to Gibson  should  be
adopted.24  This principle operates, if anything, more strongly in
cases  of  adhesive contracts.25  Finally, the approach taken  by
this  court  in  Jones indicates that only clear and  conspicuous
language  in  an  employment manual would  suffice  to  negate  a
contract   created  by  the  manual.   Paragraph   two   of   the
Acknowledgement and Agreement does not satisfy this test.
     E.   The  $50,000 Appellate Threshold Is Unconscionable  but
          Severable.
          Gibson  contends  that the clause  in  the  arbitration
agreement that provides that [a]wards exceeding $50,000.00 . .  .
shall  be  subject  to  reversal  and  remand,  modification,  or
reduction  following review of the record and  arguments  of  the
parties  by  a second arbitrator is unconscionable.  He  contends
that it is so seriously one-sided in favor of the employer as  to
be  unreasonable.   Gibson contends that  the  $50,000  appellate
          threshold ignores the possibility that a worker may have a claim
with a potential value of well over $50,000 yet receive either no
award  or an award falling under the $50,000 threshold.  In  such
cases the worker would be deprived of an appeal, whereas in cases
in  which an employer stands to lose $50,000 or more the employer
has  a  right of appeal.  Gibson also cites a number of cases  in
which  similar  appellate  thresholds  have  been  found  to   be
unconscionable.26
          Nye  argues that the $50,000 threshold provision is not
unreasonably one-sided.  It contends that Nye might  make  claims
against employees that could result in large awards.  Nye  offers
as  an  example  a  case  in  which a management  employee  might
discriminate  against  customers to whom  Nye  would  be  legally
liable;  in that event Nye might wish to seek reimbursement  from
the employee.
          We believe that Gibson has the better of this argument.
The  case  upon which Gibson places primary reliance,  Little  v.
Auto  Stiegler, Inc.,27 seems directly on point.  In  Little  the
employer, another auto dealer, sought to defend a provision in an
arbitration   agreement  that  contained  a   $50,000   threshold
identical to the language in the threshold clause in this case.28
The  court found the threshold clause unconscionable and  ordered
it severed from the arbitration agreement:
          From  a  plaintiffs perspective, the decision
          to  resort to arbitral appeal would  be  made
          not   according   to  the   amount   of   the
          arbitration award but the potential value  of
          the  arbitration claim compared to the  costs
          of  the appeal.  If the plaintiff and his  or
          her  attorney  estimate  that  the  potential
          value  of the claim is substantial,  and  the
          arbitrator  rules  that the  plaintiff  takes
          nothing     because    of    its    erroneous
          understanding of a point of law, then  it  is
          rational for the plaintiff to appeal.   Thus,
          the  $50,000 threshold inordinately  benefits
          defendants.    Given  the  fact   that   Auto
          Stiegler   was   the   party   imposing   the
          arbitration   agreement   and   the   $50,000
          threshold,  it is reasonable to  conclude  it
          imposed  the threshold with the knowledge  or
          belief   that  it  would  generally  be   the
          defendant.[29]
          
          We  agree with this rationale.  We also think that  the
cases  in which arbitration will be sought by an employer against
an  employee  are so much less frequent than cases in  which  the
employee is pursuing a claim that this possibility does not serve
to refute Gibsons charge of unreasonable one-sidedness.
          Nye   alternatively  argues  that  if   the   appellate
threshold clause is found to be unconscionable it can and  should
be severed, leaving intact the rest of the arbitration agreement.
Gibson  disagrees,  arguing that doing so would  permit  Nye  and
others  to  attempt  to  impose  without  penalty  unconscionable
          arbitration agreements on those with whom they deal.  Although
this  argument  has  some force, we reject it for  the  following
reasons.   This is the first case decided by this court involving
an  attempt to force an unconscionable arbitration remedy  on  an
employee.   We  have  no  reason to  think  that  Nye  and  other
employers will ignore the precedent created by this opinion.   If
in  future cases similar unconscionable clauses are sought to  be
enforced despite our ruling in this case, severance might not  be
appropriate.  For the present, however, the strong public  policy
favoring  arbitration points to imposing a  severance  remedy  so
that arbitration may take place.
     F.   Requiring   Gibson   To   Pay  Arbitration   Costs   Is
          Inconsistent with the AWHA.
          
          Although  Gibson argues that the arbitration  agreement
requires  him  to  pay  half  of the costs  of  arbitration,  the
arbitration  agreement  is actually silent  on  the  question  of
costs.  The FAA likewise does not address the question of costs.30
Alaskas  Revised  Uniform  Arbitration  Act  provides  that   the
arbitrator shall decide how arbitration costs will be paid in the
absence of a provision in the arbitration agreement.31  Regardless
of  the  apparent uncertainty as to how arbitration  costs  might
actually   be   apportioned,  the  parties  seem   to   have   an
understanding  that  the  expected apportionment  of  arbitration
costs  in cases of this nature would be a fifty/fifty split.   We
accept this understanding for the purposes of this case.
          It is uncertain what the costs of arbitration might be.
A  report  to  the  superior  court  signed  by  Gibsons  counsel
following  consultation  with  Nyes  counsel  states  that  [t]he
parties believe they will need five (5) trial days, with 2.5 days
allocated  to  each party.  The fee that might be  charged  by  a
retired  superior court judge acting as an arbitrator is  not  in
the record.  But we understand that a reasonable charge would  be
at least $1,000 a day.  Considering the additional possibility of
room,  reporter, and transcript costs, and the time  spent  after
the  hearing for the arbitrator to analyze the evidence and write
a decision, the arbitration costs could easily exceed $6,000.
          The  question, then, is whether requiring Gibson to  be
liable for half of these costs is inconsistent with the AWHA.  We
answer  this  question in the affirmative.   The  AWHA  does  not
require wage and hour claimants to pay forum costs other than the
court filing fee of $150.32  This sum contrasts with the uncertain
but much greater forum costs for which Gibson would be liable  in
arbitration.   The stated objective underlying  the  AWHA  is  to
protect  the  health,  efficiency,  and  general  well-being   of
workers.33  To achieve this end, the AWHA contains provisions that
are  designed to deter employers from violating the  act  and  to
encourage  employees  to  take  action  to  remedy  violations.34
Imposing substantial forum costs would run counter to the  latter
strategy.
          The  courts  of a number of jurisdictions have  reached
the same conclusion with respect to attempts to force arbitration
of  claims based on remedial statutes.  The leading case is  Cole
v. Burns International Security Services.35  The district court in
          Cole compelled the arbitration of a claim brought under Title VII
of  the  Civil  Rights  Act of 1964.  On appeal,  one  issue  was
whether  the employer could require the employee to pay  part  of
the  arbitration  costs.  The court of appeals  answered  in  the
negative:
          Because  public law confers both  substantive
          rights and a reasonable right of access to  a
          neutral  forum in which those rights  can  be
          vindicated, we find that employees cannot  be
          required to pay for the services of  a  judge
          in    order   to   pursue   their   statutory
          rights.  . . .  In our view, an employee  can
          never   be   required,  as  a  condition   of
          employment,    to    pay    an    arbitrators
          compensation   in   order   to   secure   the
          resolution  of statutory claims  under  Title
          VII (any more than an employee can be made to
          pay  a judges salary).  If there is any  risk
          that   an   arbitration  agreement   can   be
          construed to require this result, this  would
          surely deter the bringing of arbitration  and
          constitute  a  de  facto  forfeiture  of  the
          employees  statutory rights.   The  only  way
          that an arbitration agreement of the sort  at
          issue  here can be lawful is if the  employer
          assumes responsibility for the payment of the
          arbitrators compensation.[36]
          
          The  California Supreme Court followed Coles lead  with
respect  to  cost  sharing  in Armendariz  v.  Foundation  Health
Psychcare Services, Inc.37  The California court ruled:
          [C]onsistent    with    the    majority    of
          jurisdictions  to  consider  this  issue,  we
          conclude   that  when  an  employer   imposes
          mandatory  arbitration  as  a  condition   of
          employment,  the  arbitration  agreement   or
          arbitration process cannot generally  require
          the employee to bear any type of expense that
          the employee would not be required to bear if
          he  or  she were free to bring the action  in
          court.   This rule will ensure that employees
          bringing FEHA claims will not be deterred  by
          costs  greater than the usual costs  incurred
          during litigation, costs that are essentially
          imposed on an employee by the employer.[38]
          
          Nye argues that a decision of the United States Supreme
Court  decided  after Cole and Armendariz, Green  Tree  Financial
Corp.  Alabama v. Randolph,39 precludes a bright-line rule against
employment arbitration agreements that require employees to pay a
share of arbitration costs.40  In Green Tree the plaintiff was  a
borrower  who  filed suit against her lender  under  the  federal
Truth in Lending and Equal Opportunity Acts.  She argued that the
arbitration  clause  that  she had  signed  was  not  enforceable
          because its silence as to the payment of arbitration costs
created  an unacceptable risk that she would be made to pay  high
costs  and this possibility would deter her from vindicating  her
federal statutory rights.  The Supreme Court rejected this claim,
noting  that  [t]he  risk  that Randolph  will  be  saddled  with
prohibitive  costs is too speculative to justify the invalidation
of an arbitration agreement.41  The Court held that where a party
seeks  to invalidate an arbitration agreement on the ground  that
arbitration  would be prohibitively expensive, that  party  bears
the burden of showing the likelihood of incurring such costs.42
          If  Green Tree applied to this case, a remand would  be
necessary  for  a preliminary evidentiary hearing as  to  whether
prospective arbitration costs imposed on Gibson would be so large
as  to  interfere with vindication of his rights under the  AWHA.
But  we  conclude that Green Tree does not apply.  That case  has
been  interpreted as being applicable only to the arbitration  of
federal rather than state statutory claims.43  Further, the  FAA,
which  of  course  does  apply to this case,  permits  state  law
defenses  to  arbitration  on generally applicable  contract  law
grounds    that   is,   grounds  not  specifically   hostile   to
arbitration.   Here, our conclusion that a contract requiring  an
employee  to  pay arbitral costs is unenforceable because  it  is
contrary  to  the  policies  of  the  AWHA  is  not  specific  to
arbitration.   Rather,  any  contract  requiring  the  waiver  of
substantive rights afforded by the AWHA may be declared  void  on
that basis.44
          For  these reasons we reject Nyes argument that we  are
precluded from ruling that employment arbitration agreements  are
per se invalid if they require employees to pay arbitration costs
greater than the court filing fee.  We are not required to  adopt
Green  Trees  case-by-case approach either by Green Tree  or  the
FAA.  As a matter of state policy, we think a bright-line rule is
preferable  to obviate litigation in every case as to the  effect
of  cost  splitting.   Arbitration is thought  to  be  beneficial
because  it  is faster and cheaper than court litigation.   Green
Trees case-by-case approach tends to undercut these benefits.
          Having concluded that the possibility that Gibson might
be   required   to   share  substantial  arbitration   costs   is
unacceptable,  it follows that he cannot be forced  to  arbitrate
his claim in this case unless, on remand, Nye agrees that it will
be  responsible for all of the arbitration costs.  Because of the
strong  public policy favoring arbitration, we think  giving  Nye
this  option is preferable to ruling that this case  may  not  be
arbitrated.
III. CONCLUSION
          REVERSED  and REMANDED for further action in accordance
with the views expressed in this opinion.
_______________________________
     1     The  same  Employee Acknowledgement and Agreement  was
used in the Nye Frontier Ford handbook.

     2    Green Tree Fin. Corp.  Alabama v. Randolph, 531 U.S. 79
(2000).

     3    AS 23.10.060, AS 23.10.110(a).

     4    AS 23.10.110(c).

     5    AS 23.10.110(e); Bobich v. Stewart, 843 P.2d 1232, 1237-
38 (Alaska 1992).

     6     AS  23.10.110(f).  Also, nowhere in  AS  23.10.110  is
there a provision allowing an award of costs of the action  to  a
prevailing defendant.

     7    State v. Native Vill. of Nunapitchuk, 156 P.3d 389, 402-
03   (Alaska  2007)  (explaining  that  intertwined  fee-shifting
provisions are substantive because [t]hey are usually designed to
encourage  suits  that, in the judgment of the legislature,  will
further public policy goals).

     8     McKeown  v. Kinney Shoe Corp., 820 P.2d 1068,  1070-71
(Alaska 1991).

     9     Gilmer v. Interstate/Johnson Lane Corp., 500 U.S.  20,
26-28  (1991) (quoting Mitsubishi Motors Corp. v. Soler Chrysler-
Plymouth,   Inc.,  473  U.S.  614,  628,  637  (1985))  (internal
quotation marks omitted).

     10    9 U.S.C.  1 et seq.

     11    Id.  2.

     12     See  Perry  v. Thomas, 482 U.S. 483, 492  n.9  (1987)
(interpreting  9 U.S.C.  2) ([S]tate law, whether of  legislative
or  judicial  origin, is applicable if that law arose  to  govern
issues  concerning the validity, revocability, and enforceability
of  contracts  generally. A state-law principle  that  takes  its
meaning  precisely from the fact that a contract to arbitrate  is
at  issue  does not comport with [the Federal Arbitration  Act].)
(emphasis omitted).

     13    Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460
U.S. 1 (1983).

     14     AS  09.43.010.180; AS 09.43.300.595; Modern  Constr.,
Inc. v. Barce, Inc., 556 P.2d 528 (Alaska 1976); see also Dept of
Pub. Safety v. Pub. Safety Emp. Assn, 732 P.2d 1090, 1093 (Alaska
1987)  (The  common law and statutes of Alaska  evince  a  strong
public  policy in favor of arbitration.  (quoting Univ. of Alaska
v. Modern Constr., Inc., 522 P.2d 1132, 1138 (Alaska 1974))).

     15     See  Volt Info. Scis., Inc. v. Bd. of Trs., 489  U.S.
468,  476-79 (1989) (holding that FAA does not preempt state laws
governing arbitration where those laws do not undermine the goals
and policies of the FAA).

     16    Lexington Marketing Group, Inc. v. Goldbelt Eagle, LLC,
157  P.3d  470, 472 (Alaska 2007) (quoting Guin v. Ha,  591  P.2d
1281,  1284  n.6 (Alaska 1979)) (reviewing de novo  the  superior
courts decision finding an arbitration clause unenforceable).

     17     Municipality of Anchorage v. Locker, 723  P.2d  1261,
1265-66 (Alaska 1986).

     18    See text accompanying footnote 1.

     19     Among  the  cases  cited by  Gibson  are  Net  Global
Marketing,  Inc. v. Dialtone, Inc., 217 F. Appx.  598  (9th  Cir.
2007);  Ingle v. Circuit City Stores, Inc., 328 F.3d  1165   (9th
Cir.  2003); Brennan v. Bally Total Fitness, 198 F. Supp. 2d 377,
384  (S.D.N.Y.  2002); Armendariz v. Foundation Health  Psychcare
Services., Inc., 6 P.3d 669, 694 (Cal. 2000).

     20    779 P.2d 783, 787-88 (Alaska 1989).

     21     Id.  at  787 (quoting Leikvold v. Valley  View  Cmty.
Hosp., 688 P.2d 170, 174 (Ariz. 1984)).

     22    See Restatement (Second) of Contracts  203(a) (1981).

     23    See id.  207 (In choosing among the reasonable meanings
of  a  promise  or agreement or a term thereof,  a  meaning  that
serves the public interest is generally preferred.).

     24    See id.  206 (In choosing among the reasonable meanings
of  a  promise  or agreement or a term thereof, that  meaning  is
generally preferred which operates against the party who supplies
the  words  or  from  whom  a writing otherwise  proceeds.).   We
interpret   this  principle  to  operate  within  the  reasonably
possible choices of contract meaning.  We do not think that  this
principle goes further to prefer a choice that is so favorable to
the  drafter that it may be regarded as unconscionable  in  cases
where  a  conclusion of unconscionability is sought by  the  non-
drafter.   Contra Dumais v. Am. Golf Corp., 299 F.3d  1216,  1219
(10th Cir. 2002).

     25     See Burgess Constr. Co. v. State, 614 P.2d 1380, 1384
(Alaska  1980)  (Any ambiguity in an objectionable adhesive  term
will  be  seized  upon  and construed most strictly  against  the
drafter.).

     26    Gibson cites Little v. Auto Stiegler, Inc., 63 P.3d 979
(Cal.  2003);  Worldwide Insurance Group v. Klopp, 603  A.2d  788
(Del.  1992); and Zak v. Prudential Property & Casualty Insurance
Co., 713 A.2d 681 (Pa. Super. 1998).

     27    63 P.3d 979 (Cal. 2003).

     28    Id. at 983.

     29    Id. at 985.

     30    9 U.S.C.  1 et seq.

     31     AS 09.43.480(d) provides: An arbitrators expenses and
fees, together with other expenses, shall be paid as provided  in
the award.

     32    Alaska R. Admin. P. 9(b)(1) (2008).

     33    AS 23.10.050(2).

     34    See Bobich v. Stewart, 843 P.2d 1232, 1238 n.9 (Alaska
1992)  (explaining  that the purpose of the one-way  fee-shifting
provision of the AWHA is to encourage employees to press wage-and-
hour claims); McKeown v. Kinney Shoe Corp., 820 P.2d 1068 (Alaska
1991)  (voiding  private settlement of AWHA  claims  because  its
waiver of punitive damages violates public policy).

     35    105 F.3d 1465 (D.C. Cir. 1997).

     36      Id.  at  1468  (footnote  omitted)  (alterations  in
original).  The court in Cole outlined five conditions that  must
be  satisfied if an arbitrable forum is to be substituted  for  a
judicial  one with respect to statutory claims.  The  arbitration
agreement  must (1) provide for neutral arbitrators, (2)  provide
for more than minimal discovery, (3) require a written award, (4)
provide for all types of relief that would otherwise be available
in   court,   and  (5)  not  require  employees  to  pay   either
unreasonable  costs  or any arbitrators fees  or  expenses  as  a
condition  of  access  to the arbitration forum.   Id.  at  1482.
Under such circumstances, the court concluded, an employee who is
made  to use arbitration as a condition of employment effectively
may  vindicate  [his or her] statutory cause  of  action  in  the
arbitral forum.   Id. (quoting Gilmer v. Interstate/Johnson  Lane
Corp., 500 U.S. 20, 28 (1991)).

     37    6 P.3d 669 (Cal. 2000).

     38    Id. at 687.  The California Supreme Court in Armendariz
also generally endorsed the five conditions imposed by Cole,  see
supra note 36, in the context of claims brought under Californias
Fair Employment and Housing Act:

               We  emphasize  at  the outset  that  our
          general  endorsement of the Cole requirements
          occurs in the particular context of mandatory
          employment arbitration agreements,  in  order
          to  ensure that such agreements are not  used
          as  a  means  of  effectively  curtailing  an
          employees FEHA rights. . . . [I]t is for  the
          courts  to ensure that the arbitration  forum
          imposed  on  an  employee  is  sufficient  to
          vindicate his or her rights under the FEHA.
          
Armendariz, 6 P.3d at 682 n.8.

     39    531 U.S. 79 (2000).

     40     At  oral argument Nyes counsel may have changed  Nyes
position regarding Green Tree, stressing that a bright-line  rule
is bad policy even if not strictly prohibited by Green Tree.

     41    Id. at 91.

     42    Id. at 92.

     43     See  Stutler v. T.K. Constructors Inc., 448 F.3d  343
(6th Cir. 2006).

     44     See McKeown v. Kinney Shoe Corp., 820 P.2d 1068, 1071
(Alaska  1991) (finding private settlement of liquidated  damages
claim under AWHA contrary to policy of AWHA and therefore void).

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