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Beltran v. Aupaircare, Inc.

United States Court of Appeals, Tenth Circuit

October 30, 2018

JOHANA PAOLA BELTRAN; LUSAPHO HLATSHANENI; BEAUDETTE DEETLEFS; ALEXANDRA IVETTE GONZALEZ; JULIANE HARNING; NICOLE MAPLEDORAM; LAURA MEJIA JIMINEZ; SARAH CAROLINE AZUELA RASCON, Plaintiffs - Appellees,
v.
AUPAIRCARE, INC., Defendant-Appellant, and INTEREXCHANGE, INC.; USAUPAIR, INC.; GREATAUPAIR, LLC; EXPERT GROUP INTERNATIONAL INC., d/b/a Expert Au Pair; EURAUPAIR INTERCULTURAL CHILD CARE PROGRAMS; CULTURAL HOMESTAY INTERNATIONAL; CULTURAL CARE, INC., d/b/a Cultural Care Au Pair; AU PAIR INTERNATIONAL, INC.; APF GLOBAL EXCHANGE, NFP, d/b/a Aupair Foundation; AMERICAN INSTITUTE FOR FOREIGN STUDY, d/b/a Au Pair in America; AMERICAN CULTURAL EXCHANGE, LLC, d/b/a GoAuPair; AGENT AU PAIR; A.P.E.X. AMERICAN PROFESSIONAL EXCHANGE, LLC, d/b/a ProAuPair; 20/20 CARE EXCHANGE, INC., d/b/a The International Au Pair Exchange; ASSOCIATES IN CULTURAL EXCHANGE, d/b/a GoAu Pair; GOAUPAIR OPERATIONS, LLC, Defendants.

          Appeal from the United States District Court for the District of Colorado (D.C. No. 1:14-CV-03074-CMA-KMT)

          Thomas B. Quinn (Peggy E. Kozal, Nathan A. Huey, and Jennifer Arnett-Roehrich with him on the briefs), Gordon & Rees LLP, Denver, Colorado, for Defendant - Appellant.

          David H. Seligman, Towards Justice, Denver, Colorado, for Plaintiffs - Appellees.

          Before McHUGH, KELLY, and MORITZ, Circuit Judges.

          MCHUGH, CIRCUIT JUDGE.

         Au pairs and former au pairs filed a class action lawsuit against AuPairCare, Inc. ("APC") and other au pair sponsoring companies in federal district court alleging violations of antitrust laws, the Racketeer Influenced and Corrupt Organizations Act ("RICO"), the Fair Labor Standards Act ("FLSA"), federal and state minimum wage laws, and other state laws. Eventually, the au pairs amended their complaint and added two former au pairs, Juliane Harning and Laura Mejia Jimenez, who were sponsored by APC. In response, APC filed a motion to compel arbitration, which the district court denied. The district court found the arbitration provision between the parties both procedurally and substantively unconscionable and declined to enforce it. APC now appeals that denial.

         Because the arbitration provision contains only one substantively unconscionable clause, the district court abused its discretion by refusing to sever the offending clause and otherwise enforce the agreement to arbitrate. We therefore reverse the district court's ruling and remand for proceedings consistent with this decision.

         I. BACKGROUND

         A. Regulatory Framework

         To enter the United States, foreigners require a visa. One type of visa is granted under the J-1 Visa program, which the United States Department of State operates under authority from the Mutual Education and Cultural Exchange Act of 1961, 22 U.S.C. §§ 2451-2464. One of the J-1 Visa programs is the au pair program. 22 C.F.R. § 62.31. Au pairs are limited to one-year or less in the United States for each trip, id. § 62.31(c)(1), and are required to be "proficient in spoken English," id. § 62.31(d)(3), evidenced through a personal interview in English, id. § 62.31(d)(5). "Sponsors designated by the Department of State . . . conduct [the] au pair exchange program." Id. § 62.31(c). The sponsors are responsible for selecting au pairs, id. § 62.31(d), selecting suitable host families, id. § 62.31(h), and placing au pairs with particular host families, id. § 62.31(e). APC is a sponsor designated by the Department of State.

         The au pair program affords foreign nationals "the opportunity to live with an American host family and participate directly in the home life of the host family." Id. § 62.31(a). Au pairs provide child care services for the host family subject to weekly and daily hour limitations, id. § 62.31(j)(2), pursue six semester hours of academic credit during their year in the United States, id. § 62.31(k)(1), and receive in exchange monetary compensation, id. § 62.31(j)(1), and two-weeks paid vacation over the course of the year, id. § 62.31(j)(4).

         B. Underlying Lawsuit

         Johana Beltran, a former au pair sponsored by InterExchange, Inc., filed suit in the United States District Court for the District of Colorado on November 13, 2014, against her host family, her sponsor InterExchange, APC, and other organizations approved to sponsor au pairs in the United States. Ms. Beltran amended her complaint on March 13, 2015, to add four former au pairs as plaintiffs. After receiving authorization, Ms. Beltran filed a second amended complaint that added an additional four plaintiffs, including Ms. Harning and Ms. Jimenez, in a class action against the sponsoring agencies. Of the named plaintiffs, APC sponsored only Ms. Harning and Ms. Jimenez. The second amended complaint alleged the sponsors had violated antitrust laws, RICO, the FLSA, federal and state minimum wage laws, and various other state laws.

         C. Factual History

         1. Ms. Harning

         Ms. Harning is originally from Germany. She signed two different agreements with APC that include arbitration provisions. Prior to her first stint as an au pair, Ms. Harning signed an agreement in 2007 when she was nineteen years old. She then worked as an au pair in Michigan in 2008. She applied to APC again in 2013, signed another agreement when she was twenty-four or twenty-five, and worked as an au pair in Virginia in 2014. Ms. Harning alleges that "[a]t the time of signing the contract[s], [she] was not familiar with the concept of arbitration," and "was not aware of any provision regarding arbitration, or the meaning of the statutes cited in that provision." App. vol. 3 at 444. Earlier in the district court proceedings, however, she provided deposition testimony that she understood the contracts with APC "because [she] got it in German." App. vol. 2 at 384. During her deposition, she further stated that she did not think there were any portions of the au pair agreement that confused her.

         2. Ms. Jimenez

         Ms. Jimenez is originally from Colombia. She signed her only agreement with APC in December 2013, when she was twenty-two years old. She worked as an au pair from July 2014 to July 2015 in Pennsylvania. "Spanish is [her] first language." App. vol. 3 at 445. Although Ms. Jimenez did not want to sign the au pair agreement, APC told her it would not place her as an au pair if she did not sign the agreement. Ms. Jimenez further avers that at the time of signing the contract, she "did not know the English word 'arbitration, '" she "did not understand the meaning of the statutes cited in the arbitration provision," and the "rules that would govern the arbitration were not attached to the contract." Id. at 446. Similar to Ms. Harning, however, Ms. Jimenez received the agreement in her native language before she signed it. She also claimed to have read it and to have found the statements and provisions acceptable before signing.

         3. 2013 and 2014 Au Pair Agreements[1]

         The 2013 Au Pair Agreement (signed by Ms. Harning) and the 2014 Au Pair Agreement (signed by Ms. Jimenez) are largely identical. The opening paragraphs of both agreements state that "This AuPairCare Au Pair Agreement (the 'Agreement') is entered into between AuPairCare, a California Corporation and 'Au Pair.'" App. vol. 2 at 263, 270. The agreements also include identical choice of law provisions: "This Agreement shall be deemed to have been made in the State of California, U.S., and its validity, construction, breach, performance and interpretation shall be governed by the laws of the State of California, U.S." Id. at 268, 275. Finally, the agreements contain identical arbitration provisions:

         K. Other Terms and Conditions

The parties to the Agreement acknowledge and agree that any dispute or claim arising out of this Agreement, including, but not limited to any resulting or related transaction or the relationship of the parties, shall be decided by neutral, exclusive and binding arbitration in San Francisco, California, U.S [sic] before an arbitration provider selected by AuPairCare, upon the petition of either party.
In such proceeding, the parties may utilize subpoenas and have discovery as provided in California Code of Civil Procedure Sections 1282.6, 1283 and 1283.05. The decision of the arbitrator shall be final and binding and may be enforced in any court of competent jurisdiction. Au Pair agrees that California is a fair and reasonable venue for resolution of any such dispute and it submits to jurisdiction of the Courts of the State of California because, among other reasons, this agreement was negotiated in large part in California, and AuPairCare is domiciled in California.
In the event that the arbitration clause is deemed void or inapplicable, each party expressly consents to and submits to the personal jurisdiction of the federal or state court(s) of San Francisco County California, U.S. In any action, including arbitration, brought for breach of this Agreement, the prevailing party shall be entitled to recover reasonable attorney's fees and costs, including but not limited to the costs of arbitration [sic]

Id. at 267-68, 274-75 (paragraph number omitted).

         Both Au Pair Agreements are six pages long and include approximately eighty numbered paragraphs. The arbitration provision in the agreements is located under the heading "Other Terms and Conditions" together with approximately ten other provisions. The 2013 and 2014 Au Pair Agreements state: "Au Pair has fully read this Agreement and agrees to the terms and conditions contained herein" and

• I am capable of reading and understanding this Agreement in English
• I have had the opportunity to ask questions and obtain advice, to ensure I understand this Agreement in its entirety

• I accept the terms of this entire Agreement and understand that it is legally binding

Id. at 263, 268, 270, 275.

         D. Procedural History

         After Ms. Beltran filed her second amended complaint, which added the former APC au pairs, APC filed a motion to compel arbitration and dismiss the lawsuit or alternatively to stay the lawsuit. Ms. Harning and Ms. Jimenez opposed APC's motion.

         The district court denied APC's motion, finding the arbitration provision unconscionable. Beltran v. InterExchange, Inc., No. 14-cv-03074-CMA-KMT, 2017 WL 4418711 (D. Colo. Sept. 21, 2017). The district court concluded the au pair agreements were contracts of adhesion and procedurally unconscionable because the au pairs were relatively young at the time they signed the contracts, were foreigners, spoke English as a second language, and had no experience with contracts or contract law. Id. at *6. And, although each had read the contract before signing it, the district court found that neither understood what "arbitration" meant. Id. The district court also found the element of surprise in the agreements because the arbitration provision was "buried" at the end of around eighty paragraphs under a nondescript header and did not explain in plain English that the au pairs were waiving their rights to access the ...


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