VERSATILITY CONSTRUCTION LLC v. CLEVELAND CONSTRUCTION INC (2025)

OPINION AND ORDER

Plaintiff O's Versatility Construction LLC brings claims against Defendants Cleveland Construction, Inc. and James Tolbert under 42 U.S.C. § 1981, Title VII of the Civil Rights Act of 1964, the Ohio Civil Rights Act, and other State laws. Cleveland Construction, joined by Mr. Tolbert, moves to compel arbitration of Plaintiff's claims and to stay these proceedings pending arbitration. For the following reasons, the Court GRANTS IN PART the motion to compel arbitration and stay these proceedings.

STATEMENT OF FACTS

A. The Subcontract

On April 26, 2023, Cleveland Construction and O's Versatility Construction entered into a subcontract on the City Club Apartments project in downtown Cleveland, Ohio. (ECF No. 7-1.) The subcontract agreement provides that Cleveland Construction has the “sole option” to resolve any controversy or claim by arbitration under the Construction Industry Arbitration Rules of the American Arbitration Association and that O's Versatility “shall be bound by the decision of the arbitrator(s).” (Id., §§ 16.3 & 16.6, PageID #52.) In any litigation or arbitration, the parties agreed to certain limitations on discovery. (Id., § 16.4.) Specifically, the parties agreed to ten written interrogatories, no more than three depositions per party in addition to depositions of any experts, no discovery of electronically stored information other than emails, and discovery of project records directly related to the subcontractor's work on the project. (Id.) Additionally, O's Versatility “expressly waives ․ any and all rights to recover exemplary, special, or consequential damages,” or anticipated overhead and profit on any work not performed, “is not entitled to a trial by jury,” and “is liable to and shall reimburse Cleveland [Construction] for all Legal Fees it incurred” if Cleveland Construction prevails. (Id., §§ 15.9. 16.1 & 16.7, PageID #51–52.)

B. Work on the Project

O's Versatility is a minority-owned company, and its workers on the project were African American. (ECF No. 14, ¶ 16, PageID #91.) In July 2023, O's Versatility began working on the project. (ECF No. 17, Page ID #136.) The parties characterize the events of the next several months differently.

B.1. O's Versatility's Version of Events

O's Versatility reports that its workers experienced racial discrimination at the project from day one, including the display of a cardboard cutout of a human figure hanging from a noose with the message “my motivation to work,” racist graffiti in the portable bathrooms, racist slurs and comments, discriminatory treatment, and sabotage of their work. (ECF No. 14, ¶¶ 19–21 & 26–29, PageID #91–93 & 94.) James Tolbert, Cleveland Construction's on-site supervisor, was one of the Cleveland Construction employees who engaged in the racial discrimination. (Id., ¶¶ 21–22, PageID #92–93.) When O's Versatility's owner complained to Cleveland Construction about the sabotage and racial discrimination, Cleveland Construction's vice president dismissed the complaint out of hand and took no action to investigate or alleviate the situation. (Id., ¶¶ 38–39, PageID #95.) Instead, Cleveland Construction retaliated by sending a default letter containing false or misleading information and ultimately filing an arbitration claim against O's Versatility for an alleged breach of the subcontract agreement after O's Versatility workers left the project out of fear for their safety. (Id., ¶¶ 40–49, PageID #95–96.)

B.2 Cleveland Construction's Version of Events

Cleveland Construction contends that O's Versatility abandoned the project after continually failing to complete quality work. (ECF No. 17.) Cleveland Construction sent emails to O's Versatility in August, September, and October 2023 detailing serious delays and numerous quality concerns in O's Versatility's work. (ECF No. 17, PageID #136–37; ECF No. 7-2.) On October 23, 2023, Cleveland Construction issued a notice of default. (ECF No. 17, PageID #138.)

The following day, the owner of O's Versatility sent an email to Cleveland Construction alleging racial discrimination, with a picture of the cardboard cutout of the hanged man attached. (Id.) Cleveland Construction investigated the issue, determined that the cutout belonged to an employee of another subcontractor on the project, and removed the cutout and the employee from the project. (Id.) Meanwhile, O's Versatility objected to the notice of default, demobilized from the project site, and refused to complete its contract work. (Id.)

C. Additional Allegations

O's Versatility claims that the quality defects resulted from a “purposeful and racially motivated plan to drive Versatility off of the Project.” (ECF No. 14, ¶ 25, PageID #94.) O's Versatility reports multiple occasions on which it informed Defendants that units were ready for inspection, but Defendants declined to conduct the inspection until the next day. (ECF No. 14, ¶ 27, PageID #94.) By the next day, damage and imperfections would appear that were not there before. (Id., ¶ 28, PageID #94.) O's Versatility also alleges theft of their equipment from the project. (Id., ¶ 29, PageID #94.)

O's Versatility surmises that these incidents were deliberate sabotage because of statements from Mr. Tolbert that he did not believe O's Versatility would be able to handle the job, did not want them on the project, and wanted to get rid of them. (Id., ¶¶ 31–33, PageID #94–95.) On one occasion, Mr. Tolbert allegedly used a racial slur when telling someone that he did not want O's Versatility’ workers on the project. (Id., ¶ 33, PageID #95.) Additionally, when a painter identified himself as being with O's Versatility, an unnamed Caucasian individual at Cleveland Construction's offices responded, “We'll see how long that will last. We'll be taking over that contract.” (Id., ¶ 34, PageID #95.) Around October 13, 2023, Defendants began suggesting that O's Versatility must hire painters familiar to Defendants to help finish the job, at a higher hourly rate than O's Versatility workers. (Id., ¶¶ 35 & 37, PageID #95.) These substitute painters were not African American. (Id., ¶ 36, PageID #95.)

According to O's Versatility, the discovery of the hanged man cutout on October 24, 2023 was a “tipping point” after which its workers did not believe they could remain on the project safely. (Id., ¶¶ 19 & 42, PageID #91 & #96.) O's Versatility workers called the police and informed Defendants of their intended departure. (Id., ¶ 45, PageID #96.) While the O's Versatility workers prepared to depart, a Cleveland Construction worker said, “Look at the [n-words] go.” (Id., ¶ 47, PageID #96.)

D. Arbitration

Cleveland Construction and O's Versatility agree that, on January 24, 2024, Cleveland Construction filed a demand for arbitration against O's Versatility in Florida for breach of the subcontract. (ECF No. 7-3.) On May 20, 2024, O's Versatility filed objections, a provisional answer, and a provisional counterclaim before the American Arbitration Association. (ECF No. 21-1.)

STATEMENT OF THE CASE

On July 16, 2024, Plaintiff O's Versatility sued Defendants Cleveland Construction and Mr. Tolbert in federal court. (ECF No. 1.) Plaintiff alleges that Defendants violated 42 U.S.C. § 1981, Title VII, and the Ohio Civil Rights Act. (Id., PageID #9–11.) Plaintiff also brings claims for breach of contract and negligence against Cleveland Construction. (Id., PageID #11–12.) Plaintiff seeks compensatory and/or economic damages, punitive damages, and attorneys’ fees and costs. (Id., PageID #12–13.)

Cleveland Construction moved to stay the legal proceedings and compel arbitration under the Federal Arbitration Act, 9 U.S.C. § 3 (ECF No. 6), and Mr. Tolbert moved to join (ECF No. 13). Subsequently, Plaintiff amended its complaint as of right, adding a new cause of action against Cleveland Construction under Ohio's Prompt Payment Act. (ECF No. 14, PageID #100–01.) In response, Cleveland Construction filed a second motion to compel arbitration and stay the proceedings (ECF No. 16), which Mr. Tolbert again moved to join (ECF No. 19). Defendants argue that Plaintiff's claims fall squarely within the scope of the subcontract agreement's arbitration clause because they are claims “arising out of or related to” the agreement. (ECF No. 7-1, § 16.3, PageID #52.)

Plaintiff opposes both motions. (ECF No. 20.) Plaintiff argues that the clause giving Cleveland Construction the sole option to arbitrate is unenforceable because it is unilateral, the parties did not intend to include statutory claims under the arbitration provisions, the arbitration provisions prevent the effective vindication of its statutory claims, and any unenforceable arbitration provisions cannot be severed from the arbitration scheme as a whole. Additionally, Plaintiff argues that Cleveland Construction has waived arbitration. Further, Plaintiff contends that any non-arbitrable claims should not be stayed while the remaining claims move through arbitration.

ANALYSIS

Enacted in response to a perception that federal courts were unduly hostile toward arbitration, the Federal Arbitration Act “establishes ‘a liberal federal policy favoring arbitration agreements.’ ” Epic Sys. Corp. v. Lewis, 584 U.S. 497, 505 (2018) (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)). The Act makes arbitration agreements “as enforceable as other contracts, but not more so.” Parker v. Tenneco, Inc., 114 F.4th 786, 792 (6th Cir. 2024) (quoting Morgan v. Sundance, Inc., 596 U.S. 411, 418 (2022)). To compel arbitration under the Federal Arbitration Act, “a court must conclude that (1) the parties agreed to arbitrate, (2) their agreement covers the claims at issue, and (3) Congress intended those claims to be arbitrable.” Gavette v. United Wholesale Mortg., LLC, 2025 WL 318224, at *1 (6th Cir. Jan. 28, 2025) (citing Stout v. J.D. Byrider, 228 F.3d 709, 714 (6th Cir. 2000)).

I. The Parties’ Agreement to Arbitrate

“When deciding whether the parties agreed to arbitrate a certain matter,” courts generally apply the “ordinary state-law principles that govern the formation of contracts.” First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995). The subcontract agreement provides—and the parties agree—that it is governed by the laws of the State of Ohio, where the project and both parties are located. (ECF No. 7-1, §§ 1.1 & 16.1, PageID #37 & #51.) Both Ohio courts and federal courts recognize a strong public policy favoring arbitration. Hayes v. Oakridge Home, 122 Ohio St. 3d 63, 2009-Ohio-2054, 908 N.E.2d 408, ¶ 15; Albert M. Higley Co. v. N/S Corp., 445 F.3d 861, 863 (6th Cir. 2006). Nonetheless, “arbitration is strictly a matter of consent.” Sheet Metal Emps. Indus. v. Absolut Balancing Co., Inc., 830 F.3d 358, 362 (6th Cir. 2016) (citing Volt Info. Scis., Inc. v. Board of Trs. of Leland Stanford Junior Univ., 489 U.S. 468, 479 (1989)). Therefore, “generally applicable contract defenses may apply in arbitration cases just as they do elsewhere.” Parker, 114 F.4th at 792 (cleaned up). Plaintiff invokes two such defenses: absence of consideration and unconscionability.

I.A. Absence of Consideration

First, Plaintiff argues that the arbitration clause is not enforceable because it is one-sided and lacks mutuality of obligation. Because the subcontract grants Cleveland Construction the sole option to resolve claims by litigation or arbitration but does not afford O's Versatility the same choice, Plaintiff contends that there is insufficient consideration to support the agreement to arbitrate. (ECF No. 20, PageID #166–67.) Defendants respond that Ohio law does not require an exact symmetry in the substance of the obligations binding each party, only that the arbitration process exercise equal binding force on both parties. (ECF No. 21, PageID #181–82.)

Ohio courts distinguish between commercial contracts and those between consumers and commercial sellers or, importantly, those binding employees who assert discrimination claims. Ohio Plumbing, Ltd. v. Fiorilli Constr., Inc., 2018-Ohio-1748, 111 N.E.3d 763, ¶ 28 (Ohio Ct. App.). Commercial contracts that give one party the sole discretion to choose arbitration for dispute resolution are not categorically unenforceable under Ohio law. See, e.g., id. at ¶¶ 2–3 & 30–31; Albert M. Higley Co., 445 F.3d at 863–64. To argue otherwise, Plaintiff cites cases involving non-commercial contracts or the laws of other States, but an assertion that such provisions necessarily destroy mutuality of obligation does not hold in Ohio. Where “the contract as a whole did not lack consideration,” there is no reason for “separate consideration for an arbitration provision contained within a valid contract.” Wilson Elec. Contractors, Inc. v. Minnotte Contracting Corp., 878 F.2d 167, 169 (6th Cir. 1989). Therefore, Plaintiff's argument regarding mutuality fails.

I.B. Unconscionability

Next, the Court considers whether the particular circumstances of this arbitration clause render it unconscionable, as Plaintiff suggests. (ECF No. 20, PageID #167.) Unconscionability is a ground for revoking an arbitration agreement. Hayes, 2009-Ohio-2054, ¶ 19. “The party asserting unconscionability of a contract bears the burden of proving that the agreement is both procedurally and substantively unconscionable.” Id., ¶ 20. Procedural unconscionability exists where there is “an absence of meaningful choice on the part of one of the parties” during the agreement process, while substantive unconscionability means that the contract terms are themselves “unfair and unreasonable.” Ohio Plumbing, 2018-Ohio-1748, ¶ 24.

Plaintiff does not carry its burden. Nothing in the record suggests that any procedural unconscionability occurred during the formation of the subcontract. Indeed, the complaint makes no allegations about the process of contract formation at all. Nor does Plaintiff's briefing. Even if the agreement were somehow procedurally unconscionable, Plaintiff also fails to carry its burden of establishing substantive unconscionability. Therefore, the Court determines that the arbitration clause is not unconscionable.

II. Scope of the Arbitration Agreement

“[A] court may order arbitration of a particular dispute only where the court is satisfied that the parties agreed to arbitrate that dispute.” Granite Rock Co. v. International Bhd. of Teamsters, 561 U.S. 287, 297 (2010). Accordingly, the subcontract agreement compels arbitration of a claim only if the claim falls within the scope of the arbitration clause.

II.A. Arbitrability

As a threshold matter, the parties dispute whether the arbitrability of the claims at issue falls to the Court or an arbitrator. Cleveland Construction takes the position that the Court should determine the scope of the arbitration clause. (ECF No. 21, PageID #186; see also ECF No. 15-2, PageID #130.) But Plaintiff advances conflicting positions. On the one hand, Plaintiff brought this case to federal court, asks the Court to decide arbitrability in its favor, and does not expressly suggest that the Court leave the question for an arbitrator. (See ECF No. 1; ECF No. 20.) On the other hand, as a premise of its argument that Cleveland Construction waived its right to arbitrate, Plaintiff contends that the arbitration clause delegates arbitrability to the arbitrator. (See ECF No. 20, PageID #177–78.) Specifically, Plaintiff argues that Cleveland Construction waived arbitration by availing itself of the Court for a decision on arbitrability even though the arbitration agreement incorporates the Construction Industry Arbitration Rules of the American Arbitration Association, which ordinarily constitutes “clear and unmistakable evidence” that the parties agreed to arbitrate arbitrability. Blanton v. Domino's Pizza Franchising LLC, 962 F.3d 842, 846 (6th Cir. 2020).

The Court takes up Plaintiff's second argument, that Cleveland Construction waived its right to arbitrate, later. For now, the Court addresses only waiver of the arbitrability question. To the extent Plaintiff argues the parties agreed to arbitrate arbitrability, it does not directly make such an argument and, therefore, waived the issue. Further, Plaintiff suggests that the Court should rule in its favor on arbitrability but find that the subcontract reserves the issue for an arbitrator. Plaintiff cannot have it both ways. It “may not first ask the district court to determine arbitrability and then later argue that the court cannot decide.” United States ex rel. Dorsa v. Miraca Life Scis., Inc., 33 F.4th 352, 357 (6th Cir. 2022). Therefore, the Court goes on to evaluate the arbitrability of Plaintiff's claims under Section 1981.

II.B. The Arbitration Clause

Plaintiff does not dispute that its claims for breach of contract, negligence, and violation of Ohio's Prompt Payment Act are subject to the subcontract's arbitration clause. However, Plaintiff argues that the subcontract demonstrates the parties’ intent to exclude discrimination claims under Section 1981 from the arbitration clause. (ECF No. 20, PageID #168–70.) For their part, Defendants emphasize the high evidentiary bar for finding that parties intended to exclude a claim from a broad arbitration clause in the absence of any express provision to that effect. (ECF No. 17, PageID #141–42.) Defendants maintain that the arbitration clause encompasses the present claim by its plain language and that the claim necessarily turns on the subcontract agreement, which brings it into the ambit of the arbitration clause under Ohio law. (Id.)

Determining the scope of an arbitration agreement “is simply a matter of contract between the parties;” courts must seek “to resolve those disputes—but only those disputes—that the parties have agreed to submit to arbitration.” International Ass'n of Machinists & Aero. Workers v. AK Steel Corp., 615 F.3d 706, 711 (6th Cir. 2010) (quoting First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943 (1995)); see also Simon v. Pfizer Inc., 398 F.3d 765, 775 (6th Cir. 2005). When deciding whether an issue falls within the scope of an arbitration agreement, courts “ask if an action could be maintained without reference to the contract or relationship at issue.” Fazio v. Lehman Bros., Inc., 340 F.3d 386, 395 (6th Cir. 2003). If there are any ambiguities concerning the arbitration agreement's scope, the Federal Arbitration Act establishes as a matter of law that they “should be resolved in favor of arbitration[.]” Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24–25 (1983); see also Granite Rock Co., 561 U.S. at 298. Further, courts generally hold that an arbitration clause using the phrase “any controversy or claim arising out of or relating to” an agreement establishes an “extremely broad application.” Accuride Corp. v. Forgitron, LLC, No. 1:07-cv-833, 2007 WL 2381952, at *3 (N.D. Ohio Aug. 17, 2007) (citing Southland Corp. v. Keating, 465 U.S. 1, 15 n.7 (1984)); see also, e.g., Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 406 (1967); Academy of Med. v. Aetna Health, Inc., 108 Ohio St. 3d 185, 2006-Ohio-657, 842 N.E.2d 488, ¶ 18.

Such “extremely broad” language appears here. In relevant part, the arbitration clause provides that “any controversy or claim arising out of or related to this Agreement will be resolved by arbitration pursuant to the Construction Industry Arbitration Rules of the American Arbitration Association.” (ECF 7-1, § 16.3, PageID #52.) Accordingly, the language of the arbitration clause is broad enough to cover any claim that arises out of or relates to the subcontract as a whole.

This language encompasses Plaintiff's claims. Plaintiff's claims touch matters related to the subcontract and cannot be maintained without reference to the subcontract. By necessity, Plaintiff describes the underlying contractual relationship between the parties and references the subcontract in formulating the allegations of its complaint. For example, Plaintiff claims that “Defendants violated 42 U.S.C. § 1981 by, among other things, impairing Versatility's ability to enjoy, enforce, perform, modify, and terminate the benefits, privileges, terms and conditions of the contractual relationship created by the Subcontract.” (ECF No. 14, ¶ 53, PageID #97 (emphasis added).) As another example, Plaintiff alleges that “Defendants retaliated against Versatility ․ by declaring Versatility to be in default of the Subcontract on two occasions and by bringing an arbitration claim against Versatility and its bonding company.” (Id., ¶ 68, PageID #98 (emphasis added).) In alleging its Section 1981 claims, Plaintiff openly relies on the contractual relationship between the parties and the language of the subcontract itself. Plaintiff cannot maintain these claims without reference to the underlying subcontract. Accordingly, the scope of the subcontract's arbitration clause covers Plaintiff's entire action by its terms—including Plaintiff's Section 1981 claims.

To resist this conclusion, Plaintiff emphasizes the subcontract's choice of the Construction Industry Arbitration rules in the arbitration clause and its placement following contractual provisions defining “claims” and limiting damages. (ECF No. 20, PageID #169.) Both the reference to these arbitral rules and the types of claims and damages to which the contract speaks, Plaintiff argues, show that the arbitration clause does not reach its statutory claims. (Id.) But the plain language of the arbitration clause counters this construction. It covers “any controversy or claim arising out of or related to this Agreement.” (ECF 7-1, § 16.3, PageID #52.) Although it does not specifically mention statutory claims, such broad language typically covers any dispute arising from the contractual relationship between the parties. Such is the case here, where O's Versatility's work on the project owes entirely to the subcontract.

Nor does the subcontract exempt statutory claims, including those under Section 1981. As Plaintiff concedes, “[i]t is undisputed that [the arbitration clause] does not specifically reference statutory claims.” (ECF No. 20, PageID #169.) In fact, the agreement does not provide for any exceptions at all. (ECF No. 7-1, PageID #52.)

III. Congressional Intent Regarding Arbitrability of Section 1981 Claims

Whatever the parties’ contract provides for, Congress might evince “an intention to preclude a waiver of judicial remedies for the statutory rights” that Section 1981 creates. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628 (1985); see also Highlands Wellmont Health Network Inc. v. John Deere Health Plan, Inc., 350 F.3d 568, 577 (6th Cir. 2003); Academy of Med., 2006-Ohio-657, ¶ 17. The Federal Arbitration Act requires courts to enforce arbitration agreements according to their terms, “save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2; see CompuCredit Corp. v. Greenwood, 565 U.S. 95, 97–98 (2012). One such ground is the “effective vindication” doctrine, which asks whether arbitration would amount to “a substantive waiver of federally protected civil rights.” Parker, 114 F.4th at 792 (quoting 14 Penn Plaza LLC v. Pyett, 556 U.S. 247, 273 (2009)).

III.A. Effective Vindication of Statutory Rights

Plaintiff contends that the subcontract's arbitration provision prevents effective vindication of its rights under Section 1981 by limiting the remedies, forums, and discovery available to it. (ECF No. 20, PageID #170–72.) Defendants respond that an agreement to arbitrate a statutory claim does not compromise any substantive rights. (ECF No. 21, PageID #184.)

A party who chooses to resolve a federal antidiscrimination claim through arbitration does not waive any statutory right to be free from discrimination. 14 Penn Plaza, 556 U.S. at 265. Instead, the plaintiff “waives only the right to seek relief from a court in the first instance.” Id. at 265–66 (citing Gilmer, 500 U.S. at 26). Therefore, an arbitration agreement does not necessarily “alter or abridge substantive rights; it merely changes how those rights will be processed.” Viking River Cruises, Inc. v. Moriana, 596 U.S. 639, 653 (2022). Plaintiff does not argue, and the Court does not conclude, that Section 1981 claims are categorically non-arbitrable. See Willis v. Dean Witter Reynolds, Inc., 948 F.2d 305, 308–10 (6th Cir. 1991) (rejecting the argument that Congress intended claims under Title VII to be non-arbitrable); Cooper v. MRM Inv. Co., 367 F.3d 493, 509 (6th Cir. 2004) (same following amendment of Title VII in the Civil Rights Act of 1991); Lambert v. Tesla, Inc., 923 F.3d 1246, 1251 (9th Cir. 2019) (extending arbitrability to Section 1981 claims based on identical language).

However, “even if arbitration is generally a suitable forum for resolving a particular statutory claim, the specific arbitral forum provided under an arbitration agreement must nevertheless allow for the effective vindication of that claim.” McMullen v. Meijer, Inc., 355 F.3d 485, 490 (6th Cir. 2004) (quoting Floss v. Ryan's Family Steak Houses, Inc., 211 F.3d 306, 313 (6th Cir. 2000)). The effective vindication doctrine prevents a court from enforcing an arbitration agreement that “forbids the assertion of certain statutory rights.” Parker, 114 F.4th at 793 (quoting American Exp. Co. v. Italian Colors Restaurant, 570 U.S. 228, 236 (2013)) (cleaned up). Therefore, the question focuses on whether certain provisions in the arbitration agreement constitute “a prospective waiver of a party's right to pursue statutory remedies.” Id. at 792–93 (quoting Mitsubishi Motors Corp., 473 U.S. at 637 n.19). If so, “a contrary congressional command” may override the usual statutory mandate to enforce arbitration agreements according to their terms. CompuCredit Corp., 565 U.S. at 98.

Plaintiff identifies several ways in which it claims the arbitration provisions in the subcontract abrogate its statutory rights under Section 1981. (ECF No. 20, PageID #164–65.) Under the subcontract, O's Versatility waives trial by jury and recovery of consequential, exemplary, or lost profit damages as well as anticipated overhead and profit on any work not performed. (ECF No. 7-1, §§ 15.9 & 16.1, PageID #51–52.) Additionally, the arbitration clause limits discovery in various ways. Each party may serve only ten written interrogatories per party, depose three fact witnesses, and obtain discovery of electronically stored materials consisting only of emails from no more than three custodians with limited search terms. (Id., §§ 16.4.1, 16.4.2 & 16.4.3, PageID #53.) Significantly, the subcontract limits discovery “of other project records ․ to those documents directly related to [O's Versatility's] work on the Project.” (Id., § 16.4.4.) Finally, the subcontract alters the traditional American Rule by making O's Versatility responsible for paying “all Legal Fees [Cleveland Construction] incurred arising out of or relating to” the proceedings if Cleveland Construction prevails. (Id., § 16.7.) There is no reciprocal cost-shifting provision if O's Versatility prevails.

Consistent with the approach of this Circuit, the Court addresses each provision in turn. See Morrison v. Circuit City Stores, Inc., 317 F.3d 646, 653 (6th Cir. 2003) (en banc) (evaluating separately the component provisions of an arbitration agreement for effective vindication of statutory rights against racial discrimination).

III.A.1. Waiver of Trial by Jury

Citing Rule 38, Plaintiff criticizes the arbitration agreement's waiver of the right to trial by jury. (ECF No. 20, PageID #165.) But the “loss of the right to a jury trial is a necessary and fairly obvious consequence of an agreement to arbitrate.” Cooper, 367 F.3d at 506 (quoting Burden v. Check Into Cash of Ky., LLC, 267 F.3d 483, 492 (6th Cir. 2001)). “The Seventh Amendment confers not the right to a jury trial per se, but rather only the right to have a jury hear the case once it is determined that the litigation should proceed before a court.” Id. (quotation omitted). Therefore, where claims are properly before an arbitral tribunal pursuant to an arbitration agreement, there is no right to a jury trial. This provision of the subcontract does not render the arbitration clause unenforceable.

III.A.2. Limitations on Remedies

Plaintiff argues that the subcontract's limitation on available remedies interfere with its effective vindication of its statutory rights. Specifically, the subcontract provides that O's Versatility “is not entitled to and expressly waives (i) any and all rights to recover exemplary, special, or consequential damages, and (ii) any and all rights to recover anticipated overhead and profit on any Work not performed.” (ECF No. 7-1, § 15.9 PageID #51.) This provision “applies in all circumstances, including, without limitation, Termination for Cause, Termination for Convenience, Suspension for Convenience, Termination by Owner, or any default by Cleveland [Construction] under this Agreement.” (Id.) By contrast, a plaintiff suing under Section 1981 may seek compensatory damages, backpay, and punitive or exemplary damages. Johnson v. Railway Express Agency, Inc., 421 U.S. 454, 460 (1975).

“Federal statutory claims are arbitrable only when arbitration can serve the same remedial and deterrent functions as litigation.” Morrison, 317 F.3d at 670 (quoting Perez v. Globe Airport Sec. Servs., Inc., 253 F.3d 1280, 1286 (11th Cir. 2001)). In examining whether an arbitration agreement “contravene[s] Congress's intent to utilize certain damages as a tool” for compensation and deterrence, the Sixth Circuit asks “not whether a claimant may obtain some amount of the entire range of remedies under [the statute], but whether the limitation on remedies at issue undermines the rights protected by the statute.” Id. For this reason, the Sixth Circuit holds unenforceable an arbitration agreement's limitations on a plaintiff's “substantive rights to the full panoply of remedies” under Section 1981. Id. In other words, an arbitration agreement that limits the remedies available does not adequately serve the statute's functions. See id. (invalidating arbitration provision that prohibited some remedies available under Title VII); see also Parker, 114 F.4th at 801 (invalidating arbitration provision that prohibited two remedies under ERISA).

Under the law of this Circuit, to the extent the subcontract limits the remedies available under Section 1981, it impedes the statute's remedial goals by preventing Plaintiff from being “fully compensated for any harms caused by wrongful discrimination.” Morrison, 317 F.3d at 672 (invalidating arbitration provision limiting backpay to one year). Such a limitation erodes Section 1981’s deterrent purposes by eliminating the possibility of punitive damages. See id. (invalidating arbitration provision setting cap on punitive damages). Therefore, the recovery-limiting provisions of the arbitration agreement thwart the effective vindication of Plaintiff's rights under Section 1981 and are not enforceable.

III.A.3. Limitations on Discovery

Plaintiff argues that the limitations the arbitration clause places on discovery, in addition to those in the Construction Industry Arbitration Rules of the American Arbitration Association, inhibit effective vindication of its substantive rights. In particular, Plaintiff takes issue with limiting discovery to documents directly related to its work on the project, arguing that it should be permitted to show discriminatory intent through Cleveland Construction's patterns and practices on other projects. (ECF No. 20, PageID #164 n.2.)

“[T]he opportunity to undertake extensive discovery is not necessarily appropriate in an arbitral forum, the purpose of which is to reduce the costs of dispute resolution.” Walker v. Ryan's Family Steak Houses, Inc., 400 F.3d 370, 387 (6th Cir. 2005). Indeed, parties to an arms-length arbitration agreement “typically should expect that the extent of discovery will be more circumscribed than in a judicial setting.” Id. Where arbitration provisions “allow for document production, information requests, depositions, and subpoenas,” they are not per se incapable of providing a fair forum even though “those [discovery] procedures might not be as extensive as in the federal courts.” Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 31 (1991). However, restrictions on discovery may be so onerous as to prevent effective vindication of a plaintiff's statutory rights. See, e.g., Walker, 400 F.3d at 387–88 (holding unenforceable a restriction that allowed only one deposition as of right with the express policy that depositions were “not encouraged”); Dreher v. Eskco, Inc., Nos. 3:08-cv-325 & 3:09-cv-209, 2009 WL 2176060, at *17 (S.D. Ohio 2009) (holding “a wholesale preclusion of the taking of depositions unenforceable”); Ostroff v. Alterra Healthcare Corp., 433 F. Supp. 2d 538, 545 (E.D. Penn. 2006) (holding a restriction limiting depositions to expert witnesses unenforceable).

Here, Plaintiff does not argue that there is structural bias in arbitrator selection, nor does the record suggest that there would be. Most of the discovery restrictions at issue present only marginal extensions of the limitations contained in the Federal Rules of Civil Procedure. For example, Rule 33 limits interrogatories to 25 per party, and Rule 30 imposes a limit of ten depositions in a case. These limitations are consistent with the more streamlined procedures of arbitration for which the parties bargained. They are enforceable and do not impede Plaintiff's ability to vindicate its rights. See, e.g., Gilmer, 500 U.S. at 31 (enforcing arbitration rules providing for written information requests, subpoena requests, and more at the arbitrator's discretion); Howell v. Rivergate Toyota, 144 F. App'x 475, 480–81 (6th Cir. 2005) (same for document production, three depositions, and additional discovery upon a showing of good cause). Indeed, the Construction Industry Arbitration Rules of the American Arbitration Association confer sufficient discretion on the arbitrator(s) to manage the exchange of information before the hearing.

However, the subcontract's limitation on discovery to “documents directly related to Subcontractor's work on the Project” may, through the procedural exchange of information, preclude Plaintiff from establishing an element of its claims under Section 1981. (ECF No. 7-1, § 16.4.4, PageID #52.) In this respect, this limitation prevents the effective vindication of Plaintiff's statutory rights. Therefore, the Court strikes it. Again, the Construction Industry Arbitration Rules of the American Arbitration Association give the arbitrator(s) sufficient control over the exchange of information the parties need to prepare for the hearing consistent with the parties’ agreement and the goals of dispute resolution through arbitration such that striking this limitation on the scope of discovery does not frustrate the purpose of arbitration or the parties’ agreement.

III.A.4. Cost Shifting

To serve the underlying purposes of federal anti-discrimination laws, courts in the Sixth Circuit do not enforce cost-shifting provisions that “would deter a substantial number of similarly situated potential litigants.” Morrison, 317 F.3d at 663. Courts define a class of “similarly situated potential litigants” by job description and socioeconomic background, then evaluate factors including the plaintiff's income, average arbitration costs, and the costs of litigation. Id. at 663–664; see also Mazera v. Varsity Ford Mgmt. Servs., LLC, 565 F.3d 997, 1003–04 (6th Cir. 2009).

In this analysis, however, Plaintiff “bears the burden of demonstrating that the provisions in question impose costs that are likely to have an impermissible deterrent effect.” Howell, 144 F. App'x at 481 (citing Morrison, 317 F.3d at 659–60). Here, Plaintiff presents no evidence about the costs or other factors that bear on this analysis. “In sum, [Plaintiff] has presented no evidence from which a court could find that the [cost-shifting provision is] likely to deter [similarly situated potential litigants] from vindicating their statutory rights.” See id. Plaintiff's contention that the cost-shifting provision is unenforceable might well be a “promising argument.” Id. But Plaintiff makes no effort to provide the information it needs to win that argument. “Given this failure of proof, [the Court] cannot say that the challenged [provision is] unenforceable under federal law.” Id.

III.B. Severability of Unenforceable Provisions

Because certain provisions in the subcontract limiting discovery and the available remedies are unenforceable, the Court “must determine whether those provisions are severable from the agreement as a whole or whether they render the entire agreement unenforceable.” Morrison, 317 F.3d at 674. In answering this question, the Court seeks to enforce the intent of the parties, “ascertained by the ordinary rules of [contract] construction.” Id. at 675 (quotation omitted). Accordingly, “when the arbitration agreement at issue includes a severability provision, courts should not lightly conclude that a particular provision of an arbitration agreement taints the entire agreement.” Id. (citing Great Earth Cos. v. Simons, 288 F.3d 878, 890–91 (6th Cir. 2002)).

Here, the subcontract provides that, if any provision of the agreement “is found to be unenforceable or in violation of Applicable Law, then, notwithstanding such provision, this Agreement remains in full force and effect.” (ECF No. 7-1, § 18.6, PageID #53.) It goes on: “such provision will be deemed stricken, and this Agreement will be interpreted when possible to maintain the originally written intentions of the parties as indicated by such stricken provision.” (Id.) This language makes plain that the parties intended to live by their agreement even if certain terms were stricken due to their unenforceability.

In Morrison, the Sixth Circuit thought that it was a “close question” whether a severability clause covering provisions “in conflict with a mandatory provision of applicable law” manifested an intent to include “circumstances such as this, when a court holds that provisions of the arbitration agreement prevent the effective vindication of statutory rights under federal law.” 317 F.3d at 675. Nonetheless, mindful of Supreme Court precedent dictating resolution of any doubts in favor of arbitrability, the en banc court in Morrison determined that the language in question manifested the parties’ intent “to sever any terms determined to be invalid and to allow all claims to proceed to arbitration under the remaining provisions of the agreement.” Id. (citing Moses H. Cone Mem'l Hosp., 460 U.S. at 24–25) (quotation omitted). The subcontract's severability language is at least as clear as that in Morrison, if not more so. Therefore, the Court does not see, and Plaintiff does not offer, any reason to distinguish this severability clause from the one in Morrison. Accordingly, the Court strikes the limitations on remedy and discovery that impede the effective vindication of statutory rights, as discussed above, from the remainder of the contract and compels Plaintiff's Section 1981 claim to proceed to arbitration under the remaining provisions of the agreement.

IV. Waiver

Finally, Plaintiff argues that Cleveland Construction waived arbitration. Because Cleveland Construction has asked this Court to decide the threshold question of arbitrability, Plaintiff contends that Cleveland Construction acted inconsistently with its right to arbitrate. (ECF No. 20, PageID #176–78.)

Waiver of agreed-to arbitration is “not to be lightly inferred.” Johnson Assocs. Corp. v. HL Operating Corp., 680 F.3d 713, 717 (6th Cir. 2012) (quoting Glazer v. Lehman Bros., Inc., 394 F.3d 444, 450 (6th Cir. 2005)). Despite this presumption, “a party may waive an agreement to arbitrate by ․ tak[ing] actions that are completely inconsistent with any reliance on an arbitration agreement.” Schwebke v. United Wholesale Mortg. LLC, 96 F.4th 971, 974 (6th Cir. 2024) (internal quotation marks and citations omitted).

“A party acts inconsistently when it first asks a court to rule on arbitrability and then later argues that an arbitrator must do so.” United States ex rel. Dorsa v. Miraca Life Scis., Inc., 33 F.4th 352, 357 (6th Cir. 2022). Such is not the case here. To the contrary, Cleveland Construction promptly moved to stay proceedings and compel arbitration. (ECF No. 6.) At no point has Cleveland Construction moved for anything other than arbitration or submitted any briefing other than that in support of arbitration. In each of its filings with the Court, Cleveland Construction has asserted that Plaintiff's claims belong in arbitration, requested to stay the proceedings, and sought to compel arbitration. (ECF No. 6; ECF No. 7; ECF No. 8; ECF No. 16; ECF No. 17; ECF No. 21.) Cleveland Construction has not acted inconsistently with its right to arbitrate and has not waived arbitration.

To argue otherwise, Plaintiff maintains that, by litigating the question of arbitrability, Cleveland Construction waived its right to arbitrate the dispute as a whole. But Cleveland Construction argued for submission of the question of arbitrability to an arbitrator. (ECF No. 21, PageID #186–87.) Plaintiff's reliance on Cleveland Construction's brief email to the arbitrator that the question of arbitrability was for a court is unavailing. (See ECF No. 15-2.) Such “flexible,” non-binding pre-litigation communications do not constitute actions inconsistent with a right to arbitration in the Sixth Circuit. See Borror Prop. Mgmt., LLC v. Oro Karric N., LLC, 979 F.3d 491, 495–96 (6th Cir. 2020).

The case law that Plaintiff cites to argue waiver does not support its position. Blanton held that the incorporating the American Arbitration Association rules into an arbitration provision provides “clear and unmistakable” evidence that the parties agreed to have the arbitrator decide the threshold question of arbitrability. 962 F.3d at 846. It does not address the issue of waiver. In Cantie v. Hillside Plaza, 2014-Ohio-822, ¶ 14 (Ohio Ct. App.), waiver occurred because the defendant failed to enforce the arbitration agreement until nearly six months after the case was filed, filed an answer to the complaint without raising arbitration as an affirmative defense, and sought dismissal on grounds other than arbitration. In Ernst & Young LLP v. Baker O'Neal Holdings, Inc., 304 F.3d 753, 757 (7th Cir. 2002), the court determined that the defendant waived arbitration because it actively engaged in the bankruptcy plan before seeking arbitration. In each case, the party litigated substantive or procedural rights before pursuing arbitration. Here, Cleveland Constructions has not done so.

CONCLUSION

For the foregoing reasons, the Court GRANTS IN PART Defendant Cleveland Construction, Inc.’s motion to compel arbitration and to stay these proceedings pending arbitration (ECF No. 16). Pursuant to the parties’ agreement (ECF No. 7-1, § 18.6, PageID #53), the Court strikes the subcontract's limitation on remedies (id., § 15.9) and its limitation on the scope of discovery (id., § 16.4.4). The Court STAYS this action pending arbitration and ORDERS the parties to file a joint status report no later than December 30, 2025. Additionally, the Court GRANTS Defendant James Tolbert's motion to join Cleveland Construction's motion (ECF No. 19) and the DENIES AS MOOT the motions regarding arbitration filed before the first amended complaint. (ECF No. 6; ECF No. 13.)

SO ORDERED.

J. Philip Calabrese, United States District Judge