10.2190/A10K-UWD3-KPXP-V93X A10KUWD3KPXPV93X 253 ARBITRATION AFTER CIRCUIT CITY 253 266 20021107 20021107 20021107 20021107 A10KUWD3KPXPV93X.pdf http://baywood.metapress.com/link.asp?target=contribution&id=A10KUWD3KPXPV93X 4 MARK S. DICHTER IAN M. BALLARD, JR. Morgan, Lewis & Bockius LLP Section 1 of the Federal Arbitration Act contains a provision that excludes from the statute's coverage "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce" [1]. In March 2001, the United States Supreme Court interpreted those words in Circuit City Stores, Inc. v. Adams [2]. This article discusses that case and a number of still unresolved issues that concern the arbitration of employment disputes. These matters include the scope of the agreement to arbitrate, the enforceability of handbook provisions, consideration, fairness of the process, sharing of arbitration fees, limitations on remedies and discovery, time limits, the enforceability of arbitration clauses in collective bargaining agreements, and the ability of the EEOC to bring lawsuits. The authors are attorneys who represent employers and this article is written from that perspective. O'Neil v. Hilton Head Hosp., 115 F.3d 272, 274 (4th Cir. 1997). Cremin v. Merrill Lynch Pierce Fenner & Smith, Inc., 957 F. Supp. 1460, 1474 (N.D. Ill. 1997). Prudential Ins. Co. v. Lai, 42 F.3d 1299, 1305 (9th Cir. 1994), cert. denied, 516 U.S. 812 (1995); see also Renteria v. Prudential Ins. Co. of America, 113 F.3d 1104, 1105-06 (9th Cir. 1997) (stating that an employee's consent to arbitration must be "knowing" and indicating that this is a heightened standard of consent). EEOC v. Kidder Peabody & Co., 156 F.3d 209 (2d Cir. 1998), and Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Nixon, 210 F.3d 814 (8th Cir. 2000). Wright v. Universal Maritime Servs. Corp., 119 S.Ct. 391 (1998). Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991). Alexander v. Gardner-Denver Co., 415 U.S. 36 (1974). Duffield v. Robertson Stephens & Co., 144 F.3d 1182 (9th Cir. 1998), cert. denied, 525 U.S. 928 (1998), at 1093. Cole v. Burns Int'l. Security Services, 105 F.3d 1465, 1482 (D.C. Cir. 1997). Morgan v. Smith Barney, Harris Upham & Co., 729 F.2d 1163 (8th Cir. 1984). Hull v. Norcom, Inc., 750 F.2d 1547, 1550 (11th Cir. 1985) ("the consideration exchanged for one party's promise to arbitrate must be the other party's promise to arbitrate at least some specified class of claims"); Johnson v. Circuit City Stores, Inc., 148 F.3d 373, 377, rev'd on other grounds, (4th Cir. 1998); Hellenic Lines, Ltd. v. Louis Dreyfus Corp., 372 F.2d 753, 758 (2d Cir. 1967) ("Hellenic's promise to arbitrate was sufficient consideration to support Dreyfus's promise to arbitrate"). O'Neil v. Hilton Head Hosp., 115 F.3d 272, 274 (4th Cir. 1997) (agreement unenforceable where the agreement permitted the employer to ignore the results of arbitration). Consider including the following language: "[Company] agrees to follow this Employee ADR Program in connection with the associate whose signature appears above," or "You and we would have had a right or opportunity to litigate disputes through a court but have agreed instead to resolve disputes through binding arbitration." See Johnson v. West Suburban Bank, 225 F.3d 366, 369 (3d Cir. 2000) (enforcing cited language in nonemployment case), cert. denied, 121 S.Ct. 1081 (2001). See Gibbs v. Connecticut General Life Ins., No. CV 97 0567009, 1998 WL 123010, *3 (Conn. May 3, 1998) (striking down arbitration clause because of lack of consideration because the employer failed to communicate to the employee that it would forgo discharging the employee in exchange for the employee's promise to submit claims to arbitration); Phillips v. CIGNA Investment, Inc., 27 F. Supp. 2d 345, 353-59 (D. Conn. 1998) (applying Gibbs). See Johnson v. West Suburban Bank, 225 F.3d 366, 369 (3d Cir. 2000) (enforcing cited language in nonemployment case), cert. denied, 121 S.Ct. 1081 (2001). Morrison v. Circuit City Stores, Inc., 70 F.Supp.2d 815 (S.D. Ohio 1999), at 826, and Ward v. Circuit City Stores, Inc., No. CIV-S-97-0227, 1997 U.S. Dist. LEXIS 23833 (E.D. Cal. Mar. 29, 1997). But Johnson v. Circuit City Stores, Inc., 203 F.3d 821, 2000 WL 19166 (4th Cir.) (per curiam) (unpublished), cert. denied, 530 U.S. 1276 (2000) (affirmed district court's conclusion that arbitration agreement was unenforceable because it failed to provide plaintiff with the full set of remedies to which she would have been entitled to under Section 1981). The Eighth Circuit Court of Appeals recently held that this remedies limitation should simply be severed from the contract and the matter should proceed to arbitration. Gannon v. Circuit City Stores, Inc., 262 F.3d 677, 682 (8th Cir., 2001). "Although [arbitration discovery] procedures might not be as extensive as in the federal courts, by agreeing to arbitrate, a party 'trades the procedures and opportunity for review of the courtroom for the simplicity, informality, and expedition of arbitration," quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985). See also Cole v. Burns Int'l Security Servs., [26, at 1482] (an employee must be given the right to at least minimal discovery in arbitrations). See, e.g., Penn v. Ryan's Family Steakhouses, Inc., 95 F. Supp.2d 940, 948 (N.D. Ind. 2000) or Geiger v. Ryan's Family Steakhouses, Inc., 134 F. Supp.2d 985, 995 (S.D. Ind, 2001). Soltani v. Western & Southern Life Ins. Co., 2001 U.S. App. LEXIS 9267 (9th Cir. Aug. 6, 2001), unpublished opinion. See also Taylor v. Western & Southern Life Ins. Co., 966 F.2d 1188 (7th Cir. 1992), where a contractual six-month limitation valid under Illinois law was upheld since it was knowingly accepted, reasonable, and not contrary to public policy; see also Myers v. Western-Southern Life Ins. Co., 849 F.2d 259, 260-61 (6th Cir. 1988), where the six-month limitation period for bringing employment claims was held to be reasonable even though it was shorter than the limit provided in state discrimination statute. Safrit v. Cone Mills Corp., 248 F.3d 306, 308 (4th Cir. 2001). The Fourth Circuit also enforced arbitration clauses in Wikle v. CNA Holdings, Inc., No. 01-1119, 2001 WL 474692 (4th Cir. May 4, 2001), where the FMLA was explicitly incorporated into the terms of the CBA, and in Austin v. Owens-Brockway Glass Container, Inc., 78 F.3d 875 (4th Cir.), where the CBA contained a statement that all disputes arising under the provision binding company to comply with antidiscrimination laws would be submitted to grievance procedure resulting in binding arbitration. Cert. denied, 519 U.S. 980 (1996). EEOC v. Waffle House, Inc., No. 99-1823, 2002 WL 46763 (January 15, 2002). See Haskins v. Prudential Ins. Co. of Am., 230 F.3d 231, 235-36 (6th Cir. 2000) cert. denied, 121 S.Ct. 859 (2001); Emeronye v. CACI Int'l Inc., 141 F. Supp. 2d 82 (D.D.C. 2001). See Olivares v. Hispanic Broadcasting Corp., No. CV 00-00354-ER, 2001 WL 477171 (C.D. Cal. Apr. 26, 2001) (rejecting Duffield and ordering arbitration with respect to California state law claims); but see Melton v. Philip Morris Inc., No. 01-93-KI, 2001 LEXIS 12601 (D. Or. Aug. 9, 2001) (finding Duffield still viable as to Title VII and Oregon discrimination laws but compelling arbitration on ADEA and state common-law tort claims). Hooters of America, Inc. v. Hooters of Myrtle Beach, Inc., 173 F.3d 933, 937 (4th Cir. 1999). See also Gothic Constr. Group, Inc. v. Port Auth. Trans-Hudson Corp., 312 N.J. Super. 1, 9-11 (App. Div. 1998) (arbitration provision held unenforceable where drafter of provision was designated as arbitrator); Chimes v. Oritani Motor Hotel, Inc., 480 A.2d 218 (N.J. Super. 1984) (refusing to enforce arbitration agreement between union members and employer where agreement designated union board as arbitrator of dispute). Lozada v. Dale Baker Oldsmobile, Inc., 91 F. Supp. 2d 1087, 1103 (W.D. Mich. 2000). The American Bar Association's Due Process Protocol for Mediation and Arbitration of Statutory Disputes Arising Out of the Employment Relationship (May 1995) (the "ABA Protocol") recommends that employees should have the right to be represented by a spokesperson of their own choosing. See Shankle v. B-G Maintenance Management of Colorado, Inc., 163 F.3d 1230 (10th Cir, 1999). Perez v. Globe Airport Security Servs. Inc., 253 F.3d 1280 (11th Cir. 2001) (arbitration agreement unenforceable due to fee-splitting provision, even where the arbitrator awarded fees and costs to the plaintiff). The District of Columbia Circuit Court of Appeals recently held that its holding in Cole applies only to arbitration of federal statutory claims and not common law claims rooted in public policy. Brown v. Wheat First Securities, Inc., 257 F.3d 821 (D.C. Cir. 2001). Williams v. Cigna Fin. Advisors Inc., 197 F.3d 752, 763-64 (5th Cir. 1999) cert. denied, 529 U.S. 1099 (2000). See also Bradford v. Rockwell Semiconductor Sys., 238 F.3d 549, 556 (4th Cir. 2001); Rosenberg v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 170 F.3d 1, 18-19 (1st Cir. 1999) (refusing to invalidate arbitration agreement simply because of the possibility that the arbitrator would charge the plaintiffs a forum fee "which may be as high as $3,000 per day and tens of thousands of dollars per case," because, among other reasons, "arbitration is often far more affordable to plaintiffs and defendants alike than is pursuing a claim in court"). Craft v. Campbell Soup Co., 177 F.3d 1083, 1093 (9th Cir. 1999) (holding that Section 1's exclusion applies beyond employment agreements in the transportation industry). Indeed, the Ninth Circuit Court of Appeals held on remand that the arbitration agreement was unconconscionable because it was a contract of adhesion, and its limitations on damages were too restrictive. Circuit City Stores, Inc. v. Adams, 279 F.3d 889, 893-4 (9th Cir., 2002). Durkin v. CIGNA Property & Cas. Corp., 942 F. Supp. 481, 488 (D. Kan. 1996). DiCrisi v. Lyndon Guaranty Bank, 807 F. Supp. 947, 953 (W.D.N.Y. 1992). For example, Cole [26] and Kuehner v. Dickinson & Co., 84 F.3d 316, 320 (9th Cir. 1996) (compelling arbitration of Federal Labor Standards Act (FLSA) claim where arbitrator would have full power to award all remedies). 9 U.S.C. § 1, Federal Arbitration Act, 1925. Koveleskie v. SBC Capital Mkts., Inc., 167 F.3d 361, 368 (7th Cir. 1999); Hull v. NCR Corporation, 826 F. Supp. 303, 304 (E.D. Mo. 1993). Alcaraz v. Avnet, Inc., 933 F. Supp, 1025 (D.N.M. 1996). See Doyle v. Raley's Inc., No. 97-15863, 1998 WL 697395 (9th Cir. Sept. 22, 1998); Harrison v. Eddy Patash, Inc., 112 F.3d 1437 (10th Cir. 1997), remanded on other grounds, 524 U.S. 947 (1998); Penny v. United Parcel Serv., 128 F.3d 408 (6th Cir. 1997); Pryner v. Tractor Supply Co., 109 F.3d 354 (7th Cir.), cert. denied, 522 U.S. 912 (1997). Rosenberg v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 170 F.3d 1, 18-19 (1st Cir. 1999) (holding that the employer will bear the risk of the employee's ignorance about the range of claims subject to arbitration, at least where the arbitration agreement expressly identified the range by reference to another document, which was not provided to the employee). Cases enforcing arbitration agreements in employee handbooks include Patterson v. Tenet Healthcare, Inc., 113 F.3d 832, 837-38 (8th Cir. 1997); Chanchani v. Salomon/ Smith Barney Inc., No. 99 CIV 9219, 2001 WL 204214 (S.D.N.Y. Mar. 1, 2001); Bauer v. Morton's of Chicago, No. 99 C 5996, 2000 WL 149287 (N.D. Ill. Feb 9, 2000); McClendon v. Sherwin Williams, Inc., 70 F. Supp.2d 940, 943 (E.D. Ark. 1999); and Lang v. Burlington N. R.R., 835 F. Supp. 1104 (D. Minn. 1993). Examples of cases refusing to enforce arbitration agreements in employee handbooks include Nelson v. Cyprus Bagdad Copper Corp., 119 F.3d 756, 762 (9th Cir. 1997), cert. denied, 523 U.S. 1072 (1998), and Kummetz v. Tech Mold, Inc., 152 F.3d 1153 (9th Cir. 1998). Ackerman v. The Money Store, 728 A.2d 873 (N.J. Super. 1998). Quinn v. EMC Corp., 109 F. Supp.2d 681, 684 (S.D. Tex. 2000). See, e.g., Paladino v. Avnet Computer Techs., 134 F.3d 1054, 1062 (11th Cir. 1998) (invalidating employer's mandatory arbitration agreement that appeared to limit damages for Title VII claim to contract damages because it "defeated that statute's remedial purposes because it insulated [the employer] from Title VII damages and equitable relief"). See Gibbs v. Connecticut General Life Ins., No. CV97 0567009, 1998 WL 123010, *3 (Conn. May 3, 1998) (agreement not enforceable where it was announced via interoffice memorandum and no acknowledgment was required indicating receipt of the policy). In EEOC v. Luce Forward Hamilton & Scripps, LLP, 122 F. Supp. 2d 1080 (C.D. Cal. 2000). Circuit City Stores, Inc. v. Adams, 121 S.Ct. 1302 (2001). See Seus v. John Nuveen & Co., Inc., 146 F.3d 175, 179, 180 (3d Cir. 1998) cert. denied, 525 U.S. 1139 (1999). See Venuto v. Insurance Co. of N. Am., No. Civ. A. 98-96, 1998 WL 414723, at *5 (E.D. Pa. July 22, 1998); Durkin, [9]; Kinnebrew v. Gulf Ins. Co., CA No. 3:94-CV-1517-R, 1994 WL 803508, at *2 (N.D. Tex. Nov. 28, 1994) ("Federal courts do not hesitate to find enforceable an agreement to arbitrate when an arbitration policy is instituted during an employee's employment and the employee continues to work for the employer thereafter."); cf. Gibson v. Neighborhood Health Clinics Inc., 121 F.3d 1126 (7th Cir. 1997). DeGaetano v. Smith Barney, Inc., No. 95 1613, 1996 WL 44226 (S.D.N.Y. Feb. 5, 1996); Maye v. Smith Barney, Inc., 897 F. Supp. 100 (S.D.N.Y. 1995).