170 F.3d 1 (1st Cir. 1999), 98-1246, Rosenberg v. Merrill Lynch, Pierce, Fenner & Smith, Inc.

Docket Nº:98-1246.
Citation:170 F.3d 1
Party Name:Benefits Cas. 2980 Susan M. ROSENBERG, Plaintiff, Appellee, v. MERRILL LYNCH, PIERCE, FENNER & SMITH, INC. and John Wyllys, Defendants, Appellants.
Case Date:February 24, 1999
Court:United States Courts of Appeals, Court of Appeals for the First Circuit

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170 F.3d 1 (1st Cir. 1999)

Benefits Cas. 2980

Susan M. ROSENBERG, Plaintiff, Appellee,



Defendants, Appellants.

No. 98-1246.

United States Court of Appeals, First Circuit

February 24, 1999

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[Copyrighted Material Omitted]

Heard July 27, 1998.

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Allan Dinkoff, with whom Christopher P. Litterio, Barry Y. Weiner, Shapiro, Israel & Weiner, P.C., Mark K. Dichter, Joseph J. Costello, Marifrances Dant Bolger, and Morgan, Lewis, & Bockius LLP were on brief, for appellants.

Marc Redlich, with whom Merle Ruth Hass, Law Offices of Marc Redlich, and Richard P. Goodkin were on brief, for appellees.

Sally Dunaway, Cathy Ventrell-Monsees, AARP Foundation Litigation, Melvin G. Radowitz, and American Association of Retired Persons on brief for amicus curiae American Association of Retired Persons.

Joel Z. Eigerman, Roche, Carens & DeGiacomo, P.C., and Jeffrey M. Friedman on brief for amicus curiae American Jewish Congress.

Erin Quinn Gery, Ann Elizabeth Reesman, McGuiness & Williams, Stephen A. Bokat, Robin S. Conrad, Sussan L. Mahallati, and National Chamber Litigation Center, Inc. on brief for amici curiae Equal Employment Advisory Council and The Chamber of Commerce of the United States.

Robert J. Gregory, with whom C. Gregory Stewart, Philip B. Sklover, and Lorraine C. Davis were on brief, for amicus curiae Equal Employment Opportunity Commission.

Michael Rubin, Altshuler, Berzon, Nussbaum, Berzon & Rubin, Cliff Palefsky, and McGuinn, Hillsman & Palefsky on brief for amici curiae National Employment Lawyers Association, NOW Legal Defense and Education Fund, National Women's Law Center, and National Partnership for Women and Families.

Russell E. Brooks, Stacey J. Rappaport, and Milbank, Tweed, Hadley & McCloy on brief for amicus curiae New York Stock Exchange, Inc.

Jody E. Forchheimer, Rinchelle S. Kennedy, and Bingham Dana LLP on brief for amicus curiae The Securities Industry Association.

Susan Von Struensee on brief for amicus curiae Susan Von Struensee.

Sydelle Pittas and Pittas Koenig on brief for amicus curiae The Women's Bar Association (of Massachusetts).

Before BOUDIN, Circuit Judge, WELLFORD, Senior Circuit Judge, [*] and LYNCH, Circuit Judge.

LYNCH, Circuit Judge Circuit Judge.

The question raised is whether Congress intended to prohibit enforcement of pre-dispute arbitration agreements covering employment discrimination claims under Title VII and the Age Discrimination in Employment Act as a matter of law in all cases or at least under certain facts said to be present here. Every circuit that has considered the issue save one has upheld the use of such agreements. The case here, in which the district court refused to compel a plaintiff to arbitrate such claims when the employer wished to arbitrate under a pre-dispute agreement, has also drawn much attention in the form of nine briefs amici curiae.

The plaintiff, Susan Rosenberg, signed a standard securities industry form, the "U-4 Form," agreeing to arbitrate certain claims after being hired by Merrill Lynch, Pierce, Fenner & Smith as a trainee financial consultant. The form itself did not state which claims were to be arbitrated, but rather referred to the rules of various organizations with which Rosenberg was registering.

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When her employment was later terminated, Rosenberg filed suit alleging age and gender discrimination and related claims. Merrill Lynch moved to enforce the agreement and compel arbitration in the arbitration system of the New York Stock Exchange.

The district court found no actual bias in the NYSE arbitral forum. Nonetheless, troubled by a perceived tension between the federal policies favoring vindication of civil rights and those favoring arbitration, the court denied the motion to compel. In a thoughtful opinion, the court based its reasoning on two grounds: first, that the 1991 Civil Rights Act ("1991 CRA") amendments to Title VII preclude enforcement of pre-dispute arbitration agreements concerning discrimination claims, 1 and second, that the arbitral forum involved, set up by the rules of the NYSE, was not an adequate forum due to what the district court called "structural bias." Rosenberg v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 995 F.Supp. 190, 203, 207 (D.Mass.1998).

In the end we agree that the motion to compel was properly denied on the facts of this particular case, but for reasons different than those advanced by the district court. As to the first ground relied on by the district court, we hold as a matter of law that application of pre-dispute arbitration agreements to federal claims arising under Title VII and the ADEA is not precluded by the Older Workers Benefit Protection Act ("OWBPA") amendments to the ADEA or by Title VII as amended by the 1991 CRA. As to the second ground, we disavow the district court's conclusion that the agreement is not enforceable due to "structural bias" in the NYSE arbitral forum, a conclusion that was based on errors of law and fact. We agree that there has been no showing of actual bias in the forum selected and that a refusal to grant a motion to compel arbitration therefore may not be based on that ground.

We nonetheless conclude that there is an independent ground requiring affirmance of the order denying the motion to compel arbitration. The parties have agreed that the essential material facts are undisputed and that this court should, if necessary, resolve an issue not resolved by the district court: whether the parties' agreement met the standard set forth in the 1991 CRA for enforcing arbitration clauses "where appropriate and to the extent authorized by law." We hold, on the facts presented, that this standard was not met, and thus that the motion to compel was properly denied.


Rosenberg, whose prior experience had been in accounting and product engineering, was hired by Merrill Lynch on January 6, 1992. She was forty-five years old and held a Bachelor of Science degree in accounting. She had no experience in the securities industry when she entered Merrill Lynch's twenty-four month training program for financial consultants.

Rosenberg was required to fill out a standardized registration form generally required of employees in the securities industry. That form, the Uniform Application for Securities Industry Registration or Transfer, commonly referred to as the U-4 Form, included the following language under the heading "THE APPLICANT MUST READ THE FOLLOWING VERY CAREFULLY":

I agree to arbitrate any dispute, claim or controversy that may arise between me and my firm, or a customer, or any other person, that is required to be arbitrated under the rules, constitutions, or by-laws of the organizations indicated in Item 10 as may be amended from time to time and that any arbitration award rendered against me may be entered as a judgement in any court of competent jurisdiction.

Item 10 included boxes for various securities organizations and jurisdictions with which an applicant might be registered. On Rosenberg's form the boxes marked ASE, CBOE, NASD, NYSE, and MA were checked--signifying the American Stock Exchange, Chicago Board of Exchange, National Association of

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Securities Dealers, New York Stock Exchange, and Massachusetts. The ASE, NASD, and NYSE boxes were apparently checked on or prior to January 10, 1992. The CBOE and MA boxes were checked sometime between January 10 and January 24. Rosenberg's supervisor, John Wyllys, signed the form on January 10, but Rosenberg did not sign the form until January 24--although the form was back-dated to January 10. Rosenberg has no memory of reading or signing the form, although she admits that the signature is hers, and she says that she did not herself check any of the boxes. Wyllys in turn certified that Rosenberg would be familiar with the applicable rules, including the NYSE rules, at the time of approval of her U-4 Form. That certification was untrue.

Rosenberg says that she was not given a copy of the rules, or any amendments to the rules, of the NYSE, the NASD, or any of the other organizations referred to in Item 10 of the U-4. Merrill Lynch does not dispute this claim.

On May 5, 1992, Rosenberg was given the title of Financial Consultant, and she worked for Merrill Lynch until May 2, 1994, when her employment was terminated by John Wyllys. The reason given for the termination was inadequate performance.

Rosenberg alleges that she performed better than at least four male consultants during her two-year tenure, but that she, and not any of them, was terminated in mid-1994. She also says that among those with two years of tenure in her office she was the only consultant who was over age forty.

Rosenberg also alleges that on March 9, 1994, a few months before her termination, John Wyllys sexually harassed her by activating and handing to her a phallus-shaped vibrator when she went into his office to obtain a document. (Wyllys denies this and says the only unusual electrical apparatus in his office was a "stress buster.") Rosenberg did not file a harassment complaint internally with Merrill Lynch.

On April 25, 1994--allegedly the next time Rosenberg and Wyllys spoke--Rosenberg met with Wyllys to discuss her work performance. Wyllys suggested she tender her resignation, saying that her work was not up to expected levels. The next day Rosenberg called Wyllys to invite him to have dinner with her to discuss his evaluation of her, and he accepted the invitation on April 27. At dinner, Rosenberg said she would not resign. Her employment was terminated within days.


In July 1994, Rosenberg filed an administrative complaint with the...

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