Bradford v. Rockwell Semiconductor Sys.

Decision Date04 December 2000
Docket NumberNo. 99-2201,99-2201
Citation238 F.3d 549
Parties(4th Cir. 2001) JOHN BRUCE BRADFORD, Plaintiff-Appellant, v. ROCKWELL SEMICONDUCTOR SYSTEMS, INCORPORATED, Defendant-Appellee. , . Argued:
CourtU.S. Court of Appeals — Fourth Circuit

Appeal from the United States District Court for the Eastern District of North Carolina, at Wilmington.

James C. Fox, District Judge. (CA-98-169-7-F) COUNSEL: ARGUED: Kristen Gardner Lingo, MANNING, FULTON & SKINNER, P.A., Raleigh, North Carolina, for Appellant. Curtis Lee Mack, MCGUIRE, WOODS, BATTLE & BOOTHE, L.L.P., Atlanta, Georgia, for Appellee. ON BRIEF: David B. Kahng, MCGUIRE, WOODS, BATTLE & BOOTHE, L.L.P., Atlanta, Georgia, for Appellee.

Before NIEMEYER, WILLIAMS, and TRAXLER, Circuit Judges.

Affirmed by published opinion. Judge Williams wrote the opinion, in which Jude Niemeyer and Judge Traxler joined.

OPINION

WILLIAMS, Circuit Judge:

John Bradford first filed for arbitration and later filed suit in the United States District Court for the Eastern District of North Carolina against Rockwell Semiconductor Systems,1 alleging that Rockwell discriminated against him on the basis of his age in discharging him from employment. The district court granted Rockwell's motion for summary judgment and enforced the mandatory arbitration provision in Bradford's employment agreement, notwithstanding a fee-splitting provision that required Bradford to pay half of the arbitrator's fees and costs. Bradford argues on appeal that the fee-splitting provision renders the arbitration agreement unenforceable because the prohibitive costs of arbitration have prevented him from vindicating his statutory rights in the arbitral forum. Because Bradford has failed to show that the costs of arbitration were prohibitive or that he was deterred from pursuing his statutory rights, we affirm.

I.

Bradford was employed by the Brooktree Corporation, which was acquired by Rockwell. Rockwell offered him continued employment and sent him a "Mutual Agreement to Arbitrate Claims." (J.A. at 6871.) The agreement provided that

Except as otherwise provided in this Agreement, the Company and the Employee hereby consent to the resolution by arbitration of the following claims or controversies for which a court otherwise would be authorized by law to grant relief . . . . The Claims covered by this Agreement include, but are not limited to, claims for wages or other compensation due; claims for breach of any contract or covenant, express or implied, tort claims; claims for discrimination, including but not limited to discrimination based on race, sex, religion, national origin, age, marital status, handicap, disability or medical condition, claims for benefits, . . . and claims for violation of any federal, state or other governmental constitution, statute, ordinance or regulation.

(J.A. at 39.) The "Arbitration Procedures," which were attached to and referenced by the arbitration provision, provided that

To ensure that the Arbitrator is not biased in any way in favor of one party because that party is paying all or most of the Arbitration fees and costs, the parties shall share equally the fees and costs of the Arbitrator. Each party will deposit funds or post other appropriate security for its, his or her share of the Arbitrator's fee, in an amount and manner determined by the Arbitrator, 10 days before the first day of hearing. Each party shall pay for its own costs and attorney's fees, if any. However, if any party prevails on a statutory claim which entitles the prevailing party to attorney's fees, or if there is a written agreement providing for fees, the Arbitrator may award reasonable attorney's fees to the prevailing party in accordance with such statute or agreement.

(J.A. at 74 (emphasis added).) Bradford signed the agreement. On September 25, 1996, the day before the closing of the Brooktree acquisition, Rockwell informed Bradford that it would not employ him. Believing that his discharge was based upon age discrimination, Bradford filed a charge with the EEOC. On August 13, 1998, Bradford received a right to sue letter from the EEOC.

The procedural history of Bradford's claims follows two parallel routes because he pursued his claims both in arbitration and then in the district court. On February 12, 1998, Bradford filed a demand for arbitration with the American Arbitration Association ("AAA"), alleging that his termination violated the ADEA, breached his employment contract, and violated the public policy of North Carolina. On May 17 and 18, 1999, Bradford presented witnesses at the arbitration hearing, and on October 20, 1999, the arbitrator ruled against Bradford and dismissed his claims.

On September 23, 1998, while his arbitration was still pending, Bradford filed a complaint in the United States District Court for the Eastern District of North Carolina alleging the same claims as were brought before the arbitrator. On July 30, 1999, the district court granted Rockwell's motion for summary judgment, concluding that Bradford had failed to meet his burden of demonstrating that the arbitration agreement was unenforceable against him because he had failed to offer any competent evidence that fee splitting would cause him financial hardship.2 On August 27, 1999, Bradford filed a notice of appeal.

II.

Bradford argues that fee-splitting provisions necessarily render arbitration agreements unenforceable as a matter of law because, by requiring employees to pay part or all of the arbitration costs, such provisions deter employees who have been victims of discrimination from pursuing their rights, thus undermining the remedial and deterrent purposes of the federal antidiscrimination statutes.3 Although Bradford concedes that he signed the arbitration agreement and that he initiated and received the full benefit of arbitration of his statutory claims, he asserts that we should adopt a per se rule that all arbitration agreements with fee-splitting provisions are unenforceable, irrespective of actual individual deterrence, based upon the overall deterrent effect of such provisions. Bradford also argues that even if he was required to show individual financial hardship and actual deterrence, the district court erred in concluding that he failed to do so. We review the district court's grant of summary judgment de novo. Austin v. Owens-Brockway Glass Container, Inc., 78 F.3d 875, 877 (4th Cir. 1996).

Congress passed the Federal Arbitration Act (FAA), ch. 213, 43 Stat. 883 (1925) (codified as amended at 9 U.S.C.S 1 et seq.), in order to "reverse the longstanding judicial hostility to arbitration agreements that had existed at English common law and had been adopted by American courts, and to place arbitration agreements upon the same footing as other contracts." Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24 (1991). The FAA manifests "a liberal federal policy favoring arbitration agreements," Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983), and thus, "[w]hen a valid agreement to arbitrate exists between the parties and covers the matter in dispute, the FAA commands the federal courts to stay any ongoing judicial proceedings and to compel arbitration," Hooters of America, Inc. v. Phillips , 173 F.3d 933, 937 (4th Cir. 1999) (internal citations omitted). The benefits of arbitration are well documented. For example, we have previously noted that "[t]he arbitration of disputes enables parties to avoid the costs associated with pursuing a judicial resolution of their grievances. By one estimate, litigating a typical employment dispute costs at least $50,000 and takes two and one-half years to resolve." Id. at 936. Accordingly, "parties agree to arbitrate and trade `the procedures and opportunity for review of the courtroom for the simplicity, informality, and expedition of arbitration.'" Id. (quoting Gilmer , 500 U.S. at 31).

Federal statutory claims, such as claims under the ADEA, can be subjected to mandatory arbitration agreements. See Gilmer, 500 U.S. at 35. In Gilmer, the Supreme Court reasoned that agreements requiring arbitration of ADEA claims are enforceable because arbitration provides an adequate alternative forum to litigation in court through which claimants can resolve their statutory claims. See id. at 28. Thus, the Court concluded that "[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." Id. at 28 (alternations omitted).

Relying upon Gilmer's rationale that statutory claims can be resolved in arbitration because arbitration is an adequate alternative forum to litigation, some courts have concluded that fee-splitting provisions render arbitration agreements unenforceable because the cost of fee splitting deters or prevents employees from vindicating their statutory rights in arbitral forums. See Paladino v. Avnet Computer Technologies, Inc., 134 F.3d 1054, 1062 (11th Cir. 1998) (citing Gilmer and concluding that high costs of arbitration that may be imposed against an employee provide a legitimate basis for nullifying an arbitration agreement in part because "the arbitrability of [statutory claims] rests on the assumption that the arbitration clause permits relief equivalent to court remedies. When an arbitration clause has provisions that defeat the remedial purpose, therefore, the arbitration clause is not enforceable." (internal citations omitted)); Cole v. Burns Int'l Sec. Servs., 105 F.3d 1465, 1483-85 (D.C. Cir. 1997) (relying upon Gilmer and stating that employers cannot require as a condition of employment that employees waive access to a neutral forum in which to resolve their statutory claims and that arbitration is not a reasonable substitute for a judicial forum if the employee must pay for the arbitrator because "they would never be required to...

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