Morrison v. Circuit City Stores, Inc.

• Decision Date: 30 January 2003
• Docket Number: No. 99-4099.,No. 99-5897.,99-4099.,99-5897.
• Citation: 317 F.3d 646
• Parties: Lillian Pebbles MORRISON, Plaintiff-Appellant, v. CIRCUIT CITY STORES, INC., Defendant-Appellee. Mark F. Shankle, Sr., Plaintiff-Appellee, v. Pep Boys — Manny, Moe & Jack, Inc. et al., Defendants-Appellants.
• Court: U.S. Court of Appeals — Sixth Circuit

317 F.3d 646

Lillian Pebbles MORRISON, Plaintiff-Appellant, v. CIRCUIT CITY STORES, INC., Defendant-Appellee.

Mark F. Shankle, Sr., Plaintiff-Appellee, v. Pep Boys — Manny, Moe & Jack, Inc. et al., Defendants-Appellants.

No. 99-4099.

No. 99-5897.

United States Court of Appeals, Sixth Circuit.

Argued March 20, 2002.

Decided and Filed January 30, 2003.

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Randolph H. Freking (briefed), Kelly Mulloy Myers (argued and briefed), Freking & Betz, Cincinnati, OH, for Lillian Pebbles Morrison.

Cyrus L. Booker (argued and briefed), Charlnette A. Richard, Baker, Donelson, Bearman & Caldwell, Nashville, TN, for Mark F. Shankle, Sr.

Daniel G. Rosenthal, John W. Fischer (briefed), Denlinger, Rosenthal & Greenberg, Cincinnati, OH, David E. Nagle, LeClair Ryan, Richmond, VA, Diane L. Cushing, Davis, Grimm, Payne, Marra & Berry, Seattle, WA, Pamela G. Parsons, Circuit City Stores, Inc., Richmond, VA, Rex Darrell Berry (argued and briefed), Livingston & Mattesich, Sacramento, CA, for Circuit City Stores, Inc.

Richard H. Dinkins, Dodson, Parker, Dinkins & Behm, Nashville, TN, Curtis L. Mack (argued and briefed), McGuire Woods LLP, Atlanta, GA, for Pep Boys-Manny, Moe & Jack, Inc.

Jeffrey Robert White, Washington, DC, for Amicus Curiae, Association of Trial Lawyers of America.

Robert J. Gregory (briefed), Office of the General Counsel, Washington, D.C., Susan R. Oxford (argued), Equal Employment Opportunity Commission, Washington, D.C., for Amicus Curiae, E.E.O.C.

Before MARTIN, Chief Circuit Judge; BOGGS, BATCHELDER, DAUGHTREY, MOORE, COLE, CLAY, and GILMAN, Circuit Judges.

MOORE, J., delivered the opinion of the court, in which MARTIN, C.J., DAUGHTREY, COLE, CLAY, and GILMAN, JJ., joined. BATCHELDER, J. (pp. 681-85), delivered a separate dissenting opinion, in which BOGGS, J., Joined.

OPINION

MOORE, Circuit Judge.

These cases, consolidated for purposes of en banc review, involve the interaction in the employment context of the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq., with federal anti-discrimination laws, such as Title VII of the Civil Rights Act of 1964. Both of the employees involved, Lillian Pebbles Morrison and Mark F. Shankle, were required to sign arbitration agreements as conditions of their employment, Morrison with Circuit City Stores, Inc. ("Circuit City"), and Shankle with the Pep Boys-Manny, Moe & Jack, Inc. ("Pep Boys"). Morrison and Shankle both sought to sue their former employers in court for discrimination after termination. In Morrison's case, the district court held that the arbitration agreement was enforceable and thus stayed Morrison's lawsuit pending arbitration. In Shankle's case, the district court held the agreement unenforceable and stayed arbitration pending litigation. We ordered a consolidated en banc hearing to address the important issues presented in these cases regarding mandatory arbitration agreements in the employment context.

The proper resolution of these appeals requires that we carefully reconcile the "liberal federal policy favoring arbitration agreements," Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983), with the important rights created and protected by federal civil rights legislation. In the past, many have viewed mandatory arbitration in the employment context and the goals of civil rights legislation as irreconcilable, with the former understood as a means for employers to evade the purposes of the latter. The Supreme Court, however, has repeatedly "rejected generalized attacks on arbitration that rest on suspicion of arbitration as a method of weakening the protections afforded in the substantive law." Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 89-90, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000) (quotation omitted). See also Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 121 S.Ct. 1302, 149 L.Ed.2d 234 (2001) (holding that mandatory arbitration agreements in the employment context fall under the FAA).

Instead, the Supreme Court has emphasized that "federal statutory claims may be the subject of arbitration agreements... enforceable pursuant to the FAA because the agreement only determines the choice of forum." EEOC v. Waffle House, Inc., 534 U.S. 279, 295 n. 10, 122 S.Ct. 754, 151 L.Ed.2d 755 (2002). Thus, under the correct reconciliation of the sometimes-perceived conflict between arbitration agreements in the employment context and federal anti-discrimination laws, the choice to arbitrate statutory claims will change only the forum of decision and not the substantive protections afforded by the statutes in question. "By agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute; it only submits to their resolution in an arbitral, rather than a judicial, forum." Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985).

The following resolution of the cases before us attempts and, we believe, achieves such a reconciliation of the liberal policy favoring arbitration and the important goals of federal anti-discrimination statutes. Part I of this opinion provides the factual background of the two cases consolidated in this appeal. Part II addresses the enforceability of cost-splitting provisions in mandatory arbitration agreements subjecting statutory claims to an arbitral forum. After rejecting competing standards in section II.A., we provide in section II.B. a standard for determining whether a cost-splitting provision in an arbitration agreement undermines the purposes of federal anti-discrimination legislation. Consistent with the Supreme Court's holdings in Green Tree and Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991), we adopt a "case-by-case" standard that protects plaintiffs' access to an effective forum, judicial or arbitral, for the vindication of their statutory claims.

Part III addresses Morrison's claims on appeal. After setting out the standard of review in section III.A. and reviewing various state-law contract arguments in section III.B., we hold in section III.C. that the cost-splitting provision in the Circuit City arbitration agreement is not enforceable in the present case. In section III.D., we further hold that provisions in arbitration agreements that limit the remedies available in the arbitral forum, compared to those remedies available in the judicial forum, are also unenforceable. Having held that both the cost-splitting provision and the limitation-of-remedies provision in the Circuit City arbitration agreement are unenforceable, we address the severability of the offending provisions in Morrison's case in section III.E. Given our conclusion that these provisions are severable, we AFFIRM the district court's dismissal of Morrison's claims and its order compelling arbitration, although for reasons different from those provided by the district court.

Part IV addresses Pep Boys' arguments on appeal. In section IV.B., we apply the standard provided in section II.B. and hold that the cost-splitting provision in Pep Boys' arbitration agreement is also unenforceable. Section IV.C. holds that the remainder of the Pep Boys arbitration agreement is enforceable under Tennessee state law and that Shankle's proper remedy for the American Arbitration Association's (AAA's) failure to abide by the terms of the arbitration agreement is to seek a court order, pursuant to § 4 of the FAA, mandating compliance with the terms of the agreement. For these reasons, we AFFIRM the district court's order in Shankle's case in part, REVERSE in part, and REMAND for proceedings consistent with this opinion.

I. BACKGROUND

A. Morrison

On July 10, 1995, Plaintiff-Appellant Morrison, an African-American female with a bachelor's degree in engineering from the U.S. Air Force Academy and a master's degree in administration from Central Michigan University, submitted an application for a managerial position at a Circuit City store in Cincinnati, Ohio. As part of the application process, Morrison was required to sign a document entitled "Dispute Resolution Agreement." This document contained an arbitration clause that required resolution of all disputes or controversies arising out of employment with Circuit City in an arbitral forum. The application provided that Circuit City would not consider any application for employment unless the arbitration agreement was signed, that all applicants were required to arbitrate any legal dispute relating to their employment with Circuit City, including all state and federal statutory claims, contract claims, and tort claims, that all arbitrations would occur before a neutral arbitrator, and that all such arbitrations would be final and binding. Applicants could withdraw their consent to the arbitration agreement within three days of signing the application, but such action would also constitute withdrawal of their application for employment at Circuit City.

The Circuit City arbitration agreement also provided that all arbitrations were to proceed according to the "Circuit City Dispute Resolution Rules and Procedures." These rules and procedures addressed a variety of arbitral matters, including the time limitations for filing a request for arbitration, the limitation on remedies available to plaintiffs in the arbitral forum, filing fees, the payment of arbitration costs, discovery, and attorney fees. The relevant terms of the rules and procedures in the agreement entered into by Morrison are as follows.¹ Rule 4 requires an associate/employee to pay a filing fee of $75 to initiate arbitration and to submit an arbitration request form within one year of "the date on which the Associate knew, or through reasonable diligence should have known, of facts giving rise to...