Palcko v. Airborne Express, Inc.

• Decision Date: 18 June 2004
• Docket Number: No. 03-2227.,03-2227.
• Citation: 372 F.3d 588
• Parties: Margaret PALCKO v. AIRBORNE EXPRESS, INC., Appellant.
• Court: U.S. Court of Appeals — Third Circuit

372 F.3d 588

Margaret PALCKO v. AIRBORNE EXPRESS, INC., Appellant.

No. 03-2227.

United States Court of Appeals, Third Circuit.

Argued January 12, 2004.

Filed June 18, 2004.

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Sharon M. Erwin (Argued), Law Offices of Sharon M. Erwin, LLC, Philadelphia, PA, for Appellant.

David L. DaCosta (Argued), Joseph J. McAlee, Sprague & Sprague, Philadelphia, PA, for Appellee.

Before SLOVITER, RENDELL, and ALDISERT, Circuit Judges.

SLOVITER, Circuit Judge.

The principal questions before us on this appeal are the scope of the exclusion from the Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 1-16 (2004), for a "class of workers engaged in foreign or interstate commerce" and the preemptive effect, if any, of the statutory exclusion.

I.

Defendant Airborne Express, Inc. ("Airborne") appeals from the District Court's order dated April 23, 2003 denying Airborne's motion to compel arbitration of plaintiff Margaret Palcko's claims under Title VII of the Civil Rights Act of 1964 ("Title VII"), 42 U.S.C. § 2000e (2004), and the Pennsylvania Human Relations Act, 43 Pa. Cons.Stat. Ann. §§ 951-963 (2004). Airborne contends that Palcko is required to arbitrate her claims pursuant to a contractual arbitration agreement based on the FAA and Washington state law. Its appeal challenges the District Court's rulings that Palcko, as a transportation worker engaged in interstate commerce, is excluded from the FAA's coverage, and that this FAA exemption preempts enforcement of Palcko's arbitration agreement with Airborne under Washington state law.

II.

Airborne is a package transportation and delivery company that engages in intrastate, interstate, and international shipping. It began employing Palcko as a Field Services Supervisor in Philadelphia in 1998. Palcko's duties included supervising between thirty and thirty-five drivers who delivered packages from Airborne's facility near the Philadelphia International Airport to their ultimate destinations in the Philadelphia area, and picked up packages from customers in the Philadelphia area and brought them back to Airborne's facility for shipment. Palcko monitored and improved the performance of the drivers under her supervision to ensure timely and efficient delivery of packages.

When Palcko was hired, she agreed to enter into a "Mutual Agreement to Arbitrate Claims" with Airborne. The relevant portions of the Agreement, which covers "all claims," provides:

Except as provided in this Agreement, the Federal Arbitration Act shall govern the interpretation, enforcement and all proceedings pursuant to this Agreement. To the extent that the Federal Arbitration Act is inapplicable, Washington law pertaining to agreements to arbitrate shall apply.

App. at 19.

According to Palcko, once she began performing her duties at Airborne she encountered immediate resistance and hostility from the drivers under her supervision. She alleges that other Airborne employees falsely accused her of sexual misconduct, verbally and physically intimidated her during work, created a hostile work environment through sexist remarks, spread offensive rumors about her sex life and moral character through Airborne's internal communications system, and generally discriminated against her because of her gender. Pl.'s Compl. at 3-7. Palcko contends that Airborne did not meaningfully investigate and address these incidents, which she reported to the company management. According to Palcko, when her immediate supervisor, Michael Matey, told her in the presence of others during a March 5, 2001 meeting that "[m]aybe you don't belong in this industry" and "[m]aybe you should just leave," she left the meeting and never returned to her position at Airborne. Pl.'s Compl. at 7. Airborne denies all Palcko's factual allegations of company wrongdoing. Def.'s Answer at 3-6.

Palcko filed a charge against Airborne with the Equal Employment Opportunity Commission on May 31, 2001, seeking administrative remedies for her allegations under Title VII, 42 U.S.C. § 2000e-5. After 180 days elapsed without a finding by the Commission on Palcko's charge against Airborne, she requested a Dismissal and Notice of Rights from the Commission. 42 U.S.C. § 2000e-5(f)(1). The Commission issued the Dismissal and Notice, thereby exhausting Palcko's administrative remedies and allowing her to seek judicial recourse.

Palcko filed a complaint against Airborne in the District Court for the Eastern District of Pennsylvania on May 20, 2002 under Title VII and the Pennsylvania Human Relations Act. After the parties resolved issues unrelated to this appeal pertaining to the service of process, Airborne filed a motion to compel arbitration of Palcko's claims under the parties' arbitration agreement. The District Court denied Airborne's motion on April 24, 2003, holding that Palcko's employment contract is "excluded from the coverage of the FAA because of the nature of her work." App. at 14, 17-18. The court also found that the exclusionary effect of the FAA preempts alternative enforcement of the arbitration contract under Washington state law, as such enforcement "would directly conflict with Congress's express purpose" of exempting a certain class of workers "from a federal law otherwise favoring arbitration." App. at 18. Airborne now appeals from the District Court's order.

III.

A. The Federal Arbitration Act

1. Jurisdiction

The District Court had subject matter jurisdiction over Palcko's Title VII claim under 28 U.S.C. §§ 1331, 1343. The FAA, 9 U.S.C. § 16(a), provides for appellate jurisdiction over Airborne's appeal from the District Court's order denying its motion to compel arbitration.¹ Brayman Constr. Corp. v. Home Ins. Co., 319 F.3d 622, 624-25 (3d Cir.2003). Palcko contends, however, that because the District Court found Palcko's employment contract to be exempt from the FAA, we have no jurisdiction to review that court's denial of Airborne's motion to compel arbitration under 9 U.S.C. § 16(a), which is a section of the FAA. Appellee's Br. at 1.

Palcko's contention is without merit. We have held in Sandvik AB v. Advent International Corporation, 220 F.3d 99 (3d Cir.2000), that the FAA's provision for interlocutory appeals of orders denying motions to compel arbitration clearly endows us with appellate jurisdiction even in instances when the validity of the underlying contract to arbitrate is in doubt, as in Palcko's case with respect to the arbitration agreement's reference to the FAA. See id. at 100 (stating that the FAA's "plain language contemplates interlocutory appeals from orders" denying arbitration because of questions related to the validity of the underlying contract, and that "other parts of the statute evince clear Congressional intent that challenges to refusals to compel arbitration be promptly reviewed by appellate courts").

Acceptance of Palcko's argument would create the curious situation in which either all district courts' orders denying arbitration based on section 1's exemption clause would be beyond appellate review, which contradicts section 16(a)'s plain language, or the determination of our appellate jurisdiction would be contingent on the outcome of our review of the merits of the District Court's finding on the exemption question, which is precisely what we are barred from doing in the absence of appellate jurisdiction. As we stated in Sandvik, "The more natural reading [of Section 16(a) is] to treat all orders declining to compel arbitration as reviewable." Id. at 103. No appellate court has held to the contrary.

Our jurisdiction over the District Court's order here, therefore, is clear.

2. Exemption Under Section 1 of the FAA

Section 1 of the FAA provides:

... [N]othing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.

9 U.S.C. § 1.

In Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 121 S.Ct. 1302, 149 L.Ed.2d 234 (2001), the Supreme Court considered the scope of this exemption from the FAA. The employer in that case, Circuit City, sought to compel arbitration as provided for in its employment contracts. The Ninth Circuit held that arbitration was not appropriate because section 1 of the FAA exempts from its coverage all employment contracts. The Supreme Court reversed, rejecting the Ninth Circuit's expansive reading of section 1. The Court noted that "[m]ost Courts of Appeals conclude the exclusion provision is limited to transportation workers, defined, for instance, as those workers `actually engaged in the movement of goods in interstate commerce.'" Id. at 112, 121 S.Ct. 1302 (citing Cole v. Burns Int'l Security Servs., 105 F.3d 1465, 1471 (D.C.Cir.1997)). Looking to the statutory language, the Court applied the interpretation maxim of ejusdem generis and read the words "any other class of workers engaged in ... commerce," as giving "effect to the terms `seamen' and `railroad employees.' "Circuit City, 532 U.S. at 115, 121 S.Ct. 1302. The Court held that the residual phrase "any other class of workers engaged ... in interstate commerce" should "be controlled and defined by reference to the enumerated categories of workers which are recited just before it...." Id. at 115, 121 S.Ct. 1302. Reading section 1 in this narrow manner, the Court noted, also concurs with Congress's intent in enacting the FAA to compel enforcement of arbitration agreements in response to then-prevalent judicial hostility toward such agreements, especially given the fact that more specific and comprehensive federal arbitration procedures for seamen and railroad employees were already in existence or on the verge of passage. See id. at 121, 121 S.Ct. 1302 ("It would be rational for Congress to ensure that workers in general would be covered by the provisions of the FAA, while reserving for itself more specific legislation for those engaged in transportation.") (citation omitted).

To determine...