American General Life and Acc. Ins. Co. v. Wood

• Citation: 429 F.3d 83
• Decision Date: 14 November 2005
• Docket Number: No. 04-2252.,04-2252.
• Parties: AMERICAN GENERAL LIFE AND ACCIDENT INSURANCE COMPANY, Plaintiff-Appellee, v. Larry WOOD, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

429 F.3d 83

AMERICAN GENERAL LIFE AND ACCIDENT INSURANCE COMPANY, Plaintiff-Appellee, v. Larry WOOD, Defendant-Appellant.

No. 04-2252.

United States Court of Appeals, Fourth Circuit.

Argued September 19, 2005.

Decided November 14, 2005.

Leman Walton Auvil, Pyles & Auvil, Parkersburg, West Virginia, for Appellant. Vanessa M. Griffith, Vinson & Elkins, Dallas, Texas, for Appellee.

Before TRAXLER, KING, and GREGORY, Circuit Judges.

Affirmed by published opinion. Judge GREGORY wrote the opinion, in which Judge TRAXLER and Judge KING joined.

OPINION

GREGORY, Circuit Judge.

Larry P. Wood commenced a lawsuit in West Virginia state court against his employer, American General Life and Accident Insurance Company ("AGLA"), and his supervisor, Tim Starkey, asserting state-law claims of sex discrimination and wage law violations. In response, AGLA preemptively filed an action against Wood in federal district court in the Southern District of West Virginia, seeking to compel arbitration of those claims under the Federal Arbitration Act ("FAA"), 9 U.S.C. § 4, and to enter a prohibition against Wood from prosecuting the state action against AGLA. The district court granted that relief and entered judgment against Wood. Because we find that Wood's claims are arbitrable under a valid and enforceable arbitration agreement and that Starkey is not a necessary party to this litigation, we affirm the district court's judgment.

I.

Wood began his employment with AGLA on July 21, 1997, and continued working until his termination on May 5, 2000. On April 1, 1998, AGLA implemented an Employee Dispute Resolution Program ("Program" or "Plan") designed to resolve all employment-related conflicts between employees and AGLA through a four-option process. Prior to the implementation of the Program, Wood and thirty other employees attended a presentation conducted by AGLA General Manager, Nick Coris, on March 20, 1998. According to Wood, Coris represented that the Program "would not in any way prevent an employee of AGLA from suing the company and that the program did not take any rights away from the employees but only added another avenue through which the employee could pursue any dispute with the company." J.A. 57.¹

AGLA distributed an informational packet regarding the Program to each employee. The cover letter stated:

It is important for you to know that employees will not be waiving any substantive legal rights under this new Program. Rather, the Program provides that any substantive legal issues you may have will be resolved in mediation or before a neutral arbiter, whose decision will be final and binding on you and the company. This does mean, however, that under the Program you waive any procedural rights you have to bring a court action and to a jury trial concerning any employment dispute you may have with the Company, including claims of discrimination based on race, national origin, gender, religion, age, or disability under any federal or state civil rights statute.

J.A. 21. The letter further stated that AGLA "may amend the terms of or discontinue the Program at its discretion. However, any such change would affect only future disputes and not any matter pending at the time under the Program." Id. The packet detailed the four options—Open Door Policy, Employee Relations Conference, Mediation, and Arbitration— available to employees for dispute resolution.² The packet also provided that "[e]mployment or continued employment after the Effective Date of this Plan constitutes consent by both the Employee and the Company to be bound by this Plan, both during the employment and after termination of employment." J.A. 25.

Specifically with respect to arbitration, the packet set forth, inter alia, the procedures for scheduling conferences, taking discovery, and administering oaths. Under the Program, the employee must pay a $50 processing fee to initiate the arbitration process. After payment, the American Arbitration Association ("AAA") is then required to designate a list of appropriate arbitrators, such that each party can express its order of preference or strike any names. The authority of the arbitrator is limited "to the resolution of legal disputes between the parties." J.A. 54. Specifically, the arbitrator "shall be bound by and shall apply applicable law including that related to the allocation of the burden of proof as well as substantive law. The arbitrator shall not have the authority either to abridge or enlarge substantive rights available under existing law." Id.

The packet also included an "EMPLOYEE ACKNOWLEDGEMENT AND AGREEMENT CONCERNING AMERICAN GENERAL LIFE AND ACCIDENT INSURANCE COMPANY'S EMPLOYEE DISPUTE RESOLUTION PROGRAM" ("Agreement"). The Agreement stated:

By my signature below, I acknowledge and understand that I am required to adhere to the Employee Dispute Resolution Plan and its requirement for submission of employment disputes to mediation and/or binding arbitration. I further understand that my employment or continued employment with the Company constitutes my acceptance of the terms of this provision as a condition of my employment or continued employment.

J.A. 56. While Wood and other employees were handed these packets at the meeting, he attests that they were "not given an opportunity to read" the packet. J.A. 58. Moreover, he asserts that the employees "were instructed that we had to sign the forms, that we had no option but to sign them, and were given no time to read the materials before signing the same. We were simply given the materials and told to sign." J.A. 58, 61, 63. Wood claims that he was not told then, nor at any other time, that "by signing that I had received the Dispute Resolution Program that I would be giving up my right to sue under the law for any discrimination against me and, in fact, I was told the opposite." J.A. 57-58. Accordingly, Wood executed the Agreement at the meeting on March 20, 1998.

Following his termination on May 5, 2000, Wood commenced a lawsuit in the Circuit Court of Kanawha County, West Virginia, against AGLA and Starkey, asserting state-law claims pursuant to the Human Rights Act, W. Va.Code § 5-11-1 et seq., and the Wage Payment and Collection Act, W. Va.Code § 21-5-1 et seq. On July 27, 2001, AGLA responded by filing suit against Wood in the Southern District of West Virginia, seeking to compel arbitration of his state-law claims. On December 11, 2002, AGLA filed a petition in the federal action to compel arbitration and to prohibit the underlying state proceedings. On September 3, 2004, the district court granted the petition, directing that judgment be entered in favor of AGLA and a prohibition be entered against Wood from prosecuting the state action against AGLA.³ Wood now appeals.

II.

Section 2 of the FAA provides that a written arbitration agreement "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. A party can compel arbitration if he establishes: "`(1) the existence of a dispute between the parties, (2) a written agreement that includes an arbitration provision which purports to cover the dispute, (3) the relationship of the transaction, which is evidenced by the agreement, to interstate or foreign commerce, and (4) the failure, neglect or refusal of the defendant to arbitrate the dispute.'" Adkins v. Labor Ready, Inc., 303 F.3d 496, 500-01 (4th Cir.2002) (quoting Whiteside v. Teltech Corp., 940 F.2d 99, 102 (4th Cir.1991)).

Generally, "[t]he FAA reflects `a liberal federal policy favoring arbitration agreements.'" Adkins, 303 F.3d at 500 (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)). Indeed, the FAA serves as "a response to hostility of American courts to the enforcement of arbitration agreements, a judicial disposition inherited from then-longstanding English practice." Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 111, 121 S.Ct. 1302, 149 L.Ed.2d 234 (2001) (citing cases). Moreover, the FAA was intended to "create a body of federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the Act." Moses H. Cone Mem'l Hosp., 460 U.S. at 24, 103 S.Ct. 927. Accordingly, we "resolve `any doubts concerning the scope of arbitrable issues . . . in favor of arbitration.'" Hill v. PeopleSoft USA, Inc., 412 F.3d 540, 543 (4th Cir.2005) (quoting Moses H. Cone Mem'l Hosp., 460 U.S. at 24-25, 103 S.Ct. 927).

Although federal law governs the arbitrability of disputes, ordinary state-law principles resolve issues regarding the formation of contracts. Hill, 412 F.3d at 543 (citing First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995); Moses H. Cone Mem'l Hosp., 460 U.S. at 24, 103 S.Ct. 927). Specifically, "courts should remain attuned to well-supported claims that the agreement to arbitrate resulted from the sort of fraud or overwhelming economic power that would provide grounds for the revocation of any contract." Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 33, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991) (internal quotations and citations omitted). For instance, "generally applicable contract defenses, such as fraud, duress, or unconscionability, may be applied to invalidate arbitration agreements without contravening § 2." Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 687, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996) (citing cases). Since this appeal focuses squarely on the enforceability of the Agreement, we review the district court's application of West Virginia contract principles de novo. Adkins, 303 F.3d at 501.

III.

The district court concluded that while the Agreement was an adhesion contract, in that AGLA forced its employees to accept the Program or else face termination, the employees' relinquishment of their state-created constitutional rights to state judicial...