Beauchamp v. Great West Life Ins. Assur. Co., Civil Action No. 95-40357.

• Decision Date: 26 February 1996
• Docket Number: Civil Action No. 95-40357.
• Citation: 918 F. Supp. 1091
• Parties: Rosalind BEAUCHAMP, Plaintiff, v. GREAT WEST LIFE ASSURANCE COMPANY, a corporation, and Great West Life & Annuity Insurance Company, a corporation, Jointly and Severally, Defendants.
• Court: U.S. District Court — Eastern District of Michigan

918 F. Supp. 1091

Rosalind BEAUCHAMP, Plaintiff, v. GREAT WEST LIFE ASSURANCE COMPANY, a corporation, and Great West Life & Annuity Insurance Company, a corporation, Jointly and Severally, Defendants.

Civil Action No. 95-40357.

United States District Court, E.D. Michigan, Southern Division.

February 26, 1996.

COPYRIGHT MATERIAL OMITTED

Steven H. Schwartz, Dykema Gossett, P.L.L.C., Detroit, MI, for Great West Life & Annuity Ins. Co.

Michael L. Pitt, Pitt, Dowty & McGehee, Royal Oak, MI, for Rosalind Beauchamp.

MEMORANDUM AND ORDER GRANTING DEFENDANTS' MOTION TO COMPEL ARBITRATION

GADOLA, District Judge.

Plaintiff brought this ADEA and Title VII suit,¹ alleging that defendants had discriminatorily fired her because of her age and gender. Defendants now bring the present motion to compel arbitration and/or to dismiss. Pursuant to Local Rule 7.1(e)(2), the court has dispensed with oral argument and will decide the present motion based on the written submissions of the parties. For the reasons stated below, this court will grant the defendants' motion to compel arbitration.

I. Factual Background

Plaintiff began working for the defendants as an insurance salesperson on May 17, 1976. In 1984, plaintiff signed a Uniform Application for Securities Industry Registration (hereinafter "U-4 form"), which states:

THE FOLLOWING SHOULD BE READ VERY CAREFULLY BY THE APPLICANT

. . . . .

5. 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 with which I register....

Plaintiff registered with the National Association of Securities Dealers (hereinafter "NASD"). Part I of the NASD Code of Arbitration Procedure states that the code was created "for the arbitration of any dispute, claim or controversy arising out of or in connection with the business of any member of the Association...." This code mandates arbitration of:

any dispute, claim, or controversy eligible for submission under Part I of this Code between or among members and/or associated persons, and/or certain others, arising in connection with the business of such member(s) or in connection with the activities of such associated person(s), ... at the instance of:

(1) a member against another member;

(2) a member against a person associated with a member or a person associated with a member against a member; and,

(3) a person associated with a member against a person associated with a member.

Plaintiff asserts that she was informed that she had to sign the U-4 form to keep her employment and that she does not remember reading the previously quoted language from the U-4 form. The completed U-4 form was not kept in plaintiff's personnel file in Michigan, but rather at defendants' headquarters in Denver, which oversees compliance with licensing requirements.

Plaintiff alleges in her complaint that she was repeatedly passed over for promotion because of her gender and age. She resigned on January 5, 1995, allegedly the result of a constructive discharge by the defendants. She then brought a complaint before the EEOC and subsequently filed the present lawsuit in September, 1995.

II. Analysis

Defendants argue that plaintiff is compelled to arbitrate this action pursuant to the Federal Arbitration Act and the NASD Code of Arbitration Procedure. The Federal Arbitration Act states, in part:

A contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction ... shall be valid, irrevocable, and enforceable, save upon the grounds as exist at law or in equity for the revocation of any contract.

9 U.S.C. § 2. Section four of the FAA allows the court to compel arbitration when one party fails to comply with an arbitration agreement.² Defendants mainly rely on Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991), and Willis v. Dean Witter Reynolds, Inc., 948 F.2d 305 (6th Cir.1991) in arguing that the FAA and the NASD arbitration agreement apply to plaintiff's ADEA and Title VII claims.

In Gilmer, the Supreme Court held that an ADEA claim could be sent to arbitration when the plaintiff agreed to arbitration under a "Uniform Application for Securities Industry Registration or Transfer," containing the same language regarding arbitration as the U-4 form in the present case. The Court noted that the FAA "provisions manifest a `liberal federal policy favoring arbitration agreements.'" Gilmer, 500 U.S. at 25, 111 S.Ct. at 1651 (quoting Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 941, 74 L.Ed.2d 765 (1983)). The Court then stated:

by agreeing to arbitrate a statutory claim, a party does not forego the substantive rights afforded by the statute; it only submits to their resolution in an arbitral, rather than a judicial, forum.

Although all statutory claims may not be appropriate for arbitration, "having made the bargain to arbitrate, the party should be held to it unless Congress itself has evinced an intention to preclude a waiver of judicial remedies for the statutory rights at issue...." If such an intention exists, it will be discoverable in the text of the ADEA, its legislative history, or an "inherent conflict" between arbitration and the ADEA's underlying purposes.

Id. at 26, 111 S.Ct. at 1652 (citations omitted). The Court then examined the text, history, and underlying policies of the ADEA and concluded that there was no inherent conflict between the enforcement of the ADEA and the enforcement of agreements to arbitrate age discrimination claims.

In Willis, the Sixth Circuit extended the holding of Gilmer to Title VII actions:

The Supreme Court in Gilmer ... held that nothing in the ADEA or its legislative history suggested that the arbitration clause in the Securities Registration Form should not be enforced under the FAA. We find that the Court's analysis and conclusions in Gilmer compels the conclusion that the FAA and arbitration provisions of the Securities Registration Form apply equally to ... Title VII claims....

Id. at 307.

Defendants argue that these two cases demonstrate that the arbitration provision in the present case, being identical to the provisions at issue in Gilmer and Willis, applies to the plaintiff's claims and is enforceable under the FAA. Plaintiff disagrees, citing four reasons: (1) plaintiff did not knowingly agree to arbitrate because she was not aware of the arbitration clause and its application to Title VII and ADEA claims when she signed the U-4 form; (2) the contract is an adhesion contract under Michigan law and cannot be enforced; (3) defendants, under M.C.L. 423.502 have waived their right to enforce the arbitration clause because they did not keep the uniform application in plaintiff's personnel file; and (4) defendants have waived their right to enforce the arbitration clause because they did not do so in at least one other, similar case. These arguments will be addressed in turn.

A. Requirement of Actual Knowledge of Arbitration Clause

Plaintiff argues that in order for the arbitration clause to be enforceable, she must have known about the arbitration clause and its application to her claims in the present action. She claims not to have been informed about the arbitration clause and therefore asserts that she did not knowingly relinquish her rights to a judicial forum for employment discrimination claims when she signed the U-4 form.

Plaintiff relies on the Ninth Circuit case of Prudential Ins. Co. v. Lai, 42 F.3d 1299 (9th Cir.1994), which held that a plaintiff who signed a U-4 form to register with the NASD could only be held to the arbitration clause contained therein if he knowingly agreed to arbitrate his particular employment discrimination claims. The Ninth Circuit held that "Congress intended there to be at least a knowing agreement to arbitrate employment disputes before an employee may be deemed to have waived the comprehensive statutory rights, remedies, and procedural protections prescribed in Title VII...." Id. at 1304.

In reaching this conclusion, the Prudential court relied in part on one of the House Reports to the Civil Rights Act of 1991 that stated:

Section 216 of the 1991 Act encourages the use of alternative dispute resolution ... where appropriate and to the extent authorized by law.... The committee emphasizes ... that the use of alternative dispute resolution mechanisms is intended to supplement, not supplant, the remedies provided by Title VII. Thus, for example, the committee believes that any agreement to submit disputed issues to arbitration, whether in the context of a collective bargaining agreement or in an employment contract, does not preclude the affected person from seeking relief under the enforcement provisions of Title VII. This view is consistent with the Supreme Court's interpretation of Title VII in Alexander v. Gardner-Denver Co., 415 U.S. 36 94 S.Ct. 1011, 39 L.Ed.2d 147 ... (1974). The committee does not intend for the inclusion of this section to be used to preclude rights and remedies that would otherwise be available.

Id. at 1304 (quoting HR Rep.No. 40(I) 102nd Cong. 1st Sess., reprinted in U.S.C.C.A.N. 549, 635). The court also noted statements made by Senator Dole that the arbitration provision of the Civil Rights Act of 1991 encourages arbitration "where the parties knowingly and voluntarily elect to use these methods." Id. at 1305 (quoting 137 Cong. Rec.S. 15472, S. 15478 (Daily Ed. October 30, 1991)). The Prudential court heavily cited to Alexander v. Gardner-Denver,³ 415 U.S. 36, 94 S.Ct. 1011, 39 L.Ed.2d 147 (1974), and its progeny. In particular, the Ninth Circuit quoted, in part, the following language from Alexander:

Legislative enactments in this area have long evinced a general intent to accord parallel or

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