Brown v. Wheat First Securities

• Citation: 257 F.3d 821
• Decision Date: 31 July 2001
• Docket Number: No. 00-7171 and 00-7173,00-7171 and 00-7173
• Parties: (D.C.Cir. 2001) Ronald L. Brown, Appellant/Cross-Appellee v. Wheat First Securities, Inc., et al., Appellees/Cross-Appellants
• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)

Page 821

257 F.3d 821 (D.C.Cir. 2001)

Ronald L. Brown, Appellant/Cross-Appellee v. Wheat First Securities, Inc., et al., Appellees/Cross-Appellants

No. 00-7171 and 00-7173

United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 13, 2001

Decided July 31, 2001

[Copyrighted Material Omitted] Appeals from the United States District Court for the District of Columbia (No. 99cv01776)

Stephen M. Kohn argued the cause for appellant/crossappellee. With him on the briefs were Michael D. Kohn and David K. Colapinto.

Paul Gonson argued the cause for appellees/crossappellants. With him on the briefs were Stephen G. Topetzes and Rebecca L. Kline. Teri L. Nelson entered an appearance.

Before: Williams, Ginsburg and Rogers, Circuit Judges.

Opinion for the Court filed by Circuit Judge Williams.

Williams, Circuit Judge:

In Cole v. Burns International Security Services, 105 F.3d 1465 (D.C. Cir. 1997), we held that an employee who agrees to arbitration of disputes as a condition of employment and who makes a claim based on federal statutory rights may not be charged certain fees and expenses for arbitration of the claim, at least where that condition of employment was demanded by an employer not subject to regulatory oversight. See LaPrade v. Kidder, Peabody & Co., Inc., 246 F.3d 702, 704 (D.C. Cir. 2001). This case raises the issue whether Cole embraces or should be extended to non-statutory state law claims that are grounded in a "public policy rationale." We hold that the logic of Cole does not reach so far.

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Appellant Ronald Brown was employed by the Washington, D.C. office of Wheat First Securities, a member of the National Association of Securities Dealers ("NASD"), from November 1991 until his termination with three days' notice in February 1997. When Brown signed on with Wheat First, he executed the NASD "Uniform Application for Securities Industry Registration or Transfer," commonly known as Form U-4, which includes a mandatory arbitration clause.

In February 1998 Brown filed a claim under his arbitration agreement seeking $25,000,000 in damages for alleged wrongful termination, breach of implied contract, defamation, slander and tortious interference. In support of his wrongful termination claim, he argued that the District of Columbia courts have created a "whistleblower" exception to its employment-at-will rule, and that Wheat First had fired him for alerting the Securities and Exchange Commission to what he perceived to be illegal activities occurring at Wheat First. He paid a $500 non-refundable filing fee and a $1,500 hearing deposit. He also signed a Uniform Submission Agreement, agreeing to the arbitration of his claims under the NASD's rules. On February 11, 1999 during a pre-trial conference, the parties jointly requested a postponement of the final hearing, then scheduled for March 1999. The panel imposed an "adjournment fee" of $1,500 and assessed each party $750.

The final hearing was later rescheduled for September 13, 1999. But in April 1999 Brown filed an objection to the fee assessment, arguing that because he was pursuing "public law" claims, Cole prohibited any assignment of arbitration fees to him. The NASD rejected this theory. On June 29 and 30, 1999, respectively, Brown filed a second objection with the NASD and filed his claims in district court, for the first time alleging a violation of the Civil Rights Act of 1871 in addition to the claims previously brought to arbitration.

On September 7 the NASD denied Brown's second motion. "Not willing to participate" in the arbitral proceedings, Brown sought on September 10 to cancel the agreement to arbitrate contained in Form U-4 and on September 12 to have the arbitrators dismiss the claim without prejudice. On September 13 his attorney appeared before the arbitration panel to preserve objections, but didn't otherwise participate. On November 9, 1999 the arbitration panel dismissed his claims with prejudice and assessed him a fee of $6,365, which included costs that under Cole are considered arbitrators' fees. See Cole, 105 F.3d at 1484 n.15 (defining such fees).

Brown then filed a motion in the district court proceeding to vacate the arbitration award; Wheat First responded with a motion to confirm the award. The district court granted the motion to confirm and denied Brown's motion to vacate, concluding that Cole applies only to statutory claims. Brown v. Wheat First Securities, Inc., 101 F. Supp. 2d 1, 2-5 (D.D.C. 2000). On the basis of a Wheat First motion filed prior to the arbitrators' dismissal of Brown's claims, the district court also ordered arbitration of the newly-raised Civil Rights Act claims, but required that they be arbitrated on terms consistent with Cole. Brown, 101 F. Supp. 2d at 7. Brown appeals the district court's confirmation of the arbitrators' dismissal and the denial of his motion to vacate. Id. at 5-7. Wheat First cross appeals the compelled arbitration, arguing that once the arbitration award was confirmed, the Civil Rights Act claims were precluded.

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Brown's principal claim of error rests on the assertion that Cole applies to his truncated arbitration with Wheat First, either by its own terms or because its logic must extend to state common law claims that are rooted in "public policy." We assume in Brown's favor that the Supreme Court's recent decision in Green Tree Financial Corp. v. Randolph, 121 S. Ct. 513 (2000), finding that a party claiming that arbitration would be "prohibitively expensive" must at least show "the likelihood of incurring such costs," id. at 522, leaves Cole fully intact. We also assume in his favor that his whistleblower claim would qualify as an exception to the employment-at-will doctrine under the principles of District of Columbia Law elucidated in Carl v. Children's Hospital, 702 A.2d 159 (D.C. 1997). Nonetheless, both Brown's arguments fail.

Cole involved claims of discrimination under Title VII of the Civil Rights Act of 1964. Acknowledging that the Supreme Court in Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991), had "made clear that, as a general rule, statutory claims are fully subject to binding arbitration," Cole, 105 F.3d at 1478 (quoting Gilmer, 500 U.S. at 26), we also noted that "Gilmer cannot be read as holding that an arbitration agreement is enforceable no matter what rights it waives or what burdens it imposes," id. at 1482. The arbitration agreement will be valid "so long as the prospective litigant effectively may vindicate [his or her] statutory cause of action in the arbitral forum." Id. at 1481 (quoting Gilmer, 500 U.S. at 28 (quoting Mitsubishi Motors Corp. v. Soler ChryslerPlymouth, Inc., 473 U.S. 614, 637 (1985))) (alteration in original). As to fees, we found that "it would undermine Congress's intent to prevent employees who are seeking to vindicate statutory rights from gaining access to a judicial forum and then require them to pay for the services of an arbitrator when they would never be required to pay for a judge in court." Cole, 105 F.3d at 1484. Accordingly we interpreted the arbitration agreement as requiring the employer to pay the arbitrator's fees. See id. at 1485.

In arguing that Cole's holding extends to his non-statutory claims, Brown relies exclusively on the fact that Cole on occasion appears to use the phrases "public law" and "public rights" interchangeably with "statutory law" and "statutory rights." He contends that "public" carries a broader meaning than "statutory" and that this broader meaning should be given to the holding of the case. We think that Brown reads too much into this potentially expansive language.

None of these terms has a sharply defined meaning. At oral argument, for example, Brown offered a definition of "public right" that he attributed (without specific citation) to Black's Law Dictionary: "Enforcement of rights in cases where the state is regarded as the subject of the right or the object of the duty." The 7th edition offers a narrower concept: "A right belonging to all citizens and usu. vested in and exercised by a public office or political entity." Black's Law Dictionary 1324 (7th ed. 1999). For public law, Black's says: "The body of law dealing with the relations between private individuals and the government, and with the structure and operation of the government itself; constitutional law, criminal law, and administrative law taken together." Id. at 1244 (7th ed. 1999). While totally different, both of these published definitions have in common the feature that they seem not to include the District of Columbia's whistleblowing doctrine.

Even more to the point, our opinion in Cole is limited at vital points to statutory rights. For instance, when discussing the protections that Gilmer suggests are necessary, the opinion refers only to the non-waivability of the substantive protections of statutory rights and of access to a neutral forum in which to enforce them. See Cole, 105 F.3d at 1482. It nowhere mentions the waivability of or access to a forum to enforce non-statutory "public law." The court framed the issue as:

[C]an an employer condition employment on acceptance of an arbitration agreement that requires the employee to submit his or her statutory claims to arbitration and then requires that employee to pay all or part of the arbitrator's fees?

Id. at 1483 (emphasis added).

Further, in Gilmer the Supreme Court determined that compulsory arbitration pursuant to an employment agreement is not inconsistent with the Age Discrimination in Employment Act, the federal statute in question there. Gilmer, 500 U.S. at 26-33. In Cole we defined our task as resolving an "issue not raised by the agreement in Gilmer," 105 F.3d at 1483, namely the fees issue. It would be quite a contortion of Cole to find that it had addressed a far broader subject than the case that it set out simply to refine. See also LaPrade, 246 F.3d at 708 (assuming that...