Circuit City Stores, Inc. v. E.E.O.C.

• Decision Date: 12 August 1999
• Docket Number: No. 3:97CV00538.,3:97CV00538.
• Citation: 75 F.Supp.2d 491
• Parties: CIRCUIT CITY STORES, INC., Plaintiff, v. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Defendant.
• Court: U.S. District Court — Eastern District of Virginia

75 F.Supp.2d 491

CIRCUIT CITY STORES, INC., Plaintiff, v. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Defendant.

No. 3:97CV00538.

United States District Court, E.D. Virginia, Richmond Division.

August 12, 1999.

COPYRIGHT MATERIAL OMITTED

David E. Nagle, Ellen Duffy McKay, LeClair Ryan, Richmond, VA, for Plaintiff.

Gerald M. Goldstein, Office of Legal Counsel, Equal Employment Opportunity Commission, Washington, DC, Debra J. Prillaman, United States Attorney's Office, Richmond, VA, Daniel Bensing, U.S. Department of Justice, Washington, DC, for Defendant.

MEMORANDUM OPINION

PAYNE, District Judge.

This declaratory judgment action has its genesis in the decisions of the Equal Employment Opportunity Commission ("EEOC") (1) to reform what it perceived to be the law created by the decision of the Supreme Court of the United States in Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991) and its progeny in the federal courts; and (2) to foreclose the use by employers, in the wake of Gilmer, of employment agreements requiring the mandatory arbitration of claims arising under the federal employment discrimination laws enforced by the EEOC. For the reasons which follow, the Court concludes that there is no jurisdiction over the subject matter of this action, notwithstanding the unreasonable and capricious conduct of the EEOC and the serious adverse consequences of that conduct to the plaintiff, Circuit City Stores, Inc. ("Circuit City").

BACKGROUND

This declaratory judgment action was filed by Circuit City on July 18, 1997. In it Circuit City seeks a declaratory judgment that its Associate Issue Resolution Program ("AIRP"), a mandatory program for arbitration of all employment disputes, does not violate the federal employment discrimination laws enforced by the EEOC. By Memorandum Opinion dated July 21, 1998 (the July 21 Opinion), the Court granted the EEOC's motion to dismiss this action on the ground that it was not ripe for review. By Memorandum Opinion dated October 1, 1998, the Court granted the motion of Circuit City to reconsider the July 21 Opinion, pursuant to Fed.R.Civ.P. 59(e), to account for new evidence and to prevent manifest injustice related to representations which had been made to the Court by the EEOC respecting matters relevant to its argument that this matter must be dismissed on ground of ripeness. In particular, the EEOC had made its decisional process the centerpiece of its ripeness argument, and it was made to appear at the hearing on the motion for reconsideration that previous representations made by counsel for the EEOC respecting the agency's decisional process were either not correct when made, or that circumstances had evolved while the matter was under submission which made the representations no longer true, or both.

As a consequence of the foregoing circumstances, the Court vacated the July 21 Opinion and required the EEOC to make certain reports and, as a result thereof, granted Circuit City's motion for limited discovery respecting the EEOC's decisional process which the EEOC had elected to make the focal point of the ripeness argument in its original motion to dismiss the action. That discovery has been concluded and the EEOC has renewed its motion to dismiss this declaratory judgment action on the ground that it is not ripe for decision. Additionally, and belatedly, the EEOC has asserted that the Court lacks subject matter jurisdiction because there has been no waiver of sovereign immunity as to any agency action here challenged.

STATEMENT OF FACTS

The rather unique factual circumstances of this case have framed a somewhat unique jurisdictional issue. Consequently, it is necessary to recount in some detail the actions of the EEOC which prompted the filing of this declaratory judgment action.¹

In 1991, the Supreme Court of the United States held that predispute contractual agreements to submit to compulsory arbitration employment discrimination claims arising under federal statutes were permissible and enforceable under the Federal Arbitration Act ("FAA"), unless the text of the statute or its legislative history expressly precluded compulsory arbitration, or an inherent conflict existed between compulsory arbitration, or an remedial purposes of the particular statute. Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. at 26-35, 111 S.Ct. 1647.² In the wake of the decision in Gilmer and several ensuing decisions of the courts of appeals, employers throughout the country began to adopt and implement mandatory arbitration programs both as a condition of considering an individual's application for employment as well as a condition of continued employment. These arbitration plans typically required that all disputes between the employer and employee, including those involving claims of employment discrimination under federal law,³ be submitted to arbitration. The typical mandatory arbitration plan neither precludes an individual from seeking independent review of a discrimination claim by the EEOC nor prevents the EEOC from issuing a right to sue letter to the individual. However, because the arbitration agreements foreclose the employee's right to litigate in federal court based upon the individual. However, because the arbitration agreements foreclose the employee's right to litigate in federal court based upon the authority conferred by the right to sue letter, the EEOC determined that private party litigation would be of limited utility in achieving enforcement of the federal employment discrimination laws. Moreover, because these arbitration programs made the arbitral forum the exclusive place in which the employee could obtain relief, they were seen by the EEOC as an effort to preclude it from obtaining monetary or other relief on behalf of an individual or class of individuals.

Confronted with the trend toward mandatory arbitration of employment discrimination claims, the EEOC conclude that compulsory arbitration programs which require binding arbitration of employment discrimination claims as a condition of initial or continued employment were antithetical to the remedical purpose of the nation's employment discrimination laws and that such plans posed a substantial threat to the continued viability of those laws.⁴ On February 6, 1996, the EEOC formally adopted a National Enforcement Plan ("NEP") which identified the agency's priorities for the enforcement of federal employment discrimination laws. The second of the three EEOC enforcement priorities identified in the NEP was "[c]ases having the potential of promoting the development of law supporting the antidiscrimination purposes of the statutes enforced" by the EEOC. That priority included "[c]laims presenting unresolved issues of statutory interpretation under one or more of the statutes enforced by the Commission," specifically, "[c]laims addressing the legality of agreements that mandate binding arbitration of employment disputes imposed as a condition of initial or continued employment." Doc. App. to Circuit City's Opposition to Renewed Motion to Dismiss at Exh. 1, § III.⁵

Shortly before the NEP was adopted, Philip Sklover became the Associate General Counsel of Systemic Litigation Services ("SLS"), a division of the Office of General Counsel which operates out of the EEOC's national headquarters in Washington D.C. Before adoption of the NEP, the SLS group handled a hodge-podge of cases that were investigated by regional field offices which then forwarded the matter to headquarters for possible litigation. Upon his arrival, Sklover "attempted to redefine the mission of [the SLS] unit to be more targeted and proactive and [to] get away from the large multi-issue, multibas[i]s cases that [SLS] used to bring and [instead] target more cutting edge issues for specifically [sic] enforc[ing][the] policies that the Commission had publicly announced with respect to legal issues." Katahira Depo. at 19:11-17. To that end, the EEOC's Office of General Counsel conducted a comprehensive review of arbitration programs adopted by companies throughout the country in an effort to identify appropriate litigation vehicles for the purpose of bringing lawsuits aimed at clarifying and reforming the state of the law subsequent to the Gilmer decision and its progeny in the courts of appeals and the district courts.⁶ Circuit City was one of two companies selected as targets for the EEOC's efforts to further develop and reform the law and, therefore, the company's mandatory AIRP, adopted in 1995 as a condition of initial and continued employment, was identified as one of the programs to be judicially challenged by the EEOC. See e.g., Doc.App. at Exh's 2-4.

During the summer of 1996, lawyers in the General Counsel's Office began to prepare for litigation by collecting information to use in a federal court action to challenge Circuit City's AIRP. First, the legal team selected a venue for bringing the action — the Northern District of California in the Ninth Circuit — where the judges and the attitude toward arbitration were perceived by the EEOC's lawyers as most favorable to the Commission's objectives.⁷ Thereafter, the lawyers endeavored to identify potential plaintiffs and witnesses whose presence in California would support venue for the forthcoming action in the North District of California.

By October 17, 1996, the General Counsel's team had prepared a Presentation Memorandum seeking approval to initiate a directed investigation into Circuit City's AIRP by filing a Commissioner's Charge against Circuit City.⁸ The October 1996 Presentation Memorandum described the planned approach as follows:

The General Counsel has identified mandatory arbitration as posing a substantial threat to the continued viability of the anti-discrimination laws. This is the first of two expected requests for Commissioner's charges targeting this issue. Because Circuit City adopted its program in response to the...