Cooper v. Mrm Investment Co.

• Citation: 367 F.3d 493
• Decision Date: 03 May 2004
• Docket Number: No. 02-5702.,02-5702.
• Parties: Tonya COOPER, Plaintiff-Appellee, v. MRM INVESTMENT COMPANY, Terry Rogers and Larry Mays, Defendants-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

367 F.3d 493

Tonya COOPER, Plaintiff-Appellee, v. MRM INVESTMENT COMPANY, Terry Rogers and Larry Mays, Defendants-Appellants.

No. 02-5702.

United States Court of Appeals, Sixth Circuit.

Argued: October 23, 2003.

Decided and Filed: May 3, 2004.

Appeal from the United States District Court for the Middle District of Tennessee, John T. Nixon, J.

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William B. Ryan (argued and briefed), Donati Law Firm, Memphis, TN, for Plaintiff-Appellee.

David W. Anderson (argued and briefed), Regina A. Jackson (briefed), English, Lucas, Priest & Owsley, Bowling Green, KY, for Defendants-Appellants.

Robert J. Gregory (briefed), Office of the General Counsel EEOC, Washington, DC, for Amicus Curiae Equal Employment Opportunity Commission.

Ann Elizabeth Reesman (briefed), McGuiness, Norris & Williams, Washington DC, for Amicus Curiae Equal Employment Advisory Council.

Before KENNEDY and GIBBONS, Circuit Judges; ALDRICH, District Judge.^*

OPINION

ANN ALDRICH, District Judge.

This appeal concerns the validity and enforceability of an arbitration provision in an employment contract between plaintiff-appellee Tonya Cooper and defendant-appellant MRM Investment Company ("MRM"). Cooper alleges that while working as a manager at MRM's restaurant, she was sexually harassed and constructively discharged. She brought a Title VII action, and MRM moved to compel arbitration. The district court denied the motion, holding the arbitration agreement invalid or unenforceable on five grounds. The district court held that the arbitration provision is invalid as a matter of Tennessee law because it is an unconscionable contract of adhesion and is insufficiently bilateral, and invalid as a matter of federal law because it did not make clear that Cooper was waiving her right to a jury trial. The court also opined that as a matter of policy, Title VII claims belong in court, not in arbitration. For the reasons that follow, we reverse those portions of the district court's judgment.

The district court also held that the arbitration provision is unenforceable, as a matter of federal common law, because it incorporated American Arbitration Association ("AAA")¹ rules likely to impose undue costs on Cooper that she would not incur in court, rendering arbitration an ineffective forum to vindicate her rights. For the reasons that follow, we vacate this portion of the district court's judgment and remand for proceedings consistent with this opinion.

I. BACKGROUND

Terry Rogers and Larry Mays are the sole shareholders of MRM, which owns and operates several Kentucky Fried Chicken/Taco Bell ("KFC") franchises. From January 3 through August 2000, Cooper worked as an assistant manager of MRM's KFC store in Waverly, Tennessee, at $400-450 per week plus possible bonuses. See J.A. 6-10, 17 and 90-91. On January 5, 2000, MRM required her to sign a document entitled "Arbitration of Employee Rights," which provides:

Because of the delay and expense of the court systems, KFC and I agree to use confidential binding arbitration for any claims that arise between me and KFC, its related companies, and/or their current or former employees. Such claims would include any concerning compensation, employment (including, but not limited to any claims concerning sexual harassment), or termination of employment. Before arbitration, I agree: (i) first, to present any such claims in full written detail to KFC; (ii) next, to complete any KFC internal review process; and (iii) finally, to complete any external administrative remedy (such as with the Equal Employment Opportunity Commission). In any arbitration, the then prevailing rules of the American Arbitration Association (and, to the extent not inconsistent, the then prevailing rules of the [FAA]) will apply.

J.A. 23. Compare Lee v. Red Lobster Inns of Am., 92 Fed.Appx. 158 (6th Cir.2004) (employee did not affirmatively agree to arbitrate her Title VII claims, because she did not sign handbook sheet agreeing to arbitration and none of the written materials distributed by the employer advised her that continuing her employment constituted assent to the arbitration policy). The parties agree MRM did not separately advise Cooper that she was giving up her right to a jury trial, nor did they provide her with a copy of the AAA's rules. See J.A. 17-18.

As a result of sexual harassment, Cooper alleges, she was forced to quit in August 2000. She found a job at another restaurant, where she earned $7,200 in 2001, and tended bar part-time, earning an additional $300 to $500 per week as of early 2002. In January 2001, Cooper filed a Charge of Discrimination with the EEOC, which issued a Dismissal and Notice of Rights in September 2001. Cooper filed her complaint in December 2001. Following oral argument, the district court denied MRM's motion to compel arbitration on May 1, 2002. MRM appealed on May 28, 2002.

II. ANALYSIS

A. Standard of Review

We review de novo the district court's holding that the arbitration agreement is invalid and unenforceable. See Great Earth Cos. v. Simons, 288 F.3d 878, 888 (6th Cir.2002). The court's factual findings, by contrast, will be set aside only if they are clearly erroneous:

If the district court's account of the evidence is plausible in light of the record viewed in its entirety, the court of appeals may not reverse it even though convinced that had it been sitting as the trier of fact, it would have weighed the evidence differently. Where there are two permissible views of the evidence, the factfinder's choice between them cannot be clearly erroneous. This is so even when the district court's findings do not rest on credibility determinations, but are based instead on physical or documentary evidence or inferences from other facts.

Harrison v. Monumental Life Ins. Co., 333 F.3d 717, 721-22 (6th Cir.2003) (quoting Anderson v. City of Bessemer City, 470 U.S. 564, 573-75, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985)).

B. Arbitration Agreements are Generally Enforceable and are Strongly Favored

At common law, American courts were loathe to order specific enforcement of an agreement to arbitrate, adopting the "jealous notion held by the common law courts of England that arbitration agreements were nothing less than a drain on their own authority to settle disputes." Raasch v. NCR Corp., 254 F.Supp.2d 847, 853 (S.D.Ohio 2003) (citing Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 219-20 n. 6, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985)). In response, Congress enacted the Federal Arbitration Act, 9 U.S.C. § 1 et seq. ("the FAA"), "to place arbitration agreements upon the same footing as other contracts." Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991). The FAA expresses a strong public policy favoring arbitration of a wide class of disputes. It provides, in part:

A written provision in any maritime transaction or 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 such grounds as exist at law or in equity for the revocation of any contract.

9 U.S.C. § 2 (emphasis added); see also 9 U.S.C. § 1 (excepting some disputes arising out of employment in interstate transportation). Thus, generally applicable state-law contract defenses like fraud, forgery, duress, mistake, lack of consideration or mutual obligation, or unconscionability, may invalidate arbitration agreements. See Doctor's Assocs. v. Casarotto, 517 U.S. 681, 687, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996) (citations omitted); Perry v. Thomas, 482 U.S. 483, 492 n. 9, 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987); Fazio v. Lehman Bros., Inc., 340 F.3d 386, 393-94 (6th Cir.2003). "The federal policy favoring arbitration, however, is taken into consideration even in applying ordinary state law." Garrett v. Hooters-Toledo, 295 F.Supp.2d 774, 779 (N.D.Ohio 2003) (citing Inland Bulk Transfer Co. v. Cummins Engine Co., 332 F.3d 1007, 1014 (6th Cir.2003) (internal citation omitted)).

The Supreme Court has roundly endorsed arbitration and explained its benefits in the employment law context:

We have been clear in rejecting the supposition that the advantages of the arbitration process somehow disappear when transferred to the employment context. Arbitration agreements allow parties to avoid the costs of litigation, a benefit that may be of particular importance in employment litigation, which often involves smaller sums of money than disputes concerning commercial contracts. These litigation costs to parties (and the accompanying burden to the Courts) would be compounded by the difficult choice-of-law questions that are often presented in disputes arising from the employment relationship ... and the necessity of bifurcation of proceedings in those cases where state law precludes arbitration of certain types of employment claims but not others. The considerable complexity and uncertainty that [a broader reading of § 1's exclusion] would introduce into the enforceability of arbitration agreements in employment contracts would call into doubt the efficacy of alternative dispute resolution procedures adopted by many of the Nation's employers, in the process undermining the FAA's proarbitration purposes and breeding litigation from a statute that seeks to avoid it. The Court has been quite specific in holding that arbitration agreements can be enforced under the FAA without contravening the policies of congressional enactments giving employees specific protection against discrimination prohibited by federal law; as we noted in Gilmer, 500 U.S. at 26 , by agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute; it only submits to their resolution in an arbitral, rather than a judicial, forum.

Circuit City Stores v. Adams, 532 U.S. 105, 122-23, 121 S.Ct. 1302, 149...