Duffield v. Robertson Stephens & Co.

• Decision Date: 08 May 1998
• Docket Number: No. 97-15698,97-15698
• Citation: 144 F.3d 1182
• Parties: 76 Fair Empl.Prac.Cas. (BNA) 1450, 73 Empl. Prac. Dec. P 45,397, Fed. Sec. L. Rep. P 90,202, 98 Daily Journal D.A.R. 4837 Tonyja DUFFIELD, Plaintiff-Appellant, v. ROBERTSON STEPHENS & COMPANY, a partnership; Robertson Stephens & Company, a corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1182

144 F.3d 1182

76 Fair Empl.Prac.Cas. (BNA) 1450,

73 Empl. Prac. Dec. P 45,397,

Fed. Sec. L. Rep. P 90,202,

98 Daily Journal D.A.R. 4837

Tonyja DUFFIELD, Plaintiff-Appellant, v. ROBERTSON STEPHENS & COMPANY, a partnership; Robertson

Stephens & Company, a corporation, Defendants-Appellees.

No. 97-15698.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted March 9, 1998.

Decided May 8, 1998.

Michael Rubin (argued), Jeffrey B. Demain, Altshuler, Berzon, Nussbaum, Berzon & Rubin, San Francisco, California; Cliff Palefsky, McGuinn, Hillsman & Palefsky, San Francisco, California, for plaintiff-appellant.

Daniel H. Bookin, F. Curt Kirschner, Jr. (argued), David B. Newdorf, O'Melveny & Myers, San Francisco, California, for defendants-appellees.

C. Gregory Stewart, J. Ray Terry, Jr., Gwendolyn Young Reams, Vincent J. Blackwood, Robert J. Gregory (argued and on the brief), for amicus curiae Equal Employment Opportunity Commission, Washington, DC, in support of plaintiff-appellant.

David E. Feller, Berkeley, California, David T. Weckstein, San Diego, California, for amicus curiae The National Academy of Arbitrators, in support of plaintiff-appellant.

John M. True, III, Rudy, Exelrod, Zeiff & True, San Francisco, California, for amicus curiae National Employment Lawyers Association, in support of plaintiff-appellant.

Elaine R. Jones, NAACP Legal and Educational defense Fund, New York City; Judith L. Lichtman, Women's Legal Defense Fund, Washington, DC; Thomas J. Henderson, Lawyers' Committee for Civil Rights Under the Law, Washington, DC; Eva Jefferson Paterson, Lawyers' Committee for Civil Rights of the San Francisco Bay Area, San Francisco, California, for amicus curiae in support of plaintiff-appellant.

Paul D. Carrington, Duke University School of Law, Jean R. Sternlight, Florida State University College of Law, Richard C. Reuben, Stanford Center on Conflict and Negotiation, Katherine Van Wezel Stone, Cornell Law School, for amicus curiae Concerned Legal Scholars, in support of plaintiff-appellant.

William J. Emanuel, Michael L. Wolfram, John S. Battenfeld, Morgan, Lewis & Brockius, Los Angeles, CA, for amicus curiae The Employers Group, in support of defendants-appellees.

Samuel Estreicher, New York University School of Law, for amicus curiae California Employment Law Council, in support of defendants-appellees.

Robert E. Williams, Ann Elizabeth Reesman, Erin Quinn Gery, McGuiness & Williams, Washington, DC, for amicus curiae Equal Employment Advisory Counsel, in support of defendants-appellees.

Gary R. Siniscalco, Lisa K. McClelland, Orrick, Herrington & Sutcliffe, San Francisco, California, for amicus curiae Securities Industry Association, in support of defendants-appellees.

Appeal from the United States District Court for the Northern District of California; Eugene F. Lynch, District Judge, Presiding. D.C. No. C-95-0199-EFL.

Before: CANBY and REINHARDT, Circuit Judges, and RESTANI, Court of International Trade Judge. ^*

REINHARDT, Circuit Judge:

This case presents the issue whether employers may require as a mandatory condition of employment in a certain profession--here, broker-dealer in the securities industry--that all employees waive their right to bring Title VII and other statutory and non-statutory claims in court and instead agree in advance to submit all employment-related disputes to binding arbitration. We hold that, under the Civil Rights Act of 1991, employers may not by such means compel individuals to waive their Title VII right to a judicial forum. At the same time, we hold that because no state action is involved there is no constitutional bar to employers requiring employees to agree in advance to arbitrate state-law tort and contract claims (other than for violation of a state civil rights law).

I

Like every individual who wishes to work in the United States as a broker-dealer in the securities industry, Tonyja Duffield was required, as a condition of employment mandated by the national securities exchanges, to waive her right to a judicial forum to resolve all "employment related" disputes and to agree instead to arbitrate any such disputes under the exchanges' rules. Prospective employees must satisfy this condition by signing the industry's Uniform Application for Securities Industry Registration or Transfer, commonly known as Form U-4, which registers them with all of the securities exchanges with which their employers are members. Paragraph 5 of Form U-4, the arbitration clause, reads as follows:

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, as indicated in item 10 as may be amended from time to time.

Because Robertson Stephens & Co. is a member of the New York Stock Exchange ("NYSE") and the National Association of Securities Dealers ("NASD"), Duffield's "item 10" listed both of those organizations, and the form obligated her to abide by their rules, constitutions, and by-laws.

Both the NYSE and the NASD have rules that compel employees to arbitrate any employment-related dispute at the request of their employers. NYSE Rule 347 provides:

Any controversy between a registered representative and any member or member organization arising out of the employment or termination of employment of such registered representative by and with such member or member organization shall be settled by arbitration, at the instance of any such party, in accordance with the arbitration procedure prescribed elsewhere in these rules.

The NASD Code of Arbitration Procedure, as amended in 1993, provides:

[A]ny dispute, claim, or controversy arising out of or in connection with the business of any member of the Association, or arising out of the employment or termination of associated person(s) with any members ... shall be arbitrated.

Id. at Part 1, § 1. ¹ After signing her Form U-4 in 1988, Duffield began working as a broker-dealer for Robertson Stephens.

In January, 1995, Duffield brought suit in federal court, alleging sexual discrimination and sexual harassment in violation of Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e et seq., and California's Fair Employment and Housing Act (FEHA), breach of contract, deceit, intentional infliction of emotional distress, and negligent infliction of emotional distress. As a threshold matter, she requested a declaratory judgment stating that securities industry employees cannot be compelled to arbitrate their employment disputes under the arbitration provision in Form U-4. She made five specific arguments in this regard: (1) that the "compulsory" arbitration requirement mandated by Form U-4 does not constitute a voluntary agreement to arbitrate within the meaning of Title VII; (2) that signing Form U-4 does not constitute a "knowing" agreement to arbitrate within the meaning of Title VII; (3) that the NYSE's arbitration system fails adequately to protect employees' substantive Title VII rights; (4) that Form U-4 is an unconscionable contract of adhesion because it forces her to arbitrate her Title VII claims under an inadequate arbitration system; and (5) that the industry's mandatory arbitration requirement constitutes an unconstitutional condition of employment. Only in connection with her final argument did Duffield contest the arbitrability of her state law and contract claims.

After allowing extensive discovery on the securities industry's arbitration system, the district court rejected each of Duffield's arguments. It first denied her motion for summary judgment on her declaratory relief claim, and later granted Robertson Stephens' motion to compel arbitration of all of her substantive claims. The court declined to enter final judgment pursuant to Fed.R.Civ.P. 54(b) on Duffield's declaratory judgment claim, but certified both of its orders for immediate appeal pursuant to 28 U.S.C. § 1292(b).

On appeal, Duffield renews all five of her arguments below. We review de novo both the district court's denial of Duffield's motion for summary judgment, Curnow v. Ridgecrest Police, 952 F.2d 321, 323 (9th Cir.1991), and its order compelling arbitration. Zolezzi v. Dean Witter Reynolds, Inc., 789 F.2d 1447, 1449 (9th Cir.1986). In Part II, we address Duffield's contentions that are unique to her Title VII claims, and in Part III we consider her constitutional challenge to Form U-4.

II

The security industry's Form U-4 requires employees to submit to a system that is most fittingly described as "compulsory arbitration." Throughout this opinion when we use the term "compulsory arbitration," we generally refer to the system under which employers compel their prospective employees as a condition of employment to waive their rights to litigate future employment-related disputes in a judicial forum (although the term applies as well to employees subjected to such a requirement for the first time during the course of their employment); under Form U-4, as in many other form or standard agreements, future employment-related disputes include, among others, all claims of discrimination that may arise under civil rights or other statutes. By compulsory arbitration, we do not, however, include systems under which employees agree, or otherwise elect, after disputes have arisen to submit them to arbitration. Nor do we include, for purposes of this opinion, agreements in which at the time of hiring employers give prospective employees the choice to opt in advance for arbitration of all future employment-related disputes or for retention of their statutory right to litigate such disputes. In short, we refer to an arbitration agreement as "compulsory" when individuals must sign an agreement waiving their rights to litigate future claims in a judicial forum in order to obtain employment with, or continue to work...