E.E.O.C. v. Kidder, Peabody & Co., Inc., 97-6316

• Decision Date: 28 August 1998
• Docket Number: No. 97-6316,97-6316
• Citation: 156 F.3d 298
• Parties: 73 Empl. Prac. Dec. P 45,466 EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Plaintiff-Appellant, v. KIDDER, PEABODY & COMPANY, INCORPORATED, Defendant-Appellee.
• Court: U.S. Court of Appeals — Second Circuit

Page 298

156 F.3d 298

73 Empl. Prac. Dec. P 45,466

EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Plaintiff-Appellant, v. KIDDER, PEABODY & COMPANY, INCORPORATED, Defendant-Appellee.

No. 97-6316.

United States Court of Appeals, Second Circuit.

Argued May 5, 1998.

Decided Aug. 28, 1998.

Barbara L. Sloan, U.S. Equal Employment Opportunity Commission, Washington, DC (C. Gregory Stewart, General Counsel, Lorraine C. Davis, Associate General Counsel (Acting), Vincent J. Blackwood, Assistant General Counsel, Paul D. Ramshaw, U.S. Equal Employment Opportunity Commission, Washington, DC, on the brief, Delner Franklin-Thomas, U.S. Equal Employment Opportunity Commission, New York City, of counsel), for Plaintiff-Appellant.

Mark S. Dichter, Philadelphia, PA (Morgan, Lewis & Bockius LLP, Philadelphia, PA, George A. Stohner, Michael A. Putetti, Rene M. Johnson, Morgan, Lewis & Bockius LLP, New York City, of counsel), for Defendant-Appellee.

(Jody E. Forchheimer, Richelle S. Kennedy, Bingham Dana LLP, Boston, MA, on the brief and of counsel, Stuart J. Kaswell, Fredda L. Plesser, Office of General Counsel, Securities Industry Association, New York City, of counsel), for Amicus Curiae The Securities Industry Association.

(Ann Elizabeth Reesman, Erin Quinn Gery, McGuiness & Williams, Washington, DC, on the brief and of counsel), for Amicus Curiae Equal Employment Advisory Council.

(William L. Kandel, Rene Kathawala, Orrick, Herrington & Sutcliffe LLP, New York City, on the brief and of counsel, Stephen A. Bokat, Robin S. Conrad, Sussan L. Mahallati, National Chamber Litigation Center, Inc., Washington, DC, of counsel), for Amicus Curiae The Chamber of Commerce of The United States.

Before: FEINBERG, PARKER and PHILLIPS ^*, Circuit Judges.

PARKER, Circuit Judge:

The Equal Employment Opportunity Commission ("EEOC") appeals from the judgment of the United States District Court for the Southern District of New York (John E. Sprizzo, Judge ) entered October 6, 1997 dismissing pursuant to Federal Rule of Civil Procedure 12(b)(6) the EEOC's action against defendant-appellee Kidder, Peabody & Company ("Kidder") under the Age Discrimination in Employment Act ("ADEA"), 29 U.S.C. § 621. Because the individuals for whom the EEOC sought monetary damages resulting from the alleged discrimination agreed to submit all claims arising from their employment to binding arbitration, the district court held that the EEOC was barred from seeking monetary damages on their behalf in federal court.

I. BACKGROUND

On December 23, 1992, the EEOC filed suit under the ADEA against Kidder seeking back pay, liquidated damages and reinstatement on behalf of seventeen former Kidder investment bankers. The EEOC's complaint alleged that Kidder engaged in a pattern and practice of terminating its older employees on the basis of their age. By late 1994, Kidder had discontinued its investment banking operations and thus the EEOC stipulated that it no longer sought injunctive relief.

The EEOC continued to seek back pay and liquidated damages on behalf of nine of the original seventeen former Kidder employees. The nine individuals for whom the EEOC seeks back pay had signed, upon their employment with Kidder, a securities industry arbitration agreement (U-4 registration) in which they agreed to submit any and all claims arising out of their employment with Kidder to binding arbitration. While this action was proceeding, three of the nine arbitrated their claims of age discrimination before a New York Stock Exchange panel which held that their terminations did not violate the ADEA.

Once the EEOC stipulated that it no longer sought injunctive relief, Kidder moved to dismiss the action on the ground that the arbitration agreements signed by the nine former Kidder employees precluded the EEOC's pursuit of back pay and liquidated damages for those employees in federal court. After receiving briefs and hearing argument, the district court granted Kidder's motion to dismiss.

In dismissing the action, the district court relied primarily on the Supreme Court's decision in Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991). EEOC v. Kidder, Peabody & Co., Inc., 979 F.Supp. 245, 246-47 (S.D.N.Y.1997). In Gilmer, the Court addressed the question of whether an employee's private action under the ADEA could be subjected to compulsory arbitration where the employee was required to sign an arbitration agreement as a condition of registering as a securities representative with several stock exchanges, registration being a condition of employment. The Court held that in enacting the ADEA Congress did not intend to preclude arbitration of claims under the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq., and that the FAA expresses a strong Congressional preference in favor of enforcing arbitration agreements.

The court below held that "the clear implication of the Gilmer decision is that the EEOC may not seek monetary relief on behalf of claimants who have entered into valid arbitration agreements." Kidder, Peabody & Co., Inc., 979 F.Supp. at 247. The court noted that to allow the EEOC to recover monetary damages would frustrate the purpose of the FAA because an employee, having signed the agreement to arbitrate, could avoid arbitration by having the EEOC file in the federal forum seeking back pay on his or her behalf. Had the EEOC been seeking an injunction or other class-wide equitable relief, the district court stated, the public interest in the litigation would outweigh the interest in furthering the federal policy favoring arbitration agreements and the EEOC would be entitled to proceed in the federal forum. However, finding the public interest in vindicating the damage right of nine individuals relatively small in comparison to the public interest in arbitration, the district court dismissed the EEOC's action. ¹

II. DISCUSSION

This case presents an issue of first impression in this Court: whether an arbitration agreement between an employer and employee precludes the EEOC from seeking purely monetary relief for the employee under the ADEA in federal court. We hold that it does. ²

As did the district court, we begin our analysis with the Gilmer decision. Although Gilmer concerned a private individual's right to bring an ADEA claim in federal court in light of an earlier agreement to submit his claim to binding arbitration, the Court discussed at some length the potential impact of its decision on the EEOC's enforcement authority under the ADEA.

Petitioner Gilmer argued that compelling arbitration of his claim would undermine the role of the EEOC in enforcing the ADEA. Noting that it was unpersuaded by this argument, the Court stated:

An individual ADEA claimant subject to an arbitration agreement will still be free to file a charge with the EEOC, even though the claimant is not able to institute a private judicial action. Indeed, Gilmer filed a charge with the EEOC in this case. In any event, the EEOC's role in combatting age discrimination is not dependent on the filing of a charge; the agency may receive information concerning alleged violations of the ADEA "from any source," and it has independent authority to investigate age discrimination. See 29 CFR §§ 1626.4, 1626.13 (1990). Moreover, nothing in the ADEA indicates that Congress intended that the EEOC be involved in all employment disputes. See, e.g., Coventry v. United States Steel Corp., 856 F.2d 514, 522 (3rd Cir.1988); Moore v. McGraw Edison Co., 804 F.2d 1026, 1033 (8th Cir.1986); Runyan v. National Cash Register Corp., 787 F.2d 1039, 1045 (6th Cir.1986), cert. denied, 479 U.S. 850, 107 S.Ct. 178, 93 L.Ed.2d 114 (1986).

Gilmer, 500 U.S. at 28, 111 S.Ct. 1647. In the cited cases, the circuit courts held that an individual's settlement or waiver of a claim under the ADEA preempted a subsequent EEOC action on that claim seeking damages for the individual. The Gilmer Court later noted that "arbitration agreements will not preclude the EEOC from bringing actions seeking class-wide or equitable relief." Id. at 32, 111 S.Ct. 1647.

Both before and after Gilmer, circuit courts, including this one, have grappled with the relationship between an employee's right or desire to pursue an action under the ADEA and the EEOC's pursuit of a separate action raising the employee's claims. Specifically, courts have addressed whether any action the employee takes in relation to his or her claim (i.e., settlement, waiver, or litigation) affects the EEOC's ability to separately pursue the action in its own name. See, e.g., EEOC v. Johnson & Higgins, Inc., 91 F.3d 1529 (2d Cir.1996); EEOC v. Harris Chernin, Inc., 10 F.3d 1286 (7th Cir.1993); EEOC v. United States Steel Corp., 921 F.2d 489 (3d Cir.1990); EEOC v. Cosmair, Inc., L'Oreal Hair Care Div., 821 F.2d 1085, 1091 (5th Cir.1987).

While recognizing that the EEOC's right of action is separate from the employee's, circuit courts have uniformly held that the EEOC may not seek monetary relief in the name of an employee who has waived, settled, or previously litigated the claim. ³ To justify this result, courts have relied in large measure on the "distinctive enforcement scheme of the ADEA" and the belief that in seeking individual monetary relief, as opposed to class-wide injunctive relief, the EEOC does not represent the public interest to the same degree. See U.S. Steel Corp., 921 F.2d at 496; Goodyear Aerospace Corp., 813 F.2d at 1543.

The enforcement scheme of the ADEA grants individuals authorization to bring actions in federal or state court; however, "the right of any person to bring such actions shall terminate upon the commencement of an action by the Equal Employment Opportunity Commission to enforce the right of such employee under [the ADEA]." 29 U.S.C. *302s 626(c)(1). The ADEA also incorporates by reference the enforcement provisions of the Fair Labor Standards Act ("FLSA"), 29 U.S.C. §§ 216(c), 217, which grant...