E.E.O.C. v. Woodmen of World Life Ins. Soc.

• Decision Date: 09 March 2007
• Docket Number: No. 06-1522.,06-1522.
• Citation: 479 F.3d 561
• Parties: EQUAL EMPLOYMENT OPPORTUNITY COMMISSION; Louella Rollins, Appellees, v. WOODMEN OF THE WORLD LIFE INSURANCE SOCIETY, and/or Omaha Woodmen Life Insurance Society, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

479 F.3d 561

EQUAL EMPLOYMENT OPPORTUNITY COMMISSION; Louella Rollins, Appellees, v. WOODMEN OF THE WORLD LIFE INSURANCE SOCIETY, and/or Omaha Woodmen Life Insurance Society, Appellant.

No. 06-1522.

United States Court of Appeals, Eighth Circuit.

Submitted: November 17, 2006.

Filed: March 9, 2007.

Kirk S. Blecha, argued, Omaha, NE (Lindsay Kay Lundholm, Baird & Holm, on the brief), for appellant.

Patricia S. Bangert, argued, Denver, CO, for appellee Rollins.

Paul D. Ramshaw, argued, Equal Employment Opportunity Commission, Washington, DC, for appellee E.E.O.C.

Before RILEY, HANSEN, and SMITH, Circuit Judges.

HANSEN, Circuit Judge.

The Woodmen of the World Life Insurance Society (Woodmen) sought to compel its employee, Louella Rollins, to arbitrate her Title VII claims and to stay the cross-claims she brought as an intervenor in the Equal Employment Opportunity Commission's (EEOC) enforcement action filed against Woodmen. See 42 U.S.C. § 2000e-5(f). The district court ultimately denied Woodmen's motion, and it allowed Rollins to intervene in the EEOC action despite her agreement to arbitrate. Woodmen appeals, and we reverse.

I.

Louella Rollins worked for Woodmen from 1989 to 2001 pursuant to a written employment agreement that included an agreement "to resolve any and all claims, demands, causes of action, charges and disputes of any nature whatsoever, . . . in any way related to the relationship established by this contract, based on any theory . . . including . . . any claims of or for . . . discrimination based on . . . sex . . . under any state or federal law . . ." through alternative dispute resolution, including binding arbitration. (Add. at 5.) Rollins filed a charge of sex discrimination with the EEOC on September 20, 1999, alleging that Woodmen had failed to remedy a hostile work environment created by her male subordinates and ultimately demoted Rollins after she complained to Woodmen's Equal Employment Opportunity office about the hostile environment.

The EEOC commenced a Title VII enforcement action against Woodmen in April 2003, and the district court granted Rollins' motion to intervene in that action in October 2003. Concurrent with the motion to intervene, Rollins filed a cross-claim against Woodmen that was nearly identical to the EEOC's enforcement action. In August 2004, the district court granted Woodmen's motion to compel Rollins to arbitrate the individual claims that she raised as an intervenor against Woodmen in the Title VII action. The district court also stayed Rollins' participation in the EEOC's enforcement action. Thereafter, Woodmen and Rollins entered into an agreement in November 2004 entitled "Agreement to Binding Arbitration," which set out the procedural details of the arbitration. Discovery proceeded concurrently in the EEOC enforcement action and in the arbitration proceeding, and an arbitration hearing was set to begin on May 24, 2005. Prior to the hearing, Rollins filed a motion seeking relief from the district court's order compelling arbitration on the basis that the cost of the arbitration made it inequitable to force her to arbitrate. Woodmen filed a renewed motion to compel arbitration. The district court granted Rollins' motion and denied Woodmen's renewed motion in an August 25, 2005, order, allowing Rollins to avoid arbitration and to proceed in the EEOC suit.

Meanwhile, Rollins filed a Chapter 7 bankruptcy petition in July 2005 in the Middle District of Pennsylvania. In October 2005 the district court stayed the EEOC's current suit pending action by the Bankruptcy Court, which lifted the automatic stay as it applied to this litigation in December 2005. On February 3, 2006, the district court denied Woodmen's motion to amend the court's August 25, 2005, order denying the motion to compel arbitration, and the district court reissued the August 2005 order. Woodmen appeals. We have jurisdiction over the appeal of the denial of a motion to compel arbitration pursuant to 9 U.S.C. § 16(a)(1)(C).

II.

The issue before this court is whether the district court properly excused Rollins from arbitrating her individual discrimination claims and allowed her to proceed in the EEOC's enforcement action as an intervenor. The district court granted Rollins' requested relief on three bases: (1) because Rollins could not afford arbitration, (2) because forcing Rollins to arbitrate would interfere with the EEOC's ability to pursue its interests on behalf of the public, and (3) because Rollins had filed for bankruptcy protection, listing the lawsuit in her bankruptcy schedules.¹ On appeal, Rollins asserts that once the EEOC filed its enforcement action, she lost any right to litigate her individual claims other than as an intervenor in the EEOC action, leaving nothing for her to arbitrate. Rollins further asserts that the "external circumstances" of her inability to pay for the arbitration proceeding foreclose enforcement of the arbitration agreement. Woodmen contends that Rollins should be bound by her agreements to arbitrate.

We review de novo the district court's denial of Woodmen's motion to compel arbitration. Suburban Leisure Ctr., Inc. v. AMF Bowling Prods., Inc., 468 F.3d 523, 525 (8th Cir.2006). Under the Federal Arbitration Act (FAA), "[a] written provision in any . . . contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract . . . 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. "[T]he FAA's purpose [was] `to reverse the longstanding judicial hostility to arbitration agreements . . . and to place arbitration agreements upon the same footing as other contracts.'" Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 89, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000) (quoting Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991) (ellipses in original)). The federal policy manifested by the FAA "is at bottom a policy guaranteeing the enforcement of private contractual arrangements." Mitsubishi Motors v. Soler Chrysler-Plymouth, 473 U.S. 614, 625, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985) (internal marks omitted). Arbitration agreements encompassing federal statutory claims are enforceable as long as the potential litigant can effectively vindicate her statutory rights through arbitration. Green Tree, 531 U.S. at 90, 121 S.Ct. 513; see also Lyster v. Ryan's Family Steak Houses, Inc., 239 F.3d 943, 946 (8th Cir.2001) ("Title VII claims are subject to individual consensual agreements to arbitrate."). In the Civil Rights Act of 1991, Congress encouraged the use of alternative dispute resolution, including arbitration, "to resolve disputes arising under the Acts or provisions of Federal law amended by this title," including Title VII. See Civil Rights Act of 1991, Pub.L. No. 102-166, § 118, 105 Stat. 1071, 1081 (Congressional Note on the interpretation of Title VII contained within the 1991 amendments to 42 U.S.C. § 2000e). In addressing a motion to compel arbitration then, courts generally "ask only (1) whether there is a valid arbitration agreement and (2) whether the particular dispute falls within the terms of that agreement." Faber v. Menard, Inc., 367 F.3d 1048, 1052 (8th Cir.2004).

The validity of the arbitration agreement is determined by state contract law. Id. We construe the district court's reliance on Faber as raising a concern about the conscionability of the arbitration agreement based on the fee structure. Id. at 1051 (noting that the arbitration agreement at issue required the parties to each pay one half of the arbitrator's fees and their own attorney's fees). The Faber court looked to Iowa contract law to determine whether the fee-splitting provision in the arbitration agreement there at issue was unconscionable, thus invalidating the agreement under state contract law. Id. at 1053. Both the original arbitration agreement contained in Rollins' employment contract and the subsequent "Agreement to Binding Arbitration" provide that the parties will share the costs of arbitration. Rollins introduced evidence in the district court about the costs associated with the private arbitrator chosen to conduct the arbitration proceeding and about her impending bankruptcy. The district court determined that the spiraling costs, coupled with Rollins' financial situation, relieved her of her obligation to continue the arbitration, particularly where she could piggyback on the EEOC's discovery and litigation and avoid incurring those expenses personally.

Under Nebraska law, "the term `unconscionable' means manifestly unfair or inequitable." Myers v. Neb. Inv. Council, 272 Neb. 669, 724 N.W.2d 776, 799 (Neb.2006). Further, "[a] contract is not substantively unconscionable unless the terms are grossly unfair under the circumstances that existed when the parties entered into the contract." Id. Nebraska courts also consider whether a contract is "procedurally unconscionable," an essential element of which includes "the disparity in respective bargaining positions of parties to a contract." Id. Although Rollins signed a standard Woodmen employment agreement, "adhesion contracts are not automatically unconscionable or void" under Nebraska law. Kosmicki v. Nebraska, 264 Neb. 887, 652 N.W.2d 883, 893 (Neb.2002); see also Faber, 367 F.3d at 1053 (holding that "inequality in bargaining power . . . is not enough by itself to overcome the federal policy favoring arbitration," citing Gilmer, 500 U.S. at 33, 111 S.Ct. 1647). Rollins does not argue that splitting the costs of the arbitration is fundamentally unfair, an issue to be determined based on the circumstances that existed at the time the original employment contract was entered, and the district court did not rely on such a conclusion. Indeed, the district court did not analyze the contract under Nebraska contract...