Gannon v. Circuit City Stores Inc., No. 00-3243

• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)
• Writing for the Court: Bowman; VIETOR
• Citation: 2001 WL 930550,262 F.3d 677
• Parties: (8th Cir. 2001) MARKEN GANNON, PLAINTIFF - APPELLEE, v. CIRCUIT CITY STORES, INC., DEFENDANT - APPELLANT. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, AMICUS ON BEHALF OF APPELLEE. Submitted:
• Docket Number: No. 00-3243
• Decision Date: 13 April 2001

Page 677

262 F.3d 677 (8th Cir. 2001) MARKEN GANNON, PLAINTIFF - APPELLEE,
v.
CIRCUIT CITY STORES, INC., DEFENDANT - APPELLANT. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, AMICUS ON BEHALF OF APPELLEE. No. 00-3243 UNITED STATES COURT OF APPEALS FOR THE EIGHTH CIRCUIT Submitted: April 13, 2001
Filed: August 17, 2001

Appeal from the United States District Court for the Eastern District of Missouri.

Page 678

Before Bowman and Fagg, Circuit Judges, and VIETOR,¹ District Judge.

Bowman, Circuit Judge

This appeal presents the issue of whether a written agreement between an employee and employer to settle all employment-related disputes exclusively through binding arbitration remains enforceable after a provision within the agreement is found invalid. The District Court concluded that the inclusion of the invalid provision rendered the entire arbitration agreement unenforceable. We reverse.

Page 679

I.

In May 1998, Marken Gannon applied for employment with Circuit City Stores, Inc., in Ellisville, Missouri. As a prerequisite to her employment, Circuit City presented Gannon with its Dispute Resolution Agreement for her to sign. The agreement provided that Gannon agreed to settle all employment-related claims against Circuit City exclusively through binding arbitration. The agreement advised her to familiarize herself with the rules and procedures under the agreement prior to signing. Terms in bold type informed Gannon that the agreement affected her legal rights and that she might want to seek legal advice before signing. It also stated that she could withdraw her consent up to three days after signing the agreement and specified how she could effectuate a withdrawal. Gannon signed the agreement and Circuit City hired her.

After approximately one year of employment, Circuit City terminated Gannon. Following her discharge, Gannon filed charges with the Equal Employment Opportunity Commission and the Missouri Commission on Human Rights alleging that during her employment with Circuit City she had encountered sexual harassment, a hostile work environment, sex discrimination, and retaliation. Upon receiving her right-to-sue letters from both agencies, she brought suit in federal court. Circuit City responded by filing a motion to dismiss the case and to compel arbitration based on the arbitration agreement Gannon had signed. The District Court declined to compel arbitration. It determined that the entire agreement was unenforceable because it contained an invalid clause that limited punitive damages.² Circuit City filed a motion for reconsideration, arguing that it no longer enforced the punitive damages clause and that another provision in the agreement served to automatically strike terms judicially determined to be unenforceable. The District Court denied the motion and Circuit City appeals.³ On appeal, Circuit City does not challenge the ruling that the punitive-damages clause is unenforceable, but argues that the clause should be severed and Gannon should be compelled to arbitrate her claims under the remaining terms of the agreement.

II.

Congress enacted the Federal Arbitration Act (FAA), 9 U.S.C. §§ 1-16 (1994), "to reverse the longstanding judicial hostility to arbitration agreements... and to place arbitration agreements upon the same footing as other contracts." Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24 (1991). The FAA declares that written agreements to resolve disputes through arbitration are "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 (1994). The effect of the FAA was to "create a body of federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the Act." Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). In Circuit City Stores, Inc. v. Adams, ___U.S.___, 121 S. Ct. 1302 (2001), the Supreme Court held that the FAA's provisions apply to arbitration agreements covering employment-related claims. Id. at 1311 (holding that in the

Page 680

employment context "only contracts of employment of transportation workers" are exempted from the FAA's coverage). The FAA therefore governs Gannon's arbitration agreement with Circuit City and we undertake our review keeping in mind that the FAA evinces a "liberal federal policy favoring arbitration agreements." Moses H. Cone Mem'l Hosp., 460 U.S. at 24.

Our role in determining whether a court should compel arbitration is limited. We must determine simply whether the parties have entered a valid agreement to arbitrate and, if so, whether the existing dispute falls under the coverage of the agreement. Larry's United Super, Inc., v. Werries, 253 F.3d 1083, 1085 (8th Cir. 2001); Keymer v. Mgmt. Recruiters Int'l, Inc., 169 F.3d 501, 504 (8th Cir. 1999). Once we conclude that the parties have reached such an agreement, the FAA compels judicial enforcement of the arbitration agreement.

We review the District Court's interpretation of the arbitration agreement de novo, Lyster v. Ryan's Family Steak Houses, Inc., 239 F.3d 943, 945 (8th Cir. 2001), and we look to Missouri contract law to interpret the validity of the agreement. Id. at 946.

III.

The parties agree that they entered into an agreement to settle disputes through binding arbitration and that their agreement covers the present dispute. They contest, however, the validity of the agreement following the District Court's conclusion that one provision within the agreement was invalid. Circuit City contends that, under the terms of the arbitration agreement and Missouri contract law, the invalid clause should be struck and Gannon should be compelled to arbitrate her claims in accordance with the remaining terms of the agreement. Gannon argues that the invalid provision renders the entire agreement unenforceable as a matter of public policy.

A.

"The primary rule in the interpretation of a contract [under Missouri law] is to ascertain the intention of the parties and to give effect to that intention." Speedie Food Mart, Inc. v. Taylor, 809 S.W.2d 126, 129 (Mo. Ct. App. 1991). When the contract is unambiguous, the intent of the parties should be determined from the instrument alone. Marshall v. Pyramid Dev. Corp., 855 S.W. 2d 403, 406 (Mo. Ct. App. 1993). Rule 18 of the Circuit City arbitration agreement specifically states the intent of the parties in the event a provision within the agreement is found invalid. It provides that, "[i]n the event that any of these Dispute Resolution Rules and Procedures agreed upon by the Parties is held to be in conflict with a mandatory provision of applicable law, the conflicting Rule or Procedure shall be modified automatically to comply." It also states that "[i]n the event of an automatic modification with respect to a particular Rule or Procedure, the remainder of these Rules and Procedures shall not be affected." The terms of Rule 18 express an unambiguous intent by the parties to sever any terms determined to be invalid and to allow all claims to proceed to arbitration under the remaining provisions of the agreement.

Even if the parties had not recorded their intentions in the severability provision, Missouri contract law declares severance to be proper in this instance. "With respect to contracts which contain a forbidden or invalid provision, our Supreme Court at an early date declared 'the general rule to be, that if the good be mixed with the bad, it shall nevertheless stand, provided a separation can be made.'"

Page 681

Kisling v. MFA Mut. Ins. Co., 399 S.W.2d 245, 250 (Mo. Ct. App. 1966) (quoting Koontz v. Hannibal Sav. & Ins. Co., 42 Mo. 126, 129 (1868)). The essence of the contract between Circuit City and Gannon is an agreement to settle their employment disputes through binding arbitration. The punitive-damages clause represents only one aspect of their agreement and can be severed without disturbing the primary intent of the parties to arbitrate their disputes. "[W]here one provision in a contract, which does not constitute its main or essential feature or purpose, is void... but is clearly separable and severable from the other parts which are relied upon, such other parts are...