Michalski v. Circuit City Stores, Inc.

• Decision Date: 04 June 1999
• Docket Number: No. 98-3023,98-3023
• Parties: 79 Fair Empl.Prac.Cas. (BNA) 1160 Michelle L. MICHALSKI, Plaintiff-Appellee, v. CIRCUIT CITY STORES, INC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 634

177 F.3d 634

79 Fair Empl.Prac.Cas. (BNA) 1160

Michelle L. MICHALSKI, Plaintiff-Appellee, v. CIRCUIT CITY STORES, INC., Defendant-Appellant.

No. 98-3023.

United States Court of Appeals, Seventh Circuit.

Argued Jan. 7, 1999.

Decided May 5, 1999.

Rehearing and Suggestion for Rehearing En Banc Denied June 4, 1999.

Thomas P. Lyons (argued), Cunningham & Lyons, Milwaukee, WI, for Plaintiff-Appellee.

Patricia C. Slovak, Schiff, Hardin & Waite, Chicago, IL, David E. Nagle (argued), Richmond, VA, for Defendant-Appellant.

Before FLAUM, EASTERBROOK and ROVNER, Circuit Judges.

FLAUM, Circuit Judge.

Circuit City Stores, Inc. ("Circuit City") appeals from the district court's denial of its motion to dismiss and to compel arbitration of Michelle Michalski's discrimination claim under Title VII of the Civil Right Act of 1964 ("Title VII"), 42 U.S.C. §§ 2000 et seq. We now reverse and remand, holding that the arbitration agreement entered into by the parties supersedes Michalski's right to pursue her discrimination claim in federal court.

I. BACKGROUND

Michelle Michalski was employed by Circuit City from 1993 to 1997. In 1995, Circuit City instituted its Associate Issue Resolution Program ("AIRP") which asked all employees to agree to have any employment related disputes, including Title VII discrimination suits, decided in binding arbitration instead of litigation. The AIRP automatically applied to all employees unless they sent a special opt-out form to Circuit City headquarters within thirty days of signing an acknowledgment form indicating receipt of the AIRP material. Michalski did not opt out of the program.

On May 21, 1997, Michalski was fired. Claiming her termination was based on the fact that she was pregnant, Michalski filed suit under Title VII in federal court on May 12, 1998. To preserve her rights, she simultaneously filed a request to arbitrate on the same day. In response, Circuit City moved the district court to either stay the proceeding or dismiss Michalski's complaint and compel arbitration pursuant to the AIRP and the Federal Arbitration Act. The district court denied Circuit City's motion, holding that Michalski was not bound by the AIRP because the agreement to arbitrate failed "for want of compliance with basic contract law." Specifically, the district court reasoned that because Circuit City gave up nothing, and promised to do nothing for Michalski in exchange for her agreeing to be bound by the AIRP, there was no consideration sufficient to support a valid contract. Circuit City now appeals.

II. ANALYSIS

As an initial matter, we find jurisdiction for this appeal under section 16(a)(1)(C) of the Federal Arbitration Act ("FAA"), which provides that appeal may be taken from an order denying a motion to compel arbitration. 9 U.S.C. § 16(a)(1)(C); see also Koveleskie v. SBC Capital Markets, Inc., 167 F.3d 361, 363 (7th Cir.1999).

This case presents two questions: first, whether employees can agree in advance to arbitrate Title VII claims and second, whether consideration was given by Circuit City in exchange for Michalski's promise to arbitrate.

A. Arbitration of Title VII claims.

Michalski first asserts that the strong federal policy behind Title VII precludes mandatory arbitration of civil rights claims. However, this argument was explicitly rejected in this circuit by our decision in Koveleskie v. SBC Capital Markets, Inc., 167 F.3d 361, 365 (7th Cir.1999), in which we held that Congress did not intend Title VII to preclude enforcement of pre-dispute arbitration agreements such as the one used by Circuit City.

In Koveleskie, the plaintiff, a securities industry analyst, was required as a condition of her employment to sign an agreement to arbitrate all future employment disputes, including Title VII discrimination claims. She challenged the enforceability of the pre-dispute arbitration agreement, as it applied to employment discrimination claims. We found, as have most other circuits, that Congress did not intend to prohibit the use of pre-dispute arbitration agreements for resolution of Title VII claims. Id.; see also Seus v. John Nuveen & Co., 146 F.3d 175, 182 (3rd Cir.1998); Patterson v. Tenet Healthcare, Inc., 113 F.3d 832 (8th Cir.1997) (holding that Title VII claims are subject to pre-dispute arbitration agreements under the FAA); Cole v. Burns International Security Services, 105 F.3d 1465 (D.C.Cir.1997) (affirming an order compelling arbitration of Title VII claims where an employee signed a mandatory arbitration agreement as a condition of his employment); Metz v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 39 F.3d 1482 (10th Cir.1994) (holding that Title VII claims are subject to mandatory arbitration); Bender v. A.G. Edwards & Sons, Inc., 971 F.2d 698 (11th Cir.1992) (holding that Title VII claims are subject to securities industry compulsory arbitration); Willis v. Dean Witter Reynolds, Inc., 948 F.2d 305 (6th Cir.1991); Alford v. Dean Witter Reynolds, Inc., 939 F.2d 229 (5th Cir.1991) (holding that Title VII claims can be subject to compulsory arbitration). Thus, this claim is foreclosed by our recent decision in Koveleskie.

What makes Michalski's case even less compelling is that, unlike the plaintiff in Koveleskie who was required to sign the arbitration agreement as a condition of her employment, Michalski had an opt-out provision. She was free not to arbitrate; she was given a choice and she chose--by not signing the opt-out provision--to be bound by the AIRP. It does not follow that this court would invalidate an arbitration agreement such as this one, when we have previously held that a nonoptional, mandatory arbitration agreement is valid. Thus, Michalski's argument that Title VII precludes arbitrations agreements such as the AIRP fails in the face of binding precedent to the contrary.

B. Consideration.

The district court found inadequate consideration to support Michalski's agreement to arbitrate because Circuit City had not promised to give anything up.

An agreement to arbitrate is treated like any other contract: "In determining whether a valid agreement arose between the parties, a federal court should look to the state law that ordinarily governs the formation of contracts." Koveleskie v. SBC Capital Markets, Inc., 167 F.3d 361, 367-8 (7th Cir.1999) (citing Gibson v. Neighborhood Health Clinics, Inc., 121 F.3d 1126, 1130 (7th Cir.1997)). In the present case, we look to the contract law of Wisconsin, the state where the employment and termination took place. Id. at 368; Gibson, 121 F.3d at 1130 (citing First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995)). In order for a contract to be enforceable under Wisconsin law, there must be consideration, NBZ, Inc. v. Pilarski, 185 Wis.2d 827, 520 N.W.2d 93, 96 (Wis.Ct.App.1994), which may be either a detriment to the promisor or a benefit to the promisee. Lovett v. Mt. Senario College, Inc., 154 Wis.2d 831, 454 N.W.2d 356, 358 (Wis.Ct.App.1990).

In reaching its decision, the district court relied on our decision in Gibson, 121 F.3d 1126, in which we held that a lack of consideration rendered an employee's promise to submit claims to arbitration unenforceable. 121 F.3d 1126. In Gibson, the plaintiff signed a contract provided by her employer which stated, "I agree to the grievance and arbitration provisions set forth in the Associates Policy Manual" (the "Manual"). Id. at 1128. The Manual, which was not given to Gibson at the time she signed the contract, specifically stated that all disputes, including Title VII claims, were subject to arbitration, but also stated that "it does not constitute a contract or promise of any kind" on the part of the employer. Id. at 1128. Thus, the employer was not bound by the Manual's terms. This court found that because Gibson was not given a copy of the Manual at the time she signed the contract, and because she never signed the Manual, there was no consideration in the form of a promise by the employer in exchange for Gibson's agreement to arbitrate. Additionally, this court found that Gibson's promise to arbitrate was not supported by consideration in the form of her employer's promise to hire her or to continue to employ her. Id. at 1131.

The present case is distinguishable from our decision in Gibson because, as the appellant points out, Circuit City's promise to be bound by the arbitration process itself serves as mutual consideration here. Although the particular sheet that the employee signed did not state that the employer would be bound by arbitration, other information in the AIRP packet given contemporaneously to Michalski clearly indicated such a promise by Circuit City.

Similarly, in Koveleskie, the plaintiff challenged the enforcement of a pre-dispute arbitration agreement on the grounds that there was inadequate consideration to support the employee's promise to arbitrate. 167 F.3d at 366. We held that the plaintiff's contract with her employer was supported by adequate consideration for two reasons. First, we found sufficient consideration from the fact that the plaintiff promised to arbitrate all future disputes in exchange for the company's promise to employ her. Id. at 368. Second, we noted that both parties were bound by the terms of the agreement. Id.

In a relatively recent case similar to the present one, the Fourth Circuit held that under the AIRP, Circuit City's promise to be bound by the process and results of arbitration of employee disputes was sufficient consideration. Johnson v. Circuit City, 148 F.3d 373, 378 (4th Cir.1998). That court rejected the notion that Circuit City must also agree to submit its claims against the employee to arbitration. Id. at 379. While in Johnson, Circuit City stated that it agreed to be bound by arbitration in the same document which contained the signature of the employee, id. at 375, here the employer's commitment to arbitrate is found in the material given...