Musnick v. King Motor Co. of Fort Lauderdale, No. 02-12648.

• Decision Date: 28 March 2003
• Docket Number: No. 02-12648.
• Citation: 325 F.3d 1255
• Parties: Russell MUSNICK, Plaintiff-Appellee, v. KING MOTOR COMPANY OF FORT LAUDERDALE, d.b.a. King Auto Mall, Defendant-Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

325 F.3d 1255

Russell MUSNICK, Plaintiff-Appellee, v. KING MOTOR COMPANY OF FORT LAUDERDALE, d.b.a. King Auto Mall, Defendant-Appellant.

No. 02-12648.

United States Court of Appeals, Eleventh Circuit.

March 28, 2003.

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Cathy Mattson Stutin, Steven A. Siegel, Fisher & Phillips, LLP, Fort Lauderdale, FL, for Defendant-Appellant.

David J. Weiss, Beth Melissa Gordon, Parrillo, Weiss & O'Halloran, Boca Raton, FL, for Plaintiff-Appellee.

Appeals from the United States District Court for the Southern District of Florida.

Before CARNES, HILL and FARRIS^*, Circuit Judges.

HILL, Circuit Judge:

King Motor Company of Fort Lauderdale appeals the district court's order denying its motion to compel arbitration.

I.

Russell Musnick signed an agreement to arbitrate any discrimination claim he might bring against his employer, King Motor Company of Fort Lauderdale ("King"). The Arbitration Agreement (the "Agreement") provides, in part:

The prevailing party shall be awarded costs including reasonable attorneys' fees, filing fee, subpoena service and witness fee, deposition and hearing transcription costs and similar expenses, but not including expert fees unless the expert was necessary to establishing or refuting liability. In cases where a party asserts any claim, position or defense, which is not substantially justified by the law or facts, the arbitrator shall award to the opposing party that party's reasonable attorney's fees incurred as a result of that party's defending any such claim, position or defense.

Some time later, Musnick sued King in the district court, claiming religious discrimination in violation of Title VII and Florida Statute § 760.10. Pursuant to the Agreement, King filed a motion to compel arbitration, and stay the judicial proceedings. Musnick opposed the motion, arguing that the provision in the Agreement awarding costs and fees to the prevailing party rendered it unenforceable.

The district court agreed with Musnick, holding that the Agreement's "loser pays" provision denied Musnick a remedy he would have under Title VII if allowed to proceed under the statute.¹ We review the denial of the motion to compel arbitration de novo. Paladino v. Avnet Computer Technologies, Inc., 134 F.3d 1054, 1057 (11th Cir.1998).

II.

Over the last decade or so, the Courts of Appeals were split on the enforceability of fee-shifting provisions contained in arbitration agreements providing for mandatory arbitration of employment discrimination claims. At one point, the Court of Appeals for both the District of Columbia and the Tenth Circuit refused to enforce such agreements, holding that they effectively denied the Title VII plaintiff a forum to vindicate his claims. Cole v. Burns Int'l Sec. Services, 105 F.3d 1465, 1484-85 (D.C.Cir.1997); Shankle v. B-G Maint. Mgmt., Inc., 163 F.3d 1230, 1234-35 (10th Cir.1999). We, too, had refused to enforce an arbitration agreement that potentially imposed "high costs" on the employee, holding that such an agreement "undermines the policies that support Title VII." Paladino, 134 F.3d at 1062 (citing Cole as suggesting a per se rule against "fee-shifting" in such arbitrations).

On the other hand, the First, Fifth and Seventh Circuits took the position that the presence of a fee-sharing provision did not automatically render the agreement unenforceable. Rosenberg v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 170 F.3d 1, 15-16 (1st Cir.1999); Williams v. Cigna Fin. Advisors Inc., 197 F.3d 752, 764 (5th Cir.1999); Koveleskie v. SBC Capital Markets, Inc., 167 F.3d 361, 366 (7th Cir.1999).

Recently, however, the Supreme Court, in reviewing a case from this circuit, made clear that the strong federal preference for arbitration of disputes expressed by Congress in the Federal Arbitration Act (the "FAA") must be enforced where possible.² In Green Tree Financial Corp.-Alabama v. Randolph, 531 U.S. 79, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000), the Court rejected our conclusion that an arbitration agreement that is silent as to fees and costs is unenforceable because the plaintiff "might be required to bear substantial costs of the arbitration." See Randolph v. Green Tree Fin. Corp.-Alabama, 178 F.3d 1149, 1158 (11th Cir.1999) (emphasis added). The Court concluded that "an arbitration agreement's silence with respect to such matters does not render the agreement unenforceable." Id.

Although acknowledging that, "[i]t may well be that the existence of large arbitration costs could preclude a litigant ... from effectively vindicating her federal statutory rights in the arbitral forum," id. at 90, 121 S.Ct. 513, the Court held that the potential financial burden of the Green Tree plaintiff was "too speculative" to invalidate the arbitration agreement at issue there. Id. at 91, 121 S.Ct. 513. The Court observed that not only was the agreement unclear as to who would bear the arbitration costs, but that the plaintiff there supplied only "unsupported statements" regarding the costs involved. Id. at 91 n. 6. The Court made clear that it is the party seeking to avoid arbitration who has the burden to show the likelihood of prohibitive costs, and suggested that, upon a threshold showing, the burden of production of evidence might shift to the party seeking arbitration to counter that showing. Id. at 92.

Since Green Tree, we have had occasion to revisit this issue. In Bess v. Check Express, 294 F.3d 1298 (11th Cir.2002), we recognized that, under Green Tree, a Title VII plaintiff seeking to avoid his agreement to arbitrate his discrimination claim by arguing that prohibitive arbitration costs would undermine his statutory remedy has to demonstrate that he is likely to bear such costs. 294 F.3d at 1303. We acknowledged that our analysis in Green Tree, which relied on the mere possibility of prohibitive arbitration costs, was rejected by the Supreme Court, and that, absent a record establishing that the plaintiff "likely will incur prohibitive costs," an agreement to arbitrate must be enforced. Id. at 1304.

In Bess, the arbitration agreement was silent on the matter of costs and fees. Id. at 1303. We held that, under that circumstance, "any discussion of [plaintiff's] potential costs ... necessarily is based on speculation and cannot provide an adequate basis for concluding that her costs likely would be prohibitively expensive." Id. at 1304.

Since Green Tree, all but one of the other Circuits that have reconsidered this issue have applied a similar case-by-case approach. See Thompson v. Irwin Home Equity Corp., 300 F.3d 88 (1st Cir.2002) (adhering to case-by-case approach predating Green Tree); Blair v. Scott Specialty Gases, 283 F.3d 595, 610 (3d Cir.2002) ("[T]he mere existence of a fee-splitting provision in an agreement [does not] satisfy the claimant's burden to prove the likelihood of incurring prohibitive costs"); Primerica Life Ins. Co. v. Brown, 304 F.3d 469, 471 n. 6 (5th Cir.2002) (adhering to case-by-case approach predating Green Tree); Bradford v. Rockwell Semiconductor Systems, Inc., 238 F.3d 549, 556 (4th Cir.2001) ("appropriate inquiry is one that evaluates whether the arbitral forum in a particular case is an adequate and accessible substitute to litigation, i.e., a case-by-case analysis that focuses, among other things, upon the claimant's ability to pay the arbitration fees and costs, the expected cost differential between arbitration and litigation in court, and whether that cost differential is so substantial as to deter the bringing of claims"); Burden v. Check into Cash, LLC, 267 F.3d 483, 492 (6th Cir.2001) (Green Tree requires party resisting arbitration to show likelihood of prohibitive expenses); Gannon v. Circuit City Stores, Inc., 262 F.3d 677, 683 (8th Cir.2001) (on remand, district court should consider the plaintiff's arguments in light of Green Tree which requires her to show the likelihood of incurring prohibitive expenses in arbitration); LaPrade v. Kidder, Peabody & Co., Inc., 246 F.3d 702, 708 (D.C.Cir.2001) (upholding arbitration award requiring the plaintiff to pay a portion of the fees and costs, noting that the plaintiff had failed to establish her burden under Green Tree that the award had prevented her from attempting to vindicate her rights). In all of these cases, the Court of Appeals either enforced the arbitration agreement, or remanded the case for further fact-finding regarding plaintiff's claim of prohibitive costs.³

In view of Bess and the overwhelming consensus among the Circuits,⁴ it is clear that the district court erred in holding that Musnick cannot be compelled to arbitrate because the "loser pays" provision of the Agreement denies him his statutory rights under Title VII. After Green Tree, an arbitration agreement is not unenforceable merely because it may involve some "fee-shifting." The party seeking to avoid arbitration under such an agreement has the burden of establishing that enforcement of the agreement would "preclude" him from "effectively vindicating [his] federal statutory right in the arbitral forum." 531 U.S. at 90, 121 S.Ct. 513. Absent such a showing, the agreement may be enforced. Id. at 91, 121 S.Ct. 513.

Thus, the question in this case is whether Musnick met his burden under Green Tree and Bess to demonstrate that he faces such "high costs" if compelled to arbitrate his claim against King that he is effectively precluded from vindicating his Title VII rights in the arbitral forum. Green Tree, 531 U.S. at 90, 121 S.Ct. 513; Bess, 294 F.3d at 1304. We hold that he did not.

Under Green Tree, Musnick has an obligation to offer evidence of the amount of fees he is likely to incur, as well as of his inability to pay those fees. 531 U.S. at 96, 121 S.Ct. 513. See also Blair, 283 F.3d at 607 ("Green Tree placed the initial burden of proof on the party resisting arbitration to demonstrate that arbitration would be prohibitively expensive by showing `the likelihood of incurring such costs'")....