Nicholson v. CPC Intern. Inc., 88-5588

• Decision Date: 10 July 1989
• Docket Number: No. 88-5588,88-5588
• Citation: 877 F.2d 221
• Parties: 49 Fair Empl.Prac.Cas. 1678, 50 Empl. Prac. Dec. P 39,073, 57 USLW 2712 James J. NICHOLSON v. CPC INTERNATIONAL INC., a corporation, and James R. Eiszner, Appellants.
• Court: U.S. Court of Appeals — Third Circuit

Page 221

877 F.2d 221

49 Fair Empl.Prac.Cas. 1678,

50 Empl. Prac. Dec. P 39,073, 57 USLW 2712

James J. NICHOLSON v. CPC INTERNATIONAL INC., a corporation, and James R. Eiszner,

Appellants.

No. 88-5588.

United States Court of Appeals, Third Circuit.

Argued Dec. 8, 1988.

Decided June 2, 1989.

As Amended June 7, 1989.

Rehearing and Rehearing In Banc Denied July 10, 1989.

Carmine A. Iannaccone (Argued), John M. Simon, Hannoch Weisman, P.C., Roseland, N.J., Samuel Estreicher, Cahill Gordon & Reindel on the brief, New York City, for appellants.

Walter L. Leib, Gary E. Roth (Argued), Richard M. Cohen, Leib, Kraus, Grispin & Roth, P.C., Scotch Plains, N.J., for appellee.

Charles A. Shanor, Gen. Counsel, Gwendolyn Young Reams, Associate Gen. Counsel, Lorraine C. Davis, Asst. Gen. Counsel, Gale Barron Black (Argued), E.E.O.C., Washington, D.C., for amicus curiae in support of appellee.

Before SLOVITER and BECKER, Circuit Judges, and FULLAM, District Judge ^*.

OPINION OF THE COURT

SLOVITER, Circuit Judge.

The district court certified for interlocutory appeal under 28 U.S.C. Sec. 1292(b) (1982) its order denying the defendants' motion to compel arbitration of the claim of plaintiff, a former employee, alleging that his termination violated the Age Discrimination in Employment Act of 1967 (ADEA), 29 U.S.C. Sec. 621 et seq. (1982 & Supp.1986). This court is presented for the first time with the question whether an ADEA suit may be maintained despite a provision in an employment contract to arbitrate disputes arising out of the employment. We conclude, after applying the test of arbitrability devised by the Supreme Court in Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 107 S.Ct. 2332, 96 L.Ed.2d 185 (1987), and Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985), that Congress did not intend that the right under the ADEA to a judicial forum for protection against age discrimination would be subject to displacement.

I.

The plaintiff in this case, James J. Nicholson, was hired by defendant CPC International, Inc. (CPC) as an attorney in 1957. He rose steadily through the corporate ranks and was appointed Vice-President for Corporate Financial Services in 1981. In January 1986, apparently in anticipation of a possible takeover move, Nicholson and the approximately thirty other corporate officers of CPC in domestic locations were presented with an executive employment agreement, which Nicholson signed. The agreement defined, inter alia, compensation, benefits, job title, and termination procedures and benefits, ¹ and contained an arbitration clause providing that:

Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three arbitrators in New York City in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrators' award in any court having jurisdiction. The expense of such arbitration shall be borne by the Company.

App. at 107.

Approximately one year after signing this agreement, Nicholson was informed that his position was to be eliminated in a corporate restructuring. Nicholson filed a timely age discrimination charge with the EEOC which was administratively terminated at his request so that he could file suit. He sued CPC and its President in New Jersey Superior Court, raising claims under the ADEA, state antidiscrimination law, and common law breach of contract theories. CPC removed the case to federal court and moved for an order compelling arbitration of all of Nicholson's claims pursuant to the clause in the employment agreement.

On April 18, 1988, the district court, per Judge H. Lee Sarokin, denied CPC's motion for an order to compel arbitration of the ADEA claim, but granted the motion with respect to all claims arising under state law. ² Judge Sarokin had previously held in Steck v. Smith Barney, Harris Upham & Co., 661 F.Supp. 543 (D.N.J.1987), that the text and legislative history of the ADEA demonstrated that Congress intended that ADEA claims be nonarbitrable. In denying CPC's motion for arbitration, Judge Sarokin stated that the Supreme Court's opinion in Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 107 S.Ct. 2332, 96 L.Ed.2d 185 (1987), did not alter the analysis he had used in Steck.

Following the district court's ruling, CPC requested the court to certify for interlocutory appeal under 28 U.S.C. Sec. 1292(b) the question "whether the plaintiff's federal claim under the Age Discrimination in Employment Act, 29 U.S.C. Sec. 621 et seq. is arbitrable." App. at 57. The district court, undoubtedly cognizant that under the statute it can certify only an order, not a question, see Johnson v. Alldredge, 488 F.2d 820, 822-23 (3d Cir.1973), cert. denied, 419 U.S. 882, 95 S.Ct. 148, 42 L.Ed.2d 122 (1974), certified the portion of the order dealing with the ADEA claim because it was of the opinion "that the arbitrability of an action under the ADEA is a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation." App. at 62. This court granted CPC's petition for leave to appeal on July 6, 1988. We subsequently granted a motion by the Equal Employment Opportunity Commission (EEOC) to intervene in support of Nicholson's position.

II.

In several recent cases, the Supreme Court discarded its earlier reluctance to order arbitration of statutory claims. In Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 107 S.Ct. 2332, 96 L.Ed.2d 185 (1987), the Court stated that the Federal Arbitration Act (FAA), 9 U.S.C. Sec. 1 et seq. (1982), establishes a " 'federal policy favoring arbitration,' " id. 107 S.Ct. at 2337 (quoting Moses H. Cone Memorial Hosp. v. Mercury/Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 941, 74 L.Ed.2d 765 (1983)), which is not diminished when a party to an arbitration agreement raises claims under a federal statute. However, the presumption of arbitrability under the FAA will be defeated when it is "overridden by a contrary congressional command" in another statute. Id. Applying these principles, the Court has held arbitration agreements to be enforceable with respect to claims arising under the Sherman Act, see Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985), under section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. Sec. 78j(b) (1982), see Shearson, 107 S.Ct. at 2338-43, and under the civil provisions of the Racketeer Influenced and Corrupt Organizations Act, (RICO), 18 U.S.C. Sec. 1961 et seq. (1982), see Shearson, 107 S.Ct. at 2343-46. Moreover, the Court has just overruled its decision in Wilko v. Swan, 346 U.S. 427, 74 S.Ct. 182, 98 L.Ed. 168 (1953), which had held arbitration agreements were not enforceable as to claims under section 12(2) of the Securities Act of 1933. See Rodriguez de Quijas v. Shearson/American Express, Inc., --- U.S. 104, 109 S.Ct. 1917, 104 L.Ed.2d 526 (1989). The de Quijas opinion is consistent with the line of cases enforcing arbitration agreements in the setting of business transactions.

Significantly, the Court in Mitsubishi noted "[t]hat is not to say that all controversies implicating statutory rights are suitable for arbitration." 473 U.S. at 627, 105 S.Ct. at 3354; see also Gavalik v. Continental Can Co., 812 F.2d 834, 850 (3d Cir.), cert. denied, --- U.S. ----, 108 S.Ct. 495, 98 L.Ed.2d 492 (1987) (Congress did not intend that plaintiff raising discrimination claim under ERISA be required to exhaust arbitral remedies). Nothing in Mitsubishi or Shearson suggests that the Court was overruling its prior holdings that arbitration agreements do not preclude access to a judicial forum for resolution of claims arising under the Fair Labor Standards Act (FLSA), see Barrentine v. Arkansas-Best Freight System, Inc., 450 U.S. 728, 101 S.Ct. 1437, 67 L.Ed.2d 641 (1981); under 42 U.S.C. Sec. 1983, see McDonald v. City of West Branch, 466 U.S. 284, 104 S.Ct. 1799, 80 L.Ed.2d 302 (1984); and under Title VII of the Civil Rights Act of 1964, see Alexander v. Gardner-Denver Co., 415 U.S. 36, 94 S.Ct. 1011, 39 L.Ed.2d 147 (1974). Although each statutory scheme requires its own discrete analysis, in deciding whether the statutory right under the ADEA to a judicial forum can be waived we are guided by the Court's decisions, on one hand, that access to the courts under the FLSA, section 1983 and Title VII cannot be displaced and by its decisions, on the other hand, that the right to a court trial is waivable under the Sherman Act, securities acts and civil RICO.

We proceed to examine the statutory scheme embodied in the ADEA to ascertain whether Congress intended "to preclude a waiver of judicial remedies for the statutory rights at issue," a determination which must be made " 'from the text or legislative history' " of the statute or from "an inherent conflict between arbitration and the statute's underlying purposes." Shearson, 107 S.Ct. at 2337 (citing Mitsubishi, 473 U.S. at 628, 105 S.Ct. at 3354).

A. The Text of the ADEA

No language in the ADEA speaks directly to the effect of an arbitration agreement. ³ On the other hand, the statutory scheme reflects Congress' careful structuring of the procedure to be followed in enforcing the rights granted by the Act.

The ADEA vests primary enforcement responsibility with the Equal Employment Opportunity Commission (EEOC), 29 U.S.C. Sec. 626, to which the individual's right of action under the Act is secondary. Thus, individuals are not permitted to file suit alleging unlawful discrimination under the ADEA unless they first file an administrative complaint with the EEOC and wait sixty days while the EEOC considers the charge. 29 U.S.C. Sec. 626(d). The EEOC is...