Paladino v. Avnet Computer Technologies, Inc., 96-2341

Decision Date04 February 1998
Docket NumberNo. 96-2341,96-2341
Citation134 F.3d 1054
Parties76 Fair Empl.Prac.Cas. (BNA) 1315, 72 Empl. Prac. Dec. P 45,222, 11 Fla. L. Weekly Fed. C 1022 Ellen Sue PALADINO, Plaintiff-Appellee, v. AVNET COMPUTER TECHNOLOGIES, INC., a Delaware corporation doing business in the State of Florida, Defendant-Appellant.
CourtU.S. Court of Appeals — Eleventh Circuit

Morey Raiskin, Michael V. Elsberry, Lowndes, Drosdick, Doster, Kantor & Reed, P.A., Orlando, FL, for Defendant-Appellant.

Carol Swanson, Orlando, FL, for Plaintiff-Appellee.

Appeal from the United States District Court for the Middle District of Florida.

Before HATCHETT, Chief Judge, and TJOFLAT and COX, Circuit Judges.

HATCHETT, Chief Judge:

Avnet, Inc., appeals a district court ruling refusing to compel arbitration in a former employee's lawsuit alleging violations of Title VII and Florida law. We affirm.


From September 23, 1992, until January 13, 1994, Ellen Sue Paladino worked for Avnet,

Inc. (Avnet), as a Regional Technical Sales Consultant for the Southeastern United States. Prior to beginning work, Paladino signed a handbook acknowledgment containing a "consent to arbitration" agreement. The arbitration agreement (which was in smaller type than the handbook's text) provided as follows:




I recognize that during the course of my employment differences can arise between the Company and me. To that end, the Company and I consent to the settlement by arbitration of any controversy or claim arising out of or relating to my employment or the termination of my employment. Arbitration shall be in accordance with the commercial rules of the American Arbitration Association before a panel of three arbitrators in or near the city where I am principally employed. The Company and I further consent to the jurisdiction of the highest court of original jurisdiction of the state where I am principally employed, and of the United States District Court in the District where the arbitration takes place, for all purposes in connection with the arbitration, including the entry of judgment on any award. The arbitrator is authorized to award damages for breach of contract only, and shall have no authority whatsoever to make an award of other damages.

(Emphasis added.)

On January 13, 1994, Avnet fired Paladino. Paladino subsequently obtained a right to sue letter from the Equal Employment Opportunity Commission and, on September 8, 1995, filed this lawsuit against Avnet alleging violations of Title VII, a Florida anti-discrimination statute and Florida's common law. The lawsuit requested wide-ranging relief for the alleged violations, including back pay, reinstatement, damages for emotional pain and suffering, reputational harms, injunctive relief, costs and attorney's fees. On November 22, 1995, Avnet responded to Paladino's lawsuit with a motion to stay proceedings and compel arbitration, based on the arbitration agreement described above and provisions of the Federal Arbitration Act (FAA), 9 U.S.C. §§ 1-16, which require the courts to stay proceedings and compel arbitration under certain circumstances. Paladino and Avnet then filed a series of legal briefs on Avnet's pending motion, and, on December 19, 1995, the district court denied the motion. Avnet filed this appeal.


Avnet advances a single issue on appeal: whether the district court erred in refusing to stay this action and compel the parties to submit the issues raised in the complaint to arbitration.


Jurisdiction over Avnet's appeal from an order denying a motion to stay proceedings and compel arbitration is proper pursuant to 9 U.S.C. § 16(a). Accord Hornbeck Offshore (1984) Corp. v. Coastal Carriers Corp. (In re Complaint of Hornbeck Offshore (1984) Corp.), 981 F.2d 752, 754 (5th Cir.1993). 1 We conduct a de novo review of a

district court's order denying a motion to compel arbitration. Kidd v. Equitable Life Assur. Soc'y of Am., 32 F.3d 516, 518 (11th Cir.1994).


This case requires us to apply basic principles of contract interpretation in harmony with a general federal policy in favor of arbitration. The federal policy is expressed in

[t]he Federal Arbitration Act [which] was originally enacted in 1925 and then reenacted and codified in 1947 as Title 9 of the United States Code. Its purpose was to reverse the longstanding judicial hostility to arbitration agreements that had existed at English common law and had been adopted by American courts, and to place arbitration agreements upon the same footing as other contracts.

Cole v. Burns Int'l Sec. Servs., 105 F.3d 1465, 1470 (D.C.Cir.1997) (internal quotations and citations omitted). Section 2 of the FAA provides that arbitration agreements "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 (1994). Section 3 of the FAA authorizes federal district courts, upon application of a party, to stay proceedings regarding "any issue referable to arbitration under an agreement in writing for such arbitration ... until such arbitration has been had in accordance with the terms of the agreement." 9 U.S.C. § 3 (1994). Section 4 of the FAA grants federal district courts the power to compel arbitration "upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue." 9 U.S.C. § 4 (1994).

The FAA does not "require parties to arbitrate when they have not agreed to do so, ... nor does it prevent parties who do agree to arbitrate from excluding certain claims from the scope of their arbitration agreement." American Express Fin. Advisors, Inc. v. Makarewicz, 122 F.3d 936, 940 (11th Cir.1997) (quoting Volt Info. Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 478, 109 S.Ct. 1248, 1255, 103 L.Ed.2d 488 (1989)). The FAA creates a presumption in favor of arbitrability; so, parties must clearly express their intent to exclude categories of claims from their arbitration agreement. See First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 945, 115 S.Ct. 1920, 1924-25, 131 L.Ed.2d 985 (1995) (issues will be deemed arbitrable unless it is clear that the arbitration clause has not included them). Presumption notwithstanding, "the courts are not to twist the language of the contract to achieve a result which is favored by federal policy but contrary to the intent of the parties." Goldberg v. Bear, Stearns & Co., 912 F.2d 1418, 1419-20 (11th Cir.1990).

In this case we are faced with an arbitration agreement whose scope is defined in two clauses. The first clause states in a general fashion that Avnet and Paladino "consent to the settlement by arbitration of any controversy or claim arising out of or relating to ... [Paladino's] employment or the termination of ... [her] employment." Viewed in isolation, this clause appears all-inclusive, embracing both breach of contract and statutory claims. The arbitration agreement contains a second clause, however, that muddies the waters considerably. That clause states that "[t]he arbitrator is authorized to award damages for breach of contract only, and shall have no authority whatsoever to make an award of other damages."

The second clause can be read two ways: as a clarification of the types of claims the parties intended to submit to arbitration, i.e., only breach of contract claims, or as an explicit limitation on remedies available for any claims submitted to arbitration. Avnet urges us to construe the second clause as a limitation on remedies, and not as a statement about the types of claims the parties agreed to arbitrate. Avnet further urges that this court should then find the limitation on remedies inapplicable to Paladino's statutory claims if those statutes authorize remedies that a party cannot be required to waive as a condition of employment. Stated more plainly, Avnet urges us to declare that it has entered into a valid arbitration agreement At first glance, Avnet's suggested approach seems appealing: it sends the parties to arbitration, in accordance with the federal policy favoring arbitration, but preserves Paladino's right to benefit from statutory remedies. Upon closer examination, however, Avnet's suggested approach is far more problematic. This is so because the presence of an unlawful provision in an arbitration agreement may serve to taint the entire arbitration agreement, rendering the agreement completely unenforceable, not just subject to judicial reformation. See, e.g., Graham Oil v. Arco Prods. Co., 43 F.3d 1244, 1248-49 (9th Cir.1994) (arbitration clause that purported to waive federal statutory remedies and to shorten statute of limitations for filing statutory claims was unenforceable), cert. denied 516 U.S. 907, 116 S.Ct. 275, 133 L.Ed.2d 195 (1995); Stirlen v. Supercuts, Inc., 51 Cal.App.4th 1519, 60 Cal.Rptr.2d 138 (1997) (finding unconscionable and unenforceable an arbitration clause that, inter alia, limited remedy available in arbitration to a money award not to exceed the amount of actual damages for breach of contract); see also E. Allan Farnsworth, Farnsworth on Contracts § 5.8, at 70 (1990) (severance is inappropriate when the entire provision represents an "integrated scheme to contravene public policy").

with an invalid limitation of remedies clause that should be stricken for purposes of resolving its dispute with Paladino. Paladino responds, in part, with an argument that the arbitration agreement Avnet authored unconstitutionally denies her access to the courts, and should be stricken in its entirety. 2

"It is well understood that, where a contract is unclear on a point, an interpretation that makes the contract lawful is preferred to one that renders it unlawful." Cole, 105 F.3d at 1486. Accordingly, the clause at issue is best construed as a gloss explaining the types...

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