Rosenberg v. Merrill Lynch, Pierce, Fenner & Smith
| Decision Date | 26 January 1998 |
| Docket Number | No. Civ.A. 96-12267-NG.,Civ.A. 96-12267-NG. |
| Citation | 995 F.Supp. 190 |
| Court | U.S. District Court — District of Massachusetts |
| Parties | Susan ROSENBERG, Plaintiff, v. MERRILL LYNCH, PIERCE, FENNER & SMITH, INC. and John Wyllys, Defendants. |
Steven T. Sager, Marc Redlich, Law Offices of Marc Redlich, Boston, MA, Richard P. Goodkin, Framingham, MA, for Susan M. Rosenberg.
Barry Y. Weiner, Christopher P. Litterio, Shapiro, Israel & Weiner, P.C., Boston, MA, Marifrances Dant Bolger, Morgan, Lewis & Bockius, Washington, DC, Joseph J. Costello, Mark S. Dichter, Morgan, Lewis & Bockius Philadelphia, PA, for Merrill Lynch Pierce Fenner & Smith, Inc. and John Wyllys.
Robert J. Gregory, Washington, DC, for E.E.O.C.
Robert S. Mantell, Law Offices of Kevin G. Powers, Boston, MS, for Massachusetts Branch of National Employment Lawyers Ass'n.
Ozell Hudson, Jr., Lawyers' Committee for Civil Rights, Boston, MS, for Lawyer's Committee for Civil Rights.
Sydelle Pittas, Law Office of Sydelle Pittas, Winchester, MA, for Women's Bar Ass'n.
Sally Dunaway, Washington, DC, for American Ass'n of Retired Persons.
Jody E. Forchheimer, Bingham, Dana & Gould, Boston, MS, for Securities Industry Ass'n.
Loretta M. Smith, Boston, MA, for Associated Industries of Massachusetts.
Richard L. Alfred, Hill & Barlow, Boston, MA, for Boston area Management Attorney's Group.
TABLE OF CONTENTS
I. INTRODUCTION .............................................................. 191
II. BACKGROUND ................................................................ 193
III. DISCUSSION ................................................................ 194
A. The Case Law From Alexander v. Gardner-Denver To Gilmer ................ 194
1. The rule against mandatory arbitration of statutory claims .......... 194
2. The shift to a presumption in favor of arbitrability ................ 195
3. The perceived inapplicability or Mitsubishi to civil rights claims .. 196
a. The inappropriateness of free market presumptions in the
employment discrimination setting .................................... 196
b. The public functions of civil rights litigation .................. 197
4. Gilmer v. Interstate/Johnson Lane ................................... 199
B. The Arbitrability of Title VII claims .................................. 200
1. The Role of Federal Courts in the Title VII Scheme .................. 200
2. The Civil Rights Act of 1991 ........................................ 200
a. The Express Preclusion of Mandatory, Pre-Dispute Arbitration
Agreements ........................................................... 201
b. The Structure and Purpose of the 1991 Act ........................ 204
c. The creation of a right to a jury trial .......................... 205
C. The Adequacy of the NYSE Forum to vindicate Rosenberg's ADEA
claim ...................................................................... 206
1. Norms and Standards of Arbitral Impartiality ........................ 207
2. Application of Norms of Arbitral Impartiality to the NYSE System .... 210
IV. CONCLUSION ................................................................ 212
This case involves the complex interaction between the important goal of eliminating workplace discrimination on the one hand, and the national commitment to enforcing arbitration agreements on the other.
Plaintiff Susan Rosenberg ("Rosenberg") brought suit against her former employer, Merrill Lynch, Pierce, Fenner & Smith, Inc. ("Merrill Lynch") and her former supervisor, John Wyllys ("Wyllys") (collectively "defendants"), alleging age and gender discrimination, as well as sexual harassment.1 Defendants have moved to compel arbitration and to stay these proceedings pending its outcome. They allege that when Rosenberg filled out a securities industry registration Form U-4, a prerequisite to working as a securities broker, she agreed to arbitrate "any dispute, claim or controversy" that might arise between herself and her employer. Gilmer v. Interstate/Johnson Lane Corp.2 and the Federal Arbitration Act3 ("FAA"), defendants assert, require enforcing that agreement and denying Rosenberg access to this judicial forum and to a trial by jury.
On April 23, 1997, I partially deferred the defendants' motion in order to allow the parties to explore more fully several important issues raised by the pleadings. While the Gilmer Court had enforced the U-4 arbitration clause in a case brought under the Age Discrimination in Employment Act ("ADEA"), its decision had not addressed the arbitrability of claims brought under Title VII. It also left two factual issues for "decision in specific cases": whether a particular arbitral forum was adequate to vindicate the statutory rights involved; and whether the agreement to arbitrate was involuntary or unconscionable. As I explained:
The issue before me is the application of Gilmer to the facts at bar. Gilmer raises two questions, one more general, one more specific. The general question is: Whether Rosenberg may be obliged as a condition of her employment to prospectively waive the right to litigate the Title VII claim in a federal forum, before an Article III judge and jury. That question involves two others: (a) Do the conclusions of Gilmer with respect to the ADEA apply as well to Title VII, as amended by the Civil Rights Act of 1991? and, (b) Do the conclusions of Gilmer with respect to the adequacy of the arbitral fora — that the arbitrators in the securities industry are unbiased, competent and effective to enforce federal civil rights claims — apply to the instant case?
The more specific question is: Assuming Title VII permits a prospective waiver of the right to a federal forum, does Rosenberg's waiver meet the legal standards? This question also has several sub-parts: (a) What are the standards governing the waiver of this statutory and perhaps, constitutional right to a jury trial? (b) Whether the circumstances surrounding Rosenberg's waiver in fact complied with those standards, i.e., was it knowingly and voluntarily made; and, (c) Whether her agreement to arbitrate was revocable, due to the employer's unequal bargaining power or any other "adhesion" arguments.... I conclude that the record in the instant case is presently inadequate on a number of levels for current resolution....
Rosenberg v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (Rosenberg I), 965 F.Supp. 190, 192 (D.Mass.1997). I ordered additional briefing and discovery on these issues, and requested amicus participation. The parties4 and numerous amici5 responded with submissions exploring these and many other issues.
After consideration of all the written materials and the oral arguments of counsel, I have concluded that defendants' motion to compel arbitration must be DENIED.
Rosenberg was forty-five years old when she was hired by Merrill Lynch on January 6, 1992 for employment in its Wellesley, Massachusetts office. She held a bachelor of science degree and had worked in product engineering; she had no experience in the securities industry. She began in a training program for financial consultants known as the Professional Development Program; this program normally lasts 24 months. On January 10, 1992, Rosenberg filled out a U-4 Form, which is the Uniform Application For Securities Industry Registration Or Transfer. It appears from internal Merrill Lynch records that the U-4 was initially submitted with her supervisor's signature alone, and then returned to Rosenberg for her signature two weeks after she started work.
As its name implies, the U-4 is a uniform, standardized form. It must be completed by anyone seeking to work as a broker in the securities industry, for any employer, anywhere in the country. The U-4 form requires all prospective securities brokers to:
... agree to arbitrate any dispute, claim or controversy that may arise between me and my firm, or a customer, or any other person, that is required to be arbitrated under the rules, constitutions, or by-laws of the organizations indicated in item 10 as may be amended from time to time and that any arbitration award rendered against me may be entered as a judgment in any court of competent jurisdiction. (emphasis added.)
Item 10 lists the various organizations, such as the New York Stock Exchange ("NYSE") and National Association of Securities Dealers, Inc. ("NASD"), as well as the fifty states, in which one can become licensed to trade securities. The NYSE and NASD are self-regulating organizations ("SROs"), made up of securities firms and charged by statute with regulating the practices of their industry. Merrill Lynch is a member of the American Stock Exchange ("ASE"), the NASD, and the NYSE. A mark in the boxes on the U-4 form expresses an employee's intent to apply to be registered and licensed with the organizations indicated.
Five of the boxes in item 10 on Rosenberg's U-4 form are marked with an X: the boxes labeled ASE, CBOE, NASD, NYSE, and Massachusetts.6 Rosenberg, however, neither remembers checking the boxes herself nor authorizing anyone to check them for her. She adds that as a newcomer to the industry, she would have had no idea which of these boxes to check. In fact, the boxes may already have been checked before Rosenberg was given the form to complete. As explained in an affidavit by Marie Montagnino, Manager of the Registration Department at Merrill Lynch, "[s]ince all of Merrill Lynch's domestic registered representatives are required to register with the ASE, the NASD, and the NYSE, the "x" marks next to those SROs are ... pre-printed.
On the copies of Rosenberg's U-4 that Merrill Lynch has submitted in this case, the boxes for ASE, NYSE, and NASD appear to have been checked by hand by January 10,...
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