Shankle v. B-G Maintenance Management of Colorado, Inc.

• Decision Date: 05 January 1999
• Docket Number: B-G,No. 97-1130,97-1130
• Citation: 163 F.3d 1230
• Parties: 78 Fair Empl.Prac.Cas. (BNA) 1057, 74 Empl. Prac. Dec. P 45,690, 14 NDLR P 58, 1999 CJ C.A.R. 808 Matthew SHANKLE, Plaintiff-Appellee, v.MAINTENANCE MANAGEMENT OF COLORADO, INC., a corporation doing business in the State of Colorado, Defendant-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1230

163 F.3d 1230

78 Fair Empl.Prac.Cas. (BNA) 1057,

74 Empl. Prac. Dec. P 45,690, 14 NDLR P 58,

1999 CJ C.A.R. 808

Matthew SHANKLE, Plaintiff-Appellee, v. B-G MAINTENANCE MANAGEMENT OF COLORADO, INC., a corporation doing business in the State of Colorado Defendant-Appellant.

No. 97-1130.

United States Court of Appeals Tenth Circuit.

Jan. 5, 1999.

Elisa Julie Moran (John Mosby, with her on the brief), Denver, Colorado, for Plaintiff-Appellee.

William C. Berger (Robert R. Miller, with him on the briefs) of Stettner, Miller & Cohn, P.C., Denver, Colorado, for Defendant-Appellant.

Jennifer S. Goldstein (C. Gregory Stewart, General Counsel; J. Ray Terry, Jr., Deputy General Counsel; Gwendolyn Young Reams, Associate General Counsel; and Robert J. Gregory, with her on the brief), Equal Employment Opportunity Commission, Washington, DC, for amicus curiae Equal Employment Opportunity Commission.

Before TACHA, BRORBY and KELLY, Circuit Judges.

BRORBY, Circuit Judge.

Defendant-Appellant B-G Maintenance Management, Inc. ("B-G Maintenance") appeals the district court's order refusing to compel arbitration of Mr. Shankle's employment discrimination suit. Mr. Shankle alleges B-G Maintenance violated federal anti-discrimination laws when it terminated his employment because of his race, age, and disability. B-G Maintenance moved to compel arbitration based on an agreement to arbitrate signed by Mr. Shankle during his employment. The district court denied that motion and B-G Maintenance's motion for reconsideration. We exercise jurisdiction pursuant to 9 U.S.C. § 16(a)(1) and 28 U.S.C. § 1291, and we affirm.

I. Background

B-G Maintenance, a private janitorial company, hired Mr. Shankle in 1987 as a janitor and later promoted him to shift manager. In 1995, B-G Maintenance distributed an Arbitration Agreement ("the Agreement") to its non-union employees, including Mr. Shankle. Mr. Shankle initially refused to sign the Agreement, but later acquiesced. The Agreement is broad in scope and covers all claims between the parties, including federal discrimination claims under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e to e-17, as amended by the Civil Rights Act of 1991, 42 U.S.C. § 1981(a); the Americans with Disabilities Act, 42 U.S.C. §§ 12101 to 12213; and the Age Discrimination in Employment Act, 29 U.S.C. §§ 621-634. ¹ In signing the Agreement, Mr. Shankle agreed that "I will be responsible for one-half of the arbitrator's fees, and the company is responsible for the remaining one-half. If I am unable to pay my share, the company will advance the entirety of the arbitrator's fees; however, I will remain liable for my one-half."

B-G Maintenance terminated Mr. Shankle's employment in September 1995. Shortly thereafter, Mr. Shankle filed a charge of discrimination with the Equal Employment Opportunity Commission, which commenced an investigation. During the pendency of that investigation, the parties submitted Mr. Shankle's claims to the Judicial Arbiter Group, Inc. and selected an arbitrator as required by the Agreement. The Judicial Arbiter Group wrote to the parties, detailing the arrangements for the proposed arbitration including cost: "[t]he arbiter charges $250.00 per each hour of arbiter time and travel time at $125.00 per hour, and where appropriate, $45.00 for each hour of paralegal support time." The letter also required the parties to pay a $6,000.00 deposit. Several months later, Mr. Shankle filed another charge with the Equal Employment Opportunity Commission, voicing his objections to the upcoming arbitration. Mr. Shankle then canceled the arbitration, and filed the instant suit in federal court alleging his termination violated Title VII of the Civil Rights Act of 1964, 42 U.S.C. §§ 2000e to e-17, as amended by 42 U.S.C. § 1981; the Americans With Disabilities Act, 42 U.S.C. §§ 12101 to 12213; and the Age Discrimination in Employment Act, 29 U.S.C. §§ 621-634. B-G Maintenance thereafter filed its motion to compel arbitration.

In denying B-G Maintenance's motion, the district court recognized, in general, agreements to arbitrate employment discrimination claims are enforceable. However, the court found the Agreement's fee-splitting provision operated as "a disincentive to ... submitting a discrimination claim to arbitration." Therefore, the Agreement failed to provide a "reasonable substitute for a judicial forum" or "an effective means of vindicating" Mr. Shankle's federal rights and was therefore unenforceable. "We review a district court's ... denial of a motion to compel arbitration de novo, applying the same legal standard employed by the district court." Armijo v. Prudential Ins. Co., 72 F.3d 793, 796 (10th Cir.1995).

II. Federal Arbitration Act Applicability

As a preliminary matter, we must determine if the Federal Arbitration Act ("the Arbitration Act") governs our consideration of the arbitration agreement at issue in this case. 9 U.S.C. §§ 1-16. The provisions of the Arbitration Act represent a "liberal federal policy favoring arbitration." Gilmer v. Interstate/Johnson Lane Corp. 500 U.S. 20, 25, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991) (internal quotation marks and citation omitted). In substance, the Arbitration Act mandates that arbitration agreements contained in contracts involving commerce ² "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, and provides for orders compelling arbitration when one party fails to comply with a valid arbitration agreement, 9 U.S.C. § 4. The Arbitration Act thus creates a presumption in favor of arbitrability and courts must resolve all doubts concerning the scope of arbitrable issues in favor of arbitration. Armijo, 72 F.3d at 797-98.

However, the Arbitration Act does not apply to arbitration agreements contained in "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." 9 U.S.C. § 1. Mr. Shankle argues the Agreement falls within the § 1 exemption because he is a member of a class of workers engaged in interstate commerce. This court rejected a similar argument in McWilliams v. Logicon, Inc., 143 F.3d 573 (10th Cir.1998). In McWilliams, we held that § 1 is to be construed narrowly to apply only to "employees actually engaged in the channels of interstate commerce." Id. at 576. Accordingly, we concluded that even though the defendant employer's products and services affected interstate commerce, § 1 did not apply because defendant's employees, including plaintiff, did not directly engage in the channels of interstate commerce. Id. Likewise, even though B-G Maintenance's services affect interstate commerce at some level, Mr. Shankle's positions as janitor and shift manager did not directly affect the channels of commerce. Therefore, Mr. Shankle's claims are not insulated from Federal Arbitration Act coverage and we must apply the "federal substantive law of arbitrability, applicable to any arbitration agreement within coverage of the Act." Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985) (internal quotation marks and citation omitted).

III. Enforceability

The parties and amicus curiae raise numerous arguments as to why the arbitration agreement should or should not be enforced in this case. However, we find one issue to be controlling: Is a mandatory arbitration agreement, which is entered into as a condition of continued employment, and which requires an employee to pay a portion of the arbitrator's fees, unenforceable under the Federal Arbitration Act? The district court, relying principally on Cole v. Burns Int'l Sec. Serv., 105 F.3d 1465 (D.C.Cir.1997), held that such an agreement is not enforceable and we agree. Accordingly, we need not address the parties' other arguments regarding enforceability.

Our analysis begins with a review of the Supreme Court's decision in Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991). In that case, the Court held that agreements which require arbitration of statutory claims are enforceable under the Federal Arbitration Act. Gilmer, 500 U.S. at 26, 111 S.Ct. 1647 (holding that ADEA claims may be subjected to compulsory arbitration); see also Metz v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 39 F.3d 1482 (10th Cir.1994) (concluding that Title VII claims are subject to compulsory arbitration). The Court reasoned that by submitting statutory claims to arbitration, an individual does not forgo substantive rights provided by the statute, but merely submits their resolution to an alternate forum. Gilmer, 500 U.S. at 26, 111 S.Ct. 1647. Moreover, the arbitral forum, like the judicial forum, provides an adequate mechanism for furthering public policy goals advanced by the statute. Gilmer, 500 U.S. at 27-28, 111 S.Ct. 1647; Mitsubishi Motors, 473 U.S. at 635-37, 105 S.Ct. 3346. The Court noted " '[s]o long as the prospective litigant effectively may vindicate [his or her] statutory cause of action in the arbitral forum, the statute will continue to serve both its remedial and deterrent function.' " Gilmer, 500 U.S. at 28, 111 S.Ct. 1647 (quoting Mitsubishi Motors, 473 U.S. at 637, 105 S.Ct. 3346).

Thus, Gilmer reaffirmed the Arbitration Act's presumption in favor of enforcing agreements to arbitrate--even where those agreements cover statutory claims. While we recognize this presumption, Metz, 39 F.3d at 1487, we conclude that it is not without limits. As Gilmer emphasized, arbitration of statutory claims works because potential litigants have an adequate forum in which to resolve their statutory claims and because the broader social purposes behind the statute are adhered to. Gilmer, 500 U.S. at 28, 111 S.Ct. 1647. This supposition, falls apart, however, if the terms of an arbitration agreement actually prevent an...