Swenson v. Management Recruiters Intern., Inc.

Decision Date05 October 1988
Docket NumberNo. 87-5465,87-5465
Citation858 F.2d 1304
Parties47 Fair Empl.Prac.Cas. 1855, 47 Empl. Prac. Dec. P 38,338, 57 USLW 2237 Deborah J. SWENSON, Appellant, v. MANAGEMENT RECRUITERS INTERNATIONAL, INC.; David Marth, Appellees. State of Minnesota, amicus curiae/Appellant.
CourtU.S. Court of Appeals — Eighth Circuit

Douglas A. Hedin, Minneapolis, Minn., for appellant.

Donald L. Goldman, Cleveland, Ohio, for appellees.

Before LAY, Chief Judge, BROWN, * Senior Circuit Judge, and BEAM, Circuit Judge.

LAY, Chief Judge.

Swenson commenced an action against her former employer, Management Recruiters International, Inc., and her former supervisor, David Marth, alleging sex discrimination, aiding and abetting race discrimination pursuant to the Minnesota Human Rights Act, 1 invasion of privacy and tortious conversion of the contents of her mail. Management Recruiters removed the case to federal court on grounds of diversity of citizenship under 28 U.S.C. Sec. 1331 (1982) and moved to stay this suit pending arbitration of all issues pursuant to the Federal Arbitration Act (FAA). 9 U.S.C. Sec. 3 (1982). 2 The district court 3 granted the motion to stay. 670 F.Supp. 1438. On appeal, Swenson contends that the district court erred in finding that the FAA preempts state judicial remedies and in finding that the claims are subject to arbitration. We now reverse in part and affirm in part.

Management Recruiters International, Inc. does business in Minnesota as OfficeMates 5. Swenson was employed as an office manager at OfficeMates 5 in Edina, Minnesota, from August 12, 1985, until February 13, 1987, when she terminated her employment. She filed a discrimination suit making claims of sex discrimination and unfair employment practices in violation of Minnesota law. Swenson also alleges that Marth attempted to compel or coerce her to engage in racial discrimination in hiring practices, constituting an unfair employment practice in violation of Minn.Stat. Sec. 363.03 subd. 6(2) (1986).

On February 13, 1987, Swenson voluntarily quit her job allegedly because of the discriminatory actions of her employer. After Swenson quit her job, she claims that employees of Management Recruiters opened her personal, sealed mail in violation of Minn.Stat. Sec. 609.795 (1986 & Supp.1987). After Swenson terminated her employment, she filed suit in Hennepin County District Court. The suit was removed to federal court, and the district court issued an order to stay all issues subject to arbitration. Swenson now appeals.

Preemption

In Alexander v. Gardner-Denver Co., 415 U.S. 36, 94 S.Ct. 1011, 39 L.Ed.2d 147 (1974), the district court had held that the employee's statutory right to a trial de novo under Title VII was foreclosed by the employee's voluntary submission of his claim to final arbitration pursuant to the union's agreement to arbitrate. The court of appeals affirmed. The Supreme Court in reversing, was "unable to accept the proposition that petitioner waived his cause of action under Title VII." Id. at 51, 94 S.Ct. at 1021. The Court unanimously declared:

we think it clear that there can be no prospective waiver of an employee's rights under Title VII. * * * Title VII's strictures are absolute and represent a congressional command that each employee be free from discriminatory practices. Of necessity, the rights conferred can form no part of the collective-bargaining process since waiver of these rights would defeat the paramount congressional purpose behind Title VII. In these circumstances, an employee's rights under Title VII are not susceptible of prospective waiver.

Id. at 51-52, 94 S.Ct. at 1021-22. While the Alexander Court noted that federal policy favors arbitration, id. at 46, 94 S.Ct. at 1018, it recognized that the Title VII scheme indicates that Congress intended federal courts to be ultimately responsible for enforcing Title VII, and deferral to arbitral decisions would conflict with that goal. Id. at 56, 94 S.Ct. at 1023. The Court also observed that "the choice of forums inevitably affects the scope of the substantive right to be vindicated." Id. (citing U.S. Bulk Carriers, Inc. v. Arguelles, 400 U.S. 351, 359-60, 91 S.Ct. 409, 413-14, 27 L.Ed.2d 456 (1971) (Harlan, J., concurring)). The Alexander Court concluded: "the federal policy favoring arbitration of labor disputes and the federal policy against discriminatory employment practices can best be accommodated by permitting an employee to pursue fully both his remedy under the grievance-arbitration clause of a collective-bargaining agreement and his cause of action under Title VII." 415 U.S. at 59-60, 94 S.Ct. at 1025-26.

Although Alexander involves a collective bargaining agreement, and not a commercial arbitration agreement under the FAA, this fact should not change the Court's analysis. The Alexander Court was well aware that federal policy favors arbitration. That decision turned not on the fact that a collective bargaining arbitration was involved, but instead on the unique nature of Title VII. Alexander noted that "Congress indicated that it considered the policy against discrimination to be of the 'highest priority.' " Id. at 47, 94 S.Ct. at 1019.

Subsequent to the Alexander decision, the Supreme Court again recognized that certain statutes which provide minimum substantive guarantees, such as Title VII, are to be treated differently for arbitration purposes. In Barrentine v. Arkansas-Best Freight System, Inc., 450 U.S. 728, 101 S.Ct. 1437, 67 L.Ed.2d 641 (1981), the Supreme Court held that wage claims brought under the Fair Labor Standards Act are not barred by the prior submission of those claims to the contractual dispute-resolution procedures. The Court noted that "[w]hile courts should defer to an arbitral decision where the employee's claim is based on rights arising out of the collective-bargaining agreement, different considerations apply where the employee's claim is based on rights arising out of a statute designed to provide minimum substantive guarantees to individual workers." Id. at 737, 101 S.Ct. at 1443 (our emphasis). The Barrentine Court went on to state "[t]hese considerations were the basis for our decision in Alexander v. Gardner-Denver Co.," Id. (cite omitted). 4 Discrimination and civil rights legislation have traditionally been viewed differently than purely private economic disputes. R. Rotunda, J. Nowak & J. Young, Treatise on Constitutional Law: Substance and Procedure Secs. 15.4 & 15.7 (1986).

Management Recruiters argues that the federal policy favoring arbitration should prevail. It relies on recent Supreme Court decisions in which the FAA was found to preempt both state and federal remedies. However, none of these cases have involved employment discrimination claims. 5

The analysis of Alexander lends strong support that Congress did not intend federal judicial proceedings in discrimination cases to be preempted by employment arbitration agreements enforceable under the FAA. The Court pointed up an inherent conflict between arbitration and the underlying purposes of Title VII which evince a congressional intent to prohibit waiver of judicial forums. In Alexander the Supreme Court expressly commented why arbitration is poorly suited as a forum for the final resolution of rights created by Title VII. The main problems with arbitration are the lack of expertise of arbitrators, 6 the inferior factfinding process, 7 and the inability of arbitration to judicially construe Title VII by reference to public law concepts. Alexander, 415 U.S. at 56-57, 94 S.Ct. at 1023-24. See also McDonald v. City of West Branch, 466 U.S. 284, 290, 104 S.Ct. 1799, 1803, 80 L.Ed.2d 302 (1984) (lack of expertise cited as reason not to defer to arbitration in section 1983 case); Barrentine, 450 U.S. at 743, 101 S.Ct. at 1446 (lack of competence to decide legal issue cited as reason not to defer to arbitration in Fair Labor Standards Act case).

Management Recruiters argues that the Supreme Court has recently rejected the idea that the competence of arbitrators is inadequate to decide statutory claims. The Court in Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985), observed "we are well past the time when judicial suspicion of the desirability of arbitration and of the competence of arbitral tribunals inhibited the development of arbitration as an alternative means of dispute resolution." Id. at 626-27, 105 S.Ct. at 3353-54. The Court rejected arguments of inadequacy based on complexity of the claim, inadequate procedures, and fear that arbitrators will not follow the statute and fail to protect substantive rights. Id. at 634-36, 105 S.Ct. at 3357-59. See also Shearson, 482 U.S. ----, 107 S.Ct. at 2340-44.

Arguably, Mitsubishi mandates that it is the intent found in the text of the statute, and not the conclusions of the court regarding the adequacy of arbitration which is determinative. However, Mitsubishi went on to note, "[t]hat is not to say that all controversies implicating statutory rights are suitable for arbitration. * * * [I]t is the congressional intention expressed in some other statute on which the courts must rely to identify any category of claims as to which agreements to arbitrate will be held unenforceable." Mitsubishi, 473 U.S. at 627, 105 S.Ct. at 3354.

We conclude that in the passage of Title VII it was the congressional intent that arbitration is unable to pay sufficient attention to the transcendent public interest in the enforcement of Title VII. Title VII mandates the promotion of the public interest by assisting victims of discrimination. The arbitration process may hinder efforts to carry out this mandate.

State antidiscrimination laws

Having concluded that arbitration under the FAA was not intended to supersede federal judicial remedies under Title VII we turn to the discussion as to whether the same principles should...

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