Williams v. Katten, Muchin & Zavis

• Decision Date: 15 November 1993
• Docket Number: No. 92 C 5654.,92 C 5654.
• Citation: 837 F. Supp. 1430
• Court: U.S. District Court — Northern District of Illinois
• Parties: Elaine L. WILLIAMS, Plaintiff, v. KATTEN, MUCHIN & ZAVIS and Vincent Sergi, Defendants.

837 F. Supp. 1430

Elaine L. WILLIAMS, Plaintiff, v. KATTEN, MUCHIN & ZAVIS and Vincent Sergi, Defendants.

No. 92 C 5654.

United States District Court, N.D. Illinois, E.D.

November 15, 1993.

Jean M. Templeton, James D. Montgomery & Associates, Ltd., Chicago, IL, for plaintiff.

Michael A. Warner, Seyfarth, Shaw, Fairweather & Geraldson, Chicago, IL, for defendants.

ORDER

MAROVICH, District Judge.

Before us are the objections to Magistrate Pallmeyer's Report and Recommendation filed by the Plaintiff in this Title VII case. In her Report and Recommendation, Judge Pallmeyer ordered the parties to bring this dispute before the arbitrator and the Plaintiff objects.

This Court will modify or set aside the Magistrate Judge's orders only if it finds that those orders were "clearly erroneous or contrary to law." Fed.R.Civ.P. 72(a); Bobkowski v. Bd. of Educ., 141 F.R.D. 88, 90 (N.D.Ill.1992). We are aware that the Federal Arbitration Act establishes a federal policy favoring arbitration. Moses H. Cone Memorial Hosp. v. Mercury Constr. Co., 460 U.S. 1, 24, 103 S.Ct. 927, 941, 74 L.Ed.2d 765 (1982), Shearson Hayden Stone, Inc. v. Liang, 653 F.2d 310 (7th Cir.1981). After reviewing the Report and Recommendation issued by the Magistrate Judge in this case, we do not find that her order was in error or contrary to the law. Our review of the arbitration law involved here supports Judge Pallmeyer's conclusion and we therefore adopt her Report and Recommendation. We deny Plaintiffs objections.

To conclude, we dismiss this action without prejudice and we stay the tolling of the statute of limitations pending arbitration. We further deny the earlier motion to dismiss as moot.

REPORT AND RECOMMENDATION

PALLMEYER, United States Magistrate Judge.

Plaintiff Elaine L. Williams is a non-capital African-American female partner in the law firm of Katten, Muchin & Zavis ("KMZ"), who has charged Defendants, KMZ and Vincent Sergi, a capital partner of the firm, with discriminating against her on the basis of her race, sex and religion. Defendants KMZ and Sergi have moved for an order staying this action and compelling arbitration pursuant to provisions of the KMZ Partnership Agreement ("Agreement").

Count I of Plaintiff's complaint alleges that Defendants engaged in or encouraged a continuous course of discrimination and harassment against her based on her race, sex and religion in violation her civil rights under Title VII, 42 U.S.C. § 2000e et seq.¹ Count II alleges that Defendants engaged in or encouraged such discrimination and harassment with malice and/or reckless indifference to Plaintiff's right to "make and enforce contracts" under 42 U.S.C § 1981. Count III alleges that Defendants discriminated against Plaintiff wilfully, maliciously and intentionally, inflicting physical, mental and emotional injury on Plaintiff. Plaintiff seeks an order requiring Defendants to reinstate her paid medical leave and an injunction against further acts of discrimination and harassment, and compensatory and punitive damages for pecuniary, business opportunity, and emotional losses. In Count III, Plaintiff additionally seeks compensation for her medical bills.

On September 25, 1992, Defendants filed their Answer, asserting as a Tenth Affirmative Defense, the allegation that KMZ's Partnership Agreement ("Agreement"), to which Plaintiff was a party, requires arbitration of her claims. Subsequently, on February 23, 1993, Defendants filed a Motion to Stay Proceedings and to Compel Arbitration (hereinafter, "Motion to Compel"). The motion is now fully briefed. For reasons discussed below, Defendants' motion should be granted.

DISCUSSION

Article 20 of the KMZ Partnership Agreement provides that "any controversy or claim arising out of or relating to any provision of this Agreement or any other document or agreement referred to herein ... shall be resolved by arbitration ..."² Defendants argue in this motion that the Federal Arbitration Act, 9 U.S.C. § 1 et seq. ("FAA"), requires the enforcement of the parties' agreement to arbitrate. Defendants note that the Partnership Agreement expressly refers to such claims as those asserted here. Specifically, KMZ's Equal Employment Opportunity Policy (Firm Reference Manual, Ex. B ¶ 2.6 to Defendants' Memorandum), which parallels the language of Title VII precisely, and guarantees the same rights protected by § 1983, is incorporated into Article 8.4 of the Agreement. (Partnership Agreement, Art. 8.4, Ex. A to Defendants' Memorandum.)³ Thus, Defendants argue that Plaintiff has expressly consented to arbitrate her discrimination claims. Similarly, Plaintiff's allegations that Vincent Sergi discriminated against her and inflicted emotional distress may be construed as contractual claims because they too are expressly incorporated into the Agreement. (Defendants' Memorandum, at 4-5.) Article 11.6.2 of the Agreement requires managing partners in the Firm to establish committees as deemed necessary to oversee and be responsible for the Firm's affairs.

Defendants also argue that even considering Plaintiff's claims as statutory rather than contractual ones, the Supreme Court in Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991), allows the arbitration of such claims. (Defendants' Memorandum, at 6.) Although employment discrimination claims were traditionally not considered appropriate subjects of arbitration, the Court in Gilmer signalled that exceptions to that traditional understanding should be made in circumstances such as those presented here.

Plaintiff objects to Defendants' motion on several grounds. (Plaintiff's Memorandum of Law in Opposition to Defendants' Motion to Compel Arbitration (hereinafter "Plaintiff's Opposition").) She argues that her Title VII and Civil Rights Act claims are inappropriate subjects of arbitration. (Id. at 9-11.) Second, Plaintiff contends that the terms of the Federal Arbitration Act exclude this dispute from its reach. (Id. at 2-5.) Plaintiff asserts that the arbitration procedures established in the Partnership Agreement are not adequate to protect her interests. (Id. at 5-7.) She argues that the arbitration clause of the Partnership Agreement should not be enforced against her because the Partnership Agreement was not the product of arms' length negotiation, and because that clause is inconsistent with other provisions of the Partnership Agreement. (Id. at 8-9.) Finally, in a supplemental memorandum filed at this court's direction, Plaintiff has argued that Defendants waived their rights under the arbitration clause by availing themselves of the benefits of court-ordered discovery of records of Plaintiff's treating psychiatrist. (See Plaintiff's Memorandum of Law Opposing Defendants' Motion to Compel Arbitration on the Ground of Waiver (hereinafter "Plaintiff's Waiver Memorandum").) These arguments are addressed below.

I. Arbitration of Title VII and Section 1981 Claims

The Federal Arbitration Act, enacted in 1925, provides that a "written provision in ... a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, ... 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. The Supreme Court has repeatedly recognized that the FAA embodies a broad federal policy favoring arbitration. See, e.g., Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 225-26, 107 S.Ct. 2332, 2336-37, 96 L.Ed.2d 185 (1987). Section 3 of the Act requires a court to stay proceedings if an issue before it is arbitrable under an agreement covered by the FAA, while section 4 directs the court to issue an order compelling arbitration if either party fails, neglects or refuses to comply with the arbitration agreement. Id. §§ 3, 4. The FAA furthermore "establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract itself or an allegation of waiver, delay, or a like defense to arbitrability." Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 941, 74 L.Ed.2d 765 (1983).

In light of this strong policy favoring enforcement of arbitration agreements, "the burden is on the party opposing arbitration ... to show that Congress intended to preclude a waiver of judicial remedies for the statutory rights at issue." McMahon, 482 U.S. at 227, 107 S.Ct. at 2337; see also Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991) (party opposing the motion to compel arbitration has the "burden of showing that Congress, in enacting the ADEA, intended to preclude arbitration of claims under that Act." Id. 500 U.S. at ___, 111 S.Ct. at 1657).

In Gilmer, the Court enforced a private agreement requiring arbitration of an employee's age discrimination claim under the ADEA. Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991). Gilmer, a financial manager, had registered with several stock exchanges, including the New York Stock Exchange (NYSE), as required by the terms of his employment with Interstate/Johnson Lane Corp. ("Interstate"). Id. 500 U.S. at ___, 111 S.Ct. at 1650. The NYSE registration agreement provided that he would arbitrate any disputes — in particular, any controversy arising out of his employment or termination — between himself and his employer. Id. When Interstate discharged him at the age of 62, Gilmer instituted a suit against Interstate in federal district court charging age discrimination. The Court held the arbitration agreement enforceable because Gilmer had failed to meet his "burden of showing that Congress, in enacting the ADEA, intended to preclude arbitration of claims under that Act." 500 U.S. at ___, ...