Appellant
Tonyja Duffield
Appellee
Robertson Stephens & Co.
Appellant's Claim
That Form U-4 is unconstitutional and therefore cannot be enforced.
Chief Lawyer for Appellant
Michael Rubin
Chief Lawyer for Appellee
Daniel F. Bookin
Judges
William C. Canby, Jr., Stephen Reinhardt (writing for the court), Jane A. Restani (Court of International Trade Judge)
Justices Dissenting
None
Place
San Francisco, California
Date of Decision
8 May 1998
Decision
Form U-4 is unenforceable.
Significance
In a unanimous ruling in May of 1998, the Ninth Circuit Court of Appeals barred employers from requiring new employees to sign agreements as a condition of employment that they will settle sexual discrimination and sexual harassment disputes by means of arbitration, rather than in courts of law. This rulingappeared to end uncertainty and conflict among circuit courts on this issue,but in June of 1998, the Third Circuit Court of Appeals rejected the Ninth Circuit's reasoning in this case and reached the opposite conclusion--making the issue ripe for review by the U.S. Supreme Court.
Title VII of the Civil Rights Acts of 1964 outlawed job discrimination by allprivate and public employers. Congress delegated enforcement powers both tothe Civil Rights Division of the Justice Department and to the newly createdEqual Employment Opportunity Commission, but Congress also expected federal courts to play a major role in advancing the act's goal of deterring workplacediscrimination on the basis of race, sex, and national origin. In the case of Alexander v. Gardner-Denver Co. (1974), the Court held that "Congress intended federal courts to exercise final responsibility for enforcement ofTitle VII." Gardner also held that enforcement by compulsory arbitration proceedings, rather than by courts, "would be inconsistent with that goal."
Arbitration proceedings became increasingly popular in the 1980s, but circuitcourts steadfastly refused to enforce any agreements that required employeesto resolve discrimination claims through binding arbitration. At the same time, but in other contexts, the Supreme Court supported a "liberal federal policy favoring arbitration." In Title VII cases, however, the federal courts maintained the position that "Title VII is different." As the Eighth Circuit Court put it in Swenson v. Management Recruiters Int'l, Inc. (1988), "arbitration is unable to pay sufficient attention to the transcendent public interest in the enforcement of Title VII."
In 1991, the Supreme Court appeared to shift course somewhat in Gilmer v.Interstate/Johnson Lane Corp. (1991) when it ruled that employees could be required to arbitrate claims brought under the Age Discrimination in Employment Act of 1967. The Court noted that the Gardner ruling involved a collective bargaining agreement compelling arbitration, rather than Gilmer's individual agreement. It further said individual agreements to arbitrate should be considered valid, unless Congress itself clearly intended to require judicial remedies exclusively for statutory claims. After Gilmer,courts then had to consider whether Congress intended to ban all forms of arbitration requirements, or only some, by paying close attention to the legislative history of the law-making process.
As it happened, in 1991 Congress enacted the Civil Rights Act of 1991, extending the Civil Rights Act of 1964, and for the first time dealt directly withthe issue of compulsory arbitration of Title VII claims. The main purpose ofthe new law was to overrule a series of 1989 Supreme Court decisions which had made discrimination claims more difficult, but in Section 118, it also saidthat "where appropriate and to the extent authorized by law," parties to Title VII suits could choose alternative dispute resolution vehicles, includingarbitration. Subsequently, the Ninth Circuit Court of Appeals held that discrimination claimants could not be required to submit to arbitration of their claims if they did not "knowingly" agree to do so, and also held that if theydid agree to arbitration, they were then bound by the arbitrator's decision.However, no court had yet considered the issues presented by Duffield.
Tonyja Duffield was hired in 1998 as a broker-dealer in the securities industry. Before she could be hired, her employer, Robertson, Stephens and Companyrequired her to agree to arbitrate all "employment related" disputes, ratherthan to take them to court. This requirement was mandated of all employers throughout the securities industry by both the New York Stock Exchange and theNational Association of Securities Dealers; the relevant document new employees had to sign was known as Form U-4. In 1995, Duffield brought suit againsther employer, alleging sexual discrimination and sexual harassment in violation of Title VII of the Civil Rights Act of 1964, as amended.
In district court, Duffield made five specific arguments against the securities industry's use of Form U-4, but preceded those arguments by requesting thecourt to rule against compulsory arbitration. Robertson Stephens asked the court to force her to go to arbitration. The court rejected all her argumentsand denied her motion to rule against compulsory arbitration, then granted Robertson Stephens' motion--but instead of issuing a final judgment, the courtsent the case to the circuit court of appeals.
Writing for the unanimous court, Judge Reinhardt ruled in favor of Duffield'srequest for a declaratory judgment against compulsory arbitration--a requestsupported in a "friend of the court" brief filed by the Equal Employment Opportunity Commission, among others. Judge Reinhardt noted that according to the Gilmer decision, the burden of proof was on Duffield to show that the legislative history of the 1991 Civil Rights Act demonstrated Congress' intention to preclude enforcement of compulsory arbitration agreements in TitleVII cases, and then the judge proceeded to use the Gilmer test to support Gardner. His examination of the 1991 Civil Rights Act's legislative history was systematic and thorough.
Legislative History
The critical language of the act is found in Section 118, which states that parties to Title VII disputes could, "[w]here appropriate and to the extent authorized by law," choose to pursue other methods of resolving them, includingarbitration. Robertson Stephens argued that this language shows congressional intent to allow, even encourage, the kind of process represented by Form U-4. The firm also argued that by the time the Civil Rights Act of 1991 was passed, compulsory arbitration was already "authorized by law," namely, by the Gilmer case.
Judge Reinhardt remarked that this reading of Section 118 conflicts with Congress' directive to read Title VII broadly, and to choose the interpretation of the law which "most effectively advances" the underlying Congressional purpose. And when Congress "encourages" arbitration, we must read that word in the light of the "provisions of the whole law . . . [i]t would seem entirely disingenuous to fasten on that one word and conclude that Congress was boundlessly in favor of all forms of arbitration." Read in the light of Congress' objectives in the 1991 act, the words "where appropriate" point to whatever forum for dispute resolution the victims of discrimination find desirable, ratherthan to an unwanted forum forced on them.
Section 118's other critical statutory phrase, "to the extent authorized by law," most likely codifies the "law" as Congress understood it at the time-- and, Judge Reinhardt pointed out, the "overwhelming weight of the law" was that "compulsory agreements to arbitrate Title VII claims were unenforceable." Such agreements were not "authorized by law." As of the time Section 118 was reported out of the congressional committee which drafted the bill, circuit courts "without exception, had `widely interpreted' Title VII as prohibiting `any form of compulsory arbitration.'"
Through the Looking Glass
The Supreme Court's decision in the Gilmer case was handed down just before the Civil Rights Act of 1991 was passed. The judge conceded that the decisions in Gilmer and Gardner may not coincide with Congress' intend as written "to the extent authorized by law." But, "even a cursory glance" at Section 118's legislative history makes it clear that Congress "in noway intended to incorporate" Gilmer's holding into Title VII. In fact, in reporting the bill to the House of Representatives, the House Committee on Education and Labor unambiguously said that "[t]his view is consistent with the Supreme Court's interpretation of Title VII in Alexander v. Gardner-Denver Co." Not only that, Congress specifically rejected a proposal allowing employers to enforce compulsory arbitration agreements, and "it did so in the most emphatic terms," concluding with the phrase, "American workers should notbe forced to choose between their jobs and their civil rights." Further, thechairman of the reporting committee, Congressman Edwards, said "No approval whatsoever is intended of the Supreme Court's recent decision in Gilmer. . . . " Judge Reinhardt concluded that "it is the unusual force and clarityof the statute's legislative history that is ultimately dispositive in thiscase."
But in response, the securities firm urged the court to ignore the legislative history and conclude that Section 118 must be read as adopting Gilmer. Its view was that "to the extent authorized by law" was merely an elasticphrase which contracted and expanded with the ebb and flow of court decisions. Reinhardt said the defendant's interpretation meant that Section 118, "without a single word being changed, nevertheless was instantaneously transmogrified, and took on exactly the opposite meaning," on the day Gilmer wasannounced, and he rejected it. "Any such `through the looking glass' construction would entail a gross perversion of the legislative process."
In the end, Reinhardt said, the Gilmer requirement that such court decisions must be based on statutory language and legislative history is "the most compelling reason" to reject the view of Robertson, Stephens & Co. Thelegislative history of the Civil Rights Act of 1991 makes it "absolutely clear" that Congress intended to codify the Gardner approach--that is, toannounce that Gardner was the law governing compulsory arbitration inTitle VII cases. In the light of this, Reinhardt held that Form U-4 is unenforceable.
The Controversy Continues
Despite Gilmer's mandate to carefully examine legislative history andJudge Reinhardt's thorough and persuasive reading of the Civil Rights Act of1991, on 8 June 1998 the Third Circuit sharply differed from the rationale discussed above. In Seus v. John Nuveen & Co., a Pennsylvania district court had held that the Form U-4 Seus signed was enforceable under the Federal Arbitration Act; she appealed. The Third Circuit noted that "no amount of commentary from individual legislators or committees would justify a courtin reaching the result" that the Ninth Circuit reached, and it further notedthat if the legislative history of Section 118 was binding, then it should beread as having codified Gilmer. The Supreme Court has granted certiorari in Wright v. Universal Maritime Service Corp., and SupremeCourt watchers think the Court in that case will have the opportunity to resolve the conflict.
Related Cases
Tonyja Duffield
Appellee
Robertson Stephens & Co.
Appellant's Claim
That Form U-4 is unconstitutional and therefore cannot be enforced.
Chief Lawyer for Appellant
Michael Rubin
Chief Lawyer for Appellee
Daniel F. Bookin
Judges
William C. Canby, Jr., Stephen Reinhardt (writing for the court), Jane A. Restani (Court of International Trade Judge)
Justices Dissenting
None
Place
San Francisco, California
Date of Decision
8 May 1998
Decision
Form U-4 is unenforceable.
Significance
In a unanimous ruling in May of 1998, the Ninth Circuit Court of Appeals barred employers from requiring new employees to sign agreements as a condition of employment that they will settle sexual discrimination and sexual harassment disputes by means of arbitration, rather than in courts of law. This rulingappeared to end uncertainty and conflict among circuit courts on this issue,but in June of 1998, the Third Circuit Court of Appeals rejected the Ninth Circuit's reasoning in this case and reached the opposite conclusion--making the issue ripe for review by the U.S. Supreme Court.
Title VII of the Civil Rights Acts of 1964 outlawed job discrimination by allprivate and public employers. Congress delegated enforcement powers both tothe Civil Rights Division of the Justice Department and to the newly createdEqual Employment Opportunity Commission, but Congress also expected federal courts to play a major role in advancing the act's goal of deterring workplacediscrimination on the basis of race, sex, and national origin. In the case of Alexander v. Gardner-Denver Co. (1974), the Court held that "Congress intended federal courts to exercise final responsibility for enforcement ofTitle VII." Gardner also held that enforcement by compulsory arbitration proceedings, rather than by courts, "would be inconsistent with that goal."
Arbitration proceedings became increasingly popular in the 1980s, but circuitcourts steadfastly refused to enforce any agreements that required employeesto resolve discrimination claims through binding arbitration. At the same time, but in other contexts, the Supreme Court supported a "liberal federal policy favoring arbitration." In Title VII cases, however, the federal courts maintained the position that "Title VII is different." As the Eighth Circuit Court put it in Swenson v. Management Recruiters Int'l, Inc. (1988), "arbitration is unable to pay sufficient attention to the transcendent public interest in the enforcement of Title VII."
In 1991, the Supreme Court appeared to shift course somewhat in Gilmer v.Interstate/Johnson Lane Corp. (1991) when it ruled that employees could be required to arbitrate claims brought under the Age Discrimination in Employment Act of 1967. The Court noted that the Gardner ruling involved a collective bargaining agreement compelling arbitration, rather than Gilmer's individual agreement. It further said individual agreements to arbitrate should be considered valid, unless Congress itself clearly intended to require judicial remedies exclusively for statutory claims. After Gilmer,courts then had to consider whether Congress intended to ban all forms of arbitration requirements, or only some, by paying close attention to the legislative history of the law-making process.
As it happened, in 1991 Congress enacted the Civil Rights Act of 1991, extending the Civil Rights Act of 1964, and for the first time dealt directly withthe issue of compulsory arbitration of Title VII claims. The main purpose ofthe new law was to overrule a series of 1989 Supreme Court decisions which had made discrimination claims more difficult, but in Section 118, it also saidthat "where appropriate and to the extent authorized by law," parties to Title VII suits could choose alternative dispute resolution vehicles, includingarbitration. Subsequently, the Ninth Circuit Court of Appeals held that discrimination claimants could not be required to submit to arbitration of their claims if they did not "knowingly" agree to do so, and also held that if theydid agree to arbitration, they were then bound by the arbitrator's decision.However, no court had yet considered the issues presented by Duffield.
Tonyja Duffield was hired in 1998 as a broker-dealer in the securities industry. Before she could be hired, her employer, Robertson, Stephens and Companyrequired her to agree to arbitrate all "employment related" disputes, ratherthan to take them to court. This requirement was mandated of all employers throughout the securities industry by both the New York Stock Exchange and theNational Association of Securities Dealers; the relevant document new employees had to sign was known as Form U-4. In 1995, Duffield brought suit againsther employer, alleging sexual discrimination and sexual harassment in violation of Title VII of the Civil Rights Act of 1964, as amended.
In district court, Duffield made five specific arguments against the securities industry's use of Form U-4, but preceded those arguments by requesting thecourt to rule against compulsory arbitration. Robertson Stephens asked the court to force her to go to arbitration. The court rejected all her argumentsand denied her motion to rule against compulsory arbitration, then granted Robertson Stephens' motion--but instead of issuing a final judgment, the courtsent the case to the circuit court of appeals.
Writing for the unanimous court, Judge Reinhardt ruled in favor of Duffield'srequest for a declaratory judgment against compulsory arbitration--a requestsupported in a "friend of the court" brief filed by the Equal Employment Opportunity Commission, among others. Judge Reinhardt noted that according to the Gilmer decision, the burden of proof was on Duffield to show that the legislative history of the 1991 Civil Rights Act demonstrated Congress' intention to preclude enforcement of compulsory arbitration agreements in TitleVII cases, and then the judge proceeded to use the Gilmer test to support Gardner. His examination of the 1991 Civil Rights Act's legislative history was systematic and thorough.
Legislative History
The critical language of the act is found in Section 118, which states that parties to Title VII disputes could, "[w]here appropriate and to the extent authorized by law," choose to pursue other methods of resolving them, includingarbitration. Robertson Stephens argued that this language shows congressional intent to allow, even encourage, the kind of process represented by Form U-4. The firm also argued that by the time the Civil Rights Act of 1991 was passed, compulsory arbitration was already "authorized by law," namely, by the Gilmer case.
Judge Reinhardt remarked that this reading of Section 118 conflicts with Congress' directive to read Title VII broadly, and to choose the interpretation of the law which "most effectively advances" the underlying Congressional purpose. And when Congress "encourages" arbitration, we must read that word in the light of the "provisions of the whole law . . . [i]t would seem entirely disingenuous to fasten on that one word and conclude that Congress was boundlessly in favor of all forms of arbitration." Read in the light of Congress' objectives in the 1991 act, the words "where appropriate" point to whatever forum for dispute resolution the victims of discrimination find desirable, ratherthan to an unwanted forum forced on them.
Section 118's other critical statutory phrase, "to the extent authorized by law," most likely codifies the "law" as Congress understood it at the time-- and, Judge Reinhardt pointed out, the "overwhelming weight of the law" was that "compulsory agreements to arbitrate Title VII claims were unenforceable." Such agreements were not "authorized by law." As of the time Section 118 was reported out of the congressional committee which drafted the bill, circuit courts "without exception, had `widely interpreted' Title VII as prohibiting `any form of compulsory arbitration.'"
Through the Looking Glass
The Supreme Court's decision in the Gilmer case was handed down just before the Civil Rights Act of 1991 was passed. The judge conceded that the decisions in Gilmer and Gardner may not coincide with Congress' intend as written "to the extent authorized by law." But, "even a cursory glance" at Section 118's legislative history makes it clear that Congress "in noway intended to incorporate" Gilmer's holding into Title VII. In fact, in reporting the bill to the House of Representatives, the House Committee on Education and Labor unambiguously said that "[t]his view is consistent with the Supreme Court's interpretation of Title VII in Alexander v. Gardner-Denver Co." Not only that, Congress specifically rejected a proposal allowing employers to enforce compulsory arbitration agreements, and "it did so in the most emphatic terms," concluding with the phrase, "American workers should notbe forced to choose between their jobs and their civil rights." Further, thechairman of the reporting committee, Congressman Edwards, said "No approval whatsoever is intended of the Supreme Court's recent decision in Gilmer. . . . " Judge Reinhardt concluded that "it is the unusual force and clarityof the statute's legislative history that is ultimately dispositive in thiscase."
But in response, the securities firm urged the court to ignore the legislative history and conclude that Section 118 must be read as adopting Gilmer. Its view was that "to the extent authorized by law" was merely an elasticphrase which contracted and expanded with the ebb and flow of court decisions. Reinhardt said the defendant's interpretation meant that Section 118, "without a single word being changed, nevertheless was instantaneously transmogrified, and took on exactly the opposite meaning," on the day Gilmer wasannounced, and he rejected it. "Any such `through the looking glass' construction would entail a gross perversion of the legislative process."
In the end, Reinhardt said, the Gilmer requirement that such court decisions must be based on statutory language and legislative history is "the most compelling reason" to reject the view of Robertson, Stephens & Co. Thelegislative history of the Civil Rights Act of 1991 makes it "absolutely clear" that Congress intended to codify the Gardner approach--that is, toannounce that Gardner was the law governing compulsory arbitration inTitle VII cases. In the light of this, Reinhardt held that Form U-4 is unenforceable.
The Controversy Continues
Despite Gilmer's mandate to carefully examine legislative history andJudge Reinhardt's thorough and persuasive reading of the Civil Rights Act of1991, on 8 June 1998 the Third Circuit sharply differed from the rationale discussed above. In Seus v. John Nuveen & Co., a Pennsylvania district court had held that the Form U-4 Seus signed was enforceable under the Federal Arbitration Act; she appealed. The Third Circuit noted that "no amount of commentary from individual legislators or committees would justify a courtin reaching the result" that the Ninth Circuit reached, and it further notedthat if the legislative history of Section 118 was binding, then it should beread as having codified Gilmer. The Supreme Court has granted certiorari in Wright v. Universal Maritime Service Corp., and SupremeCourt watchers think the Court in that case will have the opportunity to resolve the conflict.
Related Cases
- Alexander v. Gardner-Denver Co., 415 U.S. 36 (1974).
- Swenson v. Management Recruiters Int'l, Inc., 858 F.2d 1304 (1988).
- Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991).
- Wright v. Universal Maritime Service Corp., 121 F.3d 702 (1997).
- Seus v. John Nuveen & Co., No. 97-1498 (1998).
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