Stephens & Co. Duffield v. Robertson

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 ruling appeared 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 all private and public employers. Congress delegated enforcement powers both to the Civil Rights Division of the Justice Department and to the newly created Equal Employment Opportunity Commission, but Congress also expected federal courts to play a major role in advancing the act's goal of deterring workplace discrimination 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 of Title 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 circuit courts steadfastly refused to enforce any agreements that required employees to 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 with the issue of compulsory arbitration of Title VII claims. The main purpose of the 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 said that "where appropriate and to the extent authorized by law," parties to Title VII suits could choose alternative dispute resolution vehicles, including arbitration. 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 they did 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 Company required her to agree to arbitrate all "employment related" disputes, rather than to take them to court. This requirement was mandated of all employers throughout the securities industry by both the New York Stock Exchange and the National Association of Securities Dealers; the relevant document new employees had to sign was known as Form U-4. In 1995, Duffield brought suit against her 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 the court to rule against compulsory arbitration. Robertson Stephens asked the court to force her to go to arbitration. The court rejected all her arguments and denied her motion to rule against compulsory arbitration, then granted Robertson Stephens' motion--but instead of issuing a final judgment, the court sent the case to the circuit court of appeals.

Writing for the unanimous court, Judge Reinhardt ruled in favor of Duffield's request for a declaratory judgment against compulsory arbitration--a request supported 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 Title VII 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.