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- This matter is before the Court on the parties'
cross-motions for summary judgment: specifically, the Motion for
Partial Summary Judgment of Plaintiff Equal Employment
Opportunity Commission ("EEOC") filed on August 25, 2000,
and the Motion for Summary Judgment of Defendant Luce, Forward,
Hamilton & Scripps, LLP ("LFHS") filed on October 6,
2000. For the reasons stated and in the manner stated herein,
Plaintiff's Motion for Partial Summary Judgment is hereby GRANTED
IN PART AND DENIED IN PART, and Defendant's Motion for Summary
Judgment is hereby GRANTED IN PART AND DENIED IN PART.
The parties agree that the
relevant facts in this case are undisputed. In September 1997,
Donald Lagatree applied for and was offered a full-time legal
secretary position with the LFHS. Lagatree was asked to report to
work on September 16, 1997. On that day, Lagatree was presented with
an offer letter1 which set forth the terms and conditions
of his employment, "should [he] accept." The offer letter
also contained an arbitration clause. Under this provision, Lagatree
would agree to submit all "claims arising from or related to
[his] employment or termination of [his] employment" to binding
arbitration under the Federal Arbitration Act, 9 U.S.C. § 1 et.
seq.
- On September 18, 1997, Lagatree informed the
Defendant that he thought the arbitration clause was
"unfair" and that he would not sign the offer letter.
Defendant terminated Lagatree's conditional employment.2
- On or about February 13, 1998, Lagatree filed
an action in the Los Angeles Superior Court against the Defendant
("the prior action"). Lagatree's Complaint in the prior
action alleged that he was wrongfully terminated in violation of
public policy for refusing to waive his constitutional rights to a
jury trial and a judicial forum. Lagatree also asserted that his
discharge violated the California Unfair Competition Law, Cal. Bus.
& Prof. Code §§ 17200-17209, and Cal. Civ. Code §1668, which
prohibit parties from contracting away liability for fraudulent,
intentional, or negligent violations of statutory law. Lagatree
sought lost wages, damages for emotional distress, and punitive
damages.
- The trial court in the state court action
sustained the Defendant's demurrer, agreeing that Defendant did not
violate public policy by discharging employees who refused to sign
pre-dispute arbitration agreements as a condition of employment. The
Court of Appeals affirmed the lower court's holding.3
That Court reasoned that in order for Lagatree's termination to be
wrongful, the right underlying Lagatree's wrongful termination claim
must be one that could not be bargained away or circumvented by
agreement. The Court concluded, however, that an individual's
constitutional right to a jury trial and a judicial forum for the
resolution of disputes are rights that are subject to waiver. The
California Supreme Court denied review.
- The EEOC brings the present action on behalf of
Lagatree based on the facts set forth above.4 The EEOC's
Complaint alleges that Defendant engaged in unlawful retaliatory
activity when Defendant failed to hire Lagatree in violation of §704(a)
of Title VII, §4(d) of the Age Discrimination in Employment Act, §503(a)
of the Americans with Disability Act, and §15(a)(5) of the Equal
Pay Act. The EEOC seeks lost wages, lost benefits, and damages for
emotional distress on Lagatree's behalf. The EEOC also asks this
Court for punitive damages as well as a permanent injunction on
behalf of the public interest precluding Defendant from conditioning
employment on a prospective employee agreeing to arbitrate all and
any future claims against the Defendant.5
II. Summary Judgment Standard
- Summary judgment is proper only when "the
pleadings, depositions, answers to interrogatories, and admissions
on file, together with the affidavits, if any, show that there are
no issues as to any material fact and that the moving party is
entitled to judgment as a matter of law." Fed. Rule Civ. Pro.
56(c); see also Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 106 S. Ct. 1348, 89 L.Ed.2d 538 (1986).
- The moving party bears the initial burden of
demonstrating the absence of a genuine issue of material fact. Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct. 2505, 91
L.Ed.2d 202 (1986). Whether a fact is material is determined by
looking to the governing substantive law; if the fact may affect the
outcome, it is material. Id. at 248, 106 S.Ct. 2505.
- If the moving party meets its initial burden,
the "adverse party may not rest upon the mere allegations or
denials of the adverse party's pleadings, but the adverse party's
response, by affidavits or as otherwise provided in this rule, must
set forth specific facts showing that there is a genuine issue for
trial." Fed. R. Civ. P. 56(e). Mere disagreement or the bald
assertion that a genuine issue of material fact exists does not
preclude the use of summary judgment. Harper v. Wallingford,
877 F.2d 728 (9th Cir. 1989).
- The Court construes all evidence and reasonable
inferences drawn therefrom in the light most favorable to the
non-moving party. Anderson, 477 U.S. at 255; Brookside
Assocs. v. Rifkin, 49 F.3d 490, 492_93 (9th Cir.1995).
III. Res Judicata and Collateral
Estoppel
(Claim Preclusion and Issue Preclusion)
- Defendant argues that the EEOC's action is
barred because of Lagatree's prior state court litigation against
Defendant. In that litigation, Plaintiff asserted wrongful discharge
in violation of public policy based on his constitutional right to a
jury trial and a judicial forum for the resolution of disputes.
A. Standards
- Defendant correctly noted that federal courts
must give a state court judgment the same preclusive effect as would
be given that judgment under the law of the state in which the
judgment was rendered. See Migra v. Warren City School Dist. Bd.
of Ed., 465 U.S. 75, 104 S. Ct.892 (1984).
- Under California law, res judicata, or
claim preclusion, bars relitigation of a claim when a prior action
adjudicated 1) the same claim, 2) resulted in a final judgment on
the merits, and 3) the party against whom the claim is asserted was
a party to or was in privity with a party to the prior action. Cal
State Auto Ins. Ass'n v. Superior Court, 50 Cal. 3d 658, 268
Cal. Rptr. 284 (1990); Clemmer v. Hartford Ins. Co., 22 Cal.
3d 865, 151 Cal. Rptr. 285 (1978); Victa v. Merle Norman
Cosmetics, Inc., 19 Cal. App. 4th 454, 24 Cal. Rptr. 2d 117
(1994).
- Collateral estoppel precludes a party from
relitigating an issue that was litigated and decided in a prior
proceeding when 1) the issue sought to be precluded is identical to
that decided in the former proceeding, 2) the issue was actually
litigated, 3) the issue was necessarily decided, 4) there was a
final judgment on the merits, and 5) the party was the same as, or
was in privity with, a party to the prior proceeding. Gikas v.
Zolin, 6 Cal. 4th 841, 151 Cal. Rptr. 2d 500 (1993).
B. Res Judicata
- The Parties Agree that the Prior
Action Resulted in a Final Judgment on the Merits.
In its Opposition to LFHS's
Motion, the EEOC concedes that the prior action resulted in a final
judgment on the merits.6
- The Claim Asserted
In the Present Action on Behalf of Lagatree in his Individual
Capacity Is Identical to the Claim Asserted in the Prior Action.
- The EEOC's claims on behalf of
Lagatree in the present action are identical to the claims presented
in the prior action, even though these claims are based on wholly
different legal theories. California follows the "primary
right" theory of what constitutes a cause of action. Under this
theory, a claim, or "cause of action" is based on the harm
suffered, not the particular theory asserted by the litigant. Peiser
v. Mettler, 50 Cal. 2d 594 (1958). The primary rights theory
provides that a "cause of action" is comprised of a
"primary right" of the plaintiff, a corresponding
"primary duty" of the defendant, and a wrongful act by the
defendant constituting a breach of that duty. Crowley v. Katleman,
8 Cal. 4th 666, 34 Cal. Rptr. 2d 386 (1994). The violation of a
single primary right gives rise to but a single cause of action. Id.
As far as its content is concerned, the primary right is simply the
plaintiff's right to be free from the particular injury suffered. Id.
"Even where there are multiple legal theories upon which
recovery might be predicated, one injury gives rise to only one
claim for relief." Id. at 668-69. The primary right
theory applies when a previous action has resulted in a final
judgment on the merits and a defendant in a second action asserts
that the second action is precluded under the principles of res
judicata. Id.
California courts, in determining
whether the primary right at issue is the same in two actions, have
focused on both the nature of the dispute and the nature of the
damages sought.
In focusing on the nature of the
dispute, a California appellate court held that the same primary
rights were implicated in two separate actions where both actions
were brought to resolve the disputes between the parties about the
public's right of access to a disputed tract of land. Citizens
For Open Access to Sand and Tide, Inc. v. Seadrift Ass'n, 60
Cal. App. 4th 1053 (1998) (so holding despite the two actions were
premised on wholly different legal theories). See also Weikel
v. TCW Realty Fund II Holding Co., 55 Cal. App. 4th 1234 (1997)
(holding that all claims regarding validity and scope of an easement
involved the same primary right asserted in a prior action).
Similarly, in Johnson v. American Airlines, 157 Cal. App. 3d
427 (1984),7 the court held that a flight attendant's
claims for sex discrimination were barred by an earlier class action
consent decree, notwithstanding the fact that the flight attendant's
claims were premised on different legal theories. The court held
that the primary right allegedly violated was the right to be free
from employment sex discrimination in the employer's application of
an involuntary maternity leave policy. Id.
- In focusing on the nature of the harm alleged,
a California appellate court held that a federal discrimination
claim and a state breach of employment contract claim were based on
the same primary right because the harm alleged in both instances
was being rejected for a job. Balasubramanian v. San Diego
Community College, 80 Cal. App. 4th 977 (2000).
- Still focusing on the nature of the harm
alleged, in Agarwal v. Johnson, 25 Cal. 3d 932, 160 Cal. Rptr.
14 (1979), the court held that different primary rights were
implicated in a class action suit under federal civil rights laws
and a subsequent individual suit based on defamation and intentional
infliction of emotional distress. The court reasoned that the
subsequent action sought damages that were distinct from the class
action suit. The court also noted that even though the two actions
were based on the same facts, it did not necessarily follow that the
same primary right was implicated. Accord, Craig v. County
of Los Angeles, 221 Cal. App. 3d 1294 (1990) (holding that where
the previous action sought only reinstatement, a subsequent action
for damages involved a different primary right). See also Acusa
v. Regents of University of California, 56 Cal. App. 4th 639
(1997) (finding that claims under state discrimination law were
based on the same primary right as were claims under federal
discrimination law).
Here, the claims asserted in the
prior action were based on wrongful termination in violation of
public policy based on Lagatree's constitutional right to a jury
trial and a judicial forum for the resolution of disputes. Lagatree
unsuccessfully sought front and back pay, damages for emotional
distress and punitive damages. The primary right
Lagatree sought to protect was his ability to begin his employment
with LFHS without being required to agree to arbitrate any future
employment disputes. The primary duty LFHS is alleged to have
breached is the duty to refrain from impermissibly rejecting
applicants who refuse to enter into its mandatory arbitration
agreement.
- In the present action, the EEOC asserts claims
on behalf of Lagatree based on unlawful retaliation. This legal
theory is different from that asserted in the prior action. However,
under this theory, the EEOC seeks lost wages and damages for
emotional distress on behalf of Lagatree. These damages are exactly
the same damages sought in the prior action. The primary
right Lagatree seeks to protect in the present action is his ability
to begin his employment with LFHS without being required to agree to
arbitrate any and all claims arising from and related to Lagatree's
employment with LFHS. This is precisely the same primary right
Lagatree sought to vindicate in the prior action. The primary duty
LFHS is alleged to have breached is the duty to refrain from
impermissibly refusing to hire applicants who will not enter into
its mandatory arbitration agreement. This is precisely the same
primary duty LFHS is alleged to have breached in the prior action.
Accordingly, the EEOC, on behalf of Lagatree, is impermissibly
attempting to assert the same claims as Lagatree asserted in the
prior action.
Summary judgment in favor of
Defendant is hereby granted to the extent the claims asserted in the
Complaint seek monetary relief.
- The EEOC Is in Privity with
Lagatree and the Present Action is Barred to the Extent it
Asserts Claims on Behalf of Lagatree in his Individual Capacity.
- The present action filed by the
EEOC sets forth two distinct types of claims and seeks two distinct
types of remedies. On the one hand, the EEOC asserts claims for
damages on behalf of the individual Lagatree, who it contends was
injured by LFHS's unlawful retaliation. On the other hand, the EEOC
seeks injunctive relief, on behalf of Lagatree and the public, and
requests that LFHS be enjoined from conditioning employment on a
prospective employee agreeing to arbitrate future employment claims
against LFHS. A brief review of the EEOC's role in enforcing the
nation's antidiscrimination laws, as well as a review of relevant
case law, leads the Court to the conclusion that the EEOC is in
privity with Lagatree as to his individual claims, but not as to its
claim for injunctive relief.
a) The EEOC's Enforcement Role
- The EEOC has enforcement power over Title VII
of the Civil Rights Act of 1964, as amended ("Title VII"),
Age Discrimination In Employment Act ("ADEA"), and the
Americans with Disabilities Act ("the ADA"), and the Equal
Pay Act ("EPA").
- Title VII itself imposes or allows very few
limitations on the EEOC's power to sue in federal court to
eliminate, for the public benefit, unlawful employment
discrimination. Under Title VII and the ADA,8 once an
individual files a charge alleging unlawful employment practices,
the EEOC must investigate the charge and determine whether there is
"reasonable cause" to believe that it is true. See
42 U.S.C. § 2000e_5(b). By filing a charge, an individual does not
file a complaint seeking relief, but merely informs the EEOC of
possible discrimination. See EEOC v. Shell Oil Co., 466 U.S.
54, 68, 104 S. Ct. 1621 (1984). If the EEOC finds reasonable cause
to believe discrimination occurred, it must "endeavor to
eliminate any such alleged unlawful employment practice by informal
methods of conference, conciliation, and persuasion." Id. at
88. If the EEOC cannot secure an acceptable conciliation
agreement from the employer, it may bring a civil action against a
private employer. 42 U.S.C. § 2000e_5(f). If the court agrees with
the EEOC that the employer has intentionally engaged in unlawful
discrimination, the court may order injunctive relief and such
remedies as the reinstatement or hiring of employees, back pay, and
compensatory and punitive damages. See 42 U.S.C. § § 1981a(a)(1),
2000e_5(g)(1). During the first 180 days after the filing of a
charge of discrimination, the EEOC retains "exclusive"
jurisdiction over the subject matter of that charge. General Tel.
Co. v. EEOC, 446 U.S. 318, 100 S.Ct. 1698 (1980).
- b) Case Law Regarding the EEOC's Role in
Seeking Relief on Behalf of Individual Aggrieved Parties
- 1) Claims for Individual Relief
The Third Circuit has held that where
individuals sued their employer for age discrimination based on an
employer's requirement that they sign waivers as a condition of
receiving more favorable retirement pensions, the EEOC was precluded
from asserting claims on behalf of these individuals because the EEOC
was in privity with these individuals. EEOC v. United States Steel,
921 F.2d 489 (3d Cir. 1990).
- Similarly, applying United States Steel,
the Seventh Circuit has held that the EEOC is in privity with the
employee for whom it seeks individual benefits. EEOC v. Harris
Chernin, Inc., 10 F.3d 1286 (7th Cir. 1993). In Harris Cherin,
the Court held that principles of res judicata precluded the
EEOC from seeking monetary relief and reinstatement on behalf of the
employee who unsuccessfully asserted a similar claim against his
employer in a previous action. Id.
The Court finds that the facts of
this case parallel those in United States Steel and Harris
Chernin. Accordingly, the Court holds that the EEOC was in
privity with Lagatree with respect to the claims for individual
relief.
Cases cited by the EEOC in support
of its contention that it was not in privity with Lagatree do not
convince the Court that a contrary holding is appropriate. The EEOC
relies on Victa v. Merle Norman Cosmetics, Inc., 19 Cal. App.
4th 454, 24 Cal. Rptr.2d 117 (1994); EEOC v. Frank's Nursery and
Crafts, 177 F.3d 448 (6th Cir. 1999); and Betchel Petroleum
v. Webster, 796 F.2d 252 (9th Cir. 1986).
- In Victa, the court held that a prior
suit by the EEOC asserting federal claims did not bar the
plaintiff's state law claims because the parties were not in privity.
Id. (noting that the EEOC did not have standing to assert the
plaintiff's state law claims). The Court based its decision on the
enforcement structure of the Age Discrimination in Employment Act
("ADEA"), and reasoned that it was the intent of Congress
in enacting the ADEA that the EEOC not be in privity with the
aggrieved individual. In the present case, Lagatree, not the EEOC
sued first. Therefore, the Victa's court concerns regarding
the employee's lack of control over the EEOC proceedings are not
applicable here.
In Franks Nursery, the
Sixth Circuit held that an employee's arbitration agreement did not
bar the EEOC from asserting Title VII claims on her behalf; however,
the court found that res judicata principles were
inapplicable and therefore Franks Nursery was not decided on
privity grounds. Instead, the court reasoned that the individual had
no authority to bind the EEOC to arbitration; therefore, the EEOC
was not precluded from asserting claims on the employee's behalf.
This case does not support the EEOC's argument that it was not in
privity with Lagatree.
- In Betchel Petroleum, the Ninth Circuit
held that the Secretary of Labor, by virtue of his suit for
injunctive relief, was not in privity with employees who later
sought damages for violations of state wage and hour laws. The Ninth
Circuit reasoned that the interests of the Secretary did not
significantly overlap with the aggrieved parties and that the
Secretary is not authorized to sue for damages on behalf of
individual aggrieved employees. Here, however, the interests of
Lagatree are aligned with the EEOC, and the EEOC is authorized to
sue for damages on behalf of individual aggrieved employees. This
case does not support the EEOC's argument that it was not in privity
with Lagatree.
- 2) Claims for Injunctive Relief
Although the EEOC is in privity with
Lagatree with respect to the claims for individual relief on behalf of
Lagatree, the same is not true for the EEOC's claims for injunctive
relief pursuant to its duty to vindicate the public's interest in
preventing employment discrimination.
The EEOC's enforcement powers are
intended to supplement, rather than to supplant, an aggrieved
indivdual's right to maintain a private action under Title VII. General
Telephone Co. v. EEOC, 446 U.S. 318, 100 S. Ct. 1698 (1980). The
EEOC is not merely a proxy for individual victims of discrimination;
rather, the EEOC is guided by "the overriding public interest in
equal employment opportunity . . . asserted through direct Federal
enforcement." Id. at 326 (internal citations and quotation
marks omitted). When the EEOC acts, although at the request of and for
the benefit of specific individuals, it acts to "vindicate
the public interest in preventing employment discrimination." Id.
at 318.
- In this case, therefore, the EEOC fulfills two
separate roles: First, it seeks monetary relief on behalf of
Lagatree for alleged retaliation against him in an individual
capacity, and second, it seeks injunctive relief in its role to
protect the public interest in preventing employment discrimination.
Courts across the nation are in agreement that the EEOC may pursue
an action for injunctive relief even when the employee on whose
behalf the injunction is sought is precluded from seeking further
relief.
- The Ninth Circuit has held that the EEOC's
right of action seeking to vindicate the public's interest is
independent of an employee's private action rights. EEOC v.
Goodyear Aerospace Corp., 813 F.2d 1539 (9th Cir. 1987). In Goodyear,
the Ninth Circuit held that an employee's settlement agreement with
her employer did not preclude the EEOC's subsequent action against
the employer seeking injunctive relief.9 Id. The Goodyear
court quoted General Telephone, 446 U.S. at 326: "The
EEOC 'is not merely a proxy for victims of discrimination,' but
'acts also to vindicate the public interest in preventing employment
discrimination.'" Goodyear, 813 F.2d at 1542.
Significantly, the Goodyear court also noted:
"Recognizing that the EEOC sues to vindicate the public
interest, two circuits [the Fifth and the Sixth] have held that res
judicata principles do not bar the EEOC from bringing an action
against an employer even after its employees have settled their
private claims." Id. at 1542-43 (citations omitted).
- Other Circuits have joined in this holding
subsequent to Goodyear. The Second Circuit has noted that
"[C]ircuit courts have uniformly held that the EEOC may not
seek monetary relief in the name of an employee who has waived,
settled, or previously litigated the claim." EEOC v. Kidder,
Peabody & Co., Inc., 156 F.3d 298, 301 (1998) (holding that
arbitration agreement between the employee and employer precluded
EEOC from seeking monetary relief on behalf of employee but not
injunctive relief).
- The Seventh Circuit has held that although the
EEOC was precluded from asserting a claim for individual monetary
and injunctive relief by principles of res judicata, the EEOC
was not precluded from seeking an injunction against further
violations. EEOC v. Harris Chernin, Inc., 10 F.3d 1286 (7th
Cir. 1993).
- Accordingly, the Court holds that the EEOC is
not barred by res judicata10 from pursuing its
claims for injunctive relief.11
IV. Injunctive Relief Is Appropriate
- The EEOC argues that LFHS should be enjoined
from requiring its employees to enter into mandatory arbitration
agreements because this requirement is unlawful under federal civil
rights laws. The EEOC alleges that LFHS unlawfully retaliated
against Lagatree for his refusal to sign the arbitration agreement.
For its part, LFHS argues that requiring its employees to enter into
mandatory arbitration agreements is not unlawful, that Ninth Circuit
authority regarding mandatory arbitration agreements is wrongly
decided, that California law specifically allows employers to
require employees to agree to arbitrate any claims against the
employers, and that, in any event, LFHS did not unlawfully retaliate
against Lagatree.
- A brief review of relevant case law is in
order.
A. Relevant Case Law
- The United States Supreme Court's
Decisions Regarding Mandatory Arbitration Agreements in
Employment — Gilmer, Alexander, and Circuit
City
- In Alexander v. Gardner-Denver, the
court held that a plaintiff was not precluded from filing a Title
VII lawsuit against his employer by having earlier submitted his
claim to final arbitration under a collective bargaining agreement. Alexander
v. Gardner-Denver Co., 415 U.S. 36, 94 S. Ct. 1011 (1974). In so
holding, the court noted the distinctly separate nature of the
contractual and statutory rights. Id. at 50, 94 S. Ct. 1020.
The court determined that the arbitration process was intended to
address the employee's contractual rights under the collective
bargaining agreement but not the affected employee's statutory
rights. Id. at 49-50, 94 S. Ct. 1020-1021. The court noted
that the union may waive certain types of statutory rights that are
related to "collective activity" such as the right to
strike. Id. at 51, 94 S. Ct. 1021. However, because Title VII
"stands on plainly different ground"; it concerns not
majoritarian processes, but an individual's right to equal
employment opportunities. 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 circumstance, an employee's rights under Title
VII are not susceptible of prospective waiver." Id. at
51, 94 S. Ct. 1021. Prior to Gilmer, courts often cited to Gardner-Denver
for the proposition that mandatory arbitration agreements were
unenforceable.
- Seventeen years later, the Supreme Court
decided Gilmer v. Interstate/Johson Lane Corp. In Gilmer,
the court held that an agreement to arbitrate a statutory claim is
generally enforceable. Gilmer v. Interstate/Johson Lane
Corp., 500 U.S. 20, 111 S. Ct. 1647 (1991). This case appears to
be a departure from the earlier Garder-Denver decision.
- In Gilmer, the plaintiff had been
required by his employer to register as a securities representative
with the New York Stock Exchange. The registration application
contained an agreement to arbitrate "any dispute, claim or
controversy . . . arising between him and his employer" that is
required to be arbitrated under the rules of the NYSE. Id. at
23, 111 S. Ct. 1650-51. The NYSE rules required arbitration of any
controversy between a registered representative and any member or
member organization arising out of the employment or termination of
employment of such registered representative. The plaintiff in Gilmer
alleged that he was discharged in violation of the Age
Discrimination Act of 1967 (ADEA). The employer moved to compel
arbitration.
- The Supreme Court first noted the "liberal
federal policy favoring arbitration." Id. at 24, 111 S.
Ct. 1651. The court then considered the statutory claims made the
subject of the arbitration agreement. The court stated that
"having made the bargain to arbitrate, the party should be held
to it unless Congress itself has evinced an intention to preclude a
waiver of judicial remedies for the statutory right at issue." Id.
at 26, 111 S. Ct. 1652. Because the court determined that the
arbitration clause was broad enough to encompass statutory claims,
and because the plaintiff had not demonstrated that Congress
intended to preclude the waiver of a judicial forum for the
statutory ADEA claim, the Supreme Court upheld the arbitration
clause.
- The Court distinguished Gilmer from Gardner-Denver:
"[T]here are several important distinctions between the
Gardner-Denver line of cases and the case before us." Id.
at 35, 111 S. Ct. 1657. First, Gardner-Denver did not involve
the enforceability of an agreement to arbitrate statutory claims but
instead raised the issue as to whether arbitration of contract based
claims precluded subsequent judicial resolution of statutory claims.
The court noted that because the plaintiff in Gardner-Denver
had not agreed to arbitrate his statutory claims, the arbitrator was
not allowed to resolve those claims, and thus arbitration in those
cases "understandably was held not to preclude subsequent
statutory actions." Id. Moreover, Gardner-Denver
involved collective bargaining agreements and the union represented
the plaintiff in the drafting of the collective bargaining
agreement. Therefore the tension in Gardner-Denver was
concerning the "tension between collective representation and
individual statutory rights, a concern not applicable in the present
case." Id. Finally , the Gilmer court noted that Gardner-Davis
was not decided under the Federal Arbitration Act
("FAA"), which reflects liberal federal policy favoring
arbitration. Id.
- Although of limited relevance to the present
dispute, in Circuit City Stores, Inc. v. Adams, 194
F.3d 1070 (9th Cir. 1999), an employer sought to compel arbitration
of an employee's claim pursuant to the Federal Arbitration Act
("FAA"). The Ninth Circuit held that the FAA does not
apply to contracts of employment, and reversed the district court's
order compelling arbitration. The United States Supreme Court
granted certiorari on the question of whether the Federal
Arbitration Act, 9 U.S.C. § 1 et seq., applies to contracts of
employment. Circuit City Stores, Inc. v. Adams, __ U.S. __,
120 S.Ct. 2004 (2000). The Circuit City case is currently
pending decision before the Supreme Court.
- The Ninth's Circuit
Interpretation — Duffield
- In Duffield, the Ninth Circuit held
that, under the Civil Rights Act of 1991, employers may not compel
individuals to waive their Title VII right to a judicial forum.
Duffield v. Robertson Stephens & Co., 144 F.3d 1182, 1185
(9th Cir. 1998), cert. denied, 525 U.S. 982, 119 S.Ct. 445
(1998). Contrary to Defendant's argument that Duffield held
only that mandatory arbitration agreements are unenforceable, the
holding of Duffield is broad: "We hold that, under the
Civil Rights Act of 1991, employers may not by [conditioning
employment on the execution of mandatory arbitration agreements]
compel individuals to waive their Title VII right to a judicial
forum." Id.
- The plaintiff in Duffield asserted sex
discrimination and harassment claims under Title VII and the
California Fair Employment and Housing Act ("FEHA"). The
defendant sought to compel arbitration pursuant to an arbitration
clause contained in a Form U-4.12 The plaintiff, however,
argued that the Civil Rights Act of 1991, which amended Title VII,
precluded compulsory arbitration of her discrimination claims. Id.
at 1186.
- The Court agreed with plaintiff and concluded
that the Congress intended to preclude compulsory arbitration
of Title VII claims by passing the Civil Rights Act of 1991. Id.
at 1185. The Court reasoned that this Congressional intent was
demonstrated in the text of the Act, specifically Section 118, and
its legislative history. Id. Section 118 provides that
"[w]here appropriate and to the extent authorized by law, the
use of alternative means of dispute resolutions, including . . .
arbitration is encouraged to resolve disputes arising under the Acts
or provisions of Federal law amended by this Title." Id.
at 1191.
The Duffield court reasoned that the Act's general purpose
was to enlarge the substantive and procedural rights of victims of
employment discrimination. The court noted that Congress mandated
that courts construe Title VII to expand and increase an employee's
rights and the possible remedies available to plaintiffs. Id.
at 1190. The court further reasoned that reading Section 118 as
allowing mandatory arbitration is contrary to the congressional
mandate to expand and increase employees' rights. Moreover, the
court reasoned, Section 118 merely encourages an employee
to voluntarily agree to arbitrate. Id. The court
stated that the restrictive language "where appropriate and to
the extent authorized by law" evinced Congress' intent to
restrict arbitration to those cases in which the employee
voluntarily chooses to do so. Id. at 1193.
- The California Supreme Court's
Answer to Duffield — Armendariz v. Foundation Health
Psychcare Services, Inc.
- The California Supreme Court disagreed with Duffield
and held that Title VII and FEHA claims may be subjected to
mandatory arbitration agreements in Armendariz v. Foundation
Health Psychcare Services Inc., 24 Cal. 4th 83, 99 Cal. Rptr. 2d
745 (2000). In Armendariz, the plaintiff brought
discrimination claims under FEHA and Title VII. As in previous
cases, the defendant sought to compel arbitration pursuant to an
arbitration agreement contained in an employment contract. The
employee objected and argued that the arbitration agreement was
unconscionable and a contract of adhesion. Id. at 92.
The Armenidariz court
began its inquiry by analyzing Duffield. The court
specifically rejected Duffield stating that it found the
reasoning "unpersuasive." Id. at 93. The court did
not agree with the Duffield court's conclusion that Congress,
in enacting Section 118 of the Civil Rights Act of 1991, intended to
ban mandatory arbitration agreements. The court reasoned that if
indeed this was Congress' intent, Congress would have simply stated
it was banning mandatory arbitration of discrimination claims
somewhere in the 1991 Act.13 . Id. at 93-94.
- After making this determination, the court then
looked to the validity of the arbitration agreement. Under
California law, "arbitration agreements are valid, enforceable,
and irrevocable, save upon such grounds as exists at law or in
equity for the revocation of any contract." Id. at 98.
The court proceeded to consider the following issue: "based on
contract principles, are there any reasons for refusing to enforce
the arbitration agreement," and specifically addressed
plaintiff's arguments that the contract was contrary to public
policy and unconscionable. Id. at 99.
- In determining that the agreement was not
contrary to public policy, the court stated that mandatory
arbitration agreements were indeed against public policy if through
arbitration the claimant forfeits certain substantive statutory
rights. Id. at 99-100. However, the court stated that there
was no reason to believe that mandatory arbitration deprived
claimants of the full opportunity to pursue their claims so long as
the process provided claimants a few procedural guarantees:
availability of statutory remedies, no unreasonable costs or
arbitration fees, and written arbitration decisions subject to
judicial review. Id. at 100-103.
- In determining that the contract was
unconscionable and was a contract of adhesion, the court concluded
that the contract lacked mutuality and was one-sided. For example,
the arbitration provision subjected only the employee's, but not the
employer's, claims to arbitration. Id. at 120. The court
stated that "if the arbitration system established by the
employer is indeed fair, then the employer as well as the employee
should be willing to submit claims to arbitration. Without
reasonable justification for this lack of mutuality, arbitration
appears less as a forum for neutral dispute resolution and more as a
means of maximizing employer advantage." Id. at 118.
B. An Employer's Requirement That Employees Agree to Mandatory
Arbitration of Employment Claims Is Unlawful Under Duffield
The Ninth Circuit's holding in Duffield
was unequivocal. Duffield held that an employer's actions
in requiring an employee to sign a pre-dispute mandatory arbitration
agreement is unlawful under Title VII. It is undisputed that LFHS
continues to require its employees to agree to arbitration as a
condition of employment despite the holding of Duffield.
LFHS criticizes Duffield as
being wrongfully decided and notes that Duffield will
eventually be overturned by the Ninth Circuit sitting en banc,
or by the United States Supreme Court. The Court acknowledges that a
great weight of legal authority supports LFHS's argument. See,
e.g., Seus v. John Nuveen & Co., Inc., 146 F.3d 175 (3d Cir.
1998), cert. denied, 525 U.S. 1139, 119 S.Ct. 1028 (1999); Koveleskie
v. SBC Capital Markets, Inc., 167 F.3d 361 (7th Cir.), cert.
denied, __ U.S. __, 120 S. Ct. 44 (1999); Desiderio v. National
Ass'n of Securities Dealers, Inc., 191 F.3d 198 (2d Cir. 1998), pet.
for cert. filed, 68 USLW 3497 (Jan. 31, 2000); Rosenberg v.
Merrill Lynch, Pierce, Fenner & Smith, Inc., 170 F.3d 1 (1st
Cir. 1999). Nevertheless, unless and until that day comes, Duffield
is the law of the Ninth Circuit, and the employment practice of LFHS
that is at issue in this action clearly violates that law.
C. Injunction
- As previously discussed, the EEOC has the power
to seek an injunction on behalf of the public. Under Duffield,
this Court is required to issue an injunction prohibiting LFHS from
requiring its employees to agree to arbitration of their Title VII
claims as a condition of employment and from attempting to enforce
any such previously executed agreements.
- Accordingly, Defendant LFHS is hereby
permanently enjoined from:
- 1) requiring or requesting its employees to
agree to arbitration of their Title VII claims as a condition of
employment; and
- 2) attempting to enforce any such previously
executed agreements to arbitrate Title VII claims.
- Failure to abide by the terms of this
injunction will subject Defendant to contempt sanctions.
- Defendant LFHS's Motion for Summary Judgment is
granted in part and denied in part; Defendant's alternative Motion
for Partial Summary Judgment is denied as moot. Plaintiff EEOC's
Motion for Partial Summary Judgment is granted in part and denied in
part.
- Summary judgment in favor of Defendant is
hereby granted to the extent the claims asserted in the Complaint
seek monetary relief.
DATED this ______ day of November 2000.
____________________________________
FLORENCE-MARIE COOPER, Judge
UNITED STATES DISTRICT COURT
1Lagatree actually worked
for the Defendant two days, from September 16-18, 1997.
2Although it appears to
assert that Lagatree was terminated from his employment after being
hired and working for two days, the EEOC agrees that, for purposes
of the present motions, LFHS did not terminate Lagatree's
employment; rather, it rejected his application. Both such actions
are adverse employment actions under the retaliation provisions of
the federal antidiscrimination statutes.
3Prior to working at LFHS,
Lagatree was employed with the law firm of Kessal, Young, &
Logan ("Kessel Young") for approximately three (3) years.
Lagatree had been terminated, however, when he refused to sign an
arbitration agreement.
- At the same time Lagatree commenced a state
court action against Defendant, Lagatree also sued Kessal Young
alleging the same cause of action. The case against Kessel Young was
similarly dismissed on demurrer. Lagatree appealed in both cases.
The Court of Appeal consolidated Lagatree's case against Kessal
Young and the Defendant for the purposes of appeal. See Lagatree
v. Luce, Forward, Hamilton & Scripps LLP, 74 Cal. App. 4th
1105 (1999).
4On March 4, 1998, Lagatree
filed a charge of discrimination with the EEOC alleging that he had
been terminated in retaliation for refusing to sign the offer
letter.
5LFHS intends to continue
to require its employees, as a condition of employment, to execute a
mandatory arbitration agreement. (Berry Depo. at 21).
6The EEOC states, however,
that it contests that the final judgment entered in the prior action
has any relevancy to the present action.
7Seadrift and Johnson
are to be contrasted with Rothschild v. Tyco Int'l, 83 Cal.
App. 4th 488 (2000). In Rothschild, the court held that an
employee's claims under California's False Claims Act and a
subsequent suit under California's Unfair Competition Law involved
two separate primary rights and two separate types of damages. In
the False Claims Act claim, the plaintiff acted as an arm of the
government to assist in redressing the defendant's wrongful action
of making misrepresentations in claims to the government.
Conversely, in the Unfair Competition Law claim, the plaintiff acted
on behalf of herself and others in asserting the harm resulting from
the defendant's wrongful actions in using substandard parts in water
systems it manufactured.
8The Americans with
Disabilities Act incorporates the enforcement "powers,
remedies, and procedures" of Title VII. 42 U.S.C. § 12117(a)
(incorporating by reference 42 U.S.C. §§ 2000e_4, 2000e_5,
2000e_6, 2000e_8, 2000e_9).
9The Ninth Circuit was not
presented with an issue of res judicata in Goodyear
because the employee and employer entered into a private settlement
agreement instead of litigating the employee's claims; rather, the Goodyear
Court was presented with a mootness issue. Nevertheless, Goodyear
is instructive as to the Ninth Circuit's view on the roles of the
EEOC in vindicating private rights and the public's interest.
The Court finds another "mootness" case instructive as
well. In EEOC v. United Parcel Service, 860 F.2d 372 (1988),
the Tenth Circuit held that the EEOC may challenge an ongoing
discriminatory practice even though the individual plaintiff had
settled his claim with the employer. The Court held that the EEOC's
right of action is more that a "mere" representative suit;
rather, the EEOC's right of action seeks to vindicate public
interests. Id.
10The Court agrees with
Defendant that California courts have been less than clear in
analyzing and distinguishing between the individual elements of res
judicata and collateral estoppel; these elements overlap to a
significant extent. Perhaps for that reason, neither party has
provided a meaningful analysis of the "actually litigated"
or "necessarily decided" elements of collateral estoppel.
Accordingly, the Court has limited its discussion to the elements of
res judicata.
11The EEOC argues that
California's public policy exception to the res judicata bar
should be applied here, citing Consumers Lobby Against Monopolies
v. Public Utilities Comm'n, 25 Cal. 3d 891, 160 Cal. Rptr. 124
(1979). The public policy exception to res judicata applies
when an overriding public policy dictates that a courts should, in
furtherance of that public policy, refuse to apply doctrines of res
judicata. The public policy exception is inappropriate here
because res judicata bars only the EEOC's claims for
individual relief on behalf of Lagatree; the EEOC may still seek
injunctive relief on behalf of the public's interest.
12The plaintiff was a
registered securities industry employee for the New York Stock
Exchange ("NYSE"). The NYSE application form, or the Form
U-4, contained the arbitration clause.
13The California Supreme
Court is not alone in making this determination. Several circuit
courts have likewise rejected Duffield. See Seus v. John
Nuveen & Co., Inc., 146 F.3d 175 (3d Cir. 1998), cert.
denied, 525 U.S. 1139, 119 S.Ct. 1028 (1999); Koveleskie v.
SBC Capital Markets, Inc., 167 F.3d 361 (7th Cir.), cert.
denied, __ U.S. __, 120 S. Ct. 44 (1999); Desiderio v.
National Ass'n of Securities Dealers, Inc., 191 F.3d 198 (2d
Cir. 1998), pet. for cert. filed, 68 USLW 3497 (Jan. 31,
2000); Rosenberg v. Merrill Lynch, Pierce, Fenner & Smith,
Inc., 170 F.3d 1 (1st Cir. 1999)
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