Opinion
No. C-01-3106 WHO, No. C-01-3107 WHO
October 11, 2001
MEMORANDUM DECISION AND ORDER
In these two related cases, petitioner Circuit City Stores, Inc. ("Circuit City") petitions the Court to compel arbitration of employment discrimination claims brought in Superior Court for the County of Alameda ("Superior Court") by the California Department of Fair Employment and Housing ("DFEH") on behalf of respondents Rebecca I. Banyasz ("Banyasz") and Ramona C. Caudillo ("Caudillo") Circuit City also petitions the Court to stay the state court proceedings. For the reasons set forth hereinafter, the petition is denied.
I.
Banyasz and Caudillo allegedly suffered discrimination and harassment while employed by Circuit City. They each filed complaints with the DFEH. The DFEH then filed suit on behalf of Banyasz and Caudillo in the Superior Court, charging Circuit City with unlawful employment practices in violation of the California Fair Housing and Employment Act ("FEHA"). Cal. Gov't Code § 12940. Those cases, DFEH v. Circuit City Stores, Inc. (Rebecca I. Banyasz. Real Party in Interest), No. V-018674-2, and DFEH v. Circuit City Stores, Inc. (Ramona C. Caudillo, Real Party in Interest), No. V-018594-3, are currently pending in the Superior Court.
Following the commencement of the DFEH's lawsuits on behalf of respondents, Circuit City petitioned the Superior Court to compel arbitration pursuant to arbitration agreements respondents had signed when they applied to work at Circuit City, and to stay the state court proceedings in both of the cases. The Superior Court heard both matters, and denied the petitions. (See Reply Mem. Ex. D.) The Superior Court's orders denying Circuit City's petition were entered on August 16, 2000 in Caudillo, and on October 3, 2000 in Banyasz. (Id.) Circuit City filed an application for reconsideration in Caudillo, which the Superior Court denied on October 3, 2000. (Id.) Trial is currently set to begin October 26, 2001 in Caudillo, and November 9, 2001 in Banyasz.
These agreements, which were attached to respondents' Circuit City employment applications, state "I agree that I will settle any and all previously unasserted claims, disputes or controversies arising out of . . . my . . . employment and/or cessation of employment, exclusively by final and binding arbitration before a neutral Arbitrator." (Pet. to Compel Arbitration Ex. B-1.)
II.
Circuit City now petitions this Court to compel arbitration of respondents' claims, pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq., and to stay the two state court cases. The doctrine of res judicata, however, precludes Circuit City from relitigating the issue of compelling arbitration after it had been fully and fairly litigated before the Superior Court. Moreover, even if this Court were to reach the merits of the case, controlling Ninth Circuit authority requires the Court to deny Circuit City's petition.
A.
A federal court must give to 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. Ross v. Alaska, 189 F.3d 1107, 1110 (9th Cir. 1999); see also 28 U.S.C. § 1738. Thus, it is necessary to determine what preclusive effect a California court would give its own order denying a petition to compel arbitration in order to know what effect such an order should be given in this Court.
Under California law, the doctrine of res judicata has two aspects. Brinton v. Bankers Pension Servs., Inc., 76 Cal.App.4th 550, 556, 90 Cal.Rptr.2d 469, 472 (1999). Claim preclusion forbids relitigation of a previously litigated cause of action, while issue preclusion forbids relitigation of an issue necessarily decided in a prior action. Id. (citing Vandenberg v. Superior Court, 21 Cal.4th 815, 828, 88 Cal.Rptr.2d 366, 374 (1999)). In order to apply res judicata to either an entire cause of action or to a particular issue, (1) the claim or issue raised in the present action must be identical to the claim or issue previously litigated; (2) the prior proceeding must have resulted in a final judgment on the merits; and (3) the party against whom the doctrine is being asserted must have been a party or in privity with a party to the prior proceeding. Id. (citing Teitelbaum Furs, Inc. v. Dominion Ins. Co., 58 Cal.2d 601, 604, 25 Cal.Rptr. 559, 560 (1962)).
Circuit City's previous petition to the Superior Court sought to compel arbitration of the DFEH claims and to stay the state court proceedings. That is precisely the subject of Circuit City's petition in this Court. Circuit City argues that it does not seek arbitration of the DFEH claims here, but instead seeks to compel Banyasz and Caudillo to arbitrate their individual claims. Circuit City is apparently drawing a distinction between the DFEH claims for injunctive relief and those claims brought on behalf of Caudillo and Banyasz for monetary damages. Whatever the significance of this distinction, however, all the claims that make up the subject matter of the instant petition were brought by the DFEH in the Superior Court. There is no evidence that either Banyasz or Caudillo is suing Circuit City apart from the lawsuits brought on their behalf by the DFEH. Thus, Circuit City's goal is the arbitration of the same claims that were at issue in the Superior Court, regardless of whom Circuit City chose to name as respondent in this Court.
The Superior Court denied the petitions in both the Banyasz and the Caudillo cases. (Reply Ex. D.) Circuit City, the party against whom res judicata is being asserted, was a party to those proceedings. Thus, the only remaining issue is whether the Superior Court's order was a final judgment on the merits.
In considering precisely this issue, the Third Circuit concluded "that the California Supreme Court would hold that [an] order denying arbitration [is] a final order, and that res judicata applies." Towers, Perrin, Forster Crosby, Inc. v. Brown, 732 F.2d 345, 348 (3d Cir. 1984). The court noted that "[t]here must be a limitation on successive petitions to compel arbitration other than the imagination or willpower of the party seeking arbitration, lest judicial proceedings on the merits be indefinitely delayed." Id. at 349. California cases are in accord. See Wilder v. Whittaker Corp., 169 Cal.App.3d 969, 975, 215 Cal.Rptr. 536, 538 (1985); Lounge-A-Round v. GCM Mills, Inc., 109 Cal.App.3d 190, 198, 166 Cal.Rptr. 920, 925 (1980).
These cases make clear that the Superior Court's order denying Circuit City's petition to compel arbitration and to stay the state court proceedings was a final judgment for purposes of res judicata under California law. Thus, Circuit City is precluded from bringing an identical petition in this Court.
B.
Even if this Court were to reach the merits of the case, controlling Ninth Circuit authority requires the Court to deny Circuit City's petition.
In 1998, the Ninth Circuit held that Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., prohibits an employer from requiring its employees to arbitrate claims brought under Title VII and the FEHA. Duffield v. Robertson Stephens Co., 144 F.3d 1182, 1185 (9th Cir. 1998). Duffield remains controlling authority in the Ninth Circuit despite the United States Supreme Court's recent decision in Circuit City Stores, Inc. v. Adams, 121 S.Ct. 1302 (2001).
In Circuit City, the Supreme Court overruled the Ninth Circuit's holding in Craft v. Campbell Soup Co., 177 F.3d 1083 (9th Cir. 1999), that labor and employment contracts are entirely outside the scope of the FAA. Id. at 1092. The Supreme Court determined that employment contracts are within the scope of the FAA, except for employment contracts of transportation workers. Circuit City, 121 S.Ct. at 1306. The Court did not address, however, the effect of Title VII on the enforceability of employment agreements requiring mandatory arbitration of FEHA claims, because that issue was not before the Court.
The Supreme Court did state that "[t]he Court has been quite specific in holding that arbitration agreements can be enforced under the FAA without contravening the policies of congressional enactments giving employees specific protection against discrimination prohibited by federal law[.]" Id. at 1313 (citing Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26 (1991)). That statement, however, was made in the context of ruling that employment agreements are not outside the scope of the FAA. The specific holding of Duffield — that Title VII prohibits the mandatory arbitration of Title VII and FEHA claims — was simply not at issue in Circuit City. Importantly, the Supreme Court did not order the case to arbitration, but instead reversed the Ninth Circuit's holding that employment contracts are not within the scope of the FAA, and remanded the case to the Ninth Circuit for further proceedings. Id.
Circuit City argues that even if Duffield is still good law, it is only controlling with respect to federal Title VII claims, and that the court's references to FEHA claims are dicta. Circuit City urges this Court to follow the California Supreme Court's ruling in Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal.4th 83, 90, 93-99 Cal.Rptr. 745, 750 (2000), that Title VII does not preclude enforcement of mandatory employment agreements requiring arbitration of employment discrimination claims brought under Title VII or the FEHA.
It is true that Duffield's discussion of FEHA claims is almost nonexistent and that most of its analysis addresses Title VII claims. Duffield simply states in a footnote that "[b]ecause `[p]arallel state anti-discrimination laws are explicitly made part of Title VII's enforcement scheme,' FEHA claims are arbitrable to the same extent as Title VII claims." 144 F.3d at 1187 n. 3 (quoting Prudential Ins. Co. v. Lai, 42 F.3d 1299, 1303 n. 1 (9th Cir. 1994)). The Ninth Circuit nonetheless did bar arbitration of both the Title VII and the FEHA claims. Id. at 1202-03. Moreover, although the FEHA is a California statute, Duffield's holding with respect to both Title VII and FEHA claims is an interpretation of federal law. Thus, this Court must follow it, rather than the California Supreme Court's contrary view of the effect of Title VII upon arbitration of FEHA claims.
The Ninth Circuit's decision in Duffield is undeniably in tension with the decisions of many other courts. See, e.g., Seus v. John Nuveen Co., 146 F.3d 175, 182 (3d Cir. 1998); Koveleskie v. SBC Capital Mkts., Inc., 167 F.3d 361, 365 (7th Cir. 1999); Desiderio v. National Ass'n of Sec. Dealers, Inc., 191 F.3d 198, 205 (2d Cir. 1999); Rosenberg v. Merrill Lynch, Pierce, Fenner Smith, Inc., 170 F.3d 1, 11 (1st Cir. 1999); Armendariz, 24 Cal.4th at 90, 99 Cal.Rptr. at 750. Despite these many conflicting authorities, however, Duffield remains controlling authority on this Court. Therefore, even if the Superior Court's prior judgment is disregarded, Circuit City's petition to compel arbitration of respondents' FEHA claims is denied.
III.
Accordingly,
IT IS HEREBY ORDERED that Circuit City's petition to compel arbitration and to stay the state court proceedings is DENIED.