Opinion
No. 1:99-cv-561
May 16, 2000
OPINION AND ORDER ON RESPONDENT/DEFENDANT'S MOTION FOR JUDGMENT ON THE PLEADINGS OR IN THE ALTERNATIVE, FOR SUMMARY JUDGMENT
Julie Shelton was formerly employed by Circuit City Stores, Inc. ("Circuit City"). After Shelton filed a charge of discrimination with the Equal Employment Opportunity Commission ("EEOC"), alleging that she was subjected to employment discrimination in violation of Title VII of the Civil Rights Act of 1964 while employed by Circuit City. The EEOC rendered an administrative determination on Shelton's charge and filed a civil action against the company. That action, EEOC v. Circuit City Stores, Inc., No. 1:99-cv-177 (hereinafter "EEOC v. Circuit City") (W.D.Mich. filed Mar. 8, 1999) remains pending.
Alleging that Shelton previously entered into a written agreement (hereinafter the "Circuit City Dispute Resolution Agreement" or the "agreement") to submit to arbitration any and all claims arising out of her employment with the company, Circuit City filed this civil action against Shelton on July 26, 1999. Circuit City's complaint, styled a "Petition for Order to Compel Arbitration," invokes the provisions of the Federal Arbitration Act, 9 U.S.C. § 1 et seq. ("FAA"). In this action, Circuit City requests that the court (1) order Shelton to submit her claim against the company, as asserted in Shelton's behalf by the EEOC in EEOC v. Circuit City, to arbitration in accordance with the agreement, and (2) enter a declaratory judgment that Shelton is required to arbitrate her claim against Circuit City.
This case is currently before the court on Shelton's Motion for Judgment on the Pleadings or in the Alternative, for Summary Judgment (docket no. 30). The EEOC has filed its concurrence with Shelton's motion (docket no. 29). Circuit City has filed its written opposition to the motion (docket no. 35, styled "Circuit City's Brief in Support of Its Petition to Compel Arbitration").
For the reasons to follow, the court grants Shelton's motion. This action is therefore dismissed with prejudice.
ANALYSIS
In her motion, Shelton asserts three independent grounds for dismissal and/or summary judgment. First, she argues that the Circuit City Dispute Resolution Agreement on which the Petition to Compel Arbitration is based is, for various reasons, unenforceable. Second, she argues that even if the agreement were enforceable, she would be entitled to judgment in her favor because she has not filed and does not intend to file a lawsuit nor to assert any claim against Circuit City. Third, and finally, Shelton argues that she is entitled to judgment as a matter of law because under the law of this Circuit, the EEOC's decision to commence an action against Circuit City does not obligate either the EEOC or Shelton to arbitrate such a claim.
The court need not consider the issues raised by Shelton's first argument, finding the issues raised in her second and third arguments to be dispositive here. Shelton's second argument succeeds based on the language of the agreement itself; while her third argument succeeds based on relevant Circuit law.
The EEOC's concurrence in Shelton's motion is limited to the second and third grounds which Shelton raises.
The Agreement
The Circuit City Dispute Resolution Agreement provides in pertinent part as follows:
Dispute Resolution Agreement — This agreement requires you to arbitrate certain legal disputes related to your application for employment or employment with Circuit City. Circuit City will not consider your application unless this agreement is signed.
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I recognize that differences possibly may arise between Circuit City Stores, Inc. and me during my application or employment with [Circuit City]. I recognize that it is in the interest of both Circuit City and me that disputes be resolved in a manner that is fair, private, expeditious, economical, final, and less burdensome or adversarial than court litigation. Circuit City has an effective Open Door Policy, and I will try to take advantage of it where feasible. I understand, however, that not all issues can be resolved using the Open Door Policy.
Except as set forth below, I agree that I will settle any and all previously unasserted claims, disputes or controversies arising out of or relating to my application or candidacy for employment, employment and/or cessation of employment with Circuit City, exclusively by final and binding arbitration before a neutral Arbitrator. By way of example only, such claims include claims under federal, state and local statutory or common law, such as the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, as amended, including the amendments of the Civil Rights Act of 1991, the Americans with Disabilities Act, the Family Medical Leave Act, the law of contract and law of tort. I understand that if I do file a lawsuit regarding a dispute arising out of or relating to my application or candidacy for employment, employment or cessation of employment, Circuit City may use this Agreement in support of its request to the court to dismiss the lawsuit and require me instead to use arbitration.
I understand that I still may exercise my rights under the National Labor Relations Act and file charges with the National Labor Relations Board. I further understand that I still may file administrative charges with the [EEOC] or similar federal, state or local agency, but that upon receipt of a right-to-sue letter or similar administrative determination, I shall arbitrate any claim that I may have against Circuit City. I understand that I must file a claim for arbitration within one (1) year of the day on which I learned, or through reasonable diligence, should have learned that my legal rights were violated. I further agree that if I commence an arbitration, it will be conducted in accordance with the 'Circuit City Dispute Resolution Rules and Procedures.'
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The "Circuit City Dispute Resolution Rules and Procedures" referenced in the agreement recite the following "purpose":
Circuit City (the Company) has established an employment dispute resolution procedure, culminating in formal arbitration, designed to provide a fair, private, exclusive, expeditious, final and binding means for resolving legal disputes rising out of, or relating to, employment with Circuit City, without the need for litigation in federal, state or local courts. These Dispute Resolution Rules and Procedures govern arbitrations held pursuant to the Circuit City Dispute Resolution Agreement, whether brought by an Associate or by Circuit City. The term 'Associate' includes applicants, employees and former employees. These Dispute Resolution Rules and Procedures are written to guide an Associate through the arbitration process; however, they apply with full force and effect to both Associates and Circuit City.
The "Circuit City Dispute Resolution Rules and Procedures" also contain the following provision:
By agreeing to the Dispute Resolution Program, an Associate agrees to resolve through arbitration all claims described or contemplated [herein]. If an Associate filed a lawsuit in court to resolve claims subject to arbitration, the Associate agrees that the Court shall dismiss the lawsuit and require the Associate to arbitrate the dispute. If an Associate files a lawsuit in Court involving claims which are, and other claims which are not, subject to Arbitration the Associate agrees that the court shall stay litigation of the nonarbitrable claims and require that arbitration take place with respect to those claims subject to arbitration. The Associate further agrees that the Arbitrator's decision on the arbitrable claims, including any determinations as to disputed factual or legal issues, shall be entitled to full force and effect in any later court lawsuit on any nonarbitrable claims.Procedure
Before addressing the substance of the parties' arguments further, the court will address a procedural issue raised by Circuit City.
Specifically, Circuit City argues that Shelton's "Motion for Judgment on the Pleadings or in the Alternative for Summary Judgment" is improper based on the Federal Rules of Civil Procedure.
Fed.R.Civ.P. 81(a)(3) provides in pertinent part as follows:
In proceedings under Title 9, U.S.C. relating to arbitration, or under the Act of May 20, 1926, ch. 347, § 9 ( 44 Stat. 585), U.S.C. Title 45, § 159, relating to boards of arbitration of railway labor disputes, these rules apply only to the extent that matters of procedure are not provided for in those statutes. . . .
Circuit City contends that because section 4 of the FAA governs the procedure for a petition to compel arbitration, Shelton's motion is inappropriate, as the only issues properly before the court under the FAA are the existence of a contract requiring Shelton to arbitrate and her failure to comply therewith. Circuit City's position is essentially that Shelton cannot under any circumstances avoid arbitration, and that post-arbitration award judicial review is the only vehicle through which she may resolve her challenges to the agreement.
Section 4 of the FAA provides as follows:
§ 4. Failure to arbitrate under agreement; petition to United States court having jurisdiction for order to compel arbitration; notice and service thereof; hearing and determination A party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court which, save for such agreement, would have jurisdiction under Title 28, in a civil action or in admiralty of the subject matter of a suit arising out of the controversy between the parties, for an order directing that such arbitration proceed in the manner provided for in such agreement. Five days' notice in writing of such application shall be served upon the party in default. Service thereof shall be made in the manner provided by the Federal Rules of Civil Procedure. The court shall hear the parties, and upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement. The hearing and proceedings, under such agreement, shall be within the district in which the petition for an order directing such arbitration is filed. If the making of the arbitration agreement or the failure, neglect, or refusal to perform the same be in issue, the court shall proceed summarily to the trial thereof. If no jury trial be demanded by the party alleged to be in default, or if the matter in dispute is within admiralty jurisdiction, the court shall hear and determine such issue. Where such an issue is raised, the party alleged to be in default may, except in cases of admiralty, on or before the return day of the notice of application, demand a jury trial of such issue, and upon such demand the court shall make an order referring the issue or issues to a jury in the manner provided by the Federal Rules of Civil Procedure, or may specially call a jury for that purpose. If the jury find that no agreement in writing for arbitration was made or that there is no default in proceeding thereunder, the proceeding shall be dismissed. If the jury find that an agreement for arbitration was made in writing and that there is a default in proceeding thereunder, the court shall make an order summarily directing the parties to proceed with the arbitration in accordance with the terms thereof.
The language of this provision does not support Circuit City's position that any objections which Shelton may have to arbitration may be addressed in a court of law only after Shelton participates in the arbitration. Section 4 expressly requires that "the court shall hear the parties, and upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the agreement." What this language indicates is, as has long been recognized, that "'arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed to submit.'" ATT Technologies. Inc. v. Communications Workers of America, 475 U.S. 643, 648 (1986).
A second principle following from this premise is that
the question of arbitrability — whether [an agreement] creates a duty for the parties to arbitrate the particular grievance — is undeniably an issue for judicial determination. Unless the parties clearly and unmistakably provide otherwise, the question of whether the parties agreed to arbitrate is to be decided by the court, not the arbitrator. . . .
. . . Under our decisions, whether or not [a party] is bound to arbitrate, as well as what issues it must arbitrate, is a matter to be determined by the Court on the basis of the contract entered into by the parties . . . The duty to arbitrate being of contractual origin, a compulsory submission to arbitration cannot precede judicial determination that the [agreement] does in fact create such a duty.Id., 475 U.S. at 649 (citations and internal quotation marks omitted).
By requiring the court to make a preliminary determination "that the making of the agreement for arbitration or the failure to comply therewith is not an issue," and by specific reference to the Federal Rules of Civil Procedure, section 4 of the FAA contemplates an action which in some respects follows the procedural course Shelton has sought to utilize here. See Champ v. Siegel Trading Co., Inc., 55 F.3d 269, 276 (7th Cir. 1995) ("Rule 81(a)(3) says that the Federal Rules fill in only those procedural gaps left open by the FAA"). Indeed, the Supreme Court has expressly held that "the first task of a court asked to compel arbitration of a dispute is to determine whether the parties agreed to arbitrate that dispute." Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985); see Dean Witter Reynolds. Inc. v. McCoy, 995 F.2d 649, 650 (6th Cir. 1993) ("the questions of whether certain parties are contractually bound to arbitrate and what issues may be arbitrated are for the courts to decide; 'a party cannot be forced to arbitrate the arbitrability issue'") (citing Litton Financial Printing Division, A Division of Litton Business Systems. Inc. v. National Labor Relations Board, 501 U.S. 190, 208 (1991)). The court must make this determination "by applying the 'federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the Act.'" Mitsubishi Motors, 473 U.S. at 626. The court will therefore proceed following these principles.
Arbitrability
Because it is based on contract interpretation, arbitrability is a legal question. Cogswell v. Merrill Lynch, Pierce, Fenner Smith Inc., 78 F.3d 474, 476 (10th Cir. 1996). As such, the question is a proper one for resolution by summary judgment under Fed.R.Civ.P. 56. See Bel-Ray Co. Inc. v. Chemrite (PTY) Ltd., 181 F.3d 435, 440 (3d Cir. 1999) (district court's summary judgment order compelling arbitration reviewed de novo). Under the FAA, "a court may only compel a party to arbitrate where that party has entered into a written agreement to arbitrate that covers the dispute." Id.; see 9 U.S.C. § 2. Here, there is no question that Shelton did in fact enter into an agreement to arbitrate. Thus, the question becomes one of the scope of that agreement: whether it encompasses the dispute at hand. Republic of Nicaragua v. Standard Fruit Co., 937 F.2d 469, 477 (9th Cir. 1991). The court must address this question of arbitrability
. . . with a healthy regard for the federal policy favoring arbitration. . . . The Arbitration Act 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 language itself or an allegation of waiver, delay, or a like defense to arbitrability.Moses H. Cone Memorial Hosp. v. Mercury Construction Corp., 460 U.S. 1, 24 (1983); see Asplundh Tree Expert Co. v. Bates, 71 F.3d 592, 595 (6th Cir. 1995). "Thus, as with any other contract, the parties' intentions control, but those intentions are generously construed as to issues of arbitrability." Mitsubishi Motors, 473 U.S. at 626. As written, the Circuit City Dispute Resolution Agreement requires Shelton to "settle any and all previously unasserted claims, disputes or controversies . . . exclusively by final and binding arbitration[.]" The agreement also expressly recognizes that if Shelton files a lawsuit ("I understand that if I do file a lawsuit") regarding a dispute arising out of her employment with Circuit City, the company may rely on the agreement to request the dismissal of the action. However, Shelton has filed no lawsuit, and according to her affidavit submitted in support of her present motion, she does not intend to file one. Indeed, she could not file one even if she wished to do so, for she has never received a Right-to-Sue letter. E.g., Rivers v. Barberton Bd. of Educ., 143 F.3d 1029, 1032 (6th Cir. 1998) ("we hold that the right-to-sue letter is a condition precedent and not a jurisdictional requirement").
That the agreement expressly permits Shelton to exercise her right to file an administrative charge with the EEOC cannot be questioned. However, the language of this provision, which requires Shelton to arbitrate only "upon receipt of a right-to-sue letter or similar administrative determination," indicates that the agreement does not apply where the EEOC exercises its right, under 42 U.S.C. § 2000e-5(f)(1), to file its own civil action against Circuit City. A "right-to-sue letter or similar administrative determination" can only be read as encompassing determinations which would permit Shelton to pursue her own civil action. See 29 C.F.R. § 1601.18; 1601.19; 1601.28. This language simply cannot be read to encompass the situation where the EEOC files a civil action against the respondent named in a charge, as in 29 C.F.R. § 1601.27.
The language of the Circuit City Dispute Resolution Agreement requiring Shelton to arbitrate "upon receipt of a right-to-sue letter or similar administrative determination" strongly supports the conclusion that Shelton is not required to arbitrate in the event of the filing of a civil action by the EEOC. "[A] charge of employment discrimination is not the equivalent of a complaint initiating a lawsuit." Equal Employment Opportunity Commission v. Shell Oil Co., 466 U.S. 54, 68 (1984). "The function of a Title VII charge, rather, is to place the EEOC on notice that someone . . . believes that an employer has violated the title."Id.; see also Equal Employment Opportunity Commission v. Cosmair. Inc., L'Oreal Hair Care Division, 821 F.2d 1085, 1089 (5th Cir. 1987) (employee's agreement to release employer "from all actions, causes of action, claims and demands" did not bar him from filing charge of discrimination with EEOC). By expressly permitting Shelton to exercise her right to file an administrative charge with the EEOC, the agreement itself recognizes that the mere filing of such a charge does not require Shelton to arbitrate.
Instead, the agreement indicates merely that Shelton may be required to arbitrate "if I do file a lawsuit" or "upon receipt of a right-to-sue letter or similar administrative determination" from the EEOC. Under the circumstances, the court concludes as a matter of law that the Circuit City Dispute Resolution Agreement does not provide authority for the court to compel Shelton to submit to arbitration. She simply did not agree to arbitrate a dispute which at this point exists solely between Circuit City and the EEOC.
The court's dismissal of this action is, however, supported by more than just the language of the agreement itself. In EEOC v. Frank's Nursery Crafts, Inc., 177 F.3d 448 (6th Cir. 1999), a Sixth Circuit panel held that the FAA does not apply to Title VII actions brought by the EEOC on behalf of an employee who has signed an arbitration agreement. Id. at 459-462. The panel inFrank's also held that neither preclusion nor waiver principles would apply to bar the EEOC from bringing suit on behalf of an individual who had agreed to arbitrate her claim of discrimination. Id. at 462-466. Another more recent decision has reaffirmed that, under Frank's, "the EEOC's right to sue based on the [complainant's] charge is not affected by [the complainant's] arbitration agreement, whether or not it would apply to her if she brought suit on her own." EEOC v. Northwest Airlines, 188 F.3d 695, 702 (6th Cir. 1999). Both recent decisions recognize that
while Title VII affords recovery through private action or an action by the EEOC, it does not allow both, and the power to decide which route to follow rests in the hands of the EEOC, not the aggrieved employee. Since the statute does not grant an individual the power to obtain recovery without authorization from the EEOC, such an individual cannot, by making decisions about her own ability to sue for herself, override the power of the EEOC to sue in its own name.Frank's, 177 F.3d at 466; see Northwest Airlines, 188 F.3d at 701 ("the employee may not bring a private action under Title VII if the EEOC pursues a charge on her behalf"). Because, under the circumstances, Shelton is not free to pursue her own individual claim against Circuit City, no claim remains for her to arbitrate.
Circuit City argues that neither Frank's nor Northwest Airlines has any bearing on its petition filed in this action. Those cases, Circuit City contends, merely hold that arbitration agreements between aggrieved employees and their employers cannot bind the EEOC, a nonparty to the agreement. Circuit City therefore acknowledges that, while this controlling Circuit authority would prevent Circuit City from moving to compel arbitration in the action filed by the EEOC, EEOC v. Circuit City Stores, Inc., No. 1:99-cv-177, it does not address "whether the existence of an independent enforcement action by the EEOC nullifies the validity of an arbitration agreement between an employer and employee." Circuit City's Brief in Support of Its Petition to Compel Arbitration, at 22. Although this is technically true, it cannot be said that
In Frank's, the district court had, in addition to dismissing the EEOC's complaint, issued an order granting the employer's motion to compel the employee to arbitrate. 177 F.3d at 453-454. In Northwest Airlines, the panel indicated that it was not reaching "the disputed issues related to whether [the employee] actually signed an arbitration agreement with Northwest, whether any arbitration agreement that was signed applied to the claims of [the employee] at issue, or whether the arbitration agreement specifically excluded suits by the EEOC." 188 F.3d at 701-702.
However, the decision indicates only that the EEOC filed a notice of appeal, challenging two other conclusions pertinent to the dismissal. Id. at 454.
Frank's and Northwest Airlines do not inform and support the court's conclusion herein, as noted above. What those cases do indicate, relevant to the present motion, is that an agreement by the employee to arbitrate does not bind the EEOC. If this is so, then the converse must also be true: that the EEOC's action cannot provide a basis for forcing an employee into arbitration. Indeed,Frank's says as much:
Here, Adams contracted with Frank's to resolve her own Title VII claims by arbitration. On the other hand, the EEOC, even after making efforts at conciliation and settlement, never agreed to arbitrate with Frank's. Instead, the EEOC exercised its right to sue Frank's in federal court. As for Adams, she has not raised a claim against Frank's at all: she neither initiated an arbitration nor a federal lawsuit. While the district court ordered Adams to arbitration pursuant to § 4 of the FAA, Adams has never really failed, neglected or refused to arbitrate and has thus not breached her agreement with Frank's.177 F.3d at 460 (footnote omitted).
CONCLUSION
For the foregoing reasons, the court grants Shelton's motion for judgment on the pleadings or in the alternative, for summary judgment. The court therefore dismisses, with prejudice, Circuit City's Petition for Order to Compel Arbitration.
So ordered this 16th day of May, 2000.