Opinion
Civil No. 01-93-KI
August 9, 2001
Donald B. Potter, for Plaintiff.
Carol J. Bernick, Joseph Vance, Davis Wright Tremaine LLP, for Defendant.
OPINION
Peggy Melton brings claims against her former employer, Philip Morris, Inc. dba Philip Morris, USA ("Philip Morris") for wrongful discharge, intentional infliction of emotional distress, and Oregon statutory claims for workers compensation discrimination (ORS 659.410), perceived disability discrimination (ORS 659.436), and age discrimination (ORS 659.030(a)). Finally, she brings an age discrimination claim under the Age Discrimination in Employment Act, 29 U.S.C. § 621-634 ("ADEA"). Philip Morris brings a Motion to Compel Arbitration of Melton's claims (#12). I deny the Motion as to the Oregon statutory claims, and grant the Motion as to the ADEA claim and the tort claims.
FACTS
Peggy Melton began employment with Philip Morris in February 1978. In November of 1994 Melton signed an acknowledgment stating she had received, reviewed and understood the: 1) Employee Handbook outlining the Philip Morris USA Code of Conduct, 2) a letter announcing the new Philip Morris USA — Sales Dispute Resolution Program and Benefits Plan, 3) a memo regarding the Dispute Resolution Program and 4) a brochure describing the Philip Morris Dispute Resolution Program, including a Dispute Resolution Program Pamphlet and Sales Dispute Resolution Benefits pamphlet.
Both the letter and the memo stated "if you continue your current employment after January 1, [1995] both you and Philip Morris U.S.A. will be bound to use the Dispute Resolution Program as the primary and sole means of resolving employment disputes that result in separation from the Company rather than through the court system."
The pamphlet titled "Philip Morris USA — Sales Dispute Resolution Program" is thirteen pages long. (Decl. of M. Sauro Ex. D). It describes the Open Door Policy, arbitration and mediation, and has a question and answer section. On page 10 is the following: What happens if I file a lawsuit against the Company relating to a termination dispute?
If you file a lawsuit, Philip Morris U.S.A. will file a motion with the court to dismiss the case and refer it to the Dispute Resolution Program where the dispute will be resolved by an arbitrator.
The pamphlet referred to as the "Philip Morris Dispute Resolution Program" (Decl. of M. Sauro Ex. E) is an eighteen page document and states it "applies to and binds the Company, each Employee in field Sales who is in the employment of the Company on or after the Effective Date of this Program." This pamphlet also states on the second to third pages:
The Program applies to any legal or equitable claim, demand or controversy, in tort, in contract, under statute, or alleging violation of any legal obligation, between persons bound by the Program which relates to . . . in any way . . . any other matter following separation from employment . . . including by way of example and without limitation, allegations of discrimination based on race, sex, religion, age . . . harassment prohibited by state or federal statue or the common law, including, but not limited to, sex, race, religion, age . . . workers compensation retaliation . . . infliction of emotional distress . . .
This pamphlet also describes dispute resolution rules under The Program, how arbitrators will be appointed, the legal standards to be applied in arbitration and other details. It also states, on the first page, "The Program contractually modifies the `at-will' employment relationship between the Company and its Field Sales employees, but only to the extent expressly stated in this Program." Ms. Melton continued working in the Philip Morris Oregon district until April 24, 2000 and was a unit manager when she was terminated by Philip Morris.
DISCUSSION
I. Enforceability of Agreement
The Federal Arbitration Act 9 U.S.C. § 1 et seq. ("FAA") was designed to overcome judicial hostility towards arbitration agreements. Circuit City Stores, Inc. v. Adams, 121 S.Ct. 1302, 1307 (2001). Prior to being overruled by Circuit City, the Ninth Circuit construed arbitration agreements in employment contracts to be outside the scope of the FAA. Craft v. Campbell Soup Co., 177 F.3d 1083 (9th Cir. 1998). After Circuit City, arbitration agreements in employment contracts such as Melton's are not outside the scope of the FAA and should be enforced. Circuit City, 121 S.Ct. at 1306.
Arbitration is a matter of contract, however, and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit. AT T Technologies, Inc. v. Communications Workers of Am., 475 U.S. 643, 648 (1986). In determining whether a valid arbitration agreement arose . . . a federal court should look to the state law. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943 (1995).
Under Oregon state law, continuing employment after a change of terms by the employer suffices as acceptance of the change. The Oregon Supreme Court has held a persons continued employment after distribution of a personnel handbook or policy is sufficient consideration for modification to the employment agreement. Yartzoff v. Democrat-Herald Publishing Co. Inc., 281 Or. 651, 657, 576 P.2d 356, 359 (1978). Melton signed an acknowledgment that she understood the Dispute Resolution documents. The Dispute Resolution documents clearly stated continued employment after January 1, 1995 would mean termination disputes, including those she brings in this complaint, would be settled by arbitration. The acknowledgment would put a reasonable person on notice of the agreement to arbitrate future termination claims of the type Melton now brings.
II. Viability of Ninth Circuit Law
While Circuit City reinforced the "liberal policy favoring arbitration agreements," it failed to directly address Ninth Circuit law limiting enforcement of arbitration agreements that compel employees to waive future judicial forum for Title VII ( 42 U.S.C. § 2000e et seq.) claims as a condition of employment. Duffield v. Robertson Stephens Co. 144 F.3d 1182, 1185 (9th Cir. 1998) cert. denied 525 U.S. 982 (1998). In Duffield the Ninth Circuit was aware of policy in favor of arbitration, but held Congress intended Title VII to prohibit compulsory agreements waiving judicial forum for Title VII and parallel state claims. Id.
Defendant argues Duffield is no longer good law and puts weight in the following quote from Circuit City: "by agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute; it only submits their resolution in an arbitral, rather than a judicial forum." Circuit City, 121 S.Ct. at 1313 (quoting Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26 (1991)). Duffield was not premised on the arbitral forum being inferior to the judicial forum, or on the arbitral forum causing a loss of substantive rights. Instead, Duffield found "the context, language, and [legislative] history . . . make out a conclusive case . . . that Congress intended to preclude compulsory arbitration of Title VII claims." Duffield, 144 F.3d at 1199 (citing Thompson v. Thompson, 484 U.S. 174, 187 (1988)).
A particular statute may either preclude or limit the enforcement of arbitration agreements with regard to claims arising under that statute. Kummertz v. Tech Mold, Inc., 152 F.3d 1153 (9th Cir. 1998). Duffield found Congressional intent for Title VII plaintiffs to have a broad range of methods for enforcing Title VII rights, including the right to a jury trial. Duffield did not prohibit an employee from waiving judicial forum of a Title VII complaint altogether, but held the claim must arise before the employee chooses to waive judicial forum. Duffield, 144 F.3d at 1199.
It is unnecessary for me to determine whether Melton's waiver met the "knowing and voluntary" standards required for waiver of Title VII and parallel state claims set by Lai v. Prudential Ins. Co., 113 F.3d 1104 (9th Cir. 1997). Because I find arbitration of these claims cannot be compelled in this case, determining whether the waiver was knowing and voluntary would not affect the result.
Duffield signed, as a condition of employment, a Uniform Application for Securities Industry Registration or Transfer form ("U-4" form) containing an arbitration agreement. She later brought sexual harassment claims under both Title VII and California's Fair Employment and Housing Act ("FEHA"), Cal. Govt. Code Ann. § 12900 et seq. The Ninth Circuit found this a prohibited compulsory agreement as a condition of employment to waive judicial forum for a future Title VII claim, and denied compulsory arbitration of both the Title VII and FEHA claims.
In Circuit City plaintiff signed, as part of his employment application, an agreement to arbitrate claims including Title VII claims. He later brought FEHA claims against his employer. The Supreme Court ordered arbitration of his FEHA claim under the FAA without any mention of Duffield. Circuit City, 121 S.Ct. at 1313.
Since the Duffield limitation applied to a FEHA claim, and Circuit City ordered arbitration of a FEHA claim in a similar agreement without acknowledging the Ninth Circuit prohibition against doing so, there may be some question whether the Ninth Circuit will continue to adhere to Duffield. Borg-Warner Protective Services Corp. v. EEOC, 245 F.3d 831, 835 (D.C. Cir. 2001). Until the Ninth Circuit makes this determination, and because nothing in Circuit City addresses the statutory basis for Duffield or its holding, I apply Duffield and the relevant body of law to this case.
III. ADEA claim
Duffield excluded ADEA claims from its holding: "The ADEA shares many of the substantive provisions of Title VII, but its remedial and procedural provisions were originally modeled after the FLSA, not Title VII." Duffield, 144 F.3d at 1195.
Plaintiff argues the ADEA claim is not arbitrable because the Older Workers' Benefit Protection Act, Pub.L. 101-433, 101 Stat. 978 (1990) ("OWBPA"), has strict requirements for the waiver of a jury trial for an ADEA claim which were not met in this case. 29 U.S.C. § 626(f)(1)
The Ninth Circuit has not reached this issue, but two circuit courts have concluded the OWBPA does not protect against waiver of judicial forum because it is a procedural rather than a substantive right. Williams v. Cigna Financial Advisers, Inc., 56 F.3d 656, 660-661 (5th Cir. 1995); Seus v. John Nuveen Co., Inc. 146 F.3d 175, 181-182 (3rd Cir. 1998). Plaintiff suggests I follow a district court in the Ninth Circuit which applied the OWBPA's statutory "knowing and voluntary" requirements for contractual waivers of jury trials. Thiele v. Merrill Lynch, Pierce, Fenner Smith, 59 F. Supp.2d 1060, 1062 (S.D.Cal. 1999).
I believe the Third and Fifth Circuits are correct: the statutory waiver requirements of the OWBPA were designed to protect against waiver of claims, not forum. I grant the Motion to Compel Arbitration of the ADEA claim.
IV. Oregon age discrimination claim, Oregon perceived disability discrimination claim and Oregon workers compensation discrimination claim
The Duffield court included claims brought under parallel state statutes as part of the "Title VII enforcement scheme" and applied its holding to these claims. Duffield, 144 F.3d at 1187 n. 3. The Oregon age discrimination claim, Oregon perceived disability discrimination claim and Oregon workers compensation discrimination claims arise under ORS chapter 659. Title VII was the basis for ORS chapter 659. Mains v. II Morrow, Inc., 128 Or. App. 625, 634, 877 P.2d 88, 93 (1994). Additionally, BOLI ("Bureau of Labor and Industry") enforces all claims alleged under Chapter 659 along with claims typical of Title VII such as race and sex discrimination, further evidence these claims are all part of one enforcement scheme.
Since these claims are parallel to Title VII claims, and Duffield applies to parallel state claims, I deny the Motion to Compel Arbitration of these claims.
V. Oregon tort claims: wrongful discharge, intentional infliction of emotional distress
There is no statutory preclusion or limit on enforcement of arbitration agreements regarding the tort claims, so these claims should be arbitrated as long as the agreement is valid. Melton was an "at-will" employee, and as previously discussed, under Oregon law her continued employment after the change to the employment agreement would suffice as consideration for the change. Yartzoff, 281 Or. at 657. Melton argues continued employment is not adequate consideration for the arbitration agreement. The cases she cites to support this argument are clearly distinguishable. The first finds continued employment inadequate consideration specifically for a covenant not to compete, the second finds continued employment inadequate consideration for a change to a pension agreement where the employee was not "at-will" because he had already been promised employment until retirement. McCombs v. McClelland, 223 Or. 475, 354 P.2d 311 (1960); McPhail v. Milwaukie Lumber Co., 165 Or. App. 596, 999 P.2d 1144 (2000).
Melton also makes contractual arguments regarding mutuality of obligation, illusory promises and unconscionability. Some courts have been persuaded by such arguments in relation to arbitration agreements similar to Melton's. See Harmon v. Philip Morris, Inc., 120 Ohio App.3d 187, 697 N.E.2d 270 (Ohio App. 1997). Melton fails to demonstrate that Oregon courts would be similarly persuaded.
Since the wrongful discharge and intentional infliction of emotional distress claims are subject solely to contractual analysis and plaintiff's continued employment constituted acceptance of the arbitration agreement, I grant the Motion to Compel Arbitration as to these claims.
CONCLUSION
Defendant's Motion to Compel Arbitration (#12) is granted in part. The Oregon age discrimination claim (ORS 659.030(a)), Oregon perceived disability claim (ORS 659.436) and Oregon workers compensation discrimination claim (ORS 659.410) remain for Trial.
ORDER
Defendant's Motion to Compel Arbitration (#12) is granted in part. The Oregon age discrimination claim (ORS 659.030(a)), Oregon perceived disability claim (ORS 659.436) and Oregon workers compensation discrimination claim (ORS 659.410) remain for Trial.
IT IS SO ORDERED.