GREAT WESTERN MORTGAGE CORPORATION v. MICHELE PEACOCK
No. 96-5273
UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
April 3, 1997
1997 Decisions, Paper 76
On Appeal from the United States District Court for the District of New Jersey (D.C. Civil No. 96-628)
BEFORE: STAPLETON, ROTH and GARTH Circuit Judges
(Opinion filed April 3, 1997)
Neil M. Mullin, Esq. (Argued)
Christopher P. Lenzo, Esq.
Smith Mullin, P.C.
200 Executive Drive, Suite 155
West Orange, New Jersey 07052
Attorneys for Appellant
Elizabeth B. Lynch, Esq.
Brown & Wood, LLP
One World Trade Center
New York, New York 10048
Attorneys for Appellee
OPINION OF THE COURT
GARTH, Circuit Judge:
This appeal presents the issue of whether a district court, pursuant to the Federal Arbitration Act (FAA),1 should compel arbitration of a sexual harassment claim based on New Jersey‘s Law against Discrimination.
On August 8, 1994, the plaintiff, Michele Peacock, a resident of New Jersey, applied for work as a mortgage consultant at defendant Great Western Mortgage Corporation, which was incorporated in Delaware. At the time of her application, but before she had been employed, she signed a Certification agreeing:
to submit any dispute related to my employment, or the termination of my employment, to final and binding arbitration (thus waiving any right to pursue any other administrative and/or legal proceeding), and, as a condition of my employment, I agree to sign Great Western‘s Arbitration Agreement upon commencement of my employment, and to abide by the Arbitration Agreement and Great Western‘s Binding Arbitration Policy and Procedures.2
all civil claims, excluding claims under the Workers’ Compensation Act, but including, and not limited to, claims of employment discrimination on the basis of race, sex, age, religion, color, national origin, disability and veteran status (including claims under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act and any other local, state or federal law concerning employment or employment discrimination), claims based on public policy, statutory claims and claims against individuals or other entities.3
The Agreement further provided that arbitration had to be initiated within one year after an event giving rise to a dispute, and that an employee involved in an arbitration could be represented by an attorney, at her own expense. Finally, the Agreement provided that the arbitrator could not award punitive or exemplary damages.
According to Peacock, sometime after she commenced employment she became the object of sexual harassment. She alleges that her supervisor at Great Western, William Belott,
Peacock retained counsel to represent her in pressing a claim for sexual harassment.6 In May 1995 her attorney made Great Western aware of Peacock‘s complaints, and in August 1995 Great Western responded that after conducting an investigation, it “was unable to confirm” her allegations. Great Western advised Peacock that if she was not satisfied with the results of Great Western‘s investigation, she could “file a claim in arbitration, pursuant to the Binding Arbitration Agreement . . . dated 9/26/94.” On August 23, 1995, Peacock‘s counsel filed for arbitration on Peacock‘s behalf.
Pursuant to the Arbitration Agreement, Great Western submitted the matter to JAMS/ENDISPUTE (JAMS), and on October 9, 1995, JAMS confirmed that it had received the request to arbitrate.7 In the interim, however, Peacock retained another
On November 8, 1995, pursuant to the New Jersey Law against Discrimination (NJLAD),
On February 1, 1996, Great Western filed a petition under the FAA in the District of New Jersey to compel arbitration and to stay the state proceedings. On April 9, 1996, the district court issued an Order compelling arbitration and granting the stay.8
Peacock appeals from that order, contending 1) that the FAA does not apply to employment contracts; 2) that she did not waive her rights under NJLAD; 3) that because Great Western‘s Arbitration Agreement would deprive Peacock of a two-year statute of limitations, a right to discovery, and punitive damages, it is void as a matter of public policy; 4) that Great Western waived
Great Western filed the petition to compel arbitration pursuant to
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.
The district court had diversity jurisdiction over this case pursuant to
I.
Peacock argues first that the district court erred in compelling arbitration of her claim because the FAA does not apply to employment contracts. She maintains that she falls within the scope of the exceptions to mandatory arbitration provided in the FAA.
Section 1 of the FAA provides as follows:
“Maritime transactions“, as herein defined, means charter parties, bills of lading of water carriers, agreements relating to wharfage, supplies furnished vessels or repairs to vessels, collisions, or any other matters in foreign commerce which, if the subject of controversy, would be embraced within admiralty jurisdiction;
“commerce“, as herein defined, means commerce among the several States or with foreign nations, or in any Territory of the United States or in the District of Columbia, or between any such Territory and another, or between any such Territory and any State or foreign nation, or between the District of Columbia and any State or Territory or foreign nation, but nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”11
(emphasis added).
Peacock contends that this court has construed the FAA to exclude mandatory arbitration of employment contracts.
We cannot agree. In Tenney Engineering, Inc. v. United Electrical Radio & Machine Workers of America,12 we held, after an analysis of the relevant legislation, that the exceptions specified in
The district court denied the stay and refused to compel arbitration. In vacating the district court‘s judgment, Judge Maris, writing for this court, held that the employees were not included within the class of those excepted from the operation of the FAA, and hence were required to arbitrate their disputes:
In the case before us the plaintiff‘s employees are engaged in the production of goods for subsequent sale in interstate commerce. Thus while their activities will undoubtedly affect interstate commerce they are not acting directly in the channels of commerce itself. They are, therefore, not a “class of workers engaged in . . . interstate commerce” within the meaning of Section 1 of title 9.”14
Peacock, in her initial brief, makes no reference to our Tenney decision. Rather, Peacock argues that our later case of Pritzker v. Merrill Lynch, Pierce, Fenner & Smith, Inc.15
We are satisfied that Tenney is still the controlling law in this Circuit as well as others. See, e.g., Dancu v. Coopers & Lybrand,18 citing and following Tenney,19 as well as authorities in the First, Second, Fifth, Sixth, and Seventh
II.
Peacock also argues that the Arbitration Agreement does not bind her, because she claims to have been coerced into signing it. She claims that she was unaware of the rights she was waiving, and that her waiver was involuntary. First, because at the time she applied to work at Great Western she was not
Peacock argues further that her waiver of statutory rights was coerced because she would not have been hired if she had not agreed to sign Great Western‘s Arbitration Agreement when she applied for a position with the company. She also charges that she would have been fired if she had refused to sign the Arbitration Agreement after beginning employment. We agree with the district court, however, that Peacock has neither alleged nor come forward with evidence to prove any facts that would constitute “grounds . . . at law or in equity for the revocation of any contract.”
A.
In calling on the courts to resolve these matters, Peacock misunderstands the narrow scope of the inquiry involved in the arbitration process. Under the FAA the district court must be satisfied that the parties entered into a valid
B.
The district court here held that Peacock and Great Western had agreed to arbitrate, and that Peacock‘s claims fall within the scope of the Arbitration Agreement. The record discloses that Peacock effectively agreed to arbitration on three occasions: first, as a condition of her employment by Great Western, she agreed to sign the Arbitration Agreement upon beginning employment. Second, she then signed the Arbitration Agreement itself, after she was employed. Finally, after about
The record reveals that Peacock was a college graduate, having received a Bachelor of Science degree in Business Administration after four and one-half years of college. She does not contend that she failed to read the document containing the Arbitration Agreement, or that she had not read the arbitration provisions. Indeed, Peacock had no reservations about signing any agreements which specified necessary conditions of employment. As her Certification in lieu of Affidavit discloses, Peacock decided to arbitrate her dispute with Great Western because “I could not afford the fee that my first law firm, Hannoch Weisman, would have charged me to challenge the arbitration agreement.”26 Hence, Peacock agreed to arbitration not because of coercion on the part of Great Western, as she claims, but because of the fees that she would have been charged had she resorted to other legal proceedings. Moreover, during this period of time she was represented by counsel.
Peacock adduced no evidence and made no argument that the terms of the Arbitration Agreement were kept from her. Although her brief on appeal argues that Peacock had remained generally ignorant of the details of the Arbitration Agreement--and suggests that Great Western deliberately kept her in the dark until her “job hung in the balance”27--it is clear that she made
At oral argument before the district court her attorney also conceded that she could have asked to see a copy of the Arbitration Agreement before she started working, and there was, and is, no issue presented that she had not read the employment papers which she had signed.29
C.
The true thrust of Peacock‘s argument is that signing the Certification and the Arbitration Agreement was a condition of Great Western‘s employment, which she accepted only because she was the weaker of the two parties to the employment contract.30 Yet, as the Supreme Court has made clear in Gilmer
In Gilmer, Gilmer had been required by his employer to register as a securities representative with the New York Stock Exchange (NYSE). His registration application required Gilmer to arbitrate controversies with respect to employment or termination of employment. When Gilmer‘s employment was terminated at age 62 he brought suit in district court, claiming a violation of the Age Discrimination in Employment Act of 1967. In response, his employer moved to compel arbitration, relying upon Gilmer‘s registration application and the FAA. Although the district court denied Gilmer‘s motion, the court of appeals reversed that ruling, and the Supreme Court, in turn, affirmed the court of appeals. The Court held that statutory claims such as Gilmer‘s may be the subject of an arbitration agreement and enforceable under the FAA, and that “[m]ere inequality in bargaining power . . . is not a sufficient reason to hold that arbitration agreements are never enforceable in the employment context.”32
The district court did not err in ruling that Peacock had willingly agreed to arbitrate under Great Western‘s Arbitration Agreement.
III.
Nor is there merit to Peacock‘s claims that New Jersey‘s public policy, as expressed in NJLAD,34 is offended by requiring her to arbitrate her sexual harassment claim. Peacock
First, it is evident that the FAA is meant to have a preemptive effect, albeit a narrow one. In enacting the FAA, Congress declared “a national policy favoring arbitration” and “withdrew the power of the states to require a judicial forum for the resolution of claims which the contracting parties agreed to resolve by arbitration.”35 Thus, a court considering a motion made under Section 4 of the FAA, see n.25, supra, may be called upon to decide whether the FAA preempts some state law unfavorable to arbitration.
It is also clear that the FAA will preempt such laws. The Supreme Court, in Mastrobuono v. Shearson Lehman Hutton, Inc., 115 S.Ct. 1212 (1995), Perry v. Thomas, 482 U.S. 483 (1987), and Southland Corp. v. Keating, 465 U.S. 1 (1984), has
However, while Congress‘s intention in enacting the FAA was to provide federal court enforcement of a waiver of the right to a judicial forum respecting a state statutory claim, the preemptive effect of the FAA is restricted to the question of arbitrability, and as previously discussed, whether the agreement to arbitrate is valid. See IIA, supra. The “FAA preempts state laws which ‘require a judicial forum for the resolution of claims which the contracting parties agreed to resolve by arbitration.‘” Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 478 (1989)(quoting Southland Corp. v. Keating, 465 U.S. 1, 10 (1984)). Thus, a court compelling arbitration should decide only such issues as are essential to defining the nature of the forum in which a dispute will be decided.
The FAA does not otherwise preempt state law. “The FAA contains no express preemptive provision, nor does it reflect a congressional intent to occupy the entire field of arbitration.” Volt, 489 U.S. at 477. Once a dispute is determined to be validly arbitrable, all other issues are to be decided at arbitration. Since the purpose of the FAA is to ensure that agreements to arbitrate are enforced, a court compelling arbitration should preserve the remaining disputed issues for the arbitrator to decide. Any argument that the provisions of the Arbitration Agreement involve a waiver of substantive rights
Second, we note that in the absence of a state law which discourages the enforcement of arbitration agreements, no question of preemption, as such, is presented. The issue in such cases is whether a waiver of state law rights is enforceable under the FAA, rather than whether state law rights are themselves preempted by the FAA. The instant controversy presents such a case.
Peacock has failed to demonstrate any New Jersey policy against arbitration of claims such as hers. Accordingly, we reject her argument that the Arbitration Agreement is void as a matter of public policy. Clearly, as we just described, the waiver of a state law right to a judicial forum for the resolution of state claims is enforceable under the FAA. Thus, Peacock, by agreeing to arbitration on three occasions, effectively waived her right to a jury trial.36 Likewise, the
As to the waiver of state law rights unrelated to the provision of a judicial forum, we hold only that the inclusion of such waivers in a document described as an “Arbitration Agreement” cannot be asserted to avoid the arbitration agreed to therein. Rather, the party challenging the validity of such waivers must present her challenge to the arbitrator, who will determine the validity and enforceability of the waiver of asserted state law rights. Thus, here we leave it to the (..continued) and are rejected by us. Because no material dispute of fact as to her agreement was discerned by the district court--nor is any discerned by us--the district court properly denied her request for a jury trial.
In Doctor‘s Associates, Inc. v. Jabush, 89 F.3d 109, 114 (2d Cir. 1996), a party resisting a motion to compel arbitration sought a jury trial. The court ruled that a party does not become entitled to a jury trial under the FAA merely by demanding one, but bears the burden of demonstrating that there is a genuine issue as to whether there was an agreement to arbitrate. The Second Circuit held that to “establish a genuine issue entitling a party to a jury trial, ‘an unequivocal denial that the agreement [to arbitrate] had been made [is] needed, and some evidence should [be] produced to substantiate the denial.‘” (citing and quoting Interbras Cayman Co. v. Orient Victory Shipping Co., S.A., 663 F.2d 4, 7 (2d Cir. 1981). See also Doctor‘s Associates, Inc. v. Stuart, 85 F.3d 975, 983-84 (2d Cir. 1996)(party resisting arbitration does not get a jury trial merely by demanding one)(citations omitted); Dillard v. Merrill Lynch, Pierce, Fenner & Smith Inc., 961 F.2d 1148, 1154 (5th Cir. 1992)(party resisting arbitration bears “the burden of showing that he is entitled to a jury trial under § 4 of the Arbitration Act,” and must produce at least some evidence in support of factual allegations)(quoting Bhatia v. Johnston, 818 F.2d 418, 422 (5th Cir. 1987)), cert. denied, 506 U.S. 1079 (1993).
We also do not rule on whether Peacock has waived her right to punitive damages under NJLAD--a waiveable state right not preempted by the FAA. The availability of punitive damages is not relevant to the nature of the forum in which the complaint will be heard. Thus, availability of punitive damages cannot enter into a decision to compel arbitration. NJLAD provides that a victim of unlawful discrimination may be awarded punitive damages, but the issue of whether this right has been waived, see Swarts v. Sherwin-Williams Co., 581 A.2d 1328, 1331 (N.J. Super. Ct. App. Div. 1990), is separate and apart from the issue of whether an employee has agreed to an arbitral forum, and hence, is for the arbitrator to decide. See Mastrobuono, 115 S.Ct. 1212 (1995).
Finally, we are obliged to address one last argument made by Peacock. Peacock argues that, for two reasons, Great Western had waived its right to arbitrate. First she asserts that Great Western breached the Arbitration Agreement by failing to submit her claim to JAMS within ten days after receiving it from her.40 In light of the fact that we are affirming the Order of the district court compelling arbitration, the issue of whether Great Western used its best efforts to commence arbitration in a timely fashion is for the arbitrator to determine.41
Her second claim is that Great Western, by failing to seek another arbitrator after JAMS refused to arbitrate the dispute,42 waived its right to seek arbitration.
Even if we were to accept Peacock‘s argument that Great Western failed to request a second arbitrator after JAMS refused to accept arbitration, Peacock did not establish waiver. Peacock provides no record evidence either of the date on which JAMS refused to arbitrate, or of the date on which Great Western was informed of JAMS‘s refusal to arbitrate her claim.
Moreover, the record reveals that JAMS‘s refusal to arbitrate came long after Peacock herself withdrew the matter from arbitration,44 and that Great Western did attempt to secure another arbitrator.45 Thus, while Peacock fails to indicate (..continued) damages (e.g., punitive damages, which the Civil Rights Act of 1991 allow [sic] as available damages in certain circumstances; and, double damages for ‘willful’ conduct under the federal age discrimination statutes), but only if such damages are available under the relevant law.” Appellant‘s Brief at 33-34.
In other words, the arbitration process stalled neither because JAMS refused to arbitrate, nor because Great Western waived arbitration, but because Peacock refused to continue the arbitration process. Thus, no inference can be drawn that Great Western had waived its right to compel arbitration.
Next, the record makes clear that Great Western‘s response was always to insist that the only forum in which Peacock‘s complaints could be heard was the arbitral forum. In fact, in response to the letter of May 18, 1995, in which Peacock‘s allegations of sexual harassment were first made known to Great Western, Great Western advised Peacock that she could bring her claim to an arbitrator.47 Once Peacock filed her claim and then withdrew from arbitration, Great Western was consistent in preserving its right to an arbitral forum. Thus Great
. . . Peacock initiated the arbitration on August 25, 1995 . . . . On October 25, 1995, her new counsel purported to rescind all three arbitration agreements . . . . On November 8, 1995, Peacock filed suit against Great Western in New Jersey Superior Court and resisted all efforts to compel arbitration . . . .
Upon learning it had been sued, Great Western sent a letter to JAMS/Endispute, dated December 6, 1995, advising it that Peacock was now refusing to arbitrate. Great Western stated in its letter that:
The defendants will respond to this lawsuit and assert the enforceability of the Arbitration Agreement. However, until such time as the enforceability of the Arbitration Agreement is resolved, JAMS/ENDISPUTE need not take any action on this file.48
Indeed, Great Western attempted to preserve its right to an arbitral forum by seeking to compel arbitration in state court49 as well as in federal court. Moreover, after becoming aware of JAMS‘s refusal to arbitrate Peacock‘s claim, Great Western notified Peacock‘s counsel of the need to refer the dispute to another arbitration service.50
Given the burden that Peacock bears in demonstrating waiver, and her lack of evidence in support of her assertions, we are satisfied that Great Western clearly preserved the right to
In this case, none of these factors have been shown. Great Western did not initiate any litigation, and in response to Peacock‘s suit in state court, Great Western responded vigorously by moving for a stay of proceedings and for an order compelling arbitration in both state and federal courts. There has been no discovery initiated by Great Western, no litigation on the merits, and no prejudice which has inured to Peacock. In short, the record discloses that Great Western has not waived its right to compel arbitration of Peacock‘s claims.
The district court‘s Order of April 9, 1996, which, among other provisions, compels arbitration, will be affirmed.
Notes
The record clearly reveals, however, that there could be no material dispute of fact as to Peacock‘s having agreed to arbitrate. The arguments raised by Peacock, contending that she did not so agree, were properly discounted by the district court,
“These minimum standards for employer-wide arbitration procedures are:
1. The rights and remedies that would otherwise be available to an individual under applicable federal, state or local law should remain available under the arbitration clause, unless the individual employee would retain the right to pursue the unavailable remedies in court. We are particularly concerned that the clause maintains the right to try to win exemplary