Case Information
*1 Before HATCHETT, Chief Judge, and TJOFLAT and COX, Circuit Judges.
HATCHETT, Chief Judge:
Avnet, Inc., appeals a district court ruling refusing to compel arbitration in a former employee's lawsuit alleging violations of Title VII and Florida law. We affirm.
FACTS
From September 23, 1992, until January 13, 1994, Ellen Sue Paladino worked for Avnet, Inc. (Avnet), as a Regional Technical Sales Consultant for the Southeastern United States. Prior to beginning work, Paladino signed a handbook acknowledgment containing a "consent to arbitration" agreement. The arbitration agreement (which was in smaller type than the handbook's text) provided as follows:
IMPORTANT NOTICE: READ THIS CAREFULLY
....
CONSENT TO ARBITRATION
I recognize that during the course of my employment differences can arise between the Company and me. To that end, the Company and I consent to the settlement by arbitration *2 of any controversy or claim arising out of or relating to my employment or the termination of my employment. Arbitration shall be in accordance with the commercial rules of the American Arbitration Association before a panel of three arbitrators in or near the city where I am principally employed. The Company and I further consent to the jurisdiction of the highest court of original jurisdiction of the state where I am principally employed, and of the United States District Court in the District where the arbitration takes place, for all purposes in connection with the arbitration, including the entry of judgment on any award. The arbitrator is authorized to award damages for breach of contract only, and shall have no authority whatsoever to make an award of other damages.
(Emphasis added.)
On January 13, 1994, Avnet fired Paladino. Paladino subsequently obtained a right to sue letter from the Equal Employment Opportunity Commission and, on September 8, 1995, filed this lawsuit against Avnet alleging violations of Title VII, a Florida anti-discrimination statute and Florida's common law. The lawsuit requested wide-ranging relief for the alleged violations, including back pay, reinstatement, damages for emotional pain and suffering, reputational harms, injunctive relief, costs and attorney's fees. On November 22, 1995, Avnet responded to Paladino's lawsuit with a motion to stay proceedings and compel arbitration, based on the arbitration agreement described above and provisions of the Federal Arbitration Act (FAA), 9 U.S.C. §§ 1-16, which require the courts to stay proceedings and compel arbitration under certain circumstances. Paladino and Avnet then filed a series of legal briefs on Avnet's pending motion, and, on December 19, 1995, the district court denied the motion. Avnet filed this appeal.
ISSUE
Avnet advances a single issue on appeal: whether the district court erred in refusing to stay this action and compel the parties to submit the issues raised in the complaint to arbitration.
JURISDICTION AND STANDARD OF REVIEW
Jurisdiction over Avnet's appeal from an order denying a motion to stay proceedings and
compel arbitration is proper pursuant to 9 U.S.C. § 16(a).
Accord Hornbeck Offshore (1984) Corp.
*3
v. Coastal Carriers Corp. (In re Complaint of Hornbeck Offshore (1984) Corp.),
DISCUSSION
This case requires us to apply basic principles of contract interpretation in harmony with a general federal policy in favor of arbitration. The federal policy is expressed in
[t]he Federal Arbitration Act [which] was originally enacted in 1925 and then reenacted and codified in 1947 as Title 9 of the United States Code. Its purpose was to reverse the longstanding judicial hostility to arbitration agreements that had existed at English common law and had been adopted by American courts, and to place arbitration agreements upon the same footing as other contracts.
Cole v. Burns Int'l Sec. Servs.,
The FAA does not "require parties to arbitrate what they have not agreed to do so, ... nor
does it prevent parties who do agree to arbitrate from excluding certain claims from the scope of
their arbitration agreement."
American Express Fin. Advisors, Inc. v. Makarewicz,
In this case we are faced with an arbitration agreement whose scope is defined in two clauses. The first clause states in a general fashion that Avnet and Paladino "consent to the settlement by arbitration of any controversy or claim arising out of or relating to ... [Paladino's] employment or the termination of ... [her] employment." Viewed in isolation, this clause appears all-inclusive, embracing both breach of contract and statutory claims. The arbitration agreement contains a second clause, however, that muddies the waters considerably. That clause states that "[t]he arbitrator is authorized to award damages for breach of contract only, and shall have no authority whatsoever to make an award of other damages."
The second clause can be read two ways: as a clarification of the types of claims the parties intended to submit to arbitration, i.e., only breach of contract claims, or as an explicit limitation on remedies available for any claims submitted to arbitration. Avnet urges us to construe the second clause as a limitation on remedies, and not as a statement about the types of claims the parties agreed to arbitrate. Avnet further urges that this court should then find the limitation on remedies inapplicable to Paladino's statutory claims if those statutes authorize remedies that a party cannot be required to waive as a condition of employment. Stated more plainly, Avnet urges us to declare that it has entered into a valid arbitration agreement with an invalid limitation of remedies clause that should be stricken for purposes of resolving its dispute with Paladino. Paladino responds, in part, with an argument that the arbitration agreement Avnet authored unconstitutionally denies her access to the courts, and should be stricken in its entirety. [2]
At first glance, Avnet's suggested approach seems appealing: it sends the parties to
arbitration, in accordance with the federal policy favoring arbitration, but preserves Paladino's right
to benefit from statutory remedies. Upon closer examination, however, Avnet's suggested approach
is far more problematic. This is so because the presence of an unlawful provision in an arbitration
agreement may serve to taint the entire arbitration agreement, rendering the agreement completely
unenforceable, not just subject to judicial reformation.
See, e.g., Graham Oil v. Arco Prods. Co.,
"It is well understood that, where a contract is unclear on a point, an interpretation that
makes the contract lawful is preferred to one that renders it unlawful."
Cole,
The court in
Alcaraz v. Avnet, Inc.,
The conclusion that the Alcaraz court reached is fully consistent with the federal presumption in favor of arbitrability. As suggested above, this interpretation of Avnet's arbitration agreement saves that agreement from being held unenforceable in its entirety. The interpretation thus heightens the likelihood that Avnet will be able to rely on the FAA to have at least some of its disputes with employees resolved via arbitration in the future. [3]
This approach also remains true to our precedents, most particularly our recent holding in
Brisentine v. Stone & Webster Engineering Corp.,
a mandatory arbitration clause does not bar litigation of a federal statutory claim, unless three requirements are met. First, the employee must have agreed individually to the *8 contract containing the arbitration clause.... Second, the agreement must authorize the arbitrator to resolve federal statutory claims—it is not enough that the arbitrator can resolve contract claims, even if factual issues arising from those claims overlap with the statutory claim issues. Third, the agreement must give the employee the right to insist on arbitration if the federal statutory claim is not resolved to his satisfaction in any grievance process.
Brisentine
does not stand for the proposition that an arbitration agreement must specifically
list every federal or state statute it purports to cover.
See, e.g., Bender v. A.G. Edwards & Sons, Inc.,
In this case, Avnet's arbitration agreement is woefully deficient, at least to the extent that it purports to cover statutory claims. First, it does not generally and fairly inform Paladino—a worker *9 who is presumably not trained to decipher legalese—that it covers statutory claims such as Title VII claims. Rather it states in one clause that it covers "any controversy or claim arising out of or relating to" her employment or termination, and states in another clause that arbitrators shall have authority to award damages for "breach of contract only." This confusing language is a far cry from the clear language we approved of in Bender, or from language that other courts have found sufficient to provide an employee fair notice. See, e.g., Cole, 105 F.3d at 1469 (approving arbitration agreement that read as follows:
This pre-dispute resolution agreement will cover all matters directly or indirectly related to your recruitment, employment or termination of employment by the Company; including, but not limited to, claims involving laws against discrimination whether brought under federal and/or state law, and/or claims involving co-employees but excluding Worker's Compensation Claims.)
Second, Avnet's arbitration agreement contains language which, if read as Avnet proposes, is
fundamentally at odds with the purposes of Title VII because it completely proscribes an arbitral
award of Title VII damages.
See Alcaraz,
CONCLUSION
Given the deficiencies and limited nature of this arbitration agreement, the district court properly declined to compel arbitration of Paladino's lawsuit alleging statutory anti-discrimination claims. We therefore affirm the district court's order and remand this case for further proceedings.
AFFIRMED and REMANDED.
COX, Circuit Judge, joined by TJOFLAT, Circuit Judge:
We agree with Chief Judge Hatchett that the district judge correctly refused to compel arbitration. But we disagree that the arbitration clause at issue excludes Title VII claims. We hold rather that the clause includes Title VII claims, but that (as Chief Judge Hatchett observes) it *10 deprives the employee of any prospect for meaningful relief and is therefore unenforceable.
1. Background
"In consideration of [her] employment by" the defendant Avnet, Inc., Ellen Paladino consented to
settlement by arbitration of any controversy or claim arising out of or relating to [her] employment or the termination of [her] employment. Arbitration shall be in accordance with the commercial rules of the American Arbitration Association before a panel of three arbitrators in or near the city where [she is] principally employed.... The arbitrator is authorized to award damages for breach of contract only, and shall have no authority whatsoever to make an award of other damages.
(R.-6 Ex. A.) After being terminated, Paladino sued Avnet under Title VII, alleging gender discrimination. She seeks back pay, reinstatement or front pay, and attorney's fees. Paladino refused to arbitrate the claim, and Avnet immediately moved for a stay and to compel arbitration pursuant to the Federal Arbitration Act (FAA) §§ 3, 4. See 9 U.S.C. §§ 3, 4 (1994). The district judge denied the motion. No opinion appears in the record.
Avnet appeals the denial of the motion to compel. This court reviews the district court's
ruling de novo because it is a matter of law.
See Kotam Elecs., Inc. v. JBL Consumer Prods., Inc.,
2. Discussion
a. Applicability of the Federal Arbitration Act
The FAA governs Avnet's motion. The FAA's provisions concerning the validity of
arbitration clauses reach to the edge of Congress's power under the Commerce Clause.
See Allied-
Bruce Terminix Cos. v. Dobson,
Furthermore, the appearance of the arbitration clause in an employment contract does not
*11
exempt the clause from the FAA under that Act's first section. All but one of the other circuits to
have addressed the issue have held that the FAA § 1's exemption of "contracts of employment of
seamen, railroad employees, or any other class of workers engaged in foreign or interstate
commerce," 9 U.S.C. § 1, includes only employees actually engaged in transportation of goods in
commerce.
See Cole v. Burns Int'l Security Servs.,
According to the allegations of the complaint—the only facts we have at present—Paladino provided technical support to computer system salespeople. There is no evidence that this required her to move goods in interstate commerce. The employment contract therefore does not fall within § 1's exclusion.
b. Construing the Arbitration Clause
The FAA puts arbitration clauses on even footing with all other clauses in a contract.
See
Allied-Bruce Terminix Cos.,
Two provisions of the arbitration clause here describe arbitrable claims and available
remedies. The first unambiguously includes all claims: it extends the clause to "any controversy
or claim arising out of or relating to my employment or the termination of my employment." "Any"
is not ambiguous, and if any claim "aris[es] out of ... termination," it is a Title VII
gender-discrimination claim. This provision makes Title VII claims arbitrable, as this circuit has
held for language that is materially similar.
See Bender v. A.G. Edwards & Sons, Inc.,
The second relevant provision, however, just as plainly circumscribes the arbitrator's
authority to grant relief. That provision divests the arbitrator of jurisdiction to award any relief in
a Title VII action: "The arbitrator is authorized to award damages for breach of contract only, and
shall have no authority whatsoever to make an award of other damages." Title VII actions are, of
course, not contractual.
See Alexander v. Gardner-Denver Co.,
These two provisions are not inconsistent; they should rather be read together. So read, they work hand-in-glove to make it difficult for the employee to obtain any relief. The employee must go to arbitration. Arguably, the employee can get a bare finding of liability there, but nothing more. The advantages to the drafter, Avnet, which imposed the agreement as a condition of employment, are obvious. Not only does it avoid discovery and other expenses of in-court litigation; it also is safe from damages. The words are plain, and the intent behind them apparent. There is no need, therefore, to resort to any other contract construction rules.
We therefore conclude that the arbitration clause includes Title VII claims within its scope, but denies the employee the possibility of meaningful relief in an arbitration proceeding. c. Enforceability of the Clause
Federal statutory claims are generally arbitrable because arbitration, like litigation, can serve
a remedial and deterrent function, and federal law favors arbitration.
See Gilmer v.
Interstate/Johnson Lane Corp.,
This clause defeats the statute's remedial purposes because it insulates Avnet from Title VII
damages and equitable relief.
Cf. Brisentine v. Stone & Webster Eng'g Corp.,
The difficulty of obtaining meaningful relief is not, moreover, the only infirmity of this
clause. Because Avnet makes no promises to pay for an arbitrator, employees may be liable for at
least half the hefty cost of an arbitration and must, according to the American Arbitration
Association rules the clause explicitly adopts, pay steep filing fees (in this case $2000).
[2]
One circuit
has in dicta stated that such "fee-shifting" is a per se basis for nonenforcement.
Cole,
Arbitration ordinarily brings hardships for litigants along with potential efficiency. Arbitral
litigants often lack discovery, evidentiary rules, a jury, and any meaningful right to further review.
In light of a strong federal policy favoring arbitration, these inherent weaknesses should not make
an arbitration clause unenforceable.
See Gilmer,
3. Conclusion
For these reasons, we affirm the district court.
AFFIRMED.
Notes
[1] It is assumed that the exception contained in section 1 of the FAA for "contracts of
employment of seamen, railroad employees, or any other class of workers engaged in foreign or
interstate commerce" does not apply to the agreement at issue here. It is best not to decide this
issue because it is unclear that the district court fully considered it, and because Paladino failed
to adequately develop the record with respect to her actual responsibilities as a Regional
Technical Sales Consultant for the Southeastern United States. Although a majority of the
circuits that have addressed the section 1 exception have construed it narrowly, see
Cole v. Burns
Int'l Sec. Servs.,
[2] Paladino also makes the following arguments: (1) that no binding arbitration agreement exists because her signature on a handbook acknowledgment form cannot constitute a contract under Florida law; (2) that any agreement that does exist is void ab initio because of fraud in factum; and (3) that the FAA exempts employees who are involved in interstate commerce. Because we resolve this case on contract interpretation grounds—which we construe Paladino's access to the courts argument to present—we do not address Paladino's other arguments.
[3] Although Avnet mentions its common law claims in its initial description of the issue on appeal, it has advanced no substantive argument in its brief or at oral argument to the effect that Paladino's common law claim should be subject to arbitration even if her statutory claims are not. We thus deem that argument abandoned. See Greenbriar, Ltd. v. City of Alabaster, 881 F.2d 1570, 1573 n. 6 (11th Cir.1989) (issues not argued on appeal are deemed waived, and a passing reference in an appellate brief is insufficient to raise an issue).
[1] The parties do not say what state's law applies; since Paladino was employed in Orlando, we assume that Florida law applies. These principles of contract construction are, in any event, matters of hornbook law.
[2] Paladino's complaint does not seek a specific amount of damages; such claims incur a $2000 filing fee. AAA Commercial Arbitration Rules Fee Schedule.
