Clinton Cole v. Burns International Security Services

KAREN LeCRAFT HENDERSON, Circuit Judge,

concurring in part and dissenting in part:

The majority’s first holding, that the arbitration agreement Cole’ signed is binding, is easily reached and I readily concur in it. As the majority indicates, both the statutory language and the decisions of “every circuit *1489 to consider this issue squarely” compel the conclusion that the agreement here does not come within the Section 1 exemption to the FAA. Maj. Op. 1471. The majority also acknowledges that the Supreme Court in Gil-mer “now has made it clear that, as a general rule, statutory claims are fully subject to binding arbitration, at least outside of the context of collective bargaining.” Maj. Op. 1478. Finally, the majority observes, as it must, that “all of the factors addressed in Gilmer are satisfied here.” Maj. Op. 1482.

Yet despite all the signals that the agreement must be enforced, the majority reaches the conclusion that it must only after protracted rumination on “what this ease is not about,” notably arbitration in collective bargaining situations, Maj. Op. 1472-76, and the distinction, which the majority ultimately finds irrelevant here, between an arbitrator and a judge, along with the concerns this distinction has raised for the majority (as well as for the Equal Employment Opportunity Commission and, at least in the past, for the National Labor Relations Board), Maj. Op. 1476-80. I see no reason for this far-ranging digression 1 — unless to distract from the subsequent and only briefly, if confound-ingly, explicated holding that the employer must assume all arbitrator expenses. And that is the portion of the majority opinion which I do not join.

By conditioning arbitration on the employer’s assumption of arbitrator costs, 2 the majority engages in pure judicial fee shifting which finds no support in the FAA, Gilmer or the parties’ agreement, not one of which addresses arbitration fee allocation. Yet, relying on this very silence, the majority now declares that the employer must bear the costs, regardless of the outcome or the merits of the parties’ positions, because of the majority’s own speculation on what the arbitration costs will be and who will be required to pay them — factual matters never presented to the district court or even argued by the parties on appeal. 3 The issues of costs and their allocation were first posed by the panel sua sponte during oral argument. I question initially, therefore, whether we should address them at all. Cf. Maj. Op. at Í484 n.12 (“Because Cole has not challenged the administrative fees charged by AAA, we do not address whether the AAA’s refusal to waive filing and other administrative fees could preclude enforcement of an arbitration agreement.”). In any event, the majority has now resolved those issues on the basis of its own research, see Maj. Op. 1480 n.8,1483-84 & n.13, and its construction of the AAA Rules, which were introduced only after argument at the panel’s request. Because the district court dismissed the complaint on a bare record consisting of the pleadings and attached exhibits, I would at a minimum remand to afford that court the opportunity to develop an evidentiary record and to make findings of fact regarding the likely costs and their allocation. Nevertheless, if the majority insists on soliciting evidence on its own and construing the AAA Rules in the first *1490 instance, I think it should characterize the rules accurately.

The majority states that the AAA Rules, which it concedes the arbitration agreement “incorporates,” 4 are “silent” on allocation of “the arbitrator’s fees.” See Maj. Op. 1485. But the rules are not mute. AAA Rule 35 incorporates by reference the AAA’s “Administrative Fee Schedule,” which proclaims its allocation policy: “Unless the parties agree otherwise arbitrator compensation and administrative fees are subject to allocation by the arbitrator in the award.” This statement plainly contemplates the precise circumstance we address here — lack of an express agreement on allocation of arbitrator compensation and administrative fees — and provides a solution — allocation of those expenses by the arbitrator in his award. Thus, the majority, under the rubric of contractual interpretation, modifies the contract’s provisions by usurping the arbitrator’s authority to allocate “arbitrator compensation” expressly granted under the rules 5 and incorporated into the parties’ agreement, see supra note 4. The majority thereby ignores the terms to which the parties agreed, choosing instead to rewrite the agreement as the majority would have it read.

The primary justification offered for the majority’s contract reformation is to preserve the' employee’s statutory rights which, the majority asserts, will be lost if he is subjected to all the onerous expenses of arbitration: “[I]f an employee like Cole is required to pay arbitrator’s fees ranging from $500 to $1,000 per day or more,-... in addition to administrative and attorney’s fees, is it likely that he will be able to pursue his statutory claims? We think not.” Maj. Op. 1484 (citation omitted). ’ Yet the majority “assume[s] ... that employees who would qualify for in forma pauperis status in the federal courts will similarly qualify for a waiver of fees under the AAA Rules.” Maj. Op. 1484 n.12. Attorney’s fees too will presumably be treated in arbitration substantially as they would be in litigation: made contingent upon success and, like administrative fees, assessable against the employer. See AAA Rules 32(d), 35. As for the arbitrator expenses (whatever they might actually turn out to be), to the extent if any that the arbitral award does not shift them to the employer, they will not necessarily add to the employee’s overall dispute resolution expense. The Due Process Protocol for Mediation and Arbitration of Statutory Disputes Arising out of the Employment Relationship (endorsed by, among others, the American Arbitration Association, see supra n. 4), which calls for arbitrator expenses to be shared to the extent feasible by both employer and employee, see ¶ 6, was created with the express goal of “provid[ing] expeditious, accessible, inexpensive and fair private enforcement of statutory employment *1491 disputes,” Protocol, Genesis. There is no reason to believe that result will not occur here.

The majority also rationalizes its contractual modification as a counter to the employer’s commanding position in the employment relationship: “Arbitration will occur in this case only because it has been mandated by the employer as a condition of employment.” Maj. Op. at 1484. I would suggest that the appellant’s claims will be arbitrated, if at all, because each party agreed that the employer could so elect. In any event, if the majority believes that the arbitration agreement was reached under duress or that it is unconscionable, it should say so straight out and declare it unenforceable, as the appellant requests. On the other hand, if the majority truly believes the agreement is enforceable, as it maintains, it should enforce the agreement as written without judicial reformation.

For the foregoing reasons I dissent from the majority’s holding that contractually required arbitration is conditioned on the employer’s agreement to pay all arbitrator expenses.

.While I find the majority's lengthy discourses irrelevant and unnecessary, I cannot help but contrast the observation therein that “[a] court is unlikely to rely on a treatise — even ... a widely respected one,” Maj. Op. 1477 (quoting Richard H. Block & Elizabeth A. Barasch, Practical Ramifications of Arbitration of Employment Discrimination Claims, in Proc. of N.Y.U. 44th Ann. Conf. on Lab. 281, 294 (1991)), with the majority opinion in general and in particular with the portion of Part III.B.1 quoting an article by "Professor Theodore St. Antoine, a preeminent labor law scholar," that "has been widely recognized as an almost gospel statement on' the meaning of the Steelworkers Trilogy.” See Maj. Op. 1475. Of more significance, owing to its impropriety, is the majority’s statement that "it is perhaps misguided to mourn the Supreme Court’s endorsement of the arbitration of complex and important public law claims.” Maj. Op. 1488. It is more than misguided — it is wrong. We are not in the business of lamenting or celebrating decisions of the United States Supreme Court. We are to follow them. Period.

. Although the majority purports to require the employer to pay only "arbitrator’s fees," it justifies its holding in part by suggesting that these fees merely compound the expense of arbitration which also includes attorney's fees and administrative fees. Yet neither administrative nor attorney’s fees should prove more burdensome than in litigation. See infra pages 1490-91.

. The appellant asserted only that (1) Section 1 of the FAA exempts the agreement here from the FAA’s general arbitration requirement and (2) the arbitration requirement in the agreement is unconscionable, both of which arguments the majority rejects.

. The agreement provides that arbitration be conducted "in accordance with the rules of the American Arbitration Association,” Deferred App. 12, a provision which plainly allays the majority's concerns about arbitrating statutory claims. The AAA Rules were developed to resolve "[c]onflicts which arise during the course of employment, such as wrongful termination, sexual harassment, and discrimination based on race” (the precise claims raised here) and to enable both employer and employee "to have complaints heard by an impartial person with expertise in the employment field” in "efficient and cost-effective procedures.” AAA Rules, Introduction at 1-2. To ensure fairness, the AAA drafted the rules "in cooperation with a representative Committee of advisors ... comprised of fourteen employment management and plaintiff attorneys, retired judges and full-time arbitrators,” id. at 2, and has "endorse[d] the Dm Process Protocol, which ensures fairness and equity for the resolution of workplace disputes,” see infra page 1491, and itself "encourages the use of ... arbitration of statutory disputes conducted under due process safeguards, id. at 3.” Further, the AAA, "as a matter of policy, will administer dispute resolution programs which meet the due process standards as outlined in [its] rules and the Due Process Protocol.” Id. at 3-4.

. The authority to allocate costs generally is inherent in the broad language of Rule 32(c): "The arbitrator may grant any remedy or relief that the arbitrator deems just and equitable, including, but not limited to, any remedy or relief that would have been available to the parties had the matter been heard in court.” In addition, the AAA Rules provide for allocation of filing fee costs and for relief to parties who cannot afford administrative costs generally. See AAA Rule 35 (providing that "[t]he filing fee shall be advanced by the initiating party or parties, subject to final apportionment by the arbitrator in the award" and that “[t]he AAA may, in the event of extreme hardship on any party, defer or reduce the administrative fees.”).