Amicus Curiae Brief — Circuit City Stores, Inc. v. Adams

, VUPIeme WOULL, U.o.

10 FILED

=a

No. 99-1379

Supreme Court of the United StERK

—-

CIRCUIT CITY STORES, INC.,

Petitioner,

Vv.

SAINT CLAIR ADAMS,

Respondent.

>

On Writ Of Certiorari to the

United States Court Of Appeals

for the Ninth Circuit

>

BRIEF OF THE CHAMBER OF COMMERCE

OF THE UNITED STATES OF AMERICA AS

AMICUS CURIAE IN SUPPORT OF PETITIONER

4

LAWRENCE Z. LORBER*

LAWRENCE R. SANDAK

STEPHANIE L. MARN

PROSKAUER ROSE LLP

1233 Twentieth Street, N.W.

Suite 800

Washington, D.C. 20036-2396

(202) 416-6800

Of Counsel:

STEPHEN A. BOKAT

ROBIN S. CONRAD

NATIONAL CHAMBER LITIGATION CENTER, INC.

1615 H Street, NW

Washington, D.C. 20062

(202) 463-5337

*Counsel of Record

TABLE OF CONTENTS

IID 4 o ct'ucndwetseerasbesdeccsaces ili

EL bc ines KcamedesuinedaSaedean tue x

ARIE nn ctovecsckcsnucdse@udsaeue ]

PEE 6.6466 eke dNenneddddhabeaudessenebaees 4

I. SECTION 1 OF THE FEDERAL ARBITRATION

ACT DOES NOT EXCLUDE ALL CONTRACTS OF

EMPLOYMENT FROM ITS COVERAGE ........ 4

II. SECTION 1 OF THE FAA SHOULD BE

INTERPRETED NARROWLY BECAUSE FEDERAL

POLICY FAVORS ARBITRATION ............ 10

A. Courts Have Long Recognized the Federal Policy

Paworemg ASUUBGMOR «ww. occ ccc ccc ccscces 10

B. Arbitration Should Be Favored Because the

Federal Civil Rights Statutes Contemplate

Alternative Dispute Resolution ............. 1]

III. FEDERAL POLICY FAVORING ARBITRATION IS

WELL FOUNDED BECAUSE ARBITRATION

ALLOWS CLAIMS TO BE RESOLVED FAIRLY,

QUICKLY AND INEXPENSIVELY ............ 14

IV. EXCLUDING EMPLOYMENT DISPUTES FROM

MANDATORY ARBITRATION WOULD LEAD TO

BIFURCATION OF PROCEEDINGS WITH THE

POTENTIAL FOR CONFLICTING RESULTS OF

PPS IUD cn cciccccceceisctastuses 23

Conclusion

TABLE OF AUTHORITIES

CASES

Allied-Bruce Terminix Cos., Inc. v. Dobson,

a i ebes cows

Asplundh Tree Expert Co. v. Bates,

71 F.3d 592 (6th Cir. 1995) ............

Bennett v. Spear, 520 U.S. 154 (1997) ......

Circuit City Stores, Inc. v. Adams,

194 F.3d 1070 (9th Cir. 1999) (per curiam)

Cole v. Burns Int'l Security Services,

105 F.3d 1465 (D.C. Cir. 1997) .........

Craft v. Campbell Soup Company,

177 F.3d 1083 (9th Cir. 1999) ..........

Dean Witter Reynolds, Inc. v. Byrd,

Es i cece beseenssees

Dickstein v. duPont,

443 F.2d 783 (Ist Cir. 1971) ...........

Erving v. Virginia Squires Basketball Club,

468 F.2d 1064 (2d Cir. 1972)...........

Gilmer v. Interstate/Johnson Lane Corp.,

i « cvhcedenn 6gaeee ee

Great Western Mortgage Corp. v. Peacock,

110 F.3d 222 (3d Cir.), cert. denied, 522 U.S. 915

Ditskspebadeecasunesdudununeeacuane 4,24

Mastrobuono v. Shearson Lehman Hutton, Inc.,

Pe Es Janek ceGduebddaokeetelas 24

McWilliams v. Logicon, Inc.,

Pe Pa ee CG CEU occ ccndccudetesence 5

Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.,

ee ee Pi dcosddccccebecueutess passim

Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp.,

Gs Sa. anbukeknedaeueteuesdians 11,14

O'Neil v. Hilton Head Hosp.,

11S F.36 272 (40 Cis. 1997) ... 2. ccc ccccens 4, 13

Paladino v. Avnet Computer Technologies,

134 F.36 1054 (1 Bae Cie. 1996) 2... cc ccc ccccne 5

Patterson v. Tenet Healthcare, Inc.,

iii ks 5

Perry v. Thomas,

Se as dcaticedeuducusdseskniue 13

Prima Paint Corp. v. Flood & Conklin Mfg Co.,

Fes SO chcnsnntccchsusseneowdewes 11

Pryner v. Tractor Supply Co.,

109 F.3d 354 (7th Cir.), cert. denied, 522 U.S. 912

OD. :..c ccciasicdbuccdiinae tae 5

iv

Rodriquez de Quijas v. Shearson/American Express, Inc.,

Ss SN cece ccctteactesccccesssese 13

Rojas v. TK Communications, Inc.,

BF FBG Fee Cees BID co ccccccsccccccdissecces 2

Rosenberg v. Merrill Lynch, Pierce, Fenner & Smith Inc.,

6 ff § 9 Sarr r 14

Shearson/American Express Inc. v. McMahon,

Ss PEs evedcvedcsacceseesésdveces 13

Southland Corp. v. Keating,

es PE adcccossbercsetbneceeecénsaes 11

Strachan v. Colon,

fs }- 7 ls 3 | rrr rr Te l

Volt Information Sciences, Inc. v. Board of Trustees of

Leland Stanford Junior Univ.,

oc ccncccnccccccectcncceces 24

Wilko v. Swan,

Pe ED occ bbctocnscdecnscéiuveceds 22

STATUTES

Age Discrimination in Employment Act of 1967. ...1, 13

Alternative Dispute Resolution Act of 1998 ....... 11-12

Americans with Disabilities Act .................55- l

Vv

SIE GED Uidececccnccccacdssvodesss |

Civil Rights Act of 1991,§ 118 .................. 1,11

Employee Polygraph Protection Act ................. l

Employee Retirement Income Security Act............ ]

CT ED bade dnnndecécecanteieccbases l

Family and Medical Leave Act of 1993 ............ 1,12

Federal Arbitration Act,9U.S.C.§1 ........... passim

Racketeer Influenced and Corrupt Organizations Act,

SP OEE co noccecvkecddécensducss 13

TEI 6 6 bibcccancucudeewrssnsens l

Securities Exchange Act of 1933 ................4.. 12

Securities Exchange Act of 1934 ...........,....... 12

ac dcidccccaccesccshesddeeseeuncdess 13

Worker Adjustment and Retraining Notification Act .... 1

MISCELLANEOUS

13 Daily Lab. Rep. A-1 (BNA) (Jan. 20, 2000) . . 16, 18, 19

Admin. Office of the United States Courts, 1975-98 .... 16

Lisa Bingham, Employment Arbitration: The Repeat

Player Effect, 1 Employee Rts. & Employment

Ps DEED ecbecanvedesenseveceasceess 19

Richard A. Epstein, Fidelity Without Translation,

SEEMED cccecevccceseonseseset 8

Susan A. FitzGibbon, Reflections on Gilmer

and Cole, 1 Employee Rts. & Employment

Pr Pecisuvhastéesneekdnsevceses 20

Marc Galanter, Why the "Haves" Come out Ahead:

Speculations on the Limits of Legal Change,

9 L. & Soc'y Rev. 95 (1974) .......... cece cece: 22

JAMS/Endispute Rules and Procs. for Mediation/Arb.

of Employment Disp. (1995)

lc i ree 21-22

Lewis Maltby, Employee Arbitration: Is it Really

Second Class Justice?, Disp. Resol. Mag., Vol. 6,

Seek EP OOD ccwcaccscsececectesns 19-20

vii

Mandatory Arbitration Agreements in Securities | Theodore J. St. Antoine, Mandatory Arbitration of

Industry Employment Contracts: Hearings Employee Discrimination Claims: Unmitigated

before the Comm. on Banking, Housing, Evil or Blessing in Disguise?, 15 T.M. Cooley

and Urban Affairs, July 3, 1998 at iv (written SS ST PPPPerTirrrrcerrrerrre rire

statement of Stuart J. Kaswell, General

Counsel, Securities Industry Ass'n) .............. 17 Michael J. Yelnosky, Title VII, Mediation,

and Collective Action, 1999 U. Ill. L. Rev.

Garry G. Mathiason, Evaluating and Using FED cceccovecesececcececccccecececccesscese

Employer-Initiated Arbitration Policies and

Agreements: Preparing the Workplace

for the Twenty-First Century, Q227

re 18

—_—--- —-—_—--

John W.R. Murray, The Uncertain Legacy of Gilmer:

- Mandatory Arbitration of Federal Employment

Discrimination Claims, 26 Fordham Urb. L.J. 281

SED KabeeddscdenccuunekeeausdeseNsiebest 20

Nat. Rules for Resol. of Employment Disp.

I te EEE Sunn dévodsedcenciecsess 21

Martin J. Oppenheimer & Cameron Johnstone,

A Management Perspective: Mandatory

Arbitration Agreements are an Effective

Alternative to Employment Litigation,

52 Disp. Resol. J. 19 (1997)... 0.2... eee eee eee 17

Report of the Second Circuit Task Force on Gender,

Racial and Ethnic Fairness in the Courts,

ff §& FF § % Beer 15-16

Elizabeth Rolph, et al., Inst. For Civil Justice,

Escaping the Courthouse: Private Alternative

Dispute Resolution in Los Angeles (1994) ......... 18

Viii

BRIEF AMICUS CURIAE

This amicus curiae brief is submitted in support of the

Petitioner Circuit City Stores, Inc. By letters filed with the

Clerk of the Court, Petitioner and Respondent have consented

to the filing of this brief.'

STATEMENT OF INTEREST OF AMICUS CURIAE

The Chamber of Commerce of the United States of

America (the “Chamber”) is the world’s largest business

federation. |The Chamber represents an underlying

membership of nearly three million businesses and

organizations, with 140,000 direct members, in every size,

sector and geographic region of the country. The Chamber

serves as the principal voice of the business community. An

important function of the Chamber is to represent the interests

of its members by filing amicus briefs in this Court on issues

of national concern to American business. The Chamber has

a particular interest in this case since it addresses an issue of

great concern to its members - the enforceability of pre-

dispute arbitration clauses, which are used by many Chamber

members.

' Pursuant to Supreme Court Rule 37.6, the Chamber

of Commerce of the United States of America states that this

brief was prepared in its entirety by the Chamber and its

counsel. No monetary contribution toward the preparation or

submission of this brief was made by any person other than

the Chamber, its members or their counsel.

x

SUMMARY OF ARGUMENT

The ancient adage that “justice delayed is justice

denied” is at the core of our legal tradition, finding its roots in

the Magna Carta, which provided that “justice be to none

denied or delayed.” Strachan v. Colon, 941 F.2d 128 (2d Cir.

1991)(citing 1 W.S. Holdsworth, A History of English Law,

57-58 (3d ed. 1922)). Perhaps in no area of civil law does this

legal principle carry more substance than in the application of

laws governing the workplace. During the past 40 years, the

workplace has witnessed an explosive burst of lawmaking,

regulation and adjudication at the federal, state and local

levels by which the diverse elements of our workforce have

been provided with protections and rights. These

developments did not occur in one overarching legislative act,

a “big bang” of employment legislation, but rather in separate,

successive acts, by which individual status rights were

recognized and protected.

Thus, beginning with the Equal Pay Act of 1963, the

Civil Rights Act of 1964, the Age Discrimination in

Employment Act of 1967, the Rehabilitation Act of 1973, the

Employee Retirement Income Security Act; through the

Employee Polygraph Protection Act, the Worker Adjustment

and Retraining Notification Act, the Americans with

Disabilities Act, the Civil Rights Act of 1991 and the Family

Medical Leave Act, several additional statutes, as well as the

detailed regulatory schemes accompanying these laws and the

case law built thereon, the American workplace has become

perhaps the most regulated area of common human activity.

Since this regulatory structure was developed in a

piecemeal fashion, these laws have different procedural

requirements, governmental agency involvements,

2

enforcement schemes and remedies. And this federal

structure is often mirrored by state and local regulatory and

enforcement schemes, with their own procedural requirements

and independent remedies, which apply in tandem with the

federal requirements. The courts have extended workplace

protections through recognition of various common law

actions, sounding in both tort and contract. For both the

employers who must comprehend and follow this complex

mosaic of laws and the employees who look to them for

protection, the complexity of the workplace regulatory

scheme is particularly challenging.

The purpose of underscoring the complexity of the law

of the workplace is not to question the various rights and

protections thereby established. Rather, it is to provide an

understanding of a basic principle. This extraordinarily

complex structure has been built to ensure a very simple

premise: that each individual employee be treated fairly and

equitably in the workplace and that each employer understand

what is expected to achieve this result. Yet, the very

complexity builds in delays and confusion. And when the

ultimate forum for resolution of employment disputes is the

courts, already burdened by growing caseloads of criminal

and civil matters, expeditious resolution is often impossible.

The result is that the intended benefits of these laws are often

dissipated by interminable legal jousting and the necessity to

find a place in an impossibly crowded court system.

Employees who are attempting to secure their rights or redress

grievances, and the employers who desire to understand their

obligations and conduct their businesses accordingly, are

forced into an endless legal contest which often freezes the

employment relationship into a perpetual state of conflict and

confusion. Perhaps the current morass of employment

adjudication was best described by Charles Dickens when he

3

wrote about another litigation one hundred and fifty years

ago:

Jarndyce and Jarndyce drones on. This

scarecrow ofa suit has, in course of time,

become so complicated that no man alive

knows what it means. The parties to it

understand it least, but it has been

observed that no two Chancery lawyers

can talk about it for five minutes without

coming to total disagreement as to all the

premises. Innumerable children have

been born into the cause; innumerable

young people have married into it;

innumerable old people have died out of

it. Scores of persons have deliriously

found themselves made parties to

Jarndyce and Jarndyce without knowing

how or why; whole families have

inherited legendary hatreds with the suit.

Charles Dickens, Bleak House 4 (Bantam Classic ed., Bantam

Books 1983 (1853).

It cannot have been intended by the authors of our

unique employment statutes that the parties would become

like Jarndyce and Jarndyce. Yet without a fair, expeditious

and economical dispute resolution process, that is precisely

what will happen to our employment law process. Therefore.

alternative dispute resolution processes, including arbitration,

which satisfy due process and fairness requirements and

ensure that statutory rights and remedies are enforced, should

be preserved. The Ninth Circuit’s interpretation of the

4

Federal Arbitration Act, (“FAA”) which stands alone among

the federal courts that have reviewed this issue, is

unnecessarily cramped and restricted, and at odds with the

language of that statute, the policies underlying the

encouragement of alternative dispute resolution mechanisms,

including contractual arbitration, and the basic public policy

which encourages fair and rapid resolution of employment

disputes.

ARGUMENT

I. SECTION 1 OF THE FEDERAL ARBITRATION

ACT DOES NOT EXCLUDE ALL CONTRACTS

OF EMPLOYMENT FROM ITS COVERAGE

With the exception of the Ninth Circuit,’ every United

States Court of Appeals that has addressed the scope of the

FAA’s “workers engaged in . . . interstate commerce”

exclusion has concluded that a narrow construction of 9

U.S.C. § 1 to include only employees actually engaged in the

channels of interstate commerce comports with the plain

meaning of the statute and federal policy favoring arbitration.

See Dickstein v. duPont, 443 F.2d 783, 785 (1st Cir. 1971);

Erving v. Virginia Squires Basketball Club, 468 F.2d 1064,

1069 (2d Cir. 1972); Great Western Mortgage Corp. v.

Peacock, 110 F.3d 222, 227 (3d Cir.), cert. denied, 522 U.S.

915 (1997); O'Neil v. Hilton Head Hosp., 115 F.3d 272, 274

(4th Cir. 1997); Rojas v. TK Communications, Inc., 87 F.3d

745, 748 (Sth Cir. 1996); Asplundh Tree Expert Co. v. Bates,

? Craft v. Campbell Soup Company, 177 F.3d 1083

(9th Cir. 1999).

5

71 F.3d 592, 600-01 (6th Cir. 1995); Pryner v. Tractor Supply

Co., 109 F.3d 354, 356-58 (7th Cir.), cert. denied, 522 U.S.

912 (1997); Patterson v. Tenet Healthcare, Inc., 113 F.3d

832, 835 (8th Cir. 1997); McWilliams v. Logicon, Inc., 143

F.3d 573, 576 (10th Cir. 1998); Paladino v. Avnet Computer

Technologies, 134 F.3d 1054, 1060-61 (11th Cir. 1998); Cole

v. Burns Int’l Sec. Servs., 105 F.3d 1465, 1472 (D.C. Cir.

1997).

The plain meaning of the § 1 exclusion, which states

that “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,” is that

three categories of employment contracts are excluded from

the Act’s coverage: (1) seamen; (2) railroad employees; and

(3) “any other class of workers engaged in foreign or

interstate commerce.” Well-settled precepts of statutory

construction support the conclusion that the § 1 exclusion is

properly interpreted as narrow. Under the rule of ejusdem

generis, the phrase, “any other workers engaged in foreign or

interstate commerce,” takes its meaning from the specific

terms preceding it, “seamen” and “railroad employees.”

Therefore, it includes only those other classes of workers who

are likewise engaged directly in commerce; that is, only those

other classes of workers who are actually engaged in the

movement of interstate or foreign commerce or in work so

closely related thereto as to be in practical effect part of it.

Cole, 105 F.3d at 1471.

A narrow construction of § 1’s exclusion also

comports with the cardinal principle of statutory construction

that instructs that a court has a “duty to give effect, if

possible, to every clause and word of a statute.” Bennett v.

6

Spear, 520 U.S. 154, 173 (1997). If the phrase “any other

class of workers engaged in foreign or interstate commerce”

is interpreted to extend to all workers whose jobs merely have

any effect on commerce, then the specific inclusion of

“seamen and railroad workers” is rendered altogether

redundant and unnecessary. Had Congress intended to

exclude all employment contracts from coverage under the

Act, it could simply have said “nothing herein shall apply to

contracts of employment.”

As a matter of statutory construction, the phrase

“involving commerce” used in § 2 of the FAA, has a different

and broader meaning than the phrase “in commerce” in § 1.

In Allied-Bruce Terminix Cos., Inc. v. Dobson, 513 U.S. 265,

273-74 (1995), this Court stated:

The initial interpretive question focuses

upon the words “involving commerce.”

These words are broader than the often-

found words of art “in commerce.” They

therefore cover more than “‘only persons

or activities within the flow of interstate

commerce.’” . . . After examining the

statute’s language, background, and

structure, we conclude that the word

“involving” is broad and is indeed the

functional equivalent of “affecting.”

Consequently, the exclusion in § 1 that “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,” should be given

7

a Narrow interpretation, not one that excludes from the FAA’s

coverage ail contracts of employment.

The Ninth Circuit’s analysis in Craft, relied upon in

the decision below, is fundamentally flawed because it relies

on the “theoretical musings” of legal commentators who

similarly equate the words “involving commerce” with the

words of art “in commerce.” Thus, the Ninth Circuit supports

its decision, not pursuant to settled case law, but with the

flawed analysis by Matthew W. Finkin:

The [FAA] exempts contracts of

employment, all contracts of

employment, over which Congress had

constitutional authority. * * * As the

commerce power has been expanded by

the United States Supreme Court, the

exemption has expanded along with it,

leaving the status of employees’

contracts in practical effect just as they

were when the Act passed. The contrary

(though prevailing) view produces an

anomaly.

Craft,177 F.3d at 1089 n.8. The conclusion that the scope of

the exemption has expanded along with the expansion of the

commerce power is based upon the presumption that

“involving commerce” means the same thing as “in

commerce,” which it does not.

The Ninth Circuit also relies on Richard A. Epstein

whose analysis is similarly flawed:

But once the FAA is (mistakenly) expanded, what fate

befalls its exclusion? . . . Under current law, the right

answer is that the FAA keeps to its 1925 contours. . . .

By venturing into the waters of partial translation, both

sides to the present dispute get the arguments confused.

First, they wrongly expand the coverage, “involving

commerce” to keep the FAA in play; then they give the

1925 exemption its 1925 plain meaning.

Craft at 1088 (citing Richard A. Epstein, Fidelity Without

Translation, 1 Green Bag 2d 21, 27-29 (1997)). Yet if

“involving commerce” has a broader meaning than the words

of art, “in commerce,” as this Court has said, then there is no

inconsistency or anomalous result in interpreting § 2 of the

FAA to apply to the reach of the commerce power, and

interpreting the § 1 exclusion narrowly, to apply only to

workers actually engaged in the flow of interstate commerce.

The Ninth Circuit’s decision in Craft, on which the

lower court in the present case relied, further reflects the view

that the FAA should be interpreted in terms of Congress’

understanding of the limits of the commerce power in 1925.

This Court rejected this argument in Allied-Bruce Terminix,

where it explained that it would expand the scope of § 2 of

the FAA, along with the expansion of the commerce power,

even though when the FAA was enacted, the commerce

power was much narrower:

The pre-New Deal Congress that passed

the Act in 1925 might well have thought

the Commerce Clause did not stretch as

far as it has turned out to be the case.

9

But, it is not unusual for this Court in

similar circumstances to ask whether the

scope of a statute should expand along

with the expansion of the Commerce

Clause power itself, and to answer the

question affirmatively--as, for the

reasons set forth above, we do here.

Id. at 275. Not only is it appropriate for courts to interpret

statutes in this manner, it is essential if courts are to maintain

consistency and prevent chaos in the law.

As for Craft’s reliance on the legislative history of the

FAA, the statute is not ambiguous, such that there is no need

or justification to turn to scant legislative history. See Cole,

105 F.3d at 1472 (“in a case such as this, where the statutory

text does not admit of serious ambiguity, . . . legislative

history is, at best, secondary and at worst irrelevant.”).

Moreover, the legislative history does not evidence that

Congress intended to exclude from the Act’s coverage all

contracts of employment. Since its enactment in 1925 the’

FAA has been reenacted, and in the intervening years, when

the scope of the commerce power expanded, Congress has not

seen fit to amend the FAA to expressly exclude from its scope

all employment contracts.

Finally, although this Court has never reached the

issue of § 1’s scope, see Gilmer v. Interstate/Johnson Lane

Corp., 500 U.S. 20, 25, n. 2 (1991), and did not analyze the

arbitration agreement at issue in Gilmer as an employment

contract, the result, i.e. enforcement of an agreement to

arbitrate all employment-related claims that was entered into

as a condition of employment, suggests that the FAA does not

10

exclude all contracts of employment. Certainly, “it would be

anomalous to compel arbitration of Gilmer’s employment

claims simply because the arbitration agreement was not

formally part of a ‘contract for employment.’” Cole, 105 F.3d

at 1472.

Il. SECTION 1 OF THE FAA SHOULD BE

INTERPRETED NARROWLY BECAUSE

FEDERAL POLICY FAVORS ARBITRATION

A. Courts Have Long Recognized The Federal

Policy Favoring Arbitration

A narrow construction of the exclusionary clause is

consistent with the underlying purpose of the Act, which is to

favor arbitration. In substance, the FAA mandates that

arbitration agreements contained in contracts involving

commerce “shall be valid, irrevocable, and enforceable, save

upon such grounds as exist at law or in equity for the

revocation of any contract,” 9 U.S.C. § 2, and provides for

orders compelling arbitration when one party fails to comply

with a valid arbitration agreement. 9 U.S.C. § 4. The history

of the FAA’s interpretation in this Court reflects a clear

disposition to interpret its application broadly. See Gilmer,

500 U.S. at 24 (finding that the Act was enacted “to reverse

the longstanding judicial hostility to arbitration agreements

that had existed at English common law and to place

arbitration upon the same footing as other contracts” and that

the “presumption of arbitrability” elevates arbitration

agreements to a preferred position over other contracts);

Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 221 (1985)

(“The preeminent concern of Congress in passing the [FAA]

Leer SS =

1]

was to enforce private agreements into which parties had

entered, and that concern requires that we rigorously enforce

agreements to arbitrate, even if the result is ‘piecemeal’

litigation, at least absent a countervailing policy manifested

in another federal statute”); Southland Corp. v. Keating, 465

U.S. 1, 10 (1984) (“In enacting § 2 of the federal Act,

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.”); Moses H. Cone Mem’!

Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)

(“Section 2 is a congressional declaration of a liberal federal

policy favoring arbitration agreements”); Prima Paint Corp.

v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404 (1967)

(“[W]e not only honor the plain meaning of the statute but

also the unmistakably clear congressional purpose that the

arbitration procedure, when selected by the parties to a

contract, be speedy and not subject to delay and obstruction

in the courts.”).

B. Arbitration Should Be Favored Because The

Federal Civil Rights Statutes Contemplate

Alternative Dispute Resolution

Recognition that justice delayed is justice denied is

reflected in the Civil Rights Act of 1991, which expressly

provides in § 118 that: “[w]here appropriate, and to the extent

authorized by law, the use of alternative means of dispute

resolution, including . . . arbitration, is encouraged to resolve

disputes arising under the Acts or provisions of Federal law

amended by this title.” This principle is also reflected in the

Alternative Dispute Resolution Act of 1998, 28 U.S.C. § 651

et seq., which authorized a formal program of alternative

12

dispute resolution at the federal trial court level out of

Congress’ recognition that arbitration should be encouraged

because of the advantage it enjoys over litigation in more

promptly resolving disputes. In § 2 of the Act, “Findings and

Declaration of Policy,” Congress found in pertinent part:

(1) alternative dispute resolution,

when supported by the bench and bar,

and utilizing properly trained neutrals

in a program adequately administered

by the court, has the potential to

provide a variety of benefits, including

greater satisfaction of the parties,

innovative methods of resolving

disputes, and greater efficiency in

achieving settlements;

(2) certain forms of alternative dispute

resolution, including mediation, early

neutral evaluation, minitrials, and

voluntary arbitration, may have

potential to reduce the large backlog

of cases now pending in some Federal

courts throughout the United States,

thereby allowing the courts to process

their remaining cases more efficiently;

* * *

Alternative Dispute Resolution Act of 1998, 28 U.S.C. § 651.

The policy issues surrounding arbitration have

generated extensive commentary. This Court has framed the

inquiry in terms of whether the prospective litigant is able to

13

exercise his substantive rights under the applicable civil rights

statute in the arbitration. See Gilmer, 500 U.S. at 28 (“So long

as the prospective litigant effectively may vindicate his or her

statutory cause of action in the arbitral forum, the statute will

continue to serve both its remedial and deterrent function”)

(quoting Mitsubishi Motors Corp. v. Soler Chrysler-

Plymouth, Inc., 473 U.S. 614, 637 (1985)). Over the last few

years, this Court has repeatedly found that statutory rights of

action are vindicated in the arbitral forum, and hence have

held arbitration agreements enforceable to claims under the

Sherman Act, 15 U.S.C. §§ 1-7; § 10(b) of the Securities

Exchange Act of 1934, 15 U.S.C. § 78j(b); the civil

provisions of the Racketeer Influenced and Corrupt

Organizations Act (“RICO”), 18 U.S.C. § 1961 et seq.; §

12(2) of the Securities Act of 1933, 15 U.S.C. § 77\(2); and

the Age Discrimination in Employment Act of 1967

(“ADEA”), 29 U.S.C. § 621 et seq. See Gilmer, 500 US. at

26 (citing Mitsubishi, 473 U.S. at 614; Shearson/American

Express, Inc. v. McMahon, 428 U.S. 220 (1987); Rodriquez

de Quijas v. Shearson/American Express, Inc., 490 U.S. 477

(1989)); see also Perry v. Thomas, 482 U.S. 483 (1987).

Following this Court’s example, lower courts have held

arbitration agreements enforceable in cases arising under the

Family and Medical Leave Act of 1993, 29 U.S.C. § 2612.

See O'Neil v. Hilton Head Hospital, 115 F.3d 272 (4th Cir.

1997).

It is against the background of a “federal policy

favoring arbitration,” Gilmer, 500 U.S. at 26, that the

applicability of a mandatory pre-dispute agreement to

arbitrate an employment dispute between an employer and an

employee must be measured. Having engaged in a detailed

analysis of the applicability of pre-dispute arbitration

provisions in statutory discrimination matters, the First

14

Circuit has held: “While people may and do reasonably

disagree about whether pre-dispute arbitration agreements are

a wise way of resolving discrimination claims, there is no

‘inherent conflict’ between the goals of Title VII and the

goals of the FAA.” Rosenberg v. Merrill Lynch, Pierce,

Fenner & Smith Inc , 170 F.3d 1, 11 (1st Cir. 1999)(citing

Gilmer, 500 U.S. at 26, quoting McMahon, 482 U.S. at 227

(1987)). In Cole, 105 F.3d at 1486 n.19, Chief Judge

Edwards of the D.C. Circuit emphasized the Gilmer Court’s

admonition that in evaluating the enforceability of

compulsory arbitration, it is necessary to ask whether

compulsory arbitration of Title VII claims would be

inconsistent with the statutory framework and purposes of

Title VII. Once the procedural fairness and due process of the

arbitration are established, there should be no impediment to

the utilization of the well-established alternative to court

adjudication. See Cole, 105 F.3d at 1485.

Il. FEDERAL POLICY FAVORING ARBITRATION

IS WELL FOUNDED BECAUSE ARBITRATION

ALLOWS CLAIMS TO BE RESOLVED FAIRLY,

QUICKLY AND INEXPENSIVELY

The decision of the Ninth Circuit, interpreting the

FAA to exclude from its scope virtually all claims concerning

the employment relationship, is inconsistent with the “liberal

federal policy favoring arbitration agreements.” Gilmer, 500

U.S. at 25; Moses H. Cone, 460 U.S. at 24. The very purpose

underlying the FAA’s enactment in 1925 was “to reverse the

longstanding judicial hostility to arbitration agreements that

had existed at English common law and had been adopted by

a

15

American courts, and to place arbitration agreements upon the

same footing as other contracts.” Gilmer, 500 U.S. at 24.

This Court has made clear that arbitration agreements,

enforceable under the FAA, may encompass statutory claims

concerning the employment relationship, including those

alleging employment discrimination. Jd. at 26. “By agreeing

to arbitrate a statutory claim, a party does not forgo the

substantive rights afforded by the statute; it only submits to

their resolution in an arbitral, rather than a judicial forum. It

trades the procedures and opportunity for review of the

courtroom for the simplicity, informality, and expedition of

arbitration.” Mitsubishi, 473 U.S. at 628.

With the increasing use of arbitral fora to resolve

statutory employment claims has come evidence that the

“trade-off” made by employees who entered into arbitration

agreements has been largely to their benefit. Discrimination

claims brought in arbitration are resolved more quickly and

inexpensively than those brought in court; such claims are

more fully aired in arbitration as they are rarely dismissed

prior to arbitration hearings, and such hearings are

unconstrained by strict adherence to the rules of evidence;

and, in fact, employees prevail more frequently before

arbitration panels than before juries. And for employers, the

recourse to alternative dispute resolution processes culminates

in expeditious and economical resolution of workplace issues

so that the business of the workplace may continue.

The comprehensive federal legislation of the last few

decades governing all aspects of the employment relationship

has resulted in an explosion of employment-related litigation,

which has clogged the federal courts. See, e.g., Report of the

16

Second Circuit Task Force on Gender, Racial and Ethnic

Fairness in the Courts, 1997 Ann. Surv. Am. L. 9, 88-89

(some judges surveyed believe that small cases brought by

individual claimants, including employment discrimination

cases, “clog the federal courts and divert the attention of

judges away from larger, more significant civil cases” and

that the resultant caseloads “will require an increased number

of judges, destroying the collegiality and cohesiveness of the

federal bench”)(cited in Michael J. Yelnosky, Title VII

Mediation, and Collective Action, 1999 U. Ill. L. Rev. 583,

593 n.64).

Data derived from the annual reports of the

Administrative Office of the United States Courts shows that

federal court filings of employment cases jumped from

approximately 3.9 percent of all such filings in 1991 to 8.6

percent of all filings in 1998. Similarly, civil rights’ filings

escalated from 9.2 percent in 1991 to 15.4 percent in 1998.

And, because of the general increase in litigation during the

past decade, the raw numbers are even more revealing. In

1991, 8,102 federal employment cases were filed. By 1998,

that number jumped nearly threefold to 24,111. Civil Rights

filings multiplied from 19,100 in 1991 to 43,187 in 1998.4

’ “Civil rights” filings include complaints

alleging employment discrimination, as well as housing,

accommodation, welfare and voting discrimination. 13 Daily

Lab. Rep. A-1 (BNA) (Jan. 20, 2000).

. Statistics gathered from Admin. Office of the

United States Courts, 1975-98.

17

As a result, employment discrimination cases filed in

court can take years before reaching juries. The truism that

“justice delayed is justice denied” is demonstrated daily in the

federal courts. According to one survey, the average length

of a discrimination action, from filing to award, in the

Southern District of New York was 27.5 months, as compared

to comparable arbitrations filed before the New York Stock

Exchange and the National Association of Securities Dealers,

Inc. which took 15.6 months and 17.8 months respectively.

See Mandatory Arbitration Agreements in Securities Industry

Employment Contracts: Hearings before the Comm. on

Banking, Housing, and Urban Affairs, July 3, 1998, at iv

(written statement of Stuart J. Kaswell, General Counsel,

Securities Industry Ass’n).° When the time associated with

exhausting administrative remedies in advance of court action

and litigating post-judgment appeals is factored in, the

average duration of litigation more than doubles the average

duration of arbitration.

Delays in court proceedings not only take a financial

and emotional toll on the litigants, but compromise the ability

of out-of-work employees to pay their legal bills. See Martin

J. Oppenheimer & Cameron Johnstone, A Management

Perspective: Mandatory Arbitration Agreements are an

Effective Alternative to Employment Litigation, 52 Disp.

Resol. J. 19, 22 (1997); see also Theodore J. St. Antoine,

Mandatory Arbitration of Employee Discrimination Claims:

Unmitigated Evil or Blessing in Disguise?, 15 T.M. Cooley

L. Rev. 1, 7-8 (1998). Many blue collar and non-managerial

claimants are unable to secure counsel, who are often

; Available at: www.sia.com/

government_relations/html/stuart_testimony.html.

18

reluctant to enter into contingent fee arrangements with

employees whose potential recovery does not justify the

substantial time and expense called for in discovery-intensive

discrimination cases.° By bringing disputes to a prompt and

final disposition, both sides avoid the substantial disruption

to lives and businesses inherent in the long duration of court

proceedings.

Furthermore, of the many employees who go to court,

few see their cases ever come to trial. Employment claims are

often disposed of on motions to dismiss or summary

judgment, as well as other procedural barriers that stand

between employees and juries. According to the U.S. Justice

Department’s Bureau of Justice Statistics, employment

discrimination complaints filed in federal court that reached

disposition by trial declined from 9 percent to 5 percent

between 1990 and 1998. 13 Daily Lab. Rep. A-1 (BNA) (Jan.

20, 2000). On the other hand, parties to an arbitration can be

relatively certain that their dispute will be considered on the

merits after a full hearing. See Cole, 105 F.3d at 1488

° According to one estimate, arbitration as

opposed to litigation of employment claims results in a fifty

percent cost savings to the parties. See Garry G. Mathiason,

Evaluating and Using Employer-Initiated Arbitration Policies

and Agreements: Preparing the Workplace for the Twenty-

First Century, Q227 ALI-ABA 23, 41 (1994). The same

study concluded that the average duration of an arbitration

claim is 8.6 months, compared to three to eight years for

litigation claims. See id. (citing Elizabeth Rolph, et al., Inst.

For Civil Justice, Escaping the Courthouse: Private

Alternative Dispute Resolution in Los Angeles, 18-19

(1994)).

19

(“Arbitration also offers employees a guarantee that there will

be a hearing on the merits of their claims; no such guarantee

exists in litigation where relatively few employees survive the

procedural hurdles necessary to take a case to trial in the

federal courts.”’)

Data comparing the success rate of employees in

arbitration versus their counterparts who file discrimination

claims in court also demonstrates the benefits of the arbitral

forum for employees. According to one study examining the

results of AAA arbitrations in employment cases between

1993 and 1995, employees prevailed in 63 percent of those

cases. See Lisa Bingham, Employment Arbitration: The

Repeat Player Effect, 1 Employee Rts. & Employment Pol’y

J. 189, 213 (1997). This is a far greater rate of success than

employees realize in court. See Lewis Maltby, Employment

Arbitration: Is it Really Second Class Justice?, Disp. Resol.

Mag., Vol. 6, No. 1, Fall 1999, at 23.

Though average awards to employees are higher when

made by juries than by arbitrators, this fact must be placed in

the context of the reality that between 1990 and 1998 the

percentage of employment discrimination actions which

actually culminated in a plaintiff s verdict dropped from 2 low

2 percent to a scant 1.6 percent. See 13 Daily Lab. Rep. A-1

(BNA) (Jan. 20, 2000). A more illuminating comparison is

this: during a similar period, the entire class of employees

who took their disputes to court collectively received 10.4

percent of their total demands, while employees who took

their disputes to arbitration received 18 percent of their total

20

demands.’ See Maltby, supra at 24. According to Lewis

Maltby, who compiled this data:* “[F ar more employees win

in arbitration than in court, and, overall, employees who take

their disputes to arbitration collect more than those who go to

court.” Id.

Given these facts, the contention that mandatory

arbitration agreements are contrary to public policy because

they disfavor employees, rings hollow. Critics of arbitration

often point to the limited provisions for discovery in

. The expedited process and _ greater

confidentiality of arbitration lead to an additional remedial

benefit. Employees are more likely to be in a position to

remain with or return to the employer upon resolution of their

dispute. “Because arbitration is closer in time to the

discriminatory conduct, the likelihood is greater that the

employee will accept reinstatement rather than damages. In

contrast, many courts are reluctant to order reinstatement

following protracted litigation, by which time animus

between employer and employee has intensified and the trust

required for a solid employment relationship is irretrievably

lost.” John W.R. Murray, The Uncertain Legacy of Gilmer:

Mandatory Arbitration of Federal Employment

Discrimination Claims, 26 Fordham Urb. L.J. 281, 298

(1999)(citing Susan A. FitzGibbon, Reflections on Gilmer

and Cole, 1 Employee Rts. & Employment Pol’y J. 221, 245-

55 (1997)).

. The data was compiled from a search of the

Inter-University Consortium for Political and Social Research

Database (July 11, 1997).

21

arbitration, compared to those set forth in the Federal Rules

of Civil Procedure. In Gilmer, however, this Court

emphasized that agreements to arbitrate are desirable

precisely because they trade the intricate procedures of the

federal courts for the “simplicity, informality and expedition

of arbitration.” Gilmer, 500 U.S. at 31 (quoting Mitsubishi,

473 U.S. at 628).

To the charge that arbitration is more susceptible to

bias and partiality than the court system, this Court responded

in Gilmer that judicial review under the FAA would allow the

courts to set aside any award in which there “was evident

partiality or corruption in the arbitrators.” Gilmer, 500 U.S.

at 30-31 (quoting 9 U.S.C. § 10(b)). Moreover, recent efforts

by arbitration providers to improve the diversity and expertise

of the available pool of arbitrators have proven successful.

See, e.g., ABA Protocols, supra n.6 (calling for a racially

diverse and knowledgeable pool of arbitrators); Nat. Rules for

Resol. of Employment Disp. (AAA, effective June 1, 1996)

(providing that only arbitrators with experience in

employment law be appointed); JAMS/Endispute Rules and

. Gilmer was decided before the American Bar

Association (“ABA”) Task Force on Alternative Dispute

Resolution in Employment issued its Due Process Protocols

for Mediation and Arbitration of Statutory Disputes Arising

Out of the Fmployment Relationship (“Protocols”). (AAA

website, available at www.adr.org.). The Protocol, which has

been endorsed by many of the foremost providers of alternate

dispute resolution (“ADR”) services, calls for enhanced

discovery in arbitration. Many such providers have

implemented or expanded their discovery procedures in

response to the Protocols.

22

Procs. for Mediation/Arb. of Employment Disp. (1995)

(same). A related criticism often leveled at arbitration is the

relative lack of thorough judicial review of arbitration

decisions. Since this Court’s decision in Wilko v. Swan, 346

U.S. 427, 436-37 (1953), the standard of review for an

arbitrator’s award has been “manifest disregard of the law.”

While this is indeed a high standard, most employment

disputes are fact-based and not likely to raise the kind of legal

issues that would require thorough judicial review. See Cole,

105 F.3d at 1487. Nonetheless, “although judicial scrutiny of

arbitration awards necessarily is limited, such review is

sufficient to ensure that arbitrators comply with the

requirements of the statute at issue.” Jd. at 1487 (quoting

Gilmer, 500 U.S. at 32 n.4.)

Critics of arbitration sometimes point to the so-called

“repeat-player” problem. They argue that, because the

employer is always a party to an arbitration proceeding, it has

an advantage over the one-time employee claimant in

somehow manipulating the arbitration process. That the

repeat-player theory was initially developed in the context of

a perceived problem in traditional litigation, not arbitration,

is often overlooked. See Marc Galanter, Why the “Haves”

Come out Ahead: Speculations on the Limits of Legal

Change, 9 L. & Soc’y Rev. 95 (1974). Moreover, as

arbitration providers have enhanced the procedural and due

process rights of the parties, and have bolstered the ranks of

arbitrators with increasingly competent and knowledgeable

decision-makers, many of the perceived inequities have

abated. Furthermore, as experienced employee advocates

have themselves taken on some of the characteristics of repeat

players, the playing field has been leveled substantially.

Having repeatedly “decline[d] to indulge the presumption that

the parties and arbitral body conducting a proceeding will be

23

unable or unwilling to retain competent, conscientious and

impartial arbitrators,” Gilmer, 500 U.S. at 30; Mitsubishi, 473

U.S. at 634, there is certainly no basis for this Court to alter

its course now.

IV. EXCLUDING EMPLOYMENT DISPUTES FROM

MANDATORY ARBITRATION WOULD LEAD

TO BIFURCATION OF PROCEEDINGS WITH

THE POTENTIAL FOR CONFLICTING

RESULTS OF SIMILAR DISPUTES

The policies favoring consistency of decision-making

and integrity of the judicial process would also be served by

reversal of the decision below. If this Court were to accept

the position of the Ninth Circuit and hold that the FAA does

not apply to contracts of employment and that any agreement

to arbitrate between an employer and an employee constitutes

such a contract, then all parties to employment disputes would

suffer. Discrimination claims are frequently brought in

connection with other employment claims, such as breach of

contract, tort or wage and hour claims, all presumably subject

to valid arbitration agreements under state law. Currently, all

may be joined with statutory claims in arbitration, leading to

judicial economy within a single forum. As all such claims

may arise from the same facts, the consideration of these

claims together preserves resources. If, however, this Court

were to hold that the FAA does not apply to mandatory

arbitration agreements between employers and employees, the

resultant forum bifurcation would be wasteful to both parties.

In particular, the party with the least resources -- typically the

employee -- would be at a disadvantage. Furthermore, there

would be a risk of conflicting decisions arising from the same

24

facts, causing injury to the integrity of both the courts and the

arbitration system.

Not only could there be inconsistent findings of fact

regarding the same employee, but there is a similar risk that

issues common to several employees of the same large

employer, situated in different states, would be subject to

inconsistent procedures under state laws. In those states in

which mandatory agreements to arbitrate statutory claims are

enforceable, the employee will be compelled into the arbitral

forum, while in other states, the parties may be forced into

court. Arbitration agreements within the scope of the FAA

are enforceable even if they conflict with state law policies

that preclude arbitration. See Mastrobuono v. Shearson

Lehman Hutton, Inc., 514 U.S. 52 (1995); see also Great

Western Mortgage Corp. v. Peacock, 110 F.3d, 222, 230 (3d

Cir. 1997). In jurisdictions other than the Ninth Circuit,

agreements to arbitrate employment discrimination claims are

enforceable even if state law requires the opposite. Provided

there is a valid arbitration agreement, federal courts have

jurisdiction to compel arbitration in those cases pursuant to

the FAA. For example, in Peacock, the employee argued that

New Jersey public policy, as expressed in the New Jersey

Law Against Discrimination, was inconsistent with the

mandatory arbitration of her sexual harassment claim. The

court enforced the arbitration agreement in part because the

“FAA preempts state laws which ‘require a judicial forum for

the resolution of claims which the contracting parties agreed

to resolve by arbitration.”” Peacock, 110 F.3d at 230, (quoting

Volt Information Sciences, Inc. v. Board of Trustees of Leland

Stanford Junior Univ., 489 U.S. 468, 478 (1989)).

25

However, if this Court upholds the Ninth Circuit’s ~~

position, then the FAA would not apply to employment

disputes, and there would be no federal jurisdiction to compel

arbitration of such matters. Therefore, the arbitrability of

claims would depend solely on whether employment

discrimination claims fall within the scope of that particular

state’s arbitration laws. With regard to a national employer

such as Circuit City, inconsistent treatment of similarly

situated employees is inevitable, leading to an intolerable

burden on employers with a nation-wide workforce, and to

manifest unfairness in the treatment of employees.

It should not be forgotten in an examination of the

FAA and statutory civil rights claims that there is a long

history of regulation of the workplace at the state level. The

state’s concern for the well-being and fair treatment of its

citizens has led to a welter of laws and regulations aimed at

the speedy and balanced resolution of disputes between

employers and employees. Most states have recognized that

enforcement of these laws and regulations, as well as the

obligations imposed on them in employment law by federal

statute and administrative regulation, requires the

encouragement of alternatives to the full process of trial.

Arbitration and other forms of alternative dispute resolution

are not only necessary to relieve an overloaded state court

system, but also to provide for a fair, inexpensive and speedy

resolution of employer/employee disputes.

26

CONCLUSION

For the foregoing reasons, the U.S. Chamber of

Commerce respectfully requests that this Court reverse the

Ninth Circuit in Circuit City Stores, Inc. v. Adams, 194 F.3d

1070 (9th Cir. 1999) (per curiam), and hold that the FAA

does apply to contracts of employment, with the narrow

exception of employees involved in or closely related to the

actual movement of goods in interstate commerce. Prior

decisions of this Court, the language and purpose of the

legislation at issue, and the federal and state policies favoring

arbitration and judicial economy, argue for such an outcome.

Respectfully submitted,

Lawrence Z. Lorber

Counsel of Record

Lawrence R. Sandak

Stephanie L. Marn

PROSKAUER ROSE LLP

1233 Twentieth Street, N.W.

Suite 800

Washington, D.C. 20036-2396

(202) 416-6800

Attorneys for Amicus Curiae

The Chamber of Commerce of

the United States of America

Of Counsel:

STEPHEN A. BOKAT

ROBIN S. CONRAD

NATIONAL CHAMBER LITIGATION CENTER, INC. )

1615 H Street, NW

Washington, D.C. 20062

(202) 463-5337

Dated August 7, 2000