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

79 Supreme Court, U.S.

CIRCUIT CITY STORES, INC.,

Petitioner,

—Yf,——

SAINT CLAIR ADAMS,

Respondent.

ON WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE NINTH CIRCUIT

BRIEF AMICUS CURIAE OF THE

AMERICAN ARBITRATION ASSOCIATION

IN SUPPORT OF REVERSAL

JAY W. WAKS MLORENCE M. PETERSON

RACHEL H. YARKON Counsel of Record

KAYE, SCHOLER, FIERMAN, HAYS GENERAL COUNSEL

& HANDLER, LLP AMERICAN ARBITRATION

New York, New York ASSOCIATION, INC.

335 Madison Avenue

JAMES H. CARTER New York, New York 10017

Chairman, (212) 716-3923

Arbitration Law Committee Attorneys for Amicus Curiae

American Arbitration

August 7, 2000 Association

lik oe

TABLE OF CONTENTS

Page

INTEREST OF AMICUS CURIAE .................. 2

SUMMARY OF ARGUMENT ...................05- 3

SIU 6.606 cnsnnebisuusdcccascpbascasseeues 4

A WELL-ESTABLISHED NATIONAL SYSTEM FOR

THE EFFECTIVE ARBITRATION OF EMPLOYMENT

DISPUTES HAS DEVELOPED OVER THIS POST-

GR ED oven cdnvissevcsesecenseseeres 4

A.

In Reliance Upon Gilmer, Over 500 Companies

Have Developed National Employment Arbitration

Programs Using The Due Process Protocol And

RGD ecb bs cnedetcdaseneceduacsdent 5

Substantive Rights Are Protected When

Employment Arbitrations Are Administered Under

The Due Process Protocol ................ 6

The Post-Gilmer Experience With Employment

Arbitration Has Prompted An Expansion Of

Procedural Safeguards And Resolution

GED sceneswsneecncckesenscunsseseus 7

The Availability Of Arbitration Has Prompted The

Early Resolution Of Workplace Disputes .... 9

Employment Arbitration Is At Least As Effective

For Employees As Litigation ............. 10

GDS cccbovecesevenesécuntsccetenesaus a

il

TABLE OF AUTHORITIES

CASES Page

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

Se TID -ciibdisdedtiinlaiineiatenbinphipaietsesiesensemeninnenemmenenenes 3

Gilmer v. Interstate/Johnson Lane Corp., 500 U.S.

BE crniitddnieniatnncicintsactcssnsneeesnnssemenmeecemssemnnemns 4,5

Green Tree Financial Corp.-Alabama v. Randolph,

No. 99-1235 (cert. granted Apr. 3, 2000) ........c..c00000e0 3

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

Se IE III cnttnercccsntasscasépansetsenconessosscnts 3,4, 11

Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S.

STII curisinestantibedhiniminnidddaieenptdnnatceneteninpercennpmmennen 3

Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974) ........ 3

Shearson/American Express Inc. v. McMahon, 482 U.S.

SE ITTIIITED ssnesiieciiticiibiscnmndnenduicenieietiubdiitnimnsscseresenmmenmannen 3

Southland Corp. v. Keating, 465 U.S. 1 (1984) .........0.0.. 4

UBC Southern Council of Industrial Workers, Local

Union No. 2713 v. Bruce Hardwood Floors, 522 U.S.

TT aici ieee caiidatdaanenietntensnbeeninmimemeemnenm 3

STATUTES

Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 1 ef seg. .. 2

MISCELLANEOUS

Jenna Greene, EEOC Whittling Away Backlog,

LEGAL TIMES, Oct. 4, 1999, at 20 .0........ccceceseeeeeeeeeeeeees 12

William M. Howard, Arbitrating Claims of Employment

Discrimination: What Really Does Happen? What

Really Should Happen? Disp. RESOL. J., Oct.-Dec.

ES 12

Marika F. X. Litras, Bureau of Justice Statistics Report

on Civil Rights Complaints Filed in U.S. District Courts,

13 Daily Lab. Rep. (BNA) at E-5S ........cccccceceeeeeeees 11

Lewis Maltby, Employment Arbitration: Is It Really

Second Class Justice?, DisP. RESOL. MAG., Fall 1999,

ECE ee — 10

Janet Novack, Silver Lining, FORBES, Nov. 21, 1994,

Ee 1]

IN THE

SUPREME COURT OF THE UNITED STATES

OCTUBRER TERM, 2000

No. 99-1379

CIRCUIT CITY STORES, INC..,

Petitioner,

v.

SAINT CLAIR ADAMS,

Respondent.

ON WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE NINTH CIRCUIT

BRIEF AMICUS CURIAE OF THE

AMERICAN ARBITRATION ASSOCIATION

IN SUPPORT OF REVERSAL

Pursuant to Rule 37 of the Rules of this Court, this brief is

respectfully submitted by amicus curiae, the American

Arbitration Association, Inc. ("AAA"), not in support of either

party, but to urge reversal of the decision below.'

' As required by Rule 37.6, amicus curiae, the AAA states that this brief

was authored on its behalf by the counsel identified on the cover and the

signature page, and that no one other than the AAA and its counsel made a

monetary contribution to the preparation or submission of this brief. Both

Petitioner and Respondent have consented to the filing of this brief.

2

INTEREST OF AMICUS CURIAE

Amicus curiae, the AAA, is a not-for-profit, public service

organization founded in 1926, after Congress’ enactment of the

Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 1 et seg. Today,

the AAA offers a broad range of dispute resolution services

through offices located in 37 cities throughout the United States

and cooperative agreements with arbitral institutions in 39

countries around the world. Méillions of non-union U.S.

workers currently are covered by mediation and arbitration

agreements that call for administration by the AAA. In 1999

alone, the AAA administered more than 1900 employment-

related mediations and arbitrations for employees other than

those covered by collective bargaining agreements.

In addition to maintaining administrative procedures, rules

and guides for private mediations and arbitrations, the AAA

trains and maintains rosters of mediators and arbitrators;

publishes arbitration awards; conducts educational programs;

provides membership services; and maintains library and

research facilities. In 1995, the AAA was instrumental in the

promulgation of the Due Process Protocol for Mediation and

Arbitration of Statutory Disputes Arising Out of the

Employment Relationship ("Due Process Protocol") designed

to provide fairness, equitable treatment and procedural

regularity in the extra-judicial resolution of employment

disputes.’

? Signatories to the Due Process Protocol, in addition to the AAA, include

designees from the National Academy of Arbitrators, the Labor and

Employment Law Section of the American Bar Association, the American

Civil Liberties Union, the Federal Mediation and Conciliation Service, the

Society of Professionals in Dispute Resolution and the National

Employment Lawyers Association. These organizations represent

3

Since the AAA regularly is engaged in the administration of

employment arbitration agreements, as well as the education

and training of arbitrators and mediators in employment issues,

the AAA has a substantial interest in the Court’s resolution of

the important question presented by the Petition: Whether the

Ninth Circuit erred in holding that Section 1 of the Federal

Arbitration Act does not apply to contracts of employment.

Moreover, the AAA’s substantial experience with the

arbitration of employment claims makes it uniquely qualified

to comment on the significance and practical consequences of

the Ninth Circuit’s decision below and to provide a perspective

which the AAA hopes will assist the Court in its consideration

of the merits of this action. With this singular focus in mind, the

AAA respectfully files this brief as amicus curiae to stress the

desirability of vacating the decision below.’

SUMMARY OF ARGUMENT

The Ninth Circuit’s decision, contrary to this Court’s rulings

in support of employment arbitration and the holding of every

other circuit on the issue, threatens to remove the uniform

employment attorneys, representatives of labor and management and dispute

resolution professionals.

> The AAA has filed amicus curiae briefs in numerous arbitration-related

cases previously before the Court, including Prima Paint Corp. v. Flood &

Conklin Mfg. Co., 388 U.S. 395 (1967); Scherk v. Alberto-Culver Co., 417

U.S. 506 (1974); Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.,

473 U.S. 614 (1985); Shearson/American Express Inc. v. McMahon, 482

U.S. 220 (1987); Allied-Bruce Terminix Cos., Inc. v. Dobson, 513 U.S. 265

(1995); UBC Southern Council of Industrial Workers, Local Union No.

2713 v. Bruce Hardwood Floors, 522 U.S. 928 (1997); and Green Tree

Finarvial Corp.-Alabama v. Randolph, No. 99-1235 (cert. granted Apr. 3,

2000).

4

application of the FAA from millions of employment

relationships currently covered by arbitration agreements across

the country.

This Court has long emphasized that the FAA establishes a

"national policy favoring arbitration." Southland Corp. v.

Keating, 465 U.S. 1, 10 (1984). Consistent with this policy, the

Court has enforced agreements to arbitrate a wide variety of

disputes, including, inter alia, statutory employment claims.

See, e.g., Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20,

26 (1991). As the Court has stressed, by arbitrating claims, "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 Motors Corp. v. Soler

Chrysler-Plymouth, Inc., 473 U.S. 614, 628 (1985). See also

Gilmer, 500 U.S. at 26, 31. Indeed, the AAA’s National Rules

for the Resolution of Employment Disputes ("Employment

Rules") and the Due Process Protocol provide parties to an

arbitration with explicit due process protections of their

substantive rights, and preserve the right to assert a claim before

the Equal Employment Opportunity Commission, the National

Labor Relations Board, or any other government agency.

5

ARGUMENT

A WELL-ESTABLISHED NATIONAL SYSTEM FOR

THE EFFECTIVE ARBITRATION OF EMPLOYMENT

DISPUTES HAS DEVELOPED OVER THIS POST-

GILMER DECADE

Nearly a decade ago, in the context of enforcing an

agreement to arbitrate a statutory employment dispute, this

Court emphasized that the FAA "reverse[d] the longstanding

judicial hostility to arbitration agreements that had existed at

English common law and had been adopted by American

courts, and placed] arbitration agreements upon the same

footing as other contracts." Gilmer v. Interstate/Johnson Lane

Corp., 500 U.S. 20, 24 (1991).

A. In Reliance Upon Gilmer, Over 500 Companies Have

Developed National Employment Arbitration

Programs Using The Due Process Protocol And The

AAA

In the years before the Gilmer decision, the AAA

administered arbitration agreements arising under collective

bargaining agreements, hundreds of individually negotiated

employment contracts and a small number of

employer-promulgated programs.‘ In the years after Gilmer,

over 500 companies have adopted multi-step Alternative

* According to the AAA’s records, one of the first company-wide

employment ADR programs, which included arbitration for the resolution

of employment disputes, was implemented in 1955. Employment

arbitrations, including under individual contracts, were administered under

the AAA’s Commercial / rbitration Rules until adoption of the Due Process

Protocol in 1995.

6

Dispute Resolution ("ADR") programs, with arbitration usually

as the final step, naming the AAA as the organization

responsible for the administrative process. These arbitration

provisions cover an estimated five million individuals

employed nationally in a wide range of jobs including clerical

workers, sales personnel, first line supervisors, middle

managers and top executives in virtually every industrial and

service sector.°

B. Substantive Rights Are Protected When

Employmert Arbitrations Are Administered Under

The Due Process Protocol

As the use of arbitration to resolve employment disputes

increased after Gilmer, the AAA took the initiative to address

concerns over the fairness to employees required to arbitrate

statutory claims by developing special Employment Rules,

incorporating the protections of the Due Process Protocol.°

Adopted by the AAA in 1995, the Due Process Protocol

requires that all participants in arbitration be accorded, inter

alia, the right to a neutral third party decision-maker, the right

to select the arbitrator from a diverse pool,’ the right to counsel,

* As a comparison, in the unionized labor context, virtually all collective

bargaining agreements provide for arbitration of unresolved grievances,

covering an estimated 15 million employees. The AAA administers almost

15,000 labor arbitrations each year.

®* The texts of the Employment Rules and the Due Process Protocol may

be found on the AAA’s website, www.adrorg, under “Focus

Areas-Employment."

” In accordance with the Due Process Protocol, the AAA has developed a

diverse national panel of 575 arbitrators and mediators, who participate in

the AAA’s mandatory training. These arbitrators were recommended by

7

the right to discovery as authorized by the arbitrator, the right

to the same remedies as those available in court (including the

right to an award of attorney’s fees in conformity with law), and

the right to a -written opinion.*

To ensure that these substantive and procedural rights of the

parties to an arbitration provision are not compromised, the

AAA reviews employer-promulgated ADR programs for

compliance with the Due Process Protocol; if the AAA

determines that a dispute resolution program materially deviates

from these due process standards, the AAA will decline to

administer cases under that program.

C. The Post-Gilmer Experience With Employment

Arbitration Has Prompted An Expansion Of

Procedural Safeguards And Resolution Options

Although the genesis of the Due Process Protocol! was to

offer protection specifically for statutory employment claims

encompassed by mandatory arbitration programs, the

widespread adoption of employer promulgated plans

conforming to the safeguards of the Due Process Protocol has

had a much broader impact. Invariably, the safeguards of the

advisory committees composed of individuals from various constituencies

including the American Civil Liberties Union and Equal Employment

Opportunity Commission, members of the labor community, and plaintiff

and management attorneys.

* Some critics of employment arbitration have expressed concern that the

privacy of AAA-administered arbitration is undesirable because its decisions

do not build a precedential body of law. In the fall of 2000, the AAA will

be publishing employment arbitration awards, redacting the identity of

parties, thus addressing this concern.

Due Process Protocol have been extended to a// disputes arising

out of the employment relationship, including non-statutory

claims. In fact, only 770 of the 6200 employment cases filed

with the AAA from 1997 through June 2000 ( i.e., about 12%)

involved statutory issues, but all of them benefitted from the

Due Process Protocol’s protections.

The widespread acceptance of the Due Process Protocol has

also expanded the type of remedial procedures available to

workers, as employers who implement employment ADR

programs typically offer a multi-step process before arbitration.

These programs have made available to millions of workers a

wider range of dispute resolution alternatives - from very

informal processes such as peer review and open door policies,

to progressively more structured or formal options such as

ombudspersons, mediation, and binding arbitration.

In addition, company programs increasingly offer variations

on mandatory pre-dispute arbitration, including some which

allow the employee the discretion to determine whether to opt-

in to arbitration after a dispute arises and others which compel

a multi-step dispute resolution process, culminating in an

arbitration the results of which are binding only on the

company. The multi-step dispute resolution policies of Texaco

and TRW, for example, require the company to abide by ar

arbitrator’s decision if the employee accepts it, but permit the

employee to pursue a lawsuit if dissatisfied with the arbitrator’s

award. Eaton Corporation’s program compels the company to

arbitrate disputes at the request of its employees.

Moreover, many employer-promulgated programs expand

the definition of arbitrable disputes to encompass employee

grievances that otherwise would not be cognizable in court. In

9

these programs, employees often are permitted to resolve other

employment-related concerns through the ADR program (e.g.,

those involving promotions, compensation, and company

policies). Thus, although the original intent of the Due Process

Protocol was only to provide protections for statutory claims,

the vast majority of employment claims - and, certainly, all

claims administered by the AAA - are administered in

conformance with these due process requirements. And, of

course, under the FAA a contract for arbitration that is

overreacting is voidable under grounds "as exist at law or in

equity for the revocation of any contract." 9 U.S.C. § 2.

D. The Availability Of Arbitration Has Prompted The

Early Resolution Of Workplace Disputes

Contrary to predictions that widespread use of ADR

agreements for employment disputes would result in a flood of

arbitrations, actual experience has been far different. Due to the

variety of options offered by most employers’ in-house dispute

resolution programs, the vast majority of disputes brought

under dispute resolution programs are resolved before

arbitration.? Moreover, a significant number of those disputes

that actually proceed to filing for arbitration with the AAA

settle before an arbitration award is issued. As previously

indicated, approximately five million workers are covered by

employment dispute resolution programs that provide for the

AAA to administer the arbitration, often as the final step.

* For example, Darden Restaurants recently reported that in 1999, 50,000

calls were made to the employee toll-free hotline, the first step in the

company’s multi-step procedure, which also includes peer review, mediation

and arbitration. Only two cases have advanced to arbitration since the

program was initiated in 1997. Conference Report: Workplace Conflicts

Examined at Bowie State, ADR REPORT, June 21, 2000, at 4.

10

Despite the large number of individuals covered by these

programs, in 1999, the AAA had approximately 1500

arbitrations filed, and half of those arbitrations resulted from

individual employment contracts that contained a negotiated

arbitration clause.

E. Employment Arbitration Is At Least As Effective

For Employees As Litigation

The concern that arbitration is less favorable to employees

than litigation similarly is unfounded. A recent article by the

former director of the American Civil Liberties Union’s

National Task Force on Civil Liberties in the Workplace

compared the results of AAA employment arbitration decisions

with litigation results and concluded that "far 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." Lewis Maltby, Employment Arbitration: Is It Really

Second Class Justice?, Disp. RESOL. MAG., Fall 1999, at 23, 24.

Arbitration also favors employees to the extent that, in

arbitration, their claims are more likely to reach a hearing on

the merits rather than be subject to dismissal on summary

judgment in court. By comparison, research suggests that

"fe]mployers win 98 percent of cases which are resolved

through summary judgment." Jd. at 24. As Mr. Maltby

concluded, he "‘would rather get a fair arbitration than a

nonexistent jury trial’". Janet Novack, Silver Lining, FORBES,

Nov. 21, 1994, at 124.

The process of arbitration itself also provides a variety of

venefits over traditional litigation. It is widely accepted that

arbitration produces a decision through a less costly and more

expedient process than a court proceeding. As this Court has

recognized, "it is often a judgment that streamlined proceedings

and expeditious results will best serve their needs that causes

parties to agree to arbitrate their disputes; it is typically a desire

to keep the effort and expense required to resolve a dispute -

within manageable bounds that prompts them mutually to forgo

access to judicial remedies." Mitsubishi Motors Corp. v. Soler

Chrysler-Plymouth, Inc., 473 U.S. 614, 633 (1985). These

considerations apply with particular force to individuals who

seek to assert their rights against corporate employers.

Arbitration also resolves disputes more quickly from filing

to finality, particularly in comparison with the pursuit of

statutory employment disputes through court or administrative

proceedings. The Bureau of Justice Statistics recently reported

that the average length of time from filing of civil rights

complaints (including employment-related claims) to

disposition in federal district courts in 1998 was 13.1 months

with a median of 10.9 months. See Marika F. X. Litras, Bureau

of Justice Statistics Report on Civil Rights Complaints Filed in

U.S. District Courts, 13 Daily Lab. Rep. (BNA) at E-5, E-15.

And, although reduced from previous years, the Equal

Employment Opportunity Commission’s ("EEOC") processing

time for resolving charges of discrimination was reported in

1999 to be 268 days. See Jenna Greene, EEOC Whittling Away

Backlog, LEGAL TIMES, Oct. 4, 1999, at 20. By comparison, in

1999, the AAA’s average time from filing to closing (i.e. cases

awarded, settled or withdrawn) was only 118 days, with a

median of 105 days. In addition to reducing the time to

resolution, arbitration also correspondingly reduces the strain of

employment litigation on courts and agencies, which, as a

practical matter, cannot offer employees an equally rapid

resolution.

12

Moreover, realistically, arbitration may often provide the

only avenue for redress for some employees who otherwise

would be unable to obtain legal representation to pursue a claim

in court. According to one study, due to the wide-spread

requirements of plaintiffs’ attorneys that a potential plaintiff

pay a retainer and have minimum provable damages, "only one

in 20 employment discrimination claimants can get a lawyer to

pursue the case." William M. Howard, Arbitrating Claims of

Employment Discrimination: What Really Does Happen? What

Really Should Happen?, Disp. RESOL. J., Oct.-Dec. 1995, at 40,

45. However, an employee who would not have been able to

find (or afford) an attorney to pursue her claim in court often

can utilize her company’s ADR procedure, up to and including

arbitration, with or without legal representation, and obtain a

just resolution. Under some programs, the employer will

pledge not to use an attorney if the employee does not. In

addition, the relative informality of the arbitration process, as

well as the absence of the application of strict rules of evidence,

reduces the disadvantage to the employee of proceeding on a

pro se basis. Furthermore, in cases in which legal

representation is desirable, the programs of certain employers

13

may assist the employee in paying for the costs of such

representation."

The availability of arbitration over this post-Gilmer decade,

coupled with the widespread use of the Due Process Protocol,

has produced an effective national system for the resolution of

all types of employment claims, including claims that would

never be heard in litigation.

In sum, the FAA’s 75-year-old policy of favoring arbitration

has become embedded nationally in routine employment

practice. The Ninth Circuit’s interpretation of the FAA would

require employers to attempt to enforce these arbitration

programs under varying state laws, rather than under a single

consistent national policy. Multi-state employers and their

employees would then face vastly different results depending

upon the state where the particular employee is employed.

Alternatively, some companies might choose to abandon their

ADR programs altogether. By contrast, the continued national

enforcement of employment arbitrations under the FAA

provides both a high degree of consistency and due process

protection. This well-established existing system of workplace

arbitration can be a fair, effective and efficient means of

'° For example, Philip Morris Management Corp.’s Dispute Resolution

program provides assistance to employees in paying attorney fees as well as

other expenses of pursuing their claims through arbitration and mediation.

See Forum: Employment Disputes and ADR, THE METROPOLITAN

CORPORATE COUNSEL, Nov. 1996, at 51. The Dispute Resolution Program

of Brown & Root (now Halliburton’s Kellogg-Brown & Root) similarly

compensates employees for legal expenses; however, the company reports

that, in two-thirds of the arbitrations which occurred in the first three years

of the program, the employee elected to proceed without legal counsel. See

id

14

resolving a large number and broad range of employment

disputes when due process is protected.

CONCLUSION

WHEREFORE, the AAA, as amicus curiae, respectfully

urges the Court to reverse the decision of the court below.

Respectfully submitted,

Jay W. WAKS FLORENCE M. PETERSON

RACHEL H. YARKON Counsel for Record

KAYE, SCHOLER, GENERAL COUNSEL

FIERMAN, Hays & AMERICAN ARBITRATION

HANDLER, LLP ASSOCIATION, INC.

New York, New York 335 Madison Avenue

New York, New York 10017

(212) 716-3923

JAMES H. CARTER

Chairman,

Arbitration Law Committee

Attorneys for Amicus Curiae

American Arbitration Association

August 7, 2000

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