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

No. 99-1379

In the

Supreme Court of the Gnited States

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 NATIONAL

EMPLOYMENT LAWYERS ASSOCIATION IN

SUPPORT OF RESPONDENT SAINT CLAIR ADAMS

PAULA A. BRANTNER JOHN M. TRUE, III

NATIONAL EMPLOYMENT Counsel of Record

LAWYERS ASSOCIATION RUDY, EXELROD, ZIEFF

600 Harrison Street & TRUE, L.L.P.

Suite 535 351 California Street

San Francisco, CA 94107 Suite 700

(415) 227-4655 San Francisco, CA 94104

(415) 434-9800

Attorneys for Amicus Curiae

NATIONAL EMPLOYMENT LAWYERS ASSOCIATION

Midwest Law Printing Company/Photex — Chicago — (312) 321-0220

BEST AVAILABLE COPY

i

TABLE OF CONTENTS

SUMMARY OF ARGUMENT .................... 2

PEE. 60 0 6060 00-5.00000%6n0600000ss 3

I. CONGRESS EXEMPTED EMPLOYMENT

AGREEMENTS FROM THE FEDERAL

ARBITRATION ACT FOR REASONS

THAT MADE SENSE IN 1925 AND STILL

SD ES DED 6 ec cceuseeusbsenwoess 3

A. Congress Intended To And Did Ex-

clude All Employment Contracts

From The Coverage Of The FAA ........ 3

. The Employment Relationship Is In-

herently Unequal

. Because the Employment Relation-

ship Is Inherently Unequal, It Has

Been the Subject of Extensive State

and Federal Regulation

ii

D. Circuit City’s Dispute Resolution Pro-

cedures Exemplify the Unfair Arbitra-

tion Provisions Forced on Individual,

Non-Represented Employees .......... 14

E. There Is No “Public Policy” That Fa-

vors Enforcement of Compulsory Ar-

bitration Made A Condition of Em-

Il. EXPERIENCE DURING THE TEN YEARS

SINCE THIS COURT’S DECISION IN

GILMER DEMONSTRATES THAT IT IS

NO LONGER POSSIBLE TO PRESUME

THAT THE ARBITRAL FORUM IS AN

ADEQUATE SUBSTITUTE FOR THE

COURTROOM .......--e eee cece eeeeeeee 20

CONCLUSION .......ccccccccccercecrerceeeess 27

iii

TABLE OF AUTHORITIES

Cases

Alcaraz v. Avnet, Inc.,

933 F. Supp. 1025 (D.N.M. 1996) ......

Alexander v. Gardner-Denver Co.,

415 U.S. 36 (1974) ..................

Armendariz v. Foundation Health Psychcare

Services, Inc., 2000 Cal. LEXIS 6120 ...

Arnold v. United Companies Lending Corp.,

511 S.E.2d 854 (W. Va. 1998)

Board of Education of the County of Berkeley

v. W. Harley Miller, Inc., 236 S.E.2d 439

(W: Va. 1977)

Burlington Industries v. Ellerth,

in nb eskedewsws

Cheng-Canindin v. Renaissance Hotel

(1996) 50 Cal.App.4th 676 .............

Circuit City Stores, Inc. v. Curry,

946 S.W.2d 486 (Tex. App. 1997) .......

Circuit City Stores, Inc. v. EEOC,

75 F. Supp. 2d 491 (E.D. Va. 1999) ......

Circuit City Stores, Inc. v. Shelton,

2000 U.S. Dist. LEXIS 7059 (W.D. Mich.)

PAGE(S)

aeeans 1

seeses 25

iv

Cole v. Burns Intern’l Security,

105 F.3d 1465 (D.C. Cir. 1997) ..........50005- 9

Commodore Home Systems v. Superior Court

(1982) 32 C.3d 211, 185 C.R. 270. ..........--- 13

Davis v. LPK Corp.,

76 Fair Empl. Prac. Cas

(BNA) 954 (N.D. Cal. 1998) ..........622+555- 18

DeGaetano v. Smith Barney, Inc.,

983 F. Supp. 459 (S.D.N.Y. 1997) .......-.-+-- 24

Derrickson v. Circuit City Stores, Inc.,

81 Fair Empl. Prac. Cas. (BNA) 1533

(D. Md. 1999), aff'd sub nom. Johnson

v. Circuit City Stores, Inc., 203 F.3d

821 (4th Cir.), cert. denied, 120 S. Ct.

WAG CUNO o.oo ccccccccccccccceccesccosesss 23

Faragher v. City of Boca Raton,

__U.S. __, 118 S.Ct. 2275 (1998) .......-.---- l

First Options v. Kaplan,

514 U.S. 938, 115 S.Ct. 1920 (1995) .......-.-. 19

Fuller v. Pep Boys — Manny, Moe & Jack

of Delaware, Inc., 88 F. Supp. 2d 1158

(TD. Colo. S000) 2. wc ccccccccccccccccsscccces 23

Gannon v. Circuit City Stores, Inc.,

2000 U.S. Dist. LEXIS 12125

(E.D. Mo. July 10, 2000) ......---- eee ee eee 25

Vv

Gilmer v. Interstate Johnson /Lane Corp.,

500 U.S. 20(1991) .................. 3, 9, 20, 21

Graham Oil v. ARCO Products Co.,

43F.3d 1244 (9" Cir. 1994) .................. 24

Graham v. Scissor-Tail

(1981) 28 Cal.3d 807,623 P.2d165............ 18

Great Western Mortgage Co. v. Peacock,

110 F.3d 222 (3rd Cir. 1997) ................. 23

Hooters of America Inc. v. Phillips,

173 F.3d 933 (4th Cir. 1999) ........... 22, 23, 24

Hull v. Norcom, Inc.,

750 F.2d 1547 (11th Cir. 1985) ............... 22

Johnson v. Circuit City Stores, Inc.,

148 F.3d 373 (4th Cir. 1998) .............. 23, 24

Jones v. Fujitsu Network Commun., Inc.,

81 F. Supp. 2d 688 (N.D. Tex. 1999)........... 23

Kinney v. United Healthcare Servs. Inc..,

70 Cal. App. 4th 1322 (1999) ................. 22

Kolstad v. American Dental Association,

ete, een Cy oe ED vce wveccondnce l

Lingle v. Norge,

486 U.S. 399, 108 S.Ct. 1877 (1988) ............ 9

ee

vi

McWilliams v. Logicon, Inc.,

1997 WL 383150, at *2 (D. Kan.

June 4, 1997), aff'd, 143 F.3d 573

> + ier srr 23

Michalski v. Circuit City Stores, Inc.,

177 F.3d 634 (7th Cir. 1999) ..........--e ee 25

Mitsubishi Motors v. Soler Chrysler-Plymouth,

473 U.S. 614, 105 S.Ct. 3346 (1985) ........... 19

Morrison v. Circuit City Stores, Inc.,

70 F. Supp. 2d 815 (S.D. Ohio 1999)........... 25

NLRB v. Jones & Laughlin Steel Corp.,

901 U.S. 1 (1987) 2... cece cece ccccccccccccns 11

Paladino v. Avnet Computer Technologies,

134 F.3d 1054 (11" Cir. 1998) ........----- 23, 24

Patterson v. ITT Consumer Financial

(1993) 14 Cal.App.4th 1659, 18

Cal.Rptr.2d 563 .........- eee e creer eee 24

Penn v. Ryan’s Steakhouses, Inc.,

95 F. Supp. 940 (N.D. Ind. 2000) ........-. 23, 24

Ramirez v. Circuit City Stores, Inc.,

90 Cal. Rptr. 2d 916 (Cal. Ct.

App. 1999), rev. granted, 94

Cal. Rptr. 2d 1 (Cal. 2000) ......---- ee eeeee 25

vii

Shankle v. B-G Maintenance Mgt. of Colorado,

Inc., 163 F.3d 1230 (10th Cir. 1999)

peeeateeses 23

Sportelli v. Circuit City Stores, Inc.,

1998 U.S. Dist. LEXIS 316

(E.D. Pa. Jan. 13, 1998) ..................... 25

Stirlen v. Supercuts, Inc.,

51 Cal. App. 4th 1519(1997).............. 22, 23

United Steelworkers v. American Mfg. Co..,

363 U.S. 564 (1960) ....................... 7,8

United Steelworkers v. Enterprise Wheel & Car,

363 U.S. 593 (1960) .........0000.0........ 7,8

United Steelworkers v. Warrior & Gulf

Navigation Co., 363 U.S. 574 (1960).......... 7,8

Wright v. Circuit City Stores, Inc.,

82 F. Supp. 1279 (N.D. Ala. 2000) ............ 25

Wright v. Universal Maritime Services,

Se es SO CRED vvccvcvcccceccaccecicsece )

Statutes

Americans with Disabilities Act (“ADA”),

42 U.S.C. §12101(bX(2) ..... 2... ee, 11, 12

SDUBC. BOB... cccccccess enveueecnssuceuses 9

IE oxi covanviadiixariioetaanns 10

SUB. CFSE oo vevscccvvccvescseseeseseseess 9

42 U.S.C. § IDIONOMD) . wc cere vvecvvcvveveees 9

Cal. Fair Employment & Housing Act

(“FEHA”) Gov't. Code § 12900, et seq........... 12

Cal. Gov't. Code § 12920 ........ cece eee eee eees 13

Cal. Gov’t. Code § 12960 et seq. ... 6... ee eee ee eeee 13

Cal. Gov't. Code § 12965(b) ....... 65. c eee eee eee 13

Cal. Lab. Code §§ 1171-1204 .........-. cece eeeees 8

Cal. Lab. Code §§ 1285-1312, 1390-1399 .......... 10

Cal. Unemployment Insurance Act,

Cal. Unempl. Ins. Code §§ 1-16010.......: boone ae

Cal. Workers’ Compensation Act,

Cal. Lab. Code §§ 3200-6208 ...........+5+55: 10

Equal Pay Act (“EPA”), 29 U.S.C. | eee 11

Fair Labor Standards Act (“FLSA”),

29 U.S.C. §§ 201-219 ...... cece ee ee eens 10, 12

ix

Federal Arbitration Act (“FAA”),

9 U.S.C. §§ 1, et seq. ........ 000... 00 0. passim

National Labor Relations Act (“N LRA”),

29 U.S.C. §§ 151-168

ee er eee 10

Rehabilitation Act of 1973,

29 U.S.C. §§ 701-796 ....................5-. ll

Norris LaGuardia Act, 47 Stat. 70 (1932),

ne 6, 11

Other Authority

Analysis of H.R. 13522 submitted by

President Furuseth to the ISU Convention. ...... 5

Cox, Grievance Arbitration in the Federal

Courts, 67 Harv. L.Rev. 591(1954)............. 3

Finkin, “Workers’ Contracts” Under the

United States Arbitration Act: An Essay

in Historical Clarification, 17 Berkeley

J. Emp. & Lab. L. 282(1996) ............... 3,4

Finkin, Employment Contracts under the

FAA — Reconsidered, 48 Labor L.J. 329

bh RGd86 4s odbb bens bbebdeeseesecreence 3

xX

Grodin, Arbitration of Employment

Discrimination Claims: Doctrine and

Policy in the Wake of Gilmer, 14 Hofstra

Lab. Lid. 1 (1996) 2... ccc cccccccccccecccveces 3

Proceedings of the 26" Annual Convention

of the ISU, 203 - 05 (Appendix to Annual

Proceedings) (1924) ........-e cece cere renee

Schwartz, Enforcing Small Print to Protect

Big Business: Employee and Consumer

Rights Claims in an Age of Compelled

Arbitration, 1997 Wisc. L.R. 33 (1997) ........-. 8

Sternlight, Panacea or Corporate Tool?:

Debunking the Supreme Court’s Preference

for Binding Arbitration, 74 Wash. U. L.Q.

7 2) | See ee

Sternlight, Rethinking the Constitutionality of

the Supreme Court’s Preference for Binding

Arbitration: A Fresh Assessment of Jury

Trial, Separation of Powers and Due

Process Concerns, 72 Tulane L.R. 1(1977) .....-. 9

Sternlight, Forum Shopping for Arbitration |

Decisions: Federal Courts’ Use of Antisuit

Injunctions Against State Courts, 147

U.Pa.L. Rev. 91 (1998) ....... cece cece eee eeeee

1

INTEREST OF AMICUS CURIAE

The National Employment Lawyers Association

(“NELA”) files this amicus curiae brief with the consent

of all parties." NELA, a voluntary membership organiza-

tion exceeding 3,000 attorneys, is the country’s only

professional membership organization of lawyers who

regularly represent employees in labor, employment and

civil rights disputes.

As part of its advocacy efforts, NELA regularly sup-

ports precedent setting litigation affecting the rights of

individuals in the workplace. NELA has filed numerous

amicus curiae briefs before the U.S. Supreme Court and

the federal appellate and district courts regarding the

proper interpretation and application of employment dis-

crimination laws to ensure that the laws are fully en-

forced and that the rights of workers are fully protected.

Some of the more recent cases before this Court include:

Kolstad v. American Dental Association, __U.S.__, 119

S.Ct. ____ (1999); Faragher v. City of Boca Raton, __ US.

—__, 118 S.Ct. 2275 (1998); and Burlington Industries v.

Ellerth,___ U.S. ___, 118 S.Ct. 2257 (1998).

t

' Copies of the parties’ consent to the filing of this brief have

been filed with the Clerk of the Court. No part of the attached

brief has been authored by counsel for either party or any

other entity. In accordance with Supreme Court Rule 37.6,

NELA states that counsel for respondent, Michael Rubin and

Cliff Palefsky, are among the over 3,000 members of NELA,

and, as such, pay general membership dues. The undersigned

counsel of record, also a NELA member, discloses that he is a

panel arbitrator for the American Arbitration Association,

which has filed an amicus curiae brief in support of reversal of

the decision below. No persons other than the amicus curiae,

its members or its counsel, made a monetary contribution to

the preparation and submission of this brief.

2

The issue of imposed compulsory arbitration—which is

at the heart of this case—is currently a major focus of

litigation among NELA attorneys and their clients across

the country. NELA members’ clients will be significantly

harmed, as will the public, if employers are permitted to

require—as a condition of employment—that employees

be compelled to submit any employment related claims to

arbitration under rules crafted by their employer, there-

by prospectively waiving not only their right to a jury

trial, but also their rights to have the civil rights and

other employment laws applied and enforced as written.

NELA is familiar with the questions involved in this

case and the scope of their presentation and feels that it

would be helpful to the Court, and important to the

public, to file this amicus curiae brief to assist the Court

in the resolution of this case.

SUMMARY OF ARGUMENT

The employment relationship is an inherently unequal

one. Congress recognized this when it considered passage

of the Federal Arbitration Act in 1925. In response to

persuasive arguments from representatives of organized

labor, employment contracts were specifically exempted

from the Act. Congress’ conclusion that employment

agreements were not the sort of contract that should

come within the reach of the Federal Arbitration Act was

sound—not only did it make good policy sense in 1925, it

does so now. Acceptance of the argument made by Peti-

tioner and its amici that the language excluding employ-

ment contracts from the Act should be read narrowly will

devastate this country’s ability to enforce the rights of

individual, non-represented workers.

3

This is all the more so because in the ten years since

this court decided Gilmer v. Interstate Johnson /Lane

Corp., 500 U.S. 20 (1991), the use of mandatory, pre-

dispute arbitration agreements has greatly expanded.

Employers imposing these agreements on their workers

have frequently succumbed to the irresistible temptation

to deprive employees of substantive rights and remedies

under the guise of choosing “just another forum” for the

resolution of employment disputes. Permitting this mass

“opt-out” from state and federal civil rights laws affecting

the workplace would be profoundly wrong.

ARGUMENT

I. CONGRESS EXEMPTED EMPLOYMENT AGREE-

MENTS FROM THE FEDERAL ARBITRATION ACT

FOR REASONS THAT MADE SENSE IN 1925 AND

STILL MAKE SENSE TODAY.

A. Congress Intended to and Did Exclude All

Employment Contracts from the Coverage of

the FAA.

NELA agrees with Respondent Saint Clair Adams, his

amici and with the overwhelming consensus of legal

scholarship that, in enacting the Federal Arbitration Act

(FAA)’ in 1925, Congress intended to and did exclude all

contracts of employment from its coverage.’ At the time

* 9 U.S.C. §1 et seq.

* See Matthew W. Finkin, “Workers’ Contracts” Under the

United States Arbitration Act: An Essay in Historical Clari-

fication, 17 Berkeley J. Emp. & Lab. L. 282 (1996) (hereafter,

“Workers’ Contracts”); Finkin, Employment Contracts under

the FAA — Reconsidered, 48 Labor L.J. 329 (1997); Archibald

Cox, Grievance Arbitration in the Federal Courts, 67 Harv.

(continued...)

4

the FAA became law, there were very few written em-

ployment agreements. There were some, however, and

the legislative record reflects that Congress was aware

that such employment contracts that did exist were not

the result of equal bargaining power, but were instru-

ments imposed on the weaker employee by the far more

powerful employer.

Opposition to the FAA came from organized labor,

particularly the International Seamen’s Union of Amer-

ica (ISU) which was afraid that arbitration clauses in

individual seamen’s employment agreements (not union

contracts) would be specifically enforced if the bill under

consideration became law. Arbitrators, the ISU worried,

would be more likely than courts to issue orders compel-

ling seamen to serve out the terms of these contracts—

essentially imposing involuntary servitude on individual

seamen with no power to resist.* Andrew Furuseth, the

President of the ISU, criticized the arbitration bill on the

ground that it would force employees to forfeit the pro-

tection of the courts: “(T]he bill provides for the re-

introduction of forced or compulsory labor if the free-

men through his necessities shall be induced to sign,

> (...continued) —

L.Rev. 591 (1954); Joseph R. Grodin, Arbitration of Employ-

ment Discrimination Claims: Doctrine and Policy in the Wake

of Gilmer, 14 Hofstra Lab. L.J. 1, 19 (1996) and Sternlight,

Forum Shopping for Arbitration Decisions: Federal Courts’ Use

of Antisuit Injunctions Against State Courts, 147 U.Pa.L. _,

91, 193, n. 438 (1998) (“The federal courts have typically foun

that the FAA applies to employment disputes despite statutory

language that would seem to preclude such coverage.)

4 See Finkin, “Workers’ Contracts,” supra, 17 Berkeley J. of

Empl. & Lab. L. 282, 284-88.

5

Furuseth proclaimed.’ As the available record clearly

reflects, and as is thoroughly discussed in other submis-

sions to the Court in this case, it was this opposition,

mounted in conjunction with the American Federation of

Labor, that resulted in the ultimate passage of the ex-

clusion in Section 2 of the FAA now under review.

Why did this language end up in the FAA? Other nar-

ties and amici examine the text and the legislative his-

tory of this language of the Act, and demonstrate that

the purpose of the additional language was to “prevent| |

the enactment of any measure designed to fasten any

species of compulsory arbitration upon any group of

workers in America.”” NELA addresses itself to a closely

connected subject its members know well: we argue here-

in that the unique nature of the relationship between

individual worker and employer, a relationship that

made it inappropriate then (as Congress recognized) and

now (as this Court should hold) for individual employees

to be compelled to accept arbitration.

B. The Employment Relationship Is Inherently Un-

equal.

Since the Industrial Revolution, employment has been

considered to be contractual, the product of a tacit bar-

gain between “servant” and “master” in which the former

agrees to perform services in return for a wage paid by

* Proceedings of the 26" Annual Convention of the ISU, 203 -

05 (Appendix to Annual Proceedings) (19214) quoted in Finkin,

Workers Contracts, supra, at 289.

° Analysis of H.R. 13522 submitted by President Furuseth to

the Convention, Which Was Adopted, reproduced in Finkin,

Workers’ Contracts, supra at 301.

6

the latter. In the vast majority of employment “con-

tracts,” however, the contracting parties are possessed of

significantly unequal bargaining power. Typically, the

“master” offers terms which the “servant” may either

take or leave. Meaningful negotiations rarely occur.

In the past, employees were required to accept twelve-

to fourteen-hour days, substandard pay, dangerous work-

ing conditions, “yellow dog” clauses, overt, explicit job

discrimination, even involuntary servitude as terms of

their employment. These deplorable, unilaterally im-

posed job conditions existed because working people in

the early part of the last century were powerless to ob-

tain better “deals” in the countless individual contracts

struck for the performance of their labor. As Congress

recognized in the preamble to one of its important early

twentieth century labor laws, the Norris LaGuardia Act,

under prevailing economic conditions, developed

with the aid of governmental authority for own-

ers of property to organize in the corporate and

other forms of ownership association, the individ-

ual unorganized worker is commonly helpless to

exercise actual liberty of contract and to protect

his freedom of labor, and thereby to obtain ac-

ceptable terms and conditions of employment.

47 Stat. 70 (1932), 29 U.S.C. § 102 (emphasis supplied).

This unequal bargaining relationship is far from the

sort of negotiation which might take place between, e.8:,

merchants who wish the convenience of an alternative

forum for dispute resolution and who therefore contract

with each other for private arbitration. “Take it or leave

it” arbitration clauses in employee personnel policies

were not what was contemplated by the drafters of

the FAA. Unlike businesses dealing with each other at

arms’ length, most employees represented by members of

7

NELA cannot actually bargain with a prospective em-

ployer as to the selection of a dispute resolution forum. In

the vast majority of cases—as in the one at bar—em-

ployees must either accept imposed arbitration of dis-

putes as a condition of employment, or attempt to find

another job. They find themselves in the very dilemma

presciently described by ISU President Furuseth seventy-

five years ago:

Will such contracts be signed? Esau agreed,

because he was hungry. It was the desire to live

that caused slavery to begin and continue. With

the growing hunger in modern society, there will

be but few that will be able to resist. The per-

sonal hunger of the seaman, and the hunger of

the wife and children of the railroad man will

surely tempt them to sign, and so with sundry

other workers in ‘Interstate and Foreign Com-

merce.”

Nor, as this Court has recognized, are these individual

employment agreements the same as union contracts.

Collectively bargained arbitration mechanisms have a

long and honorable history in the unionized workplace.

Their historic role in explicating and illuminating “the

law of the shop” was approved by this Court in the Stee/-

workers Trilogy,” but the arbitration contemplated there-

in is completely and fundamentally at odds with the

values at stake in cases like this. First and most im-

" Proceedings of the 26” Annual Convention of the ISU, 203 -

05 (Appendix to Annual Proceedings) (1924) quoted in Finkin,

Workers Contracts, supra, at 289.

* United Steelworkers v. Enterprise Wheel & Car, 363 U.S. 593

(1960); United Steelworkers v. Warrior & Gulf Navigation Co.,

363 U.S. 574 (1960); United Steelworkers v. American Mfg. Co.,

363 U.S. 564 (1960).

8

portant, the labor arbitration language reviewed in the

Steelworker cases had been agreed to by parties of rough-

ly equal bargaining power. The unions agreeing to this

mechanism had the power—and frequently used it—to

bring an employer’s business to an unceremonious halt

if they chose to do so. Collective bargaining agreements

containing arbitration clauses were then perceived to

be—and still are—contracts between equals. Second, the

Court recognized the unique trade-off inherent in collec-

tive bargaining: the finality of arbitration in exchange for

labor peace. Arbitration was the quid pro quo for an

agreement not to strike for the contract’s term. Third, the

Trilogy recognized that the labor arbitrator is given a

limited role: to interpret and decide contract issues aris-

ing out of the collective bargaining agreement itself, not

to rule on issues of public law.”

Even so, this Court has recognized limitations on ar-

bitration to the extent it implicates statutory claims

brought by union-represented workers. It is now well

settled that unionized employees are not required to

arbitrate statutory and other public policy claims that do

not involve interpretation of the collective bargaining

agreement under which they work. Arbitration exists

only to give ongoing life to the document which fixes the

* See, United Steelworkers v. Enterprise Wheel & Car, supra,

363 U.S. 593; United Steelworkers v. Warrior & Gulf Naviga-

tion Co., supra, 363 U.S. 574 (1960); United Steelworkers v.

American Mfg. Co., supra, 363 U.S. 564. See also, J. Stern-

light, Panacea or Corporate Tool?: Debunking the Supreme

Court's Preference for Binding Arbitration, 74 Wash. U. L.Q.

637, 642-43, 653-54 (1996); D. Schwartz, Enforcing Small

Print to Protect Big Business: Employee and Consumer Rights

Claims in an Age of Compeiled Arbitration, 1997 Wisc. L.R. 33,

72-73, n. 130 (1997)

9

“rule of the shop” in which they work.’® This Court, lower

courts and numerous commentators have recognized the

obvious and vast difference between arbitration in the

organized labor context and in the individual employee

context."'

Simply put, the “contract” between the individual em-

ployee and his or her employer may not be analyzed as if

it were either a commercial deal between merchants who

wish the convenience of an alternative forum or as if it

were a mechanism arrived at between union and em-

ployer for resolving grievances. It is something entirely

different.

C. Because The Employment Relationship Is In-

herently Unequal, It Has Been The Subject Of

Extensive State and Federal Regulation.

Since the beginning of the twentieth century, as law-

makers began to grapple with the excesses of the Indus-

‘0 See, Alexander v. Gardner-Denver Co., 415 U.S. 36. 45

(1974); Lingle v. Norge, 486 U.S. 399, 108 S.Ct. 1877 (1988):

Wright v. Universal Maritime Services, 119 S.Ct. 391 (1998).

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

(1991); Cole v. Burns Intern'l Security, 105 F.3d 1465, 1476-

1477 (D.C. Cir. 1997) (questioning the validity of imposing the

model of collective bargaining agreement arbitration on indi-

vidual employment situations where employees are attempting

to enforce public statutory rights, and noting the structural

protections for employees inherent in the union/collective bar-

gaining arena); Sternlight, Panacea, supra, pp. 642-43 (labor

arbitration as a substitute for a strike is entirely different

from individual arbitration as a substitute for public judicial

proceeding); J. Sternlight, Rethinking the Constitutionality of

the Supreme Court’s Preference for Binding Arbitration: A

Fresh Assessment of Jury Trial, Separation of Powers and Due

Process Concerns, 72 Tulane L.R. 1, 7 (1977)

10

trial Revolution, Congress and state legislatures through-

out the country began enacting protective legislation to

protect the rights of the individual employee so that

today, a vast number of statutes restrict an employer's

freedom to impose terms of employment on working

people. For example, federal and state laws in effect

throughout the country since very near the beginning of

the twentieth century prohibit the use of child labor.”

Others, in place since the First World War era and after

provide a “no-fault” system of benefits for those injured

at work.’ Depression-era unemployment insurance regu-

lations provide a “safety net” for those suddenly deprived

of work through no fault of their own.'* Wage and hour

laws regulate the minimum amounts employers may pay

their employees and the maximum number of hours they

may require those employees to work."

In addition, during the Great Depression, Congress and

many state legislatures saw fit to confer on employees

the right to organize, to form and join unions or to oppose

unionization. California Labor Code § 923, for example,

2 See, e.g., 29 U.S.C. § 212; Cal. Lab. Code §§ 1285-1312,

1390-1399.

'S See, e.g., Cal. Workers’ Compensation Act, Cal. Lab. Code

§§ 3200-6208.

'* See, e.g., Cal. Unemployment Insurance Act, Cal. Unempl.

Ins. Code §§ 1-16010.

'S See, e.g., the Fair Labor Standards Act (“FLSA”), 29 U.S.C.

§§ 201-219; Cal. Lab. Code §§ 1171-1204.

‘© See, e.g., the National Labor Relations Act (“NLRA”), 29

U.S.C. §§ 151-168. Congress noted that passage of the NLRA

was necessary because of, “The inequality of bargaining power

between employees . . . and employers... .” 29 U.S.C. § 151.

(continued...)

11

articulates the public policy of the State of California

in terms which echo both the NLRA and the Norris

LaGuardia Act:

Negotiations of terms and conditions of labor

should result from voluntary agreement between

employer and employees. Governmental author-

ity has permitted and encouraged employers to

organize in the corporate and other forms of

capital control. In dealing with such employers,

the individual unorganized worker is helpless to

exercise actual liberty of contract and to protect

his freedom of labor, and thereby to obtain ac-

ceptable terms and conditions of employment.

Therefore, it is necessary that the individual

workman have full freedom of association, self-

organization, and designation of representatives

of his own choosing, to negotiate the terms and

conditions of his employment, and that he shall

be free from the interference, restraint, or coer-

cion of employers of labor, or their agents, in the

designation of such representatives or in self-

organization or in other concerted activities for

the purpose of collective bargaining or other

mutual aid or protection."

Since the Depression, Congress has regularly involved

itself with the employee-employer relationship in order

to protect the rights of employees.'* The NLRA and other

early enactments have been followed by a comprehensive

‘© (continued)

The NLRA was designed to “restor(e] equality of bargaining

power between employers and employees.” Jd.

‘’ Cal. Labor Code § 923 (West, 1989) (emphasis supplied).

'* In 1937 this Court held that the NLRA was a valid exercise

of Congressional power under the Commerce Clause. NLRB v.

Jones & Laughlin Steel Corp., 301 U.S. 1 (1937).

12

array of additional statutes enacted to protect employee

rights." Each of these acts, individually, serves as a

strong statement of policy by Congress.””

Throughout the country, state legislatures have in

many instances addressed employment inequities before

Congress got to them. California’s employment discrimi-

nation act, for instance, was first enacted in 1959 as the

“California Fair Employment Practices Act” and revised

in 1980 as the “California Fair Employment and Housing

Act,” (FEHA).”! Section 12920 of the FEHA announces as

the public policy of the state of California

'% See, e.g.,Title VII of the Civil Rights Act of 1964, 42 U.S.C.

§§ 2000e-2000e-17; the FLSA, 29 U.S.C. §§ 201-219; the Equal

Pay Act (“EPA”), 29 U.S.C. § 206(d); the Age Discrimination in

Employment Act (ADEA), 29 U.S.C. §§ 621-634; the Rehabili-

tation Act of 1973, 29 U.S.C. §§ 701-796; and the Americans

With Disabilities Act (ADA), 42 U.S.C. §§ 12101-12113.

2” Title VII of The Civil Rights Act of 1964, for example, rep-

resents an “important congressional policy against discrimi-

nating employment practices.” Alexander v. Gardner-Denver

Co., supra, 415 U.S. 36, 45. See also, FLSA, 29 U.S.C. § 202(a)

(FLSA enacted to correct “labor conditions detrimental to the

maintenance of the minimum standard of living necessary

for health, efficiency, and general well-being of workers”); the

Equal Pay Act, Pub. L. No. 88-38 § 2 (EPA passed to cure a

variety of social ills caused by wage differences based on sex);

Gilmer v. Interstate / Johnson Lane Corp, 500 U.S. at 27 (the

ADEA was designed “to further important social policies”); the

Rehabilitation Act of 1974, 29 U.S.C. § 701 (Rehabilitation Act

reflects national policy of respect for individuals with disabili-

ties); the ADA, 42 U.S.C. § 12101(b)(2) (purpose of the ADA is

“to provide clear, strong, consistent, enforceable standards

addressing discrimination against individuals with disabili-

ties”).

*! Cal. Gov't. Code § 12900, et seq.

13

that it is necessary to protect and safeguard the

right and opportunity of all persons to seek, ob-

tain, and hold employment without discrimina-

tion or abridgment on account of race, religious

creed, color, national origin, ancestry, physical

disability, mental disability, medical condition,

marital status, sex, age, or sexual orientation.”

In enacting the comprehensive scheme underlying the

FEHA, the California legislature sought to ensure a full

range of remedies for victims of discrimination.” Thus,

employees who bring claims for discrimination are not

only entitled to the full range of tort remedies,” but are

entitled to an award of attorney’s fees should they pre-

vail.”° And, even though an administrative scheme exists

for resolution of such claims,” victims of employment

discrimination are always entitled to bring their statu-

tory claims in a civil court action.”

Taken together, these state and federal statutes repre-

sent strong policies which protect employees from dis-

crimination or other wrongful workplace conduct when

they cannot protect themselves due to the vastly superior

bargaining power of their employers. These laws—and

many, many others like them—were passed at different

** Cal. Gov't. Code § 12920.

“ “It is the purpose of this part to provide effective remedies

which will eliminate such discriminatory practices.” Cal. Gov't.

Code § 12920.

** Commodore Home Systems v. Superior Court (1982) 32 C.3d

211, 185 C.R. 270.

*° Cal. Gov't. Code § 12965(b).

*° Cal. Gov't. Code § 12960 et seq.

“7 Cal. Gov't. Code § 12965.

14

times and in response to different economic, political and

social circumstances. But they represent far more than

a patchwork of haphazard workplace regulations. To-

gether, they are a powerful legislative statement that

there is something different about the workplace, some-

thing that invites, indeed requires, a governmental

presence.

D. Circuit City’s Dispute Resolution Procedures

Exemplify The Unfair Arbitration Provisions

Forced On Individual, Non-Represented Em-

ployees.

The Respondent in this case, Saint Clair Adams, in-

voked the protection of the California FEHA when he

filed the underlying lawsuit in this case in state court. In

response, Circuit City sued Mr. Adams in the U.S. Dis-

trict Court for the Northern District of California to

enjoin his state court suit and to compel arbitration

under its “Dispute Resolution Agreement” (DRA). These

procedures, which designate the American Arbitration

Association (AAA) as the administrator of arbitration

arising under them, significantly limit the rights of Cir-

cuit City’s employees (though not of Circuit City) in the

following ways: (1) They impose a one-year statute of

limitations on all claims, including claims that have

longer limitations periods under California law. (2) They

obligate employees to pay half the cost of any arbitra-

tion, including arbitrator fees and expenses. (3) They vest

complete discretion in the arbitrator to decide whether to

award attorney’s fees to a prevailing employee, even on

statutory discrimination claims. (4) They cap the amount

of front pay or punitive damages that an arbitrator could

award. (5) They do not require the arbitrator to provide

findings or reasoning in support of the arbitration award.

15

These material limitations on otherwise available rem-

edies, taken together with the imposition of significant

forum costs, make it clear that Circuit City’s rules are

something quite different from a straightforward pro-

posal to its employees for “another forum” in which to

resolve disputes.

Although there is no indication that Circuit City ever

told Mr. Adams this, it is doubtful that—if the AAA were

to follow its own oft-stated policy—it would agree to ad-

minister the arbitration in this case should it ever take

place. As the AAA has explained to this Court in its

amicus submission, it is a signatory to the “Due Process

Protocol for Mediation and Arbitration of Statutory

Disputes Arising out of the Employment Relationship”

(hereafter, “the Due Process Protocol”), a document

drafted by representatives of the AAA, the National

Academy of Arbitrators (NAA), the Labor and Employ-

ment 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 NELA. As the AAA points out,

The Due Process Protocol requires that all partic-

ipants 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, the right to discovery as

authorized by the arbitrator, the right to the

same remedies as those available in court (includ-

ing the right to an award of attorneys’ fees in

conformity with the law), and the right to a

written opinion.”

** Brief Amicus Curiae of the American Arbitration Associa-

tion in Support of Reversal at p. 7.

16

It is also the case, as the AAA tells this Court, that it

will decline to administer an arbitration program not in

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.””

There can be no doubt that Circuit City’s arbitration

program falls far short of the Due Process Protocol. As

noted above, it substantially shortens limitations periods,

constricts the remedies an arbitrator can award and does

not provide for a written decision which would enable a

party to seek judicial review. Circuit City’s arbitration

program is deficient in other respects, as well: since it

imposes substantial costs on the employee and since it

permits the employer, but not the employee access to

court, it does not even comply with current California

law.”

*2 Id. Given that the AAA has taken a position in this case in

favor of Petitioner and against Respondent, it is hard to

imagine how Mr. Adams could feel that he would have the

benefit of “a neutral third party decision maker” (required by

the Due Process Protocol) should his dispute with Circuit City

end up being administered by the AAA.

*° The California Supreme Court recently held a pre-employ-

ment agreement to arbitrate employment discrimination

claims unenforceable on the grounds that it violated public

policy and was unconscionably unilateral. In Armendariz v.

Foundation Health Psychcare Services, Inc., ___ Cal.4th __.,

__P2d__,____ Cal. Rptr. 2d__, 2000 Cal. LEXIS 6120, No.

S075942 (August 24, 2000), the court held that such agree-

ments may be valid and enforceable, but only if they incorpo-

rate substantive and procedural protections. Specifically, they

must allow for recovery of all types of relief otherwise avail-

able in court. They must also provide for neutral arbitrators,

adequate discovery, and written arbitration awards. The

(continued...)

17

E. There Is No “Public Policy’ That Favors En-

forcement Of Compulsory Arbitration Made A

Condition Of Employment.

When he filed his state court lawsuit, Respondent

invoked the FEHA, California’s unequivocal statutory

prohibition against employment discrimination that has

been in place since the fifties. That statute explicitly

provides for access to California’s courts.*' Its protections

may not be waived.” The long history of legislation to

protect those powerless to protect themselves—of which

the FEHA is a part—and the social policy it represents,

must prevail over the so-called “policy” favoring arbitra-

tion to which Circuit City and its amici herein enthusias-

tically refer. Indeed, the “policy” they invoke is not a

policy favoring all arbitration. Rather, it is a policy fa-

voring voluntary arbitration, and, of course, arbitration

under agreements covered by, rather than excluded by,

the FAA.

*” (continued)

agreement may not require the employee to pay “either un-

reasonable costs or any arbitrators’ fees or expenses as a

condition of access to the arbitration forum.” (/d., slip opinion

at 18.) Finally, the agreement must evidence “a modicum of

bilaterality,” (id. at 39), that is, the employee cannot be bound

to submit his claims to arbitration if the employer is free to

litigate its claims in court.

*' California Government Code §12965 vests “the superior and

municipal courts of the State of California” with jurisdiction

over FEHA claims.

* “It is indisputable that an employment contract that re-

quired employees to waive their rights :inder the FEHA to

redress sexual harassment or discrimination would be con-

trary to public policy and unlawful.” Armendariz v. Founda-

tion Health Psychcare Services, Inc., supra, ____ Cal. 4th __,

__P.2d__,___ Cal. Rptr. 2d__, 2000 Cal. LEXIS 6120, slip

opinion at p. 12.

18

The district court in this case relied on this supposed

policy “favoring” arbitration. It mistakenly pointed to the

FAA and claimed that its passage was meant to indicate

a new “preference” for arbitration of employment dis-

putes. The district court got it wrong. First, a statute

such as the FAA cannot create a “public policy” which

contradicts the right to a jury trial and access to an

Article III court. Second, the FAA was passed 40 years

before the first federal employment discrimination laws

were enacted. Thus, the FAA cannot be deemed to have

ever created a “policy” superseding the provisions of the

civil rights laws which ensure victims of discrimination

access to federal courts and the right to a jury trial.

Third, the FAA was never intended to create a “prefer-

ence” for arbitration of statutory employment disputes,

much less a “public policy” favoring arbitration of them.

The original intent of the FAA was simply to allow

commercial entities of equal bargaining power the right

to use arbitration as a dispute mechanism, at a time

when arbitration was held in such low regard that many

courts flatly refused to enforce pre-dispute arbitration

agreements, even if they were voluntary.

In sum, Congress passed the FAA not to give a “prefer-

ence” to arbitration, but simply to allow courts to permit

arbitration of contractual matters arising out of “transac-

tions” between commercial entities when such agree-

ments were wholly voluntary. There is a vast difference

between removing a “prohibition” on arbitration and

creating a “preference” for it.

Moreover, the knowing and voluntary consent to an

alternative method of resolving a workplace dispute is

simply not present in the employment relationships

entered into by those workers whom NELA members

represent. These employees, like Respondent in this case,

19

are faced with “take it or leave it” policies which require

them to accept an alternate—and often highly sus-

pect—forum as a condition of employment. Coercion, not

consent, lies beneath such agreements, and they cannot

be held to be consistent with a federal policy in favor of

arbitration.

This Court recognized this crucial distinction when it

held that a “liberal” federal policy favoring arbitration

simply means that if two parties have entered into a

valid, consensual agreement to arbitrate, courts should

thereafter liberally construe the scope of that agree-

ment.*’ And in 1995 the Court reemphasized the point,

making it clear that:

the basic objective in this area is not to resolve

disputes in the quickest manner possible, no mat-

ter what the parties’ wishes, but to ensure that

commercial arbitration agreements, like other

contracts, are enforced according to their terms,

and according to the intentions of the parties.**

| Thus, the language of the statute, its unequivocal leg-

islative history and this Court’s recent pronouncements

all point in the same direction: Congress excluded agree-

ments between employers and employees like Circuit

City and Mr. Adams from the reach of the FAA.

*’ Mitsubishi Motors v. Soler Chrysler-Plymouth, 473 U.S. 614,

625-27, 105 S.Ct. 3346 (1985).

“ First Options v. Kaplan, 514 U.S. 938, 115 S.Ct. 1920, 1925

(1995) (emphasis added).

20

II. EXPERIENCE DURING THE TEN YEARS SINCE

THIS COURT’S DECISION IN GILMER DEMON-

STRATES THAT IT IS NO LONGER POSSIBLE TO

PRESUME THAT THE ARBITRAL FORUM IS AN

ADEQUATE SUBSTITUTE FOR THE COURTROOM.

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

20 (1991), to be sure, this Court upheld an arbitration

agreement which required arbitration of a statutory age

discrimination claim.” Petitioner and its amici conclude

therefrom that any agreement, no matter how unbal-

anced, may be the vehicle for the disposal of any employ-

ment claim no matter how funcamental. They are wrong.

The ruling in Gilmer was based on at least two critical

assumptions neither one of which NELA respectfully

suggests applies to the dispute now before the Court.

First, in Gilmer this Court stated that, “by agreeing to

arbitrate a statutory claim, a party does not forego the

substantive rights afforded by the statute; it only sub-

mits to their resolution in an arbitral, rather than a

judicial, forum.””° In other words, this Court accepted at

face value—in the absence of proof before the Court

to the contrary—that arbitration of statutory employ-

ment disputes would be “just another forum,” essentially

equivalent to federal court for purposes of vindicating

statutory rights.

*° The court in Gilmer merely held that parties cou/d arbitrate

an ADEA case. It made it clear that Mr. Gilmer was not

contending that he was “coerced” into signing the arbitration

clause contained in his U-4 registration document. Thus, the

Gilmer decision does not support the concept that employers

may condition employment upon an arbitration agreement for

statutory claims.

* Gilmer, 500 U.S. at 26.

21

This Court’s second critical assumption in Gilmer was

that, “the prospective litigant effectively may vindicate

[his or her] statutory cause of action in the arbitral

forum,” such that the specific statute at issue would

“continue to serve both its remedial and deterrent func-

tion.””’

In the context of employer-mandated arbitration, it

is NELA’s experience that both of these assumptions

have proven woefully unfounded. Arbitration is not “just

another forum,” and individual employees are not able to

vindicate effectively their statutory rights. Employees do

lose substantive mghts when they are coerced into pri-

vate arbitration, including the right to have the civil

rights laws applied and enforced as written. The result is

that the remedial and deterrent functions of the nation’s

employment laws are being undermined.” When employ-

ers are allowed to condition employment on the accep-

tance of arbitration, they too often use them—as Circuit

City does—to tip the dispute resolution mechanism in

their favor and thereby evade the reach of public law. For

good reason, one court described such an overreaching

arbitration agreement as “the contract between the rab-

bits and foxes.”

* Gilmer, 500 U.S. at 28 (emphasis added).

* This Court has long recognized that the choice of forum may

materially affect the substantive mghts to be vindicated in

Title VII cases. As the Court explained in Alexander, “arbitral

procedures, while well suited to the resolution of contractual

disputes, make arbitration a comparatively inappropriate

forum for the final resolution of rights created by Title VII.”

Alexander v. Gardner-Denver, supra, 415 U.S. at 57.

* Arnold v. United Companies Lending Corp., 511 S.E.2d 854,

861 (W. Va. 1998) (quoting The Board of Education of the

(continued...)

22

As a result, courts have been swamped with litigation

as employers and their employees square off over defi-

cient arbitration agreements of all sorts and types. In but

one notorious example, the Fourth Circuit reviewed a

pre-dispute arbitration agreement and found it to be “so

one-sided” as to be a clear attempt by the employer to

“undermine the neutrality of the proceeding.” The

arbitration clause at issue in that case was especially

egregious in that it, among other things, required the

employee to make extensive one-sided disclosures about

her case, ensured that the decision maker selected would

be biased in favor of the employer and allowed the

company to change the rules of the arbitration even in

the middle of a proceeding. Jd. at 938-39. Another com-

mon method used by employers to take advantage of

superior bargaining power is to make the arbitration

obligation run in only one direction, requiring the em-

ployee to arbitrate but allowing the employer to bring its

disputes to the courthouse.*’

* (. continued)

County of Berkeley v. W. Harley Miller, Inc., 236 S.E.2d 439

(W. Va. 1977) (describing a consumer contract’s arbitration

clause )).

*” Hooters of America Inc. v. Phillips, 173 F.3d 933, 938 (4th

Cir. 1999).

*' Circuit City’s agreement has this feature. See also Hull v.

Norcom, Inc., 750 F.2d 1547, 1549 (11th Cir. 1985) (finding

unenforceable an agreement whereby the employer reserved

the right to “raise and resolve any and all disputes” in a court

of law “rather than through arbitration”); Kinney v. United

Healthcare Servs. Inc., 70 Cal. App. 4th 1322, 1325-26 (1999)

(declining to enforce an arbitration agreement that bound the

employee to arbitrate her disputes but allowed the employer

recourse to the courts); Stirlen v. Supercuts, Inc., 51 Cal. App.

(continued...)

23

We have also seen arbitration agreements that:

limit remedies an employee may recover by excluding

tort damages and/or punitive damages;*

require employees to finance significant portions of the

arbitration process;*’

limit discovery;“

* (. continued)

4th 1519, 1528 (1997) (refusing to enforce an arbitration clause

that exempted actions initiated by the company from arbitra-

tion while requiring the employee arbitrate his claims)

* Again, this is an advantage Circuit City secured for itse!f.

See, also, Paladino v. Avnet Computer Technologies, 134 F.3d

1054 (11 Cir. 1998); Stirlen v. Supercuts, supra, 51 Cal.

App.4th 1519; Great Western Morigage Co. v. Peacock, 110

F.3d 222 (3rd Cir. 1997); Hooters of America v. Phillips, supra,

173 F.3d 933, 938; Alcaraz v. Avnet, Inc., 933 F. Supp. 1025,

1027-28 (D.N.M. 1996); Derrickson v. Circuit City Stores, Inc..

81 Fair Empl. Prac. Cas. (BNA) 1533 (D. Md. 1999), aff'd sub

nom. Johnson v. Circuit City Stores, Inc., 203 F.3d 821 (4th

Cir.), cert. denied, 120 S. Ct. 2744 (2000).

“ Once again, the DRA does this. See, also, Shankle v. B-G

Maintenance Mgt. of Colorado, Inc., 163 F.3d 1230, 1234-35

(10th Cir. 1999); Paladino v. Avnet Computer Technologies,

Inc., 134 F.3d 1054, 1062 (11th Cir. 1998); Davis v. LPK Corp.,

76 Fair Empl. Prac. Cas. (BNA) 954 (N.D. Cal. 1998); Fuller v.

Pep Boys — Manny, Moe & Jack of Delaware, Inc., 88 F. Supp.

2d 1158, 1162-63 (D. Colo. 2000); Jones v. Fujitsu Network

Commun., Inc., 81 F. Supp. 2d 688, 693 (N.D. Tex. 1999); Cole,

105 F.3d at 1485; McWilliams v. Logicon, 'nc., No. CIV. A. 95-

2500-GTV, 1997 WL 383150, at *2(D. Kan. June 4, 1997), affd,

143 F.3d 573 (10th Cir. 1998).

“ Penn v. Ryan's Steakhouses, Inc., 95 F. Supp. 940 (N.D. Ind.

2000); Hooters of America v. Phillips, supra.

24

establish a panel of arbitrators controlled by the em-

ployer;*

require arbitration in a distant location;*

shorten applicable statutes of limitations;*’ and

preclude or limit awards of attorneys fees or costs, re-

gardless of whether statutes provide such remedies to

prevailing plaintiffs.“

While it is not surprising that the foxes will ensure

that they would have the upper hand in contracts they

know the rabbits must accept, these one-sided agree-

ments have led to a flood of litigation. Circuit City’s ar-

bitration program alone has been the subject of eleven

reported cases of which this amicus is aware.” The

* Cheng-Canindin v. Renaissance Hotel (1996) 50 Cal.App.

4th 676; Penn v. Ryan’s Steakhouses, Inc., supra, 95 F. Supp.

940; Hooters of America v. Phillips, supra; Graham v. Scissor-

Tail (1981) 28 Cal.3d 807, 623 P.2d 165).

* Patterson v. ITT Consumer Financial (1993) 14 Cal.App.4th

1659, 18 Cal.Rptr.2d 563.

*? Circuit City’s DRA does this. See, also, Graham Oil v.

ARCO Products Co., 43 F.3d 1244 (9" Cir. 1994), supra; Stir-

len v. Supercuts, supra.

** DeGaetano v. Smith Barney, Inc., 983 F. Supp. 459 (S.D.

N.Y. 1997); Stirlen v. Supercuts, supra; Paladino v. Avnet

Computer, supra; Hooters of America v. Phillips, supra;

Graham Oil v. ARCO, supra.

* Johnson v. Circuit City Stores, Inc., 148 F.3d 373 (4th Cir.

1998) (adequate consideration for DRA when both parties

agreed to be bound by the arbitration process): Johnson v.

Circuit City Stores, Inc., No. 99-1449, 2000 U.S. App. LEXIS

370 (4th Cir. Jan. 12, 2000) (per curiam) (on remand, the

district court held the DRA unenforceable because it failed to

(continued...)

—— ee

25

courts in virtually every jurisdiction in the country are

experiencing similar frequent recurrences of litigation

over the issue.

* (continued)

provide the {ull set of remedies to which Johnson would be

entitled to under §1981); Michalski v. Circuit City Stores, Inc.,

177 F.3d 634 (7th Cir. 1999) (Circuit City’s promise to be

bound by arbitration itself served as adequate consideration

for DRA); Wright v. Circuit City Stores, Inc., 82 F. Supp. 1279

(N.D. Ala. 2000) (same; exclusion language in the FAA should

be read narrowly to apply only to employment contracts for

workers actually engaged in the movement of goods in in-

terstate or foreign commerce); Circuit City Stores, Inc. v.

Shelton, No. 1:99-cv-561, 2000 U.S. Dist. LEXIS 7059 (W.D.

Mich. May 16, 2000) (EEOC’s decision to commence action

against Circuit City does not obligate either the EEOC or

individual employee to arbitrate claims); Gannon v. Circuit

City Stores, Inc., No. 4:00CV330 JCH, 2000 U.S. Dist. LEXIS

12125 (E.D. Mo. July 10, 2000) (DRA does not adequately

protect employee's substantive rights because it limits the

amount of punitive damages); Morrison v. Circuit City Stores,

Inc., 70 F. Supp. 2d 815 (S.D. Ohio 1999) (FAA should be read

narrowly); Sportelli v. Circuit City Stores, Inc., No. 97-5850,

1998 U.S. Dist. LEXIS 316 (E.D. Pa. Jan. 13, 1998) (plaintiff,

a Circuit City employee prior to the imposition of the DRA,

opted out of DRA, thus was not bound to compulsory arbitra-

tion); Circuit City Stores, Inc. v. EEOC, 75 F. Supp. 2d 491

(E.D. Va. 1999) (district court lacked subject matter jurisdic-

tion in case in which the EEOC asserted no waiver of sover-

eign immunity); Ramirez v. Circuit City Stores, Inc., 90 Cal.

Rptr. 2d 916 (Cal. Ct. App. 1999), rev. granted, 94 Cal. Rptr.

2d 1 (Cal. 2000) (DRA held to be unenforceable on the basis of

unconscionability by intermediate court of appeal; review

granted by the California Supreme Court); Circuit City Stores,

Inc. v. Curry, 946 S.W.2d 486 (Tex. App. 1997) (since plaintiff,

another employee employed before the DRA went into effect,

had the opportunity to opt out and did not, DRA not fraudu-

lently induced or unconscionable).

26

Circuit City and its amici go to great lengths to praise

the current system of employment arbitration that the

AAA and others administer.” Workers and their repre-

sentatives have a different perspective. Despite what

Circuit City and its amici say, workers and attorneys

representing workers do not favor mandatory pre-dispute

arbitration and do not believe that such arbitration

furthers the important statutory goals in state and fed-

eral anti-discrimination laws. Why, if arbitration is so

fair, do employers have to impose it on workers as a

condition of employment?

NELA and its members are not opposed to Alternative

Dispute Resolution. NELA’s members represent individu-

als in employment mediation and arbitration all the

time. Indeed, we often elect arbitration where, after a

dispute has arisen, it appears that justice will best be

served thereby. But it is only when our clients knowingly

and voluntarily make such elections that arbitration is

appropriate. Especially since this Court has made it clear

that arbitration is a matter of consent, not coercion, we

believe firmly that the concept of voluntariness is essen-

tial to the very definition of arbitration, as well as to the

fairness and appropriateness of how it is carried out.

Contrary to the expressions of petitioner and its amici,

” See, e.g. Brief of the Chamber of Commerce of the United

States of America as Amicus Curiae in Support of Petitioner

at pp. 15, 18-19; Brief of Amicus Curiae, the Counsel for Em-

ployment Law Equity in Support of the Petitioner at pp. 5, 12,

13 and 24; Brief of Amicus Curiae Securities Industry Associa-

tion in Support of Petitioner at pp. 13-15; Brief Amicus Curiae

of the Texas Employment Council in Support of Petitioner at

p. 25; Brief Amicus Curiae of the Equal Employment Advisory

Council and LPA, Inc. in Support of Petitioner at pp. 12-17,

and Brief Amicus Curiae of the American Arbitration Associa-

tion in Support of Reversal at pp. 10-12.

27

there simply is no policy favoring mandatory arbitration.

In enacting the FAA, Congress meant nothing more than

to encourage voluntary resolution of commercial disputes

outside of the courts; it did not intend to set up a sepa-

rate and unequal system of justice for unrepresented

employees.

CONCLUSION

Congress was aware of the disparity in bargaining pow-

er between employers and workers in 1925 and exempted

all employment contracts from the FAA for that very

reason. That disparity still exists, and the FAA should

not be “interpreted” to cover a class of agreements Con-

gress explicitly, and for good reason, chose to exempt.

The decision of the Ninth Circuit should therefore be

affirmed.

Respectfully submitted,

PAULA A. BRANTNER JOHN M. TRUE, III

NATIONAL EMPLOYMENT Counsel of Record

LAWYERS ASSOCIATION RUDY, EXELROD, ZIEFF

600 Harrison Street & TRUE, L.L.P.

Suite 535 351 California Street

San Francisco, CA 94107 Suite 700

(415) 227-4655 San Francisco, CA 94104

(415) 434-9800

Attorneys for Amicus Curiae

NATIONAL EMPLOYMENT LAWYERS ASSOCIATION

September 19, 2000