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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2001
- **Citation:** 532 U.S. 105

## Text

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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0355%3A19. Public record. Not legal advice.