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Employer Can Insist on Arbitration Agreement

The 9th U.S. Circuit Court of Appeals overturned one of its more controversial employment law decisions in recent years when it ruled Tuesday that employers can force workers to sign arbitration agreements as a condition of employment. Judge Stephen Trott, writing for a divided panel, ruled a law firm did not violate the law when it rescinded an employment offer to a legal secretary because he refused to give up his right to sue for workplace discrimination.

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The 9th U.S. Circuit Court of Appeals overturned one of its more controversial employment law decisions in recent years when it ruled Tuesday that employers can force workers to sign arbitration agreements as a condition of employment. In a decision one plaintiffs lawyer described as “heartbreaking,” a divided panel ruled that the law firm of Luce, Forward, Hamilton & Scripps did not violate the law when it rescinded an employment offer to a legal secretary, Donald Scott Lagatree, because he refused to give up his right to sue for workplace discrimination. “Lagatree did not engage in a protected activity when he refused to sign the Luce, Forward arbitration agreement, and consequently, Luce, Forward did not retaliate when it refused to hire him,” Judge Stephen Trott wrote. The suit was brought on behalf of Lagatree by the Equal Employment Opportunity Commission, which argued that Luce, Forward unlawfully retaliated against Lagatree for refusing to sign the agreement. In reaching its conclusion, the 9th Circuit overturned Duffield v. Robertson Stephens, 144 F.3d 1182, which held that employees cannot lose their jobs for refusing to agree to have their Title VII workplace discrimination claims settled by an arbitrator. Trott wrote that a recent U.S. Supreme Court case, Circuit City Stores v. Adams, 532 U.S. 105, “implicitly” overturned Duffield, even though the decision in Circuit City never mentioned the case. “Although Circuit City did not repudiate Duffield by name, the Supreme Court’s language and reasoning decimated Duffield’s conclusion that Congress intended to preclude compulsory arbitration of Title VII claims,” Trott wrote. Duffield, a position that no other federal circuit court has adopted, was authored by Judge Stephen Reinhardt. Michael Rubin, a partner at Altshuler, Berzon, Nussbaum, Rubin & Demain who argued both the Duffield and Circuit City cases, said the decision was heartbreaking. “They’re not even close,” Rubin said. “There’s not a single reference in the [ Circuit City] briefs to the Duffield case.” He was also upset that one panel had overturned the holding of another. Such machinations are not allowed — unless an intervening Supreme Court decision changes the law. But whether Circuit City did change the law was disputed among the panel in Lagatree v. Luce, Forward, Hamilton & Scripps, 02 C.D.O.S. 8033. Trott’s majority opinion was joined by Alaska Senior District Judge James Fitzgerald, who was sitting by designation. Judge Harry Pregerson dissented. “For essentially one 9th Circuit judge to reverse a decision that has stood for five years on the ground that it was ‘implicitly’ reversed by the Supreme Court has profound implications,” Rubin said. Rubin said the decision will discourage employees from bringing legitimate claims against their employers, since it is sometimes harder to find a lawyer willing to take a case involving an arbitration agreement. “Very few lawyers are willing to take arbitration cases on a contingency basis,” he said. John True III, an Oakland employment lawyer at Leonard, Carder, Nathan & Zuckerman, said employers can avoid jury trials by requiring arbitration. “They perceive them to be a way to cabin litigation against them in a forum that is more favorable,” True said. He, too, said arbitration agreements can cause problems for plaintiffs looking for representation. Lawyers, he said, “have to look at whether a sexual harassment case might be worth seven figures, or might be worth low six figures because of an arbitration.” Charles Bird, a partner at Luce, Forward who worked on the case, said the decision solved a number of problems, including the possibility of litigating some claims in state court and others in federal court, as was the case under Duffield. “That is gone now. We’re back to being like every other circuit,” he said. Although he said some employees might prefer arbitration as an easier route to settling disputes, he conceded that “There’s no question that the plaintiffs employment bar would rather go into court.” Although stressing that not all plaintiffs attorneys are looking for a big payday, Bird added that “there is also an attorneys fee concern here, because the contingencies that people can charge in arbitrations are not as big for some people.” Pregerson argued that in Duffield, the 9th Circuit considered the language later adopted by the Supreme Court in Circuit City, and found that it didn’t preclude the unanimous holding. Defense lawyers in Duffield petitioned for certiorari after the case was decided in 1998. It was denied, which Pregerson was quick to point out. There may be benefits to arbitration, he wrote. However, “that does not justify allowing employers to shove arbitration decisions down the throats of individual employees as a non-negotiable pre-condition of employment.”

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