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When a federal judge dismisses an employment discrimination suit on the grounds that the plaintiff agreed to arbitrate any such claim, the plaintiff has the right to appeal the ruling — even if the dismissal was “without prejudice” — the 3rd U.S. Circuit Court of Appeals has ruled. In Blair v. Scott Specialty Gases, a unanimous three-judge panel found that the U.S. Supreme Court effectively overturned a previous 3rd Circuit decision that barred such appeals as interlocutory. Having concluded that Diane Blair had the right to pursue the appeal, the court went on to find that Senior U.S. District Judge Clarence C. Newcomer of the Eastern District of Pennsylvania must now give Blair the chance to challenge the arbitration agreement as unfair because it requires her to pay half the arbitration costs and she simply cannot afford it. “While this court must be mindful of the liberal federal policy favoring arbitration agreements, the Supreme Court has also made clear that arbitration is only appropriate ‘so long as the prospective litigant effectively may vindicate [his or her] statutory cause of action in the arbitral forum’ allowing the statute to serve its purposes,” 3rd Circuit Judge Dolores K. Sloviter wrote. “Arbitration costs are directly related to a litigant’s ability to pursue the claim,” Sloviter said. But Sloviter also found that Blair has a burden of proof she must satisfy to show that the arbitration costs would be prohibitively expensive and that her affidavit complaining of her inability to pay was not enough to meet the burden. On remand, Sloviter said, Blair should be given limited discovery rights to amass the evidence she needs, including the rates charged by the American Arbitration Association and the approximate length of similar arbitration proceedings. And if Blair meets her burden, showing that arbitration “would deny her a forum to vindicate her statutory rights,” Sloviter found that her former employer “should also be given the opportunity to meet its burden to prove that arbitration will not be prohibitively expensive, or as has been suggested in other cases, offer to pay all of the arbitrator’s fees.” According to the suit, Blair was employed by Scott, a Bucks County, Pa., producer and supplier of specialty gas products, from January 1995 through March 1999. In April 1997, she became the plant manager at the Plumstead, Pa., medical products division. Blair claims that during the course of her employment, she was subjected to discrimination and harassment on the basis of her gender. During her initial interview with Tom Barford, one of the company’s vice presidents, Blair claims Barford told her he would “rather employ a male plant manager, with a couple of kids who lived nearby and wouldn’t leave him high and dry in a few months to marry a lawyer or doctor.” She also claims that Barford told her that he could not attend the sensitivity training on sexual discrimination and harassment “because he was a ‘sexist pig’ and that if people knew all the things he had done, he would be fired.” After she was hired, Blair claims, Barford demeaned her suggestions during meetings, as well as those of other female staff members, and routinely made sexist references to her, such as “putting tits on a bull” and “putting people in bed together.” She also claims he commented on her appearance and choice of clothing and suggested that she wear skirts more often to show her legs. Blair resigned in March 1999, claiming that she could no longer tolerate the harassing work environment. She claims that soon after she resigned and reported the sexual harassment to Scott management, Barford and another Scott supervisor began to take retaliatory action by spreading rumors around the plant that Blair had engaged in an affair with a female co-worker. In July 2000, Blair filed suit, alleging sexual harassment, sex discrimination and constructive discharge under Title VII, the Pennsylvania Human Relations Act, the Pennsylvania Constitution, and state common-law claims of intentional infliction of emotional distress, defamation, negligent employment, breach of contract, and breach of the covenant of good faith and fair dealing. Lawyers for Scott filed a motion to dismiss on the grounds that Blair had agreed to submit all claims relating to her employment to binding arbitration. A mandatory arbitration provision had been placed by Scott in an updated employee handbook that was distributed to all employees in February 1998. Blair signed an “acknowledgment of receipt and reading” of the policy. Blair’s lawyer, Martha Sperling of Silver & Sperling in Doylestown, Pa., argued that the arbitration agreement was not a validly formed contract and thus was not binding and, in the alternative, that the agreement should not be enforced on public policy grounds because it required her to pay one-half of the arbitrator’s fees. Newcomer rejected Blair’s arguments and ordered her to pursue arbitration. On appeal, Scott’s lawyers — Thomas J. Barton and James G. Fannon of Philadelphia-based Drinker Biddle & Reath — argued that the 3rd Circuit did not have jurisdiction to hear the appeal because Newcomer’s order was not final or appealable since it dismissed Blair’s claims without prejudice and ordered the parties to arbitrate. Newcomer’s order, they argued, effectively acted as a stay of the proceedings pending the outcome of the arbitration. And under the Federal Arbitration Act, they said, a stay is considered an interlocutory order that may not be appealed. But Sloviter found that Scott was relying on a 3rd Circuit decision that has now been overturned by the U.S. Supreme Court. In Smith v. The Equitable, the 3rd Circuit held that the dismissal of an employment discrimination case without prejudice with an order to compel arbitration was not a final appealable order. But Sloviter found that “the continued viability of the holding and rationale in Smith and earlier cases must be examined in light of the Supreme Court’s recent decision in Green Tree Financial Corp. v. Randolph.” In Green Tree, Sloviter said, the justices held that a district court’s order directing the parties to arbitrate and dismissing the plaintiff’s claims with prejudice was a final order and therefore appealable because it “plainly disposed of the entire case on the merits and left no part of it pending before the court.” The justices held that the ability of a party to an arbitration to bring a later proceeding in a district court to enter judgment on an arbitration award or vacate or modify that award “does not vitiate the finality of the district court’s resolution of the claims in the instant proceeding.” Sloviter found that the Green Tree decision “did not comment on whether a dismissal without prejudice should be treated as a stay or as a final order, nor did it address whether the district court should have entered a stay instead of a dismissal.” Instead, she said, the court’s opinion “speaks generally of ‘dismissals’ and does not indicate whether it hinges on the fact that the dismissal was with prejudice.” Sperling argued that there is no valid distinction between a dismissal with prejudice and one without prejudice because in both instances, there is nothing left for her to do but submit to arbitration, and nothing left for the district court to do other than execute, modify, or vacate the ultimate arbitration award. Sloviter found that three other appellate courts — the 2nd, 9th and 11th Circuits — had already tackled the question and all held that a dismissal without prejudice is a final, appealable order. “We agree with the reasoning in these cases,” Sloviter wrote. “The Green Tree decision draws a distinction between dismissals and stays, but does not draw any distinctions within the universe of dismissals. The focus in Green Tree is on the traditional definition of a final order.” In Blair’s case, Sloviter said, the trial court did not retain jurisdiction over any of Blair’s claims, as every claim was held to be arbitrable. Adopting Blair’s argument, Sloviter found that “because there is nothing more for the court to do but execute the judgment, the district court’s order falls within the Supreme Court’s definition of an appealable final order.”

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