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The 9th U.S. Circuit Court of Appeals, sitting en banc, has finally joined the rest of the country in holding that there is no Title VII exception to the enforcement of employment arbitration agreements. Reversing course in its Sept. 30, 2003 ruling in EEOC v. Luce, Forward, Hamilton & Scripps, LLP, [FOOTNOTE 1] the court held that the 1991 amendments to Title VII of the Civil Rights Act of 1964 (Title VII) do not prohibit an employer from conditioning employment on an employee or applicant’s agreement to submit all Title VII claims to binding arbitration. The en banc opinion in Luce, authored by Circuit Judge Atsushi Wallace Tashima, concluded that the 9th Circuit had wrongly decided Duffield v. Robertson Stephens & Co., [FOOTNOTE 2] which had held that mandatory arbitration agreements could not reach Title VII claims. The Luce decision brings the 9th Circuit in line with its sister circuits across the country. However, the Luce opinion leaves open at least one remaining area for employees to attack such agreements, through the doctrine of unconscionability and other generally applicable contract defenses. PRE-’LUCE’ JURISPRUDENCE IN THE 9TH CIRCUIT Despite the U.S. Supreme Court’s ruling in Gilmer v. Interstate/Johnson Lane Corp. [FOOTNOTE 3] that predispute arbitration agreements covering statutory employment claims — in that case, a federal age-bias claim — are generally enforceable, the 9th Circuit held in Duffield in 1998 that an employer may not “compel individuals to waive their Title VII right to a judicial forum.” [FOOTNOTE 4] The Duffield opinion first considered � 118 of the 1991 amendments to Title VII and concluded that the language employed by Congress as to arbitration was ambiguous. [FOOTNOTE 5] Specifically, while � 118 expressly “encouraged” use of arbitration, this language was deemed ambiguous because it might not have been intended to apply to arbitration agreements obtained as a condition of employment. [FOOTNOTE 6] The panel then turned to the legislative history of the 1991 amendments, which it determined revealed a congressional intent to preclude compulsory arbitration of Title VII claims. Therefore, the opinion concluded, � 118′s language indicating that arbitration was “encouraged” must have included only those Title VII claims that the employee voluntarily (presumably in the post-dispute setting) decided to arbitrate. [FOOTNOTE 7] Two years later, in Armendariz v. Found. Health Psychare Serv. Inc., [FOOTNOTE 8] the California Supreme Court parted ways with Duffield and held that predispute arbitration agreements applicable to Title VII claims are generally enforceable. The Armendariz opinion rejected the reasoning of Duffield, observing that if Congress intended to prohibit mandatory arbitration agreements under the 1991 Act, it knew how to do so. [FOOTNOTE 9] Instead, the California high court concluded, mandatory arbitration agreements were enforceable provided they made provision for certain procedural guarantees, including the availability of statutory remedies, no unreasonable costs or fees for an employee, the availability of judicial review of awards and some modicum of mutuality of obligation by both sides to arbitrate their disputes with each other. [FOOTNOTE 10] At the time of the Armendariz decision, most of the 9th Circuit’s sister circuits had similarly rejected the Duffield decision, ruling that mandatory arbitration agreements were enforceable if they contained requisite procedural guarantees. [FOOTNOTE 11] DISTRICT COURT IN ‘LUCE’ In September 1997, Donald Langatree applied for and was offered a position as a legal secretary at the law firm Luce, Forward, Hamilton & Scripps (Luce Forward). [FOOTNOTE 12] Before formally beginning employment, the firm presented Langatree with an offer letter for his execution that included the following mandatory arbitration provision: In the event of any dispute or claim between you and the firm (including employees, partners, agents, successors and assigns), including but not limited to claims arising from or related to your employment or the termination of your employment, we jointly agree to submit all such disputes or claims to confidential binding arbitration, under the Federal Arbitration Act. Any arbitration must be initiated within 180 days after the dispute or claim first arose, and will be heard before a retired State or Federal judge in the county containing the firm office in which you were last employed. The law of the State in which you last worked will apply. [FOOTNOTE 13] Langatree refused to sign the letter, which he viewed as “unfair,” and Luce Forward withdrew its offer of employment. [FOOTNOTE 14] On Feb. 13, 1998, Langatree filed an action in Los Angeles Superior Court, alleging that Luce Forward’s insistence on his execution of the arbitration agreement as a condition of employment violated public policy as well as California’s Unfair Competition Law. [FOOTNOTE 15] The court granted Luce Forward’s motion to dismiss, the Court of Appeals affirmed, and the California Supreme Court declined review. [FOOTNOTE 16] While his state court litigation was still pending, Langatree also filed a discrimination charge with the U.S. Equal Employment Opportunity Commission (EEOC) challenging Luce Forward’s decision not to hire him based on his refusal to submit to mandatory arbitration. [FOOTNOTE 17] The EEOC then brought an action on his behalf in the federal district court, charging that Duffield prohibited Luce Forward from requiring its employees to arbitrate their Title VII claims and alleging that the firm’s refusal to hire Langatree for not signing the arbitration agreement constituted retaliatory termination in violation of Title VII and other federal anti-discrimination laws. [FOOTNOTE 18] In addition to monetary relief, the EEOC asked the court to grant a permanent injunction barring Luce Forward from conditioning employment on a prospective employee’s consent to mandatory arbitration of Title VII claims. [FOOTNOTE 19] As an initial matter, the district court concluded that despite the ruling in the California state court action, the EEOC was not barred by res judicata from pursuing its action for injunctive relief against Luce Forward. [FOOTNOTE 20] After a review of the relevant case law, the court ruled that Duffield clearly prohibited employers from requiring employees to sign mandatory arbitration agreements involving waiver of their Title VII rights, and entered an injunction prohibiting the firm from requiring its employees to arbitrate their Title VII claims and from seeking to enforce any such existing agreements. [FOOTNOTE 21] 9TH CIRCUIT IN ‘LUCE’ Upon appeal to the 9th Circuit, a three-judge panel, in an opinion authored by Judge Stephen Trott, reversed the district court’s decision and held that an employer may require an employee to arbitrate future Title VII claims as a condition of employment. Therefore, the appeals court reasoned, an employee’s refusal to sign a mandatory arbitration agreement could not constitute protected opposition to an unlawful employment practice giving rise to a Title VII retaliation claim. [FOOTNOTE 22] The court found that the U.S. Supreme Court’s decision in Circuit City Stores, Inc. v. Adams [FOOTNOTE 23] was controlling, and that the high court’s confirmation that employment claims are arbitrable under the Federal Arbitration Act required an overruling of Duffield. [FOOTNOTE 24] The court also rejected the contention in Duffield that a jury trial is a nonwaivable right guaranteed by the 1991 Act (and thus cannot be the subject of a valid predispute arbitration agreement), noting that such reasoning was inconsistent with both Gilmer and Circuit City. [FOOTNOTE 25] Concluding that “ Duffield, like Bikini Atoll, [sat] ignominiously alone awaiting remediation,” the court observed, its demise would bring the 9th Circuit in accordance with its sister courts of appeals and the supreme courts of California and Nevada. [FOOTNOTE 26] 9TH CIRCUIT EN BANC The 9th Circuit agreed to rehear the Luce case en banc. [FOOTNOTE 27] On Sept. 30, 2003, the court withdrew its earlier opinion that Circuit City overruled Duffield, and held instead that Duffield itself was wrongly decided. [FOOTNOTE 28] First, the court noted that Circuit City specifically dealt with a state employment discrimination claim and not a claim under Title VII. [FOOTNOTE 29] Therefore, while Circuit City strongly encouraged the enforcement of arbitration agreements, the Supreme Court did not directly address the issue of whether Congress had demonstrated an intent to preclude arbitration of Title VII claims in the 1991 Act. [FOOTNOTE 30] Thus, the 9th Circuit reasoned, Circuit City did not overrule Duffield. [FOOTNOTE 31] Determining that Circuit City was not directly on point, the 9th Circuit proceeded to re-evaluate Duffield on its own terms. First, the court questioned the Duffield court’s conclusion that the language of the 1991 Act was “ambiguous” with respect to mandatory arbitration agreements. [FOOTNOTE 32] The court found no ambiguity in � 118 of the 1991 Act, concluding that Congress was aware at the time of the 1991 amendments of Supreme Court case law enforcing predispute agreements requiring arbitration of statutory claims. Thus, the court observed, if Congress intended to preclude arbitration of Title VII claims it knew how to evidence such an intention in the text of the statute. [FOOTNOTE 33] Since Title VII as amended did not contain such an express prohibition of arbitration, the text could not be ambiguous on this score. It followed, the 9th Circuit reasoned, that Duffield’s venture into legislative history was inappropriate and should not continue as law for the circuit. [FOOTNOTE 34] ‘UNCONSCIONABILITY’ CASES While Luce brings the 9th Circuit in line with other courts in upholding predispute agreements directing arbitration of Title VII claims, the validity of those agreements is still subject to traditional contract law defenses such as fraud, duress or unconscionability. [FOOTNOTE 35] Therefore, while mandatory arbitration agreements are not inherently unenforceable, the 9th Circuit continues to show a reluctance to give effect to the Supreme Court’s decisions through an expansive reading of unconscionability doctrine. [FOOTNOTE 36] SPECIAL DOCTRINE? We leave for a later article whether the 9th Circuit is indeed, as the Federal Arbitration Act requires, treating arbitration agreements as valid and enforceable, “save upon such grounds as exist at law or in equity for the revocation of any contract,” or rather has minted a special employment-arbitration doctrine as a means of continuing its disagreement with the Supreme Court’s jurisprudence in the area. Samuel Estreicher is a professor of law and director of the Center for Labor and Employment Law at the New York University of Law, as well as labor and employment law counsel to Morgan, Lewis & Bockius. Rene M. Johnson is a partner at Morgan, Lewis, specializing in labor and employment law. Michael J. Puma, an associate at the firm, assisted in the preparation of this article. If you are interested in submitting an article to law.com, please click here for our submission guidelines. ::::FOOTNOTES:::: FN1 2003 WL 22251382 (9th Cir. Sept. 30, 2003). FN2 144 F3d 1182 (9th Cir. 1998). FN3 500 US 20 (1991). FN4 144 F3d at 1185. FN5 Id. at 1193. FN6 Id. FN7 Id. 1193. FN8 24 Cal. 4th 83 (2000). FN9 Id. at 95. FN10 Id. at 102. FN11 See, e.g., Koveleskie v. SBC Capital Markets, Inc., 167 F3d 361 (7th Cir. 1999); Desiderio v. Nat’l Ass’n of Securities Dealers, Inc., 191 F3d 198 (2d Cir. 1999); Rosenberg v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 170 F3d 1 (1st Cir. 1999); Seus v. John Nuveen & Co., Inc., 146 F3d 175 (3d Cir. 1998). FN12 EEOC v. Luce, Forward, Hamilton & Scripps, LLP, 303 F3d 994, 997 (9th Cir. 2002). FN13 Id. FN14 Id. at 997-98. FN15 EEOC v. Luce, Forward, Hamilton & Scripps, LLP, 122 FSupp2d 1080, 1083 (C.D. Cal. 2000). FN16 Id. FN17 303 F3d at 998. FN18 Id.; 122 FSupp2d at 1083. FN19 303 F3d at 998. FN20 122 FSupp2d at 1089. FN21 Id. at 1093. FN22 303 F3d at 1008. FN23 532 US 105 (2001). FN24 303 F3d at 1008. FN25 Id. at 1003. FN26 303 F3d at 1002 (citing Amendariz, 24 Cal. 4th 83 (2000); Kindred v. Second Judicial Dist., 116 Nev. 405 (2000); Koveleskie, 167 F.3d 361; Desidero, 191 F.3d 198; Rosenberg, 170 F.3d 1; Seus, 146 F.3d 175; Patterson v. Tenet Healthcare, Inc., 113 F.3d 832 (8th Cir. 1997); Cole v. Burns Int’l Sec. Servs., 105 F.3d 1465 (D.C. Cir. 1997); Austin v. Owens-Brockway Glass Container, Inc., 78 F.3d 875 (4th Cir. 1996); Metz v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 39 F.3d 1482 (10th Cir. 1994); Bender v. A.G. Edwards & Sons, Inc., 971 F.2d 698 (11th Cir. 1992); Willis v. Dean Witter Reynolds, Inc., 948 F.2d 305 (6th Cir. 1991)). FN27 2003 WL 22251382 *1. FN28 Id. FN29 Id. *1 n.1. FN30 Id. FN31 Id. FN32 Id. *8. FN33 Id. *7-8. FN34 Id. *8-9. FN35 Doctor’s Associates, Inc. v. Casarottoi, 517 US 681, 686 (1996). FN36 See e.g., Ingle v. Circuit City Stores, Inc., 328 F3d 1165 (9th Cir. 2003) (arbitration agreement was unconscionable due to the following factors: (1) as a contract of adhesion, since employees could not “opt out”; (2) a lack of mutuality of obligations, as employer was not required to arbitrate its claims against the employee; (3) a one-year statute of limitations on arbitrating claims; (4) a prohibition on consolidation of employee claims; (5) a filing fee of $75 imposed on employees; (6) a provision which split costs of arbitration between employer and employee; (7) a provision limiting total damages, front pay, and punitive damages; and (8) a provision allowing employer to modify agreement unilaterally); Ting v. AT&T, 319 F.3d 1126 (9th Cir. 2003) (arbitration agreement limiting legal remedies, banning class actions, splitting arbitration fees between the parties. and requiring any arbitration to remain confidential, was unconscionable); Circuit City Stores, Inc. v. Adams, 279 F3d 889 (9th Cir. 2002) (arbitration agreement which lacked mutuality of obligations, imposed a one year statute of limitations on employee claims, split costs between employer and employee, and was imposed upon employee on a “take it or leave it basis,” was unconscionable).

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