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Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued February 16, 2001 Decided April 24, 2001

No. 00-7082

Linda E. LaPrade,

Appellant

v.

Kidder, Peabody & Co., Inc.,

Appellee

Appeal from the United States District Court

for the District of Columbia

(No. 91cv03330)

Steven W. Teppler argued the cause for appellant. With

him on the briefs was Frazer Walton, Jr.

Kathy B. Houlihan argued the cause for appellee. With

her on the brief was Andrew J. Schaffran.

Before: Williams, Sentelle and Rogers, Circuit Judges.

Opinion for the Court filed by Circuit Judge Rogers.

Rogers, Circuit Judge: Linda E. LaPrade appeals the

confirmation of an arbitration award requiring her to pay a

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portion of the forum fees for arbitration of her statutory and

non-statutory claims against her former employer.1 She contends that assessment of the forum fees contravenes Cole v.

Burns International Security Services, 105 F.3d 1465 (D.C.

Cir. 1997), where the court held when a federal statutory

claim is subjected to arbitration pursuant to an arbitration

agreement executed as a condition of employment, an employee cannot be required to pay arbitration-related costs that are

analogous to a judge's salary or expenses in a traditional

judicial forum. Because LaPrade has not met her burden of

demonstrating that the arbitrators acted in manifest disregard of the law, we affirm.

I.

In January 1989 LaPrade began working for Kidder Peabody in the State of New York as an Assistant Vice President

and Manager of the New Issue Agency Syndicate, and in July

1989 she was promoted to Vice President, Product ManagerAgency Bond Trading. Her position at Kidder Peabody

required her to be a registered representative in the securities industry, which, in turn, required that she execute a

Uniform Application for Securities Industry Registration or

Transfer, or "Form U-4."2 By signing the Form U-4 LaPrade agreed to arbitrate any claims that might arise between her and Kidder Peabody.3

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1 This case was previously before the court on a matter unrelated to the instant appeal. See LaPrade v. Kidder, Peabody & Co.,

146 F.3d 899 (D.C. Cir. 1998).

2 See 15 U.S.C. s 78s (1994); 17 C.F.R. s 240.15b7-1 (2000);

NASD Regulation Rules 1031 (a)-(b), 1013(a)(2)(B), http://se

cure.nasdr.com/wbs/NETbos.dll?RefShow?ref=NASD4;&xinfo=/go

odbye.htm (last visited March 28, 2001).

3 LaPrade's Form U-4 states in relevant part:

I agree to arbitrate any dispute, claim, or controversy that may

arise between me and my firm, or a customer, or any other

person, that is required to be arbitrated under the rules,

constitution, or by-laws of the organizations with which I

register....

Following a series of disagreements with her employer,

LaPrade left Kidder Peabody in October 1991. Thereafter,

she sued her former employer in the United States District

Court for the District of Columbia for breach of contract,

fraud, and for violations of federal and state law. Over

LaPrade's objection, the district court granted Kidder Peabody's motion to stay the lawsuit pending arbitration. The

parties then pursued arbitration before the National Association of Securities Dealers, Inc. ("NASD") under the terms of

the arbitration clause contained in LaPrade's Form U-4.

In the arbitration proceedings, LaPrade claimed gender

discrimination under Title VII and New York state law, and

denial of equal pay under New York state law and the

Federal Equal Pay Act, as well as common law defamation

and fraud. The arbitration panel conducted seven preUSCA Case #00-7082 Document #591731 Filed: 04/24/2001 Page 2 of 9
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hearing conferences and 67 hearing sessions from November

1994 to May 1999. In October 1999, the arbitration panel

dismissed LaPrade's statutory claims for discrimination under New York and federal law, but granted her injunctive

relief with respect to her Form U-5 and ordered Kidder

Peabody to pay her $65,000.00.4 The panel decision stated

that "all other claims not specifically addressed ... are

denied in their entirety, including defamation and fraud." In

addition, while ordering that "[e]ach party shall be responsible for its own attorneys' fees and other costs related to this

arbitration," the arbitration panel assessed forum fees, total-

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4 After LaPrade left the firm, Kidder Peabody filed a Uniform

Termination Notice for Securities Industry Registration, or "Form

U-5," stating that "[d]uring the course of an inquiry by firm

personnel, Ms. LaPrade initially provided information which the

firm believed to be inaccurate (inadvertently, by her account), which

she subsequently clarified. She was then permitted to resign." See

15 U.S.C. s 78o-5 (1994 & Supp. V 1999); 15 U.S.C. s 78ff(a)

(1994); 17 C.F.R. s 400.4 (2000). As part of the relief ordered by

the arbitration panel, Kidder Peabody was ordered to revise the

explanation section of the Form U-5 to read: "During the course of

an inquiry by firm personnel, Ms. LaPrade offered to provide her

cooperation and information if the firm agreed to permit her to

resign, and the firm agreed."

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ing $69,800.00, save 12%, against Kidder Peabody. See

NASD Code of Arbitration Procedure Rule 10205(c). Thus,

LaPrade was ordered to pay 12%, or $8,376.00.5

Kidder Peabody returned to the district court, filing a

motion to lift the stay and confirm the arbitration award.

LaPrade filed a cross motion to vacate the arbitration award

insofar as it directed her to pay $8,376.00 in forum fees. The

district court confirmed the arbitration award. Concluding

that the law regarding the assessment and allocation of

arbitral forum fees was neither "well defined, explicit, [nor]

clearly applicable" to her case, the district court rejected

LaPrade's argument that the arbitration panel had acted in

manifest disregard of the governing law in this circuit in

assessing and allocating arbitral fees. In the district court's

view Cole was not dispositive, and it followed Sobol v. Kidder,

Peabody & Co., Inc., 49 F. Supp. 2d 208 (S.D.N.Y. 1999). In

Sobol the court distinguished Cole and ruled that assessment

against a former employee of half of the arbitral forum fees

neither offended public policy nor discouraged arbitration

because NASD rules authorized the sharing of expenses and

arbitration is generally less expensive than traditional litigation in court. Id. at 224. Finally, noting the scope of

permissible fees identified in Cole, the district court found

that LaPrade had not demonstrated that the panel's award

lacked colorable support in the record.

II.

It is well settled that a court's review of an arbitration

award is limited. In addition to the limited statutory grounds

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5 The arbitration panel assessed forum fees for six pre-hearing

conferences at $300.00 each, one pre-hearing conference with the

full panel at $1,000.00, and 67 hearing sessions at $1,000.00 per

session. See NASD Code of Arbitration Procedure Rule 10205(k)

(schedule of fees). Deducting the balances previously deposited,

the panel directed LaPrade to pay $6,776.00, and Kidder Peabody

to pay $50,824.00. The assessment against LaPrade was independent of the $250.00 non-refundable filing fee that she had previously

paid; the panel ordered that the filing fee be retained by NASD.

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on which an arbitration award may be vacated,6 "arbitration

awards can be vacated [only] if they are in 'manifest disregard of the law,' " Cole, 105 F.3d at 1486 (quoting First

Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 942 (1995)),

or "if they are contrary to 'some explicit public policy' that is

'well defined and dominant' and ascertained 'by reference to

the laws or legal precedents.' " Id. (quoting United Paperworks Int'l Union v. Misco, Inc., 484 U.S. 29, 43 (1987)).

Manifest disregard of the law "means more than error or

misunderstanding with respect to the law." Kanuth v. Prescott, Ball & Turben, Inc., 949 F.2d 1175, 1178 (D.C. Cir. 1991)

(citing Sargent v. Paine Webber Jackson & Curtis, Inc., 882

F.2d 529, 532 (D.C. Cir. 1989)). Consequently,

to modify or vacate an award on this ground, a court

must find that (1) the arbitrators knew of a governing

legal principle yet refused to apply it or ignored it

altogether and (2) the law ignored by the arbitrators was

well defined, explicit, and clearly applicable to the case.

DiRussa v. Dean Witter Reynolds, Inc., 121 F.3d 818, 821 (2d

Cir. 1997) (quotations omitted); see also Glennon v. Dean

Witter Reynolds, Inc., 83 F.3d 132, 136 (6th Cir. 1996).

As the party seeking to vacate or otherwise modify the

arbitration award, LaPrade bears the burden of demonstrating that the arbitration panel acted in manifest disregard of

the law. See Al-Harbi v. Citibank, N.A., 85 F.3d 680, 683

__________

6 Under the Federal Arbitration Act, 9 U.S.C. s 10 (1994), an

arbitration award may be vacated where:

(1) the award was procured by corruption, fraud, or undue

means; (2) there was evident partiality or corruption in the

arbitrators, or either of them; (3) the arbitrators were guilty of

misconduct in refusing to postpone the hearing, upon sufficient

cause shown, or in refusing to hear evidence pertinent and

material to the controversy; or of any other misbehavior by

which the rights of any party have been prejudiced; or (4) the

arbitrators exceeded their powers, or so imperfectly executed

them that a mutual, final, and definite award upon the subject

matter submitted was not made.

LaPrade makes no claim of such error here.

(D.C. Cir. 1996); DiRussa, 121 F.3d at 825; cf. Green Tree

Fin. Corp. v. Randolph, 531 U.S. 79, ----, 121 S.Ct. 513, 522

(Dec. 11, 2000); Gilmer v. Interstate/Johnson Lane Corp., 500

U.S. 20, 26 (1991). Our review of the district court's factual

findings in the order confirming the arbitration award is for

clear error, while the court reviews questions of law de novo.

See First Options, 514 U.S. at 947-48.

In Gilmer, the Supreme Court held that federal statutory

claims alleging age discrimination in employment could be

subjected to compulsory arbitration pursuant to an arbitration agreement that an employee was required to sign as a

condition of employment. See Gilmer, 500 U.S. at 23. Subsequently, in Cole, this court was confronted with the question "can an employer condition employment on acceptance of

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an arbitration agreement that requires the employee to submit his or her statutory claims to arbitration and then requires the employee to pay all or part of the arbitrators'

fees?" Cole, 105 F.3d at 1483. The district court had dismissed Cole's complaint alleging claims under Title VII and

compelled arbitration pursuant to the parties' agreement. Id.

at 1467. This court upheld the arbitration agreement. Id. at

1485. But reasoning, in reliance on Gilmer, that there was no

reason to conclude that the Supreme Court would have

approved mandatory arbitration where the employee had to

pay the cost of the arbitrator's services, id. at 1484, the court

also concluded that "Cole could not be required to agree to

arbitrate his public law claims as a condition of employment if

the arbitration agreement required him to pay all or part of

the arbitrator's fees or expenses." Id. at 1485. The court

noted that the arbitration agreement executed by Cole did

not explicitly address the issue and merely incorporated the

American Arbitration Association rules, which were silent on

the question of which party should bear the arbitrator's fees

and expenses. Id. Thus, to uphold the validity of the

parties' contract, the court interpreted the arbitration agreement to require the former employer to pay all arbitrators'

fees in connection with the resolution of Cole's claims.7 Id. at

1486.

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7 In Cole, the court defined "arbitrators' fees"

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Contrary to LaPrade's contention that the assessment of

arbitral forum fees contravenes Cole, Cole does not bar the

assessment of all forum fees against an employee. In Cole

the court explained that an employee who executed a compulsory arbitration provision as a condition of employment could

be "required to assume the [reasonable] costs of filing fees

and other administrative expenses" arising from arbitration of

statutory claims because "parties appearing in federal court"

may likewise be required to pay such costs. Id. at 1484.

Other than by misinterpreting Cole to afford her a right to

arbitration as a virtually cost-free alternative to traditional

court proceedings, LaPrade makes no claim that the panel

otherwise lacked authority to assess and allocate forum fees.

LaPrade nonetheless contends that the district court erred in

confirming the arbitral award because the assessment of

forum fees violates public policy by burdening the assertion of

her federal statutory right to be free from gender discrimination. Unfortunately for LaPrade, she has not met her burden

of demonstrating that the arbitration panel acted in manifest

disregard of the law or in violation of public policy. See AlHarbi, 85 F.3d at 683; DiRussa, 121 F.3d at 825; cf. Green

Tree, 121 S.Ct. at 522; Gilmer, 500 U.S. at 26.

First, LaPrade makes no showing that the arbitration

panel, which was aware of Cole, "refused to apply [Cole] or

ignored [Cole] altogether." DiRussa, 121 F.3d at 821; see

also Kanuth, 949 F.3d at 1182. Rather, she relies on the

unjustified assumption that the forum fees assessed against

her are the type of costs forbidden by Cole.8 Under the

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to include not only the arbitrator's honorarium, but also the

arbitrator's expenses and any other costs associated with the

arbitrator's services.

105 F.3d at 1484 n.15.

8 At oral argument, LaPrade noted that she paid the $250.00

filing fee and $5.00 in copying costs, that the parties paid court

reporter fees, and that the proceedings were conducted on the

premises of the NASD. Consequently, LaPrade argued, because

there were no other costs left to be paid, the forum fees assessed by

the arbitration panel must be the type prohibited by Cole.

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NASD's rules, two of the arbitrators were entitled to compensation in the amount of $200.00 per hearing session while the

chairperson of the panel was entitled to $275.00 per hearing

session.9 Therefore, of the $1,000.00 assessed for each hearing session with the full panel, $325.00 cannot be characterized as arbitrators' compensation. LaPrade's assessment, in

turn, appears to be well below that amount.10

In any event, there is a substantial possibility that, fully

consistent with Cole, the entire assessment against LaPrade

covers only the costs associated with her non-statutory

claims. Given the lengthy nature of the parties' proceedings,

spanning six years and involving 74 arbitral sessions, it is

reasonable to conclude, as Kidder Peabody suggests, that the

forum fees assessed against LaPrade were attributable to

arbitration of her non-statutory claims. LaPrade protests

that Kidder Peabody's proposed reasonable conclusion is

speculative, but she has failed to provide an evidentiary basis

for any alternate conclusion, and it is her burden to do so.

See Al-Harbi, 85 F.3d at 683; DiRussa, 121 F.3d at 825; cf.

Green Tree, 121 S.Ct. at 522; Gilmer, 500 U.S. at 26.

Second, in articulating the " 'liberal federal policy favoring

arbitration agreements,' " Gilmer, 500 U.S. at 25 (quoting

Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460

U.S. 1, 24 (1983)), the Supreme Court explained that "so long

as the prospective litigant effectively may vindicate his or her

statutory cause of action in the arbitral forum, the [statutory

right created by Congress] will continue to serve both its

remedial and deterrent function[s]." Id. at 28 (citing Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473

U.S. 614, 637 (1985)). While the court in Cole declined to

read Gilmer "as holding that an arbitration agreement is

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9 See NASD Code of Arbitration Procedure Rule IM-10104, at

http://www.nasdadr.com/arb_code/arb_code#IM_10104 (last updated March 15, 2001).

10 Kidder Peabody suggests in its brief that LaPrade's per

session share of the non-compensation costs ($325.00, or $1,000.00

minus a total of $675.00) is $113.19, and LaPrade does not contest

this figure in her reply brief.

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enforceable no matter what rights it waives or what burdens

it imposes," 105 F.3d at 1482, LaPrade has not shown that the

arbitration panel manifestly disregarded Cole in assessing a

limited amount of forum fees against her. LaPrade makes no

claim that the possibility of a large assessment arising from

arbitration of her claims prevented her from attempting to

vindicate her rights. See Green Tree, 121 S. Ct. at 522.

Neither does she claim that the arbitration panel failed to

consider the evidence that she submitted to show she was

financially unable to pay any assessment. That evidence

consisted of her W-2 forms from 1993 through 1998 and a

single commission statement for January 1999, which the

arbitration panel might reasonably view as an incomplete

portrait of her financial resources. Because LaPrade has not

demonstrated that the assessment against her runs afoul of

the balance of public policies struck in Cole, her effort to have

the assessment vacated on public policy grounds fails.

Accordingly, we affirm the district court's order confirming

the arbitration award.

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