Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-00-05094/USCOURTS-caDC-00-05094-0/pdf.json

Parties Involved:
Borg-Warner Protective Services Corporation
Appellant
Equal Employment Opportunity Commission
Appellee

Document Text:

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued January 26, 2001 Decided April 17, 2001

No. 00-5094

Borg-Warner Protective Services Corporation,

Appellant

v.

Equal Employment Opportunity Commission,

Appellee

Appeal from the United States District Court

for the District of Columbia

(99cv00861)

Priscilla L. Hapner argued the cause for appellant. With

her on the briefs were John M. Stephen and Thomas P.

Steindler.

Robert J. Gregory, Attorney, Equal Employment Opportunity Commission, argued the cause for appellee. On the brief

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were Philip B. Sklover, Associate General Counsel, and Geoffery L. J. Carter, Attorney.

Before: Williams, Randolph, and Tatel, Circuit Judges.

Opinion for the Court filed by Circuit Judge Randolph.

Concurring opinion filed by Circuit Judge Williams, with

whom Circuit Judge Tatel joins.

Randolph, Circuit Judge: Since 1991, Borg-Warner Protective Services Corporation has required its employees to

sign, as a condition of employment, some form of an arbitration agreement or, as the company calls it, a "Pre-Dispute

Resolution Agreement." A typical version of the agreement

provides that if the employee brings suit on an employmentrelated claim, Borg-Warner may insist on arbitration pursuant to the Federal Arbitration Act, 9 U.S.C. s 1 et seq.,

before a single arbitrator of "all matters directly or indirectly

related" to the individual's recruitment, employment and termination, including "claims involving laws against discrimination ...." The Equal Employment Opportunity Commission

considers such agreements unenforceable in regard to claims

arising under Title VII of the Civil Rights Act of 1964, and

has spelled out its position in a "Policy Statement on Mandatory Binding Arbitration of Employment Disputes as a Condition of Employment" (July 10, 1997) ("Policy Statement").

Borg-Warner brought this action against the EEOC in the

district court seeking a declaratory judgment that its arbitration agreements were enforceable and that it had not violated

Title VII by insisting that its employees sign such agreements as a condition of their employment. The company also

sought an injunction, nationwide in scope, forbidding "the

EEOC from issuing determinations to the contrary or attacking the facial validity of arbitration agreement[s] through

litigation." According to the complaint, the events precipitating this action were as follows. On December 10, 1998, Rudy

Lee, a former Borg-Warner employee, filed a charge with the

EEOC's Seattle, Washington, office alleging that BorgWarner had discriminated against him on the basis of his

race. After an investigation, the EEOC found insufficient

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evidence to support the charge. Although Lee had not

complained about the arbitration agreement, the EEOC District Director issued a "determination," a finding that there

was "reasonable cause" to believe a Title VII violation had

occurred when Borg-Warner required Lee to sign the arbitration agreement as a condition of employment. The EEOC

invited the company and Lee to engage in conciliation to

"eliminate the alleged unlawful practices." In a letter addressed to Borg-Warner, the EEOC asked the company to

agree to cease using such agreements, and to provide notice

to all employees that it had rescinded its policy favoring

mandatory arbitration. Borg-Warner refused and filed this

action a few days later.

On the EEOC's motion to dismiss for lack of subject matter

jurisdiction, the district court held that the complaint did not

arise under Title VII and so jurisdiction could not rest on 28

U.S.C. s 1331, 28 U.S.C. s 1337 or 28 U.S.C. s 1343. BorgWarner Protective Services Corp. v. EEOC, 81 F. Supp. 2d

20, 24-25 (D.D.C. 2000). The court found nothing in Title VII

to give an employer a cause of action against the EEOC. Id.

Borg-Warner could not invoke the Administrative Procedure

Act, the court held, because neither the EEOC's Policy

Statement nor its determination in the Lee case constituted

"final" agency action. Id. at 26-28. The determination was

merely tentative and interlocutory. The Policy Statement did

not finally fix any obligation on the part of Borg-Warner. As

to the company's request for a declaratory judgment, the

court held that although it had subject matter jurisdiction,

Borg-Warner lacked standing because the company has not

alleged injury that could "be redressed by a favorable decision." Id. at 29.

I.

We have no doubt the district court had subject matter

jurisdiction over Borg-Warner's complaint under 28 U.S.C.

s 1331: "The district courts shall have original jurisdiction of

all civil actions arising under the Constitution, laws, or treaties of the United States." This means, as Professor Mishkin

put it in his classic article, that "the plaintiff must be contendUSCA Case #00-5094 Document #590231 Filed: 04/17/2001 Page 3 of 13
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ing that a federally ordained rule specifically creates his

cause of action." Paul J. Mishkin, The Federal Question in

the District Courts, 53 Colum. L. Rev. 157, 164 (1953). "Any

national source," he added, "will suffice...." Id. Or as

Justice Holmes wrote in American Well Water Works Co. v.

Layne & Bowler Co., 241 U.S. 257, 260 (1916), a "suit arises

under the law that creates the cause of action." These

formulations scarcely exhaust the definitions of federal question jurisdiction, see Franchise Tax Board of California v.

Construction Laborers Vacation Trust, 463 U.S. 1, 8-9 (1983),

but they are surely at the heart of the matter.

Borg-Warner's complaint "arises under" federal law in the

following respects. The company alleges a cause of action

based on the Administrative Procedure Act: it contends that

the APA entitles it to judicial review of the EEOC's Policy

Statement and the EEOC's determination that Lee had a

right to sue for a violation of Title VII. Both the APA and

Title VII are federal laws, and so the claims satisfy the

"arising under" requirement. It is of no moment whether

Borg-Warner's claims are meritless or would eventually fail.

A claim does not have to be a good one for the court to have

subject matter jurisdiction over it. See, e.g., Bell v. Hood, 327

U.S. 678 (1946). Borg-Warner's request for a declaratory

judgment also arises under federal law. "Federal courts have

regularly taken original jurisdiction over declaratory judgment suits in which, if the declaratory judgment defendant

[here the EEOC] brought a coercive action to enforce its

rights, that suit would necessarily present a federal question."

Franchise Tax Bd., 463 U.S. at 19.

II.

Subject matter jurisdiction is one thing. Ripeness, standing, justiciability and the like, all of which the district court

invoked in dismissing the complaint, are quite another. To

put matters into perspective, we need to take stock of the

state of the law regarding arbitration agreements and Title

VII.

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The EEOC has been waging a losing battle in its efforts to

convince the courts that agreements like Borg-Warner's cannot be enforced to require employees to arbitrate Title VII

claims. Gilmer v. Interstate/Johnson Lane Corp., 500 U.S.

20 (1991), held that an employer could compel an employee to

arbitrate his claim that the employer had violated the Age

Discrimination in Employment Act (ADEA), 29 U.S.C. s 621

et seq. The Supreme Court considered and rejected Gilmer's

contention that compulsory arbitration of an ADEA claim is

inconsistent with that statute. However, because Gilmer's

arbitration agreement was contained in his application to the

New York Stock Exchange to become a registered securities

representative, the Court reserved the question whether a

compulsory arbitration clause found in an employment contract would be enforceable. 500 U.S. at 25 n.2. Shortly after

Gilmer, Congress passed the Civil Rights Act of 1991, Pub. L.

No. 102-166, 105 Stat. 1071, s 118 of which stated that

"[w]here appropriate and to the extent authorized by law, the

use of alternative means of dispute resolution, including ...

arbitration, is encouraged to resolve disputes arising under"

Title VII. 105 Stat. 1081 (reprinted in notes to 42 U.S.C.

s 1981).

In Cole v. Burns International Security Services, Inc., 105

F.3d 1465 (D.C. Cir. 1997), we relied on Gilmer to affirm a

district court order dismissing an employee's Title VII action

and compelling the employee to arbitrate with his employer

pursuant to a compulsory arbitration agreement. Burns International Security Services, the prevailing party in Cole, is

the parent corporation of Borg-Warner and Borg-Warner's

arbitration agreements are about the same as the one we held

enforceable in Cole.

Therefore, if the district court were to grant the relief

Borg-Warner seeks in this case the company would gain

nothing in the District of Columbia. Our decision in Cole

already rejected the EEOC's position. A declaratory judgment saying as much would be redundant. An injunction

against the EEOC (assuming one were proper) is entirely

unnecessary. As far as this jurisdiction is concerned, BorgWarner is therefore suffering no injury for which it is entitled

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to redress. Nor is Borg-Warner suffering any conceivable

injury in the First Circuit, the Second Circuit, the Third

Circuit, the Fourth Circuit, the Fifth Circuit, the Sixth Circuit, the Seventh Circuit, the Eighth Circuit, the Tenth

Circuit, or the Eleventh Circuit, all of which have also rejected the EEOC's position. Rosenberg v. Merrill Lynch, Pierce,

Fenner & Smith, Inc., 163 F.3d 53 (1st Cir. 1998); Desidero

v. National Ass'n of Securities Dealers, Inc., 181 F.3d 198 (2d

Cir. 1999); Seus v. John Nuveen & Co., 146 F.3d 175, 182 (3d

Cir. 1998); Austin v. Owens-Brockway Glass Container, Inc.,

78 F.3d 875 (4th Cir. 1996); Alford v. Dean Witter Reynolds,

Inc., 939 F.2d 229 (5th Cir. 1991); Willis v. Dean Witter

Reynolds, Inc., 948 F.2d 305 (6th Cir. 1991); Koveleskie v.

SBC Capital Markets, Inc., 167 F.3d 361 (7th Cir. 1999);

Patterson v. Tenet Healthcare, Inc., 113 F.3d 832 (8th Cir.

1997); 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). Each of those

courts of appeals agrees with us that Title VII claims may be

subject to mandatory arbitration.1

The Supreme Court's decision in Circuit City Stores, Inc. v.

Adams, 2001 WL 273205 (Mar. 21, 2001), adds to the weight

of these precedents. The Court held that s 1 of the Federal

Arbitration Act, 9 U.S.C. s 1, did not exempt contracts of

employment except those involving transportation workers, a

position we had reached in Cole, which the Court cited. Id. at

*3. As to statutory claims, the Court reiterated "that arbitration agreements can be enforced under the FAA without

contravening the policies of congressional enactments giving

employees specific protection against discrimination prohibited by federal law...." Id. at *10. Not only does that broad

statement encompass Title VII and all other federal laws

__________

1 Even if any one of these court of appeals had not ruled on this

question, the Policy Statement still would have no effect on BorgWarner in that particular jurisdiction. The existence (or nonexistence) of the Policy Statement does not affect the EEOC's

ability to file an amicus brief arguing the same position. In fact, if

we credit the EEOC's representation about how it litigates this

issue, its amicus briefs hardly even mention the Policy Statement.

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forbidding discrimination, but also the arbitration agreement

in Circuit City Stores expressly stated that Title VII disputes

were subject to mandatory arbitration.

The Ninth Circuit is the only court of appeals to hold that

Title VII disputes cannot be made subject to compulsory

arbitration agreements. See Duffield v. Robertson Stephens

& Co., 144 F.3d 1182 (9th Cir. 1998). We cannot say whether

the Ninth Circuit will continue to adhere to Duffield in the

face of the Supreme Court's Circuit City decision (which

overruled another Ninth Circuit case). We do know that

although the EEOC maintained in its "determination" in the

Lee case that requiring employees to sign an agreement to

arbitrate future Title VII claims was itself a violation of Title

VII, Duffield does not so hold. Duffield ruled only that such

agreements are "unenforceable" with respect to Title VII

claims. 144 F.3d at 1199.

A.

Borg-Warner's first claim, set out as Count I of its complaint, alleges that the EEOC's determination letter to Lee--

stating that there was reasonable cause to believe that BorgWarner was violating Title VII in requiring employees to sign

the arbitration agreement--exceeded its authority under Title

VII. (The EEOC's Policy Statement does not take the

position that requiring employees to sign the agreement is

itself a violation of Title VII; as in Duffield, it states only

that such agreements are unenforceable with respect to Title

VII claims. Policy Statement at 3101, 3106.) This portion of

Borg-Warner's complaint fails, the district court ruled, because the determination is merely interlocutory and not final.

Borg-Warner, 81 F. Supp. 2d at 26.

The court relied upon Georator Corp. v. EEOC, 592 F.2d

765, 767 (4th Cir. 1979), which held that an EEOC determination of reasonable cause is not "final agency action" because

"standing alone, it is lifeless and can fix no obligation nor

impose any liability on the plaintiff." A Supreme Court

opinion, which the parties failed to mention, adds further

support to the court's ruling. Federal Trade Commission v.

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Standard Oil, 449 U.S. 232 (1980), held that the FTC's

determination that there was reasonable cause to believe the

company was violating the pertinent statute and its later

issuance of an administrative complaint did not constitute

final agency action within the meaning of s 704 of the APA.

"It represents a threshold determination that further inquiry

is warranted and that a complaint should initiate proceedings." Id. at 241. If the FTC's complaint in Standard Oil

"had no legal force or practical effect upon [the company's]

daily business other than the disruptions that accompany any

major litigation," id. at 243, the EEOC's determination in the

matter of Lee had even less effect. At least the complaint in

Standard Oil served "to initiate the proceedings," id. at 242.

The EEOC's determination is even further removed: rather

than initiating proceedings, it merely informed Lee that he

had a right to bring a complaint. While there may be other

reasons for rejecting this portion of Borg-Warner's complaint, it is perfectly clear that the EEOC's determination is

not final agency action. That is enough to sustain the district

court's judgment.

B.

As to Borg-Warner's alleged cause of action under the

APA to review the EEOC's Policy Statement, we will assume

that the Policy Statement is a "rule" within the meaning of 5

U.S.C. s 551(13) and we will also assume that it represents

the EEOC's "final" position regarding arbitration of Title VII

claims--that, in other words, it constitutes "final agency

action." 5 U.S.C. s 704; Bennet v. Spear, 520 U.S. 154

(1997). Even so, Borg-Warner still must establish that it is

"aggrieved" by the EEOC's policy position. See 5 U.S.C.

s 702.

The EEOC's Policy Statement carries no special weight in

the courts: if it has any force, it is derived from the power of

the EEOC's reasoning to persuade. Christensen v. Harris

Co., 529 U.S. 576, 587 (2000) (quoting Skidmore v. Swift &

Co., 323 U.S. 134, 140 (1944)). The EEOC tells us that in its

amicus briefs it therefore pays scant attention to its Policy

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Statement; its efforts are devoted to mounting arguments

that, it hopes, will convince. What injury then is the Policy

Statement inflicting on Borg-Warner? As we have written,

in the District of Columbia and in the geographic areas

covered by all the circuits except the Ninth, the answer is

none.

Borg-Warner seems to recognize as much, which is why it

wants us to concentrate our attention on the state of affairs in

the Ninth Circuit. But even in the Ninth Circuit, BorgWarner's problem is not with the EEOC's Policy Statement.

It is with Duffield. The only plausible harm to the company

consists in its inability to enforce its arbitration agreements

with its employees who are working within the geographical

limits of the Ninth Circuit. But that harm is not being

caused by the EEOC's Policy Statement. It results directly

from the Duffield decision.

Borg-Warner claims that as "a result of the Policy ...,

[Borg-Warner] can be subjected to stiffer legal and monetary

penalties in future litigation challenging the Agreement since

both the Policy and Determination may be admissible to show

that [its] use of the Agreement is unlawful and utilized with

reckless indifference to the law." We think this is much too

speculative. The Policy Statement does not declare--as did

the EEOC's determination in the Lee case--that having

employees sign such agreements itself violates Title VII.

The Policy Statement instead concludes that agreements

compelling arbitration of Title VII claims are "inconsistent"

with or "contrary to" Title VII. See Policy Statement

("agreements that mandate binding arbitration of discrimination claims as a condition of employment are contrary to the

fundamental principles evinced in these laws") ("the Commission believes that such agreements are inconsistent with the

civil rights laws") ("the Commission will continue to challenge

the legality of specific agreements"). At oral argument, the

EEOC's attorney said that the Commission carefully worded

its Policy Statement so that it did not maintain that an

employer violates Title VII by conditioning employment on

the employee's signing of an agreement to arbitrate. All the

Policy Statement was intended to convey, he added, was the

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EEOC's view that such agreements are unenforceable.2

Even if the Policy Statement treated arbitration agreements

as "illegal" that would not support Borg-Warner's argument.

To say that an agreement is illegal is not to say that

employers who require employees to sign the agreements as

a condition of employment are guilty of violating Title VII.

Calling an unenforceable agreement "illegal" is "misleading

insofar as it suggests that some penalty is necessarily imposed on one of the parties, apart from the court's refusal to

enforce the agreement. In some cases, the conduct that

renders the agreement unenforceable is a crime, but this is

not necessarily or even usually so." E. Allan Farnsworth,

Contracts s 5.1 (2d ed. 1990).

Even Duffield does not say that companies requiring employees to sign arbitration agreements are guilty of violating

Title VII. Although the Duffield court refused, with respect

to Title VII claims, to enforce a general arbitration agreement, the court enforced the same agreement in regard to

state law claims. See 144 F.3d at 1203. In the face of that

ruling, we cannot see how an employer exposes itself to

__________

2 We credit counsel's statement of how the EEOC views its Policy

Statement. After oral argument, the EEOC supplied us with some

of its filings in EEOC v. Luce, Forward, Hamilton & Scripps, LLP,

122 F. Supp. 2d 1080 (C.D. Cal. 2000), a case now on appeal to the

Ninth Circuit. Invoking res judicata, the district court there

rejected the EEOC's argument for punitive damages. Two items

are of note. First, in support of the claim for punitive damages the

EEOC cited its Policy Statement, stating that it put employers "on

notice regarding the EEOC's position concerning most discrimination issues." Plaintiff's Opposition to Defendant's Motion for Summary Judgment, at 15. This statement does not contradict the

representation made by the EEOC's counsel at oral argument in

this case. The question we have been considering is what position

the EEOC did express in the Policy Statement. Second, the

district court enjoined the employer in Luce from requiring prospective employees to sign mandatory arbitration agreements regarding Title VII claims. In doing so the court did not cite the

Policy Statement. It cited only Duffield. 122 F. Supp. 2d at 1093.

Whether the court correctly interpreted the Ninth Circuit's opinion

remains to be seen.

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punitive damages by having employees sign such an agreement. Furthermore, the notion that Borg-Warner could be

held liable in punitive damages for insisting upon an arbitration agreement in the face of the Supreme Court's Circuit

City opinion and the decisions of eleven courts of appeals

upholding such agreements is, we think, far-fetched. (The

California Supreme Court, observing that the Ninth Circuit

was in "minority of one," also rejected Duffield and indicated

that Title VII claims may be subject to mandatory arbitration

agreements. Armendariz v. Foundation Health Psychare

Servs., Inc., 6 P.3d 669, 677 (Cal. 2000).)

The short of the matter is that Borg-Warner is not aggrieved by the existence of the EEOC's Policy Statement. It

is not suffering any legally cognizable injury from the Policy

Statement, and for that reason the district court properly

dismissed its complaint. Given this disposition, we do not

address any questions of comity between this circuit and the

Ninth, or the propriety of a federal court in the District of

Columbia enjoining the EEOC from adhering to a litigating

position in the Ninth Circuit that the court of appeals for that

circuit has sustained.

Affirmed.

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Williams, Circuit Judge, with whom Circuit Judge Tatel

joins, concurring: Because the EEOC's use of its Policy

Statement appears more complicated than stated above, I

write separately.

The Policy Statement may not explicitly state that employment contracts requiring arbitration of discrimination claims

violate Title VII, but the EEOC apparently believes that it

could honestly be read to that effect. The EEOC has cited it

in at least one brief in support of precisely that argument. In

October 2000 the EEOC submitted a brief in the Central

District of California that expressly asks the court for punitive damages because the defendant allegedly "unlawfully

retaliated against Mr. Lagatree [an applicant for employment] by denying him employment ... based on his refusal to

sign an employment agreement compelling mandatory arbitration of future claims of employment discrimination ..., in

violation of Title VII." EEOC v. Luce, Forward, Hamilton &

Scripps, LLP, No. 00-1322 at 2 (C.D. Cal. Oct. 23, 2000)

(plaintiff's opposition to defendant's motion for summary

judgment) (submitted under Circuit Rule 28(j)). In the section specifically addressing punitive damages, the brief states:

[I]t is also important to note that the EEOC had published a Policy Statement on July 10, 1997, two months

before Luce terminated Mr. Lagatree, on "Mandatory

Arbitration of Employment Disputes as a Condition of

Employment", which concluded that these unilateral

agreements harms [sic] both the individual civil rights

claimant and the public interest in eradicating discrimination. These policy statements put employers on notice

regarding the EEOC's position concerning most discrimination issues.

Id. at 15. Although the EEOC did not explicitly say in its

brief that the Policy Statement concludes that these agreements violate Title VII, its citation to the Policy Statement--

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in an argument supporting the imposition of punitive damages

on an employer who insisted on such agreements--must

mean that the EEOC briefwriter believed that competent

judges could be persuaded to believe that it reached that

conclusion.1

As the preceding opinion notes, however, EEOC counsel

before us took a quite different position--one that we believe

is better supported by the Policy Statement's language. He

declared, "This agreement [referring to the Policy Statement]

does not purport to do that [make an assertion of illegality],

and I hope it doesn't do that." Tr. at 31. Indeed, he said

that the Policy Statement "was vetted very carefully to make

sure that it didn't say it [an employer's insistence on an

arbitration agreement] was illegal under Title VII." Id. at

28.

Because the formulation of the Commission's position before a court of appeals is a more material commitment than

the filing of a district court brief, and counsel certainly did

not file a corrective letter despite the panel's prolonged

interrogation on the issue, it seems reasonable to take the

EEOC's position before us as its true position, a proposition

helpful, though not necessarily essential, to the ultimate

judgment here.

1 Although the district court rejected EEOC's argument for

punitive damages because of res judicata, the court declined to

interpret Duffield as holding "only that mandatory arbitration

agreements are unenforceable" and held that injunctive relief was

appropriate because requiring employees to enter into mandatory

arbitration agreements is "unlawful under Title VII." EEOC v.

Luce, Forward, Hamilton & Scripps, LLP, 122 F. Supp. 2d 1080,

1091, 1093 (C.D. Cal. 2000).

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