Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca6-07-06204/USCOURTS-ca6-07-06204-0/pdf.json

Parties Involved:
Timothy Landis
Appellant
Louisville Optometric Centers III, Inc.
Appellee
Pinnacle Eye Care, LLC
Appellee
Rod Rallo
Appellee
John M. Schmitt
Appellee

Document Text:

*

 The Honorable Robert H. Cleland, United States District Judge for the Eastern District of Michigan, sitting

by designation.

RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit Rule 206

File Name: 08a0285p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT _________________

TIMOTHY LANDIS, O.D.,

 Plaintiff-Appellant,

v.

PINNACLE EYE CARE, LLC, dba VisionFirst; JOHN

M. SCHMITT; LOUISVILLE OPTOMETRIC CENTERS III,

INC., Successor-in-Interest to Louisville Optometric

Centers II, Inc.; ROD RALLO,

 Defendants-Appellees.

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No. 07-6204

Appeal from the United States District Court

for the Western District of Kentucky at Louisville.

No. 06-00569—Charles R. Simpson III, District Judge.

Argued: June 11, 2008

Decided and Filed: August 11, 2008 

Before: SILER and COLE, Circuit Judges; CLELAND, District Judge.*

_________________

COUNSEL

ARGUED: Edward Brian Davis, DAVIS LAW OFFICE, Louisville, Kentucky, for Appellant.

Edward J. Smith, SMITH, GREENBERG & NAPIER, PLLC, Louisville, Kentucky, for Appellees.

ON BRIEF: Myrle L. Davis, KRUGER, SCHWARTZ & MORREAU, Louisville, Kentucky, for

Appellant. Edward J. Smith, SMITH, GREENBERG & NAPIER, PLLC, Louisville, Kentucky, for

Appellees.

SILER, J., delivered the opinion of the court, in which CLELAND, D. J., joined. COLE, J.

(pp. 6-7), delivered a separate concurring opinion.

1

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1

 The full text reads:

Practice and Optometrist shall negotiate in good faith to resolve any controversy, dispute, or

disagreement arising out of or relating to this Agreement or the breach of any provision of this

Agreement. Any matter not resolved by negotiation shall be settled (a) first, by the parties trying in

good faith to settle the dispute by mediation under the Commercial Mediation Rules of the American

Arbitration Association (“AAA”) (such mediation session to be held in Chicago, Illinois and to

commence within fifteen (15) days of the appointment of the mediator by the AAA), and (b) if the

controversy, claim, or dispute cannot be settled by mediation, then by arbitration administered by the

AAA under its Commercial Arbitration Rules (such arbitration to be held in Chicago, Illinois before

a single arbitrator and to commence within fifteen (15) days of the appointment of the arbitrator by

the AAA), and judgment on the award rendered by the arbitrator may be entered in any court having

jurisdiction thereof. 

_________________

OPINION _________________

SILER, Circuit Judge. Dr. Timothy Landis, O.D., brought suit against Pinnacle Eye Care,

LLC, dba VisionFirst, John Schmitt, Louisville Optometric Centers III, Inc., successor to Louisville

Optometric Centers II, Inc., and Rod Rallo (collectively “Defendants”), alleging employment

discrimination based on his military service and his age. The district court granted the Defendants’

motion to stay the suit and ordered the matter to arbitration. Landis now appeals. We AFFIRM.

I. Background

In 1995, Louisville Optometric Centers II (“LOC II”) hired Landis as an optometrist. Landis

signed an employment agreement with LOC II. In Article VII of the employment agreement, he

agreed to “resolve any controversy, dispute or disagreement arising out of or relating to [the]

Agreement” through negotiation or, if negotiation proved unsuccessful, through arbitration governed

by the American Arbitration Association.1

 In 1999, LOC II was succeeded by Louisville

Optometric Centers III (“LOC III”). Landis executed another employment agreement with LOC III

that was identical in all material respects, including the arbitration clause. 

Rallo was LOC’s primary doctor of optometry throughout this time period. Schmitt worked

for LOC as a manager. In 2002, Rallo formed a new management company, Pinnacle Eye Care,

LLC. Since 2002, Rallo has directed LOC officers under the management of Pinnacle Eye Care.

These companies do business as VisionFirst, which is not registered as a separate business entity.

In April 2004, Landis was ordered to report for duty in Afghanistan as a member of the

Indiana National Guard. He claimed that he negotiated his employment upon return with Schmitt

before leaving for Afghanistan, but the employment agreement was not amended to include these

alleged terms. Landis claimed that the terms were as follows: during deployment in Afghanistan,

VisionFirst would preserve his Hodgenville, Kentucky, practice by hiring additional optometrists

to care for his patients, VisionFirst would deduct three percent of the gross earnings of the

Hodgenville office from his overdraw debt to LOC when he returned, and VisionFirst would make

his last draw payment on May 10, 2004. He alleged that upon his return from Afghanistan, Schmitt

refused to honor these terms and VisionFirst demoted him and threatened that any further

involvement with the military would adversely affect his career. 

In 2006, Landis filed suit, alleging (1) employment discrimination based on military service

in violation of the Uniformed Services Employment and Reemployment Rights Act of 1994, 38

U.S.C. §§ 4301-4334 (“USERRA”), and Ky. Rev. Stat. § 38.238; (2) age discrimination in violation

of Ky. Rev. Stat. § 344.040; and (3) unlicensed practice of optometry by Schmitt and VisionFirst

in violation of Ky. Rev. Stat. § 320.300. Specifically, Landis alleged that VisionFirst ordered a stop

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payment on his May 10, 2004 draw payment, that it had sent fill-in doctors to his practice for two

days a week instead of the promised three, and that it did not apply the three percent of the gross

earnings of the Hodgenville office as a credit against his overdraw debt to LOC III. 

The district court granted Defendants’ motion to stay the matter and order it to arbitration.

It held that (1) Landis’s claims were within the scope of the employment agreement, (2) USERRA

did not preempt the arbitration clause, (3) the claims against some appellees who were not parties

to the employment agreement should be arbitrated, and (4) the claims against VisionFirst and

Schmitt were not properly before a federal court.

II. Discussion

We review de novo a district court’s decision to compel arbitration. Bratt Enters., Inc. v.

Noble Intern., Inc., 338 F.3d 609, 612 (6th Cir. 2003). We must determine whether the dispute is

arbitrable, meaning that a valid agreement to arbitrate exists between the parties and that the specific

dispute falls within the substantive scope of the agreement. Id. 

Scope of the Employment Agreement and Claims Against Other Parties

The claims in Landis’s complaint fall within the scope of the employment agreement since

Article VIII, Section 8.7 of the agreement states that “[t]his Agreement constitutes the entire

agreement between Practice and Optometrist pertaining to the employment relationship between

Practice and Optometrist.” Therefore, any termination or modification of employment necessarily

relates to “the employment relationship” and is subject to the arbitration clause. 

The district court correctly held that the claims against Rallo, Schmitt, and Pinnacle Eye Care

were subject to the arbitration clause of the employment agreement. These parties were employers

within the meaning of USERRA, 38 U.S.C. § 4303(4)(A), and the claims against them arose in their

capacities as managers of LOC offices. 

Arbitrability of USERRA Claims

Federal law favors arbitration. Federal Arbitration Act, 9 U.S.C. § 1 et seq. (“FAA”). While

the Supreme Court has not addressed the arbitrability of USERRA claims, it has repeatedly held that

statutory claims are arbitrable. District courts are divided on the arbitrability of USERRA claims,

but the only court of appeals to address the question, the Fifth Circuit, held that USERRA claims

are arbitrable. 

In Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 23 (1991), the Court concluded that

an age discrimination claim brought pursuant to the Age Discrimination Act of 1967 can be

subjected to compulsory arbitration. Statutory claims “may be the subject of an arbitration

agreement, enforceable pursuant to the FAA.” Id. at 26. The Court held enforceable arbitration

agreements relating to claims arising under the Sherman Act, § 10(b) of the Securities Exchange Act

of 1934, the civil provisions of the Racketeer Influenced and Corrupt Organizations Act, and § 12(2)

of the Securities Act of 1933. Id. “Although all statutory claims may not be appropriate for

arbitration, having made the bargain to arbitrate, the party should be held to it unless Congress itself

has evinced an intention to preclude a waiver of judicial remedies for the statutory rights at issue.”

Id. (internal quotations and alteration omitted). The burden is on the party opposing arbitration to

show that Congress intended to preclude a waiver of a judicial forum for the particular claim. Id. If such an intention exists, it will be discoverable (1) in the text of the statute, (2) the legislative

history, or (3) an inherent conflict between arbitration and the statute’s purposes. Id. All “questions

of arbitrability must be addressed with a healthy regard for the federal policy favoring arbitration.”

Id. 

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2

 The relevant text of the House Committee Report reads:

Section 4302(b) would reaffirm a general preemption as to State and local laws and ordinances, as

well as to employer practices and agreements, which provide fewer rights or otherwise limit rights

provided under amended chapter 43 or put additional conditions on those rights. [Several federal court

decisions] provide that no employer practice or agreement can reduce, limit or eliminate any right

under chapter 43. Moreover, this section would reaffirm that additional resort to mechanisms such

as grievance procedures or arbitration or similar administrative appeals is not required. It is the

Committee’s intent that, even if a person protected under the Act resorts to arbitration, any arbitration

decision shall not be binding as a matter of law. 

Id. at 679 (internal citations omitted) (quoting H.R. Rep. No. 103-65, 1994, as reprinted in 1994 U.S.C.C.A.N. 2453.4.).

Garrett v. Circuit City Stores, Inc., 449 F.3d 672, 674-75 (5th Cir. 2006) held that USERRA

claims are arbitrable. Garrett alleged that he was fired from his job at Circuit City as the American

military was preparing for combat in Iraq because of his supervisors’ hostility toward his status as

a reservist. Id. at 674. The arbitration agreement between Garrett and Circuit City provided that

claims arising out of cessation of employment would be settled by final and binding arbitration,

enforceable by and subject to the FAA. Id. 

Relying heavily on Gilmer, the Fifth Circuit concluded that USERRA claims are arbitrable.

Id. at 674-75. First, nothing in the statutory language of USERRA demonstrated a Congressional

intent to preclude arbitration. Id. at 677. The court rejected the argument that USERRA § 4302(b)

precludes arbitration. Id. at 676. This section reads:

This chapter supersedes any State law . . . contract, agreement, policy, plan, practice

or other matter that reduces, limits, or eliminates in any manner any right or benefit

provided by this chapter, including the establishment of additional prerequisites to

the exercise of any such right or receipt of any such benefit.

Id. (quoting 38 U.S.C. § 4302(b)). By agreeing to arbitration, a party does not forego the substantive

rights provided by the statute, but rather it submits its claims to an arbitral forum instead of a judicial

forum. Id. at 677. Nothing in § 4302(b) mentions mandatory arbitration or the FAA,

notwithstanding the Gilmer decision issued three years before the enactment of § 4302(b). Id. Congress was presumptively aware of Gilmer but chose not to include text exempting USERRA

from the policy favoring arbitration. Id. 

Second, the legislative history of USERRA does not prevent arbitrability of claims. Id. at

680. Garrett argued that a portion of the 1994 legislative history of § 4302(b) from the House

Committee Report confirmed Congressional intent to forbid binding arbitration.2 Id. at 679. After

noting “a powerful line of Supreme Court authority [suggesting] that legislative history should rarely

be used in statutory interpretation,” the court stated that the text of USERRA was unambiguous,

rendering resort to legislative history unnecessary. Id. It also noted that there was no comparable

report from the Senate, no mention of Gilmer, and the totality of the circumstances supported the

conclusion that “Congress intended § 4302(b) only to prohibit the limiting of USERRA’s substantive

rights by union contracts and collective bargaining agreements, and that Congress did not refer to

arbitration agreements between an employer and individual employee.” Id. at 679-80.

Third, there is no inherent conflict between arbitration and USERRA’s underlying structure

and purposes. Id. at 680. The grant of administrative and enforcement authority to the Department

of Labor and the Attorney General did not conflict with arbitration. Id. In Gilmer, the Court

rejected the plaintiff’s argument that the Equal Employment Opportunity Commission’s authority

and role in the enforcement of the ADEA precluded arbitration. Id. “The same reasoning applies

to USERRA, which, like the ADEA and Title VII, affords both civil actions by the agency and

private actions by an employee.” Id. at 680-81. “Even if Garrett had chosen to involve the Attorney

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General . . . nothing in [USERRA] suggests that the Attorney General would not have been able to

represent Garrett in arbitration.” Id. at 681. Arbitration presents a fair opportunity for a claimant

to present and prevail on a claim of a USERRA violation. Id. at 681. 

Several district courts have agreed with Garrett and held USERRA claims arbitrable, see,

e.g., Kitts v. Menards, Inc., 519 F. Supp. 2d 837, 844 (N.D. Ind. 2007), while others have not. In

Breletic v. Caci, Inc.-Federal, 413 F. Supp. 2d 1329 (N.D. Ga. 2006), the district court held that

USERRA granted a plaintiff the right to pursue a USERRA claim in a judicial forum and preempted

an arbitration agreement covering claims arising under USERRA. Id. at 1336-37. In Lopez v.

Dillards, Inc., 382 F. Supp. 2d 1245 (D. Kan. 2005), the district court held that USERRA superseded

an arbitration agreement between an employee and employer. Id. at 1249. 

Here, the district court properly rejected Breletic and Lopez. We will not follow Breletic

because there is no ambiguity in the text of USERRA regarding preemption of arbitration

agreements. We will not follow Lopez because it characterizes arbitration as a “prerequisite” to the

exercise of substantive rights. 382 F. Supp. 2d at 1248-49. The Supreme Court, however, does not

characterize arbitration as such. Gilmer, 500 U.S. at 26. We find Garrett persuasive because it

properly applied Gilmer. USERRA claims are arbitrable. 

Supplemental Jurisdiction Over Unlicensed Practice of Optometry Claim

The district court properly determined that it lacked supplemental jurisdiction over Landis’s

claim that Schmitt and VisionFirst practiced optometry without a license. This claim was based

solely on state law and Landis conceded that the only basis for jurisdiction over these claims would

be supplemental jurisdiction. Because the district court determined that it lacked jurisdiction over

any of the federal claims due to the arbitration clause in the employment agreement, there was no

claim properly before the district court to which this state law claim could attach. 

AFFIRMED. 

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___________________

CONCURRENCE

___________________

COLE, Circuit Judge, concurring. While this is a close case, I ultimately believe that my

colleagues have come to the right conclusion—that Section 4302(b) of the Uniformed Services

Employment and Reemployment Rights Act (“USERRA”), 38 U.S.C. § 4302(b), is not a clear

expression of congressional intent to preclude the arbitration of servicemembers’ employment

disputes. I write separately only to acknowledge the odd result this holding produces and to

encourage Congress, when this issue comes up again, to be a bit more clear. 

Section 4302(b) states, in part, that “[t]his chapter supersedes any . . . contract, agreement,

policy, plan, practice, or other matter that reduces, limits, or eliminates in any manner any right or

benefit provided by this chapter, including the establishment of additional prerequisites to the

exercise of any such right or the receipt of any such benefit.” Id. I agree that the first clause of this

provision—“reduces, limits, or eliminates in any manner any right or benefit provided by this

chapter”— should be interpreted as relating to the substantive terms and conditions of employment,

not the procedures used to resolve such disputes. “By agreeing to arbitrate a statutory claim,” the

Supreme Court has told us, “a party does not forgo the substantive rights afforded by the statute; it

only submits to their resolution in an arbitral, rather than a judicial, forum.” Mitsubishi Motors

Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 615, 628 (1985). 

But the latter clause, which precludes “the establishment of additional prerequisites,” gives

me some cause for concern. By “additional prerequisites,” Congress clearly meant to stop

employers from requiring “additional resort to mechanisms such as grievance procedures or

arbitration or similar administrative appeals.” H.R. Rep. No. 103-65, at 20 (citations omitted). And

if there is any residual doubt as to whether Congress meant to include arbitration as an “additional

prerequisite,” the House Committee Report explained that “[i]t is the Committee’s intent that, even

if a person protected under the Act resorts to arbitration, any arbitration decision shall not be binding

as a matter of law.” Id. 

So what is the end result? Section 4302(b) precludes an employer from requiring an

employee to submit to arbitration, mediation, or any grievance procedure as a prerequisite to filing

suit in federal court. I presume that, in so doing, Congress intended employees, not employers, to

dictate the method or forum in which they pursue their rights under USERRA. But now, if an

employee’s contract requires him or her to substitute federal court with arbitration, the employee

has no choice but to do so. In other words, if Landis’s contract required him to arbitrate any

employment dispute under USERRA before bringing suit in federal court, Section 4302(b) expresses

an opinion that such an arbitration would be hostile to USERRA’s underlying structure and purpose.

Yet if Landis’s contract requires him to waive his right to federal court altogether, we must defer

to the strong federal policy favoring arbitration. Mitsubishi, 473 U.S. at 626-27. 

Unfortunately, this incongruous result is what the plain language of Section 4302(b) tells us.

Congress may not have intended members of our armed forces to submit to binding, coercive

arbitration agreements—indeed, I think quite the opposite—but nothing in the text of the USERRA,

or its legislative history, evinces a clear intent to preclude a waiver of judicial remedies for the

statutory rights at issue. I acknowledge that we have moved beyond the yesteryears of skepticism,

mistrust, and even hostility toward arbitration agreements. See Gilmer v. Interstate/Johnson Lane

Corp, 500 U.S. 20, 24 (1991) (acknowledging that the FAA was enacted “to reverse the longstanding judicial hostility to arbitration agreements . . . and to place arbitration agreements upon the

same footing as other contracts”). But with a growing number of employers turning to pre-dispute

and pre-packaged mandatory arbitration agreements to limit the ability of their employees to bring

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their statutory claims in federal court, and with the Supreme Court enforcing those provisions, see

id. at 26, if Congress intends to preclude arbitration as a substitute for a judicial forum in the future,

I encourage it to do so with language that is unmistakably clear. 

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