Opinion ID: 764164
Heading Depth: 2
Heading Rank: 2

Heading: eeoc action for monetary relief

Text: 28 The district court in this case treated Adams' contractual waiver of her private right to a judicial forum for her claim of discrimination as a waiver by the EEOC of its public right to sue under Title VII. Without legal citation, the district court stated: 29 To the extent that the EEOC is suing for substantive relief (back pay, reinstatement, etc.) on behalf of a specific individual who has been allegedly discriminated against, they must take their plaintiff as they find them. 30 EEOC v. Frank's Nursery & Crafts, Inc., 966 F.Supp. 500, 505 (E.D.Mich.1997). In reaching this result, the district court attempted to rely on general principles of arbitrability, preclusion, and waiver. As its pronouncement finds no support in principles of law or of equity, however, we must reverse the district court's decision to override the broad powers of the EEOC to obtain monetary remedies for violations of Title VII.
31 We begin with the district court's application of the FAA in this case. The district court ordered Adams to arbitrate in accordance with her agreement and dismissed the EEOC's complaint on the grounds that the only viable claim in this case--Adams' individual claim seeking damages due to alleged racial discrimination--must be arbitrated and that staying the action would therefore serve no purpose. Frank's Nursery, 966 F.Supp. at 506. Thus, while Frank's argues that even nonsignatories to arbitration agreements can be compelled to arbitrate, the point is inapposite since the district court did not order the EEOC to arbitrate. It ordered Adams, a party to the agreement but not to the lawsuit, to arbitrate. In doing so, the district court compelled to arbitration an individual who did not wish to pursue any kind of an action in the first place, for Adams neither initiated a grievance nor sought to intervene in the EEOC action once filed. We reject the lower court's application of the FAA. 32 The FAA grants federal courts the authority to order into arbitration one who has failed, neglected, or refused to arbitrate despite having agreed in writing to do so. See 9 U.S.C. § 4 (1996). The preeminent concern of Congress in passing the FAA was to require courts to enforce private agreements to arbitrate. See Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 221, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985). Since the FAA, as a whole, is at bottom a policy guaranteeing the enforcement of private contractual arrangements, the Court has noted that the first task of a court asked to compel arbitration of a dispute is to determine whether the parties agreed to arbitrate that dispute. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, 473 U.S. 614, 625-26, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985). Under the FAA, then, courts must treat an agreement to arbitrate as a contract that embodies bargained-for exchange where a party consents to the resolution of their substantive claims in an arbitral forum instead of a judicial one. See id. at 628. Because courts are to treat agreements to arbitrate as all other contracts, they must apply general principles of contract interpretation to the interpretation of an agreement covered by the FAA. See Volt Info. Sciences, Inc. v. Board of Trustees, 489 U.S. 468, 475, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989). 33 Under general principles of contract law, it is axiomatic that courts cannot bind a non-party to a contract, because that party never agreed to the terms set forth therein. Accordingly, one individual cannot contractually waive the statutory rights of one who is not a party to the contract, and one individual cannot, by waiving her statutory right to vindicate her own interest, waive the statutory right of a federal sovereign to vindicate the public interest unless the government agrees to such waiver. Therefore, while the Court has held that an individual may contract for an arbitral resolution of her statutory claims, an individual surely cannot contract away the arbitral resolution of another's statutory claims. 6 34 Here, Adams contracted with Frank's to resolve her own Title VII claims by arbitration. On the other hand, the EEOC, even after making efforts at conciliation and settlement, never agreed to arbitrate with Frank's. Instead, the EEOC exercised its right to sue Frank's in federal court. As for Adams, she has not raised a claim against Frank's at all: she neither initiated an arbitration nor a federal lawsuit. 7 While the district court ordered Adams to arbitration pursuant to § 4 of the FAA, Adams has never really failed, neglected or refused to arbitrate and has thus not breached her agreement with Frank's. 35 In an effort to circumvent the obvious fact that the EEOC never agreed to the arbitration of its dispute with Frank's, the district court relied on Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 20, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983), to bind the EEOC under Adams' agreement to arbitrate. Indeed, the Supreme Court did state in Moses H. Cone that under the FAA, an arbitration agreement must be enforced notwithstanding the presence of other persons who are parties to the underlying dispute but not to the arbitration agreement. Id. However, a careful reading of Moses H. Cone reveals that the district court's reliance on the quoted language was misplaced. 36 In the case cited, Moses H. Cone Memorial Hospital had substantive related disputes with Mercury Construction Company, with which it had agreed contractually to arbitrate disputes, and an architect with whom it had no arbitration agreement. See Moses H. Cone, 460 U.S. at 20, 103 S.Ct. 927. The hospital sought a declaratory judgment against Mercury establishing that Mercury had no right to arbitration. See id. at 7, 103 S.Ct. 927. In resolving the case, the Court recognized merely that the hospital's related dispute with its architect could not prevent enforcement of its valid arbitration agreement with its construction company. See id. at 20, 103 S.Ct. 927. 37 More significantly, however, the Court recognized that if the dispute between Mercury and the Hospital is arbitrable under the Act, then the Hospital's two disputes will be resolved separately--one in arbitration, and the other (if at all) in state-court litigation. Id. The Court did not require the hospital to arbitrate its dispute with the architect in the absence of an agreement to arbitrate between the two, even where the two disputes were closely related factually. See id. Therefore, Moses H. Cone could not possibly support the district court's order forcing into arbitration a dispute--between the EEOC and Frank's--that was not the subject of an agreement to arbitrate. That another, hypothetical dispute--between Adams and Frank's--involving the same facts did fall under an agreement to arbitrate could not justify the conclusion of the district court in this case. 38 Setting aside the point that the EEOC never agreed to arbitrate and is not bound by Adams' agreement to arbitrate, allowing the EEOC to seek monetary relief on behalf of an individual who has signed an arbitration agreement would not, contrary to the implicit assumption of the district court, undermine the FAA and the Court's decision in Gilmer. The centerpiece provision of the FAA makes a written agreement to arbitrate 'in any maritime transaction or a contract evidencing a transaction involving commerce ... valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.'  Mitsubishi Motors, 473 U.S. at 625 (quoting 9 U.S.C. § 2 (1998)). Under the FAA, not all disputes implicating statutory rights should go to arbitration; indeed, it is the congressional intention expressed in some other statute on which the courts must rely to identify any category of claims as to which agreements to arbitrate will be held unenforceable. Id. at 627-28. As we have discussed, Congress crafted Title VII so that the EEOC would possess an independent right to sue in federal court to vindicate the public interest against employment discrimination. To allow Adams and Frank's to take that right away would completely undo Congress' effort. In essence, our interest in protecting, as a matter of public policy, the EEOC's power to guide the course of every Title VII action outweighs the interest in enforcing Adams' private promise to arbitrate against the EEOC. See Town of Newton v. Rumery, 480 U.S. 386, 392, 107 S.Ct. 1187, 94 L.Ed.2d 405 (1987). 39 Moreover, we see no inconsistency between Gilmer and permitting the EEOC to recover monetary relief on behalf of an individual. While Gilmer stated that arbitration agreements will not preclude the EEOC from bringing actions seeking class-wide or equitable relief, see 500 U.S. at 32, we do not read the Court's language as excluding other kinds of relief. Indeed, the Court made that statement specifically in response to the suggestion that arbitration procedures were inadequate, in that they did not allow for class actions and the pursuit of equitable relief. See id. Given that context, Gilmer cannot stand for the proposition that where an arbitration agreement exists, the EEOC is automatically limited to actions for equitable relief. 40 We observe that the EEOC raised the concern in Gilmer that employees such as Adams may, by signing arbitration agreements, jeopardize the EEOC's role in fighting employment discrimination. See Gilmer, 500 U.S. at 28. In response, the Court noted that even though the claimant is not able to institute a private judicial action, she would still be free to file a charge with the EEOC. Id. Indeed, the regulations implementing Title VII explain that the EEOC may receive information concerning alleged Title VII violations from any individual. See 29 C.F.R. § 1601.6 (1998). Given the enforcement scheme we have described, the filing of a charge automatically gives rise not only to the exclusive jurisdiction of the EEOC for a period of 180 days, but also to the power of the EEOC to bring its own lawsuit upon finding reasonable cause to believe the charge is true. 41 Presumably, under Gilmer, if an individual subject to an arbitration agreement filed a charge with the EEOC and ultimately received a right to sue letter, that individual would have a private cause of action that she waived by her prospective agreement to arbitrate. However, if an individual subject to an arbitration agreement filed a charge with the EEOC and put the EEOC on notice of employment practices violative of Title VII, and the EEOC in turn exercised its right to sue, that individual would no longer possess a private cause of action subject to her prior agreement to arbitrate. Rather, the EEOC would have a cause of action on behalf of that individual and the public interest that would fall outside the arbitration agreement. 42 As Title VII makes clear, the EEOC and aggrieved individuals seek to vindicate distinct though overlapping interests. Congress vested the EEOC with the responsibility of protecting not only the rights of certain aggrieved individuals, but also the public interest generally. The EEOC therefore pursues an interest broader than the one a private Title VII litigant pursues. Indeed, while Title VII provides that the lawsuit of one will preclude the lawsuit of another, the statute charges the EEOC with determining, within 180 days of receiving a charge, whether it should sue to further its broad interests or it should permit an aggrieved individual to sue in order to further her own interests. To the extent there exists a difference between the two types of actions, we believe courts may not treat the agreement of a private party to arbitrate her action as the agreement of the EEOC to arbitrate its action. While we express no opinion on the ability of the EEOC to agree to arbitrate its disputes with private employers, we conclude, based on the provisions in Title VII creating public and private rights of action and the legislative history of the 1972 amendments, that the EEOC's cause of action in this case falls into a category of claims as to which courts should hold private agreements to arbitrate unenforceable.
43 As the district court could not, under the FAA, order into arbitration a dispute between two parties that never agreed to arbitrate, we must now consider the other potential grounds for its dismissal of the EEOC's complaint. Through its citation of EEOC v. Harris Chernin, Inc., 10 F.3d 1286 (7th Cir.1993), the district court apparently acted to give preclusive effect to the contract between Adams and Frank's so as to prevent the EEOC from bringing its claim on grounds otherwise covered by that contract. In Harris Chernin, the Seventh Circuit followed the Third Circuit in holding that  'if a person first litigates in his own behalf, that person may be precluded from claiming any of the benefits of a judgment in a subsequent action that is brought or defended by a party representing him.'  Id. at 1291 (quoting EEOC v. U.S. Steel Corp., 921 F.2d 489, 493 (3d Cir.1990)). We believe the representative claim preclusion cited in those cases does not apply to this kind of case. We instead find that principles of preclusion cannot bar the EEOC from suing to make whole an individual who has agreed to arbitrate her own claim of discrimination, where that individual has neither initiated nor participated in an arbitration proceeding in the first place. 44 Under federal res judicata, or claim preclusion, a final judgment on the merits bars further claims by parties or their privies based on the same cause of action. See Montana v. United States, 440 U.S. 147, 153, 99 S.Ct. 970, 59 L.Ed.2d 210 (1979). The doctrine precludes litigation of claims that were previously available to the parties, regardless of whether they were asserted or determined in the first proceeding. Brown v. Felsen, 442 U.S. 127, 131, 99 S.Ct. 2205, 60 L.Ed.2d 767 (1979). Because res judicata ensures the finality of decisions, see id., it is essential that, at a minimum, the party or privy bound by the doctrine enjoy a full and fair opportunity to participate in some adjudication or resolution of the claim in question. Montana, 440 U.S. at 153. Prior proceedings may bind a nonparty as a privy where the relationship between the nonparty and a party is such as to legally entitle the latter to stand in judgment for the former, or where the nonparty's interests were adequately represented by a party with the same interests. See Hansberry v. Lee, 311 U.S. 32, 41-43, 61 S.Ct. 115, 85 L.Ed. 22 (1940). 45 As we view this case, preclusion cannot apply because the EEOC and Adams are not in privity, and because they do not possess identical causes of action or interests. See Kimberly-Clark Corp., 511 F.2d at 1359. While it is clear that the EEOC did not have a legal relationship with Adams entitling Adams to sign an arbitration agreement on its behalf, the EEOC's interest in suing on Adams' behalf extends beyond protecting Adams' interest to the interest of the public in general. As the Supreme Court has observed: 46 the EEOC is authorized to proceed in a unified action and to obtain the most satisfactory overall relief even though competing interests are involved and particular groups may appear to be disadvantaged.... The EEOC exists to advance the public interest in preventing and remedying employment discrimination, and it does so in part by making the hard choices where conflicts of interest exist. 47 General Telephone, 446 U.S. at 331. Adams could not adequately represent the EEOC's broad interest when she waived her own right to sue, just as she could not represent the same interests that the EEOC seeks to further by bringing a private Title VII suit. Given a statutory framework and history that vests in the EEOC and not private individuals the power and responsibility to represent not only individual but also public interests whenever it sues in its own name, we cannot conclude that the EEOC and Adams, without more, are privies. 48 Moreover, there is no question that the present case does not involve a prior suit or even a prior arbitration that raised or resolved the issues raised in the EEOC's complaint. 8 Therefore, claim preclusion cannot apply to the EEOC in this case as it has where the aggrieved individual filed suit in federal court on his own before the EEOC commenced its litigation. See, e.g., Harris Chernin, 10 F.3d at 1289 (precluding EEOC suit where employee filed suit on the same claim prior to the EEOC and lost on summary judgment); U.S. Steel Co., 921 F.2d at 492 (precluding EEOC suit where private suits by aggrieved individuals on the same claim lost on the merits);EEOC v. Huttig Sash & Door Co., 511 F.2d 453, 456 (5th Cir.1975) (speculating res judicata would bar EEOC suit where employee had had his suit adjudicated). 49 As res judicata could not properly provide a basis for the district court's preclusion of the EEOC's claim for relief on behalf of Adams, we turn to the possible application of judicial estoppel by the doctrine of election of remedies to preclude the EEOC in this case. Under the doctrine of election of remedies, an individual having two coexistent but inconsistent remedies chooses to exercise one, in which event he loses the right to thereafter exercise the other. Black's Law Dictionary 518 (6th ed.1990). As the Court has explained it, the doctrine refers to situations where an individual pursues remedies that are legally or factually inconsistent. Alexander v. Gardner-Denver Co., 415 U.S. 36, 49-50, 94 S.Ct. 1011, 39 L.Ed.2d 147 (1974). 9 Significantly, courts have long recognized not only the demise of this doctrine, but also its inapplicability to actions brought under Title VII. See Newman v. Avco Corp., 451 F.2d 743, 746-47 & n. 1 (6th Cir.1971). 50 Regardless, we observe that Adams neither filed suit against Frank's nor pursued an arbitral remedy against Frank's that led to a substantive resolution of her claim of discrimination. While Adams certainly possessed the power to arbitrate her claims at any time by initiating the arbitral process with Frank's, she did not elect that remedy. By signing her arbitration agreement, Adams merely traded a judicial forum for an arbitral one--she did not pursue an arbitral remedy just by signing an agreement to arbitrate in the event that she suffered a violation of her statutory rights. Cf. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, 473 U.S. 614, 628, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985) (By agreeing to arbitrate a statutory claim, a party does not forego the substantive rights afforded by the statute; it only submits to their resolution in an arbitral, rather than a judicial forum.). Adams therefore stands in the same shoes as an individual who possesses the right to sue but never files a complaint. Since election of remedies could not preclude such an individual, we cannot say that Adams elected an arbitral remedy in this case. 51 Nor can we say that Adams elected the remedy pursued by the EEOC. As the statutory framework illustrates, when the EEOC decides to retain exclusive jurisdiction by exercising its statutory right to sue under Title VII, it implements Congress' purpose by taking the power to protect the public from unlawful employment discrimination out of the hands of the private individual aggrieved by such discrimination. Congress created such a scheme on the basis of its determination that placing the impetus on individuals to enforce Title VII was not sufficient, partly because private employers successfully relied on the failure of aggrieved employees to sue. See H. Rep. No. 92-238, at 8, reprinted in 1972 U.S.C.C.A.N. 2137, 2144. Indeed, even if Adams had not signed an agreement to arbitrate, she would not have been free to choose a judicial remedy for herself once the EEOC filed its suit on her behalf. 52 Of the numerous grounds for preclusion that we have discussed, none apply to this case. While Adams could not be an adequate representative of the EEOC, she never adjudicated or arbitrated her claim of discrimination in any event. And, while she did not elect the remedy of arbitration in that she did not initiate an arbitration proceeding, she also did not elect the judicial remedy initiated by the EEOC in this case. Under these circumstances, we conclude that principles of preclusion by the doctrines of res judicata and election of remedies cannot justify the district court's dismissal of the EEOC's action for monetary relief.
53 As traditional res judicata and estoppel by election of remedies cannot govern this case, we turn to the district court's implicit reliance, in dismissing the EEOC's claim for relief to make Adams whole, on cases precluding EEOC actions brought on behalf of individuals who have settled their claims or who have waived their own rights to sue under Title VII. See, e.g., EEOC v. Goodyear Aerospace Corp., 813 F.2d 1539, 1543 (9th Cir.1987). Indeed, the Second Circuit recently held that where an individual has freely agreed to arbitrate [his] ADEA claim, that decision, like the decision to waive or settle a claim, prevents the EEOC from pursuing monetary remedies on behalf of the individual in the federal forum. EEOC v. Kidder, Peabody & Co., 156 F.3d 298, 302 (2d Cir.1998). Because we believe that an employee cannot preclude an EEOC suit by waiving her own right to sue under Title VII, we must part company with the Second Circuit to the extent it would bar the EEOC from suing for both monetary and injunctive relief on behalf of such an employee. 54 In Kidder Peabody, the Second Circuit followed those courts that recognize the EEOC's right of action as distinct from that of the aggrieved employee but that hold, on the basis of res judicata, that the EEOC may not seek monetary relief in the name of an employee who has waived, settled, or previously litigated the claim. Id. at 301 & n. 3. In accordance with this conclusion, the Second Circuit, like the district court, determined that while the EEOC was still free to pursue injunctive relief on behalf of an aggrieved individual whose Title VII claim is subject to arbitration, the EEOC could not pursue monetary relief on behalf of such an individual. 55 Aside from placing emphasis on the res judicata decisions in U.S. Steel and Harris Chernin that cannot apply to this case, the Second Circuit relied heavily on the Ninth Circuit's decision in Goodyear. In that case, the Ninth Circuit expressly rejected Goodyear's argument that the interests of the EEOC and the aggrieved individual were identical, and affirmed the right of the EEOC to seek injunctive relief through its action on behalf of that individual. 10 See Goodyear, 813 F.2d at 1542-43. Significantly, the Ninth Circuit did not hold, as a general principle, that the EEOC could not seek monetary relief on behalf of an aggrieved individual who had agreed to settle her discrimination claims. Rather, the court concluded that because the individual in the case before it had received satisfaction of her interests by her private settlement, the EEOC's claim was moot. See id. at 1542. The court further dismissed as moot the EEOC's claim for backpay on that individual's behalf because she freely contracted away her right to back pay through her settlement agreement with Goodyear. Id. at 1543. 56 It is obvious that the present case stands on separate footing. Here, Adams neither received satisfaction of her interests through settlement, nor agreed to give up her right to back pay. While the Second Circuit likened an individual's decision to submit her claim to an arbitral forum to the decision by an individual to settle or waive her claim, we must disagree. Indeed, the Second Circuit and the district court below premised their conclusions on the possibility that individuals who have freely agreed to arbitrate all employment claims could make an end run around the arbitration agreement by having the EEOC pursue back pay or liquidated damages on his or her behalf.... Kidder Peabody, 156 F.3d at 303. As we have explained, while Title VII affords recovery through private action or an action by the EEOC, it does not allow both, and the power to decide which route to follow rests in the hands of the EEOC, not the aggrieved employee. Since the statute does not grant an individual the power to obtain recovery without authorization from the EEOC, such an individual cannot, by making decisions about her own ability to sue for herself, override the power of the EEOC to sue in its own name. 57 Accordingly, we see no reason why the EEOC could not seek monetary remedies in its lawsuit on behalf of an individual who could otherwise have pursued an arbitral remedy, just as it always has when suing on behalf of an individual. See, e.g., EEOC v. Wilson Metal Casket Co., 24 F.3d 836, 842 (6th Cir.1994). As Title VII clearly states, when the EEOC decides to sue and a federal court agrees with the EEOC that the defendant-employer has unlawfully discriminated against a particular individual, the EEOC may obtain both injunctive relief and substantive relief including the reinstatement or hiring of employees, with or without back pay. 42 U.S.C. § 2000e-5(g)(1) (1998). The EEOC may also recover compensatory damages beyond back pay and punitive damages in cases of intentional employment discrimination that violates Title VII. See 42 U.S.C. § 1981a (a)(1) (1998). Thus, while of course, Title VII defendants do not welcome the prospect of backpay and other monetary relief, the law provides for such liability and the EEOC's authority to sue for it. General Telephone, 446 U.S. at 324. 58 Moreover, limiting the EEOC to the pursuit of injunctive and not monetary relief on behalf of aggrieved individuals would severely impede its ability to protect the public interest against unlawful employment discrimination, and would effectively eradicate the efforts of Congress to provide meaningful enforcement powers to the EEOC. As the Court has stated: 59 If employers faced only the prospect of an injunctive order, they would have little incentive to shun practices of dubious legality. It is the reasonably certain prospect of a backpay award that provides the spur or catalyst which causes employers and unions to self-examine and to self-evaluate their employment practices and to endeavor to eliminate, so far as possible, the last vestiges of an unfortunate and ignominious page in this country's history. 60 Albemarle Paper Co. v. Moody, 422 U.S. 405, 417, 95 S.Ct. 2362, 45 L.Ed.2d 280 (1975). Congress affirmed this notion when it added the remedies of compensatory and punitive damages by enacting the Civil Rights Act of 1991. See Civil Rights Act of 1991, § 2, Pub.L. No. 102-166, 105 Stat. 1071 (1991) (codified at 42 U.S.C. § 1981a (1998)) (finding that additional remedies under Federal law are needed to deter unlawful harassment and intentional discrimination in the workplace). If Congress believed the EEOC could effectively eradicate employment discrimination through injunctive remedies alone, it would not have empowered the EEOC to obtain more. 61 Federal courts are equipped well to account for situations where an aggrieved individual has already received satisfaction of her interests through settlement or through arbitration. See, e.g., EEOC v. Yenkin-Majestic Paint Corp., 112 F.3d 831, 836 (6th Cir.1997) (observing that district courts can exercise broad authority when fashioning appropriate relief under Title VII). Indeed, Title VII charges district courts with the responsibility of determining whether a particular award will aid in ending illegal discrimination and rectifying the harm it causes. Shore v. Federal Express Corp., 777 F.2d 1155, 1159 (6th Cir.1985). Courts retain equitable power to locate a just result when deciding on the kind and amount of relief to award under Title VII. Occidental Life, 432 U.S. at 373. In keeping with this principle, we have recognized that an individual's receipt of an arbitration award or settlement funds may limit the amount of relief that the EEOC may recover on her behalf. See Kimberly-Clark, 511 F.2d at 1361. 62 Where Congress granted the EEOC the broad power to choose which Title VII actions to litigate in order to eliminate unlawful employment discrimination, we cannot sustain the district court's attempt to use FAA, preclusion or waiver principles to treat an EEOC right of action as identical to Adams' private right of action. Were we to endorse the district court's construction of the EEOC's cause of action and of Adams' arbitration agreement, we would permit employees nationwide to contract away the right of the EEOC to enforce Title VII by bringing actions in federal court. Given the unequivocal intent of Congress that the EEOC possess an independent authority to vindicate the public interest by suing in its own name, we decline to reach such an untenable result by affirming the district court's enforcement of Adams' agreement to arbitrate against the EEOC. 63