Opinion ID: 764164
Heading Depth: 3
Heading Rank: 1

Heading: Inapplicability of FAA

Text: 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.