Court Opinion

ID: 3014207
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Date Created: 2015-10-13 22:02:05.913792+00
Date Added: 2024-06-11T11:46:51.067050
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Opinions of the United
2004 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

5-13-2004

Lloyd v. Hovensa
Precedential or Non-Precedential: Precedential

Docket No. 03-1502

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Recommended Citation
"Lloyd v. Hovensa" (2004). 2004 Decisions. Paper 664.
http://digitalcommons.law.villanova.edu/thirdcircuit_2004/664

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                      PRECEDENTIAL
                                        Lee J. Rohn
     UNITED STATES COURT                K. Glenda Cameron (Argued)
          OF APPEALS                    Law Offices of Lee J. Rohn
     FOR THE THIRD CIRCUIT              1101 King Street - Suite 2
                                        Christiansted
                                        St. Croix, USVI 00820
     NOS. 03-1502 and 03-1592            Attorneys for Bruno Lloyd
                                         Appellant/Cross-Appellee

         BRUNO LLOYD                    Charles E. Engeman
      Appellant in No. 03-1502          David J. Comeaux (Argued)
                                        Ogletree, Deakins, Nash, Smoak &
                 v.                      Stewart
                                        The Tunick Building - Suite 202
HOVENSA, LLC; WYATT, V.I., INC.         1336 Beltjen Road
                                        St. Thomas, USVI 00802
                                         Attorneys for Wyatt, V.I., Inc.
                                         Appellee/Cross-Appellant
          BRUNO LLOYD
                                        Linda J. Blair
                 v.                     Rachel L. Witty (Argued)
                                        Bryant, Barnes & Moss
HOVENSA, LLC.; WYATT, V.I., INC.        1134 King Street - 2nd Floor
       Wyatt, V.I., Inc.                Christiansted
    Appellant in No. 03-1592            St. Croix, USVI 00820
                                         Attorneys for HOVENSA, LLC
           ____________                  Appellee

  On Appeal From the District Court
          of the Virgin Islands
 (D.C. Civil Action No. 02-cv-00121)          OPINION OF THE COURT
District Judge: Hon. Raymond L. Finch

     Argued December 10, 2003
                                        STAPLETON, Circuit Judge:
BEFORE: NYGAARD, BECKER and
   STAPLETON, Circuit Judges               Bruno Lloyd appeals from an order of
                                        the District Court of the Virgin Islands
   (Opinion Filed: May 13, 2004)        compelling arbitration of his claims
                                        against Wyatt, V.I., Inc. (“Wyatt” or
“Cross-Appellant”) and HOVENSA, LLC                 time, HOVENSA awarded a contract to
(“HOVENSA”; collectively, “Appellees”)              Wyatt, a newly created subsidiary of Wyatt
pursuant to the Federal Arbitration Act             Field Services Company (“Wyatt Field
(“FAA”), 9 U.S.C. § 1 et seq. Wyatt                 Services”), for services that Jacobs/IMC
cross-appeals from the District Court’s             had been performing. Lloyd was then
order insofar as it denied Wyatt’s motion           informed by Jacobs/IMC that he would be
for a stay of the proceedings on Lloyd’s            laid-off when Jacobs/IMC’s contract
claims pending arbitration.                         expired on December 31, 2001.1 After
                                                    Wyatt was awarded the new contract, it
    Lloyd, who applied for employment at            filled positions in its upper management
Wyatt, brought suit against Appellees               with persons on the continental United
alleging, inter alia, discriminatory conduct        States who were already employed by its
in violation of Title VII of the Civil Rights       parent corporation, Wyatt Field Services.
Act of 1964, 42 U.S.C. § 2000e et seq.              These persons, according to Lloyd, were
Invoking the provisions of an arbitration           predominantly white.
agreement entered into as a condition of
Lloyd’s application, Appellees filed a                 In January 2002, Wyatt began to hire
motion to compel arbitration of Lloyd’s             between 300 and 400 people in the Virgin
claims and to stay the proceedings pending          Islands. Also in January 2002, Wyatt
arbitration. The District Court granted             began requiring all applicants to sign a
Appellees’ motion to compel arbitration,            Dispute Resolution Agreement (“DRA”)
but dismissed the case with prejudice               as a condition of having their applications
rather than granting a stay. For the reasons        considered. App. at 196. The DRA states,
that follow, we will reverse the District           in relevant part:
Court’s order and remand with instructions
to enter an order consistent with this                I recognize that differences may
opinion.                                              arise between W yatt and me in
                                                      relation to my application for
                     I.                               employment. Both Wyatt and I agree
                                                      to resolve any and all claims,
    Lloyd worked for more than twelve                 disputes or controversies arising out
years as a boilermaker and pipefitter for             of or relating to my application or
various contractors at the HOVENSA                    candidacy for employment, the terms
refinery in St. Croix, Virgin Islands.
Although the contractors for maintenance              1
                                                        According to Lloyd, it was the custom
and repairs changed over these years,
                                                    at the HOVENSA refinery that the former
Lloyd remain ed em ployed at the
                                                    employees of the outgoing contractor
HOVENSA refinery. In November 2001,
                                                    would be offered employment or
Lloyd was working for Jacobs/IMC, one of
                                                    transferred to the incoming contractor, but
the contractors at the refinery. At that
                                                    Wyatt did not adhere to that custom.

                                                2
   and conditions of my employment,                Rules 17, 18, and 34 with respect to
   and any claims arising from or                  confidentiality, AAA Rule 7 with respect
   relating to the employment                      to discovery procedure, and the DRA’s
   relationship exclusively by final and           fee-s plitti n g p r o v i s i o n w e r e a ll
   binding arbitration before a neutral            unconscionable and against public policy.
   arbitrator pursuant to the American             Lloyd also requested that the District Court
   Arbitration Association’s National              allow him further discovery based on his
   Rules for the Resolution of                     belief that Wyatt’s use of the DRA only in
   Employment Disputes [(“AAA                      the Virgin Islands was motivated by bad
   Rules”)] . . . . This agreement                 faith or an otherwise improper motive. He
   extends to disputes with or claims              claimed that, if Wyatt had indeed
   against W ya t t V .I . , I n c.,               discriminated against Black or Hispanic
   HOVENSA, L.L.C., and any of their               Virgin Islanders through the use of the
   related or affiliated companies,                DRA, then the DRA would be violative of
   entities, or individuals (as intended           federal and Virgin Islands law and
   third party beneficiaries).                     unenforceable as a matter of public policy.

App. at 37.                                           On November 18, 2002, Wyatt filed a
                                                   reply to Lloyd’s memorandum opposing
    On January 9, 2002, Lloyd applied for          arbitration and HOVENSA filed a notice
employment with Wyatt and signed the               of joinder, thereby joining Wyatt’s motion
DRA. He was not hired. Lloyd thereafter            to compel arbitration. The District Court
filed this action against both Wyatt and           held a hearing on the motion on January
HOVENSA. The complaint alleged: (1)                14, 2003, at which the testimony of several
violation of the Federal Civil Rights Act of       witnesses was taken.
1967; (2) violation of Titles 10 and 24 of
the Virgin Islands Code; (3) wrongful                 After the evidentiary hearing, the
discharge by HOVENSA; (4) breach of an             District Court granted Wyatt’s motion to
implied contract of good faith and fair            compel arbitration and dismissed the
dealing by HOVENSA; and (5) negligent              complaint with prejudice. The District
and/or intentional infliction of emotional         Court held that AAA Rules 17, 18, and 34,
distress. Lloyd requested punitive as well         as incorporated into the DRA , were
as compensatory damages.                           unconscionable. In addition, the District
                                                   Court denied Lloyd’s request for discovery
   On September 27, 2002, Wyatt filed a            on his theory that Wyatt used the DRA in
motion to compel arbitration, pursuant to          a racially discriminatory manner. The
the DRA, and to stay the proceedings               District Court noted that Lloyd had never
pending arbitration. Lloyd opposed this            filed a motion for an order to conduct
motion, arguing that the agreement to              discovery, in accordance with Fed. R. Civ.
arbitrate was unenforceable because AAA            P. 7(b) or Local R. Civ. P. 7.1, during the

                                               3
nearly three months between his October                  this case under 28 U.S.C. §§ 1331 and 48
21, 2002 mem orandum opp osing                           U.S.C. § 1612(a), because the case arose
arbitration and the evidentiary hearing.                 under, inter alia, Title VII, 42 U.S.C. §§
The District Court further held that the                 2000e, et seq.       The District Court
most Lloyd had shown was that Wyatt                      exercised supplemental jurisdiction over
differentiated between applicants on the                 Lloyd’s Virgin Islands claims pursuant to
basis of residency and nothing more.                     28 U.S.C. § 1367 and 48 U.S.C. § 1612(a).
Accordingly, the District Court found that
the DRA had not been used as a tool of                      We have jurisdiction over this appeal
unlawful discrimination.         Finally, the            and cross-appeal pursuant to 9 U.S.C. §
District Court severed the confidentiality               16(a)(3) because the District Court’s order
provisions of AAA Rules 17, 18 and 34                    constituted a final decision with respect to
from the DRA and granted Wyatt and                       an arbitration. See Green Tree Fin. Corp.-
H O V E N SA ’s m o t i o n to c o m p e l               Ala. v. Randolph, 531 U.S. 79, 88-89
arbitration.      Rather than stay the                   (2000). 3 We recognize that a district
proceedings pending arbitration, however,                court’s order compelling arbitration is
the District Court dismissed the action                  usually an interlocutory order that cannot
with prejudice because it found all of                   be appealed. See 9 U.S.C. § 16(b)(2). 4 In
Lloyd’s claims to be arbitrable and thus                 this case, however, the District Court both
left no claims for adjudication by the                   compelled the parties to arbitrate their
District Court. 2 Lloyd filed a timely notice            dispute and also dismissed the matter with
of appeal and Wyatt subsequently filed a                 prejudice. In Green Tree, the Supreme
notice of cross-appeal.                                  Court also considered an order compelling
                                                         arbitration and dismissing the plaintiff’s
                       II.                               case with prejudice, and, applying the
                                                         well-established meaning of the term
    The District Court had jurisdiction over             “final decision,” ruled that such order
                                                            plainly dispose[s] of the entire case
    2
        The District Court also held that (1)
the DRA’s fee-splitting provision, because                  3
                                                              9 U.S.C. § 16(a)(3) provides that “an
it provided that Lloyd would not have to                 appeal may be taken from a final decision
pay any fees upon demonstrating financial                with respect to an arbitration that is subject
hardship to the arbitrator, was not                      to this title.”
unconscionable, (2) AAA Rule 7’s
                                                                4
d i s c o v e r y p r o c e d u r e s w e r e no t              9 U.S.C. § 16(b)(2) provides that
unconscionable, and (3) that the DRA was                 “[e]xcept as otherwise provided in section
not unconscionable solely because of the                 1292(b) of title 28, an appeal may not be
existence of unequal bargaining power.                   taken from an interlocutory order . . .
These rulings are not at issue in this appeal            directing arbitration to proceed under
or cross-appeal.                                         section 4 of this title.”

                                                     4
   on the merits and le[aves] no part of                               III.
   it pending before the court. The
   FAA does permit parties to                         We first address the issue of whether
   arbitration agreements to bring a              the District Court erred in dismissing
   separate proceeding in a district              Lloyd’s complaint with prejudice rather
   court to enter judgment on an                  than staying the proceedings pending
   arbitration award once it is made (or          arbitration. On cross-appeal, Wyatt argues
   to vacate or modify it), but the               that pursuant to § 3 of the FAA, 9 U.S.C.
   existence of that remedy does not              § 3, the District Court was required to
   vitiate the finality of the District           grant Appellees’ motion to stay the
   Court’s resolution of the claims in            litigation of Lloyd’s claims pending the
   the instant proceeding. 9 U.S.C. §§            outcome of the arbitration and that the
   9, 10, 11. The District Court’s order          dismissal of Lloyd’s case was therefore
   was therefore “a final decision with           improper.6
   respect to an arbitration” within the
   meaning of § 16(a)(3), and an                      Courts of Appeals have reached
   appeal may be taken.                           different resolutions of the issue of
                                                  whether a District Court has discretion to
531 U.S. at 86. Accordingly, we have              deny a motion for a stay pending
before us a final appealable order that we        arbitration and dismiss a complaint where
may address on the merits.5                       it finds all claims before it to be arbitrable.
                                                  Compare Choice Hotels Intern., Inc. v.
     5
                                                  BSR Tropicana Resort, Inc., 252 F.3d 707,
      We note that although the District
                                                  709-10 (4th Cir. 2001) (“Notwithstanding
Court’s order in this case granted the
                                                  the terms of § 3, however, dismissal is a
dismissal with prejudice, the District
                                                  proper remedy when all of the issues
Court’s opinion stated that the matter
                                                  presented in a lawsuit are arbitrable.”), and
would be dismissed without prejudice. See
                                                  Green v. Ameritech Corp., 200 F.3d 967,
App. at 15, 16. This disparity, however,
                                                  973 (6th Cir. 2000) (“The weight of
does not affect our appellate jurisdiction.
                                                  authority clearly supports dismissal of the
See Blair v. Scott Specialty Gases, 283
                                                  case when all of the issues raised in the
F.3d 595, 602 (3d Cir. 2002) (holding that
the jurisdictional ruling in Green Tree,
where the action had been dismissed with          from an order refusing a stay of any action
prejudice, applies equally to a case that         under section 3 of this title.”).
was dismissed without prejudice).
                                                    6
       Moreover, we note that, while                  In construing the language of the FAA,
Wyatt does not rely on it, appellate              our review is plenary. See Shenango Inc.
jurisdiction over the cross-appeal may be         v. Apfel, 307 F.3d 174, 192 n.19 (3d Cir.
exercised pursuant to 9 U.S.C. §                  2002) (“The standard of review in cases of
16(a)(1)(A) (“An appeal may be taken              statutory construction is plenary.”).

                                              5
district court must be submitted to                       any issue referable to
arbitration.”), and Bercovitch v. Baldwin                 arbitration under a n
School, Inc., 133 F.3d 141, 156 & n.21                    agreement in writing for
(1st Cir. 1998) (remanding a case to the                  such arbitration, the court in
District Court to decide whether to dismiss               which such suit is pending,
or stay, depending upon whether all issues                upon being satisfied that the
before the court are arbitrable), and Alford              issue involved in such suit
v. Dean Witter Reynolds, Inc., 975 F.2d                   or proceeding is referable to
1161, 1164 (5th Cir. 1992), and Sparling                  arbitration under such an
v. Hoffman Const. Co., Inc., 864 F.2d 635,                a greement, shall o n
638 (9th Cir. 1988), with Adair Bus Sales,                application of one of the
Inc. v. Blue Bird Corp., 25 F.3d 953, 955                 parties stay the trial of the
(10th Cir. 1994) (holding that where a                    action until such arbitration
defendant moved for a stay pending                        has been had in accordance
arbitration under 9 U.S.C. § 3, the District              with the terms of the
court erred in instead entering a dismissal               agreement, providing the
and the proper course would have been to                  applicant for the stay is not
enter the stay). We have not heretofore                   in default in proceeding
had occasion to resolve the issue.7 Today,                with such arbitration.
we side with those courts that take the
Congressional text at face value.                  9 U.S.C. § 3 (emphasis added).

   Section 3 of the FAA provides:                     In accordance with the Supreme Court’s
                                                   instruction in Green Tree, we apply the
         If any suit or proceeding be              “the plain language of the statutory text” in
         brought in any of the courts              interpreting the FAA. See 531 U.S. at 88
         of the United States upon                 (holding that the plain meaning of the term
                                                   “final decision” in 9 U.S.C. § 16(a)(3)
     7
                                                   must be applied). Here, the plain language
      We have twice commented on the
                                                   of § 3 affords a district court no discretion
issue in dicta, see Seus v. John Nuveen &
                                                   to dismiss a case where one of the parties
Co., 146 F.3d 175, 179 (3d Cir. 1998) and
                                                   applies for a stay pending arbitration. The
Blair, 283 F.3d at 601. In neither of those
                                                   directive that the Court “shall” enter a stay
cases, however, did a party argue that a
                                                   simply cannot be read to say that the Court
stay rather than a dismissal should have
                                                   shall enter a stay in all cases except those
been entered and the Court accordingly
                                                   in which all claims are arbitrable and the
had no occasion to decide whether Section
                                                   Court finds dismissal to be the preferable
3 is mandatory. Our comments with
                                                   approach. On the contrary, the statute
respect to that issue are thus not
                                                   clearly states, without exception, that
precedential. Marianna v. Fisher, 338
                                                   whenever suit is brought on an arbitrable
F.3d 189, 201 (3d Cir. 2003).

                                               6
claim, the Court “shall” upon application            arbitration. For example, the FAA allows
stay the litigation until arbitration has been       arbitrating parties to return to court for
concluded. In this case, Wyatt requested a           resolution of disputes regarding the
stay of the proceeding as part of his motion         appointment of an arbitrator or the filling
to compel arbitration. Accordingly, we               of an arbitrator vacancy, 9 U.S.C. § 5.
hold that the District Court was obligated           Similarly, parties may ask the court to
under 9 U.S.C. § 3 to grant the stay once it         compel the attendance of witnesses, or to
decided to order arbitration.                        punish the witnesses for contempt, 9
                                                     U.S.C. § 7. Then, after an arbitration
    We are free to disregard an                      award is rendered, a party is entitled to
unambiguous directive of Congress only in            seek relief in the District Court in the form
the rare instances where failing to do so            of a judgment on the award or an order
produces a nonsensical result that could             vacating or modifying the award. See 9
not have been intended. Mitchell v. Horn,            U.S.C. §§ 9, 10, 11. If the plaintiff’s case
318 F.3d 523, 535 (3d Cir. 2003) (“We do             has been dismissed rather than stayed, the
not look past the plain meaning [of                  parties will have to file a new action each
statutory language] unless it produces a             time the Court’s assistance is required,
result ‘demonstrably at odds with the                with the attendant risk of having their case
intentions of its drafters’ . . . or an              assigned to a new judge. On the other
outcome ‘so bizarre that Congress could              hand, if the court enters a stay of the action
not have intended it.’”). This is not one of         and retains jurisdiction, then proceedings
those rare exceptions. Congress adopted              under §§ 5, 7, 9, 10, or 11 may be
the FAA to establish, promote and                    expedited, as the parties may simply return
facilitate a national policy strongly                the to the same district judge presiding
favoring arbitration as a process for                over the plaintiff’s case.
resolving disputes. Alexander v. Anthony
Int’l, L.P., 341 F.3d 256, 263 (3d Cir.                  There is an even more important reason,
2003). Holding that Congress intended to             however, to hold that Congress meant
deprive the District Court of discretion to          exactly what it said. Whenever a party is
deny a stay produces results that                    subjected to litigation on any issue and is
effe ctively prom ote an d fac ilitate               found to be entitled to arbitrate that issue,
arbitration.                                         § 3 of the FAA, as we have noted,
                                                     mandates that a stay be entered by the
    Contrary to Lloyd’s suggestion, the              District Court. The effect of that stay is
District Court has a significant role to play        twofold: it relieves the party entitled to
under the FAA even in those instances in             arbitrate of the burden of continuing to
which the District Court orders the                  litigate the issue while the arbitration
arbitration of all claims. Even in those             process is on-going, and it entitles that
instances, the parties are entitled to seek          party to proceed immediately to arbitration
the Court’s assistance during the course of          without the delay that would be occasioned

                                                 7
by an appeal of the District Court’s order              While it is true that the suggested
to arbitrate. Under § 16 of the FAA, 9               exception would extend only to cases
U.S.C. § 16, whenever a stay is entered              where the claim subject to arbitration is
under § 3, the party resisting arbitration is        not asserted along with other non-
expressly denied the right to an immediate           arbitrable claims – that is, where all
appeal.8 The legislative scheme of the               asserted claims are arbitrable – none of the
FAA thus reflects a policy decision that, if         courts that have been willing to endorse it
a district court determines that arbitration         has suggested a reason why Congress
of a claim is called for, the judicial               might have wanted a party entitled to
system’s interference with the arbitral              arbitration to be subjected to an immediate
process should end unless and until there is         appeal or not depending on how his
a final award.                                       adversary has chosen to draft his
                                                     complaint.
    If an exception to the mandate of § 3
were to be fashioned, thus giving the                   In short, a literal reading of § 3 of the
District Court discretion to dismiss the             FAA not only leads to sensible results, it
action rather than enter a stay, a party who         also is the only reading consistent with the
has been held entitled to arbitration would          statutory scheme and the strong national
be deprived of an important benefit which            policy favoring arbitration. Accordingly,
the FAA intended him to have – the right             the District Court erred in refusing to enter
to proceed with arbitration without the              a stay order.
substantial delay arising from an appeal.
Stated conversely, the effe ct of                       Although we agree with Wyatt that the
recognizing an exception to the mandatory            District Court’s order dismissing Lloyd’s
directive of § 3 is to give the District Court       case must be reversed, we reject the
the power to confer a right to an                    argument that reversal would, in turn,
immediate appeal that would not otherwise            deprive us of jurisdiction to hear the merits
exist.                                               of Lloyd’s appeal. Relying in part on
                                                     Green Tree, 531 U.S. at 87 n.2, Wyatt
                                                     suggests that if we vacate the District
   8
                                                     Court’s dismissal, we would be left with
    Under 9 U.S.C. § 16(a)(1)(A) & (B), a
                                                     an unappealable interlocutory order. This
party may seek immediate appeal of an
                                                     argument misconstrues Green Tree. In
order refusing a to grant a stay under § 3
                                                     that case, the Supreme Court noted that
of the FAA or an order denying a petition
                                                     “[h]ad the District Court entered a stay
to compel arbitration under § 4. Under 9
                                                     instead of a dismissal . . . , that order
U.S.C. § 16(b)(1) & (2), however, an
                                                     would not be appealable.” Id. (emphasis
appeal may not be taken (except as
                                                     added). In this case, however, the District
provided by 28 U.S.C. § 1292(b)) from an
                                                     Court did not enter a stay. Wyatt’s
interlocutory order granting a stay under §
                                                     argument assumes that a conclusion that
3 or compelling arbitration under § 4.

                                                 8
the District Court should have entered a                         agreement. Failure to raise these matters
stay is tantamount to the conclusion that                        in the District Court should be excused,
the District Court did enter a stay. This is                     Lloyd insists, because “standing” to
simply not the case. As we have noted                            arbitrate is a jurisdictional matter that can
supra, the order before us is a final                            be raised at any stage of the proceedings
decision that is appealable under 9 U.S.C.                       and because, in any event, finding a waiver
§ 16(a)(3).                                                      would result in manifest injustice.9 We are
                                                                 unpersuaded.
     While it is clear that a court in this
procedural context has jurisdiction to                              It is true that our case law, as well as the
address the merits of the appeal, it may                         decisions of other courts, has often
choose to defer to the FAA’s policy                              referred to a party’s “standing” to compel
f a v o r i n g e x p e d i t i o u s ar b i t r a t i o n       arbitration. See, e.g., In re Prudential Ins.
proceedings and decline to do so when it                         Co. of Am. Sales Practice Litig. All Agent
believes addressing the merits will prolong                      Actions, 133 F.3d 225, 229 (3d Cir. 1998);
the ultimate resolution of the dispute. See,                     Britton v. Co-op Banking Group, 916 F.2d
e.g., Adair Bus Sales, 25 F.3d at 955.                           1405, 1413 (9th Cir. 1990). Lloyd is
Here, however, we are called upon to                             mistaken, however, in equating the
exercise our discretion after this appeal has                    doctrine of Article III constitutional
been fully briefed and argued, and in a                          standing with the “standing” required to
context where resolution of the merits is                        compel arbitration in this case. In order
likely to advance, rather than prolong, the                      for there to be Article III standing, there
ultimate resolution of the dispute by                            must be a “case or controversy.” That is,
arbitration. We will therefore proceed to                        the following three elements must be
consider the merits of Lloyd’s appeal.                           present:

                          IV.                                         9
                                                                       Lloyd also contends that he had no
                                                                 opportunity to raise these matters in the
    Lloyd argues before us for the first
                                                                 District Court, pointing to the fact that
time that HOVENSA failed to demonstrate
                                                                 HOVENSA did not join in Wyatt’s motion
that it was an intended third party
                                                                 to compel arbitration until after Lloyd had
beneficiary of the DRA. It follows,
                                                                 filed his memorandum in opposition
according to Lloyd, that HOVENSA failed
                                                                 thereto. Nearly two months elapsed,
to affirmatively show that it had
                                                                 however, between HOVENSA’s initial
“standing” to compel arbitration. In his
                                                                 reliance on the DRA and the oral argument
reply brief, Lloyd adds that HOVENSA
                                                                 on the motion to arbitrate.          Lloyd,
clearly lacks standing to compel arbitration
                                                                 accordingly, had ample opportunity to
of certain of his claims against it because
                                                                 dispute HOVENSA’s status as an intended
those claims predate the DRA and,
                                                                 beneficiary of the DRA and to challenge
accordingly, fall outside the scope of that
                                                                 the arbitrability of his claims against it.

                                                             9
    First, the plaintiff must have                                manifest injustice argument. It well may
    suffered an injury in fact – an                               be that some of his claims against
    invasion of a legally protected                               HOVENSA are not within the scope of the
    interest which is (a) concrete and                            arbitration clause, but the FAA’s scheme
    particularized, and (b) actual or                             for the ex peditio us and efficient
    imminent, not conjectural or                                  disposition of disputes by arbitration
    hypothetical. Second, there must                              would be frustrated if parties were not
    be a causal connection between the                            required to put their arbitrability claims on
    injury and the conduct complained                             the table when the District Court is called
    of – the injury has to be fairly . . .                        upon to address such issues. We believe it
    trace[able] to the challenged action                          is not manifestly unjust to require parties
    of the defendant, and not . . . th[e]                         to do so when the only consequence of a
    result [of] the independent action of                         waiver is an alternative form of dispute
    some third party not before the                               resolution and no loss of substantive
    court. Third, it must be likely, as                           rights. See Mitsubishi Motors Corp. v.
    opposed to merely speculative, that                           Soler Chrysler-Plymouth, Inc., 473 U.S.
    the injury will be redressed by a                             614, 628 (1985) (“By agreeing to arbitrate
    favorable decision.                                           a statutory claim, a party does not forgo
                                                                  the substantive rights afforded by the
Lujan v. Defenders of Wildlife, 504 U.S.                          statute; it only submits to their resolution
555, 560-61 (1992) (citations and internal                        in an arbitral, rather than a judicial, forum.
quotations and footnote omitted). Here,                           It trades the procedures and opportunity
the party invoking federal jurisdiction was                       for review of the courtroom for the
Lloyd, and his complaint presented the                            simplicity, informality, and expedition of
District Court with a “case or controversy”                       arbitration.”).
that has not yet been resolved. Thus, the
District Court properly exercised its                                Our Circuit adheres to a “well
jurisdiction. The issues that Lloyd seeks to                      established principle that it is inappropriate
raise before us relate only to whether                            for an appellate court to consider a
HOVENSA has or does not have a                                    contention raised on appeal that was not
c o n t r a c t- b a s e d d e f e n s e r e q u i r i n g        initially presented to the district court.” In
arbitration rather than litigation of those                       re City of Phila. Litig., 158 F.3d 723, 727
claims. That issue is not a jurisdictional                        (3d Cir. 1998) (citing Armbruster v.
one. See Prudential Ins. Co. of Am., 133                          Unisys Corp., 32 F.3d 768, 772 n.4 (3d
F.3d at 229 (referring to the contractual                         Cir. 1994); Frank v. Colt Indus., Inc., 910
standing of a party to arbitrate its claims);                     F.2d 90, 99-100 (3d Cir. 1990)).
Paul Revere Variable Annuity Ins. Co. v.                          Accordingly, we decline to sustain Lloyd’s
Zang, 248 F.3d 1, 5 n.2 (1st Cir. 2001).

    Nor are we impressed with Lloyd’s

                                                             10
“standing to arbitrate” arguments.10                challenges the District Court’s holding that
                                                    AAA Rules 17, 18, and 34, which govern
                    V.                              the confidentiality of certain aspects of the
                                                    arbitration, are unconscionable and
    Finally, we address two arguments               unenforceable.      We exercise plenary
relating to the enforceability of the DRA.          review over questions regarding the
First, Lloyd challenges the District Court’s        validity and enforceability of an agreement
holding that the DRA was not used in a              to arbitrate. Alexander, 341 F.3d at 263.
discriminatory manner against public                However, “to the extent that the district
policy.11 Second, Wyatt’s cross-appeal              court predicated its decision on findings of
                                                    fact, our standard of review is whether
                                                    those findings were clearly erroneous.”
    10
      As we have noted, the DRA allows              Medtronic AVE, Inc. v. Advanced
HOVENSA, as an intended beneficiary, to             Cardiovascular Sys., Inc., 247 F.3d 44, 53-
compel arbitration of claims arising out of         54 (3d Cir. 2001) (citing Kaplan v. First
Lloyd’s employment and employment                   Options of Chicago, Inc., 19 F.3d 1503,
application. While Lloyd urges that we              1509 (3d Cir. 1994)).
should remand for fact finding on whether
the parties intended HOVENSA to be a                                     A.
third party beneficiary, he has not made a
proffer of evidence which would tend to                Lloyd’s primary argument on appeal is
show an intent contrary to that reflected on        that Wyatt used the DRA in a
the face of the DRA.                                discriminatory manner as part of a
         11
                                                    “purposeful scheme to contravene
        Lloyd also argues that, even if
                                                    unambiguous Virgin Islands public policy,
HOVENSA were an intended third-party
                                                    as reflected by the V.I. Civil Rights Act,
beneficiary of the DRA, the provision
                                                    10 V.I.C. § 3.” Appellant’s Br. at 12.
granting it such status is unconscionable.
                                                    Lloyd bases this claim on his assertion that
He contends that the provision is
                                                    Wyatt, by requiring Virgin Islands workers
unreasonably one-sided because while he
                                                    to sign the DRA as a condition of
is bound to arbitrate claims against
                                                    employment, uses “place of residence” as
HOVENSA, the provision does not require
                                                    a “proxy” for race, color and national
Wyatt to arbitrate claims against
HOVENSA; nor does the DRA allow
Lloyd to compel arbitration of any claims           but not vice versa. See Restatement
that HOVENSA may have against him.                  (Second) of Contracts § 304 (1981). We
As an initial matter, we note that this             need not address the issue, however,
argument appears to be a challenge to the           because it was never presented to the
fundamental principle of contract law that          District Court and was therefore waived.
an intended beneficiary to a contract may           See In re City of Phila. Litig., 158 F.3d at
enforce a promise made by the promisor,             727.

                                               11
origin. Alternatively, Lloyd alleges that           Lloyd also cites Title VII and the Virgin
the DRA has a disparate impact upon                 Islands Civil Rights Act, 10 V.I. Code
Blacks and Hispanics who predominate in             Ann. § 1 et seq., as illustrative of a strong
the Virgin Islands workforce. As a result,          federal and local public policy against
he urges, the DRA is unenforceable under            employment discrimination.13
the generally applicable contract defense
that use of the agreement contravenes                  Significantly, Lloyd does not allege that
public policy. Lloyd also claims that the           any particular promise or term in the DRA
District Court erred in not allowing him an         was discriminatory. Rather, he claims that
opportunity to conduct discovery into this          Wyatt used the DRA in a discriminatory
issue.                                              manner. Even assuming, however, that §
                                                    178 of the Restatement may be applied to
   Lloyd’s generally applicable contract            a facially neutral contract, Lloyd’s
defense relies on § 178(1) of the                   argument must still fail as he has proffered
Restatement (Second) of Contracts, which            no evidence that Wyatt’s use of the DRA
provides:                                           was in any way discriminatory.

   A promise or other term of an                       Lloyd’s argument is based solely on two
   agreement is unenforceable on                    facts: (1) that Wyatt began using the DRA
   grounds of public policy if                      after its upper management was hired; and
   legislation provides that it is                  (2) that Wyatt’s parent company, Wyatt
   unenforceable or the interest in its             Field Services, does not use the DRA.
   enforcement is clearly outweighed                Wyatt does not contest these facts.
   in the circumstances by a public                 Instead, it admits that it began using the
   policy against the enforcement of                DRA in the Virgin Islands in January
   such terms.12                                    2002. Wyatt responds, however, that this

                                                       13
                                                          Lloyd further cites, for the first time
    12
      Wyatt argues on appeal that Lloyd             on appeal, 24 V.I. Code Ann. § 74a(b),
waived his public policy argument by not            which provides that “[a]n employer subject
relying on § 178 of the Restatement                 to this chapter may not require an
(Second) of Contracts in the District Court.        employee to arbitrate a dispute as a
While it is true that Lloyd never                   condition of employment.” Section 74a
specifically relied upon the Restatement,           was enacted on September 18, 2002, one
he nonetheless expressly argued that the            month before Lloyd filed his memorandum
DRA was applied in a discriminatory                 in opposition to Wyatt’s motion to compel
manner and unenforceable as a matter of             arbitration. Lloyd did not, however, bring
public policy. He therefore preserved the           this statute to the attention of the District
argument for appeal and we will address it          Court as a source of public policy and we
on the merits.                                      therefore need not address it.

                                               12
timing explains why its upper management           well established that the scope and conduct
employees, who were hired before January           of discovery are within the sound
2002, were not required to sign the DRA.           discretion of the trial court and that after
The record indicates that all persons who          final judgment of the district court or final
applied for employment at Wyatt after              agency order, our review is confined to
January 2002 were obligated to sign the            determining if that discretion has been
DRA. Wyatt proffered that the reason it            abused.” (citations omitted))).       Lloyd
began using the DRA was concern for the            argues that the District Court erred in not
high cost of employee litigation claims in         considering his request to conduct
the Virgin Islands. It adds that its parent        discovery, but he does not cite any motion
does not, and has not, engaged in any              that the court denied or allege that he was
business in the Virgin Islands. Lloyd has          deprived of the opportunity to conduct
not addressed Wyatt’s explanations or              discovery on his own. The Federal Rules
claimed that they are pretextual.                  of Civil Procedure allow for numerous
                                                   discovery mechanisms that do not require
    The burden of proving a generally              leave of the court. See Fed. R. Civ. P.
applicable contract defense lies with the          30(a)(1) (oral depositions), 31(a)(1)
party challenging the contract provision.          (written depositions), 33(a )
Cf. Harris v. Green Tree Fin. Corp., 183           (interrogatories), 34(b) (production of
F.3d 173, 181 (3d Cir. 1999) (“The party           documents). Lloyd does not state whether
challenging a contract provision as                he ever attempted to use any of these
unconscionable generally bears the burden          avenues of discovery to support his claim.
of proving unconscionability.”); E. Allen          We therefore reject his assignment of
Farnworth, Farnsworth on Contracts §               error.
4.28 & n.14 (3d ed. 1999) (“The party
asserting the defense of unconscionability                              B.
must prove it.”). Here, Lloyd has failed to
present any evidence in attempting to meet            On cross-appeal, Wyatt argues that the
this burden. We will therefore affirm the          District Court erred in holding that the
District Court’s holding that the DRA was          confidentiality provisions of AAA Rules
not unenforceable as violative of public           17, 18, and 34, as incorporated in the
policy.                                            DRA, were unconscionable and severable
                                                   from the remainder of the DRA. We
    With respect to Lloyd’s assignment of          recently addressed an identical issue in
error regarding his request for discovery,         Parilla v. IAP Worldwide Services VI, Inc.,
we review a district court’s denial of a           ___ F.3d ___ (3d Cir. 2004) and concluded
discovery motion for an abuse of                   that the district court in that case had erred
discretion. See Seus, 146 F.3d at 178              in hold ing the se A AA Ru les
(citing Marroquin-Manriquez v. I.N.S.,             unconsc i o n a b le .       The factual
699 F.2d 129, 134 (3d Cir. 1983) (“It is           circumstances in this case are substantially

                                              13
the same as those in Parilla and the parties
have also presented substantially the same
arguments that were presented in that case.
For the reasons given in Parilla, we hold
that the District Court’s ruling on this issue
was in error. Accordingly, AAA Rules 17,
18, and 34 should not have been held
unconscionable or severed from the DRA.

                     VI.

   For the reasons set forth above, we will
reverse the District Court’s order and will
remand with instructions to enter an order
compelling arbitration pursuant to the
Dispute Resolution Agreement, as written,
and staying the proceedings in this case
pending arbitration.

LLOYD v. HOVENSA – NOS. 03-1502
AND 03-1592

BECKER, Circuit Judge, concurring:
    I join Parts I, II, and III of the
majority’s opinion in full. I concur in
Parts IV and V with the understanding that
this case, because it raises substantial and
unresolved questions of considerable
importance to those involved in
employment litigation in the Virgin
Islands, is the rare one in which we will
exercise our discretion to address the
merits of a decision that should have
resulted in a stay pending arbitration,
rather than dismissal.

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