Court Opinion

ID: 1080428
Source: CourtListenerOpinion
Date Created: 2013-10-09 20:40:28.0559+00
Date Added: 2024-06-11T13:17:30.425437
License: Public Domain

IN THE COURT OF APPEALS OF TENNESSEE
                       WESTERN SECTION AT JACKSON

PATRICIA J. GUNBY                )
and JANICE HAMIL,                )
                                 )
          Plaintiffs/Appellees,  ) Shelby Chancery No. 107064-1 R.D.
                                 )
VS.                              ) Appeal Nos. 02A01-9606-CH-00140

THE EQUITABLE LIFE ASSURANCE )
SOCIETY OF THE UNITED STATES, )
                                 ) and 02A01-9704-CH-00073
                                                                       FILED
DAVID BRYAN, and BOB DUNHAM, )
                                                                October 16, 1997
                                 )
          Defendants/Appellants. )
                                                               Cecil Crowson, Jr.
                                                                       Appellate C ourt Clerk

          APPEAL FROM THE CHANCERY COURT OF SHELBY COUNTY
                       AT MEMPHIS, TENNESSEE
               THE HONORABLE NEAL SMALL, CHANCELLOR

STEPHEN H. BILLER
MAURICE WEXLER
BAKER, DONELSON, BEARMAN
& CALDWELL, P.C.
Memphis, Tennessee
Attorneys for Appellants

TIM EDWARDS
JAMES F. HORNER
GLASSMAN, JETER, EDWARDS & WADE
Memphis, Tennessee
Attorneys for Appellees

REVERSED

                                                          ALAN E. HIGHERS, J.

CONCUR:

CRAWFORD, P.J., W.S.

LILLARD, J.
     In these sexual discrimination/sexual harassment cases, consolidated on appeal,
Plaintiffs, Patricia Gunby (“Gunby”) and Janice Hamil (“Hamil”), filed suit against

Defendants, The Equitable Life Assurance Society of the United States (“The Equitable”),

David Bryan (“Bryan”) and Bob Dunham (“Dunham”), seeking damages for Defendants’

alleged acts of sexual discrimination and sexual harassment. The Defendants filed a

motion to compel arbitration and to stay the action pending arbitration or, in the alternative,

to dismiss. The trial court denied Defendants’ motions. Defendants appeal the judgment

of the trial court arguing that the trial court erred in denying Defendants’ motion to compel

Plaintiffs to submit their claims for sexual harassment and sexual discrimination to

arbitration. For the reasons stated hereafter, we reverse the judgment of the trial court.

                                           FACTS

       In April 1991, Gunby began employment with The Equitable as a commissioned

insurance salesperson. In August 1992, Hamil began employment with The Equitable as

a commissioned insurance salesperson. Upon commencing employment with The

Equitable, Plaintiffs executed a contract entitled Uniform Application for Securities Industry

Registration or Transfer (the “contracts”) which provided in part as follows:

              I agree to arbitrate any dispute, claim or controversy that may
              arise between me and my firm, or a customer, or any other
              person, that is required to be arbitrated under the rules,
              constitutions, or by-laws of the [National Association of
              Securities Dealers, Inc. (“NASD”)] . . . as may be amended
              from time to time.

       At the time Plaintiffs signed the contracts, the Code of Arbitration Procedure

adopted by the NASD stated in part as follows:

              This Code of Arbitration Procedure is prescribed and adopted
              pursuant to Article IV, Section 2(b) of the By-Laws of the
              National Association of Securities Dealers, Inc. (the
              Association) for the arbitration of any dispute, claim or
              controversy arising out of or in connection with the business of
              any member of the Association, with the exception of disputes
              involving the insurance business of any member which is also
              an insurance company:

              (1) between or among members;

              (2) between or among members and public customers, or others; and

              (3) between or among members, registered clearing agencies
              with which the Association has entered into an agreement to

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              utilize the Association’s arbitration facilities and procedures,
              and participants, pledgees or other persons using the facilities
              of a registered clearing agency, as these terms are defined
              under the rules of such a registered clearing agency.

NASD (CCH) § 3701 (June 1, 1990).

       During Plaintiffs’ period of employment with The Equitable, the NASD amended its

Code of Arbitration Procedure, which became effective on October 1, 1993. NASD’s

amended Code of Arbitration Procedure provided for the arbitration of “any dispute, claim

or controversy arising out of or in connection with the business of any members of the

Association, or arising out of termination of employment of associated persons with any

member.“ NASD (CCH) § 3703 (October 1, 1993).

       Throughout Plaintiffs’ employment duration with The Equitable, Bryan served as the

agency manager of The Equitable’s Memphis operation, and Dunham served as a

management employee in The Equitable’s Memphis office.

       During Plaintiffs’ employment with The Equitable, Plaintiffs allege that they were

subjected to disparate terms, conditions and opportunities as a result of their gender and

that they were subjected to sexual harassment. Plaintiffs further allege that they were

constructively discharged on March 7, 1995. On February 28, 1996, Plaintiffs filed a

complaint against Defendants in the Shelby County Chancery Court alleging violations of

the Tennessee Human Rights Act, T.C.A. § 4-21-101 et seq.

                                            LAW

       The sole issue before this Court is as follows: whether the trial court erred in

denying Defendants’ motions to compel Plaintiffs to submit their claims for sexual

harassment and sexual discrimination to arbitration.

       In Gilmer v. Interstate/Johnson Lane Corp., 111 S. Ct. 1647 (1991), the United

States Supreme Court addressed an issue similar to the one in the case at bar. The

Plaintiff, Gilmer, a former registered securities representative, filed suit for discrimination

                                              3
under the Age Discrimination in Employment Act of 1967 (“ADEA”), 29 U.S.C. § 621 et seq.

The sole issue presented for review in Gilmer was whether a claim under the ADEA could

be subjected to compulsory arbitration pursuant to an arbitration agreement in a securities

registration application. Defendant, Interstate/Johnson Lane Corporation (“Interstate”),

hired Gilmer as the manager of its financial services department in May 1981. As required

by Interstate, Gilmer registered as a securities representative with several stock

exchanges, including the New York Stock Exchange (“NYSE”). Gilmer’s registration

application entitled “Uniform Application for Securities Industry Registration or Transfer”

provided, inter alia, that Gilmer “agree[d] to arbitrate any dispute, claim or controversy”

arising between him and Interstate “that is required to be arbitrated under the rules,

constitutions or by-laws of the organizations with which I register.” Gilmer, 111 S.Ct. at

1650. Rule 347 of the NYSE provided for the arbitration of “[a]ny controversy between a

registered representative and any member or member organization arising out of the

employment or termination of employment of such registered representative.” Id. at 1650-

51. In 1987, Interstate terminated Gilmer’s employment. Gilmer was sixty-two years of

age. After filing an age discrimination charge with the Equal Employment Opportunity

Commission (“EEOC”), Gilmer filed suit in the United States District Court for the Western

District of North Carolina, alleging that Interstate had discharged him because of his age,

in violation of the ADEA. Relying upon the arbitration agreement contained in Gilmer’s

registration application and upon the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq,

Interstate filed a motion to compel arbitration of Gilmer’s ADEA claim. The district court

denied Interstate’s motion to compel arbitration based upon Alexander v. Gardner-Denver

Co., 94 S. Ct. 1011 (1974) and its progeny. In holding that the age discrimination claim was

subject to compulsory arbitration pursuant to the arbitration agreement in Gilmer’s

securities registration application, the United States Supreme Court stated:

              It is by now clear that statutory claims may be the subject of an
              arbitration agreement, enforceable pursuant to the FAA.
              Indeed, in recent years we have held enforceable arbitration
              agreements relating to claims arising under the Sherman Act,
              15 U.S.C. §§ 1-7; § 10(b) of the Securities Exchange Act of
              1934, 15 U.S.C. § 78j(b); the civil provisions of the Racketeer
              Influenced and Corrupt Organizations Act (RICO), 18 U.S.C.
              § 1961 et seq.; and § 12(2) of the Securities Act of 1933, 15
              U.S.C. § 77l (2). See Mitsubishi Motors Corp. v. Soler
              Chrysler-Plymouth, Inc., 473 U.S. 614, 105 S. Ct. 3346, 87

                                             4
L. Ed. 2d 444 (1985); Shearson/American Express Inc. v.
              McMahon, 482 U.S. 220, 107 S. Ct. 2332, 96 L. Ed. 2d 185
              (1987); Rodriguez de Quijas v. Shearson/American Express,
              Inc., 490 U.S. 477, 109 S. Ct. 1917, 104 L. Ed. 2d 526 (1989).
              In these cases we recognized that “by agreement to arbitrate
              a statutory claim, 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, 473 U.S., at
              628, 105 S.Ct., at 3354.

Gilmer, 111 S.Ct. at 1652.

       In a strikingly similar case to the case sub judice, the United States Court of Appeals

for the Sixth Circuit in Willis v. Dean Witter Reynolds, Inc., 948 F.2d 305 (6th Cir. 1991)

addressed the issue of whether a registered securities representative’s claims of sexual

harassment and sexual discrimination against her brokerage firm were subject to

arbitration pursuant to the securities registration form that she was required to execute in

order to perform her work as an account executive. Plaintiff, Linda Willis (“Willis”),

originally filed an action for sexual harassment, sexual discrimination, common law contract

claims of outrage and breach of contract in state trial court. Defendant, Dean Witter

Reynolds, Inc. (“Dean Witter”), removed the case to federal court and filed a motion to

compel arbitration based upon Willis’ execution of a Securities Registration Form U-4 and

upon Willis’ registration with various national securities exchanges, including the NYSE.

The arbitration clause of the U-4 Form stated: “I agree to arbitrate any dispute, claim or

controversy that may arise between me and my firm, or a customer, or any other person,

that is required to be arbitrated under the rules, constitutions, or by-laws of the

organizations with which I register.” Id. at 306. Rule 347 of the NYSE Rules provided:

              Any controversy between a registered representative and any
              member or member organization arising out of the employment
              or termination of employment of such registered representative
              by and with such member or member organization shall be
              settled by arbitration, at the instance of any such party, in
              accordance with the arbitration procedure prescribed
              elsewhere in these Rules.

Id. Willis thereafter filed a motion for leave to amend her complaint to add a claim under

Title VII. The district court subsequently granted Willis’ motion to amend her complaint,

granted Dean Witter’s motion to compel arbitration on Willis’ breach of contract claims, and

denied Dean Witter’s motion to compel arbitration as to Willis’ sexual harassment, sexual

                                              5
discrimination and Title VII claims. Id. In holding that the district court’s denial of Dean

Witter’s motion to arbitrate Willis’ discrimination claims was in error, the Sixth Circuit Court

of Appeals relied largely upon the Supreme Court’s decision in Gilmer and stated:

              The plaintiff’s arguments which suggest that something
              inherent in Title VII precludes the enforcement of valid
              arbitration agreements in circumstances where the FAA is
              otherwise applicable was rejected in Gilmer. Further, while §
              1 of the FAA excludes “contracts of employment” from the
              scope of the FAA, the Supreme Court has squarely held that
              arbitration agreements contained in a securities registration
              application such as the one at issue in this case do not
              constitute contracts for employment. Thus, § 1 of the FAA
              does not exempt Willis’ discrimination claims from her
              agreement to arbitrate.

Id. at 312.

       In the present case, Plaintiffs argue that Alexander v. Gardner-Denver Co., 94 S. Ct.
1011 (1974), and its progeny prohibit enforcement of the arbitration provisions contained

within the contracts Plaintiffs executed regarding Plaintiffs’ claims of sexual harassment

and sexual discrimination. In Alexander, the Supreme Court addressed the issue of

whether a union employee was foreclosed from pursuing an action under Title VII of the

Civil Rights Act of 1964 (“Title VII”), 42 U.S.C. § 2000e et seq., after he had been

unsuccessful in an arbitration compelled by his collective bargaining agreement. In holding

that the employee’s statutory right to a trial de novo under Title VII is not foreclosed by prior

submission of a claim to final arbitration under the nondiscrimination clause of a collective

bargaining agreement, the Supreme Court stated that “[t]here is no suggestion in the

statutory scheme that a prior arbitral decision either forecloses an individual’s right to sue

or divests federal courts of jurisdiction.” Alexander, 94 S.Ct. at 1019. In addressing

Plaintiffs’ argument that the Supreme Court’s decision in Alexander prohibits the

enforcement of the arbitration provisions contained within the contracts Plaintiffs executed

regarding Plaintiffs’ claims of sexual harassment and sexual discrimination, we note that

the Supreme Court in Gilmer and the Sixth Circuit Court of Appeals in Willis addressed this

same argument. The Supreme Court in Gilmer stated that the Alexander line of cases

involved the issue of whether the arbitration of contract-based claims precluded

subsequent judicial resolution of statutory claims, not the enforceability of an agreement

                                               6
to arbitrate statutory claims. In distinguishing the Gilmer case from the Alexander line of

cases, the Supreme Court stated:

              First, [the Alexander line of cases] did not involve the issue of
              the enforceability of an agreement to arbitrate statutory claims.
              Rather, they involved the quite different issue whether
              arbitration of contract-based claims precluded subsequent
              judicial resolution of statutory claims. Since the employees
              there had not agreed to arbitrate their statutory claims, and the
              labor arbitrators were not authorized to resolve such claims,
              the arbitration in those cases understandably was held not to
              preclude subsequent statutory actions. Second, because the
              arbitration in those cases occurred in the context of a
              collective-bargaining agreement, the claimants there were
              represented by their unions in the arbitration proceedings. An
              important concern therefore was the tension between
              collective representation and individual statutory rights, a
              concern not applicable to the present case. Finally, those
              cases were not decided under the FAA, which, as discussed
              above, reflects a “liberal federal policy favoring arbitration
              agreements.” Mitsubishi, 473 U.S., at 625, 105 S.Ct., at 3353.
              Therefore, those cases provide no basis for refusing to enforce
              Gilmer’s agreement to arbitrate his ADEA claim.

Gilmer, 111 S.Ct. at 1657. Similarly, the Sixth Circuit Court of Appeals in Willis cited the

foregoing quotation from Gilmer and held that the Supreme Court’s holding in Alexander

was inapplicable to the facts in Willis. See Willis, 948 F.2d at 307-308.

       Plaintiffs further argue that the contracts they executed are contracts of adhesion,

ones which are dictated by employers in the field of securities sales and which are forced

upon all persons seeking and obtaining employment in the securities field. The Supreme

Court addressed a similar argument in Gilmer and stated that “[t]he unequal bargaining

power between employers and employees is not a sufficient reason to hold that arbitration

agreements are never enforceable in the employment context.” Gilmer, 111 S.Ct. at 1650.

Here, as in Gilmer, there is no indication that Plaintiffs were coerced or defrauded into

agreeing to the arbitration clause contained within the contracts they executed. We,

therefore, find this argument of the Plaintiffs to be without merit.

       In the instant case, the securities registration contracts that the Plaintiffs signed

upon commencing their employment with The Equitable were the same contracts that the

plaintiff in Gilmer and the plaintiff in Willis had signed. Because the Supreme Court in

Gilmer held that Gilmer’s age discrimination claim was subject to compulsory arbitration

                                              7
pursuant to the arbitration agreement in the securities registration application that Gilmer

had executed and because the Sixth Circuit Court of Appeals in Willis held that Willis’

sexual harassment, sexual discrimination and Title VII claims were subject to arbitration

pursuant to the arbitration agreement in the securities registration application that Willis

had executed, we find that the Supreme Court’s analysis and conclusions in Gilmer and

the Sixth Circuit’s reasoning in Willis compel the conclusion that the arbitration provisions

contained within the contracts Plaintiffs executed apply equally to Plaintiffs’ sexual

harassment and sexual discrimination claims. Furthermore, the Tennessee Human Rights

Act specifically provides that it embodies the policies of the Federal Civil Rights Act of

1964, 1968 and 1972. T.C.A. § 4-21-101 (a)(1). We, therefore, hold that the Plaintiffs’

claims of sexual harassment and sexual discrimination shall be submitted to arbitration in

accordance with the contracts signed by the Plaintiffs.

       The judgment of the trial court is hereby reversed and this matter is remanded to

the trial court for entry of an appropriate order. Costs on appeal are taxed to the

Appellees for which execution may issue if necessary.

                                                          HIGHERS, J.
CONCUR:

CRAWFORD, P.J., W.S.

LILLARD, J.

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