Court Opinion

ID: 3032749
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:48:24.173445+00
Date Added: 2024-06-11T11:48:20.754591
License: Public Domain

United States Court of Appeals
                         FOR THE EIGHTH CIRCUIT
                                 ___________

                                 No. 02-1444
                                 ___________

Halver Bailey, et al.,            *
                                  *
     Plaintiffs - Appellees,      *
                                  * Appeal from the United States
     v.                           * District Court for the
                                  * District of Minnesota.
Ameriquest Mortgage Company,      *
                                  *
     Defendant - Appellant.       *
                             ___________

                            Submitted: November 4, 2002

                                Filed: October 14, 2003
                                 ___________

Before WOLLMAN, FAGG, and LOKEN,* Circuit Judges.
                           ___________

LOKEN, Chief Judge.

      This is an action under the Fair Labor Standards Act, 29 U.S.C. §§ 201-219,
by present and former account executives at Ameriquest Mortgage Company
(“Ameriquest”), who allege that they often work more than forty hours per week
without being paid overtime compensation the FLSA requires. Ameriquest moved
to compel arbitration pursuant to the standard-form Mutual Agreement to Arbitrate
Claims signed by Ameriquest and each account executive (the “Arbitration

      *
       The Honorable James B. Loken became Chief Judge of the United States
Court of Appeals for the Eighth Circuit on April 1, 2003.
Agreement”). The district court denied the motion. Relying upon decisions from
other circuits, the court concluded that the Arbitration Agreement is unenforceable
because certain of its terms are inconsistent with the account executives’ procedural
and remedial rights under the FLSA.1 In so ruling, the court ignored the provision in
the Arbitration Agreement giving the arbitrator “exclusive authority to resolve”
disputes over the validity of any part of the agreement. The court also ignored
controlling decisions of this court which have declined to follow the decisions from
other circuits on which the district court relied. See Arkcom Digital Corp. v. Xerox
Corp., 289 F.3d 536, 538-39 (8th Cir. 2002).

      Ameriquest appeals the order denying its motion to compel arbitration.
Though the order is interlocutory, we have jurisdiction under the Federal Arbitration
Act (FAA) to review it. See 9 U.S.C. § 16(a)(1)(B). The scope of our review is
narrow; we determine only “whether there is a valid agreement to arbitrate and
whether the specific dispute at issue falls within the substantive scope of that
agreement.” Larry’s United Super, Inc. v. Werries, 253 F.3d 1083, 1085 (8th Cir.
2001). We reverse.

       The Arbitration Agreement clearly encompasses the FLSA claims at issue, for
the agreement broadly applies to all account executive claims, whether contractual
or statutory, “for wages or other compensation due.” The Supreme Court has
repeatedly held that contracts to arbitrate federal statutory claims are enforceable
unless “Congress has evinced an intention to preclude a waiver of judicial remedies

      1
        The account executives argue that the Arbitration Agreement is unenforceable
because its one-year statute of limitations unlawfully limits the damages they may
recover under the FLSA; because the agreement’s cost-sharing provision may impose
significantly greater costs than a judicial forum; because the California venue
provision may increase costs and discourage the assertion of FLSA claims; and
because the agreement does not expressly provide for collective action, as the FLSA
does, see 29 U.S.C. § 216(b).

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for the statutory rights at issue.” Green Tree Fin. Corp. v. Randolph, 531 U.S. 79, 90
(2000). That exception is not an issue here. The Court upheld the arbitrability of
federal age discrimination claims in Gilmer v. Interstate/Johnson Lane Corp., 500
U.S. 20 (1991), and the age discrimination statute there at issue had borrowed its
remedial provisions from the previously enacted FLSA. See 29 U.S.C. § 626(b).

       The FAA provides that arbitration agreements are enforceable “save upon such
grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2.
Based upon that § 2 proviso, the Supreme Court has noted an exception to the general
rule that agreements to arbitrate federal statutory claims are enforceable:

      Of course, courts should remain attuned to well-supported claims that
      the agreement to arbitrate resulted from the sort of fraud or
      overwhelming economic power that would provide grounds for the
      revocation of any contract.

Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 627 (1985)
(quotation omitted), followed in Gilmer, 500 U.S. at 33, and in Shearson/Am.
Express, Inc. v. McMahon, 482 U.S. 220, 226 (1987). In this case, though plaintiffs
complain that the Arbitration Agreement was presented to account executives on a
take-it-or-leave-it basis, there is no evidence of “fraud or overwhelming economic
power.” The agreement contains an express acknowledgment that the account
executive has discussed its terms with an attorney “to the extent I wish to do so.”2

       Rather than invoke this narrow exception that the Supreme Court has
recognized but never applied, the district court applied a far broader exception to
arbitrability, declaring invalid and unenforceable an agreement to arbitrate that

      2
        “Mere inequality in bargaining power . . . is not a sufficient reason to hold that
arbitration agreements are never enforceable in the employment context.” Gilmer,
500 U.S. at 33.

                                           -3-
applies to a wide variety of claims because some of its procedural terms and remedial
limitations appear to be facially inconsistent with the FLSA statutory claims being
asserted by the account executives. In our view, the court’s analysis reflects an out-
moded judicial hostility to arbitration that the Supreme Court has consistently
rejected in construing the FAA. The court’s decision is contrary to controlling
decisions of the Supreme Court and this court for two distinct reasons.

       First, while a party does not forgo substantive statutory rights by agreeing to
arbitrate statutory claims, see Gilmer, 500 U.S. at 26, the Court has evidenced its
confidence that arbitrators are perfectly capable of protecting statutory rights when
the parties have conferred the authority to decide statutory claims. In PacifiCare
Health Sys., Inc. v. Book, 123 S. Ct. 1531, 1536 (2003), for example, where plaintiffs
alleged that the limited remedies in the agreement to arbitrate were inconsistent with
their federal statutory rights, the Court held that it was proper to compel arbitration
because “we do not know how the arbitrator will construe the remedial limitations.”
Similarly, the Court has held that procedural questions “which grow out of the dispute
and bear on its final disposition” are presumptively for the arbitrator, not a judge, to
decide. Howsam v. Dean Witter Reynolds, Inc., 123 S. Ct. 588, 592 (2002)
(quotation omitted). Accord Green Tree Fin. Corp. v. Bazzle, 123 S. Ct. 2402, 2407-
08 (2003). When an agreement to arbitrate encompasses statutory claims, the
arbitrator has the authority to enforce substantive statutory rights, even if those rights
are in conflict with contractual limitations in the agreement that would otherwise
apply.3 Based upon these principles and Supreme Court precedent, we held in Larry’s
United Super, 253 F.3d at 1086, and again in Arkcom, 289 F.3d at 539, that the extent
of an arbitrator’s procedural and remedial authority are issues for the arbitrator to

      3
       Here, the Arbitration Agreement expressly requires the arbitrator to apply
applicable federal and state law, authorizes the arbitrator to conclude that any part of
the agreement is void or voidable, and provides for the severability of any
unenforceable terms.

                                           -4-
resolve in the first instance. Accord Gannon v. Circuit City Stores, Inc., 262 F.3d
677, 681-82 (8th Cir. 2001).

       Second, in denying Ameriquest’s motion to compel arbitration, the district
court compared the terms of the Arbitration Agreement with the provisions of the
FLSA and declared the agreement to arbitrate unenforceable. We will assume
without deciding that the grounds-for-revocation proviso in 9 U.S.C. § 2 creates an
exception to arbitrability over and above the “fraud or overwhelming economic
power” exception noted in Gilmer. But even if that is true, the district court’s
decision is contrary to AT&T Technologies, Inc. v. Communications Workers of
America, 475 U.S. 643, 649 (1986), where the Court adopted the rule that issues of
arbitrability are to be decided by the arbitrator in the first instance if the agreement
to arbitrate “clearly and unmistakably” so provides. Accord First Options of Chicago,
Inc. v. Kaplan, 514 U.S. 938, 944-45 (1995). In this case, the Arbitration Agreement
clearly and unmistakably left the issues addressed by the district court to the
arbitrators in the first instance.

       For these reasons, the district court erred in denying the motion to compel
arbitration. Its Order of January 23, 2002 is reversed. The mandate shall issue
forthwith.
                       ______________________________

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