Court Opinion

ID: 774077
Source: CourtListenerOpinion
Date Created: 2012-04-18 11:44:57+00
Date Added: 2024-06-11T17:56:15.748587
License: Public Domain

257 F.3d 821 (D.C.Cir. 2001)
Ronald L. Brown, Appellant/Cross-Appelleev.Wheat First Securities, Inc., et al., Appellees/Cross-Appellants
No. 00-7171 and 00-7173
United States Court of Appeals  FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued April 13, 2001Decided July 31, 2001

[Copyrighted Material Omitted]
Appeals from the United States District Court  for the District of Columbia (No. 99cv01776)
Stephen M. Kohn argued the cause for appellant/crossappellee.  With him on the briefs were Michael D. Kohn and  David K. Colapinto.
Paul Gonson argued the cause for appellees/crossappellants.  With him on the briefs were Stephen G. Topetzes  and Rebecca L. Kline.  Teri L. Nelson entered an appearance.
Before:  Williams, Ginsburg and Rogers, Circuit Judges.
Opinion for the Court filed by Circuit Judge Williams.
Williams, Circuit Judge:

1
In Cole v. Burns International  Security Services, 105 F.3d 1465 (D.C. Cir. 1997), we held  that an employee who agrees to arbitration of disputes as a  condition of employment and who makes a claim based on  federal statutory rights may not be charged certain fees and  expenses for arbitration of the claim, at least where that  condition of employment was demanded by an employer not  subject to regulatory oversight.  See LaPrade v. Kidder,  Peabody & Co., Inc., 246 F.3d 702, 704 (D.C. Cir. 2001).  This  case raises the issue whether Cole embraces or should be  extended to non-statutory state law claims that are grounded  in a "public policy rationale."  We hold that the logic of Cole  does not reach so far.

2
* * *

3
Appellant Ronald Brown was employed by the Washington,  D.C. office of Wheat First Securities, a member of the  National Association of Securities Dealers ("NASD"), from  November 1991 until his termination with three days' notice  in February 1997.  When Brown signed on with Wheat First,  he executed the NASD "Uniform Application for Securities  Industry Registration or Transfer," commonly known as  Form U-4, which includes a mandatory arbitration clause.

4
In February 1998 Brown filed a claim under his arbitration  agreement seeking $25,000,000 in damages for alleged wrongful termination, breach of implied contract, defamation, slander and tortious interference.  In support of his wrongful  termination claim, he argued that the District of Columbia  courts have created a "whistleblower" exception to its  employment-at-will rule, and that Wheat First had fired him  for alerting the Securities and Exchange Commission to what he perceived to be illegal activities occurring at Wheat First. He paid a $500 non-refundable filing fee and a $1,500 hearing  deposit.  He also signed a Uniform Submission Agreement,  agreeing to the arbitration of his claims under the NASD's  rules.  On February 11, 1999 during a pre-trial conference,  the parties jointly requested a postponement of the final  hearing, then scheduled for March 1999.  The panel imposed  an "adjournment fee" of $1,500 and assessed each party $750.

5
The final hearing was later rescheduled for September 13,  1999.  But in April 1999 Brown filed an objection to the fee  assessment, arguing that because he was pursuing "public  law" claims, Cole prohibited any assignment of arbitration  fees to him. The NASD rejected this theory.  On June 29  and 30, 1999, respectively, Brown filed a second objection  with the NASD and filed his claims in district court, for the  first time alleging a violation of the Civil Rights Act of 1871 in  addition to the claims previously brought to arbitration.

6
On September 7 the NASD denied Brown's second motion. "Not willing to participate" in the arbitral proceedings,  Brown sought on September 10 to cancel the agreement to  arbitrate contained in Form U-4 and on September 12 to  have the arbitrators dismiss the claim without prejudice.  On  September 13 his attorney appeared before the arbitration  panel to preserve objections, but didn't otherwise participate. On November 9, 1999 the arbitration panel dismissed his  claims with prejudice and assessed him a fee of $6,365, which  included costs that under Cole are considered arbitrators'  fees.  See Cole, 105 F.3d at 1484 n.15 (defining such fees).

7
Brown then filed a motion in the district court proceeding  to vacate the arbitration award;  Wheat First responded with  a motion to confirm the award.  The district court granted  the motion to confirm and denied Brown's motion to vacate,  concluding that Cole applies only to statutory claims.  Brown  v. Wheat First Securities, Inc., 101 F. Supp. 2d 1, 2-5 (D.D.C.  2000).  On the basis of a Wheat First motion filed prior to the  arbitrators' dismissal of Brown's claims, the district court also  ordered arbitration of the newly-raised Civil Rights Act  claims, but required that they be arbitrated on terms consistent with Cole.  Brown, 101 F. Supp. 2d at 7.  Brown appeals  the district court's confirmation of the arbitrators' dismissal  and the denial of his motion to vacate.  Id. at 5-7.  Wheat  First cross appeals the compelled arbitration, arguing that  once the arbitration award was confirmed, the Civil Rights  Act claims were precluded.

8
* * *

9
Brown's principal claim of error rests on the assertion that  Cole applies to his truncated arbitration with Wheat First,  either by its own terms or because its logic must extend to  state common law claims that are rooted in "public policy." We assume in Brown's favor that the Supreme Court's recent  decision in Green Tree Financial Corp. v. Randolph, 121 S. Ct. 513 (2000), finding that a party claiming that arbitration would be "prohibitively expensive" must at least show  "the likelihood of incurring such costs," id. at 522, leaves Cole  fully intact.  We also assume in his favor that his whistleblower claim would qualify as an exception to the  employment-at-will doctrine under the principles of District of  Columbia Law elucidated in Carl v. Children's Hospital, 702 A.2d 159 (D.C. 1997).  Nonetheless, both Brown's arguments  fail.

10
Cole involved claims of discrimination under Title VII of  the Civil Rights Act of 1964.  Acknowledging that the Supreme Court in Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991), had "made clear that, as a general rule,  statutory claims are fully subject to binding arbitration," Cole, 105 F.3d at 1478 (quoting Gilmer, 500 U.S. at 26), we also  noted that "Gilmer cannot be read as holding that an arbitration agreement is enforceable no matter what rights it waives  or what burdens it imposes," id. at 1482.  The arbitration  agreement will be valid "so long as the prospective litigant  effectively may vindicate [his or her] statutory cause of action  in the arbitral forum."  Id. at 1481 (quoting Gilmer, 500 U.S.  at 28 (quoting Mitsubishi Motors Corp. v. Soler ChryslerPlymouth, Inc., 473 U.S. 614, 637 (1985))) (alteration in  original).  As to fees, we found that "it would undermine  Congress's intent to prevent employees who are seeking to vindicate statutory rights from gaining access to a judicial  forum and then require them to pay for the services of an  arbitrator when they would never be required to pay for a  judge in court."  Cole, 105 F.3d at 1484.  Accordingly we  interpreted the arbitration agreement as requiring the employer to pay the arbitrator's fees.  See id. at 1485.

11
In arguing that Cole's holding extends to his non-statutory  claims, Brown relies exclusively on the fact that Cole on  occasion appears to use the phrases "public law" and "public  rights" interchangeably with "statutory law" and "statutory  rights."  He contends that "public" carries a broader meaning  than "statutory" and that this broader meaning should be  given to the holding of the case.  We think that Brown reads  too much into this potentially expansive language.

12
None of these terms has a sharply defined meaning.  At  oral argument, for example, Brown offered a definition of  "public right" that he attributed (without specific citation) to  Black's Law Dictionary:  "Enforcement of rights in cases  where the state is regarded as the subject of the right or the  object of the duty."  The 7th edition offers a narrower  concept:  "A right belonging to all citizens and usu. vested in  and exercised by a public office or political entity."  Black's  Law Dictionary 1324 (7th ed. 1999).  For public law, Black's  says:  "The body of law dealing with the relations between  private individuals and the government, and with the structure and operation of the government itself;  constitutional  law, criminal law, and administrative law taken together." Id. at 1244 (7th ed. 1999).  While totally different, both of  these published definitions have in common the feature that  they seem not to include the District of Columbia's whistleblowing doctrine.

13
Even more to the point, our opinion in Cole is limited at  vital points to statutory rights.  For instance, when discussing the protections that Gilmer suggests are necessary, the  opinion refers only to the non-waivability of the substantive  protections of statutory rights and of access to a neutral  forum in which to enforce them.  See Cole, 105 F.3d at 1482. It nowhere mentions the waivability of or access to a forum to enforce non-statutory "public law."  The court framed the  issue as:

14
[C]an an employer condition employment on acceptance of an arbitration agreement that requires the employee to submit his or her statutory claims to arbitration and then requires that employee to pay all or part of the arbitrator's fees?

15
Id. at 1483 (emphasis added).

16
Further, in Gilmer the Supreme Court determined that  compulsory arbitration pursuant to an employment agreement is not inconsistent with the Age Discrimination in  Employment Act, the federal statute in question there.  Gilmer, 500 U.S. at 26-33.  In Cole we defined our task as  resolving an "issue not raised by the agreement in Gilmer," 105 F.3d at 1483, namely the fees issue.  It would be quite a  contortion of Cole to find that it had addressed a far broader  subject than the case that it set out simply to refine.  See  also LaPrade, 246 F.3d at 708 (assuming that arbitration  assessment of fees for arbitration of non-statutory claims  would not be subject to Cole).

17
We also see no basis for extending Cole.  As we have  explained, our central rationale--respecting congressional intent--does not extend beyond the statutory context.  Moreover, by enacting the Federal Arbitration Act, Congress  "manifest[ed] a 'liberal federal policy favoring arbitration  agreements.' "  Gilmer, 500 U.S. at 25 (quoting Moses H.  Cone Memorial Hospital v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)).  The Act also pre-empted state restrictions on  the enforcement of arbitration agreements.  See Allied-Bruce  Terminix Cos., Inc. v. Dobson, 513 U.S. 265, 272 (1995); Southland Corp. v. Keating, 465 U.S. 1, 10-16 (1984).  Gilmer, as we've seen, framed the question as whether dispute  resolution under the FAA was consistent with the federal  right-creating statute in question.  See also, e.g., Green Tree, 121 S. Ct. at 521 ("[W]e first ask whether the parties agreed  to submit their claims to arbitration, and then ask whether  Congress has evinced an intention to preclude a waiver of  judicial remedies for the statutory rights at issue.") (internal citations omitted).  For a common law claim under District of  Columbia law, any such inconsistency would be resolved in  favor of the only federal law involved, the FAA.

18
Brown repeatedly urges that the D.C. Court of Appeals  explicitly grounded its whistleblower exception in a "public  policy" rationale.  If this criterion controls, it is hard to see  what falls outside it.  All claims not based on contract-including, for example, the defamation and tortious interference claims that Brown asserted but does not link to his fees  theory--implement values that society has in one way or  another thought deserving.  Even contract, although the  branch of law most dependent on and deferential to individual  choice, rests ultimately on social decisions to support fulfillment of promises either as a good in itself or as an instrumental good, facilitating people's investment in projects that  depend on others' adherence to their promises.  Further,  even if the exception identified by the D.C. court were  somehow special, it is inconsequential as a measure of Congress's interest in the stated policy.  While Congress has  enacted specific whistleblower protections, Brown never here  asserts that he falls within any of them.

19
Brown also nowhere asserts that D.C. law creates a Colelike requirement for its own common law "public policy"  causes of action.  Perhaps this omission is because state  restrictions on arbitration are pre-empted by the Federal  Arbitration Act.  See Allied-Bruce, 513 U.S. at 272.  Conceivably the rule Brown proposes could arise as part of the  District of Columbia's law and yet escape pre-emption by  being classified as a limitation on the arbitration procedures,  rather than on the enforcement of agreements.  See Southland, 465 U.S. at 11 n.6.  Because neither party raised this  issue, we need not address it.

20
Finally Brown asserts that because Congress in 1901  granted power to the D.C. courts to enforce the common law,  see Act of March 3, 1901, 31 Stat. 1189 (1899-1901), in the  District of Columbia "common law and statutory claims are  on the same footing."  Obviously the District of Columbia's  possession of congressionally granted authority to create common law does not turn all its doctrines into the equivalent  of federal statutes, anymore than the Constitution's preservation of state lawmaking authority turns all state laws into  federal constitutional law.

21
In short, the proposed extension of Cole would significantly  alter the terms of the Federal Arbitration Act, imposing a  serious procedural limit on a wide (but unpredictable) range  of arbitration claims, all without the slightest signal from  Congress.

22
* * *

23
Brown makes two secondary arguments that need not  detain us long.  He argues, first, that even if he loses on the  Cole claim the arbitration ruling should be vacated because  the arbitrators lost jurisdiction when--in the middle of the  arbitration that he had initiated--he went to court with a  challenge to the arbitrability of his claims based on Cole. This loses on a superfluity of grounds, the simplest of which  is that Brown's was a losing Cole claim.

24
Brown also asserts that the failure of one of the arbitrators  to timely disclose a tangential relationship to one of the  lawyers for Wheat First requires vacatur of the arbitration  award.  The NASD rules require arbitrators to disclose past  or present relationships with any of the parties, counsel, or  witnesses.  See NASD Code of Arbitration Procedure Rule  10312.  A party then has ten days after the announcement of  the arbitrators to make a peremptory strike against one of  the arbitrators.  See id. Rule 10311.  Several months after  the initial disclosures but still months before the hearing, one  of the arbitrators disclosed that she was the account executive  of a discretionary brokerage account for a partner of the law  firm representing Wheat First in this matter, and that more  than 10 years earlier her firm had acted as investment banker  for corporate issuers using that firm (or a predecessor law  firm) as securities counsel.

25
Brown claims that this late disclosure deprived him of his  right to exercise his peremptory strike.  But the cases cited  in support of this proposition all involved revelations made after the award had been made, and are therefore inapplicable here.  See, e.g., Commonwealth Coatings Corp. v. Continental Casualty Co., 393 U.S. 145 (1968).  Brown fails to  show that he requested an extension of the time available to  use his peremptory strike.  Nor does he show that he used  his peremptory against another arbitrator, which would at  least explain a belief (which he nowhere asserts) that he had  no peremptory left.  His only written communication on the  matter (Brown claims verbal objections that are in the record  only to the extent his letter and the NASD response make  reference to them) requested only removal for cause.  The  NASD rejected this request, and Brown fails to even allege  here that the connections disclosed would justify removal for  cause.

26
* * *

27
Wheat First argues on cross appeal that Brown's Civil  Rights Act claim--which first appeared in a district court  complaint filed after commencement of the arbitration--is  barred by claim preclusion.  Thus, it argues, the district court  should not have ordered arbitration on the claim, but rather  should have dismissed it.  We agree.

28
Brown's civil rights claim, alleging a conspiracy to prevent  him from reporting criminal wrongdoing, arises out of essentially the same set of events that were the subject of his  original arbitral claims.  It is clear that final adjudication of  those claims would bar the civil rights claim, see, e.g., Schattner v. Girard, Inc., 668 F.2d 1366, 1368-69 (D.C. Cir. 1981),  so long as Wheat First hasn't forfeited its claim preclusion  objection.

29
The record plainly shows that it did not.  Wheat First has  not yet filed its answer to Brown's district court complaint. "[I]f a party that fails to assert res judicata in a motion is sleeping on its rights, it is an inconsequential  catnap."  Stanton v. District of Columbia Court of Appeals,  127 F.3d 72, 77 (D.C. Cir. 1997).  Thus there was no forfeiture.

30
We will assume in Brown's favor that the issue was raised  for the first time on appeal.  In Stanton, we allowed a party  to raise res judicata for the first time on appeal where there  was no forfeiture and the claim could be successfully raised  below on remand.  See id. at 77 ("We can conceive of no  reason for such judicial volleyball.").  Concern for the efficient use of adjudicative resources seems even more compelling here, where in theory the defense would be shipped off to  arbitration, presumably to return to district court on similar  cross motions.

31
Brown asserts that he will be prejudiced if we find the  claim preclusion defense properly before us because it will  mean the dismissal of his last remaining claim.  But the only  prejudice that Brown will suffer is the prejudice that comes  from having a losing argument.

32
The order confirming the arbitration award is affirmed and  the order compelling arbitration of the statutory claim is  vacated and remanded with instructions to dismiss the complaint.

33
So ordered.