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Case Summary: Stanley Brown v. ITT Consumer Financial Corporation, No. 99-10506 (11th Cir. May 5, 2000)

Factual and Procedural Background

Stanley Brown, an African-American employee hired by ITT in 1990 and promoted to Assistant Vice-President in 1991, worked in consumer loan collections and supervised Bruce Billue and Terry Jenkins. In 1993 Brown, Billue and Jenkins filed EEOC complaints alleging racial discrimination. During a corporate reorganization converting to home equity loans, Billue and Jenkins were not retained; Brown was retained until August 1993, then terminated and offered severance if he signed a release, which he refused. In February 1994 Brown, Billue and Jenkins filed suit in district court alleging race discrimination and retaliation. ITT moved to compel arbitration under an Employee Agreement signed by the employees that contained a broad arbitration clause. The district court compelled arbitration. Arbitration (before JAMS/Endispute) resulted in awards for Billue and Jenkins and denied relief to Brown. Brown moved to vacate the arbitrator's award; the district court denied the motion. Brown appealed. The Court of Appeals affirmed.

Legal Issues Presented

  1. Whether the district court properly compelled arbitration under the Employee Agreement's arbitration clause (including whether the clause was vague, overly broad, void due to the unavailability of the chosen forum, or waived by ITT).
  2. Whether the district court erred in denying Brown's motion to vacate the arbitrator's award (whether the award was arbitrary and capricious or evidenced manifest disregard of the law, and whether procedural deficiencies in JAMS' handling affected Brown's rights).

Arguments of the Parties

Appellant's (Brown's) Arguments

  • The arbitration clause is void for vagueness because it does not specifically state that statutory claims are included.
  • The arbitration clause is overly broad and exceeds the scope of 9 U.S.C. § 2 by covering all claims between the parties, including statutory claims.
  • The arbitration agreement is void because the specified forum (the National Arbitration Forum) no longer existed.
  • ITT waived its right to arbitrate by issuing employment-related documents after the Agreement and by failing to raise arbitration with the EEOC.
  • In a footnote, Brown argued that requiring him to pay part of arbitration fees rendered the clause unenforceable (not raised below, not addressed by the court of appeals).
  • Brown argued the arbitrator's award was arbitrary and capricious and in manifest disregard of the law, and raised procedural objections to JAMS' handling of optional appeal rules.

Appellee's (ITT's) Arguments

  • ITT moved to compel arbitration pursuant to the Employee Agreement signed by the employees and defended enforcement of the Agreement's arbitration clause.
  • ITT maintained the Agreement and arbitration clause remained effective and were not superseded by other company materials; ITT promptly demanded arbitration after suit was filed.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Sunkist Soft Drinks, Inc. v. Sunkist Growers, Inc., 10 F.3d 753, 756 Standard of review: order compelling arbitration reviewed de novo. Used to state the standard for reviewing the district court's order compelling arbitration.
Scott v. Prudential Securities, Inc., 141 F.3d 1007, 1014 Standard for reviewing denial of motion to vacate: accept district court's findings unless clearly erroneous; review questions of law de novo; burden on party to assert grounds to vacate. Applied as the standard for reviewing the denial of Brown's motion to vacate and allocation of burdens.
ATT Tech., Inc. v. Communications Workers of America, 475 U.S. 643, 649, 106 S.Ct. 1415, 1418, 89 L.Ed.2d 648 Arbitration is a creature of contract; cannot compel arbitration absent agreement. Supported the principle that the court must find an agreement to arbitrate before compelling arbitration.
Bender v. A.G. Edwards Sons, Inc., 971 F.2d 698, 700 Title VII and other statutory claims can be subject to mandatory arbitration. Used to reject Brown's vagueness argument and to conclude statutory claims were covered by an inclusive arbitration clause.
Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 111 S.Ct. 1647, 114 L.Ed.2d 26 Supports arbitrability of statutory claims (reasoning relied upon in Bender). Cited as foundational authority supporting arbitrability of statutory claims.
Brisentine v. Stone Webster Engineering Corp., 117 F.3d 519, 524-25 Where arbitration agreement made by individual employee (not collective bargaining rep), employee can be compelled to arbitrate statutory claims. Applied to confirm Brown, as an individual signatory, could be compelled to arbitrate statutory claims.
Paladino v. Avnet Computer Tech., Inc., 134 F.3d 1054, 1059 An arbitration agreement need not specifically list every federal or state statute it covers; FAA creates a presumption in favor of arbitrability. Used to conclude the Agreement's inclusive language covered statutory claims and to apply the presumption favoring arbitrability.
First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 945, 115 S.Ct. 1920, 1924-25, 131 L.Ed.2d 985 Cited for the FAA presumption in favor of arbitrability (part of Paladino's reasoning). Supported the presumption that parties must clearly express intent to exclude categories of claims from arbitration.
Sims v. Trus Joist MacMillan, 22 F.3d 1059, 1060 n.2 Issues not raised before the district court will not be addressed on appeal. Explained why Brown's fee-based challenge was not addressed on appeal.
Luckie v. Smith Barney, Harris Upham Co., 999 F.2d 509 Parties may be compelled to arbitrate before one of specifically listed fora; supports enforcing chosen fora. Used to discuss consequences when a chosen forum is unavailable and to introduce §5 substitution principles.
In re Salomon Inc. Shareholders' Derivative Litig., 68 F.3d 554, 558-59 Accord with Luckie regarding enforcement of forum choices. Supported the court's position that substitution mechanisms apply when a chosen forum is unavailable.
Astra Footwear Indus. v. Harwyn Int'l, Inc., 442 F. Supp. 907, 910; aff'd, 578 F.2d 1366 Section 5 of FAA permits naming a substitute arbitrator when the chosen forum fails. Cited to show that NAF's unavailability does not void an arbitration clause because §5 provides a remedy.
Zechman v. Merrill Lynch, Pierce, Fenner Smith, Inc., 742 F. Supp. 1359, 1364 Failure of a chosen forum precludes arbitration only if the forum choice is integral to the agreement rather than ancillary. Applied to conclude there was no evidence NAF was an integral part of the agreement, so arbitration was not precluded.
Nat'l Iranian Oil Co. v. Ashland Oil, 817 F.2d 326 Cited in support of the proposition that choice-of-forum issues may not invalidate arbitration absent integrality. Referenced via Zechman to support the analysis regarding forum failure.
Morewitz v. West England Ship Owners Mut. Protection and Indem. Assoc., 62 F.3d 1356, 1366 Waiver arises from substantial participation in litigation inconsistent with intent to arbitrate and resulting prejudice; no obligation to make pre-suit arbitration demand. Applied to reject Brown's waiver argument because ITT promptly demanded arbitration and Brown showed no prejudice from delay.
Raiford v. Merrill Lynch, Pierce, Fenner Smith, 903 F.2d 1410, 1413 An arbitration award cannot be vacated as arbitrary and capricious unless no ground for the decision can be inferred from the facts. Used to find Brown failed to meet the burden to vacate because the arbitrator's factual findings had evidentiary support.
Ainsworth v. Skurnick, 960 F.2d 939, 941 Example of an award found arbitrary and capricious where no explanation existed for a decision denying damages. Contrasted with present case to show the arbitrator provided a factual basis, so Raiford's standard was not met.
Montes v. Shearson Lehman Bros., Inc., 128 F.3d 1456, 1460-61 Arbitration awards will not be reversed for erroneous legal interpretations; manifest disregard requires conscious disregard of the law; manifest disregard found where panel was asked to ignore the law and gave no reasons. Applied to reject Brown's manifest-disregard claim because no evidence the arbitrator consciously ignored applicable law and the circumstances differed from Montes.

Court's Reasoning and Analysis

The court first stated standards of review: the order compelling arbitration is reviewed de novo; the denial of the motion to vacate is reviewed accepting district court's factual findings unless clearly erroneous and legal questions de novo. The court addressed Brown's four principal challenges to arbitrability:

  1. Vagueness: The arbitration clause's inclusive language ("any dispute... or claim") is brief, unequivocal and all-encompassing. The court held that inclusive general language is sufficient to cover statutory claims, relying on circuit precedent that statutory claims (including Title VII) can be arbitrable and that agreements need not enumerate every statute.
  2. Breadth: Brown's contention that the clause exceeded § 2 of the FAA by covering all claims (including statutory) was rejected for the same reasons the vagueness challenge failed.
  3. Failure of Chosen Forum: The court held the unavailability of the National Arbitration Forum did not void the arbitration clause because 9 U.S.C. § 5 permits appointment of a substitute arbitrator when a named forum lapses; only when the chosen forum is integral would its failure preclude arbitration, and there was no evidence of such integrality here.
  4. Waiver: The court applied the Morewitz standard, finding no waiver because ITT's actions did not demonstrate substantial participation inconsistent with intent to arbitrate nor did Brown show prejudice; the Agreement's express modification requirement (a signed writing) meant post-Agreement statements and benefit summaries did not supersede the arbitration clause.

On the motion to vacate, the court explained Brown bore the burden of demonstrating grounds for vacatur. The arbitrator made factual findings (e.g., the decision not to continue Brown's employment was a unilateral act by a particular manager) supported by the record, so the award was not arbitrary or capricious under Raiford. As to manifest disregard, the court required conscious and deliberate ignorance of the law and found no such evidence here; an arguable legal error by the arbitrator alone did not establish manifest disregard. Finally, procedural complaints about JAMS' failure to solicit consent to an optional appeal were addressed: Brown had no unilateral right to a JAMS appeal, JAMS Rule 6 was permissive, and Brown suffered no demonstrated prejudice.

Holding and Implications

AFFIRM

Holding: The Court of Appeals affirmed the district court's order compelling arbitration of Brown's statutory claims under the Employee Agreement and affirmed the denial of Brown's motion to vacate the arbitrator's award.

Implications: The direct effect is that Brown's claims were properly submitted to arbitration and the arbitrator's adverse decision as to Brown stands. The opinion applies established principles regarding arbitrability, forum failure (§5), waiver, and narrow standards for vacating arbitration awards; it does not announce a novel departure from those principles.

STANLEY BROWN, Plaintiff-Appellant, v. ITT CONSUMER FINANCIAL CORPORATION, Defendant-Appellee.

BIRCH, Circuit Judge:

Plaintiff-Appellant Stanley Brown appeals the district court's rulings compelling arbitration and denying Brown's motion to vacate the arbitrator's decision in favor of Defendant-Appellee ITT Consumer Financial Corporation (ITT). Because we find that the district court properly compelled arbitration, and find no error in the district court's denial of the motion to vacate the award, we AFFIRM.

I. BACKGROUND

Stanley Brown, an African-American, was hired by ITT in 1990. Brown worked in consumer loan collections for ITT, and was promoted to Assistant Vice-President in 1991. In that role, he trained and supervised Bruce A. Billue and Terry Jenkins, supervisors in ITT's Atlanta Recovery Center. Billue and Jenkins are also African-American. In 1993, Brown, Billue and Jenkins all filed complaints with the Equal Employment Opportunity Commission (EEOC) alleging racially discriminatory treatment by their superiors at ITT.

At the same time that their discrimination claims were being pursued with the EEOC, ITT was undergoing a reorganization and conversion from the consumer loan business to the home equity loan business. Billue and Jenkins were not offered employment in the Home Equity Center after the Atlanta Recovery Center closed in May 1993. Brown was retained until August 1993, during which time he managed the Home Equity Center and trained his replacement. Brown was then terminated from his position and offered severance if he signed a release of claims against ITT. He refused to sign.

In February 1994, Brown, Billue and Jenkins filed a complaint in the district court alleging race discrimination and retaliation. ITT moved to compel arbitration in accordance with the terms of an Employee Agreement (the Agreement) signed by each of the men. The Agreement contains an arbitration clause which provides that ITT and the employee

agree that any dispute between them or claim by either against the other or any agent or affiliate of the other shall be resolved by binding arbitration under the Code of Procedure of the National Arbitration Forum. . . .

R1-4, Exh.B.

The Agreement also provided that it could not be modified "except in a writing designated as an `EMPLOYMENT AGREEMENT MODIFICATION', signed by an ITT CFC officer." Id. In the district court, Brown argued, among other things, that a Benefits Summary given to employees at the time of their termination and interim bulletins issued by ITT executives replaced the Agreement, thereby invalidating the arbitration clause. He also argued that the arbitration clause should fail because the National Arbitration Forum (NAF) no longer existed. The district court rejected Brown's arguments and compelled arbitration.

The arbitration was conducted by Judge John W. Sognier of JAMS/Endispute. At the conclusion of the arbitration, Billue and Jenkins were awarded damages. Brown was denied relief. His motion to vacate the arbitrator's judgment was denied by the district court. This appeal ensued.

II. DISCUSSION

We review the district court's order compelling arbitration de novo. Sunkist Soft Drinks, Inc. v. Sunkist Growers, Inc., 10 F.3d 753, 756 (11th Cir. 1993). In reviewing the denial of the motion to vacate the arbitration award, we accept the district court's findings of fact unless clearly erroneous, and we review questions of law de novo. Scott v. Prudential Securities, Inc., 141 F.3d 1007, 1014 (11th Cir. 1998), cert. denied, 525 U.S. 1068, 119 S.Ct. 798, 142 L.Ed.2d 660 (1999).

A. Arbitrability of the Dispute

Brown challenges the order compelling arbitration on four grounds: (1) that the arbitration clause fails because it is vague; (2) that the arbitration clause is so broad as to exceed § 2 of the Federal Arbitration Act (FAA); (3) that any agreement to arbitrate is void because the arbitrator and procedure specified no longer exist; and (4) that ITT waived its right to arbitration by its acts during the reorganization of the company and its failure to raise the arbitrability of the claims with the EEOC. We address each of these claims in turn.

Brown also argues in a footnote that requiring Brown to pay a portion of the arbitration fees renders the arbitration clause unenforceable. Brief of Appellant, at 24 n. 6. As this issue was not raised before the district court, we do not address it here. See Sims v. Trus Joist MacMillan, 22 F.3d 1059, 1060 n. 2 (11th Cir. 1994).

1. Vagueness

Brown argues on appeal that the arbitration clause is void because it fails to specifically state that statutory claims were included in the agreement to arbitrate. "It is well established that arbitration is a creature of contract" and neither party can be compelled to arbitrate when he has not agreed to do so. Scott, 141 F.3d at 1011 (citing ATT Tech., Inc. v. Communications Workers of America, 475 U.S. 643, 649, 106 S.Ct. 1415, 1418, 89 L.Ed.2d 648 (1986)). A party cannot avoid arbitration, however, because the arbitration clause uses general, inclusive language, rather than listing every possible specific claim.

The language of the clause at issue is brief, unequivocal and all-encompassing. It states that "any dispute between them or claim by either against the other" is subject to arbitration. By using this inclusive language, the parties agreed to arbitrate any and all claims against each other, with no exceptions. An arbitration agreement is not vague solely because it includes the universe of the parties' potential claims against each other.

Brown also argues that as a matter of law statutory claims cannot be arbitrated unless the arbitration clause so specifically states. This circuit has held that statutory claims, including Title VII claims, can be subject to mandatory arbitration. See Bender v. A.G. Edwards Sons, Inc., 971 F.2d 698, 700 (11th Cir. 1992) (finding that Title VII claims were arbitrable under the reasoning in Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991)). Where, as here, the agreement to arbitrate was made by the individual employee, and not by his collective bargaining representative, the employee can be compelled to arbitrate his statutory claim. Brisentine v. Stone Webster Engineering Corp., 117 F.3d 519, 524-25 (11th Cir. 1997). In addition, we have noted that "an arbitration agreement [need not] specifically list every federal or state statute it purports to cover." Paladino v. Avnet Computer Tech., Inc., 134 F.3d 1054, 1059 (11th Cir. 1998).

The plaintiff in Bender agreed to arbitrate "any dispute, claim or controversy that may arise between me and my firm. . . ." 971 F.2d at 700 n. 1. No specific reference to statutory claims was made at all in the arbitration clause. Id. Bender's Title VII claim was held to be included within the scope of the arbitration clause. Id. at 700. This finding is consistent with the well-established principle that "[t]he FAA creates a presumption in favor of arbitrability; so, parties must clearly express their intent to exclude categories of claims from their arbitration agreement." Paladino, 134 F.3d at 1057 (citing First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 945, 115 S.Ct. 1920, 1924-25, 131 L.Ed.2d 985 (1995)). We think that the language of the instant arbitration clause similarly includes statutory claims. Brown's vagueness challenge fails.

2. Breadth

Brown argues that the arbitration clause is too broad, because it exceeds the scope of § 2 of the FAA by addressing not just those claims arising out of the employment contract, but all claims between the parties, including statutory violations related to the employment relationship. This is an additional attempt to argue that Title VII and other statutory claims are not arbitrable. For the reasons articulated above, this argument is without merit.

3. Failure of Chosen Forum

Brown also argues that the arbitration clause is void because the specified forum, the National Arbitration Forum (NAF), had dissolved. This argument is without merit. Section 5 of the FAA provides a mechanism for appointment of an arbitrator where "for any reason there shall be a lapse in the naming of an arbitrator. . . ." 9 U.S.C. § 5 (West 2000). The unavailability of the NAF does not destroy the arbitration clause.

In Luckie v. Smith Barney, Harris Upham Co., 999 F.2d 509 (11th Cir. 1993) (per curiam), we held that parties to securities transactions could be compelled to arbitrate in front of one of the specifically listed fora. Id. at 514. Accord In re Salomon Inc. Shareholders' Derivative Litig., 68 F.3d 554, 558-59 (2d Cir. 1995). Where the chosen forum is unavailable, however, or has failed for some reason, § 5 applies and a substitute arbitrator may be named. Astra Footwear Indus. v. Harwyn Int'l, Inc., 442 F. Supp. 907, 910 (S.D.N.Y.), aff'd, 578 F.2d 1366 (2d Cir. 1978). Only if the choice of forum is an integral part of the agreement to arbitrate, rather than an "ancillary logistical concern" will the failure of the chosen forum preclude arbitration. See Zechman v. Merrill Lynch, Pierce, Fenner Smith, Inc., 742 F. Supp. 1359, 1364 (N.D.Ill. 1990) (citing Nat'l Iranian Oil Co. v. Ashland Oil, 817 F.2d 326 (5th Cir. 1987)). Here there is no evidence that the choice of the NAF as the arbitration forum was an integral part of the agreement to arbitrate. Brown's argument that the arbitration agreement is void because the NAF was unavailable must fail.

4. Waiver

Brown also argues that ITT waived its right to arbitrate by issuing employment related documents to employees subsequent to the Agreement, and by failing to raise the arbitration issue with the EEOC. This assertion is also without merit. Waiver results from a party's "substant[ial] participat[ion] in litigation to a point inconsistent with an intent to arbitrate" which results in prejudice to the other party. Morewitz v. West England Ship Owners Mut. Protection and Indem. Assoc., 62 F.3d 1356, 1366 (11th Cir. 1995).

Brown refers to statements made by ITT executives and a "Benefits Summary" issued by the company as indicating an intent by the company to abandon the Agreement and the arbitration clause contained therein. The Agreement, however, expressly provides that it "cannot be modified except in a writing designated as an `EMPLOYMENT AGREEMENT MODIFICATION. . . .'" R1-4, Exh. B. The oral and written statements referred to by Brown do not suffice to supersede the arbitration clause of the Agreement.

ITT was also under no obligation to make a pre-suit demand for arbitration. Morewitz, 62 F.3d at 1366. The demand for arbitration was made promptly after the lawsuit was filed. Brown did not incur the delay or expense associated with litigation that might otherwise demonstrate prejudice. Id. As there was no delay or action by ITT inconsistent with an intent to arbitrate, no waiver occurred. The district court properly granted the motion to compel arbitration.

B. Propriety of the Arbitrator's Decision

Brown also appeals the district court's refusal to vacate the arbitrator's award, arguing that the award was arbitrary and capricious and evidenced a manifest disregard for the law. Brown, however, bears the burden of asserting sufficient grounds to vacate the award. Scott, 141 F.3d at 1014. Furthermore, an award cannot be vacated as arbitrary and capricious unless no ground for the decision can be inferred from the facts. Raiford v. Merrill Lynch, Pierce, Fenner Smith, 903 F.2d 1410, 1413 (11th Cir. 1990).

Brown has not met his burden here. The arbitrator made a finding of fact that the decision not to offer Brown continuing employment was a unilateral one by Latina Cunningham. There is evidence to support this finding in the record. Compare Ainsworth v. Skurnick, 960 F.2d 939, 941 (11th Cir. 1992) (finding an award arbitrary and capricious where "[t]here is simply no explanation in the award itself why damages were not awarded.") Since we cannot say that the arbitrator's decision was not grounded in fact, the assertion that the award was arbitrary and capricious must fail.

Brown has also failed to show that the arbitrator acted with manifest disregard for the law. Arbitration awards will not be reversed due to an erroneous interpretation of law by the arbitrator. Montes v. Shearson Lehman Bros., Inc., 128 F.3d 1456, 1460 (11th Cir. 1997). "To manifestly disregard the law, one must be conscious of the law and deliberately ignore it." Id. at 1461. In Montes, we found manifest disregard and remanded for a new arbitration proceeding because the arbitration panel was specifically asked by a party to disregard the law, and their award provided no reasons for their decision that would indicate that the request had not been followed. There are no such circumstances here. Brown argues that the arbitrator applied the wrong legal test in assessing his retaliation claim, but does not assert that this alleged error was intentional or that the arbitrator made a conscious decision not to follow the appropriate legal standard. Even if the arbitrator applied the wrong standard, which we need not decide, no manifest disregard for the law has been shown, and Brown's argument fails. The district court properly denied the motion to vacate the award.

As a final matter, Brown argues that the failure of JAMS to inform him of his right to appeal or to grant an appeal of the arbitrator's award was procedurally deficient. There is no evidence that Brown did not have a copy of the JAMS rules indicating that appeal was possible. Second, the language of JAMS Rule 6 is permissive. The case administrator "may ask" the parties if they agree to an optional appeal process. Brief of Appellant, at 40. Finally, both parties must agree in order for the appeal process to be binding. While it is possible that ITT would have agreed to bind itself to an appeal process if asked at the preliminary hearing, nothing prevented Brown from raising the issue himself once the case administrator failed to do so. We find no prejudice from the case administrator's failure to request the parties' consent to the appeal process as Brown had no unilateral right to appeal under the JAMS rules.

III. CONCLUSION

The district court properly compelled arbitration of Brown's statutory claims pursuant to the terms of the Agreement. The arbitrator's award was not arbitrary and capricious and did not evidence a manifest disregard for the law. Accordingly, we

AFFIRM.

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BROWN v. ITT CONSUMER FINANCIAL CORP
(May 5, 2000)