Great Western Mtg v. Peacock ( 1997 )

Opinions of the United
1997 Decisions States Court of Appeals
for the Third Circuit
4-3-1997
Great Western Mtg v. Peacock
Precedential or Non-Precedential:
Docket 96-5273
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
----------
No. 96-5273
----------
GREAT WESTERN MORTGAGE
CORPORATION
v.
MICHELE PEACOCK
Appellant
----------
On Appeal from the United States District Court
for the District of New Jersey
(D.C. Civil No. 96-628)
----------
Argued Monday, December 16, 1996
BEFORE: STAPLETON, ROTH
and GARTH Circuit Judges
----------
(Opinion filed April 3, 1997)
----------
Neil M. Mullin, Esq. (Argued)
Christopher P. Lenzo, Esq.
Smith Mullin, P.C.
200 Executive Drive, Suite 155
West Orange, New Jersey 07052
Attorneys for Appellant
1
Roger J. Hawke, Esq. (Argued)
Elizabeth B. Lynch, Esq.
Brown & Wood, LLP
One World Trade Center
New York, New York 10048
Attorneys for Appellee
----------
OPINION OF THE COURT
----------
GARTH, Circuit Judge:
This appeal presents the issue of whether a district
court, pursuant to the Federal Arbitration Act (FAA),1 should
compel arbitration of a sexual harassment claim based on New
Jersey's Law against Discrimination.
On August 8, 1994, the plaintiff, Michele Peacock, a
resident of New Jersey, applied for work as a mortgage consultant
at defendant Great Western Mortgage Corporation, which was
incorporated in Delaware. At the time of her application, but
before she had been employed, she signed a Certification
agreeing:
to submit any dispute related to my employment, or the
termination of my employment, to final and binding
arbitration (thus waiving any right to pursue any other
administrative and/or legal proceeding), and, as a
condition of my employment, I agree to sign Great
Western's Arbitration Agreement upon commencement of my
employment, and to abide by the Arbitration Agreement
and Great Western's Binding Arbitration Policy and
Procedures.2
1. 9 U.S.C. § 1 et seq.
2. App. at 22a (emphasis in original).
2
On September 1, 1994, Great Western employed Peacock
and she began work. Thereafter, on September 26, 1994, Peacock
signed a more detailed form entitled "Great Western Financial
Corporation and Affiliates Binding Arbitration Agreement"
(Arbitration Agreement). The Agreement required arbitration of
all employee discrimination claims, including statutory claims
and claims based on sex. It provided for binding arbitration in
all employment-related disputes, including:
all civil claims, excluding claims under the Workers'
Compensation Act, but including, and not limited to,
claims of employment discrimination on the basis of
race, sex, age, religion, color, national origin,
disability and veteran status (including claims under
Title VII of the Civil Rights Act of 1964, the Age
Discrimination in Employment Act, the Americans with
Disabilities Act and any other local, state or federal
law concerning employment or employment
discrimination), claims based on public policy,
statutory claims and claims against individuals or
other entities.3
The Agreement further provided that arbitration had to be
initiated within one year after an event giving rise to a
dispute, and that an employee involved in an arbitration could be
represented by an attorney, at her own expense. Finally, the
Agreement provided that the arbitrator could not award punitive
or exemplary damages.
According to Peacock, sometime after she commenced
employment she became the object of sexual harassment. She
alleges that her supervisor at Great Western, William Belott,
3. Id. at 32a.
3
made unwelcome advances toward her and threatened reprisal in the
event that she discussed his behavior with others.4 In addition,
she claims that the Branch Manager, Alice Morris, knew of
Belott's advances but failed to take any action against him, and
that Morris herself made inappropriate comments and suggestions.5
Peacock retained counsel to represent her in pressing a
claim for sexual harassment.6 In May 1995 her attorney made
Great Western aware of Peacock's complaints, and in August 1995
Great Western responded that after conducting an investigation,
it "was unable to confirm" her allegations. Great Western
advised Peacock that if she was not satisfied with the results of
Great Western's investigation, she could "file a claim in
arbitration, pursuant to the Binding Arbitration Agreement . . .
dated 9/26/94." On August 23, 1995, Peacock's counsel filed for
arbitration on Peacock's behalf.
Pursuant to the Arbitration Agreement, Great Western
submitted the matter to JAMS/ENDISPUTE (JAMS), and on October 9,
1995, JAMS confirmed that it had received the request to
arbitrate.7 In the interim, however, Peacock retained another
4. See Complaint and Jury Demand in Michele Peacock v. Great
Western Mortgage Corporation et al., Superior Court of New Jersey
Law Division: Essex County, No. L-13441-95, App. at 54a-56a.
5. Id. at 56a-57a. Morris is alleged to have told Peacock, "If
you aren't getting any deals from your realtors, walk in with
your skirt over your head; I bet you get business then," and to
have ordered Peacock to kiss an appraiser. Id.
6. Great Western asserts that Peacock retained the law firm
Hannoch Weisman in January of 1995.
7. App. at 140a.
4
attorney, whose fees, apparently, were lower than the fees
charged by Hannoch Weisman. On October 25, 1995, her new counsel
informed Great Western that "we hereby withdraw all settlement
offers and that we do not consent to arbitration of this matter."
On November 8, 1995, pursuant to the New Jersey Law
against Discrimination (NJLAD), N.J.S.A. 10:5-1 et seq., Peacock
filed a complaint against Great Western and supervisors Belott
and Morris. In the complaint, which was filed in the Superior
Court of New Jersey, Peacock sought money damages as well as
declaratory and injunctive relief. In its answer, filed on
January 30, 1996, Great Western responded, inter alia, that the
dispute came within the purview of a binding arbitration
agreement and that Peacock had waived any right she might have
had to a trial.
On February 1, 1996, Great Western filed a petition
under the FAA in the District of New Jersey to compel arbitration
and to stay the state proceedings. On April 9, 1996, the
district court issued an Order compelling arbitration and
granting the stay.8
Peacock appeals from that order, contending 1) that the
FAA does not apply to employment contracts; 2) that she did not
waive her rights under NJLAD; 3) that because Great Western's
Arbitration Agreement would deprive Peacock of a two-year statute
of limitations, a right to discovery, and punitive damages, it is
void as a matter of public policy; 4) that Great Western waived
8. Great Western Mortgage Corp. v. Peacock, No. 96-0268, Order of
April 9, 1996 (D.N.J. 1996).
5
any right to arbitration that it might have had; and 5) that the
district court erred in denying her motion for a jury trial under
9 U.S.C. § 4.
Great Western filed the petition to compel arbitration
pursuant to 9 U.S.C. § 4, which provides:
A party aggrieved by the alleged failure, neglect, or refusal of
another to arbitrate under a written agreement for
arbitration may petition any United States district
court which, save for such agreement, would have
jurisdiction under Title 28, in a civil action or in
admiralty of the subject matter of a suit arising out
of the controversy between the parties, for an order
directing that such arbitration proceed in the manner
provided for in such agreement.
The district court had diversity jurisdiction over this
case pursuant to 28 U.S.C. § 1332, and we have jurisdiction of
this appeal pursuant to 28 U.S.C. § 1291.9 The district court's
decision is subject to plenary review.10 We affirm.
I.
Peacock argues first that the district court erred in
compelling arbitration of her claim because the FAA does not
apply to employment contracts. She maintains that she falls
within the scope of the exceptions to mandatory arbitration
provided in the FAA.
Section 1 of the FAA provides as follows:
9. Trap Rock Industries, Inc. v. Local 825, International Union
of Operating Engineers, AFL-CIO, 982 F.2d 884, 887 (3d Cir.
1992).
10. PaineWebber Inc. v. Faragalli, 61 F.3d 1063, 1065 (3d Cir.
1995).
6
"Maritime transactions", as herein defined, means charter
parties, bills of lading of water carriers, agreements
relating to wharfage, supplies furnished vessels or
repairs to vessels, collisions, or any other matters in
foreign commerce which, if the subject of controversy,
would be embraced within admiralty jurisdiction;
"commerce", as herein defined, means commerce among the
several States or with foreign nations, or in any
Territory of the United States or in the District of
Columbia, or between any such Territory and another, or
between any such Territory and any State or foreign
nation, or between the District of Columbia and any
State or Territory or foreign nation, but nothing
herein contained shall apply to contracts of employment
of seamen, railroad employees, or any other class of
workers engaged in foreign or interstate commerce."11
(emphasis added).
Peacock contends that this court has construed the FAA to exclude
mandatory arbitration of employment contracts.
We cannot agree. In Tenney Engineering, Inc. v. United
Electrical Radio & Machine Workers of America,12 we held, after
an analysis of the relevant legislation, that the exceptions
specified in 9 U.S.C. § 1 refer only to workers actually engaged
in interstate commerce.13 Tenney involved an employer and
11. 9 U.S.C § 1.
12. 207 F.2d 450 (3d Cir. 1953)(en banc).
13. Id. at 452.
7
employees engaged in the manufacture of goods for sale in
interstate commerce. The company's employees, who were
represented by a labor union, were all engaged in the manufacture
of these goods and in incidental plant maintenance. The
collective bargaining agreement between the company and the union
contained an arbitration clause. The company, claiming that a
strike by its employees violated the collective bargaining
agreement, brought suit in the district court for the District of
New Jersey under Section 301 of the Labor Management Relations
Act. The union moved for a stay of the suit, pending arbitration
under Title 9.
The district court denied the stay and refused to
compel arbitration. In vacating the district court's judgment,
Judge Maris, writing for this court, held that the employees were
not included within the class of those excepted from the
operation of the FAA, and hence were required to arbitrate their
disputes:
In the case before us the plaintiff's employees are engaged in
the production of goods for subsequent sale in
interstate commerce. Thus while their activities will
undoubtedly affect interstate commerce they are not
acting directly in the channels of commerce itself.
They are, therefore, not a "class of workers engaged in
. . . interstate commerce" within the meaning of
Section 1 of title 9."14
Peacock, in her initial brief, makes no reference to
our Tenney decision. Rather, Peacock argues that our later case
of Pritzker v. Merrill Lynch, Pierce, Fenner & Smith, Inc.15
14. Id. at 453.
15. 7 F.3d 1110 (3d Cir. 1993).
8
holds squarely that "the FAA by its own terms does not apply to
employment contracts." Pritzker, however, was an appeal which
did not involve employment contracts. Rather, it held that the
asset management contracts in that case could be subjected to
arbitration.16 Hence, even if Pritzker sought to overrule
Tenney--which it could not17--the holding of Pritzker has no
reference to employment contracts, and hence has no bearing on
the issue here.
We are satisfied that Tenney is still the controlling
law in this Circuit as well as others. See, e.g., Dancu v.
Coopers & Lybrand,18 citing and following Tenney,19 as well as
authorities in the First, Second, Fifth, Sixth, and Seventh
16. Id. at 1120.
17. In this Circuit a published opinion can be overruled only by
the court sitting en banc, and not by a subsequent panel
decision. Internal Operating Procedure 9.1. See also O.Hommel
Company v. Ferro Corporation, 659 F.2d 340, 354 (3d Cir.
1981)("Yet a panel of this court cannot overrule a prior panel
precedent."), cert. denied, 455 U.S. 1017 (1982).
18. 778 F. Supp. 832 (E.D. Pa. 1991), aff'd, 972 F.2d 1330 (3d
Cir. 1992).
19. Id. at 834.
9
Circuits.20 In addition, any number of district courts have
enforced arbitration agreements in employment contracts.21
As a consequence, in this Circuit, in particular, as well as in
the other Circuits which follow Tenney, the only class of workers
included within the exception to the FAA's mandatory arbitration
provision are those employed directly in the channels of commerce
itself. Peacock does not fall within this classification.
Accordingly, the district court did not err in compelling
arbitration by holding that the mandatory arbitration provision
of the FAA applied to Peacock's employment agreement.
II.
Peacock also argues that the Arbitration Agreement does
not bind her, because she claims to have been coerced into
signing it. She claims that she was unaware of the rights she
was waiving, and that her waiver was involuntary. First, because
at the time she applied to work at Great Western she was not
20. See, e.g., Rojas v. TK Communications , Inc., 87 F.3d 745,
747-48 (5th Cir. 1996); Asplundh Tree Expert Co. v. Bates, 71
F.3d 592, 597-99 (6th Cir. 1995); Bacashihua v. United States
Postal Service, 859 F.2d 402, 405 (6th Cir. 1988); Miller Brewing
Co. v. Brewery Workers' Local Union No. 9, AFL-CIO, 739 F.2d
1159, 1162 (7th Cir. 1984), cert. denied, 469 U.S. 1160 (1985);
Erving v. Virginia Squires Basketball Club, 468 F.2d 1064, 1069
(2d Cir. 1972); and Dickstein v. duPont, 443 F.2d 783, 785 (1st
Cir. 1971).
21. See, e.g., Powers v. Fox Television Stations, Inc., 923 F.
Supp. 21, 23-24 (S.D.N.Y. 1996)(enforcing arbitration of claims
of age discrimination brought under New York State Human Rights
Law); Crawford v. West Jersey Health Sys., 847 F. Supp. 1232,
1242-43 (D.N.J. 1994)(enforcing arbitration of Title VII and
NJLAD claims); Cherry v. Wertheim Schroder and Co., 868 F. Supp.
830, 834-35 (D.S.C. 1994)(enforcing arbitration of Title VII and
state law sexual harassment claims).
10
informed of the provisions of the Arbitration Agreement, although
she signed the Certification agreeing to abide by arbitration.
Second, she argues that neither the Arbitration Agreement itself,
nor the employee handbook which details the agreement,22 informed
her of the New Jersey statutory rights she was being asked to
waive. In her brief Peacock suggests that if she had been
advised specifically of her rights under NJLAD, she would have
sought legal advice.23
Peacock argues further that her waiver of statutory
rights was coerced because she would not have been hired if she
had not agreed to sign Great Western's Arbitration Agreement when
she applied for a position with the company. She also charges
that she would have been fired if she had refused to sign the
Arbitration Agreement after beginning employment. We agree with
the district court, however, that Peacock has neither alleged nor
come forward with evidence to prove any facts that would
constitute "grounds . . . at law or in equity for the revocation
of any contract." 9 U.S.C. § 2.
A.
In calling on the courts to resolve these matters,
Peacock misunderstands the narrow scope of the inquiry involved
in the arbitration process. Under the FAA the district court
must be satisfied that the parties entered into a valid
22. Great Western claims to have provided Peacock with a copy of
the employee handbook, but Peacock denies having received it.
23. Appellant's Brief at 21-22.
11
arbitration agreement. In conducting this inquiry the district
court decides only whether there was an agreement to arbitrate,
and if so, whether the agreement is valid. 9 U.S.C. § 2. In so
deciding, the district court is not to consider the merits of the
claims giving rise to the controversy, but is only to determine,
as we have stated, whether there is a valid agreement to
arbitrate. Once such an agreement is found, the merits of the
controversy are left for disposition to the arbitrator.24
Moreover, there is a strong presumption in favor of arbitration,
and doubts "concerning the scope of arbitrable issues should be
resolved in favor of arbitration."25
B.
The district court here held that Peacock and Great
Western had agreed to arbitrate, and that Peacock's claims fall
within the scope of the Arbitration Agreement. The record
discloses that Peacock effectively agreed to arbitration on three
occasions: first, as a condition of her employment by Great
Western, she agreed to sign the Arbitration Agreement upon
beginning employment. Second, she then signed the Arbitration
Agreement itself, after she was employed. Finally, after about
24. See Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S.
395 (1967).
25. Moses H. Cone Memorial Hospital v. Mercury Construction
Corp., 460 U.S. 1, 24-25 (1983); see also Dean Witter Reynolds
Inc. v. Byrd, 470 U.S. 213, 218 (1985)("By its terms, the Act
leaves no place for the exercise of discretion by a district
court, but instead mandates that district courts shall direct the
parties to proceed to arbitration on issues as to which an
arbitration agreement has been signed.").
12
one year of employment, on August 23, 1995, Peacock's attorney
initiated arbitration by invoking the Arbitration Agreement, when
he filed for arbitration on her behalf.
The record reveals that Peacock was a college graduate,
having received a Bachelor of Science degree in Business
Administration after four and one-half years of college. She
does not contend that she failed to read the document containing
the Arbitration Agreement, or that she had not read the
arbitration provisions. Indeed, Peacock had no reservations
about signing any agreements which specified necessary conditions
of employment. As her Certification in lieu of Affidavit
discloses, Peacock decided to arbitrate her dispute with Great
Western because "I could not afford the fee that my first law
firm, Hannoch Weisman, would have charged me to challenge the
arbitration agreement."26 Hence, Peacock agreed to arbitration
not because of coercion on the part of Great Western, as she
claims, but because of the fees that she would have been charged
had she resorted to other legal proceedings. Moreover, during
this period of time she was represented by counsel.
Peacock adduced no evidence and made no argument that
the terms of the Arbitration Agreement were kept from her.
Although her brief on appeal argues that Peacock had remained
generally ignorant of the details of the Arbitration Agreement--
and suggests that Great Western deliberately kept her in the dark
until her "job hung in the balance"27--it is clear that she made
26. Supplemental Certification of Michele Peacock, App. at 187a.
27. Appellant's Brief at 23.
13
no effort to find out the terms of the Arbitration Agreement to
which she had agreed as a condition of her employment. Indeed,
Peacock's attorney agreed that Peacock would have signed anything
in order to be hired.28
At oral argument before the district court her attorney
also conceded that she could have asked to see a copy of the
Arbitration Agreement before she started working, and there was,
and is, no issue presented that she had not read the employment
papers which she had signed.29
C.
The true thrust of Peacock's argument is that signing
the Certification and the Arbitration Agreement was a condition
of Great Western's employment, which she accepted only because
she was the weaker of the two parties to the employment
contract.30 Yet, as the Supreme Court has made clear in Gilmer
28. App. at 166a.
29. App. at 165a. Further, the Certification in the employment
application begins by instructing applicants to read the
Certification carefully before signing, and to ask for assistance
with any questions respecting its terms. The Certification goes
on to state clearly that by agreeing to binding arbitration an
applicant was "waiving any right to pursue any other
administrative and/or legal proceeding." Id. at 22a.
30. We note that the only condition of employment challenged by
Peacock is the binding arbitration requirement. She nowhere
claims that the other conditions of employment--which required
Peacock, among other things, to be fingerprinted, to pass a
physical examination, to take a drug test, to agree to credit
checks, to be bonded, and to allow Great Western to contact her
references in the course of a background investigation--were
either coerced or unenforceable.
14
v. Interstate/Johnson Lane Corp.,31 more than a disparity in
bargaining power is needed in order to show that an arbitration
agreement was not entered into willingly. See also Pritzker v.
Merrill Lynch, Pierce, Fenner & Smith, Inc., 7 F.3d 1110, 1118
(3d Cir. 1993) (rejecting argument that arbitration clause was
adhesive merely because there was a disparity in bargaining
power).
In Gilmer, Gilmer had been required by his employer to
register as a securities representative with the New York Stock
Exchange (NYSE). His registration application required Gilmer to
arbitrate controversies with respect to employment or termination
of employment. When Gilmer's employment was terminated at age 62
he brought suit in district court, claiming a violation of the
Age Discrimination in Employment Act of 1967. In response, his
employer moved to compel arbitration, relying upon Gilmer's
registration application and the FAA. Although the district
court denied Gilmer's motion, the court of appeals reversed that
ruling, and the Supreme Court, in turn, affirmed the court of
appeals. The Court held that statutory claims such as Gilmer's
may be the subject of an arbitration agreement and enforceable
under the FAA, and that "[m]ere inequality in bargaining power
. . . is not a sufficient reason to hold that arbitration
agreements are never enforceable in the employment context."32
31. 500 U.S. 20, 33 (1991).
32. 500 U.S. at 33.
15
The Court noted that Gilmer, who was an experienced
businessman, had not been coerced or defrauded into agreeing to
arbitrate. Similarly, the record in this case reveals no
indication that Peacock, who was a Business Administration
graduate with four and one-half years of college education, was
coerced or defrauded when she agreed to arbitrate any controversy
that might arise out of her employment with Great Western.33 She
does not allege that Great Western misled her or concealed
anything from her, and as we have recounted earlier, Peacock had
effectively agreed to arbitration on three separate occasions.
See IIB, supra.
The district court did not err in ruling that Peacock
had willingly agreed to arbitrate under Great Western's
Arbitration Agreement.
III.
Nor is there merit to Peacock's claims that New
Jersey's public policy, as expressed in NJLAD,34 is offended by
requiring her to arbitrate her sexual harassment claim. Peacock
33. The kind of "fraud or overwhelming economic power that would
provide grounds 'for the revocation of any contract,'" as the
Supreme Court stated the matter in Mitsubishi Motors Corp. v.
Soler Chrysler-Plymouth Inc., 473 U.S. 614, 627 (1985)(quoting 9
U.S.C. § 2), is not present in the instant case. See also
Coleman v. Prudential Bache Securities, Inc., 802 F.2d 1350, 1352
(11th Cir. 1986)("absent a showing of fraud or mental
incompetence," a party to an arbitration agreement will be held
bound to its terms).
34. New Jersey's LAD provides that practices of discrimination
entailing race, creed, color, national origin, ancestry, age,
sex, or affectional or sexual orientation, among others, are
proscribed and actionable. N.J.S.A. 10:5-1 et seq.
16
argues that New Jersey public policy is expressed clearly in
NJLAD, and that because attorney's fees, a two-year statute of
limitations, discovery, and punitive damages are all available
under NJLAD, any agreement like the Arbitration Agreement which
prospectively deprives an employee of these rights runs counter
to that public policy. She also contends that, apart from NJLAD,
New Jersey's standards for establishing waiver of a jury trial
are not met by the Arbitration Agreement. Peacock, accordingly,
concludes that her agreement to arbitrate is unenforceable. We
disagree with Peacock that the waiver embodied in the Arbitration
Agreement of certain rights afforded by New Jersey law renders
the Agreement unenforceable under the FAA.
First, it is evident that the FAA is meant to have a
preemptive effect, albeit a narrow one. In enacting the FAA,
Congress declared "a national policy favoring arbitration" and
"withdrew the power of the states to require a judicial forum for
the resolution of claims which the contracting parties agreed to
resolve by arbitration."35 Thus, a court considering a motion
made under Section 4 of the FAA, see n.25, supra, may be called
upon to decide whether the FAA preempts some state law
unfavorable to arbitration.
It is also clear that the FAA will preempt such laws.
The Supreme Court, in Mastrobuono v. Shearson Lehman Hutton,
Inc., 115 S.Ct. 1212 (1995), Perry v. Thomas, 482 U.S. 483(1987), and Southland Corp. v. Keating, 465 U.S. 1 (1984), has
35.Southland Corp. v. Keating, 465 U.S. 1, 10 (1984).
17
held that arbitration agreements within the scope of the FAA may
be enforced even if they conflict with state law policies that
would preclude arbitration.
However, while Congress's intention in enacting the FAA
was to provide federal court enforcement of a waiver of the right
to a judicial forum respecting a state statutory claim, the
preemptive effect of the FAA is restricted to the question of
arbitrability, and as previously discussed, whether the agreement
to arbitrate is valid. See IIA, supra. The "FAA preempts state
laws which 'require a judicial forum for the resolution of claims
which the contracting parties agreed to resolve by arbitration.'"
Volt Information Sciences, Inc. v. Board of Trustees of Leland
Stanford Junior Univ., 489 U.S. 468, 478 (1989)(quoting Southland
Corp. v. Keating, 465 U.S. 1, 10 (1984)). Thus, a court
compelling arbitration should decide only such issues as are
essential to defining the nature of the forum in which a dispute
will be decided.
The FAA does not otherwise preempt state law. "The FAA
contains no express preemptive provision, nor does it reflect a
congressional intent to occupy the entire field of arbitration."
Volt, 489 U.S. at 477. Once a dispute is determined to be
validly arbitrable, all other issues are to be decided at
arbitration. Since the purpose of the FAA is to ensure that
agreements to arbitrate are enforced, a court compelling
arbitration should preserve the remaining disputed issues for the
arbitrator to decide. Any argument that the provisions of the
Arbitration Agreement involve a waiver of substantive rights
18
afforded by the state statute may be presented in the arbitral
forum. It would be anomalous for a court to decide that a claim
should be referred to an arbitrator rather than a court, and
then, by deciding issues unrelated to the question of forum,
foreclose the arbitrator from deciding them.
Second, we note that in the absence of a state law
which discourages the enforcement of arbitration agreements, no
question of preemption, as such, is presented. The issue in such
cases is whether a waiver of state law rights is enforceable
under the FAA, rather than whether state law rights are
themselves preempted by the FAA. The instant controversy
presents such a case.
Peacock has failed to demonstrate any New Jersey policy
against arbitration of claims such as hers. Accordingly, we
reject her argument that the Arbitration Agreement is void as a
matter of public policy. Clearly, as we just described, the
waiver of a state law right to a judicial forum for the
resolution of state claims is enforceable under the FAA. Thus,
Peacock, by agreeing to arbitration on three occasions,
effectively waived her right to a jury trial.36 Likewise, the
36. In addition to insisting that she was entitled to a jury
trial as a matter of New Jersey's public policy, Peacock also
claims that she was entitled to a jury trial to determine whether
the parties agreed to arbitrate. Her request is grounded on
Section 4 of the FAA, which provides: "If the making of the
arbitration agreement or the failure, neglect, or refusal to
perform the same be in issue, the court shall proceed summarily
to the trial thereof." 9 U.S.C. § 4. She claims that the
district court ignored her request for a jury trial.
The record clearly reveals, however, that there could
be no material dispute of fact as to Peacock's having agreed to
arbitrate. The arguments raised by Peacock, contending that she
did not so agree, were properly discounted by the district court,
19
waiver of the state-created right that Peacock claims to
litigation-type discovery is also enforceable under the FAA.37
As to the waiver of state law rights unrelated to the
provision of a judicial forum, we hold only that the inclusion of
such waivers in a document described as an "Arbitration
Agreement" cannot be asserted to avoid the arbitration agreed to
therein. Rather, the party challenging the validity of such
waivers must present her challenge to the arbitrator, who will
determine the validity and enforceability of the waiver of
asserted state law rights. Thus, here we leave it to the
(..continued)
and are rejected by us. Because no material dispute of fact as
to her agreement was discerned by the district court--nor is any
discerned by us--the district court properly denied her request
for a jury trial.
In Doctor's Associates, Inc. v. Jabush, 89 F.3d 109,
114 (2d Cir. 1996), a party resisting a motion to compel
arbitration sought a jury trial. The court ruled that a party
does not become entitled to a jury trial under the FAA merely by
demanding one, but bears the burden of demonstrating that there
is a genuine issue as to whether there was an agreement to
arbitrate. The Second Circuit held that to "establish a genuine
issue entitling a party to a jury trial, 'an unequivocal denial
that the agreement [to arbitrate] had been made [is] needed, and
some evidence should [be] produced to substantiate the denial.'"
(citing and quoting Interbras Cayman Co. v. Orient Victory
Shipping Co., S.A., 663 F.2d 4, 7 (2d Cir. 1981). See also
Doctor's Associates, Inc. v. Stuart, 85 F.3d 975, 983-84 (2d Cir.
1996)(party resisting arbitration does not get a jury trial
merely by demanding one)(citations omitted); Dillard v. Merrill
Lynch, Pierce, Fenner & Smith Inc., 961 F.2d 1148, 1154 (5th Cir.
1992)(party resisting arbitration bears "the burden of showing
that he is entitled to a jury trial under § 4 of the Arbitration
Act," and must produce at least some evidence in support of
factual allegations)(quoting Bhatia v. Johnston, 818 F.2d 418,
422 (5th Cir. 1987)), cert. denied, 506 U.S. 1079 (1993).
37. Indeed, given that Great Western argues that informal
discovery will be available at arbitration, there appears to be
no point at issue here. Appellee's Brief at 42; App. at 66a-67a.
See Gilmer, 500 U.S. at 31 (less extensive, more informal
discovery available in arbitral forum does not render arbitral
forum inadequate to vindicate statutory rights).
20
arbitrator to determine whether Peacock has waived her right to
attorney's fees38 or to a two-year statute of limitations.39
We also do not rule on whether Peacock has waived her
right to punitive damages under NJLAD--a waiveable state right
not preempted by the FAA. The availability of punitive damages
is not relevant to the nature of the forum in which the complaint
will be heard. Thus, availability of punitive damages cannot
enter into a decision to compel arbitration. NJLAD provides that
a victim of unlawful discrimination may be awarded punitive
damages, but the issue of whether this right has been waived, see
Swarts v. Sherwin-Williams Co., 581 A.2d 1328, 1331 (N.J. Super.
Ct. App. Div. 1990), is separate and apart from the issue of
whether an employee has agreed to an arbitral forum, and hence,
is for the arbitrator to decide. See Mastrobuono, 115 S.Ct. 1212(1995).
38. Peacock asserts that NJLAD's provision for attorney's fees
makes the Arbitration Agreement inconsistent with New Jersey
public policy. Great Western has acknowledged in this
proceeding, however, that the Arbitration Agreement authorizes
the arbitrator to award counsel fees.
39. Peacock actually filed her claim within the one-year period
provided for in the Arbitration Agreement.
21
IV.
Finally, we are obliged to address one last argument
made by Peacock. Peacock argues that, for two reasons, Great
Western had waived its right to arbitrate. First she asserts
that Great Western breached the Arbitration Agreement by failing
to submit her claim to JAMS within ten days after receiving it
from her.40 In light of the fact that we are affirming the Order
of the district court compelling arbitration, the issue of
whether Great Western used its best efforts to commence
arbitration in a timely fashion is for the arbitrator to
determine.41
Her second claim is that Great Western, by failing to
seek another arbitrator after JAMS refused to arbitrate the
dispute,42 waived its right to seek arbitration.
40. Great Western's Arbitration Policy provides that Great
Western, within ten business days of receiving a demand for
arbitration, should "use its best efforts to commence arbitration
proceedings by submitting the dispute to the Judicial Arbitration
& Mediation Services ("J.A.M.S.") or, if applicable, a comparable
arbitration service." App. at 66a.
41. Peacock's initial request for arbitration was made in a
letter dated August 23, 1995. On September 7, 1995--ten business
days later--Great Western indicated to Peacock's prior counsel
that the matter had been forwarded to Great Western's Legal
Department for processing.
42. According to Peacock, Great Western's arbitration policy
failed to meet JAMS's standards of procedural fairness, and JAMS
refused to accept her case for arbitration. Peacock points to the
following statement of JAMS standards, in particular:
"These minimum standards for employer-wide arbitration
procedures are:
1. The rights and remedies that would otherwise be
available to an individual under applicable federal, state or
local law should remain available under the arbitration clause,
unless the individual employee would retain the right to pursue
the unavailable remedies in court. We are particularly concerned
that the clause maintains the right to try to win exemplary
22
This argument, which is tantamount to claiming that
Great Western waived its right to compel arbitration, is without
merit. Peacock adduces no evidence that would allow us to find
that Great Western had waived its right to compel arbitration.
Courts deciding whether a party has waived a right to compel
arbitration must make an initial determination as to whether the
conditions of waiver have been met, and waiver under the FAA is
not to be lightly inferred.43
Even if we were to accept Peacock's argument that Great
Western failed to request a second arbitrator after JAMS refused
to accept arbitration, Peacock did not establish waiver. Peacock
provides no record evidence either of the date on which JAMS
refused to arbitrate, or of the date on which Great Western
was informed of JAMS's refusal to arbitrate her claim.
Moreover, the record reveals that JAMS's refusal to
arbitrate came long after Peacock herself withdrew the matter
from arbitration,44 and that Great Western did attempt to secure
another arbitrator.45 Thus, while Peacock fails to indicate
(..continued)
damages (e.g., punitive damages, which the Civil Rights Act of
1991 allow [sic] as available damages in certain circumstances;
and, double damages for 'willful' conduct under the federal age
discrimination statutes), but only if such damages are available
under the relevant law." Appellant's Brief at 33-34.
43. PaineWebber Inc. v. Faragalli, 61 F.3d 1063, 1068 (3d Cir.
1995)(citations omitted).
44. Certification of Neil Mullin, App. at 90a.
45. Great Western's counsel, just two days after the district
court Order compelling arbitration of Peacock's claim, informed
Peacock's counsel that in light of JAMS's refusal to arbitrate,
and pursuant to Paragraph 3 of the Arbitration Agreement, the
parties were required to select a new arbitrator.
Letter, April 11, 1996, Record Ex. B.
23
either precisely when JAMS refused to arbitrate, or when that
knowledge was made known to Great Western, it was not until
February 1996 that Peacock's second attorney certified that JAMS
had made him aware of its policies just several weeks earlier.46
Peacock, of course, had by that time, long since withdrawn her
claim from arbitration by her counsel's letter of October 25,
1995.
In other words, the arbitration process stalled neither
because JAMS refused to arbitrate, nor because Great Western
waived arbitration, but because Peacock refused to continue the
arbitration process. Thus, no inference can be drawn that Great
Western had waived its right to compel arbitration.
Next, the record makes clear that Great Western's
response was always to insist that the only forum in which
Peacock's complaints could be heard was the arbitral forum. In
fact, in response to the letter of May 18, 1995, in which
Peacock's allegations of sexual harassment were first made known
to Great Western, Great Western advised Peacock that she could
bring her claim to an arbitrator.47 Once Peacock filed her claim
and then withdrew from arbitration, Great Western was consistent
in preserving its right to an arbitral forum. Thus Great
46. The Certification of Peacock's attorney, Neil Mullin, dated
February 26, 1996, states: "Several weeks ago, I was advised by a
Mr. Elston of JAMS/Endispute that the Great Western 'arbitration
policy' and the alleged 'arbitration agreement' between Michele
Peacock and Great Western failed to meet JAMS/Endispute's minimum
standards. Mr. Elston advised me that consequently,
JAMS/Endispute would not entertain arbitration in this matter."
App. at 90a.
47. App. at 44a.
24
Western, as its brief on appeal demonstrates, informed JAMS of
its intention to preserve its right to arbitration:
. . . Peacock initiated the arbitration on August 25, 1995 . . .
. On October 25, 1995, her new counsel purported to
rescind all three arbitration agreements . . . . On
November 8, 1995, Peacock filed suit against Great
Western in New Jersey Superior Court and resisted all
efforts to compel arbitration . . . .
Upon learning it had been sued, Great Western sent
a letter to JAMS/Endispute, dated December 6, 1995,
advising it that Peacock was now refusing to arbitrate.
Great Western stated in its letter that:
The defendants will respond to this lawsuit and assert the
enforceability of the Arbitration Agreement.
However, until such time as the enforceability of
the Arbitration Agreement is resolved,
JAMS/ENDISPUTE need not take any action on this
file.48
Indeed, Great Western attempted to preserve its right
to an arbitral forum by seeking to compel arbitration in state
court49 as well as in federal court. Moreover, after becoming
aware of JAMS's refusal to arbitrate Peacock's claim, Great
Western notified Peacock's counsel of the need to refer the
dispute to another arbitration service.50
Given the burden that Peacock bears in demonstrating
waiver, and her lack of evidence in support of her assertions, we
are satisfied that Great Western clearly preserved the right to
48. Appellee's Brief at 43-44 (citations omitted); Supplemental
Appendix, annexed thereto, at 7.
49. App. at 100a.
50. See n.45 supra.
25
refer Peacock's claim to arbitration. As we have stated, waiver
is not to be lightly inferred.51 Indeed, a party waives the
right to compel arbitration only in the following circumstances:
when the parties have engaged in a lengthy course of litigation,
when extensive discovery has occurred, and when prejudice to the
party resisting arbitration can be shown.52
In this case, none of these factors have been shown.
Great Western did not initiate any litigation, and in response to
Peacock's suit in state court, Great Western responded vigorously
by moving for a stay of proceedings and for an order compelling
arbitration in both state and federal courts. There has been no
discovery initiated by Great Western, no litigation on the
merits, and no prejudice which has inured to Peacock. In short,
the record discloses that Great Western has not waived its right
to compel arbitration of Peacock's claims.
51. PaineWebber Inc. v. Faragalli, 61 F.3d 1063, 1068 (3d Cir.
1995)(citations omitted).
52. Id. at 1068-69; Gavlik Const. Co. v. H.F. Campbell Co., 526
F.2d 777, 783-84 (3d Cir. 1975)(rejecting argument that party
compelling arbitration waived right by filing third-party
complaint, because prejudice was not shown); Hoxworth v. Blinder,
Robinson & Co. Inc., 980 F.2d 912, 925-27 (3d Cir. 1992)(party
waived right to compel arbitration because by contesting the
merits in litigation, party opposing arbitration had been
prejudiced).
26
V.
The district court's Order of April 9, 1996, which,
among other provisions, compels arbitration, will be affirmed.
27