Blair v. Scott Spec Gases ( 2002 )

Opinions of the United
2002 Decisions States Court of Appeals
for the Third Circuit
3-13-2002
Blair v. Scott Spec Gases
Precedential or Non-Precedential:
Docket 1-1096
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PRECEDENTIAL
Filed March 13, 2002
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 01-1096
DIANE BLAIR,
Appellant
v.
SCOTT SPECIALTY GASES;
THOMAS BARFORD; JERRY STUMP
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civil No. 00-cv-03865)
District Judge: Hon. Clarence C. Newcomer
Argued November 1, 2001
Before: SLOVITER, NYGAARD and CUDAHY,*
Circuit Judges
(Filed: March 13, 2002)
_________________________________________________________________
* Hon. Richard D. Cudahy, United States Senior Circuit Judge for the
United States Court of Appeals for the Seventh Circuit, sitting by
designation.
Martha Sperling
Silver & Sperling
Doylestown, PA 18901
Ralph E. Lamar, IV (Argued)
Doylestown, PA 18901
Attorneys for Appellant
Thomas J. Barton (Argued)
James G. Fannon
Drinker, Biddle & Reath
Philadelphia, PA l9l03
Attorneys for Appellees
Elisabeth S. Shuster
Pennsylvania Human Relations
Commission
Harrisburg, PA l7101
Attorney for Amicus-Appellant
Pennsylvania Human Relations
Commission
Robert J. Gregory (Argued)
Senior Attorney
Gwendolyn Young Reams
Associate General Counsel
Philip B. Sklover
Associate General Counsel
Lorraine C. Davis
Assistant General Counsel
Equal Employment Opportunity
Commission
Washington, D.C. 20507
Attorneys for Amicus-Appellant
Equal Employment Opportunity
Commission
2
OPINION OF THE COURT
SLOVITER, Circuit Judge.
Diane Blair brought suit in the United States District
Court for the Eastern District of Pennsylvania against Scott
Specialty Gases ("Scott"), her former employer, alleging
sexual harassment and discrimination in violation of Title
VII of the Civil Rights Act of 1964, 42 U.S.C. S 2000e et seq.
(2001), the Pennsylvania Human Relations Act (PHRA), 43
Pa. Cons. Stat. S 951 et seq. (2001), the Equal Rights
provision of the Pennsylvania Constitution, Pa. Const. art.
I, S 28, and other state claims. The District Court order on
appeal dismissed Blair's complaint without prejudice
pursuant to the Federal Arbitration Act (FAA), 9 U.S.C. S 4
(2001), and directed the parties to arbitrate the claims
pursuant to the terms of their arbitration agreement. Blair
argues on appeal that the arbitration agreement is invalid
and unenforceable, and that the agreement violates public
policy by requiring the employee to pay one-half of the
arbitrator's fees.
I.
FACTS AND PROCEDURAL BACKGROUND
Blair was employed by Scott, a producer and supplier of
specialty gas products, from January 1995 through March
1999. In April 1997, she became the Plant Manager at the
Plumstead Medical Products Division. Blair alleges that
during the course of her employment she was subjected to
discrimination and harassment based on her gender.
Blair alleges that during her initial interview with one of
the Vice-Presidents of Scott, Tom Barford, he told her he
would "rather employ a male plant manager, with a couple
of kids who lived nearby and wouldn't leave him high and
dry in a few months to marry a lawyer or doctor." App. at
66. Blair further alleges that Barford told her that he could
not attend the sensitivity training on sexual discrimination
and harassment "because he was a ``sexist pig' and that if
3
people knew all the things he had done, he would be fired."
App. at 67-68. In fact, Blair alleges that after she was
hired, Barford demeaned her suggestions during meetings,
as well as those of other female staff members, and
routinely made sexist references to her, such as"putting
tits on a bull" and "putting people in bed together." App. at
67. He allegedly commented on her appearance and choice
of clothing, and suggested, for example, that she wear
skirts more often to show her legs.
Blair resigned from her position on March 24, 1999,
claiming that she could no longer tolerate the harassing
work environment. Blair alleges that sometime after she
resigned and reported the sexual harassment to Scott
management, Barford and another Scott supervisor began
to take retaliatory action by spreading rumors around the
plant that Blair had engaged in an affair with a female co-
worker.
On September 20, 1999, Blair filed an administrative
"Charge of Discrimination" with the Equal Employment
Opportunity Commission (EEOC) that was cross-filed with
the Pennsylvania Human Relations Commission (PHRC).
Both the EEOC and PHRC eventually dismissed her
complaint.
On July 31, 2000, Blair filed a complaint in the United
States District Court for the Eastern District of
Pennsylvania alleging sexual harassment, sex
discrimination, and constructive discharge under Title VII,
the PHRA, the Pennsylvania Constitution, and state
common law claims of intentional infliction of emotional
distress, defamation, negligent employment, breach of
contract, and breach of the covenant of good faith and fair
dealing. Scott filed a motion to dismiss, or in the alternative
for summary judgment, on the ground that Blair had
agreed to submit all claims relating to her employment to
binding arbitration. A mandatory arbitration provision had
been placed by Scott in an updated employee handbook
that was distributed to all employees in February 1998.
Blair, who was given the assignment of making sure that all
of the Medical Products' employees signed an
"Acknowledgment of Receipt and Reading" of the revised
handbook, signed such an acknowledgment on February
4
27, 1998. That acknowledgment stated that she had read
the arbitration provision and agreed to submit any disputes
arising out of her employment to a final and binding
arbitration.
In response to Scott's motion to dismiss based on the
arbitration agreement, Blair argued that the arbitration
agreement was not a validly formed contract and thus was
not binding and, in the alternative, that the agreement
should not be enforced on public policy grounds because it
required her to pay one-half of the arbitrator's fees.
The District Court granted summary judgment to Scott,
and initially dismissed Blair's complaint with prejudice. On
Blair's motion for reconsideration, the District Court
modified the order to dismiss the case without prejudice
pursuant to 9 U.S.C. S 4, and ordered the parties to
arbitrate their claims as directed by the arbitration
agreement. Blair filed a timely notice of appeal. On
November 30, 2000, she also filed for arbitration before the
American Arbitration Association (AAA) as directed by the
arbitration agreement but requested that the AAA hold her
case in abeyance pending the outcome of these
proceedings.
II.
JURISDICTION
Scott argues, as a threshold matter, that this court does
not have jurisdiction on the ground that the District Court's
modified order was not final or appealable because it
dismissed Blair's claims without prejudice and ordered the
parties to arbitrate. Scott argues that the court's order
effectively acted as a stay of the proceedings pending the
outcome of the arbitration. Under the FAA, a stay is
considered an interlocutory order that may not be
appealed. 9 U.S.C. S 16(b)(1).
Scott relies on Smith v. The Equitable, 209 F.3d 268 (3d
Cir. 2000), where we held, on facts similar to the present
case, that the dismissal of an employment discrimination
case without prejudice with an order to compel arbitration
5
was not a final appealable order. Smith, an African
American, brought suit in federal court alleging that the
defendant company's decision not to hire him was based on
his race in violation of Title VII and the PHRA. Because he
had signed a pre-employment contract that included an
agreement to arbitrate any employment-related disputes,
the district court dismissed Smith's action without
prejudice and compelled arbitration. Id. at 270.
On appeal, we noted that under section 16(b) of the FAA,
federal courts are expressly barred from taking an appeal of
a district court's interlocutory order compelling arbitration.
Id. at 271. Section 16 provides:
(a) An appeal may be taken from--
(1) an order--
(A) refusing a stay of any action under section 3 of
this title,
(B) denying a petition under section 4 of this title
to order arbitration to proceed,
(C) denying an application under section 206 of
this title to compel arbitration,
(D) confirming or denying confirmation of an award
or partial award, or
(E) modifying, correcting, or vacating an award;
(2) an interlocutory order granting, continuing, or
modifying an injunction against an arbitration that is
subject to this title; or
(3) a final decision with respect to an arbitration that
is subject to this title.
(b) Except as otherwise provided in section 1292(b) of
title 28, an appeal may not be taken from an
interlocutory order--
(1) granting a stay of any action under section 3 of
this title;
(2) directing arbitration to proceed under section 4 of
this title;
6
(3) compelling arbitration under section 206 of this
title; or
(4) refusing to enjoin an arbitration that is subject to
this title.
9 U.S.C. S 16.
We dismissed Smith's appeal on the ground that it was
an interlocutory order directing arbitration to proceed
under section 4, and therefore not appealable under 9
U.S.C. S 16(b). We stated that a district court's order in an
independent proceeding, one brought by the plaintiff in
order to compel arbitration, is considered final and
immediately appealable because it addresses the exact relief
sought. Smith, 209 F.3d at 271. We contrasted such an
order from an order in an "embedded" proceeding, one
where the defendant, rather than the plaintiff, moves to
compel enforcement of the arbitration agreement as a
defense to claims brought before the court. We noted that
the latter traditionally had been considered interlocutory
and not immediately appealable. Id.In Smith, we recognized the apparent anomaly of treating
these types of proceedings differently but pointed to the
rationale we had previously applied " ``that an order
directing arbitration is interlocutory and, therefore, not
appealable if it is made in a lawsuit, such as a suit for
damages, in which in the normal course of judicial
procedure there will be a later final order or judgment from
which an appeal can be taken by a person aggrieved by the
prior order to arbitrate.' " Id. at 271 (quoting Zosky v.
Boyer, 856 F.2d 554, 558 (3d Cir. 1988) (quoting Rogers v.
Schering Corp., 262 F.2d 180, 182 (3d Cir. 1959))). We
stated that the district court's decision to dismiss the
proceedings rather than stay the proceedings under 9
U.S.C. S 3, was appropriate "for reasons of judicial
efficiency" when " ``all the claims involved in an action are
arbitrable.' " Smith, 209 F.3d at 272 (quoting Seus v. John
Nuveen & Co., Inc., 146 F.3d 175, 179 (3d Cir. 1998)). We
also noted that the dismissal "was the functional equivalent
of a stay" since the plaintiff could test the validity of the
arbitration agreement before the arbitrator and then, if
necessary, challenge the arbitration award in the district
court. Id.7
The continued viability of the holding and rationale in
Smith and earlier cases must be examined in light of the
Supreme Court's recent decision in Green Tree Financial
Corp.-Alabama v. Randolph, 531 U.S. 79 (2000), which Blair
contends is inconsistent with Smith and establishes our
jurisdiction over this appeal. In Green Tree, the plaintiff
sued the companies that had financed her purchase of her
mobile home alleging that they violated the Truth in
Lending Act, 15 U.S.C. S 1601 et seq. and the Equal Credit
Opportunity Act, 15 U.S.C. SS 1691-1691f. Green Tree, 531
U.S. at 82-83. The district court granted the defendants'
motion to compel arbitration and dismissed the plaintiff's
claims with prejudice. The court of appeals rejected the
defendants' challenge to its jurisdiction on the ground that
the order was not appealable. Randolph v. Green Tree Fin.
Corp.-Alabama, 178 F.3d 1149, 1156-57 (11th Cir. 1999).
The Supreme Court pointed to the well-established
definition of a "final decision" as a decision that "ends the
litigation on the merits and leaves nothing more for the
court to do but execute the judgment." Green Tree, 531
U.S. at 86 (quotations omitted). The Court then held that
the district court's order directing the parties to arbitrate
and dismissing the plaintiff's claims with prejudice"plainly
disposed of the entire case on the merits and left no part of
it pending before the court." Id. The ability of a party to an
arbitration to bring a later proceeding in a district court to
enter judgment on an arbitration award or vacate or modify
that award "does not vitiate the finality of the District
Court's resolution of the claims in the instant proceeding."
Id. On this basis, the Court held that the district court's
order was final and appealable.
Of particular significance to the issue before us, the
Supreme Court rejected the distinction between "embedded"
and "independent" proceedings that we and many other
courts of appeals had adopted. The Court noted that the
embedded/independent distinction was not firmly
established at the time of the enactment of FAAS 16(a)(3)
with respect to cases "where the District Court both ordered
arbitration and dismissed the remaining claims." Id. at 88.
By contrast, the Court continued, the definition of"final
decision" was firmly established at the time. Id. at 88. On
8
this basis, the Court concluded that "where . . . the District
Court has ordered the parties to proceed to arbitration, and
dismissed all the claims before it, that decision is``final'
within the meaning of S 16(a)(3), and therefore appealable."
Id. at 89.
The question presented in this case is whether the
jurisdictional holding in Green Tree, where the action had
been dismissed with prejudice, applies equally to a case
such as this one that was dismissed without prejudice.
Scott argues that a dismissal without prejudice is the
"functional equivalent of a stay," as the Smith court noted,
and as such does not dispose of the claims on the merits.
Scott directs our attention to a footnote in Green Tree
which stated that "[h]ad the District Court entered a stay
instead of a dismissal in this case, that order would not be
appealable." Green Tree, 531 U.S. at 87 (citing 9 U.S.C.
S 16(b)(1)).
The Supreme Court did not comment on whether a
dismissal without prejudice should be treated as a stay or
as a final order, nor did it address whether the district
court should have entered a stay instead of a dismissal.
The Court's opinion speaks generally of "dismissals" and
does not indicate whether it hinges on the fact that the
dismissal was with prejudice. Nor does the statute provide
guidance, as it does not differentiate between appeals of
district court orders dismissing cases with or without
prejudice.
Blair argues that there is no valid distinction between a
dismissal with prejudice and one without prejudice with
regard to these proceedings. In both instances, there is
nothing left for her to do but submit to arbitration, and
nothing left for the District Court to do other than execute,
modify, or vacate the ultimate arbitration award. No
justiciable claims remain for the District Court to address
outside of the arbitrable claims. Blair also argues that the
case relied upon in Smith to find that a dismissal without
prejudice is functionally equivalent to a stay,
Communication Workers v. AT&T Co., 932 F.2d 199 (3d Cir.
1991), is inapplicable. In Communication Workers , the
district court dismissed one set of claims with leave to
amend due to pleading irregularities and dismissed another
9
set of claims because they were arbitrable. Id. at 204. We
stated in that case that the district court's order dismissing
the action because it was arbitrable was "functionally
analogous to the grant of a stay in an ongoing proceeding
pending the outcome of arbitration. . . . [t]hus, our result
advances the laudable policy favoring arbitration over
litigation." Id. at 207 (citing Zosky , 856 F.2d at 561-62).
Because there were additional claims in that case not
subject to arbitration that the district court gave leave to
amend, that decision is distinguishable from the instant
case where the District Court dismissed all of Blair's claims
in favor of arbitration.
After the decision in Green Tree, at least three courts of
appeals have had the opportunity to address whether a
dismissal without prejudice is a final, appealable order, or
should be treated as a non-appealable stay. In Interactive
Flight Technologies, Inc. v. Swissair Swiss Air Transport Co.,
249 F.3d 1177 (9th Cir. 2001), the district court had
dismissed the complaint without prejudice and directed the
parties to arbitrate in accordance with their agreement, and
the court of appeals had previously dismissed the appeal
for lack of jurisdiction. The Supreme Court remanded and
directed the Ninth Circuit to reconsider the issue in light of
Green Tree. On remand, the Ninth Circuit held that the
district court's decision to dismiss the action without
prejudice and order the parties to arbitrate was a final,
appealable decision in accordance with Green Tree. The
court noted that Green Tree overruled the Ninth Circuit's
earlier decisions that had based their holdings on the
distinction between embedded and independent
proceedings and it instead used the traditional definition of
a final order. Id. at 1179. The court then proceeded to
address precisely the issue presented here and rejected the
distinction between dismissals with or without prejudice.
[A]ppellees . . . suggest that the district court's
dismissal in this case was not final simply because it
was made without prejudice. We reject this argument
because the district court's order and judgment
sufficiently show that the court intended to close this
case without precluding the parties from bringing a
new action after completing arbitration. It is only in
10
this sense that the dismissal was "without prejudice,"
and that is not enough to show that the dismissal was
interlocutory rather than an appealable final decision.
Id. (citing Green Tree, 121 S.Ct at 520).
In a recent decision, the Court of Appeals for the Second
Circuit reached the same conclusion, holding that a
"dismissal without prejudice in favor of arbitration is an
appealable ``final decision' under 9 U.S.C. S 16(a)(3) and that
Green Tree has overruled our precedents that distinguish
between ``independent' and ``embedded' actions for purposes
of appealability." Salim Oleochemicals v. M/V Shropshire,
No. 01-7624, 2002 U.S. App. LEXIS 878, at *3 (2d Cir. Jan.
18, 2002). The court noted that Green Tree involved a
dismissal with prejudice, unlike the dismissal without
prejudice before it, but stated that "dismissals with and
without prejudice are equally appealable as final orders.
. . . There is thus no reason to think that a dismissal
without prejudice is any less a ``final decision' under Green
Tree than is a dismissal with prejudice." Id. at *8
The Eleventh Circuit held similarly. In Employers
Insurance of Wausau v. Bright Metal Specialties, Inc., 251
F.3d 1316 (11th Cir. 2001), the district court had dismissed
each of the underlying actions in a construction contract
case and granted the defendant's motion to compel
arbitration. The Eleventh Circuit characterized Green Tree
as holding that a "district court order compelling arbitration
and dismissing all other claims is ``final' within the meaning
of S 16(a)(3), and therefore appealable, even when that order
occurs in an ``embedded' proceeding involving both a
request for arbitration and other claims for relief." Id. at
1321-22 (citing Green Tree, 121 S.Ct. at 520-21). The court
noted that the dismissal and direction to arbitrate left the
district court with nothing to do but execute the judgment.
The court observed that although the "district court did not
specify whether the dismissal was with or without
prejudice," the "arbitration order clearly disposed of the
entire case on the merits and left no part of it pending
before the court. Moreover, the district court could have,
but did not, stay the case pending arbitration." Id. at 1322
n.6. (citing Green Tree, 121 S.Ct. at 520 n.2).
11
We agree with the reasoning in these cases. The Green
Tree decision draws a distinction between dismissals and
stays, but does not draw any distinctions within the
universe of dismissals. The focus in Green Tree is on the
traditional definition of a "final order." Here, the District
Court did not retain jurisdiction over any of Blair's claims
as every claim was held to be arbitrable. Because there is
"nothing more for the court to do but execute the
judgment," the District Court's order falls within the
Supreme Court's definition of an appealable final order.
Although there remains the possible anomaly of different
jurisdictional results depending on whether a district court
dismisses or stays a case, the line between the two types of
dispositions follows from the Supreme Court's language.1
We conclude that even though the District Court's order
dismissed this case without prejudice and directed the
parties to proceed with arbitration, the order was final and
appealable.2 We turn to Blair's challenge to the validity of
the arbitration agreement.
III.
ARBITRATION AGREEMENT
A. Standard of Review
We review a grant of summary judgment de novo and
must apply the same test as the district court. Omnipoint
Communications Enters. v. Newtown Township., 219 F.3d
240, 242 (3d Cir. 2000). A grant of summary judgment is
appropriate "if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to
any material fact and that the moving party is entitled to a
_________________________________________________________________
1. We have no reason to assume that a district court will enter a stay
rather than a dismissal when all of the claims are arbitrable. Therefore,
the issue may not arise.
2. In light of our conclusion, we need not address Blair's alternative
argument that this order is an appealable order under the collateral
order doctrine.
12
judgment as a matter of law." Fed. R. Civ. P. 56(c). The
non-movant's allegations are to be taken as true, and when
they "conflict with those of the movant, the former must
receive the benefit of the doubt." Valhal Corp. v. Sullivan
Assocs., 44 F.3d 195, 200 (3d Cir. 1995) (quoting Goodman
v. Mead Johnson & Co., 534 F.2d 566, 573 (3d Cir. 1976)).
The Supreme Court has held that in response to a
motion for summary judgment, the non-moving party must
"go beyond the pleadings and by her own affidavits, or by
the ``depositions, answers to interrogatories, and admissions
on file,' designate ``specific facts showing that there is a
genuine issue for trial.' " Celotex Corp. v. Catrett, 477 U.S.
317, 324 (1986) (quoting Fed. R. Civ. P. 56(e)).
B. Validity of Arbitration Agreement
Blair first argues that the arbitration agreement is not
supported by adequate consideration and thus is not a
binding, enforceable contract. A federal court must
generally look to the relevant state law on the formation of
contracts to determine whether there is a valid arbitration
agreement under the FAA. See, e.g., First Options of
Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995). Before
concluding that there is a valid contract under
Pennsylvania law, the court must "look to: (1) whether both
parties manifested an intention to be bound by the
agreement; (2) whether the terms of the agreement are
sufficiently definite to be enforced; and (3) whether there
was consideration." ATACS Corp. v. Trans World
Communications, Inc., 155 F.3d 659, 666 (3d Cir. 1998); see
also Aircraft Guar. Corp. v. Strato-Lift, Inc., 103 F. Supp. 2d
830, 836 (E.D. Pa. 2000) ("[C]ontracts are enforceable when
parties reach a mutual agreement, exchange consideration,
and have set forth the terms of their bargain with sufficient
definiteness to be specifically enforced.")."Consideration
``confers a benefit upon the promisor or causes a detriment
to the promisee and must be an act, forbearance or return
promise bargained for and given in exchange for the
original promise.' " Channel Home Centers v. Grossman, 795
F.2d 291, 299 (3d Cir. 1986) (quoting Curry v. Estate of
Thompson, 481 A.2d 658, 661 (Pa. Super. Ct. 1984)).
13
Without consideration, a contract is unenforceable. Id. at
298-99.
Blair contends that the agreement was unenforceable for
lack of mutuality of consideration because Scott did not
agree to be bound by the arbitration agreement. However,
the arbitration agreement specifically states that"if any
dispute arises from your employment with Scott, you and
Scott agree that final resolution of the dispute will occur
exclusively in a final and binding arbitration proceeding."
App. at 49. The language of the agreement is clear that
both parties agreed to be bound to the arbitration
agreement and Blair admitted to having read that language
when she signed the acknowledgment shortly after receipt
of the revised handbook containing the arbitration clause.
When both parties have agreed to be bound by arbitration,
adequate consideration exists and the arbitration
agreement should be enforced. See, e.g., Michalski v. Circuit
City Stores, Inc., 177 F.3d 634, 637 (7th Cir. 1999);
Johnson v. Circuit City Stores, Inc., 148 F.3d 373, 378 (4th
Cir. 1998). Moreover, a contract need not have mutuality of
obligation as long as the contract is supported by
consideration. Harris v. Green Tree Fin. Corp. , 183 F.3d
173, 180 (3d Cir. 1999) (finding contract enforceable where
one party had option to litigate arbitral issues in court,
while the other party was required to invoke arbitration,
because mutuality is not required where the requirement of
consideration is met).
Blair contends that Scott's unilateral ability to alter the
agreement renders the agreement illusory. Blair's
acknowledgment of the agreement reads in relevant part,
I understand that nothing in this Handbook can be
modified or deleted, nor can anything be added in any
way by oral statements or practice. Only the Executive
Committee of Scott Specialty Gases can change this
Handbook, and the change must be in writing. If Scott
Specialty Gases makes any material changes, it will
give me a copy of them, and by remaining employed by
Scott Specialty Gases thereafter I will be deemed to
have accepted these changes.
App. at 23.
14
In support of her argument, Blair points to the decision
of the Court of Appeals for the Sixth Circuit in Floss v.
Ryan's Family Steak Houses, Inc., 211 F.3d 306 (6th Cir.
2000). In that case, the court concluded that the arbitration
agreement was illusory and unenforceable because the
agreement gave the provider of the arbitration services the
unlimited right to modify the arbitration rules without
giving notice to the employee or gaining the employee's
consent. The court held that " ``[w]here a promisor retains
an unlimited right to decide later the nature or extent of his
performance, the promise is too indefinite for legal
enforcement.' " Id. at 316 (quoting 1 Samuel Williston,
Contracts S 43, at 140 (3d ed. 1957)).
The District Court here distinguished Floss on the
ground that Scott's Executive Committee retained the right
to alter the material aspects of the agreement only after
putting the change in writing, providing a copy to the
employees, and allowing the employees to accept the
change by continuing employment. Scott's right is much
more confined than the unfettered discretion of the
arbitration provider in Floss who could make changes to
the agreement without notice to or consent of the
employees. Although Blair argues that Scott has the right of
"unilateral modification" to its handbook, Br. of Appellant
at 13 n.1, in fact that is limited to non-material changes to
the handbook. It is unlikely that the unfettered discretion
to modify the agreement as to arbitration would be
categorized as non-material and we need not hypothesize
about that possibility. See, e.g., The American Heritage
College Dictionary 837 (3d ed. 1993) (defining "material" as
"[b]eing both relevant and consequential").3
_________________________________________________________________
3. Because we conclude that Scott's promise to submit to arbitration
serves as consideration, we need not consider Blair's argument that her
continued employment was not adequate consideration for her
agreement to arbitrate but we note that such an argument is
questionable in light of decisions that have found that continued
employment may serve as consideration. See, e.g. , Hightower v. GMRI,
Inc., 272 F.3d 239, 243 (4th Cir. 2001); Venuto v. Ins. Co. of N. Am., No.
98-96, 1998 U.S. Dist. LEXIS 11050, at *14-15 (E.D. Pa. July 22, 1998)
(holding that an at-will employee's continued employment provides
adequate consideration for an arbitration provision).
15
We thus conclude that the arbitration agreement satisfies
these basic contract principles and is not unenforceable on
those grounds.
C. Arbitrator's Fees
The most far-reaching issue in this case, and the one
that prompted filing of amicus briefs by the EEOC and the
PHRC, is the effect of the provision in the agreement to
arbitrate that requires Blair to pay one-half of the
arbitrator's fees. Blair v. Scott Specialty Gases, No. 00-
3865, 2000 U.S. Dist. LEXIS 16809 at *20-21 (E.D. Pa.
Nov. 22, 2000). The arbitration agreement provides that
"[i]n order to make the arbitration procedure readily
available to its employees, Scott will pay one hundred
percent (100%) of any administrative fee required by the
AAA [American Arbitration Association] to initiate the
arbitration process. Other expenses will be paid by the
parties as set forth in the applicable AAA rules." App. at 49.
The AAA rules provide that the "arbitrator's compensation
shall be borne equally by the parties unless they agree
otherwise, or unless the law provides otherwise." App. at
112. The parties have not agreed to another arrangement,
and it is therefore uncontested that Blair is required to pay
one-half of the arbitrator's compensation. The AAA rules
also provide, though the parties do not address, that other
expenses of the arbitration will be borne equally by the
parties including the travel expenses of the arbitrator, AAA
representatives, and witnesses produced at the direction of
the arbitrator.
The District Court rejected Blair's argument that the
agreement is unenforceable as a result of the fee-sharing
provision. While this court must be mindful of the"liberal
federal policy favoring arbitration agreements," Moses H.
Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1,
24 (1983), the Supreme Court has also made clear that
arbitration is only appropriate "so long as the prospective
litigant effectively may vindicate [his or her] statutory cause
of action in the arbitral forum" allowing the statute to serve
its purposes. Gilmer v. Interstate/Johnson Lane Corp., 500
U.S. 20, 28 (1991) (alteration in original) (quoting Mitsubishi
Motors Corp. v. Soler Chrysler--Plymouth, Inc., 473 U.S.
16614, 637 (1985)). Arbitration costs are directly related to a
litigant's ability to pursue the claim. In Green Tree Financial
Corp.-Alabama v. Randolph, 531 U.S. 79 (2000), the
Supreme Court acknowledged that "the existence of large
arbitration costs could preclude a litigant . . . from
effectively vindicating her federal statutory rights in the
arbitral forum." Id. at 90.
In Green Tree, the plaintiff alleged that the financial
institutions that had financed her mobile home violated the
Truth in Lending Act and the Equal Opportunity Credit Act.
The district court compelled arbitration. Plaintiff appealed,
arguing that the arbitration agreement's silence on the
subject of fees created a risk that she would be required to
bear a prohibitive proportion of the arbitration costs, which
would force her to forego arbitration and relinquish her
rights. Id. The Eleventh Circuit agreed and reversed. When
the matter reached the Supreme Court, it held that the
articulated risk to the plaintiff was too "speculative" to
justify invalidating the arbitration agreement. Id. at 91.
Prior to the decision in Green Tree, the decisions of
several courts of appeals had expressed concern about fee-
splitting arrangements in employment arbitration
agreements. For example, in Cole v. Burns International
Security Services., 105 F.3d 1465 (D.C. Cir. 1997), the
court wrote,
[W]e are unaware of any situation in American
jurisprudence in which a beneficiary of a federal
statute has been required to pay for the services of the
judge assigned to hear her or his case. Under Gilmer,
arbitration is supposed to be a reasonable substitute
for a judicial forum. Therefore, 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.
Id. at 1484.
The Cole court held that where arbitration has been
imposed by the employer, the employer may not require the
employee to pay all or part of the arbitrator's fees in order
17
to pursue statutory claims under Title VII. Id. at 1484-85.
The parties in Cole had stipulated that arbitrator's fees vary
between $500 to $1000 or more per day. Id. at 1480 & n.8
(citing several articles regarding the cost of arbitration). In
Cole, as in Green Tree, the arbitration agreement was silent
on the allocation of the arbitrator's fees between the
parties, and the court concluded that the employer alone
must pay. Id. at 1481. The opinion does not indicate
whether the court had specific proof of the claimant's
financial position but does note that the job from which
Cole was fired was that of a security guard, id. at 1469, and
that "[t]hese fees would be prohibitively expensive for an
employee like Cole, especially after being fired from his job."
Id. at 1484.
The Tenth Circuit reached a similar result in Shankle v.
B-G Maintenance Management of Colorado, Inc., 163 F.3d
1230, 1234-35 (10th Cir. 1999). In Shankle, as in Cole, the
arbitration agreement covered the employment relationship,
but here the arbitration agreement was specific about the
costs and required the employee to pay one-half of the
arbitrator's fees. The court held that requiring payment
from someone who cannot afford to pay "undermines the
remedial and deterrent functions of the federal anti-
discrimination laws." Id. at 1235. "[A]n arbitration
agreement that prohibits use of the judicial forum as a
means of resolving statutory claims must also provide for
an effective and accessible alternative forum." Id. at 1234.
The court noted that arbitration generally provides such an
alternative but that the presence of a fee-splitting provision
calls the accessibility of that alternative into question. Id. at
1234 n.3. In Shankle, the parties had submitted their
claims to arbitration and received a letter from the
arbitration provider specifying the costs of arbitration. Id. at
1232. At that point, the employee decided arbitration would
be too expensive, canceled the arbitration, and filed suit in
federal court. Id. The court of appeals concluded that
Shankle, a former janitor, could not afford such a fee and
that "it [was] unlikely other similarly situated employees
could either." Id. at 1234-35.
The District Court in the instant case refused to apply
the decision in Shankle, finding Blair's case less compelling
18
than Shankle's because Blair had not submitted any
evidence to demonstrate the amount of the arbitrator's fees,
while Shankle had received a letter from the arbitrators
indicating their rates (but not the time they expected to
spend on the case). Blair, 2000 U.S. Dist. LEXIS 16809, at
*20.
Scott cites Williams v. Cigna Financial Advisors Inc., 197
F.3d 752 (5th Cir. 1999), in support of its position that the
fee-sharing provision does not invalidate the agreement.
Williams is not entirely analogous to the case before us. In
Williams, the claimant went to arbitration, an award was
issued, and then the claimant challenged his obligation to
pay forum fees. Although the court noted the requirement
that arbitration provide an adequate substitute for a
judicial forum, it held that Williams did not demonstrate
that the arbitrator's order to pay one-half of the fees
prevented him from having a "full opportunity to vindicate
his claims effectively or prevented the arbitration
proceedings from affording him an adequate substitute for
a federal judicial forum," since he did in fact seek a
resolution through arbitration. Id. at 764. The court noted
that there was no evidence that the costs were
"prohibitively expensive" as Williams had testified in his
arbitration hearing that his income was in excess of six
figures. Id. at 764-65.
Similarly, in Rosenberg v. Merrill Lynch, Pierce, Fenner &
Smith, Inc., 170 F.3d 1 (1st Cir. 1999), the court rejected a
claimant's argument that the possibility that the arbitrator
may require her to bear expensive forum fees should
invalidate the agreement. Id. at 15-16. The court reasoned
that the levying of fees is often waived by the arbitrator and
can always be reviewed in a judicial forum. Id. In that case,
the applicable arbitration rules did not require the claimant
to pay the arbitrator's fees, but only presented the
possibility that fees would be assessed against her. Id.(noting also that "arbitration is often far more affordable to
plaintiffs and defendants alike than is pursuing a claim in
court"); see also Koveleskie v. SBC Capital Mkts., Inc., 167
F.3d 361, 366 (7th Cir. 1999) (following reasoning in
Rosenberg).
19
Although the Supreme Court's decision in Green Tree was
decided in a context different from that of an employment
dispute, it offers the closest guidance on the issue of
arbitration fees. The Supreme Court in Green Tree placed
the initial burden of proof on the party resisting arbitration
to demonstrate that arbitration would be prohibitively
expensive by showing "the likelihood of incurring such
costs." Id. at 92. The Court found that the plaintiff had not
met her burden of proving the costs of the arbitration or
her inability to pay. However, the Court suggested an
eventual burden shift when it stated that "[h]ow detailed
the showing of prohibitive expense must be before the party
seeking arbitration must come forward with contrary
evidence is a matter we need not discuss[ ] for . . . neither
during discovery nor when the case was presented on the
merits was there any timely showing at all on the point." Id.
Scott argues that no burden shift is required under Green
Tree, but as the language quoted above demonstrates, a
shift is contemplated. The Court simply never reached the
level of proof required to shift the burden because the
plaintiff in that case failed to present evidence to show she
would "be saddled with prohibitive costs." Id. at 91. The
arbitration agreement was silent on the allocation of fees
and the parties had not designated a particular arbitration
association or arbitrator to resolve the dispute. 531 U.S. at90 n.6. The Green Tree Court concluded that the AAA
informational material plaintiff provided (which did not
discuss fees), an article citing average fees for arbitrators,
and her citations to fees referenced in other court
decisions, were insufficient proof of likely costs in the case
before it. Id. at 91 n.6.
The Green Tree decision thus informs us that claimants
have the burden to come forward with some evidence to
show the projected fees that would apply to their specific
arbitrations. We draw support for that inference from the
Court's rejection of the position of the four dissenting
justices that the burden should be on the defendant who
has superior information about the cost of pursuing
arbitration to show that the arbitral forum will not be
financially inaccessible. 531 U.S. at 96 (Ginsburg, J.,
dissent).
20
In this case, the District Court, in a decision that
predated Green Tree, held that Blair had not met her
burden since she failed to offer proper evidence of her
inability to pay or of the amount of the arbitrator's fees. The
court also noted that Blair did not produce any evidence
that she attempted to reach an agreement with Scott
providing that Scott would pay her share of the fees. Blair,
2000 U.S. Dist. LEXIS 16809, at *21.
Blair argues that the affidavit she submitted setting forth
her financial status comprised sufficiently competent
evidence that she could not afford to pay the arbitrator's
fees. Her affidavit states that she "can't afford to pay the
costs of taking [her] case to arbitration" and sets forth the
amounts of her assets (her car and house), monthly
income, debt, and monthly bills. App. at 120. The affidavit
indicates that her monthly bills exceed her monthly income
by $182 per month and that her debt exceeds her assets by
$57,000. App. at 120. However, Blair did not attach any
documents to support these figures, such as copies of bank
statements and bills.
In rejecting Blair's submission as inadequate, the District
Court cited cases holding that conclusory, self-serving
affidavits are insufficient to withstand a motion for
summary judgment. Blair, 2000 U.S. Dist. LEXIS 16809, at
*20-21 (citing Wells v. Shalala, 228 F.3d 1137, 1144 (10th
Cir. 2000); Taylor v. Monsanto Co., 150 F.3d 806, 809 (7th
Cir. 1998); Rose-Maston v. NME Hospitals, Inc. , 133 F.3d
1104, 1109 (8th Cir. 1998); Lindemann v. Empress Casino
Hammond Corp., No. 97-C-8938, 1999 WL 59839, *4 (N.D.
Ill. Jan. 27, 1999)). In order to satisfy the standard for
summary judgment "the affiant must ordinarily set forth
facts, rather than opinions or conclusions. An affidavit
that is ``essentially conclusory' and lacking in specific facts
is inadequate to satisfy the movant [or non-movant]'s
burden." Maldonado v. Ramirez, 757 F.2d 48, 51 (3d Cir.
1985) (quotation omitted).
Also missing from Blair's submission is any information
about the estimated cost of arbitration, such as the fees
charged by AAA arbitrators in her area. Blair plausibly
argues that the fact that her affidavit shows that her net
income is negative indicates that she could not afford to
21
pay any costs of arbitration, no matter how much or how
little they prove to be, but Green Tree tells us we need
greater proof in order to find Blair's burden satisfied.
The EEOC, appearing as an amicus, suggests that in
light of Green Tree we must remand to the District Court
for further factual inquiry on the issue of arbitrator's fees.
The EEOC emphasizes the importance of addressing this
issue pre-arbitration since a decision to foreclose access to
a judicial forum exposes claimants to potentially large
arbitration costs that might deter them from pursuing
arbitration at all. It reiterates the Supreme Court's
statements in Gilmer that individuals may be required to
arbitrate statutory claims of discrimination but that the
arbitration agreement must not force a party to"forgo the
substantive rights afforded by the statute." Gilmer, 500 U.S.
at 26 (quoting Mitsubishi, 473 U.S. at 628). If Blair is
ordered to arbitration without a full inquiry, she may be
forced to relinquish her rights under the discrimination
statute due to her inability to afford the cost of defending
those rights.
Because the District Court did not have the advantage of
the Green Tree opinion, its decision, which accurately
anticipated much of the Supreme Court's later decision,
nonetheless did not fully explore the cost issue. As the
EEOC notes, Green Tree established the right of a claimant
to invoke discovery procedures in the pre-arbitration
proceeding in order to assist the claimant in meeting her
burden of showing the likelihood of bearing prohibitive
costs. Although discovery is ordinarily not undertaken at
such an early stage of a proceeding that is governed by an
arbitration agreement, there is language in the Supreme
Court's opinion faulting the claimant for not presenting
evidence "during discovery." Green Tree , 531 U.S. at 92.
Additionally, the EEOC cites an interchange during oral
arguments before the Supreme Court that indicates that
the Supreme Court assumed that discovery was available.
Br. of EEOC at 12.4 Without some discovery, albeit limited
_________________________________________________________________
4. The EEOC quotes excerpts from the oral argument before the Supreme
Court in Green Tree, in which the Court asked the claimant why she did
not " ``make any showing' in the district court on the issue of arbitration
22
to the narrow issue of the estimated costs of arbitration
and the claimant's ability to pay, it is not clear how a
claimant could present information on the costs of
arbitration as required by Green Tree and how the
defendant could meet its burden to rebut the claimant's
allegation that she cannot afford to share the cost. See,
e.g., Livingston v. Associates Fin., Inc., 2001 WL 709465, at
*2 (N.D. Ill. June 25, 2001) (holding that the only way a
claimant can uncover the reasonably specific facts required
by Green Tree is through limited discovery since "it seems
axiomatic that, if the Supreme Court places a burden of
proof on a party, then that party must be given an
opportunity to pursue discovery related to the issue that it
has the burden to prove").
Several cases since Green Tree have tried to articulate
what a claimant needs to show in order to meet her burden
on this issue. In Bradford v. Rockwell Semiconductor
Systems Inc., 238 F.3d 549 (4th Cir. 2001), the court held
that the determination of whether fee-splitting renders an
agreement unenforceable must be examined on a case-by-
case basis rather than through the application of a broad
per se rule against all fee-splitting. Id. at 556. The court
stated,
[T]he appropriate inquiry is one that evaluates whether
the arbitral forum in a particular case is an adequate
and accessible substitute to litigation, i.e., a case-by-
case analysis that focuses, among other things, upon
the claimant's ability to pay the arbitration fees and
costs, the expected cost differential between arbitration
and litigation in court, and whether that cost
differential is so substantial as to deter the bringing of
claims.
Id._________________________________________________________________
costs . . . criticized the claimant for not seeking``discovery going to the
costs of arbitration' . . . opined that ``proof could be offered in the
district
court, before the arbitration' on the fees issue . .. [and] asked whether
the claimant could have sought ``discovery' concerning ``the costs of
arbitration.' " Br. of EEOC at 12 (quoting Transcript of Oral Argument in
Green Tree, 2000 WL 1513141, at *35-39, 54).
23
The court cautioned that these objections should be
raised in court prior to arbitration. Id. at 558 n.7. Its
encouragement of a pre-arbitration, case-by-case evaluation
of the claimant's expected costs and ability to pay
necessarily implies that some factual inquiry will be
authorized. Id. at 556 n.5. The court found that Bradford
had not demonstrated that he was unable to pay or that he
was deterred from arbitration since Bradford, unlike Blair,
had initiated arbitration before litigation and proceeded
through a full arbitration hearing on the merits of his
claim, demonstrating conclusively that he was not deterred
from entering into arbitration. Id. at 558. Evidence in his
case also showed that he earned a salary of $115,000 in
addition to yearly bonuses prior to his discharge. Id. at 558
n.6.
A number of district courts have looked at these issues,
including courts in this circuit. See, e.g., Giordano v. Pep
Boys--Manny, Moe & Jack, Inc., No. Civ. A. 99-1281, 2001
WL 484360, at *6 (E.D. Pa. Mar. 29, 2001) (finding Green
Tree does not "mandate a searching inquiry into an
employee's bills and expenses," that the focus should be on
the costs of arbitration, and when the agreement required
the claimant who earned only $400 a week to pay half the
costs of arbitration, the agreement was unenforceable and
the employer must bear all of the costs); Goodman v. ESPE
America, Inc., No. 00-CV-862, 2001 U.S. Dist. LEXIS 433,
at *13-14 (E.D. Pa. Jan. 19, 2001) (rejecting a per se rule
that fee-splitting is unenforceable and finding that claimant
who earned a base salary of $80,000 was able to afford the
costs of arbitration).
The EEOC suggests that the existence of the fee-
allocation provision requiring Blair to pay one-half of the
arbitrator's fees satisfies her threshold burden of presenting
evidence of the "likelihood" of incurring"prohibitive" costs,
and that the burden has now shifted to Scott to show
contrary evidence. In the alternative, it argues that the
existence of this provision is sufficient to trigger Blair's
right to discovery on this issue. The EEOC argues that
remand is appropriate in this case, where it was not in
Green Tree, because in Green Tree the arbitration
agreement was silent on the subject of fees, rendering the
24
risk that the claimant "will be saddled with prohibitive
costs" too speculative, whereas here the claimant is clearly
required to pay one-half of the arbitrator's fees.
Blair would have us hold that the mere existence of a fee-
splitting provision in an agreement would satisfy the
claimant's burden to prove the likelihood of incurring
prohibitive costs under Green Tree, 530 U.S. at 92. We
decline to do so. It would be inconsistent with Green Tree
and would run counter to the strong federal preference for
arbitration and the liberal policy regarding arbitration.
Accord Bradford, 238 F.3d at 557.
However, we agree with the EEOC that a remand is
appropriate in light of Blair's affidavit of her limited
financial capacity, the evidence that the AAA would preside
over the arbitration, and the AAA rules requiring the parties
to bear equally the costs of the arbitrator's fees. Limited
discovery into the rates charged by the AAA and the
approximate length of similar arbitration proceedings
should adequately establish the costs of arbitration, and
give Blair the opportunity to prove, as required under Green
Tree, that resort to arbitration would deny her a forum to
vindicate her statutory rights. Scott should also be given
the opportunity to meet its burden to prove that arbitration
will not be prohibitively expensive, or as has been
suggested in other cases, offer to pay all of the arbitrator's
fees.
D. Great Western
The District Court relied upon this court's decision in
Great Western Mortgage Corp. v. Peacock, 110 F.3d 222 (3d
Cir. 1997), to find Blair's claims regarding the statute of
limitations and waiver of a jury trial right to be issues for
the arbitrator and not the court. In Great Western, this
court, finding no contrary state policy, rejected the
plaintiff's argument that her arbitration agreement was void
as a matter of public policy. It left to the arbitrator the
decision of whether the plaintiff waived any rights under
state laws. Id. at 231. Blair argues Great Western was in
error and should be reversed. The Great Western decision
has not been overruled and may only be reversed by this
25
court en banc. See 3d Cir. Internal Operating P. 9.1. It is
this "court's tradition that a panel may not overrule or
disregard a prior panel decision unless that decision has
been overruled by the Supreme Court or by our own court
sitting en banc." Patriot Party v. Allegheny County Dep't of
Elections, Nos. 96-3677, 96-3359, 1998 U.S. App. LEXIS
12688, at *6 (3d Cir. June 15, 1998) (citing Nationwide Ins.
Co. of Columbus, Ohio v. Patterson, 953 F.2d 44, 46 (3d Cir.
1991)).
Blair contends in her reply brief that Great Western was
implicitly overruled by Green Tree. She argues that the
decision in Great Western deferring public policy questions
to the arbitrator is in conflict with the decision in Green
Tree allowing the court to invalidate an arbitration
agreement based on prohibitive costs.
We disagree. Both decisions articulate similar scopes of
inquiry for district courts evaluating arbitration
agreements, first, whether there was an arbitration
agreement, and second, whether that agreement was valid.
Great Western, 110 F.3d at 228; Green Tree, 531 U.S. at 90("[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."). Both decisions
recognize the strong presumption in favor of arbitration and
that doubts " ``concerning the scope of arbitrable issues
should be resolved in favor of arbitration.' " Great Western,
110 F.3d at 228 (quoting Moses H. Cone Mem'l Hosp., 460
U.S. at 24-25 (1983)); see also Green Tree, 531 U.S. at 91
(citing Moses H. Cone Mem'l Hosp., 531 U.S. at 24). Great
Western held that the question of whether the arbitration
agreement validly waived certain rights afforded by New
Jersey law could be presented in the arbitral forum, but
also evaluated that claim on the merits and found that the
claimant had not demonstrated any New Jersey policy
against arbitration. 110 F.3d at 231-32. Because Great
Western did not foreclose the ability of courts to examine
public policy arguments, it is not in conflict with the
holding of Green Tree, and has not been overruled.5
_________________________________________________________________
5. The PHRC filed an amicus brief arguing that requiring a victim of
employment discrimination to pay fees to protect her rights is contrary
26
Finally, Scott argues that this court should affirm the
earlier order of the District Court dismissing Blair's
complaint "with prejudice" because Blair did not file for
arbitration within one year, as provided for in the
arbitration agreement. The District Court did not address
the statute of limitations outside of recognizing Blair's
argument that the statute of limitations in the arbitration
agreement conflicts with the underlying statutory
limitations periods. We agree with the District Court that
this question, and others relating to the statute of
limitations,6 should be deferred to the arbitrator.
IV.
CONCLUSION
For the reasons set forth above, we will reverse the
decision of the District Court and remand for further
factual inquiry into the costs of arbitration and Blair's
ability or inability to pay for arbitration.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
_________________________________________________________________
to the public policy of Pennsylvania guaranteeing a costless forum for
enforcing her rights, and that the arbitration agreement did not foreclose
the claimant's opportunity to bring a claim before the PHRC. Blair's
administrative complaint was dismissed by the PHRC for failure of proof
or failure to cooperate. The question whether arbitration is contrary to
Pennsylvania public policy is not at issue in this case, and we do not
reach to decide it.
6. For example, Blair argues that the one-year limitation period in the
agreement with Scott conflicts with the incorporated AAA rules that
provide that timeliness should be based on the statutes of limitations in
the underlying statutes on which the claims are based, and that the
ambiguity should be construed against the maker of the contract. See,
e.g., Burns v. Franklin Life Ins. Co., 301 A.2d 799, 804 (Pa. 1973).
27