EEOC v. Waffle House ( 2002 )

Case reversed and remanded by Supreme
Court opinion filed 1/15/02
Cert. granted by Supreme Court on 3/26/01
PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
EQUAL EMPLOYMENT OPPORTUNITY
COMMISSION,
Plaintiff-Appellee,
No. 98-1502
v.
WAFFLE HOUSE, INCORPORATED,
Defendant-Appellant.
Appeal from the United States District Court
for the District of South Carolina, at Columbia.
Matthew J. Perry, Jr., Senior District Judge.
(CA-96-2739-3-10BC)
Argued: March 1, 1999
Decided: October 6, 1999
Before NIEMEYER and KING, Circuit Judges, and
LEE, United States District Judge for the
Eastern District of Virginia, sitting by designation.
_________________________________________________________________
Affirmed in part, reversed in part, and remanded by published opin-
ion. Judge Niemeyer wrote the opinion, in which Judge Lee joined.
Judge King wrote a dissenting opinion.
_________________________________________________________________
COUNSEL
ARGUED: Stephen Floyd Fisher, JACKSON, LEWIS, SCHNITZ-
LER & KRUPMAN, Greenville, South Carolina, for Appellant. Rob-
ert John Gregory, EQUAL EMPLOYMENT OPPORTUNITY
COMMISSION, Washington, D.C., for Appellee. ON BRIEF: Paul
B. Lindemann, JACKSON, LEWIS, SCHNITZLER & KRUPMAN,
Greenville, South Carolina, for Appellant. C. Gregory Stewart, Gen-
eral Counsel, Philip B. Sklover, Associate General Counsel, EQUAL
EMPLOYMENT OPPORTUNITY COMMISSION, Washington,
D.C., for Appellee.
_________________________________________________________________
OPINION
NIEMEYER, Circuit Judge:
This appeal presents the question of first impression in this circuit
whether and to what extent the Equal Employment Opportunity Com-
mission ("EEOC"), in prosecuting a suit in its own name, is bound by
a private arbitration agreement between the charging party and his
employer. Other circuits are split on the proper response to this ques-
tion. Compare EEOC v. Kidder, Peabody & Co., 156 F.3d 298 (2d
Cir. 1998) (holding that an arbitration agreement between a charging
party and an employer precludes the EEOC from seeking purely mon-
etary relief in federal court on behalf of the charging party but not
from seeking broad injunctive relief), with EEOC v. Frank's Nursery
& Crafts, Inc., 177 F.3d 448 (6th Cir. 1999) (holding that a private
arbitration agreement does not affect the scope of the EEOC's federal
court suit at all).
Recognizing that the EEOC is vested with enforcement authority
both to seek broad-based injunctive relief in the public interest and to
seek "make-whole" relief on behalf of a charging party, we conclude
(1) that the EEOC cannot be compelled, by reason of an arbitration
agreement between the charging party and his employer, to arbitrate
its claims, but (2) that, to the extent that the EEOC seeks to obtain
"make-whole" relief on behalf of a charging party who is subject to
an arbitration agreement, it is precluded from seeking such relief in
a judicial forum. Accordingly, we affirm the district court's decision
to deny Waffle House's petition to compel arbitration generally and
remand to the district court for consideration of the EEOC's claims
in light of this opinion.
2
I
On June 23, 1994, Eric Baker, who was seeking employment,
entered the Waffle House facility located at exit 113 of Interstate 26
in Columbia, South Carolina, and proceeded to fill out and sign an
application for employment with Waffle House, Inc. He left blank the
space on the application asking what position he sought. The applica-
tion included a provision requiring the applicant to submit to binding
arbitration "any dispute or claim concerning Applicant's employment
with Waffle House, Inc., or any subsidiary or Franchisee of Waffle
House, Inc., or the terms, conditions or benefits of such employment."
Although the manager at that Waffle House facility, Lee Motlow,
asked Baker whether he wanted the job there, Baker declined and
instead, called the manager of a nearby Waffle House facility located
at exit 110 of Interstate 26 in West Columbia, to whom Motlow had
referred Baker.1 1 The West Columbia Waffle House manager inter-
viewed Baker and hired him to begin work two weeks later. Baker did
not fill in another application and began work in the West Columbia
facility on August 10, 1994, as a grill operator.
At his home, approximately two weeks later, Baker suffered a sei-
zure, ostensibly caused by a change in the medication he was taking
to control a seizure disorder that had developed as a result of a 1992
automobile accident. The next day, just after arriving for work, Baker
suffered another seizure. Waffle House discharged Baker on Septem-
ber 5, 1994, stating in the separation notice that"We decided that for
[Baker's] benefit and safety and Waffle House it would be best he not
work any more."
Baker filed a charge with the EEOC, complaining that his dis-
charge violated the Americans With Disabilities Act of 1990
("ADA"), and on September 9, 1996, the EEOC filed this enforce-
_________________________________________________________________
1 In its answers to interrogatories, the EEOC stated more particularly:
"Shortly after he had spoken with Motlow, Baker called the Manager at
the Waffle House to which Motlow had referred him. The Manager inter-
viewed Baker and hired him to work in another nearby Waffle House,
Unit #446 in West Columbia. Baker visited Unit #446 and spoke with the
Manager, Mike Bradley. They agreed that Baker would start two weeks
later." J.A. at 13.
3
ment action in its own name against Waffle House pursuant to
§ 107(a) of the ADA, 42 U.S.C. § 12117(a), and § 102 of the Civil
Rights Act of 1991, 42 U.S.C. § 1981a, alleging that Waffle House
had engaged in "unlawful employment practices at its West Colum-
bia, South Carolina, facility." The EEOC stated in its complaint that
its purpose for filing the suit was "to correct unlawful employment
practices on the basis of disability and to provide appropriate relief to
Eric Scott Baker, who was adversely affected by such practices." It
sought as relief (1) a permanent injunction barring Waffle House from
engaging in employment practices that discriminate on the basis of
disability; (2) an order that Waffle House institute and carry out
antidiscrimination policies, practices, and programs to create opportu-
nities and to eradicate the effects of past and present discrimination
on the basis of disability; (3) backpay and reinstatement for Baker; (4)
compensation for pecuniary and non-pecuniary losses suffered by
Baker; and (5) punitive damages.
In response to the complaint, Waffle House filed a petition under
the Federal Arbitration Act ("FAA"), 9 U.S.C.§ 1 et seq., to compel
arbitration and to stay the litigation and, alternatively, to dismiss the
action under Federal Rule of Civil Procedure 12(b)(6). The motion
was referred to a magistrate judge who -- relying on the undisputed
record consisting of the complaint, answers to interrogatories, and
affidavits filed in connection with the motion to compel arbitration --
recommended to the district court that it conclude that Baker had
entered into an arbitration agreement with Waffle House and that the
EEOC was required to arbitrate the claims it filed on behalf of Baker.
The district court, relying on the facts "extrapolated from the plead-
ings," disagreed with the magistrate judge's recommendations and
denied each of Waffle House's motions, concluding that the arbitra-
tion provision contained in Baker's employment application was inap-
plicable because the West Columbia Waffle House facility, which
ultimately hired Baker, had not hired him pursuant to his earlier appli-
cation submitted at the Columbia Waffle House facility.
Waffle House filed this interlocutory appeal challenging the district
court's denial of its petition to compel arbitration and to stay proceed-
ings. See 9 U.S.C. § 16(a)(1). On appeal, it argues that (1) contrary
to the district court's holding, a valid, enforceable arbitration agree-
ment existed between Baker and Waffle House and (2) its motion to
4
compel arbitration under § 4 of the FAA should be granted because
the arbitration agreement between Baker and Waffle House binds the
EEOC to "assert Baker's claim in an arbitral forum."
II
Because arbitration is a matter of contract, we must first determine
whether an enforceable arbitration agreement governed Baker's
employment with Waffle House. See Johnson v. Circuit City Stores,
Inc., 148 F.3d 373, 377 (4th Cir. 1998). The district court concluded
that the arbitration agreement in Baker's employment application did
not govern his employment relationship with Waffle House because
it was submitted to the Waffle House facility at exit 113 of Interstate
26 in Columbia, and Baker was not ultimately employed at that facil-
ity. When Baker later went to the Waffle House facility at exit 110
of Interstate 26 in West Columbia, he was given a job there without
submitting another application. The court thus concluded, "it does not
appear that Baker's acceptance of employment at the West Columbia
Waffle House was made pursuant to the written application which
included the agreement to arbitrate."
We disagree with the district court's analysis because it assumes
that the two Waffle House facilities were legally distinct entities in
this context. The employment application Baker completed was the
standard form application for employment with the corporation Waf-
fle House, Inc., and not with an individual Waffle House facility.
Indeed, the manager at the Columbia Waffle House facility referred
Baker to the manager at the West Columbia Waffle House facility. In
filling out the application, Baker left blank the space provided on the
form for listing specific positions applied for, and he specified no
intent to limit the application to a particular location. Moreover, when
Baker did begin work at the West Columbia facility, he did not fill
out another application. It cannot be assumed that a national corpora-
tion like Waffle House hired an individual without gathering any of
the requisite information, such as his proper name, address, social
security number, age and other personal data, qualifications, and ref-
erences, all of which were contained in the application Baker origi-
nally submitted at the Waffle House facility in Columbia.
Accordingly, the fact that Baker was ultimately employed at a dif-
ferent facility than the one at which he was physically present when
5
he completed the application is immaterial to the applicability of the
arbitration agreement. The generic, corporation-wide employment
application completed and signed by Baker, and the arbitration provi-
sion it contained, followed Baker to whichever facility of Waffle
House hired him. We thus conclude that Baker's application, when
accepted by Waffle House, did form a binding arbitration agreement
between Baker and Waffle House.
Having reached that conclusion, however, we must still determine
what effect, if any, the binding arbitration agreement between Baker
and Waffle House has on the EEOC, which filed this action in its own
name both in the public interest and on behalf of Baker.
III
In its motion to compel arbitration, Waffle House sought "to
enforce the arbitration agreement between Waffle House and Baker
and compel the EEOC, on behalf of Baker, to submit Baker's employ-
ment related dispute with Waffle House to arbitration." On appeal, it
continues to maintain that "[i]t is of no consequence under the FAA
that the EEOC is bringing this action on behalf of Baker rather than
Baker bringing this action directly" because the EEOC is "bound by
Baker's arbitration agreement with Waffle House." The EEOC char-
acterizes Waffle House's argument as "an astounding proposition." It
argues that not only did it "never agree[ ] to arbitrate its statutory
claim," but also that the EEOC "has independent statutory authority
to bring suit in any federal district court where venue is proper." We
agree with the EEOC.
In enforcing the federal antidiscrimination laws, the EEOC does
not act merely as a proxy for the charging party but rather seeks to
"advance the public interest in preventing and remedying employment
discrimination." General Tel. Co. of the Northwest, Inc. v. EEOC, 446
U.S. 318, 331 (1980). The EEOC's independent authority to enforce
the ADA is clear.
In enacting the ADA, Congress chose to incorporate the enforce-
ment "powers, remedies, and procedures" of Title VII of the Civil
Rights Act of 1964. 42 U.S.C. § 12117(a) (incorporating by reference
42 U.S.C. §§ 2000e-4, -5, -6, -8, -9). These Title VII mechanisms vest
6
the EEOC with broad authority to enforce, in federal court, the stat-
ute's ban on disability-based discrimination. See 42 U.S.C. § 2000e-
5(f)(1), (f)(3). Under Title VII as originally enacted, the EEOC's
powers were limited to investigation and conciliation, and Congress
relied exclusively on private parties' suits for enforcement. In 1972,
however, seeking to remedy widespread noncompliance under this
enforcement system, Congress amended Title VII, according the
EEOC the right to file suit in federal court in its own name to eradi-
cate discriminatory employment practices. See General Tel., 446 U.S.
at 325-26. Although the amendments created a dual system of private
and government enforcement, we have long recognized that "it was
clear that Congress intended by these [1972] Amendments to place
primary reliance upon the powers of enforcement to be conferred
upon the Commission . . . and not upon private law suits, to achieve
equal employment opportunity." EEOC v. General Elec. Co., 532
F.2d 359, 373 (4th Cir. 1976) (internal quotation marks and citation
omitted).
Because of this public mission, the EEOC cannot be viewed as
merely an institutional surrogate for individual victims of discrimina-
tion. See General Tel., 446 U.S. at 326 (holding that "the EEOC's
enforcement suits should not be considered representative actions
subject to Rule 23"). "[U]nlike the individual charging party, the
EEOC [sues] `to vindicate the public interest' as expressed in the
Congressional purpose of eliminating employment discrimination as
a national evil rather than for the redress of the strictly private inter-
ests of the complaining party." General Elec. , 532 F.2d at 373 (quot-
ing EEOC v. Kimberly Clark Corp., 511 F.2d 1352, 1361 (6th Cir.
1975)); see also EEOC v. Harris Chernin, Inc. , 10 F.3d 1286, 1291
(7th Cir. 1993) (concluding that because the EEOC's"interests are
broader than those of the individuals injured by discrimination . . .
private litigants cannot adequately represent the government's interest
in enforcing the prohibitions of federal statutes" (citations omitted));
EEOC v. U.S. Steel Corp., 921 F.2d 489, 496 (3d Cir. 1990) (observ-
ing that "[p]rivate litigation in which the EEOC is not a party cannot
preclude the EEOC from maintaining its own action because private
litigants are not vested with the authority to represent the EEOC"
(citations omitted)); EEOC v. United Parcel Serv., 860 F.2d 372 (10th
Cir. 1988); EEOC v. Goodyear Aerospace Corp., 813 F.2d 1539 (9th
Cir. 1987).
7
The statutory structure of Title VII's enforcement remedies (and
therefore those of the ADA) reflects the notion that the scope of the
public interest exceeds that of the individual's interest. In order to
preserve the EEOC's authority to litigate selectively those cases
which it believes will have the most significant public impact, a
charging party "may not proceed to federal district court until . . . the
EEOC has made its own determination as to the validity of complain-
ant's claim and issued a right-to-sue letter." Davis v. North Carolina
Dep't of Correction, 48 F.3d 134, 138 (4th Cir. 1995). And if the
EEOC chooses to file suit, the charging party may not bring his own
suit; his right is then limited to intervening in the EEOC's suit. See
42 U.S.C. § 2000e-5(f)(1). In a similar vein, when a private individual
brings suit, the court may, under certain circumstances, permit the
EEOC to intervene to protect the national interest. See id. In addition,
once the EEOC decides to sue in its own name, it is not limited to the
facts presented in the charge. Rather, the EEOC may sue based on
"[a]ny violations that [it] ascertains in the course of a reasonable
investigation of the charging party's complaint." General Tel., 446
U.S. at 331; see also General Elec., 532 F.2d at 370. Finally, the
EEOC's independent interest is also reflected in the fact that a charg-
ing party may not withdraw his charge without the consent of the
EEOC. See 29 C.F.R. § 1601.10.
Even while empowering the EEOC to sue on a charge indepen-
dently, Congress preserved the individual's private remedies under
Title VII, indicating that private suits are still appropriate to redress
individuals' grievances. And even when the EEOC has determined to
bring suit in its own name, the charging party retains "the right to
intervene in a civil action brought by the Commission" if the individ-
ual believes that the EEOC will not adequately represent his interests
as it pursues its public objectives. See 42 U.S.C. § 2000e-5(f)(1);
compare 29 U.S.C. § 626(c)(1) (terminating an individual's right to
sue under the ADEA upon the EEOC's commencement of an action
to enforce that individual's rights).22 Congress anticipated that the
_________________________________________________________________
2 In concluding that this "distinctive enforcement scheme of the
ADEA" illustrates the EEOC's "representative responsibilities when it
initiates litigation to enforce an employee's rights," the Third Circuit
expressly noted that the enforcement scheme of Title VII "from which
the framers of the ADEA consciously departed . . . has no similar fea-
ture." U.S. Steel, 921 F.2d at 494 & n.4.
8
EEOC would not always be able to achieve the best possible result
for each individual while at the same time pursuing its mission to vin-
dicate the public interest. See General Tel., 446 U.S. at 331 (noting
that the EEOC "is authorized to . . . obtain the most satisfactory over-
all relief even though competing interests are involved" and that it
must make "the hard choices where conflicts of interest exist").
In short, under the 1972 amendments to Title VII, which are incor-
porated into the ADA, Congress has created a dual enforcement sys-
tem, reflecting the notion that the EEOC and the charging party are
not interchangeable plaintiffs. Each has its own distinct, albeit over-
lapping, interests for which overlapping remedies are provided. Thus,
in pursuing the inquiry into whether the EEOC can be compelled to
arbitrate on the basis of an arbitration agreement binding the charging
party, we do not take the EEOC as a surrogate for the charging party,
subrogated to his interest. Rather, we examine the related, but inde-
pendent, interests of both the EEOC and the charging party to deter-
mine how an arbitration agreement signed by the charging party
affects the prosecution of a claim by the EEOC.
First, we must recognize that neither the ADA nor Title VII as
incorporated therein requires the EEOC to arbitrate. On the contrary,
as demonstrated above, the 1972 amendments to Title VII clearly
show that Congress intended that the EEOC vindicate the public inter-
est by conciliation and then by suit in federal court. We must also rec-
ognize that in this case the EEOC is not a party to any arbitration
agreement. See AT&T Technologies, Inc. v. Communications Workers
of Am., 475 U.S. 643, 648-49 (1986); Arrants v. Buck, 130 F.3d 636,
640 (4th Cir. 1997) (explaining that "[e]ven though arbitration has a
favored place, there still must be an underlying agreement between
the parties to arbitrate" (citation omitted)). Thus, the only argument
Waffle House could advance to require the EEOC to arbitrate is that
the EEOC's interest in enforcing the ADA is derivative of Baker's
interest. This argument, however, disregards the EEOC's independent
statutory role as we have outlined it.
In addition, contrary to Waffle House's claims, neither of the other
two circuits that have addressed the question of the impact of a pri-
vate arbitration agreement on the EEOC's ability to sue in its own
name have concluded that such an agreement permits a court to force
9
the EEOC into arbitration under the FAA. See Frank's Nursery, 177
F.3d at 462 (observing that "courts may not treat the agreement of a
private party to arbitrate her action as the agreement of the EEOC to
arbitrate its action"); Kidder, Peabody, 156 F.3d at 301-02 (upholding
the district court's grant of the employer's motion to dismiss the
EEOC's ADEA suit seeking solely monetary damages but not
addressing the issue of compelling the EEOC to arbitrate because the
employer did not seek to do so).
Moreover, the Supreme Court has recognized implicitly that the
EEOC, acting in its public role, is not bound by private arbitration
agreements. See Gilmer v. Interstate/Johnson Lane Corp., 500 U.S.
20 (1991) (holding that an employee's private arbitration agreement
with her employer precluded her from filing suit against the employer
under the ADEA). Although a private arbitration agreement does bar
an individual ADEA claimant from asserting her claim in court, it
does not prevent her from filing a charge with the EEOC. See id. at
28. This rule demonstrates the Court's recognition that the EEOC's
suit can accomplish aims -- namely, combating discrimination on a
societal level -- that an individual's suit is not equipped, nor perhaps
intended, to accomplish. The court also emphasized, in refuting the
argument that enforcing arbitration agreements would undercut the
statutory scheme, that "it should be remembered that arbitration
agreements will not preclude the EEOC from bringing actions seeking
class-wide and equitable relief." Id. at 32. Thus, it is apparent that the
Court did not intend that when an individual who is subject to an arbi-
tration agreement files a charge, the EEOC can only pursue relief in
an arbitral forum. To the contrary, the Court appears to have contem-
plated that arbitration agreements between charging parties and their
employers would not infringe on the EEOC's statutory duty to
enforce the antidiscrimination laws in court.
Accordingly, we conclude that Waffle House cannot succeed on its
motion to compel the EEOC to arbitrate.
IV
While we have thus observed that the important role of the EEOC
in vindicating the public interest in preventing and eradicating work-
place discrimination is not to be restricted by arbitration agreements
10
to which it is not a party, its role in vindicating in federal court the
individual interests of the charging party implicates the competing
federal policy favoring the enforcement of arbitration agreements.
When an individual and an employer agree to submit employment
disputes to arbitration, it is the federal policy to give that contract
effect in order to favor the arbitration mechanism for dispute resolu-
tion. See 9 U.S.C. § 2; Moses H. Cone Mem'l. Hosp. v. Mercury Con-
str. Corp., 460 U.S. 1, 24 (1983). To permit the EEOC to prosecute
in court Baker's individual claim -- the resolution of which he had
earlier committed by contract to the arbitral forum-- would signifi-
cantly trample this strong policy favoring arbitration. Because
Baker's own suit in court to enforce his ADA claim would be barred
by his contract and by the federal policy embodied in the FAA, only
a stronger, competing policy could justify allowing the EEOC to do
for Baker what Baker could not have done himself. The EEOC's pub-
lic mission to eradicate and to prevent discrimination may be such a
policy in certain contexts, see Gilmer, 500 U.S. at 28, but, as we con-
clude herein, it cannot outweigh the policy favoring arbitration when
the EEOC seeks relief specific to the charging party who assented to
arbitrate his claims. Although the EEOC acts in the public interest,
even when enforcing only the charging party's claim, cf. Albemarle
Paper Co. v. Moody, 422 U.S. 405, 417-18 (1975), the public interest
aspect of such a claim is less significant than an EEOC suit seeking
large-scale injunctive relief to attack discrimination more generally.
Recognizing these competing policies, we agree with the balance
struck by the Second Circuit, which held that although the EEOC
"may seek injunctive relief in the federal forum for employees even
when those employees have entered into binding arbitration agree-
ments," it may not pursue relief in court -- in that case, monetary
relief -- specific to individuals who have waived their right to a judi-
cial forum by signing an arbitration agreement. Kidder, Peabody, 156
F.3d at 302-03; but see Frank's Nursery, 177 F.3d at 459-67 (holding
that neither the FAA nor principles of preclusion or waiver could
operate to bar the EEOC from seeking monetary relief on behalf of
aggrieved individuals). When the EEOC seeks "make-whole" relief
for a charging party, the federal policy favoring enforcement of pri-
vate arbitration agreements outweighs the EEOC's right to proceed in
federal court because in that circumstance, the EEOC's public interest
11
is minimal, as the EEOC seeks primarily to vindicate private, rather
than public, interests. On the other hand, when the EEOC is pursuing
large-scale injunctive relief, the balance tips in favor of EEOC
enforcement efforts in federal court because the public interest domi-
nates the EEOC's action.
Thus, we hold that to the extent that the EEOC seeks"a permanent
injunction enjoining [Waffle House] from discharging individuals and
engaging in any other employment practice which discriminates on
the basis of disability" and an order to Waffle House "to institute and
carry out policies, practices, and programs which provide equal
employment opportunities for qualified individuals with disabilities,
and which eradicate the effects of its past and present unlawful
employment practices," the EEOC is pursuing the public interest in
a discrimination-free workplace, and it must be allowed to do so in
federal court, as authorized by the ADA, notwithstanding the charg-
ing party's agreement to arbitrate. In seeking to"vindicate rights
belonging to the United States as sovereign," EEOC v. Goodyear
Aerospace Corp., 813 F.2d 1539, 1543 (9th Cir. 1987) (internal quo-
tation marks and citation omitted), which are not necessarily identical
to the interests of the individual charging party, the EEOC's course
of conduct should not be affected by the actions of an individual in
entering into a private arbitration agreement. See Part III, supra. In
similar contexts where charging parties have been deprived of their
right to sue either by settling their claims or having their claims dis-
missed, courts have nevertheless permitted the EEOC to maintain a
suit for injunctive relief. See, e.g. , EEOC v. Massey Yardley Chrysler
Plymouth, Inc., 117 F.3d 1244, 1253 (11th Cir. 1997) (noting that
"there would be little point in [the EEOC] having the independent
power to sue if it could not obtain relief beyond that fashioned for the
individual claimant"); EEOC v. Harris Chernin, Inc., 10 F.3d 1286,
1291-92 (7th Cir. 1993); Goodyear Aerospace, 813 F.2d at 1542-45.
Conversely, however, in these same contexts some of the same
courts have recognized that a charging party's actions that impede his
own right to sue can also circumscribe the contours of the EEOC's
suit in its own name to the extent that it acts on behalf of the charging
party. See, e.g., Goodyear Aerospace, 813 F.2d at 1543 (holding that
the charging party's acceptance of a personal settlement of her claims
rendered moot the EEOC's claims for backpay on her behalf); EEOC
12
v. U.S. Steel Corp., 921 F.2d 489, 496 (3d Cir. 1990) (holding that the
doctrine of res judicata barred the EEOC from seeking "individual-
ized benefits" under the ADEA on behalf of individuals whose own
suits were unsuccessful because the EEOC was "in privity" with those
individuals); Harris Chernin, 10 F.3d at 1291 (following U.S. Steel's
reasoning with regard to the EEOC's claim for backpay, liquidated
damages, and reinstatement for an individual whose suit was dis-
missed as barred by the statute of limitations).
Similarly, we also hold that when the EEOC enforces the individ-
ual rights of Baker by seeking backpay, reinstatement, and compensa-
tory and punitive damages, it must recognize Baker's prior agreement
to adjudicate those rights in the arbitral forum. Because the EEOC
maintains that it "has no intention" of pursuing a claim in arbitration,
we do not reach the question of whether the EEOC is authorized to
do so. But it cannot pursue Baker's individual remedies in court,
although it may seek broad injunctive relief in its public enforcement
role.
Accordingly, we affirm the district court's order to the extent that
it denied Waffle House's motions to compel the EEOC to arbitrate
and to dismiss this action. We reverse its ruling that the EEOC may
prosecute Baker's individual claims in court. And we remand with
instructions to the district court to dismiss, without prejudice, the
EEOC's claims asserted on behalf of Baker individually and to permit
the EEOC to move forward on its claims for broad injunctive relief.33
AFFIRMED IN PART, REVERSED IN PART,
AND REMANDED
KING, Circuit Judge, dissenting:
Because I agree with the district court that there was no agreement
to arbitrate in this case, I must respectfully dissent. I would, therefore,
_________________________________________________________________
3 Waffle House argues that the EEOC is not entitled to broad injunctive
relief because its claim relies exclusively on the incident involving
Baker. We leave to the district court the question of whether the EEOC
has pled sufficient facts to warrant the equitable relief it seeks. See 42
U.S.C. § 2000e-5(g)(1).
13
without reaching the issue of the authority of the EEOC to seek
injunctive and "make-whole" relief for Mr. Baker on his ADA claim,
simply affirm the decision of the district court.
I.
On June 23, 1994, Mr. Baker completed an employment applica-
tion at a Waffle House restaurant in Columbia, South Carolina
("Columbia Waffle House" or "CWH"). 1 The district court found that
the manager of the CWH offered Mr. Baker a job on that occasion,
which Mr. Baker did not accept.
Approximately three weeks later, Mr. Baker travelled to a different
Waffle House restaurant, one located in West Columbia, South Caro-
lina ("West Columbia Waffle House" or "WCWH"), where, the dis-
trict court found, Mr. Baker "orally applied for a job and was orally
given a job which he accepted." J.A. 137. Mr. Baker did not execute
a written employment application at the WCWH. Indeed, there is no
evidence that the terms of the employment application that Mr. Baker
completed at the CWH were discussed or adopted by Mr. Baker and
_________________________________________________________________
1 The employment application completed by Mr. Baker contains a man-
datory arbitration provision, which is comprised of four lines of single-
spaced text located at the bottom of the first page of a two-page applica-
tion. It states in full:
The parties agree that any dispute or claim concerning Appli-
cant's employment with Waffle House, Inc., or any subsidiary or
Franchisee of Waffle House, Inc., or the terms, conditions or
benefits of such employment, including whether such dispute or
claim is arbitrable, will be settled by binding arbitration. The
arbitration proceedings shall be conducted under the Commercial
Arbitration Rules of the American Arbitration Association in
effect at the time a demand for arbitration is made. A decision
and award of the arbitrator made under the said rules shall be
exclusive, final and binding on both parties, their heirs, execu-
tors, administrators, successors and assigns. The costs and
expenses of the arbitration shall be borne evenly by the parties.
This provision, printed in seven-point font, occupies merely 5/16 of an
inch of a page that is eleven inches long. No other clause in the employ-
ment application is printed in as small a font size.
14
Mike Bradley, the WCWH manager who hired Mr. Baker. Since there
was no evidence on the point, the district court found that it did not
appear that the "management [of WCWH] knew of or had the benefit
of the application form which Baker had previously signed." J.A. 137-
38.
The district court made no findings connecting the WCWH offer
to the CWH offer that Baker had rejected.2 2 Further, the district court's
affirmative rejection of the magistrate judge's findings, see supra note
2, is, in itself, a factual finding that requires our deference. The dis-
trict court's "[f]indings of fact, whether based on oral or documentary
evidence, shall not be set aside [on appeal] unless clearly erroneous."
Fed. R. Civ. P. 52(a). Findings of fact may be overturned only if we
are "left with the definite and firm conviction that a mistake has been
committed." Anderson v. City of Bessemer City, N.C., 470 U.S. 564,
_________________________________________________________________
2 In its written opinion of March 20, 1998, from which this appeal is
taken, the district court found and concluded as follows:
[T]his Court sua sponte inquired concerning the existence of evi-
dence that Baker and Waffle House made an agreement to arbi-
trate with respect to the job he accepted. The facts stated by the
Magistrate Judge which are extrapolated from the pleadings do
not suggest that an employment agreement came into being fol-
lowing Baker's signing of the application form on June 23, 1994.
Baker left the Columbia Waffle House without accepting
employment. It does not appear from the statement of facts relied
upon by the Magistrate Judge that when Baker went to the West
Columbia, South Carolina Waffle House, the management there
knew of or had the benefit of the application form which Baker
had previously signed. Instead, it appears that Baker orally
applied for and was orally given a job which he accepted. That
being the case, it does not appear that Baker's acceptance of
employment at the West Columbia Waffle House was made pur-
suant to the written application which included the agreement to
arbitrate. For that reason, I am unable to agree with that portion
of the Magistrate Judge's conclusions.
J.A. 137-38. Significantly, the district court expressly rejected the magis-
trate judge's conclusion that Baker "appear[ed] to have assented to be
bound by the prior agreement, that if employed he would submit his
claim to arbitration," by Baker's subsequent acceptance of employment
at the WCWH.
15
573-74 (1985).3
3 The majority wrongly implies that an appellate court
may consider and adopt facts found by a magistrate judge -- facts
already expressly rejected by the district court-- without finding
such facts to be clearly erroneous.4
4
Based on its factual findings, the district court concluded that Mr.
Baker and Waffle House had not made an agreement to arbitrate with
respect to the job that he ultimately accepted -- the position of grill
operator at the West Columbia Waffle House. Consequently, the dis-
trict court denied Waffle House's motion to compel arbitration and its
motion to dismiss.
The district court's findings of fact are not clearly erroneous, and
its conclusion that there was no agreement to arbitrate follows per-
force from its findings. Accordingly, I would affirm the district
court's order denying Waffle House's motions to dismiss and compel
arbitration, thereby enabling the EEOC to pursue injunctive and
"make-whole" relief on behalf of Mr. Baker.
_________________________________________________________________
3 See also Fed. R. Civ. P. 52 advisory committee's note (1985) (public
interest recognizes the trial court, not the appellate tribunal, as the fact-
finder, to promote stability and judicial economy). When a court of
appeals actively engages in the fact-finding function, it undermines the
legitimacy of the district courts. Id.4 While the majority asserts that the EEOC interrogatory answers sup-
port its factual scenario, see ante p.3 note 1, these answers are legally
irrelevant for at least three reasons: (1) they are invalid because they
were not made under oath (as required by Rule 33(b) of the Federal
Rules of Civil Procedure); (2) they are signed by counsel only (not by
Baker, who had the requisite personal knowledge); and (3) their evidenti-
ary value was repudiated by the EEOC at oral argument. Bracey v.
Grenoble, 494 F.2d 566, 570 n.7 (3rd Cir. 1974). Accordingly, these
answers could not and cannot be properly relied on in this case. See id.Most importantly, subsequently filed affidavits (properly sworn) do not
contain the information relied upon by the majority, see J.A. 12, 28, and
that information is contrary to the findings of the district court. See supra
note 2. As I have noted, the majority has not determined the factual find-
ings of the district court to be clearly erroneous.
16
II.
A.
The Federal Arbitration Act ("FAA"), 9 U.S.C.§ 1, et seq., which
governs here, represents "a liberal federal policy favoring arbitration
agreements." Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp.,
460 U.S. 1, 24 (1983). Where there is a valid agreement to arbitrate
that covers the matter in dispute, the FAA requires federal courts to
stay any ongoing judicial proceedings and compel arbitration. See
Hooters of Am., Inc. v. Phillips, 173 F.3d 933, 937 (4th Cir. 1999)
(citing the FAA, 9 U.S.C. §§ 3, 4).
But the mandate and policy concerns of the FAA come into play
only if the claims at issue are arbitrable in the first instance, and if
there is a valid agreement to arbitrate. See Phillips, 173 F.3d at 937-
38. This court has held that a claim such as Baker's is arbitrable; the
ADA does not prohibit arbitration of a claim arising under that stat-
ute. See Austin v. Owens-Brockway Glass Container, Inc., 78 F.3d
875, 881 (4th Cir. 1996) ("The language of the[ADA] could not be
any more clear in showing Congressional favor towards arbitration.");
see also Phillips, 173 F.3d at 937. However, the question remains
whether Mr. Baker and Waffle House entered into an agreement to
arbitrate that would require Mr. Baker to arbitrate any ADA claim
arising from his employment at the WCWH.
Whether a contract to arbitrate exists is "an issue for judicial deter-
mination to be decided as a matter of contract." Johnson v. Circuit
City Stores, 148 F.3d 373, 377 (4th Cir. 1998) (citing AT & T Techs.,
Inc. v. Communications Workers of Am., 475 U.S. 643, 648-49
(1986)). In deciding this issue, we should apply"ordinary state-law
principles that govern the formation of contracts." Johnson, 148 F.3d
at 377 (quoting First Options of Chicago, Inc. v. Kaplan, 514 U.S.
938, 944 (1995)).
South Carolina law supports the district court's conclusion here. In
recognition of the fact that Mr. Baker did not accept the offer of
employment at the CWH, the district court held that"no employment
agreement came into being following Baker's signing of the applica-
tion form on June 23, 1994." The formation of contracts under South
17
Carolina law "is governed by well-settled principles." Carolina
Amusement Co. v. Connecticut Nat'l Life Ins. Co., 437 S.E.2d 122,
125 (S.C. Ct. App. 1993).
Quite simply, [a] contract exists where there is an agreement
between two or more persons upon sufficient consideration
either to do or not to do a particular act. Stated another way,
there must be an offer and an acceptance accompanied by
valuable consideration.
Id. (internal citations and quotation marks omitted).
When the manager at the Columbia Waffle House offered Mr.
Baker a job, the terms of that offer included the provisions of the
employment application, which Mr. Baker had completed in the res-
taurant on June 23, 1994, while the restaurant manager was sitting
next to him. Those terms were part of the "bargained-for exchange"
offered by the manager of the CWH.5 5 "An offer is the manifestation
of willingness to enter into a bargain, so made as to justify another
person in understanding that his assent to that bargain is invited and
will conclude it." Restatement (Second) of Contracts § 24 (1981); see
also Prescott v. Farmers Tel. Coop., 516 S.E.2d 923, 926 (S.C. 1999).
"The offer identifies the bargained for exchange and creates a power
of acceptance in the offeree." Carolina Amusement, 437 S.E.2d at 125(citations omitted). Without an acceptance of an offer, there can be no
contract. Id.; see also Restatement (Second) of Contracts § 35 cmt. c.
Because Mr. Baker declined to accept the job offered on June 23,
1994, by the manager of the CWH, no employment agreement was
_________________________________________________________________
5 Indeed, at the top of the application in large, bold, capital letters, Waf-
fle House states the following requirement:
MUST BE COMPLETED IN THE RESTAURANT
J.A. 26. The choice of the definite article "the" is telling. Which restau-
rant must the application form be completed in? The answer is obvious
-- the Waffle House restaurant to which the job applicant is applying.
In Mr. Baker's case, he did just what the form required -- he com-
pleted the employment application in the Columbia Waffle House -- the
restaurant to which he was applying when he filled out the application.
18
formed. Id. Under settled legal principles, the terms of the rejected
offer, including the provisions of the employment application, did not
survive the rejection of the offer. Mr. Baker's power of acceptance of
that offer was terminated by his rejection of it. See Restatement (Sec-
ond) of Contracts §§ 36, 38 (when offeree rejects offer, his power of
acceptance is terminated).
When Mr. Baker, three weeks later, travelled to the West Columbia
Waffle House and orally applied for a job there, its manager, Mr.
Bradley, made Mr. Baker an offer for a job as a grill operator at $5.50
an hour. Mr. Baker accepted Mr. Bradley's offer on the spot. There
is no evidence that the provisions of the June 23, 1994 employment
application were adopted, or even discussed, as part of the employ-
ment agreement that came into being three weeks later at the West
Columbia Waffle House. See Player v. Chandler , 382 S.E.2d 891,
893 (S.C. 1989) (a valid and enforceable contract requires "a meeting
of the minds between the parties with regard to the essential and
material terms of the agreement"). Thus, there is no basis for the
majority's conclusion that Mr. Baker agreed to arbitrate claims arising
from his employment at the West Columbia Waffle House.6 6
B.
In its opinion, the majority simply relies on its own assumptions
about corporate practices, as if those are somehow dispositive of the
question whether an agreement to arbitrate has been formed, while
ignoring the district court's factual findings. 7 The majority's holding
-- that the "generic, corporation-wide employment application com-
pleted and signed by Baker, and the arbitration provision it contained,
followed Baker to whichever facility of Waffle House hired him,"
ante at 6 -- creates an unprecedented rule that has disturbing implica-
tions beyond the injustice done to Mr. Baker.
_________________________________________________________________
6 It is undisputed that when Mr. Baker spoke with Mr. Bradley about
a job at the WCWH, Mr. Bradley mentioned neither arbitration nor any-
thing else about the way disputes were settled between Waffle House and
its employees.
7 Indeed, the majority substitutes its assumptions for the district court's
findings, and fails to review or analyze the district court's findings for
clear error. See Section I.
19
Under the rule the majority creates today, the terms contained in
an employment application submitted to one facility in a restaurant
chain, or any other business chain, become binding on the job appli-
cant if she is subsequently hired by another facility in the same chain.
In effect, the terms contained in the employment application, includ-
ing the mandatory arbitration provision, become free-floating, ready
to bind the unsuspecting job applicant whenever and wherever she
might obtain employment with the same chain. It is not surprising that
the majority fails to cite any authority to support its conclusion. As
explained above, the majority's holding is untenable under fundamen-
tal principles of contract law.8 8
_________________________________________________________________
8 In addition, I believe that even under the majority's theory -- that the
employment application "followed" Mr. Baker to the West Columbia
Waffle House -- the arbitration provision would be unenforceable.
First, the arbitration provision mandates that the employee pay one-
half of the costs and expenses of arbitration, see supra note 1 ("The costs
and expenses of the arbitration shall be borne evenly by the parties"). At
least three of our sister circuits have held that a mandatory arbitration
agreement that requires an employee to pay a portion of the arbitrator's
fees is unenforceable under the Federal Arbitration Act. See Shankle v.
B-G Maintenance Mgmt. of Colorado, Inc., 163 F.3d 1230 (10th Cir.
1999); Paladino v. Avnet Computer Techs., Inc. , 134 F.3d 1054 (11th
Cir. 1998); Cole v. Burns Int'l Sec. Servs., 105 F.3d 1465 (D.C. Cir.
1997). These courts reasoned that if an employer requires an employee
to agree to mandatory arbitration as a condition to obtaining or continu-
ing employment, thereby prohibiting the employee from using the judi-
cial forum to vindicate his rights, then the employer must provide an
accessible alternative forum. See, e.g. , Shankle, 163 F.3d at 1235. If an
arbitration agreement requires the employee to pay a portion of the arbi-
trators' fees -- which often may amount to thousands of dollars -- an
accessible forum is, in effect, unavailable, because of the disincentive to
arbitrate created by such fees. Id. Under these circumstances, an
employee like Mr. Baker is unlikely to pursue his statutory claims. See
Cole, 105 F.3d at 1484 (noting that arbitration fees "are unlike anything
that [employee] would have to pay to pursue his statutory claims in
court"). As the Tenth Circuit reasoned, "[s]uch a result clearly under-
mines the remedial and deterrent functions of the federal anti-
discrimination laws." Shankle, 163 F.3d at 1235 (citations omitted).
Second, the mandatory arbitration provision would be unenforceable
because it is so inconspicuous that it failed, as a matter of law, to provide
20
The majority's rule has no temporal or geographical limits. For
example, suppose a student submits an employment application to a
McDonald's in North Carolina, and is offered but declines a position
there. Then, months or years later, she seeks and obtains employment
at a McDonald's in Maryland without submitting another written
employment application. Under the majority's rule, she would be
bound by the terms of the employment application submitted earlier
in North Carolina.
Moreover, if a job applicant wishes to escape the stranglehold of
the "generic, corporation-wide employment application," he must
specify his "intent to limit the application to a particular location."
Ante at 5. The Waffle House application, however, does not request
the applicant to specify which Waffle House locations he is applying
for. And the application form itself clearly assumes that the job seeker
is applying for a position at the restaurant where he obtained and
completed the application. Yet the majority would nonetheless require
the job applicant -- rather than the corporation that drafted the terms
of the employment application -- to specify his intent, which is not
asked for, to limit the application to a particular location. To place
such a duty on job applicants is patently unfair and unwarranted.
Common sense tells us that a person who physically goes to the
Wal-Mart in Lewisburg, West Virginia, is applying for a job at that
Wal-Mart, not one in Richmond, Virginia, or Charlotte, North Caro-
lina, absent express negotiations to the contrary. He would not reason-
ably expect that the employment application submitted to the
_________________________________________________________________
Mr. Baker with sufficient notice that he was waiving his right to a judi-
cial forum for his statutory claims. See Rosenberg v. Merrill Lynch,
Pierce, Fenner & Smith, Inc., 170 F.3d 1, 20-21 (1st Cir. 1999). In
Rosenberg, the First Circuit interpreted the Supreme Court's decision in
Wright v. Universal Maritime Serv. Corp., 525 U.S. 70 (1998), and a
provision of the 1991 Civil Rights Act (which is also included in the
ADA), as requiring that "there be some minimum level of notice to the
employee [who is a party to a private arbitration agreement] that statu-
tory claims are subject to arbitration"). Rosenberg, 170 F.3d at 20-21.
With its buried arbitration provision, Waffle House failed, as a matter of
law, to provide such "minimum level of notice" to Mr. Baker that he was
required to arbitrate his ADA claim. See Rosenberg, 170 F.3d at 20.
21
Lewisburg Wal-Mart would be considered an application to work in
Richmond or Charlotte. The majority sets a trap for the unwary job
applicant by the counterintuitive rule that it has created today.
III.
Because I agree with the district court that there was no agreement
to arbitrate between Waffle House and Mr. Baker, I would affirm its
ruling and permit the EEOC to pursue both injunctive and "make-
whole" relief on behalf of Mr. Baker.
I respectfully dissent.
22