Rojas v. TK Communications, Inc. ( 1996 )

United States Court of Appeals,
Fifth Circuit.
No. 95-50882.
Summary Calendar.
Camille ROJAS, Plaintiff-Appellant,
v.
TK COMMUNICATIONS, INC., d/b/a KXTN Radio Station and Tichenor
Media Systems, Inc., d/b/a KXTN Radio Station, Defendants-
Appellees.
July 11, 1996.
Appeal from the United States District Court for the Western
District of Texas.
Before WIENER, EMILIO M. GARZA and PARKER, Circuit Judges.
ROBERT M. PARKER, Circuit Judge:
FACTS
In 1991, Camille Rojas was employed as a disc jockey by TK
Communications Inc. ("TK"), which operated KXTN radio station in
San Antonio, Texas. During her tenure at the station, Rojas
alleges that she was sexually harassed by her supervisor, Jesse
Arce. Despite her complaints, Rojas alleges that TK never took
corrective action and that Arce and another supervisor retaliated
against her because of her complaints. Rojas resigned from
employment with KXTN on December 22, 1991.
While working at the radio station, Rojas executed an
employment agreement with her employer. Paragraph 23 of that
agreement provides, in pertinent part, as follows:
23. Arbitration Except for breaches or threatened breaches of
the provisions of Paragraphs 15 through 18 relating to
equitable relief, any action contesting the validity of this
1
Agreement, the enforcement of its financial terms, or other
disputes shall be submitted to arbitration pursuant to the
American Arbitration Association in Ft. Lauderdale,
Florida....
Despite this arbitration clause, Rojas commenced this lawsuit
against TK and Tichenor Media Systems, Inc., ("Tichenor").1
PROCEEDINGS BELOW
In her original petition, Rojas alleged that she was subjected
to sexual harassment and retaliation by TK for having complained of
the alleged sexual harassment, in violation of Title VII of the
Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e et seq.
Rojas joined Tichenor as a defendant under a theory of
successorship liability. TK and Tichenor filed their answers,
denying Rojas' allegations.
TK then sought to dismiss the action on the ground that Rojas'
claims were subject to the mandatory arbitration clause in her
employment agreement. Tichenor filed a motion for summary judgment
claiming that it had no successor liability in connection with
Rojas' underlying claim.
On October 30, 1995, the district court granted TK's motion to
dismiss and Tichenor's motion for summary judgment. The court
first ruled that Rojas must arbitrate her claims against TK in
accordance with the arbitration clause in her employment agreement.
The court further held that, as a matter of law, Tichenor had no
liability to Rojas as a successor to TK. This appeal followed.
DISCUSSION
1
Tichenor purchased KXTN from TK in June of 1993.
2
I. Standard of Review
The district court's dismissal of Rojas' claims and grant of
summary judgment are subject to de novo review. Burns-Toole v.
Byrne, 11 F.3d 1270 (5th Cir.1994) (internal citation omitted). A
district court's grant of summary judgment is proper when "there is
no genuine issue as to any material fact" and "the moving party is
entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The
evidence presented to the trial court is viewed in a light most
favorable to the nonmovant. Hassan v. Lubbock Indep. Sch. Dist.,
55 F.3d 1075, 1078 (5th Cir.1995).
II. Arbitration
The district court concluded that Rojas' Title VII claims were
subject to compulsory arbitration. Rojas challenges this
conclusion on several grounds. First, she claims that Title VII
claims fall within the Federal Arbitration Act's ("FAA") "contracts
of employment" exclusion. Therefore, she contends she is not
required to arbitrate her claims. In the alternative, she argues
that even if her claims are not within the FAA's exclusion, the
contract in question contains a narrow arbitration clause which is
inapplicable to her claims. Finally, she contends that the
employment agreement in question is an unconscionable contract of
adhesion and is therefore unenforceable. We address each of these
arguments below.
A. Arbitrability of Title VII Claims
Under the FAA, "[a] written provision in ... a contract
evidencing a transaction involving commerce to settle by
3
arbitration a controversy thereafter arising out of such contract
... shall be valid, irrevocable, and enforceable, save upon such
grounds as exist at law or in equity for the revocation of any
contract." 9 U.S.C. § 2. None of the parties disputes that Rojas'
contract with TK for employment as a disc jockey is one "involving
commerce" within the meaning of § 2 of the FAA. However, Rojas
contends that her employment contract is excluded from the FAA's
coverage.
Section 1 of the FAA provides, in pertinent part: "but
nothing herein contained shall apply to contracts of employment of
seamen, railroad employees, or any other class of workers engaged
in foreign or interstate commerce." 9 U.S.C. § 1 et seq. Arguing
for a broad reading of this section, Rojas contends that because
she is a worker engaged in interstate commerce, the FAA does not
apply to her contract of employment. We disagree.
In 1991, the Supreme Court held that an employee, who agreed
to arbitrate claims arising out of his employment, was required to
arbitrate a claim under the Age Discrimination in Employment Act
("ADEA"), 29 U.S.C. § 621 et seq., and therefore was barred from a
federal court lawsuit. Gilmer v. Interstate/Johnson Lane Corp.,
500 U.S. 20, 111 S. Ct. 1647, 114 L. Ed. 2d 26 (1991). Following
Gilmer this court held that Title VII claims must likewise be
arbitrated. In Alford v. Dean Witter Reynolds, Inc., 939 F.2d 229
(5th Cir.1991), an employee sued under Title VII for discriminatory
discharge. Although the employee was subject to an arbitration
agreement, the district court refused to dismiss the case or to
4
compel arbitration. This court affirmed. However, the Supreme
Court subsequently vacated our affirmance and remanded for further
consideration in light of Gilmer, supra. Relying on Gilmer, we
held that the employee's Title VII claim must be arbitrated:
Because both the ADEA and Title VII are similar civil rights
statutes, and both are enforced by the EEOC ... we have little
trouble concluding that Title VII claims can be subjected to
compulsory arbitration. Any broad public policy arguments
against such a conclusion were necessarily rejected by Gilmer.
939 F.2d at 230. While the preceding statement would appear to
dispose of the issue presently before the court, we must address a
distinction between the facts of the instant case and those present
in both Gilmer and Alford.
In Gilmer the Supreme Court noted:
[I]t would be inappropriate to address the scope of the § 1
exclusion because the arbitration clause being enforced here
is not contained in a contract of employment. The FAA
requires that the arbitration clause being enforced be in
writing. See 9 U.S.C. §§ 2, 3. The record before us does not
show, and the parties do not contend, that Gilmer's employment
agreement with [his employer] contained a written arbitration
clause. Rather, the arbitration clause at issue in Gilmer's
securities registration application, which is a contract with
the securities exchanges, not with [his employer]....
Consequently, we leave for another day the issue [of whether
§ 1 excludes from the FAA all "contracts of employment"].
Gilmer, 500 U.S. at 24 n. 1, 111 S. Ct. at 1651 n. 1.
Similarly, in Alford, a case that also dealt with an
arbitration clause contained in a contract between an employee and
a securities exchange rather than an employer, we noted that the
Supreme Court had expressly refused to address the issue now before
the court. See Alford, 939 F.2d at 230 n. * (noting that courts
should be mindful of the potential issue presented by the
exclusionary language present in § 1 of the FAA when dealing with
5
arbitration clauses contained in employment contracts between
employers and employees). Consequently, we must determine the
scope of the exclusionary language present in § 1.
We are not the first to address the scope of the exclusions
present in § 1. In fact, numerous other courts have addressed this
very issue, the majority of which have determined that the
exclusionary language present in § 1 is to be narrowly construed.2
Particularly persuasive is a recent opinion from the Sixth Circuit.
In Asplundh Tree Expert Co. v. Bates, 71 F.3d 592 (6th
Cir.1995), the court, after a thorough analysis of the treatment of
this issue by its sister circuits, came to the following
conclusion:
[T]he exclusionary clause of § 1 of the Arbitration Act should
be narrowly construed to apply to employment contracts of
seamen, railroad workers, and any other class of workers
actually engaged in the movement of goods in interstate
commerce in the same way that seamen and railroad workers are.
We believe this interpretation comports with the actual
language of the statute and the apparent intent of the
Congress which enacted it. The meaning of the phrase "workers
engaged in foreign or interstate commerce" is illustrated by
the context in which it is used, particularly the two specific
examples given, seamen and railroad employees, those being two
classes of employees engaged in the movement of goods in
commerce.
2
See Miller Brewing Co. v. Brewery Workers Local Union No.
9, 739 F.2d 1159, 1162 (7th Cir.1984) (§ 1 exclusion is limited
to workers employed in the transportation industries or engaged
in the actual movement of goods in interstate commerce), cert.
denied 469 U.S. 1160, 105 S. Ct. 912, 83 L. Ed. 2d 926 (1985);
Erving v. Virginia Squires Basketball Club, 468 F.2d 1064, 1069
(2d Cir.1972) (same); Dickstein v. duPont, 443 F.2d 783, 785
(1st Cir.1971) (same); Tenney Eng'g, Inc. v. United Elec. Radio
& Mach. Workers, 207 F.2d 450, 453 (3d Cir.1953) (same); But see
Willis v. Dean Witter Reynolds, Inc., 948 F.2d 305, 310-11 (6th
Cir.1991) (dicta); Pritzker v. Merrill Lynch, Pierce, Fenner &
Smith, Inc., 7 F.3d 1110, 1119-20 (3d Cir.1993).
6
Asplundh, 71 F.3d at 601.
If Congress had intended to exclude all contracts of
employment from FAA coverage, Congress could simply have used
statutory language in § 1 similar to the following: "... but
nothing herein contained shall apply to any contracts of
employment." Congress did not do this. As another court has
noted, "[i]t is quite impossible to apply a broad meaning to the
term "commerce' in Section 1 and not rob the rest of the exclusion
clause of all significance." Albert v. National Cash Register Co.,
874 F. Supp. 1324, 1327 (S.D.Fla.1994). We agree with the majority
of other courts which have addressed this issue and conclude that
§ 1 is to be given a narrow reading. Therefore, we find that the
district court was correct when it determined that Rojas'
employment contract was subject to the requirements of the FAA.
B. Applicability of the Arbitration Clause in Question
Next, Rojas argues that even if her claim is not excluded
from the FAA's coverage, her claim is not within the "narrow
language" of the arbitration clause in her contract. The clause at
issue covers "any action contesting the validity of this Agreement,
the enforcement of its financial terms, or any other disputes."
(emphasis added).
Whenever the scope of an arbitration clause is in question,
the court should construe the clause in favor of
arbitration.... "The [FAA] establishes that, as a matter of
federal law, any doubts concerning the scope of arbitrable
issues should be resolved in favor of arbitration, whether the
problem at hand is the construction of the contract language
itself or an allegation of waiver, delay or a like defense to
arbitrability."
City of Meridian, Miss. v. Algernon Blair, Inc., 721 F.2d 525, 527-
7
28 (5th Cir.1983) (quoting Moses H. Cone Memorial Hosp. v. Mercury
Constr. Corp., 460 U.S. 1, 24-250, 103 S. Ct. 927, 941-42, 74
L. Ed. 2d 765 (1983)). Contrary to Rojas' attempt to characterize
the arbitration clause as "narrow", we conclude that the district
court was correct when it found that "any other disputes" was
sufficiently broad to encompass Rojas' Title VII claims. See also
Crawford v. West Jersey Health Sys., 847 F. Supp. 1232, 1243
(D.N.J.1994) (Title VII claim encompassed by arbitration clause
requiring arbitration of " "any dispute ... regard[ing] the
interpretation or performance of any part of this Agreement' ");
DiCrisci v. Lyndon Guar. Bank, 807 F. Supp. 947, 950-51
(W.D.N.Y.1992) (Title VII claims encompassed by arbitration clause
requiring arbitration of "any dispute").
C. Unconscionability of Agreement
Rojas' claim that the employment agreement is an
unconscionable contract of adhesion is an attack on the formation
of the contract generally, not an attack on the arbitration clause
itself.3 Because her claim relates to the entire agreement, rather
than just the arbitration clause, the FAA requires that her claims
be heard by an arbitrator. See R.M. Perez & Assoc., Inc. v. Welch,
3
In her brief, Rojas contends that her attack on the
Agreement is limited to the arbitration clause. While we
acknowledge that she specifically attacks the arbitration clause,
she also contends that she signed the Agreement "[b]ased upon the
Defendant's representations ... [that the Agreement's] coverage
[would] be limited to situations such as non-competition, payola,
and intellectual property rights." Appellant's Brief at 18. She
also attacks the agreement based upon "inequality of bargaining
power". Id. These assertions belie Rojas' contention that her
attack is limited to the arbitration clause and they support our
conclusion that her attack is directed at the entire agreement.
8
960 F.2d 534, 538 (5th Cir.1992).
III. Successor Liability4
Under general contract principles, there is no dispute that
Tichenor did not assume liability on Rojas' claim. Rojas does not
dispute that, in its asset purchase agreement with TK, Tichenor
expressly excepted Rojas' claim against TK when it assumed certain
pre-transfer obligations of TK.
The liability that Rojas seeks to establish against Tichenor,
however, does not arise from contract. The successorship doctrine
is derived from labor law principles enunciated in four Supreme
Court cases: John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543,
84 S. Ct. 909, 11 L. Ed. 2d 898 (1964), NLRB v. Burns International
Security Servs., Inc., 406 U.S. 272, 92 S. Ct. 1571, 32 L. Ed. 2d 61
(1972), Howard Johnson Co. v. Detroit Local Joint Executive Bd.,
417 U.S. 249, 94 S. Ct. 2236, 41 L. Ed. 2d 46 (1974), and Fall River
Dyeing & Finishing Corp. v. NLRB, 482 U.S. 27, 107 S. Ct. 2225, 96
L. Ed. 2d 22 (1987). See Southward v. South Cent. Ready Mix Supply
Corp., 7 F.3d 487, 493 (6th Cir.1993).
Wiley held that a successor employer will have a duty to
arbitrate under a preexisting collective bargaining agreement when
there is "substantial continuity" in the business enterprise before
and after a change in ownership. 376 U.S. at 551, 84 S.Ct. at 915.
In Burns, the Court ruled that, even though a successor employer
4
Finding that we are in agreement with the district court on
this issue, we have adopted, and will simply restate the relevant
portions of the district court's analysis of Tichenor's successor
liability.
9
may be required to recognize and bargain with a union under the
reasoning in Wiley, it is not bound to the substantive terms of a
preexisting collective bargaining agreement. 406 U.S. at 277-90,
92 S.Ct. at 1576-84. In Howard Johnson, the Court further limited
Wiley by holding that a successor employer by way of sale of
assets, as opposed to a merger transaction as in Wiley, was not
bound to arbitrate a grievance. 417 U.S. at 257-59, 94 S.Ct. at
2240-42. Finally, in Fall River Dyeing, the Court reaffirmed Burns
holding that a new employer was free to disregard the terms of its
predecessor's collective bargaining agreement in hiring the
predecessor's employees and that it had no duty to arbitrate unless
there was substantial continuity between the former and latter's
business operations. 482 U.S. at 40, 43-47, 107 S. Ct. at 2234,
2236-38. See generally, Southward, 7 F.3d at 493-96.
Although developed in the context of labor relations, the
doctrine of successor liability has been extended to claims
asserted under Title VII and related statutes. As one court
explained,
the successor doctrine arises in the context of discrimination
cases in situations where the assets of a defendant employer
are transferred to another entity. Thus, the purpose of the
doctrine is to ensure that an employee's statutory rights are
not "vitiated by the mere fact of a sudden change in the
employer's business." The doctrine allows the aggrieved
employee to enforce against the successor a claim he could
have secure against the predecessor.
Thus, applicability of the doctrine hinges on the need to
protect a plaintiff where the offending entity is substituted
by another company.
Brennan v. Nat'l Tel. Directory Corp., 881 F. Supp. 986, 992
(E.D.Pa.1995) (citations omitted).
10
In EEOC v. MacMillan Bloedel Containers, Inc., 503 F.2d 1086,
1094 (6th Cir.1974), the court identified nine factors to be
considered in determining whether successor liability should be
imposed in a discrimination case. These factors are:
(1) whether the successor company had notice of the charge or
pending lawsuit prior to acquiring the business or assets of
the predecessor; (2) the ability of the predecessor to
provide relief; (3) whether there has been a substantial
continuity of business operations; (4) whether the new
employer uses the same plant; (5) whether he uses the same or
substantially the same work force; (6) whether he uses the
same or substantially the same supervisory personnel; (7)
whether the same jobs exist under substantially the same
working conditions; (8) whether he uses the same machinery,
equipment, and methods of production; and (9) whether he
produces the same product.
Musikiwamba v. ESSI, Inc., 760 F.2d 740, 750 (7th Cir.1985)
(paraphrasing MacMillan ). This court agrees with Musikiwamba that
the first two factors are critical. Id. The remaining seven
simply "provide a foundation for analyzing the larger question of
whether there is a continuity in operations and the work force of
the successor and predecessor employers," as required by Wiley and
its progeny. Id. at 751; see also Bates v. Pacific Maritime
Ass'n, 744 F.2d 705, 709-10 (9th Cir.1984) (three factors governing
successor liability determination are (1) continuity in operations
and workforce, (2) notice of the claim, and (3) ability of
predecessor employer to provide relief); Preyer v. Gulf Tank &
Fabricating Co., 826 F. Supp. 1389, 1395 (N.D.Fla.1993); cf.
Criswell v. Delta Air Lines, Inc., 868 F.2d 1093, 1095 (9th Cir.)
(applying Bates factors in age discrimination case), cert. denied,
489 U.S. 1066, 109 S. Ct. 1342, 103 L. Ed. 2d 811 (1989).
The policy underlying the successor doctrine—to protect an
11
employee when the ownership of his employer suddenly changes—is not
served by imposing liability on Tichenor in this case. Although
Tichenor had notice of Rojas' claim and continued to operate KXTN
in much the same way as TK, TK is still a viable entity. Tichenor
submitted uncontroverted evidence on summary judgment that,
although TK has sold the assets of KXTN, it still operates five
other radio stations, including one in Dallas. Moreover, Rojas
does not seek reinstatement in this action and has, in fact,
rejected Tichenor's offer for reemployment at KXTN under conditions
designed to prevent further harassment. Under these circumstances,
it would be unjust to impose liability on Tichenor for the mere
purpose of enhancing Rojas' ability to collect a money judgment.
See Musikiwamba, 760 F.2d at 750-751; Brennan, 881 F. Supp. at 992;
Brown v. Evening News Ass'n, 473 F. Supp. 1242 (E.D.Mich.1979).
Compare Bates, 744 F.2d at 710 (fact that predecessor still a
viable entity less relevant where plaintiffs sought classwide
relief rather than only monetary and injunctive relief as
individuals). Accordingly, we find that the district court did not
err when it granted Tichenor's motion for summary judgment on the
issue of successor liability.
CONCLUSION
For the foregoing reasons, the judgment of the district court
is AFFIRMED.
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