Alford v. Dean Witter Reynolds, Inc. ( 1992 )

United States Court of Appeals,
Fifth Circuit.
No. 91–6208
Summary Calendar.
Joan Chason ALFORD, Plaintiff–Appellant,
v.
DEAN WITTER REYNOLDS, INC. and Don L. Harris, Defendants–Appellees.
Oct. 26, 1992.
Appeal from the United States District Court for the Southern District of Texas.
Before JONES, DUHÉ, and WEINER, Circuit Judges.
DUHÉ, Circuit Judge:
This appeal follows the district court's dismissal with prejudice of Joan Chason Alford's Title
VII lawsuit with an order that her claims be arbitrated. We find no error and affirm.
Background
Joan Chason Alford ("Alford"), Appellant, sued her former employer and supervisor, Dean
Witter Reynolds, Inc. and Don Harris, appellees, alleging discrimination in violation of Title VII.
Dean Witter and Harris demanded that Alford arbitrate her claims based on an arbitration clause in
the broker registration agreements Alford signed with the New York Stock Exchange ("NYSE") and
the National Association of Securities Dealers, Inc. ("NASD"). Alford signed these registration
agreements pursuant to her employment with Dean Witter. Both the district court and this Court
refused Dean Witter and Harris' demand to arbitrate. See Alford v. Dean Witter Reynolds, Inc., 905
F.2d 104 (5th Cir.1990). Dean Witter and Harris sought writs.
Thereafter, the United States Supreme Court decided Gilmer v. Interstate/Johnson Lane
Corp., 500 U.S. ––––, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991). Gilmer presented the same
arbitrability question involved in this case. The Supreme Court in Gilmer ruled that age
discrimination claims are subject to arbitration pursuant to the terms of arbitration agreements such
as those signed by Alford. The Court also held that securities registration applications which contain
arbitration agreements are contracts between the individual and the securities exchanges, and not the
employer. Therefore, such arbitration agreements are not within the Federal Arbitration Act
exclusionary clause and are subject to mandatory arbitration. Gilmer v. Interstate/Johnson Corp.,
––– U.S. at –––– n. 2, 111 S.Ct. at 1651 n. 2.
In light of its decision in Gilmer, the Supreme Court vacated this Court's earlier decision in
Alford v. Dean Witter Reynolds, Inc., 905 F.2d 104 (5th Cir.1990), and remanded this case for
further consideration. Alford v. Dean Witter Reynolds, Inc., ––– U.S. ––––, 111 S.Ct. 2050, 114
L.Ed.2d 456 (1991).
On remand from the Supreme Court, this Court reversed its earlier decision and remanded.
Alford v. Dean Witter Reynolds, Inc., 939 F.2d 229 (5th Cir.1991). This reversal was based on the
similarity between the ADEA claim in Gilmer and the Title VII claim in this case. We also
recognized Gilmer 's rejection of Alexander v. Gardner–Denver Company, 415 U.S. 36, 94 S.Ct.
1011, 39 L.Ed.2d 147 (1974), upon which this Court's original decision was primarily based. Alford
v. Dean Witter Reynolds, Inc., 939 F.2d at 230. Additionally, this Court found that Alford's
arbitration agreement was in a contract between her and the securities exchanges and not in a contract
of employment with Dean Witter, thus holding that Alford's claim was within the ambit of the Federal
Arbitration Act. Id. at 230 n. *. (discussing the exclusionary clause of 9 U.S.C. § 1). See also
Gilmer, ––– U.S. at –––– n. 1, 111 S.Ct. at 1651 n. 1.
Upon remand, the district court granted Dean Witter and Harris' Motion to Dismiss and to
Compel Arbitration. Alford's action was dismissed with prejudice and the parties were ordered to
arbitration within 30 days.
Alford now appeals that decision. We affirm.
Discussion
I.
Alford argues that she was fraudulently induced to enter into employment with Dean Witter
and that the arbitration clauses contained within the brokers registration agreements constitute
adhesion contracts. Because Alford failed to raise these issues before the district court, we need not
consider them on appeal. See Hobbs v. Blackburn, 752 F.2d 1079, 1083 (5th Cir.), cert. denied, 474
U.S. 838, 106 S.Ct. 117, 88 L.Ed.2d 95 (1985). If "consideration of the newly raised issue in the trial
court would have resulted in additional facts being developed there, the rationale for the application
of the general rule applies, and the issue will not be considered by the appellate court." Volkswagen
of Am., Inc. v. Robertson, 713 F.2d 1151, 1166 (5th Cir.1983); see also U.S. v. Bigler, 817 F.2d
1139, 1140 (5th Cir.1987). "We will consider an issue raised for the first time on appeal only if the
issue is purely a legal issue and if consideration is necessary to avoid a miscarriage of justice. (citing
In re Johnson, 724 F.2d 1138, 1140 (5th Cir.1984)). We will not allow a party to raise an issue for
the first time on appeal merely because the party thinks that he or she might prevail if given the
opportunity to try the case again on a different theory. (citing Holiday Inns, Inc. v. Alberding, 683
F.2d 931, 934 (5th Cir.1982))." In re Goff, 812 F.2d 931, 933 (5th Cir.1987).
The only claims raised before the district court were Alford's Title VII claims. Alford
provides no explanation as to why her claims of fraud and adhesion could not have been asserted in
the initial action. As Alford herself contends, these issues require factual determinations, therefore
do not fall within the "pure question of law" exception.
Finally, although Alford's claims are similar to those claims raised in Mago v. Shearson
Lehman Hutton, Inc., 956 F.2d 932 (9th Cir.1992), in which the Ninth Circuit held that an adhesion
contract is not subject to arbitration, the plaintiff in Mago raised the issue of adhesion in the district
court. Id. at 934. Alford, t o the contrary, failed to raise this issue in the district court, and is
therefore precluded from raising it here.
II.
Seco nd, Alford argues that Dean Witter has waived the right to arbitration by filing a
counterclaim in the currently pending arbitration proceeding. The actions of Dean Witter during the
arbitration proceeding occurred after the district court dismissed the case, were never considered by
the district court and are not properly before this court. As the issue of waiver involves a
determination of fact and is not "purely a legal issue"1, we will not consider this issue on appeal.
III.
Alford also argues that the district court improperly ordered her to arbitrate claims relating
solely to her employment which are not subject to arbitration under the holding of Gilmer. We
disagree. Although Alford asserts that cert ain state law claims were to be litigated in the federal
action, the only claims actually filed in the district court were Alford's Title VII claims. Therefore,
these state law claims assert ed by Alford are not properly before this Court and will not be
considered. See discussion in I. above. Additionally, this Court has already held that Alford's Title
VII claims are properly subject to arbitration under the analysis in Gilmer, and that the securities
registration application containing the arbitration agreement was a contract between Alford and the
securities exchanges, and not a contract with her employer. Alford v. Dean Witter Reynolds, Inc.,
939 F.2d at 230. As a result, reconsideration of this issue is foreclosed by this Court's decision in the
previous appeal.
IV.
Finally, Alford argues that the district court's dismissal with prejudice of her claims is
contrary to the precise terms of Section 3 of the Federal Arbitration Act. Section 3 provides that
1
See discussion I above.
when claims are properly referable to arbitration, that upon application of one of the parties, the court
shall stay the trial of the action until the arbitration is complete. 9 U.S.C. § 3. As correctly asserted
by Alford, a stay is mandatory upon a showing that the opposing party has commenced suit "upon
any issue referable to arbitration under an agreement in writing for such arbitration...."2 Thus, the
court may not deny a stay in such a situation. This rule, however, was not intended to limit dismissal
of a case in the proper circumstances. The weight of authority clearly supports dismissal of the case
when all of the issues raised in the district court must be submitted to arbitration. Sea–Land Service,
Inc. v. Sea–Land of P.R., Inc., 636 F.Supp. 750, 757 (D.Puerto Rico 1986); Sparling v. Hoffman
Const. Co., Inc., 864 F.2d 635, 638 (9th Cir.1988) (expressly holding that 9 U.S.C. § 3 does not
preclude dismissal); Hoffman v. Fidelity and Deposit Co. of Maryland, 734 F.Supp. 192, 195
(D.N.J.1990); Dancu v. Coopers & Lybrand, 778 F.Supp. 832, 835 (E.D.Pa.1991). As stated in
Sea–Land:
Although we understand that plaintiff's motion to compel arbitration must be granted,
we do not believe the proper course is to stay the action pending arbitration. Given our ruling
that all issues raised in this action are arbitrable and must be submitted to arbitration, retaining
jurisdiction and staying the action will serve no purpose. Any post-arbitration remedies
sought by the parties will not entail renewed consideration and adjudication of the merits of
the controversy but would be circumscribed to a judicial review of the arbitrator's award in
the limited manner prescribed by law. See 9 U.S.C. sections 9–12; ....
Sea–Land, 636 F.Supp. at 757. Because it determined that all of Alford's claims were subject to
arbitration, the district court acted within its discretion when it dismissed this case with prejudice.
V.
Dean Witter and Harris request this Court to assess damages/sanctions against Alford
individually, or jointly against her and her appellate counsel pursuant to Rule 38 of the Rules of
Appellate Procedure, 28 U.S.C. § 1912 and 28 U.S.C. § 1927. This request is denied.
This district court correctly dismissed Alford's claims and ordered arbitration. The judgment
2
Campeau Corp. v. May Dept. Stores Co., 723 F.Supp. 224 (S.D.N.Y.1989).
of the district court is
AFFIRMED.