Garcia v. Houston NW Medical

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 95-20481
_____________________
CATALINA GARCIA; AGNES L MANNING; DONNA R. BROWN;
JACQUELINE R GIBSON
Plaintiffs - Appellees,
v.
HOUSTON NORTHWEST MEDICAL CENTER INC
Defendant - Appellant
------------------------------
GENEVA CHATMAN
Plaintiff - Appellee
v.
HOUSTON NORTHWEST MEDICAL CENTER INC
Defendant - Appellant
------------------------------
MARY J WRIGHT
Plaintiff - Appellee
v.
HOUSTON NORTHWEST MEDICAL CENTER INC
Defendant - Appellant
------------------------------
THERESA KENNEY; RONALD DOLBY; JANIS FOSTER; STELLA
CHAMBERS; ELTON CRAWFORD; CYNTHIA EDWARDS; GLORIA
ROBERTS FORD; GLORIA HERRERA; DUANA HILL; ANGELA
JACKSON; VICKIE MOORE HARRIS; LA RHONDA PETITT; SOCCORA
DAVID POWELL; ANA RIVAS; HORTENCIA ROSALES; ADELINA
SERRATO; MARILYN SIMMONS; VERONDA HEARNE STEWART;
SHARON STEWART; MARTHA VALLEJO; JANICE WEBSTER; MELROSE
WEDDERBURN; PAULA SAMUELS; SHELLENA WOFFORD; SHIRLEY
BOLDEN; DORIS DURHAM; FRED GARZA; JUDY LAWSON; ESTER
MORRIS; DONNA OWENS; JOSEPH OZENNE; JEAN RUNCIE;
Plaintiffs - Appellees
v.
HOUSTON NORTHWEST MEDICAL CENTER INC
Defendant - Appellant
------------------------------
WILLIE J SKIPPER
Plaintiff - Appellee
v.
HOUSTON NORTHWEST MEDICAL CENTER INC
Defendant - Appellant
------------------------------
PATRICIA REYES; DELINDA ROGERS; ANTHONY SMITH; CYNTHIA
VAUGHN; MANUELA SILVA; CAROLYN MCCRAY; SHARI PATTERSON;
VESHAE WILLIS; LUPE STOUGHTON; BETTY HOPSON; KATIE
VASSER; DIANE HAYNES; JANE DOE; THELMA DEMERY; REA
MACHETTE; JOAN PRINCE; LOTTIE SEWELL; EULA SHORTER;
EDDIE SIMLIN; GEORGE SINGLETON; EUNICE TAYLOR;
Plaintiffs - Appellees
v.
HOUSTON NORTHWEST MEDICAL CENTER INC
Defendant - Appellant
------------------------------
HATTIE D FREENY
Plaintiff - Appellee
v.
HOUSTON NORTHWEST MEDICAL CENTER INC
2
Defendant - Appellant
------------------------------
MARTHA UDDIN
Plaintiff - Appellee
v.
HOUSTON NORTHWEST MEDICAL CENTER INC
Defendant - Appellant
------------------------------
VICKIE HARRIS-MOORE
Plaintiff - Appellee
v.
HOUSTON NORTHWEST MEDICAL CENTER INC
Defendant - Appellant
------------------------------
PAMELA C MOSQUERA; SHARON BOOKMAN; MIGUEL MARTINEZ;
VANESSA MARTIN; CARMEN MERCHAN; BENNIE STEWART; SAKENNA
REED; BETTY SHEPARD; GLORIA SPURLOCK
Plaintiffs - Appellees
V.
HOUSTON NORTHWEST MEDICAL CENTER INC
Defendant - Appellant
------------------------------
ELEANOR C TONGEE
Plaintiff - Appellee
v.
HOUSTON NORTHWEST MEDICAL CENTER INC
Defendant - Appellant
3
------------------------------
MARIE H MCCULLOUGH
Plaintiff - Appellee
v.
HOUSTON NORTHWEST MEDICAL CENTER INC
Defendant - Appellant
------------------------------
PEGGY MIGGINS
Plaintiff - Appellee
v.
HOUSTON NORTHWEST MEDICAL CENTER INC
Defendant - Appellant
------------------------------
GAMSTER W FRANKLIN; CLAUDETTE B WAIR; ANNETTE REED
SURGERS; VERONICA THOMAS; KEITH A DENMAN; CHERYL
CHATMAN; GERTRUDE M PERRY; CAROL BEATRICE JOHNSON-
GREENE; MARGARET WILLIAMS; FURNELL BROWN; JOYCE A
SCOTT; ANN HUTCHINS; MARILYN ROBERTS; JUDY EDISON
Plaintiffs - Appellees
v.
HOUSTON NORTHWEST MEDICAL CENTER INC
-------------------------------
DAVID SALDANA
Plaintiffs - Appellees
v.
HOUSTON NORTHWEST MEDICAL CENTER INC
Defendant - Appellant
4
_________________________________________________________________
Appeal from the United States District Court
for the Southern District of Texas
_________________________________________________________________
April 5, 1996
Before KING, WIENER, and BENAVIDES, Circuit Judges.
PER CURIAM:*
Houston Northwest Medical Center (the "Hospital") appeals
the order denying its motion to stay the action brought by the
appellees pending arbitration. For the reasons assigned, we
vacate and remand.
I. FACTUAL AND PROCEDURAL BACKGROUND
On October 4, 1984, EEOC Commissioner Fred W. Alvarez filed
an administrative charge of discrimination against the Hospital.
The resulting investigation culminated in a decision by the EEOC
finding reasonable cause to believe that certain allegations in
the charge were true.
The EEOC entered into a conciliation agreement (the
"Agreement") with the Hospital on May 25, 1990. The Agreement
was intended to remain in effect for three years. It contained
two primary components: affirmative action and reporting
requirements, and procedures for evaluating individual claims of
disparate treatment and implementing appropriate remedies if the
claimants met the specified criteria. The section of the
*
Pursuant to Local Rule 47.5, the court has determined
that this opinion should not be published and is not precedent
except under the limited circumstances set forth in Local Rule
47.5.4.
5
Agreement that outlined the individual claims procedure included
an arbitration clause providing that, "[i]f any dispute arises
between the Company and the Commission in determining the
validity of a claim, an independent Arbitrator shall make the
final and binding determination."
The Agreement also contained a separate section addressing
dispute resolution. The dispute resolution section began with a
subsection stating, "[i]f any dispute arises between the Company
and the Commission . . . the Arbitrator(s) shall make the final
binding determination by reference to the standards of review set
forth herein." The dispute resolution section went on in another
subsection to provide that "[i]t is expressly agreed that if
either party concludes that this Agreement has been materially
breached, that party may bring an action in the appropriate
federal court to specifically enforce this Agreement." This
provision was followed by a series of conditions, including
communication of a notice of noncompliance by the party alleging
breach of the Agreement to the other party and attempted dispute
resolution through "discussion, conference, investigation,
correspondence, and other appropriate means," which were required
to be satisfied before either party could bring suit on the
Agreement.
Pursuant to the terms of the Agreement, the Hospital
identified 2,887 members of the aggrieved class covered by the
Commissioner's charge, mailed notices to them explaining their
rights under the Agreement, and provided the EEOC with
6
information on each class member. Of this group, 369 persons
filed claims under the Agreement. In June 1994, the EEOC
concluded that the Hospital had breached the Agreement and
responded by issuing Notices of Right to Sue to the class members
previously named by the Hospital.
On July 1, 1994, Catalina Garcia, who had previously
received notice that she was part of the aggrieved class under
the Commissioner's charge and had filed a claim under the
Agreement, filed a complaint in federal district court alleging
that the Hospital had discriminated against her and a class of
similarly situated persons in violation of Title VII, 42 U.S.C. §
2000e et seq., and 42 U.S.C. § 1981. Two months later, Garcia
amended the complaint to include Donna R. Brown, Jacqueline R.
Gibson, and Agnes L. Manning as named plaintiffs. She later
amended her complaint a second time to include a breach of
contract claim based upon the Agreement.
The Hospital filed a motion to stay the litigation pending
arbitration pursuant to § 3 of the Federal Arbitration Act, 9
U.S.C. § 1 et seq. Without addressing its merits, the district
court denied the motion.1 Upon several motions by the Hospital,
the district court subsequently consolidated the actions of all
individuals who had brought racial and national origin
discrimination claims against the Hospital (collectively
1
The district court later stated, "It's not that I don't
think it's meritorious; it's that I can't determine whether or
not it's meritorious under the circumstances, at this point
anyway."
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"appellees") with the action by Garcia, Brown, Gibson, and
Manning designated as lead case.
Prior to consolidation, Garcia, Brown, Gibson, and Manning
had moved for class certification, and class certification
hearings were held in November 1994. In spite of the Hospital's
opposition to class certification, the court certified three
classes of plaintiffs: African-Americans and Hispanics denied
employment, African-Americans and Hispanics denied promotions,
and African-Americans terminated allegedly because of their race.
The certified classes were broader than the class covered by the
Agreement, because, in addition to those covered by the
Agreement, the certified classes included persons denied
promotions and persons denied employment or terminated after the
Agreement became effective on July 26, 1990.
The Hospital renewed its motion for a stay pending
arbitration. The court denied the motion, and the Hospital
timely appealed.
II. ANALYSIS
The district court's order denying the Hospital's motion to
stay litigation of this action pending arbitration consisted of
one sentence and contained no factual conclusions or legal
analysis. As such, the order is effectively unreviewable.
Without expressing any opinion as to the proper resolution of the
Hospital's motion, we vacate the district court's order and
8
remand with instructions to reconsider and provide detailed
reasons for whatever conclusion the court ultimately reaches.
In order to be reviewable, the district court's ruling on
the Hospital's motion to stay must address two primary issues.
First, it must determine arbitrability, i.e., the scope of the
Agreement and whether its arbitration provisions bind any of the
class members with respect to their contractual or statutory
claims. Second, the court must address the appellees' argument
that the arbitration provisions of the Agreement did not survive
the Agreement's termination.
A. Scope of the Agreement
Resolution of the Hospital's motion will require a detailed
series of conclusions relating to the scope of the Agreement and
the meaning and effect of its dispute resolution provisions.
Under the FAA, the scope of the Agreement is governed by
state contract law to the extent that the applicable state
contract law does not treat arbitration agreements any
differently than other contracts. See Perry v. Thomas, 482 U.S.
483, 492 n.9 (1987); Progressive Cas. Ins. Co. v. C.A.
Reasegurado Nacional De Venezuela, 991 F.2d 42, 46 (2nd Cir.
1993). "When deciding whether the parties agreed to arbitrate a
certain matter . . ., courts generally . . . should apply
ordinary state-law principles that govern the formation of
contracts." First Options of Chicago, Inc. v. Kaplan, 115 S. Ct.
1920, 1924 (1995). In determining the scope and effect of the
9
Agreement, the district court should analyze the appellees'
contract and statutory claims independently.
1. Contract claims
Given that the Agreement is a contract between the EEOC and
the Hospital, any recovery on the part of the appellees under the
Agreement will be predicated upon a determination that the
appellees are third party beneficiaries of the contract. Under
Texas contract law, third party beneficiaries of a contract may
acquire no greater rights than the promisee under the contract.
See S & H Supply Co. v. Hamilton, 418 S.W.2d 489, 493 (Tex.
1967). The third party beneficiary stands in the shoes of the
contracting party in seeking performance. United States v.
Industrial Crane & Mfg. Corp., 492 F.2d 772, 774 (5th Cir. 1974).
Thus, if the district court determines that any of the appellees
are third party beneficiaries of the Agreement, then it must
determine the scope of the EEOC's rights under the Agreement in
order to determine whether arbitration is a condition precedent
to the recovery of those appellees under the Agreement.
A determination of the arbitrability of the appellees'
claims under the Agreement will require the resolution of a
number of subsidiary issues. First, the district court must
determine the scope and effect of each of the arbitration
provisions in the Agreement, bearing in mind that it should avoid
interpreting any provision of the contract in a manner that
renders any other provision meaningless. See R & P Enterprises
10
v. LaGuarta, Gavrel, & Kirk, Inc., 596 S.W.2d 517, 518-19 (Tex.
1980).
Second, as noted above, the dispute resolution portion of
the Agreement contained a provision outlining the parties' rights
to sue for breach of the Agreement. The district court must
determine whether the EEOC's right to sue for breach of the
Agreement under this provision, as opposed to its obligation to
arbitrate under other provisions of the Agreement, also
constitutes a right for the appellees to sue for breach of the
Agreement as third party beneficiaries.
2. Statutory claims
In determining whether any of the appellees' statutory
claims under Title VII and § 1981 are arbitrable, the district
court should express its interpretation of the language of § 102
D of the Agreement, which provides that
[t]his agreement resolves all issues between the Commission
and . . . [the Hospital] arising out of charge numbers
064850084 and 064841059 as to acts and practices occurring
prior to the effective date of this agreement.
The court should determine (1) whether any of the statutory
claims constitute "issues between the Commission" and the
Hospital arising out of the identified charges, and (2) whether
the Agreement is legally capable of binding the appellees with
respect to their attempts to vindicate their statutory rights.
a. Title VII
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In determining the legal effect of the Agreement on the
appellees' Title VII claims, the court should bear in mind that a
ripe Title VII action requires the filing of an administrative
charge of discrimination with the EEOC and a timely claim in
federal district court once the EEOC issues a Notice of Right to
Sue. See BARBARA L. SCHLEI & PAUL GROSSMAN, EMPLOYMENT DISCRIMINATION LAW
1092-93 (2d ed. 1990). Before issuing a Notice of Right to Sue,
the EEOC must attempt conciliation with the party against whom
the charge is made. 29 C.F.R. § 1601.26 (1994). However, a
conciliation agreement cannot bind the charging party unless the
charging party agrees to it. Flowers v. Local No. 6, Laborers
Int'l Union of North America, 431 F.2d 205, 207 (7th Cir. 1970).
In this case, the charging party was the EEOC Commissioner
rather than a private party. The appellees' Title VII claims are
made pursuant to the Commissioner's charge.2 As such, the
district court must determine whether any of the appellees are
restricted in bringing those claims by virtue of the arbitration
provisions in the Agreement. Furthermore, the district court
must evaluate the appellees' right to sue (as distinguished from
being compelled to arbitrate) in light of the provision in the
2
The EEOC's administrative regulations provide that,
"[w]here the Commission has found reasonable cause to believe
that Title VII . . . has been violated, has been unable to obtain
voluntary compliance with Title VII . . ., and where the
Commission has decided not to bring a civil action against the
respondent, it will issue a notice of right to sue to . . . any
member of the class" covered by the charge. 29 C.F.R. §
1601.28(b) (1994).
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dispute resolution section of the Agreement that defines the
EEOC's right to sue for breach of the Agreement.
b. Section 1981
The district court must also determine whether any of the
appellees' § 1981 claims are arbitrable under the Agreement.
Section 1981 claims are not subject to the administrative
requirements of Title VII. Johnson v. Railway Express Agency,
Inc. 421 U.S. 454, 460 (1975). Nevertheless, some courts have
held that § 1981 claims fall within the ambit of arbitration
clauses in employment contracts. See, e.g., Williams v. Katten,
Muchin & Zavis, 837 F. Supp. 1430, 1436-37 (N.D. Ill. 1993).
However, in such situations, the party who was forced to
arbitrate the § 1981 claim was a party to the employment contract
in question, and this is not the case with the appellees and the
Agreement.
Regardless of the district court's legal conclusion on the
arbitrability of the appellees' § 1981 claims, the court will
have discretion to stay the § 1981 claims because the discovery
related to those claims will be virtually identical to that
necessary for the Title VII claims and claims under the
Agreement. In re Complaint of Hornbeck Offshore (1984) Corp.,
981 F.2d 752, 755 (5th Cir. 1993).
Should the district court determine that any of the claims
in question, statutory or contractual, fall within the purview of
the arbitration provisions of the Agreement, then it lacks
13
discretion to deny a stay pending arbitration as to those claims.
Midwest Mechanical Contractors, Inc. v. Commonwealth Constr. Co.,
801 F.2d 748, 751 (5th Cir. 1986). When the issues in a case
fall within the scope of a written arbitration agreement, § 3 of
the FAA mandates a stay of legal proceedings. Hornbeck, 981 F.2d
at 754.
B. Survival of the arbitration clause
The appellees contend that the arbitration provisions of the
Agreement no longer have any legal effect because they expired
along with the Agreement in 1993. The court must determine
whether this issue--the continued legal effect of the arbitration
clause after the termination of the Agreement--is a matter for
judicial resolution or resolution through arbitration. See First
Options; Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S.
395 (1967); Mesa Operating Ltd. Partnership v. Louisiana
Intrastate Gas Corp., 797 F.2d 238 (5th Cir. 1986) .
If the court decides that the issue of whether the
arbitration provisions survived the termination of the Agreement
is a matter for judicial resolution, then it may find an analysis
of case law surrounding expired collective bargaining agreements
to be a useful starting point in resolving the issue. In the
context of collective bargaining agreements, the Supreme Court
has held that "structural provisions relating to remedies and
dispute resolution--for example, an arbitration provision--may in
some cases survive in order to enforce duties arising under the
14
contract . . . . [The Court presumes] as a matter of contract
interpretation that the parties did not intend a pivotal dispute
resolution provision to terminate for all purposes upon the
expiration of the agreement." Litton Fin. Printing Div. v. NLRB,
501 U.S. 190, 208 (1991). Rebutting this presumption that an
arbitration clause survives the termination of the underlying
collective bargaining agreement requires either express rebuttal
or rebuttal by clear implication from the language of the
agreement. Nolde Bros., Inc. v. Local No. 358, Bakery and
Confectionery Workers Union, 430 U.S. 243, 255 (1977). If the
court ultimately decides to resolve the issue of whether the
arbitration provisions survived the termination of the Agreement,
then it should determine whether presumptions similar to those
that operate in interpreting collective bargaining agreements
also apply in interpreting Title VII conciliation agreements.
Because the EEOC was a principal architect of the Agreement,
the district court would be well advised to request the
submission of an amicus brief from the EEOC establishing its
position on the questions of law at issue in the resolution of
the Hospital's motion to stay pending arbitration. To say the
least, the court is entitled to the benefit of the EEOC's
considered views on those questions.
III. CONCLUSION
For the reasons outlined above, we VACATE the district
court's order and REMAND with instructions to the district court
15
to reconsider its order and provide legal analysis and factual
conclusions sufficient to facilitate effective review.
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