Rent-A-Center, Inc. v. Iowa Civil Rights Commission

IN THE SUPREME COURT OF IOWA
No. 13–0412
Filed February 28, 2014
RENT-A-CENTER, INC.,
Appellee,
vs.
IOWA CIVIL RIGHTS COMMISSION,
Appellant.
Appeal from the Iowa District Court for Polk County, Robert B.
Hanson, Judge.
The Iowa Civil Rights Commission appeals the district court’s order
remanding for dismissal its enforcement action against an employer.
REVERSED AND REMANDED WITH INSTRUCTIONS.
Thomas J. Miller, Attorney General, and Katie A. Hlavka Fiala,
Assistant Attorney General, for appellant.
Edward F. Berbarie and Robert F. Friedman of Littler Mendelson,
P.C., Dallas, Texas, Mary L. Harokopus and Andrew M. Trusevich, Plano,
Texas, Frank B. Harty and Debra L. Hulett of Nyemaster Goode P.C., Des
Moines, for appellee.
Russell E. Lovell II, Des Moines, and David S. Walker, Windsor
Heights, for amicus curiae National Association for the Advancement of
Colored People.
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MANSFIELD, Justice.
In this case, we must decide whether the Iowa Civil Rights
Commission (ICRC) can pursue an enforcement action under the Iowa
Civil Rights Act against an employer when the complaining employee
signed an agreement with the employer to arbitrate all employment-
related claims. The ICRC accepted the administrative law judge’s finding
that the agreement did not limit the ICRC’s rights because the ICRC was
not a party to the agreement. On judicial review, the district court
disagreed. It found the Federal Arbitration Act (FAA) preempted state law
and remanded the matter to the ICRC with instructions to dismiss the
matter pending arbitration by the parties. The ICRC appealed.
Because the ICRC was not a party to the agreement and its
interest is not derivative of the employee’s, we find the agreement does
not limit its ability to bring claims against the employer. Iowa law
authorizing ICRC enforcement is thus not preempted by the FAA.
Accordingly, we reverse the district court’s order and remand the case
with instructions to affirm the commission’s order.
I. Facts and Procedural History.
Nicole Henry began working for Rent-A-Center, Inc. (RAC) in
Council Bluffs in approximately April 2007. On June 19, 2007, as a
condition of her continued employment, Henry signed a Mutual
Agreement to Arbitrate Claims (Arbitration Agreement) with RAC. The
Arbitration Agreement stated that Henry agreed to arbitrate “all claims
for violation of any federal, state or other governmental law, statute,
regulation or ordinance” arising out of or related to her employment with
RAC that “would have been justiciable under applicable state or federal
law.” It further stated that neither party would
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initiate or prosecute any lawsuit or adjudicative
administrative action (other than an administrative charge of
discrimination to the Equal Employment Opportunity
Commission or an administrative charge within the
jurisdiction of the National Labor Relations Board) in any
way arising out of or related to any claim covered by [the]
Agreement.
The Arbitration Agreement also said that nothing in it would “be
construed to relieve any party of the duty to exhaust administrative
remedies by filing a charge or complaint with an administrative agency
and obtaining a right to sue notice, where otherwise required by law.”
After her employment began, Henry became pregnant. On
November 15, Henry provided RAC with a note from her doctor that
imposed a twenty-pound lifting restriction on her for the duration of her
pregnancy. Henry alleges the district manager told her “the company
usually does not accommodate restrictions or limitations caused by non-
work related temporary health conditions, and that [she] should go apply
for unemployment immediately.” The next day, according to Henry, she
“was sent home because the corporate office made the final decision not
to accommodate [her], yet the company has been accommodating a
pregnant store manager.” As an assistant manager, Henry contends she
had performed many duties on a daily basis that did not require heavy
lifting.
Henry alleges that after she was sent home, the company gave her
a choice between unpaid leave and termination. She chose unpaid leave.
On February 4, 2008, Henry filed a complaint with the ICRC, alleging
RAC had discriminated against her because of her pregnancy. The ICRC
cross-filed Henry’s complaint with the Federal Equal Employment
Opportunity Commission (EEOC) under a workshare agreement between
the EEOC and the ICRC.
4
After attempts to resolve the complaint were unsuccessful, the
ICRC filed a statement of charges with the Iowa Department of
Inspections and Appeals (DIA) on December 17, 2010. The statement
charged RAC with violations of Iowa Code sections 216.6(1) and
216.6(2)(d) “based upon its requiring Nicole Henry to take a leave of
absence from her employment upon her presenting a doctor’s note that
she had a pregnancy-related disability.” See Iowa Code § 216.6(1), (2)(d)
(2007). Henry’s complaint to the ICRC was attached to and expressly
incorporated in the statement of charges. In the caption on the
statement, Henry’s name appeared as the complainant above that of the
ICRC.
Once the statement of charges was filed, Henry could no longer
obtain a release from the ICRC to commence her own action against RAC
in district court. See Iowa Code § 216.16(3)(a)(3) (2011) (stating the ICRC
shall not issue a release for the right to commence an action after notice
of hearing has been served on a respondent). Henry did not attempt to
intervene in the administrative proceeding against RAC. See Iowa
Admin. Code r. 161—4.26(1) (allowing an individual to file a motion to
intervene in a contested case).
On February 8, 2011, RAC filed a motion to dismiss the ICRC’s
charges, or in the alternative, compel arbitration. Attached to the motion
was an authenticated copy of the Arbitration Agreement.
The DIA’s administrative law judge (ALJ) issued a decision on April
19, denying RAC’s motion to dismiss or compel arbitration on the ground
that the ICRC was not a party to the Arbitration Agreement and therefore
not bound by it.
RAC appealed the ALJ’s order to the ICRC on April 25 and
requested a stay of proceedings. On August 31, however, the ICRC
5
upheld the ALJ’s decision. It reasoned: (1) the ICRC was not a party to
the Arbitration Agreement, (2) the ICRC could lawfully initiate
proceedings on behalf of persons in Iowa when it believed discrimination
had occurred, (3) the remedial actions available to the ICRC are not
available to the arbitrator and are important to protect RAC’s Iowa
workers from discriminatory practices, (4) an arbitrator does not have the
same public interest to end discrimination that the ICRC has, and
(5) Henry could not waive the enforcement rights statutorily vested in the
ICRC.
On September 30, RAC filed a petition in district court for judicial
review of the ICRC’s order. See Iowa Code § 17A.19 (providing for
judicial review of agency action). RAC’s petition alleged that the
Arbitration Agreement and the FAA required that the ICRC’s charges be
adjudicated by an arbitrator. See 9 U.S.C. §§ 1–16 (2012).
After hearing oral arguments from the parties, the district court
issued a ruling on March 5, 2013, granting RAC’s requested relief. The
court found the FAA preempted state law granting jurisdiction to the
ICRC over Henry’s complaint. In the decision, the court acknowledged a
prior United States Supreme Court decision which held the FAA did not
bar the EEOC from seeking victim-specific relief in an administrative
proceeding for the benefit of a complainant who had signed an
arbitration agreement with his employer. See E.E.O.C. v. Waffle House,
Inc., 534 U.S. 279, 122 S. Ct. 754, 151 L. Ed. 2d 755 (2002). Yet the
district court found that decision did not apply to a state agency such as
the ICRC. The district court therefore remanded the matter to the ICRC
with instructions to dismiss the proceeding until Henry and RAC had
arbitrated their dispute.
The ICRC appealed. We retained the case.
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II. Standard of Review.
This case involves questions of legal interpretation. If an agency
has not been clearly vested with discretion to interpret a law, we do not
give deference to the agency’s interpretation and will substitute our own
judgment if we conclude the agency made an error of law. See Iowa Code
§ 17A.19(10)(c); Renda v. Iowa Civil Rights Comm’n, 784 N.W.2d 8, 14–15
(Iowa 2010).
The ICRC concedes neither it nor the DIA have been clearly vested
with the authority to interpret the relevant provisions of the Iowa Civil
Rights Act or federal law, such as the FAA. Therefore, we shall give no
deference to the ICRC’s or the DIA’s legal interpretations in this case.
III. Analysis.
The present controversy involves whether the FAA and the
Arbitration Agreement bar the ICRC from bringing nonarbitration claims
against RAC relating to Henry’s employment. RAC argues, and the
district court agreed, that the ICRC could not assert claims outside
arbitration that Henry had agreed to arbitrate. RAC contends the terms
of the FAA-protected Arbitration Agreement would be nullified if the ICRC
and the DIA could adjudicate these claims, rather than having them
decided by an arbitrator. In RAC’s view, the FAA preempts any state law
that would grant authority for the ICRC to bring nonarbitration claims
against RAC that relate to matters covered by the Henry–RAC Arbitration
Agreement.
The ICRC, on the other hand, denies that it is bringing an action
on behalf of Henry. Rather, it maintains it has brought an independent
public enforcement action. Because it was not a party to the Arbitration
Agreement, the ICRC insists it cannot be bound to arbitrate claims
against RAC.
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We turn first to the ICRC’s function and its claims against RAC.
A. The ICRC. The ICRC is entrusted by the legislature with
interpreting, administering, and enforcing the Iowa Civil Rights Act,
which was designed “ ‘to eliminate unfair and discriminatory practices in
public accommodations (and) employment.’ ” Estabrook v. Iowa Civil
Rights Comm’n, 283 N.W.2d 306, 308 (Iowa 1979) (quoting 1965 Iowa
Acts ch. 121 (preface)); see also Iowa Code § 216.5 (outlining the powers
and duties of the ICRC). The Act is intended to “correct a broad pattern
of behavior rather than merely affording a procedure to settle a specific
dispute.” Renda, 784 N.W.2d at 19 (internal quotation marks omitted).
Among the powers and duties of the ICRC set forth in Iowa Code
section 216.5 are the following:
2. To receive, investigate, mediate, and finally
determine the merits of complaints alleging unfair or
discriminatory practices.
....
5. To hold hearings upon any complaint made against
. . . an employer, . . . to subpoena witnesses and compel
their attendance at such hearings, to administer oaths and
take the testimony of any person under oath, and to compel
such . . . employer . . . to produce for examination any books
and papers relating to any matter involved in such
complaint.
Iowa Code § 216.5(2), (5).
A complaint of discrimination or unfair practice may be filed with
ICRC by any aggrieved person. Id. § 216.15(1). Alternatively, the ICRC
itself, a commissioner of the ICRC, or the attorney general may initiate a
complaint. Id. When a complaint is filed, the ICRC staff completes an
investigation and submits a recommendation to an ALJ, who then makes
a determination whether there is probable cause to believe a
discriminatory practice has occurred. Id. § 216.15(3)(a). If the ALJ
8
concurs that probable cause exists, the ICRC “shall promptly endeavor to
eliminate the discriminatory or unfair practice by conference,
conciliation, and persuasion.” Id. § 216.15(3)(c).
If the ICRC is unsuccessful in its attempts to resolve the
complaint, the ICRC director, with the approval of a commissioner, may
issue a notice of charges and require the respondent to answer those
charges at an administrative hearing. Id. § 216.15(6). “The case in
support of such complaint shall be presented at the hearing by one of the
commission’s attorneys or agents.” Id. § 216.15(7). The Iowa Attorney
General’s criminal justice bureau prosecutes the charges on behalf of the
ICRC. Iowa Admin. Code r. 61—1.3(3)(e) (“The civil rights unit is a
separate unit within the criminal justice bureau. . . . It furnishes legal
advice to the civil rights commission and its staff, prosecutes civil rights
cases, and represents the commission in cases in which it is a party or is
interested.”).
We have noted that the “legislative intent was to permit the
commission to be selective in the cases singled out to process through
the agency, so as to better impact unfair or discriminatory practices with
highly visible and meritorious cases.” Estabrook, 283 N.W.2d at 311.
The ICRC, not the complainant, decides whether and how far to pursue
an administrative action. See Iowa Admin. Code r. 161—3.8(3) (stating a
complainant may withdraw a complaint, but that does not prevent the
ICRC “from continuing the investigation and initiating a complaint on its
own behalf against the original respondent, as provided for in the Act,
whenever it deems it in the public interest”); id. r. 161—3.12(2)(c) (noting
the ICRC can close a case “as satisfactorily adjusted when the
respondent has made an offer of adjustment acceptable to the executive
director or designee but not to the complainant”); id. r. 161—4.2(1)(a), (d)
9
(indicating the ICRC’s attorney prepares the statement of charges and
the ICRC can elect not to prosecute some charges despite a probable
cause finding).
The Iowa Civil Rights Act authorizes the ICRC to order a
respondent found to have engaged in a discriminatory or unfair practice
to cease and desist and “to take the necessary remedial action as in the
judgment of the commission will carry out the purposes” of the Act. Iowa
Code § 216.15(9)(b). Such remedies include:
(1) Hiring, reinstatement or upgrading of employees
with or without pay. Interim earned income and
unemployment compensation shall operate to reduce the pay
otherwise allowable.
....
(5) Extension to all individuals of the full and equal
enjoyment of the advantages, facilities, privileges, and
services of the respondent denied to the complainant
because of the discriminatory or unfair practice.
(6) Reporting as to the manner of compliance.
(7) Posting notices in conspicuous places in the
respondent’s place of business in form prescribed by the
commission and inclusion of notices in advertising material.
(8) Payment to the complainant of damages for an
injury caused by the discriminatory or unfair practice which
damages shall include but are not limited to actual damages,
court costs and reasonable attorney fees.
Id. § 216.15(9)(a).
A complainant can seek a release—a so-called right-to-sue letter—
to pursue his or her own independent action in district court once sixty
days have elapsed from the filing of the initial complaint, provided the
ALJ has not made a finding of no probable cause. See id. § 216.16(1)–(3)
(outlining the process for a complainant to obtain a release to pursue
relief in district court); Ackelson v. Manley Toy Direct, L.L.C., 832 N.W.2d
10
678, 680 n.1 (Iowa 2013). If the ICRC grants a right-to-sue letter, the
agency cannot pursue further action on the complaint. See Iowa Code
§ 216.16(4).
In this case, Henry brought her complaint to the attention of the
ICRC on February 4, 2008. She never sought a right-to-sue letter. On
December 17, 2010, the ICRC filed its statement of charges against RAC.
Those charges incorporated Henry’s administrative complaint. Henry did
not seek to intervene in the action. See Iowa Admin. Code r. 161—
4.26(1) (authorizing intervention in a contested case proceeding).
B. Overview of the FAA. Section 2 of the FAA provides:
A written provision in . . . a contract evidencing a transaction
involving commerce to settle by arbitration a controversy
thereafter arising out of such contract or transaction . . . .
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. The United States Supreme Court has indicated that
section 2 of the FAA “is a congressional declaration of a liberal federal
policy favoring arbitration agreements.” Moses H. Cone Mem’l Hosp. v.
Mercury Constr. Corp., 460 U.S. 1, 24, 103 S. Ct. 927, 941, 74 L. Ed. 2d
765, 785 (1983). In enacting the FAA, “Congress intended to place
arbitration agreements upon the same footing as other contracts, where
[they] belong.” Heaberlin Farms, Inc. v. IGF Ins. Co., 641 N.W.2d 816,
818–19 (Iowa 2002) (internal quotation marks omitted).
The Supreme Court has repeatedly stated that, under the FAA,
parties who have contracted to arbitrate claims arising between them are
bound to do so. See, e.g., Nitro-Lift Techs., L.L.C. v. Howard, 568 U.S.
___, ___, 133 S. Ct. 500, 503, 184 L. Ed. 2d 328, 332–33 (2012) (per
curiam); Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 445–
46, 126 S. Ct. 1204, 1209, 163 L. Ed. 2d 1038, 1044 (2006); First
11
Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 943, 115 S. Ct. 1920, 1923–
24, 131 L. Ed. 2d 985, 993 (1995).
However, the Court has also said that the enforceability of an
arbitration agreement flows from the consent of the parties to the
agreement. See, e.g., Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559
U.S. 662, 684, 130 S. Ct. 1758, 1775, 176 L. Ed. 2d 605, 624 (2010) (“[A]
party may not be compelled under the FAA to submit to class arbitration
unless there is a contractual basis for concluding that the party agreed
to do so.”); Waffle House, 534 U.S. at 294, 122 S. Ct. at 764, 151 L. Ed.
2d at 769 (“Arbitration under the [FAA] is a matter of consent, not
coercion. . . . It goes without saying that a contract cannot bind a
nonparty.” (Citation and internal quotation marks omitted.)); First
Options, 514 U.S. at 943, 115 S. Ct. at 1924, 131 L. Ed. 2d at 993
(“[A]rbitration is simply a matter of contract between the parties; it is a
way to resolve those disputes—but only those disputes—that the parties
have agreed to submit to arbitration.”); Volt Info. Scis., Inc. v. Bd. of Trs.
of Leland Stanford Junior Univ., 489 U.S. 468, 474–75, 109 S. Ct. 1248,
1253, 103 L. Ed. 2d 488, 497 (1989) (noting a party cannot be compelled
to arbitrate issues if the parties did not require such arbitration in their
agreement); AT&T Techs., Inc. v. Commc’ns Workers of Am., 475 U.S. 643,
648–49, 106 S. Ct. 1415, 1418, 89 L. Ed. 2d 648, 655 (1986)
(“[A]rbitrators derive their authority to resolve disputes only because the
parties have agreed in advance to submit such grievances to
arbitration.”).
We have acknowledged the provisions of the FAA apply in state
courts and preempt inconsistent state laws. Heaberlin Farms, 641
N.W.2d at 818–19 (stating the FAA preempts state law by operation of
the Supremacy Clause where state law is in conflict with the provisions
12
of the FAA); see also Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 109,
121 S. Ct. 1302, 1306, 149 L. Ed. 2d 234, 243 (2001) (holding the FAA
covers all employment contracts with arbitration clauses within the
reach of Congress’s commerce power except for those of transportation
workers). Yet, when discussing the FAA and arbitration agreements, we
have also noted “arbitration is a matter of contract and parties cannot be
compelled to arbitrate a question which they have not agreed to
arbitrate.” Bullis v. Bear, Stearns & Co., 553 N.W.2d 599, 601–02 (Iowa
1996) (internal quotation marks omitted) (noting the question of whether
a nonsignatory to an arbitration agreement could be bound to the
agreement was a matter of contract and agency law).
C. EEOC v. Waffle House. In Waffle House, as we have already
mentioned, the United States Supreme Court held an arbitration
agreement between an employer and an employee did not bar the EEOC
from bringing an enforcement action against the employer to obtain relief
for the employee. 534 U.S. at 297, 122 S. Ct. at 766, 151 L. Ed. 2d at
771. That case began when an employee was discharged after suffering
a seizure at work. Id. at 282–83, 122 S. Ct. at 758, 151 L. Ed. 2d at
761–62. He filed a timely charge of disability discrimination with the
EEOC, which ultimately brought a civil action asking the court to grant
relief to the employee, including backpay, reinstatement, and
compensatory damages. Id. at 283–84, 122 S. Ct. at 758, 151 L. Ed. 2d
at 762.
The employer filed a petition under the FAA to stay the suit and
compel arbitration. Id. at 284, 122 S. Ct. at 759, 151 L. Ed. 2d at 762.
The district court denied the employer’s motion. Id. On appeal, the
United States Court of Appeals for the Fourth Circuit reversed, holding
the EEOC was “precluded from seeking victim-specific relief in court
13
because the policy goals expressed in the FAA required giving some effect
to [the employee]’s arbitration agreement.” Id. The Fourth Circuit
distinguished between “victim-specific relief” and “broad injunctive
relief,” finding that in the former area, the FAA’s policies outweighed
those of Title VII of the Civil Rights Act of 1964. Id. at 290, 122 S. Ct. at
762, 151 L. Ed. 2d at 766.
The Supreme Court reversed the Fourth Circuit. In a key passage,
the Court explained,
Absent some ambiguity in the agreement, however, it is the
language of the contract that defines the scope of disputes
subject to arbitration. For nothing in the statute authorizes
a court to compel arbitration of any issues, or by any parties,
that are not already covered in the agreement. The FAA does
not mention enforcement by public agencies; it ensures the
enforceability of private agreements to arbitrate, but
otherwise does not purport to place any restriction on a
nonparty’s choice of a judicial forum.
Id. at 289, 122 S. Ct. at 762, 151 L. Ed. 2d at 766 (citation omitted).
Later in its opinion, the Court returned to this theme:
Because the FAA is at bottom a policy guaranteeing the
enforcement of private contractual arrangements, we look
first to whether the parties agreed to arbitrate a dispute, not
to general policy goals, to determine the scope of the
agreement. While ambiguities in the language of the
agreement should be resolved in favor of arbitration, we do
not override the clear intent of the parties, or reach a result
inconsistent with the plain text of the contract, simply
because the policy favoring arbitration is implicated.
Arbitration under the [FAA] is a matter of consent, not
coercion. Here there is no ambiguity. No one asserts that
the EEOC is a party to the contract, or that it agreed to
arbitrate its claims. It goes without saying that a contract
cannot bind a nonparty. Accordingly, the proarbitration
policy goals of the FAA do not require the agency to
relinquish its statutory authority if it has not agreed to do
so.
Id. at 294, 122 S. Ct. at 764, 151 L. Ed. 2d at 769 (citations and internal
quotation marks omitted). In short, the Court did not base its analysis
14
on clashing federal policies but emphasized, rather, that the EEOC had
not been a party to the employee–employer arbitration agreement. The
Court went on to add that the EEOC’s claim was not “merely derivative”
of the employee’s claim, nor did the EEOC simply “stand in the
employee’s shoes” or act as “a proxy” for the employee. Id. at 297–98,
122 S. Ct. at 766, 151 L. Ed. 2d at 771.
There are considerable similarities between Title VII and the Iowa
Civil Rights Act. Just as the EEOC in Waffle House exercised
enforcement powers, remedies, and procedures set forth in Title VII to
enforce federal prohibitions against discrimination in the workplace, the
ICRC has been authorized by the legislature to interpret, administer, and
enforce the Iowa Civil Rights Act to eliminate discriminatory and unfair
practices in employment in Iowa. Compare Waffle House, 534 U.S. at
285, 122 S. Ct. at 759, 151 L. Ed. 2d at 763, with Estabrook, 283 N.W.2d
at 308. As the Supreme Court put it in Waffle House,
[W]henever the EEOC chooses from among the many charges
filed each year to bring an enforcement action in a particular
case, the agency may be seeking to vindicate a public
interest, not simply provide make-whole relief for the
employee, even when it pursues entirely victim-specific relief.
534 U.S. at 296, 122 S. Ct. at 765, 151 L. Ed. 2d at 770. Likewise, the
ICRC is “selective in the cases singled out to process through the
agency,” Estabrook, 283 N.W.2d at 311, and, while it may pursue victim-
specific relief, it does so to enforce the Iowa Civil Rights Act, which is
intended to “correct a broad pattern of behavior rather than merely
affording a procedure to settle a specific dispute,” Renda, 784 N.W.2d at
19 (internal quotation marks omitted).
Additionally, both the federal civil rights laws and the Iowa Civil
Rights Act allow victims to bring their own lawsuits if a certain time
15
period has passed without agency action. Compare 42 U.S.C. § 2000e–
5(f)(1) (allowing an action to be brought by the complainant after the
statutorily prescribed time period if the EEOC dismisses the charges or
takes no action), with Iowa Code § 216.16(2) (allowing an action for relief
to be brought by the complainant after the complaint has been on file for
sixty days and the ICRC issues a release). But once either the EEOC or
the ICRC initiates proceedings, the agency, not the complainant, is the
“master of its own case” and determines the course of the case. Waffle
House, 534 U.S. at 291, 122 S. Ct. at 763, 151 L. Ed. 2d at 761.
Compare 42 U.S.C. § 2000e–5(b) (noting the EEOC can file its own
charge), 42 U.S.C. § 2000e–(f)(1) (giving the EEOC exclusive rights over a
case for 180 days or until a right-to-sue letter has been issued), and Gen.
Tel. Co. of the Nw., Inc. v. EEOC, 446 U.S. 318, 331, 100 S. Ct. 1698,
1706–07, 64 L. Ed. 2d 319, 330 (1980) (“EEOC enforcement actions are
not limited to the claims presented by the charging parties. Any
violations that the EEOC ascertains in the course of a reasonable
investigation of the charging party’s complaint are actionable.”), with
Iowa Code § 216.16(2) (noting the ICRC has control of the claim for sixty
days before a complainant can seek the right to sue), Iowa Admin. Code
r. 161—3.12(2)(c) (“A complaint may be closed as satisfactorily adjusted
when the respondent has made an offer of adjustment acceptable to the
executive director or designee but not to the complainant.”), and Iowa
Admin. Code r. 161—4.2(1)(a), (d) (indicating the ICRC’s attorney
prepares the statement of charges and can elect not to prosecute some
charges even when probable cause has been found). Both the EEOC and
the ICRC may decide to pursue a matter even when the original
complainant has “disavowed any desire to seek relief.” Waffle House,
534 U.S. at 291, 122 S. Ct. at 763, 151 L. Ed. 2d at 767. Compare 29
16
C.F.R. § 1626.13 (2013) (“Because the Commission has independent
investigative authority, . . . it may continue any investigation and may
secure relief for all affected persons notwithstanding a request by a
charging party to withdraw a charge.” (Citation omitted.)), with Iowa
Admin. Code r. 161—3.8(3) (authorizing a claimant to withdraw a
complaint, but indicating the ICRC can still file its own complaint against
the original respondent when it deems it in the public interest).
At the same time, both the federal and the Iowa civil rights laws
afford some protection to settlements between employers and employees.
In Waffle House, the Court noted that if an employee “had accepted a
monetary settlement, any recovery by the EEOC would be limited
accordingly.” 534 U.S. at 296, 122 S. Ct. at 766, 151 L. Ed. 2d at 770.
The Court stressed, “[I]t goes without saying that the courts can and
should preclude double recovery by an individual.” Id. at 297, 122 S. Ct.
at 766, 151 L. Ed. 2d at 770 (internal quotation marks omitted).
Likewise, in Board of Supervisors v. Iowa Civil Rights Commission, this
court held that a settlement of a civil rights claim through a negotiated
salary increase could not be challenged by the ICRC as discriminatory for
“some period of time.” 584 N.W.2d 252, 257 (Iowa 1998).
Given these similarities, the ICRC urges that Waffle House controls
here. It should not make a difference, according to the ICRC, that the
enforcement action was brought by a state civil rights agency rather than
a federal one. As we read the Supreme Court’s opinion, we are inclined
to agree. The essential point of Waffle House is that the FAA’s reach does
not extend to a public agency that is neither a party to an arbitration
agreement nor a stand-in for a party. 534 U.S. at 289, 294, 122 S. Ct. at
762, 764, 151 L. Ed. 2d at 766, 769. True, at one point the Court refers
to “the detailed [Title VII] enforcement scheme created by Congress.” Id.
17
at 296, 122 S. Ct. at 765, 151 L. Ed. 2d at 770. But this paragraph of
the Court’s opinion needs to be read in its entirety:
The compromise solution reached by the Court of
Appeals turns what is effectively a forum selection clause
into a waiver of a nonparty’s statutory remedies. But if the
federal policy favoring arbitration trumps the plain language
of Title VII and the contract, the EEOC should be barred
from pursuing any claim outside the arbitral forum. If not,
then the statutory language is clear; the EEOC has the
authority to pursue victim-specific relief regardless of the
forum that the employer and employee have chosen to
resolve their disputes. Rather than attempt to split the
difference, we are persuaded that, pursuant to Title VII and
the ADA, whenever the EEOC chooses from among the many
charges filed each year to bring an enforcement action in a
particular case, the agency may be seeking to vindicate a
public interest, not simply provide make-whole relief for the
employee, even when it pursues entirely victim-specific relief.
To hold otherwise would undermine the detailed enforcement
scheme created by Congress simply to give greater effect to
an agreement between private parties that does not even
contemplate the EEOC’s statutory function.
Id. at 295–96, 122 S. Ct. at 765, 151 L. Ed. 2d at 769–70.
Even here, the Court criticizes the Fourth Circuit for creating “a
waiver of a nonparty’s statutory remedies” and “giv[ing] greater effect to
an agreement between private parties” than the agreement itself would
allow. Id. Hence, we do not view the Court’s reasoning as based upon
the notion that Title VII trumps the FAA in this area. Rather, the Court
relied on the inherent limitations of the FAA and the underlying
arbitration agreement. That being the case, it should not matter whether
a federal or a state civil rights enforcement regime is at issue.
Nonparties don’t have to arbitrate.
D. Subsequent United States Supreme Court Decisions. Still,
RAC contends that several later Supreme Court cases have clarified the
law and establish that the FAA has preemptive force here.
18
The first of these cases, Preston v. Ferrer, involved a contract
dispute between two private parties: an attorney in the entertainment
industry, Preston; and his client, Ferrer, a TV personality. 552 U.S. 346,
350, 128 S. Ct. 978, 981–82, 169 L. Ed. 2d 917, 923 (2008). Preston
sought fees allegedly due under the parties’ contract and invoked the
contract’s arbitration provision. Id. at 350, 128 S. Ct. at 982, 169 L. Ed.
2d at 923. Ferrer countered by filing a petition with the California Labor
Commissioner that claimed Preston was acting as an unlicensed talent
agent and, therefore, the contract was invalid under the California Talent
Agencies Act. Id. The California courts determined the labor commission
had “exclusive original jurisdiction” over the dispute. Id. at 351, 128 S.
Ct. at 982, 169 L. Ed. 2d at 924 (internal quotation marks omitted). The
Supreme Court granted certiorari “to determine whether the FAA
overrides a state law vesting initial adjudicatory authority in an
administrative agency.” Id. at 351–52, 128 S. Ct. at 982–83, 169 L. Ed.
2d at 924.
The Court noted the arbitration agreement provided that “ ‘any
dispute . . . relating to the . . . validity, or legality’ of the agreement ‘shall
be submitted to arbitration.’ ” Id. at 352, 128 S. Ct. at 983, 169 L. Ed.
2d at 924. “[T]he question is simply who decides whether Preston acted
as personal manager or as talent agent.” Id. at 352, 128 S. Ct. at 983,
169 L. Ed. 2d at 925. The Court held that Ferrer could not avoid
arbitration on that question. Id. at 353–54, 128 S. Ct. at 983–84, 169 L.
Ed. 2d at 925–26; see also Buckeye Check Cashing, Inc., 546 U.S. at 446,
126 S. Ct. at 1209, 163 L. Ed. 2d at 1044 (finding questions about the
validity of a contract in its entirety are to be decided “by an arbitrator,
not a court”); Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395,
403–404, 87 S. Ct. 1801, 1806, 18 L. Ed. 2d 1270, 1277 (1967)
19
(indicating the FAA “does not permit the federal court to consider claims
of fraud in the inducement of the contract generally”).
The Court observed that, in Ferrer’s case, the labor commissioner
would serve as an impartial arbiter, in contrast to the EEOC’s “role of an
agency, not as adjudicator but as prosecutor, pursuing an enforcement
action in its own name” in Waffle House. Preston, 552 U.S. at 359, 128
S. Ct. at 987, 169 L. Ed. 2d at 929. It also made clear that “the
arbitration clause in [Ferrer’s] contract . . . leaves undisturbed the Labor
Commissioner’s independent authority to enforce the [Talent Agencies
Act]. And so it may.” Id. at 358–59, 128 S. Ct. at 986–87, 169 L. Ed. 2d
at 928–29. The Court pointed out that the enforcement of the arbitration
agreement as between the parties “does not displace any independent
authority the Labor Commissioner may have to investigate and rectify
violations of the [Talent Agencies Act].” Id. at 359 n.7, 128 S. Ct. at 987
n.7, 169 L. Ed. 2d at 929 n.7.
The Court further noted that “Preston’s petition presents precisely
and only a question concerning the forum in which the parties’ dispute
will be heard.” Id. at 359, 128 S. Ct. at 987, 169 L. Ed. 2d at 929. The
Court added:
[We] disapprove the distinction between judicial and
administrative proceedings drawn by Ferrer and adopted by
the appeals court. When parties agree to arbitrate all
questions arising under a contract, the FAA supersedes state
laws lodging primary jurisdiction in another forum, whether
judicial or administrative.
Id.
According to RAC’s interpretation of Preston, because RAC and
Henry agreed to arbitrate all employment disputes, the FAA preempts
state law granting administrative jurisdiction to the ICRC over matters
related to Henry’s employment with RAC. We do not share this view.
20
In Preston, a private individual sought to rely on state law to avoid
having to arbitrate a specific issue he had agreed to arbitrate. Id. at 353–
54, 128 S. Ct. at 983–84, 169 L. Ed. 2d at 925–26. The California Labor
Commissioner would have determined only whether the parties’ contract
was valid—a question committed to the arbitrator by the contract itself.
Id. at 352, 359, 128 S. Ct. at 983, 987, 169 L. Ed. 2d at 924, 929. By
contrast, here, the ICRC is not only a forum. Rather, like the EEOC in
Waffle House, it is a public agency acting in its prosecutorial capacity to
bring an enforcement action against RAC, independent of Henry’s own
claims, in order to protect the public interest under the Iowa Civil Rights
Act. Preston carves out this specific situation and makes clear it is not
covered by the Court’s holding. See id. at 359 n.7, 128 S. Ct. at 987 n.7,
169 L. Ed. 2d at 929 n.7.
RAC also directs us to another case where the litigants were
parties to an arbitration agreement. See AT&T Mobility LLC v.
Concepcion, 563 U.S. ___, 131 S. Ct. 1740, 179 L. Ed. 2d 742 (2011).
The Concepcions had entered a contract for the sale and servicing of cell
phones with AT&T which “provided for arbitration of all disputes between
the parties, but required that claims be brought in the parties’ ‘individual
capacity, and not as a plaintiff or class member in any purported class or
representative proceeding.’ ” Id. at ___, 131 S. Ct. at 1744, 179 L. Ed. 2d
at 749. The Concepcions disputed certain charges incurred and filed a
complaint against AT&T in federal district court that was later
consolidated with a class action. Id. at ___, 131 S. Ct. at 1744, 179 L.
Ed. 2d at 749–50. AT&T moved to compel arbitration with the
Concepcions, who argued in response that the agreement to arbitrate
was “unconscionable and unlawfully exculpatory under California law
because it disallowed classwide procedures.” Id. at ___, 131 S. Ct. at
21
1745, 179 L. Ed. 2d at 750. Relying on the California Supreme Court’s
decision in Discover Bank v. Superior Court, 113 P.3d 1100 (Cal. 2005),
the district court denied AT&T’s motion to compel arbitration because
“AT&T had not shown that bilateral arbitration adequately substituted
for the deterrent effects of class actions.” Concepcion, 563 U.S. at ___,
131 S. Ct. at 1745, 179 L. Ed. 2d at 750. The Ninth Circuit agreed and
found the FAA did not preempt the Discover Bank rule invalidating the
arbitration agreement under California law. Id.
The United States Supreme Court took a different view. It
determined the Discover Bank rule stood “as an obstacle to the
accomplishment and execution of the full purposes and objectives of
Congress” and was therefore preempted by the FAA. Id. at ___, 131 S. Ct.
at 1753, 179 L. Ed. 2d at 759 (citation and internal quotation marks
omitted). The Court conceded that the rule did not prohibit arbitration
outright; it merely invalidated arbitration clauses that did not allow for
classwide arbitration. Id. at ___, 131 S. Ct. at 1750, 179 L. Ed. 2d at
755. Nonetheless, analogizing the Discover Bank rule to a state law
requiring arbitration to comply with the Federal Rules of Civil Procedure,
which the Concepcions admitted would be unenforceable, the Court
found that superimposing classwide procedures on traditional bilateral
arbitration would make the process slower and more costly, and entail
greater risk. Id. at ___, 131 S. Ct. at 1750–52, 179 L. Ed. 2d at 756–58.
“It is not reasonably deniable that requiring consumer disputes to be
arbitrated on a classwide basis will have a substantial deterrent effect on
incentives to arbitrate,” the Court said. Id. at ___ n.8, 131 S. Ct. at 1752
n.8, 179 L. Ed. 2d at 758 n.8. In short, Concepcion indicates that
“[s]tates cannot require a procedure that is inconsistent with the FAA,
22
even if it is desirable for unrelated reasons.” Id. at ___, 131 S. Ct. at
1753, 179 L. Ed. 2d at 758.
RAC reads Concepcion as invalidating state laws that shift
particular disputes from consensual bilateral arbitration to another
forum. In RAC’s view, mandating state civil rights enforcement through
administrative and judicial proceedings is analogous to prohibiting
arbitration agreements that do not allow classwide arbitration: Both
ultimately intrude upon the role of traditional arbitration.
We do not read Concepcion so broadly. The problem in Concepcion
was that the state law operated directly on the parties’ arbitration
agreement and required something different from the relatively informal
process contemplated by the FAA and agreed to by the parties. It
interfered with “the enforcement of arbitration agreements according to
their terms so as to facilitate streamlined proceedings.” Id. at ___, 131 S.
Ct. at 1748, 179 L. Ed. 2d at 753. Here, by contrast, RAC cannot point
to any provision in the Arbitration Agreement that would not be enforced
according to its terms. RAC, rather, seeks relief against a nonparty, a
situation not addressed by Concepcion.
RAC also relies on some recent summary reversals by the United
States Supreme Court of state supreme court decisions declining to order
arbitration. In Sonic-Calabasas A, Inc. v. Moreno, the California Supreme
Court had refused to enforce a waiver of a state administrative wage-
claim process in an arbitration agreement between an employee and an
employer. 247 P.3d 130, 152 (Cal.), rev’d, 563 U.S. ___, 132 S. Ct. 496,
181 L. Ed. 2d 343 (2011). Under this process, an employee with a claim
for unpaid wages could obtain an informal hearing before the California
Labor Commissioner, with the employer having a right of de novo review
before the superior court. Id. at 133. The California Supreme Court
23
found that the arbitration agreement could take effect only after the wage
claim was initially addressed by the labor commissioner; thus, an appeal
would go to arbitration rather than the superior court. Id. at 137–38.
The United States Supreme Court vacated the judgment and remanded
the case “for further consideration in light of AT&T Mobility LLC v.
Concepcion.” Moreno, 563 U.S. at ___, 132 S. Ct. at 496, 181 L. Ed. 2d at
343.
RAC maintains that because the statute in Moreno authorized the
labor commissioner in some circumstances to prosecute wage claims
after receiving them, see 247 P.3d at 134, the Supreme Court’s remand
for further consideration in light of Concepcion indicates matters
assigned to arbitration by employee–employer arbitration agreements are
not subject to administrative enforcement in a different forum. We
disagree. The California Supreme Court’s decision did not turn on any
independent authority of the labor commissioner to prosecute wage
claims. Rather, it focused on the fact that the California legislature had
established an administrative “gateway” for wage claims and reasoned
that the FAA did not bar a state from requiring parties to proceed
through that gateway before commencing arbitration between
themselves. Id. at 151.
In a per curiam opinion, the Supreme Court vacated a West
Virginia highest court decision that refused to enforce predispute
arbitration agreements in cases alleging personal injury or wrongful
death against nursing homes. See Marmet Health Care Ctr., Inc. v.
Brown, 565 U.S. ___, ___, 132 S. Ct. 1201, 1202, 182 L. Ed. 2d 42, 44
(2012) (per curiam), vacating Brown ex rel. Brown v. Genesis Healthcare
Corp., 724 S.E.2d 250 (W. Va. 2011). The Supreme Court stated the
West Virginia court’s “interpretation of the FAA was both incorrect and
24
inconsistent with clear instruction in the precedents of this Court.” Id. at
___, 132 S. Ct. at 1203, 182 L. Ed. 2d at 45. The following term, the
Supreme Court also vacated an Oklahoma Supreme Court decision that
declared noncompetition agreements in two employment contracts null
and void, rather than leaving that determination to the arbitrator in the
first instance. See Nitro-Lift Techns., 568 U.S. at ___, 133 S. Ct. at 501,
184 L. Ed. 2d at 330–31, vacating 273 P.3d 20 (Okla. 2011). The
Supreme Court determined the Oklahoma court had disregarded its FAA
precedents and, quoting Preston, noted it had been established that
“when parties commit to arbitrate contractual disputes, it is a mainstay
of the Act’s substantive law that attacks on the validity of the contract,
as distinct from attacks on the validity of the arbitration clause itself, are
to be resolved ‘by the arbitrator in the first instance, not by a federal or
state court.’ ” Id. at ___, 133 S. Ct. at 503, 184 L. Ed. 2d at 332 (quoting
Preston, 552 U.S. at 349, 128 S. Ct. at 981, 169 L. Ed. 2d at 923).
We see Marmet and Nitro-Lift as readily distinguishable. Both
reflect efforts by states to displace the arbitration forum in an action
between the parties to the arbitration agreement. Neither involves, as
here, the independent responsibility of a government agency to enforce
state civil rights law.
E. Application of Waffle House in Other State Courts. It is
also worth considering the views of other state supreme courts. How
have they addressed the authority of state agencies to bring independent
enforcement actions on matters that private parties by agreement
committed to arbitration? Although the sample size is small, two state
supreme courts applying Waffle House have found that state agencies
retain their independent enforcement authority, even when the
25
proceeding was initiated by a complaint from an individual who had
agreed to arbitrate the dispute.
In People v. Coventry First LLC, the New York Court of Appeals
reasoned that Waffle House stood for two basic propositions: (1) “pro-
arbitration policy goals do not require a government agency to give up its
statutory enforcement authority in favor of arbitration if it has not
consented to do so,” and (2) “the government agency may seek relief
specific to a victim who agreed to arbitrate claims, because . . . that relief
is best understood as part of the vindication of a public interest.”
Coventry First, 915 N.E.2d 616, 619 (N.Y. 2009). There, the state
attorney general commenced an action against life insurance settlement
providers, alleging fraudulent and anticompetitive conduct and seeking
damages “ ‘on behalf of the owners of life insurance policies who have
been damaged by the schemes.’ ” Id. at 618. Coventry First moved to
compel arbitration on all claims for victim-specific relief because the life
insurance policyholders had agreed in writing to arbitrate any disputes
with the providers. Id.
In affirming the lower courts’ denial of arbitration, the New York
court found that the attorney general’s authority to protect the public
interest was comparable to that of the EEOC in Waffle House and held
that he could seek injunctive and victim-specific relief against Coventry
First. Id. at 619. It concluded the agreement of the private parties
“cannot alter the Attorney General’s statutory role or the remedies that
he is empowered to seek.” Id.
In a case with facts similar to those here, the Massachusetts
Supreme Judicial Court found that Waffle House applied to a state civil
rights agency’s enforcement powers. See Joulé, Inc. v. Simmons, 944
N.E.2d 143, 149 (Mass. 2011). In Joulé, a former employee alleged her
26
employer had terminated her employment for discriminatory reasons and
lodged a complaint with the Massachusetts Commission Against
Discrimination (MCAD). Id. at 145. The employer responded by filing a
court action and a motion to compel arbitration based on the employee’s
agreement to arbitrate the claim under the arbitration provision
contained in her employment agreement. Id. The employee resisted the
motion to compel arbitration and MCAD intervened. Id. at 147. The trial
court concluded MCAD had authority to conduct an investigation and
adjudication, unaffected by the arbitration agreement. Id. It further
decided the employee was not precluded from participating in the MCAD
matter as a party. Id. The employer appealed.
The Supreme Judicial Court of Massachusetts concluded MCAD
could “conduct its own, independent proceeding based on [the
complainant’s] complaint,” even if the complainant was bound by a valid
arbitration agreement to have her own employment discrimination claims
decided by the arbitrator. Id. at 145. Relying on Waffle House, the court
stated “[e]ven where there is a clear and unmistakable provision in an
employment agreement requiring arbitration of discrimination claims . . .
it would not affect the MCAD’s authority . . . [to proceed] with its
investigation and resolution of [the complainant’s] discrimination
complaint—including, if evidence warrants, granting relief specific to [the
complainant].” Id. at 149. However, the court found the employee could
not intervene as a party in the proceeding because it would “contravene
the requirement of the arbitration provision that she resolve her own
disputes with [her employer] through arbitration.” Id. at 151. The
employee was not prevented from assisting the MCAD with its
investigation or testifying in the hearing before the MCAD. Id.
27
We agree with the reasoning of the above-mentioned cases. The
Court’s rationale in Waffle House allows the ICRC to proceed with “its
investigation and resolution” of Henry’s claims against RAC, “including, if
evidence warrants, granting relief specific to” Henry. See id. at 149. The
agreement between the parties—Henry and RAC—“does not displace any
independent authority” the ICRC has “to investigate and rectify
violations” of the Act. See Preston, 552 U.S. at 359 n.7, 128 S. Ct. at 987
n.7, 169 L. Ed. 2d at 929 n.7. No one argues that the ICRC was a party
to the Arbitration Agreement. “Accordingly, the proarbitration policy
goals of the FAA do not require the agency to relinquish its statutory
authority if it has not agreed to do so.” Waffle House, 534 U.S. at 294,
122 S. Ct. at 764, 151 L. Ed. 2d at 769.
IV. Conclusion.
The FAA does not mandate arbitration per se; it mandates that
arbitration agreements be enforced. See 9 U.S.C. § 2. Thus, the FAA
does not require arbitration of a proceeding brought by an entity that is
not bound to arbitrate under generally applicable principles of contract
law. For the reasons stated herein, we reverse the district court’s
judgment and remand the case to the district court with instructions to
affirm the ICRC’s order.
REVERSED AND REMANDED WITH INSTRUCTIONS.