Gunby v. Equitable Life Assurance Society of United States

IN THE COURT OF APPEALS OF TENNESSEE
WESTERN SECTION AT JACKSON
PATRICIA J. GUNBY )
and JANICE HAMIL, )
)
Plaintiffs/Appellees, ) Shelby Chancery No. 107064-1 R.D.
)
VS. ) Appeal Nos. 02A01-9606-CH-00140
THE EQUITABLE LIFE ASSURANCE )
SOCIETY OF THE UNITED STATES, )
) and 02A01-9704-CH-00073
FILED
DAVID BRYAN, and BOB DUNHAM, )
October 16, 1997
)
Defendants/Appellants. )
Cecil Crowson, Jr.
Appellate C ourt Clerk
APPEAL FROM THE CHANCERY COURT OF SHELBY COUNTY
AT MEMPHIS, TENNESSEE
THE HONORABLE NEAL SMALL, CHANCELLOR
STEPHEN H. BILLER
MAURICE WEXLER
BAKER, DONELSON, BEARMAN
& CALDWELL, P.C.
Memphis, Tennessee
Attorneys for Appellants
TIM EDWARDS
JAMES F. HORNER
GLASSMAN, JETER, EDWARDS & WADE
Memphis, Tennessee
Attorneys for Appellees
REVERSED
ALAN E. HIGHERS, J.
CONCUR:
CRAWFORD, P.J., W.S.
LILLARD, J.
In these sexual discrimination/sexual harassment cases, consolidated on appeal,
Plaintiffs, Patricia Gunby (“Gunby”) and Janice Hamil (“Hamil”), filed suit against
Defendants, The Equitable Life Assurance Society of the United States (“The Equitable”),
David Bryan (“Bryan”) and Bob Dunham (“Dunham”), seeking damages for Defendants’
alleged acts of sexual discrimination and sexual harassment. The Defendants filed a
motion to compel arbitration and to stay the action pending arbitration or, in the alternative,
to dismiss. The trial court denied Defendants’ motions. Defendants appeal the judgment
of the trial court arguing that the trial court erred in denying Defendants’ motion to compel
Plaintiffs to submit their claims for sexual harassment and sexual discrimination to
arbitration. For the reasons stated hereafter, we reverse the judgment of the trial court.
FACTS
In April 1991, Gunby began employment with The Equitable as a commissioned
insurance salesperson. In August 1992, Hamil began employment with The Equitable as
a commissioned insurance salesperson. Upon commencing employment with The
Equitable, Plaintiffs executed a contract entitled Uniform Application for Securities Industry
Registration or Transfer (the “contracts”) which provided in part as follows:
I agree to arbitrate any dispute, claim or controversy that may
arise between me and my firm, or a customer, or any other
person, that is required to be arbitrated under the rules,
constitutions, or by-laws of the [National Association of
Securities Dealers, Inc. (“NASD”)] . . . as may be amended
from time to time.
At the time Plaintiffs signed the contracts, the Code of Arbitration Procedure
adopted by the NASD stated in part as follows:
This Code of Arbitration Procedure is prescribed and adopted
pursuant to Article IV, Section 2(b) of the By-Laws of the
National Association of Securities Dealers, Inc. (the
Association) for the arbitration of any dispute, claim or
controversy arising out of or in connection with the business of
any member of the Association, with the exception of disputes
involving the insurance business of any member which is also
an insurance company:
(1) between or among members;
(2) between or among members and public customers, or others; and
(3) between or among members, registered clearing agencies
with which the Association has entered into an agreement to
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utilize the Association’s arbitration facilities and procedures,
and participants, pledgees or other persons using the facilities
of a registered clearing agency, as these terms are defined
under the rules of such a registered clearing agency.
NASD (CCH) § 3701 (June 1, 1990).
During Plaintiffs’ period of employment with The Equitable, the NASD amended its
Code of Arbitration Procedure, which became effective on October 1, 1993. NASD’s
amended Code of Arbitration Procedure provided for the arbitration of “any dispute, claim
or controversy arising out of or in connection with the business of any members of the
Association, or arising out of termination of employment of associated persons with any
member.“ NASD (CCH) § 3703 (October 1, 1993).
Throughout Plaintiffs’ employment duration with The Equitable, Bryan served as the
agency manager of The Equitable’s Memphis operation, and Dunham served as a
management employee in The Equitable’s Memphis office.
During Plaintiffs’ employment with The Equitable, Plaintiffs allege that they were
subjected to disparate terms, conditions and opportunities as a result of their gender and
that they were subjected to sexual harassment. Plaintiffs further allege that they were
constructively discharged on March 7, 1995. On February 28, 1996, Plaintiffs filed a
complaint against Defendants in the Shelby County Chancery Court alleging violations of
the Tennessee Human Rights Act, T.C.A. § 4-21-101 et seq.
LAW
The sole issue before this Court is as follows: whether the trial court erred in
denying Defendants’ motions to compel Plaintiffs to submit their claims for sexual
harassment and sexual discrimination to arbitration.
In Gilmer v. Interstate/Johnson Lane Corp., 111 S. Ct. 1647 (1991), the United
States Supreme Court addressed an issue similar to the one in the case at bar. The
Plaintiff, Gilmer, a former registered securities representative, filed suit for discrimination
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under the Age Discrimination in Employment Act of 1967 (“ADEA”), 29 U.S.C. § 621 et seq.
The sole issue presented for review in Gilmer was whether a claim under the ADEA could
be subjected to compulsory arbitration pursuant to an arbitration agreement in a securities
registration application. Defendant, Interstate/Johnson Lane Corporation (“Interstate”),
hired Gilmer as the manager of its financial services department in May 1981. As required
by Interstate, Gilmer registered as a securities representative with several stock
exchanges, including the New York Stock Exchange (“NYSE”). Gilmer’s registration
application entitled “Uniform Application for Securities Industry Registration or Transfer”
provided, inter alia, that Gilmer “agree[d] to arbitrate any dispute, claim or controversy”
arising between him and Interstate “that is required to be arbitrated under the rules,
constitutions or by-laws of the organizations with which I register.” Gilmer, 111 S.Ct. at
1650. Rule 347 of the NYSE provided for the arbitration of “[a]ny controversy between a
registered representative and any member or member organization arising out of the
employment or termination of employment of such registered representative.” Id. at 1650-
51. In 1987, Interstate terminated Gilmer’s employment. Gilmer was sixty-two years of
age. After filing an age discrimination charge with the Equal Employment Opportunity
Commission (“EEOC”), Gilmer filed suit in the United States District Court for the Western
District of North Carolina, alleging that Interstate had discharged him because of his age,
in violation of the ADEA. Relying upon the arbitration agreement contained in Gilmer’s
registration application and upon the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq,
Interstate filed a motion to compel arbitration of Gilmer’s ADEA claim. The district court
denied Interstate’s motion to compel arbitration based upon Alexander v. Gardner-Denver
Co., 94 S. Ct. 1011 (1974) and its progeny. In holding that the age discrimination claim was
subject to compulsory arbitration pursuant to the arbitration agreement in Gilmer’s
securities registration application, the United States Supreme Court stated:
It is by now clear that statutory claims may be the subject of an
arbitration agreement, enforceable pursuant to the FAA.
Indeed, in recent years we have held enforceable arbitration
agreements relating to claims arising under the Sherman Act,
15 U.S.C. §§ 1-7; § 10(b) of the Securities Exchange Act of
1934, 15 U.S.C. § 78j(b); the civil provisions of the Racketeer
Influenced and Corrupt Organizations Act (RICO), 18 U.S.C.
§ 1961 et seq.; and § 12(2) of the Securities Act of 1933, 15
U.S.C. § 77l (2). See Mitsubishi Motors Corp. v. Soler
Chrysler-Plymouth, Inc., 473 U.S. 614, 105 S. Ct. 3346, 87
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L. Ed. 2d 444 (1985); Shearson/American Express Inc. v.
McMahon, 482 U.S. 220, 107 S. Ct. 2332, 96 L. Ed. 2d 185(1987); Rodriguez de Quijas v. Shearson/American Express,
Inc., 490 U.S. 477, 109 S. Ct. 1917, 104 L. Ed. 2d 526 (1989).
In these cases we recognized that “by agreement to arbitrate
a statutory claim, a party does not forgo the substantive rights
afforded by the statute; it only submits to their resolution in an
arbitral, rather than a judicial forum.” Mitsubishi, 473 U.S., at
628, 105 S.Ct., at 3354.
Gilmer, 111 S.Ct. at 1652.
In a strikingly similar case to the case sub judice, the United States Court of Appeals
for the Sixth Circuit in Willis v. Dean Witter Reynolds, Inc., 948 F.2d 305 (6th Cir. 1991)
addressed the issue of whether a registered securities representative’s claims of sexual
harassment and sexual discrimination against her brokerage firm were subject to
arbitration pursuant to the securities registration form that she was required to execute in
order to perform her work as an account executive. Plaintiff, Linda Willis (“Willis”),
originally filed an action for sexual harassment, sexual discrimination, common law contract
claims of outrage and breach of contract in state trial court. Defendant, Dean Witter
Reynolds, Inc. (“Dean Witter”), removed the case to federal court and filed a motion to
compel arbitration based upon Willis’ execution of a Securities Registration Form U-4 and
upon Willis’ registration with various national securities exchanges, including the NYSE.
The arbitration clause of the U-4 Form stated: “I agree to arbitrate any dispute, claim or
controversy that may arise between me and my firm, or a customer, or any other person,
that is required to be arbitrated under the rules, constitutions, or by-laws of the
organizations with which I register.” Id. at 306. Rule 347 of the NYSE Rules provided:
Any controversy between a registered representative and any
member or member organization arising out of the employment
or termination of employment of such registered representative
by and with such member or member organization shall be
settled by arbitration, at the instance of any such party, in
accordance with the arbitration procedure prescribed
elsewhere in these Rules.
Id. Willis thereafter filed a motion for leave to amend her complaint to add a claim under
Title VII. The district court subsequently granted Willis’ motion to amend her complaint,
granted Dean Witter’s motion to compel arbitration on Willis’ breach of contract claims, and
denied Dean Witter’s motion to compel arbitration as to Willis’ sexual harassment, sexual
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discrimination and Title VII claims. Id. In holding that the district court’s denial of Dean
Witter’s motion to arbitrate Willis’ discrimination claims was in error, the Sixth Circuit Court
of Appeals relied largely upon the Supreme Court’s decision in Gilmer and stated:
The plaintiff’s arguments which suggest that something
inherent in Title VII precludes the enforcement of valid
arbitration agreements in circumstances where the FAA is
otherwise applicable was rejected in Gilmer. Further, while §
1 of the FAA excludes “contracts of employment” from the
scope of the FAA, the Supreme Court has squarely held that
arbitration agreements contained in a securities registration
application such as the one at issue in this case do not
constitute contracts for employment. Thus, § 1 of the FAA
does not exempt Willis’ discrimination claims from her
agreement to arbitrate.
Id. at 312.
In the present case, Plaintiffs argue that Alexander v. Gardner-Denver Co., 94 S. Ct.
1011 (1974), and its progeny prohibit enforcement of the arbitration provisions contained
within the contracts Plaintiffs executed regarding Plaintiffs’ claims of sexual harassment
and sexual discrimination. In Alexander, the Supreme Court addressed the issue of
whether a union employee was foreclosed from pursuing an action under Title VII of the
Civil Rights Act of 1964 (“Title VII”), 42 U.S.C. § 2000e et seq., after he had been
unsuccessful in an arbitration compelled by his collective bargaining agreement. In holding
that the employee’s statutory right to a trial de novo under Title VII is not foreclosed by prior
submission of a claim to final arbitration under the nondiscrimination clause of a collective
bargaining agreement, the Supreme Court stated that “[t]here is no suggestion in the
statutory scheme that a prior arbitral decision either forecloses an individual’s right to sue
or divests federal courts of jurisdiction.” Alexander, 94 S.Ct. at 1019. In addressing
Plaintiffs’ argument that the Supreme Court’s decision in Alexander prohibits the
enforcement of the arbitration provisions contained within the contracts Plaintiffs executed
regarding Plaintiffs’ claims of sexual harassment and sexual discrimination, we note that
the Supreme Court in Gilmer and the Sixth Circuit Court of Appeals in Willis addressed this
same argument. The Supreme Court in Gilmer stated that the Alexander line of cases
involved the issue of whether the arbitration of contract-based claims precluded
subsequent judicial resolution of statutory claims, not the enforceability of an agreement
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to arbitrate statutory claims. In distinguishing the Gilmer case from the Alexander line of
cases, the Supreme Court stated:
First, [the Alexander line of cases] did not involve the issue of
the enforceability of an agreement to arbitrate statutory claims.
Rather, they involved the quite different issue whether
arbitration of contract-based claims precluded subsequent
judicial resolution of statutory claims. Since the employees
there had not agreed to arbitrate their statutory claims, and the
labor arbitrators were not authorized to resolve such claims,
the arbitration in those cases understandably was held not to
preclude subsequent statutory actions. Second, because the
arbitration in those cases occurred in the context of a
collective-bargaining agreement, the claimants there were
represented by their unions in the arbitration proceedings. An
important concern therefore was the tension between
collective representation and individual statutory rights, a
concern not applicable to the present case. Finally, those
cases were not decided under the FAA, which, as discussed
above, reflects a “liberal federal policy favoring arbitration
agreements.” Mitsubishi, 473 U.S., at 625, 105 S.Ct., at 3353.
Therefore, those cases provide no basis for refusing to enforce
Gilmer’s agreement to arbitrate his ADEA claim.
Gilmer, 111 S.Ct. at 1657. Similarly, the Sixth Circuit Court of Appeals in Willis cited the
foregoing quotation from Gilmer and held that the Supreme Court’s holding in Alexander
was inapplicable to the facts in Willis. See Willis, 948 F.2d at 307-308.
Plaintiffs further argue that the contracts they executed are contracts of adhesion,
ones which are dictated by employers in the field of securities sales and which are forced
upon all persons seeking and obtaining employment in the securities field. The Supreme
Court addressed a similar argument in Gilmer and stated that “[t]he unequal bargaining
power between employers and employees is not a sufficient reason to hold that arbitration
agreements are never enforceable in the employment context.” Gilmer, 111 S.Ct. at 1650.
Here, as in Gilmer, there is no indication that Plaintiffs were coerced or defrauded into
agreeing to the arbitration clause contained within the contracts they executed. We,
therefore, find this argument of the Plaintiffs to be without merit.
In the instant case, the securities registration contracts that the Plaintiffs signed
upon commencing their employment with The Equitable were the same contracts that the
plaintiff in Gilmer and the plaintiff in Willis had signed. Because the Supreme Court in
Gilmer held that Gilmer’s age discrimination claim was subject to compulsory arbitration
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pursuant to the arbitration agreement in the securities registration application that Gilmer
had executed and because the Sixth Circuit Court of Appeals in Willis held that Willis’
sexual harassment, sexual discrimination and Title VII claims were subject to arbitration
pursuant to the arbitration agreement in the securities registration application that Willis
had executed, we find that the Supreme Court’s analysis and conclusions in Gilmer and
the Sixth Circuit’s reasoning in Willis compel the conclusion that the arbitration provisions
contained within the contracts Plaintiffs executed apply equally to Plaintiffs’ sexual
harassment and sexual discrimination claims. Furthermore, the Tennessee Human Rights
Act specifically provides that it embodies the policies of the Federal Civil Rights Act of
1964, 1968 and 1972. T.C.A. § 4-21-101 (a)(1). We, therefore, hold that the Plaintiffs’
claims of sexual harassment and sexual discrimination shall be submitted to arbitration in
accordance with the contracts signed by the Plaintiffs.
The judgment of the trial court is hereby reversed and this matter is remanded to
the trial court for entry of an appropriate order. Costs on appeal are taxed to the
Appellees for which execution may issue if necessary.
HIGHERS, J.
CONCUR:
CRAWFORD, P.J., W.S.
LILLARD, J.
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