Gilmer v. Interstate Johnson Lane Corporation/Dissent Stevens

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Dissenting Opinion

Justice STEVENS, with whom Justice MARSHALL joins, dissenting.

Section 1 of the Federal Arbitration Act (FAA) states:

"[N]othing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." 9 U.S.C. § 1.

The Court today, in holding that the FAA compels enforcement of arbitration clauses even when claims of age discrimination are at issue, skirts the antecedent question whether the coverage of the Act even extends to arbitration clauses contained in employment contracts, regardless of the subject matter of the claim at issue. In my opinion, arbitration clauses contained in employment agreements are specifically exempt from coverage of the FAA, and for that reason respondent Interstate/Johnson Lane Corporation cannot, pursuant to the FAA, compel petitioner to submit his claims arising under the Age Discrimination in Employment Act of 1967 (ADEA), 29 U.S.C. § 621 et seq., to binding arbitration.

Petitioner did not, as the majority correctly notes, ante, at 25, n. 2, raise the issue of the applicability of the FAA to employment contracts at any stage of the proceedings below. Nor did petitioner raise the coverage issue in his petition for writ of certiorari before this Court. It was amici who first raised the argument in their briefs in support of petitioner prior to oral argument of the case. See Brief for American Federation of Labor and Congress of Industrial Organizations as Amicus Curiae; Brief for American Association of Retired Persons as Amicus Curiae; Brief for Lawyers' Committee for Civil Rights Under Law as Amicus Curiae 17-18.

Notwithstanding the apparent waiver of the issue below, I believe that the Court should reach the issue of the coverage of the FAA to employment disputes because resolution of the question is so clearly antecedent to disposition of this case. On a number of occasions, this Court has considered issues waived by the parties below and in the petition for certiorari because the issues were so integral to decision of the case that they could be considered "fairly subsumed" by the actual questions presented. See, e.g., Teague v. Lane, 489 U.S. 288 , 300, 109 S.Ct. 1060, 1069-1070, 103 L.Ed.2d 334 (1989) ("The question of retroactivity with regard to petitioner's fair cross section claim has been raised only in an amicus brief. Nevertheless, that question is not foreign to the parties, who have addressed retroactivity with respect to petitioner's Batson claim. Moreover, our sua sponte consideration of retroactivity is far from novel" (citations omitted)); Batson v. Kentucky, 476 U.S. 79 , 84-85, n. 4, 106 S.Ct. 1712, 1716, n. 4, 90 L.Ed.2d 69 (1986) (notwithstanding petitioner's seemingly deliberate failure to raise the equal protection issue, "[w]e agree with the State that resolution of petitioner's claim properly turns on application of equal protection principles and express no view on the merits of any of petitioner's Sixth Amendment arguments"); Mapp v. Ohio, 367 U.S. 643 , 646, n. 3, 81 S.Ct. 1684, 1686, n. 3, 6 L.Ed.2d 1081 (1961) ("Although appellant chose to urge what may have appeared to be the surer ground for favorable disposition and did not insist that Wolf [v. Colorado, 338 U.S. 25 , 69 S.Ct. 1359, 93 L.Ed. 1782 (1949) ] be overruled, the amicus curiae, who was also permitted to participate in the oral argument, did urge the Court to overrule Wolf "). See also R. Stern, E. Gressman, & S. Shapiro, Supreme Court Practice § 6.26 (6th ed. 1986) (describing rule concerning need for presenting questions below and in petition for certiorari, and deviations from rule).

Only this Term, the Court has on at least two occasions decided cases on grounds not argued in any of the courts below or in the petitions for certiorari. In Arcadia v. Ohio Power Co., 498 U.S. 73 , 111 S.Ct. 415, 112 L.Ed.2d 374 (1990), we decided the case on an issue that not only was not raised below or in any of the papers in this Court, but that also was not raised at any point during oral argument before the Court. "In our view, however," the decided question was "antecedent to these [issues presented] and ultimately dispositive of the present dispute." Id., at 77, 111 S.Ct., at 418. Similarly, in McCleskey v. Zant, 499 U.S. 467 , 111 S.Ct. 1454, 113 L.Ed.2d 517 (1991), the Court issued a decision on a question which the parties had not argued below and evidently had not anticipated would be at issue in this Court, "since respondent did not even mention [Wainwright v.] Sykes [433 U.S. 72]] , 97 S.Ct. 2497, 53 L.Ed.2d 594], or cause-and-prejudice in its brief or at oral argument, much less request the Court to adopt this standard." Id., at 522-523, 111 S.Ct., at 1485 (MARSHALL, J., dissenting).

In my opinion the considerations in favor of reaching an issue not presented below or in the petition for certiorari are more compelling in this case than in the cited cases. Here the issue of the applicability of the FAA to employment contracts was adequately briefed and raised by the amici in support of petitioner. More important, however, is that respondent and its amici had full opportunity to brief and argue the same issue in opposition. See Brief for Respondent 42-50; Brief for Securities Industry Association, Inc., as Amicus Curiae 18-20; Brief for Equal Employment Advisory Council et al. as Amici Curiae 14-16. Moreover, the Court amply raised the issue with the parties at oral argument, at which both sides were on notice and fully prepared to argue the merits of the question. Finally, as in Arcadia, the issue whether the FAA even covers employment disputes is clearly "antecedent . . . and ultimately dispositive" of the question whether courts and respondent may rely on the FAA to compel petitioner to submit his ADEA claims to arbitration.

The Court, declining to reach the issue for the reason that petitioner never raised it below, nevertheless concludes that "it would be inappropriate to address the scope of the § 1 exclusion because the arbitration clause being enforced here is not contained in a contract of employment. . . . Rather, the arbitration clause at issue is in Gilmer's securities registration application, which is a contract with the securities exchanges, not with Interstate." Ante, at 25, n. 2. In my opinion the Court too narrowly construes the scope of the exclusion contained in § 1 of the FAA.

There is little dispute that the primary concern animating the FAA was the perceived need by the business community to overturn the common-law rule that denied specific enforcement of agreements to arbitrate in contracts between business entities. The Act was drafted by a committee of the American Bar Association (ABA), acting upon instructions from the ABA to consider and report upon "the further extension of the principle of commercial arbitration." Report of the Forty-third Annual Meeting of the ABA, 45 A.B.A.Rep. 75 (1920). At the Senate Judiciary Subcommittee hearings on the proposed bill, the chairman of the ABA committee responsible for drafting the bill assured the Senators that the bill "is not intended [to] be an act referring to labor disputes, at all. It is purely an act to give the merchants the right or the privilege of sitting down and agreeing with each other as to what their damages are, if they want to do it. Now that is all there is in this." Hearing on S. 4213 and S. 4214 before a Subcommittee of the Senate Committee on the Judiciary, 67th Cong., 4th Sess., 9 (1923). At the same hearing, Senator Walsh stated:

"The trouble about the matter is that a great many of these contracts that are entered into are really not [voluntary] things at all. Take an insurance policy; there is a blank in it. You can take that or you can leave it. The agent has no power at all to decide it. Either you can make that contract or you can not make any contract. It is the same with a good many contracts of employment. A man says, 'These are our terms. All right, take it or leave it.' Well, there is nothing for the man to do except to sign it; and then he surrenders his right to have his case tried by the court, and has to have it tried before a tribunal in which he has no confidence at all." Ibid. Given that the FAA specifically was intended to exclude arbitration agreements between employees and employers, I see no reason to limit this exclusion from coverage to arbitration clauses contained in agreements entitled "Contract of Employment." In this case, the parties conceded at oral argument that Gilmer had no "contract of employment" as such with respondent. Gilmer was, however, required as a condition of his employment to become a registered representative of several stock exchanges, including the New York Stock Exchange (NYSE). Just because his agreement to arbitrate any "dispute, claim or controversy" with his employer that arose out of the employment relationship was contained in his application for registration before the NYSE rather than in a specific contract of employment with his employer, I do not think that Gilmer can be compelled pursuant to the FAA to arbitrate his employment-related dispute. Rather, in my opinion the exclusion in § 1 should be interpreted to cover any agreements by the employee to arbitrate disputes with the employer arising out of the employment relationship, particularly where such agreements to arbitrate are conditions of employment.

My reading of the scope of the exclusion contained in § 1 is supported by early judicial interpretations of the FAA. As of 1956, three Courts of Appeals had held that the FAA's exclusion of "contracts of employment" referred not only to individual contracts of employment, but also to collective-bargaining agreements. See Lincoln Mills of Ala. v. Textile Workers Union of America, 230 F.2d 81 (CA5 1956), rev'd, 353 U.S. 448 , 77 S.Ct. 912, 1 L.Ed.2d 972 (1957); United Electrical, Radio & Machine Workers of America v. Miller Metal Products, Inc., 215 F.2d 221 (CA4 1954); Amalgamated Assn. of Street, Electric R. and Motor Coach Employees of America v. Pennsylvania Greyhound Lines , Inc., 192 F.2d 310 (CA3 1951). Indeed, the application of the FAA's exclusionary clause to arbitration provisions in collective-bargaining agreements was one of the issues raised in the petition for certiorari and briefed at great length in Lincoln Mills and its companion cases, Goodall-Sanford, Inc. v. Textile Workers, 353 U.S. 550 77 S.Ct. 920, 1 L.Ed.2d 1031 (1957), and General Electric Co. v. Electrical Workers, 353 U.S. 547 , 77 S.Ct. 921, 1 L.Ed.2d 1028 (1957). Although the Court decided the enforceability of the arbitration provisions in the collective-bargaining agreements by reference to § 301 of the Labor Management Relations Act, 1947, 29 U.S.C. § 185, it did not reject the Courts of Appeals' holdings that the arbitration provisions would not otherwise be enforceable pursuant to the FAA since they were specifically excluded under § 1. In dissent, Justice Frankfurter perceived a

"rejection, though not explicit, of the availability of the Federal Arbitration Act to enforce arbitration clauses in collective-bargaining agreements in the silent treatment given that Act by the Court's opinion. If an Act that authorizes the federal courts to enforce arbitration provisions in contracts generally, but specifically denies authority to decree that remedy for 'contracts of employment,' were available, the Court would hardly spin such power out of the empty darkness of § 301. I would make this rejection explicit, recognizing that when Congress passed legislation to enable arbitration agreements to be enforced by the federal courts, it saw fit to exclude this remedy with respect to labor contracts." Textile Workers v. Lincoln Mills, 353 U.S., at 466, 77 S.Ct., at 926.

Not only would I find that the FAA does not apply to employment-related disputes between employers and employees in general, but also I would hold that compulsory arbitration conflicts with the congressional purpose animating the ADEA, in particular. As this Court previously has noted, authorizing the courts to issue broad injunctive relief is the cornerstone to eliminating discrimination in society. Albemarle Paper Co. v. Moody, 422 U.S. 405 , 415, 95 S.Ct. 2362, 2370, 45 L.Ed.2d 280 (1975). The ADEA, like Title VII of the Civil Rights Act of 1964 , authorizes courts to award broad, class-based injunctive relief to achieve the purposes of the Act. 29 U.S.C. § 626(b). Because commercial arbitration is typically limited to a specific dispute between the particular parties and because the available remedies in arbitral forums generally do not provide for class-wide injunctive relief, see Shell, ERISA and Other Federal Employment Statutes: When is Commercial Arbitration an "Adequate Substitute" for the Courts?, 68 Texas L.Rev. 509, 568 (1990), I would conclude that an essential purpose of the ADEA is frustrated by compulsory arbitration of employment discrimination claims. Moreover, as Chief Justice Burger explained:

"Plainly, it would not comport with the congressional objectives behind a statute seeking to enforce civil rights protected by Title VII to allow the very forces that had practiced discrimination to contract away the right to enforce civil rights in the courts. For federal courts to defer to arbitral decisions reached by the same combination of forces that had long perpetuated invidious discrimination would have made the foxes guardians of the chickens." Barrentine v. Arkansas-Best Freight System, Inc., 450 U.S. 728, 750, 101 S.Ct. 1437, 1449-1450, 67 L.Ed.2d 641 (1981) (dissenting opinion).

In my opinion the same concerns expressed by Chief Justice Burger with regard to compulsory arbitration of Title VII claims may be said of claims arising under the ADEA. The Court's holding today clearly eviscerates the important role played by an independent judiciary in eradicating employment discrimination .

When the FAA was passed in 1925, I doubt that any legislator who voted for it expected it to apply to statutory claims, to form contracts between parties of unequal bargaining power, or to the arbitration of disputes arising out of the employment relationship. In recent years, however, the Court "has effectively rewritten the statute",[1] and abandoned its earlier view that statutory claims were not appropriate subjects for arbitration. See Mitsubishi Motors v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 , 646-651, 105 S.Ct. 3346, 3363-3367, 87 L.Ed.2d 444 (1985) (STEVENS, J., dissenting). Although I remain persuaded that it erred in doing so,[2] the Court has also put to one side any concern about the inequality of bargaining power between an entire industry, on the one hand, and an individual customer or employee, on the other. See ante, at 32-33. Until today, however, the Court has not read § 2 of the FAA as broadly encompassing disputes arising out of the employment relationship. I believe this additional extension of the FAA is erroneous. Accordingly, I respectfully dissent.


  1. Compare the decision below with Nicholson v. CPC Int'l Inc., 877 F.2d 221 (CA3 1989).
  2. Section 1 of the FAA provides that "nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." 9 U.S.C. § 1. Several amici curiae in support of Gilmer argue that that section excludes from the coverage of the FAA all "contracts of employment." Gilmer, however, did not raise the issue in the courts below; it was not addressed there; and it was not among the questions presented in the petition for certiorari. In any event, it would be inappropriate to address the scope of the § 1 exclusion because the arbitration clause being enforced here is not contained in a contract of employment. The FAA requires that the arbitration clause being enforced be in writing. See 9 U.S.C. § § 2, 3. The record before us does not show, and the parties do not contend, that Gilmer's employment agreement with Interstate contained a written arbitration clause. Rather, the arbitration clause at issue is in Gilmer's securities registration application, which is a contract with the securities exchanges, not with Interstate. The lower courts addressing the issue uniformly have concluded that the exclusionary clause in § 1 of the FAA is inapplicable to arbitration clauses contained in such registration applications. See, e.g., Dickstein v. DuPont, 443 F.2d 783 (CA1 1971); Malison v. Prudential-Bache Securities, Inc., 654 F.Supp. 101, 104 (WDNC 1987); Legg, Mason & Co. v. Mackall & Coe, Inc., 351 F.Supp. 1367 (DC 1972); Tonetti v. Shirley, 219 Cal.Rptr. 616, 618, 173 Cal.App.3d 1144 (1985); see also Stokes v. Merrill Lynch , Pierce, Fenner & Smith, 523 F.2d 433 , 436 (CA6 1975). We implicitly assumed as much in Perry v. Thomas, 482 U.S. 483 , 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987), where we held that the FAA required a former employee of a securities firm to arbitrate his statutory wage claim against his former employer, pursuant to an arbitration clause in his registration application. Unlike the dissent, see post, at 38-41, we choose to follow the plain language of the FAA and the weight of authority, and we therefore hold that § 1's exclusionary clause does not apply to Gilmer's arbitration agreement. Consequently, we leave for another day the issue raised by amici curiae.

This work is in the public domain in the United States because it is a work of the United States federal government (see 17 U.S.C. 105).