Blair vs. Scott Special Specialty Gases 01-1096 IN THE UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT No. 01-1096 BLAIR vs. SCOTT SPECIALTY GASES, et al. Diane Blair, Appellant On Appeal from the United States District Court for the Eastern District of Pennsylvania BRIEF OF THE EQUAL EMPLOYMENT OPPORTUNITY COMMISSION AS AMICUS CURIAE IN SUPPORT OF THE APPELLANT GWENDOLYN YOUNG REAMS Associate General Counsel PHILIP B. SKLOVER Associate General Counsel LORRAINE C. DAVIS Assistant General Counsel ROBERT J. GREGORY Senior Attorney EQUAL EMPLOYMENT OPPORTUNITY COMMISSION 1801 L Street, N.W. Washington, D.C. 20507 (202) 663-4059 STATEMENT OF INTEREST The Equal Employment Opportunity Commission ("Commission") is the agency entrusted with the enforcement of Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq. ("Title VII"), and other federal anti-discrimination statutes. In this case, the plaintiff brought suit in federal court, alleging sex discrimination under Title VII. The defendant moved to dismiss the plaintiff's suit, arguing that the plaintiff was required to arbitrate her Title VII claim pursuant to a pre-dispute arbitration agreement imposed by the defendant. That agreement, among other things, presumptively required the plaintiff to pay one-half of the arbitrator's fees. Despite this feature of the agreement, the district court granted the defendant's motion and dismissed the plaintiff's suit. The decision of the district court raises important issues concerning the enforceability of pre-dispute arbitration agreements that require a federal statutory claimant to pay a portion of the arbitrator's fees. Although the district court held that the agreement in this case was enforceable, the district court's decision was issued prior to the Supreme Court's decision in Green Tree Fin. Corp. v. Randolph, 121 S. Ct. 513 (2000). In that case, the Supreme Court explicitly addressed the fee-allocation issue, adopting standards that, in our view, require reversal of the district court's decision in this case. To assist the Court in resolving the important issues raised by this appeal and to give the Court the benefit of the Commission's views on the Green Tree decision, the Commission, pursuant to F.R.A.P. 29(a), offers its views as amicus curiae. STATEMENT OF THE ISSUES 1. Whether the Supreme Court's Green Tree decision empowers a federal district court to determine, in a pre-arbitration judicial proceeding, whether the arbitration agreement makes it likely that the federal statutory claimant will incur prohibitive arbitration costs, thus rendering the agreement unenforceable as a matter of federal law. 2. Whether, under Green Tree, a federal statutory claimant is entitled to invoke discovery procedures in a pre-arbitration judicial proceeding to demonstrate the likelihood that prohibitive arbitration costs will be incurred under the arbitration agreement. 3. Whether a remand for further factual inquiry is the proper remedy in this case, given the fact that the arbitration agreement, by its very terms, presumptively requires the federal statutory claimant to pay one-half of the arbitrator's fees. STATEMENT OF THE CASE 1. Diane Blair began working for Scott Specialty Gases ("Scott") in 1995. See Blair v. Scott Specialty Gases, 2000 WL 1728503, *1 (E.D. Pa. Nov. 21, 2000). In February 1998, Scott published and distributed an updated employee handbook that included a mandatory, binding arbitration provision. Id. That provision set forth detailed arbitration procedures. Among other things, the provision stated that arbitration "expenses," other than the filing fee, "will be paid by the parties as set forth in the applicable AAA [American Arbitration Association] rules." Id. at *2. Under the AAA's National Rules for the Resolution of Employment Disputes, the arbitrator's fees are to be "'borne equally by the parties unless they agree otherwise, or unless the law provides otherwise.'" Id. On February 27, 1998, Blair signed an acknowledgment stating that she had read the arbitration provision of the employee handbook and agreeing "'that if there is any dispute arising out of [her] employment . . . [she] will submit it exclusively to final and binding arbitration.'" Id. Blair resigned her employment with Scott in March 1999. Id. Blair filed a timely charge of discrimination with the Commission. Id. Blair eventually brought suit in federal district court, alleging that Scott subjected her to discrimination and harassment because of her sex, thus causing her to resign her employment. Id. at *1. 2. In dismissing Blair's suit, the district court rejected Blair's argument that her arbitration agreement with Scott was unenforceable "because under the agreement, Blair is required to pay half of the arbitrator's fees." Id. at *7. The court faulted Blair for failing to "submit any evidence that demonstrates the amount of the arbitrator's fee" and failing to demonstrate "why she cannot afford arbitration, whether it is or is not possible to cut back on her expenses to afford arbitration, and whether when she was eligible to file for arbitration, she could afford arbitration." Id. The court also noted that, under the terms of the arbitration provision imposed by Scott, it was possible that the parties could have forged an agreement to have Scott pay the full share of the arbitrator's fees. Id. The court drew no significance from the fact that the arbitration provision imposed by Scott, by its very terms, presumptively requires the statutory claimant to pay one-half of the arbitrator's fees. 3. Subsequent to the district court's decision in this case, the Supreme Court issued its decision in Green Tree Fin. Corp. v. Randolph. In Green Tree, the Court addressed the arbitration fee-allocation issue in the context of a rental agreement purporting to require the arbitration of any claim arising under the agreement (including any claim brought under the Truth in Lending Act). The Court agreed with the claimant that the "existence of large arbitration costs" (including arbitrators' fees) could render an arbitration agreement unenforceable. 121 S. Ct. at 522 (noting that such costs could preclude a claimant "from effectively vindicating her statutory rights in the arbitral forum"). The Court further opined that a court was empowered to invalidate an agreement, in a pre-arbitration judicial proceeding, based on a showing that "arbitration would be prohibitively expensive." Id. In the Court's view, the claimant was entitled to make this showing in the district court and, if necessary, to invoke "discovery" procedures to demonstrate "the likelihood of incurring such [prohibitive] costs." Id. at 522-23. The Court held that the claimant in the case before it had failed to make the requisite showing of prohibitive expense, stressing that the agreement before the Court in that case was "silen[t]" on the issue of arbitrators' fees. Id. at 522. Although Green Tree did not involve arbitration of an employment dispute, the Court's decision has already been extended to the employment context. See, e.g., Lyster v. Ryan's Family Steak Houses, Inc., 239 F.3d 943, 947 (8th Cir. 2001) (applying Green Tree in an employment discrimination case); Bradford v. Rockwell Semiconductor Sys., Inc., 238 F.3d 549, 556-57 (4th Cir. 2001) (applying Green Tree in an ADEA case); Geiger v. Ryan's Family Steak Houses, Inc., 2001 WL 278120, *8 n.5 (S.D. Ind. March 21, 2001) (applying Green Tree in a Title VII case). In the Commission's view, Green Tree establishes a legal framework for all cases involving pre-dispute agreements to arbitrate federal claims, including claims under the federal anti-discrimination statutes. ARGUMENT I. THE SUPREME COURT'S GREEN TREE DECISION EMPOWERS A FEDERAL DISTRICT COURT TO DETERMINE, IN A PRE-ARBITRATION JUDICIAL PROCEEDING, WHETHER THE ARBITRATION AGREEMENT MAKES IT LIKELY THAT THE FEDERAL STATUTORY CLAIMANT WILL INCUR PROHIBITIVE ARBITRATION COSTS, THUS RENDERING THE AGREEMENT UNENFORCEABLE AS A MATTER OF FEDERAL LAW. The most critical point established in Green Tree is that a district court is empowered to determine, in a pre-arbitration judicial proceeding, whether the arbitration agreement is unenforceable because it imposes prohibitive arbitration costs on the statutory claimant. In Green Tree, the arbitration proponent (the financing company) argued that any issue concerning the claimant's liability for arbitrators' fees should be deferred to post-arbitration review in court. Stressing that the claimant was entitled to seek a judicial "modification" of an arbitrator's cost award, the company argued that such post-arbitration review was "adequate" to protect the claimant's statutory rights. See Petitioner's Reply Brief, 2000 WL 1215299, **15-16 & n.10. Similar arguments were advanced by the amici supporting the company's position in the Supreme Court. See Brief of American Bankers Association, et al., 2000 WL 744158, *13 (arguing that any injury inflicted by an arbitrator's fee-allocation order is properly corrected through "judicial review" of the arbitration decision); Brief of Equal Employment Advisory Council, 2000 WL 744164, *19 (arguing that because the "availability of judicial review . . . serves as a safeguard against the imposition of unreasonable fees," improper to invalidate an arbitration agreement in a pre-arbitration judicial proceeding). The Supreme Court flatly rejected this argument. The Court stressed that statutory claims may be arbitrated under the FAA but only "'so long as the prospective litigant effectively may vindate [his or her] statutory cause in the arbitral forum.'" 121 S. Ct. at 521. The Court recognized that "[i]t may well be that the existence of large arbitration costs could preclude a litigant [from] effectively vindicating her federal statutory rights in the arbitral forum." Id. at 522. The Court ruled that a statutory claimant can have an arbitration agreement invalidated by demonstrating the "likelihood" of incurring "prohibitive" arbitration costs under the agreement. Id. The Court clarified that, where the claimant makes a "showing of prohibitive expense," the burden shifts to the arbitration proponent to "come forward with contrary evidence." Id. at 522-23. In short, the Court established a framework for resolving the fee-allocation issue in a pre-arbitration judicial proceeding, a framework that empowers the district court to deny enforcement of an arbitration agreement that imposes prohibitive arbitration costs. The Supreme Court's decision, on this point, is consistent with a large body of pre-Green Tree circuit court precedent, supporting the view that an arbitration agreement is unenforceable, as an initial matter, if it requires the federal statutory claimant to incur prohibitive arbitration costs. In Cole v. Burns Int'l Sec. Servs., 105 F.3d 1465, 1483 (D.C. Cir. 1997), for example, the D.C. Circuit ruled that an employer may not require an employee to accept an arbitration agreement "that requires the employee to submit his or her statutory claims to arbitration and then requires the employee to pay all or part of the arbitrators' fees." In Shankle v. B-G Maint. Mgmt. of Colorado, Inc., 163 F.3d 1230, 1233 (10th Cir. 1999), the Tenth Circuit ruled that a "mandatory arbitration agreement" that "requires an employee to pay a portion of the arbitrator's fees, [is] unenforceable under the [FAA]." The court stressed that such an agreement "undermines the remedial and deterrent functions of the federal anti-discrimination laws," imposing a "prohibitive cost" on the exercise of statutory rights. Id. at 1235. Likewise, in Paladino v. Avnet Computer Techs., Inc., 134 F.3d 1054, 1062 (11th Cir. 1998) (Cox, J., & Tjoflat, J., concurring), the Eleventh Circuit opined that a pre-dispute agreement imposed by an employer is unenforceable where the agreement makes the claimant liable for a portion of the sometimes "hefty cost of an arbitration." Green Tree affirms the settled view that a "'federal court, before enforcing an employer's demand for arbitration under an employment contract, may -- indeed, must -- scrutinize the agreed-upon or contemplated arbitration system'" to ensure that the system provides "substantive protection[s] and access to a neutral forum in which to enforce those protections." Cole, 105 F.3d at 1482-83 (quoting Robert A. Gorman, "The Gilmer Decision and the Private Arbitration of Public-Law Disputes," 1995 U. ILL. L. REV. 635, 645)). In this regard, Green Tree closely tracks the Supreme Court's arbitration precedent, most notably, Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991). In Gilmer, the Supreme Court ruled that an individual can be required to arbitrate a claim of discrimination under the federal Age Discrimination in Employment Act. The Court, however, imposed significant conditions on the enforcement of pre-dispute agreements that purport to require the arbitration of federal statutory claims. The Court stated that an arbitration agreement must not require a party to "'forgo the substantive rights afforded by the statute.'" Id. at 26 (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628 (1985)). The Court clarified that mandatory arbitration of federal statutory claims is permissible only if "'the prospective litigant effectively may vindicate [his or her] statutory cause of action in the arbitral forum'" such that "'the statute will continue to serve both its remedial and deterrent function.'" 500 U.S. at 28 (quoting Mitsubishi, 473 U.S. at 637). Gilmer establishes that there are limitations, derived from federal law, on the use of arbitration procedures that are imposed by employers in pre-dispute agreements with employees. One of those limitations is that employees "seeking to vindicate statutory rights" not be required to "pay for the services of an arbitrator when they would never be required to pay for a judge in court." Cole, 105 F.3d at 1484 (citing Gilmer). The rationale for having a court rule on the fee-allocation issue, at the pre-arbitration stage, is obvious. A possible by-product of an arbitration agreement of this nature is that some individuals will be dissuaded from asserting their statutory claims. The agreement denies access to a judicial forum and then, by its terms, exposes claimants to liability for what may be substantial arbitral forum fees. Many putative claimants (and their attorneys), faced with this potential liability, will simply give up the fight and not pursue an otherwise viable claim. It is not enough to say that a fee award might be corrected in a post-arbitration review proceeding. To ensure that claimants are not dissuaded from pursuing their claims as an initial matter, the deterrent effect of a potential fee award must be removed at the enforcement stage. II. UNDER GREEN TREE, A FEDERAL STATUTORY CLAIMANT IS ENTITLED TO INVOKE DISCOVERY PROCEDURES IN A PRE-ARBITRATION JUDICIAL PROCEEDING TO DEMONSTRATE THE LIKELIHOOD THAT PROHIBITIVE ARBITRATION COSTS WILL BE INCURRED UNDER THE ARBITRATION AGREEMENT. The second important point established in Green Tree is that a federal statutory claimant is entitled to invoke discovery procedures, in a pre-arbitration judicial proceeding, to assist the claimant in meeting her "burden of showing the likelihood of incurring [prohibitive arbitration] costs." 121 S. Ct. at 522. In Green Tree, the Supreme Court cited a failure of proof on the issue of arbitration costs, noting that the record contained "hardly any information" on the issue at all. Id. In doing so, the Court made clear that the fault was the claimant's; the claimant could have developed a record on the cost issue. Specifically, the claimant could have done so during the "discovery" phase of the pre-arbitration judicial proceeding. Id. at 523. Under Green Tree, the claimant bears the burden of proof in seeking to "invalidate an arbitration agreement on the ground that arbitration would be prohibitively expensive." Id. at 522. The claimant, in shouldering that burden, is entitled to deploy discovery procedures, procedures that would allow the claimant, among other things, to unearth the history of fee and cost awards under the arbitration procedures established by the agreement. Notably, the discovery issue was explicitly raised during the Supreme Court oral argument in Green Tree. Chief Justice Rehnquist vigorously questioned the claimant's attorney on why the claimant did not "make any showing" in the district court on the issue of arbitration costs. Transcript of Oral Argument, 2000 WL 1513141, *35. The Chief Justice criticized the claimant for not seeking "discovery going to the costs of the arbitration." Id. at **35-36. The Chief Justice opined that "proof could be offered in the district court, before the arbitration," on the fees issue. Id. at *39. Later, counsel for the financing company, the arbitration proponent, was asked whether the claimant could have sought "discovery" concerning "the costs of arbitration." Id. at *54. Counsel agreed that "[t]here's no problem with seeking discovery" but urged that the claimant had failed to invoke properly her discovery rights. Id. It is clear from the oral argument in Green Tree that all concerned assumed that discovery would be available in a pre-arbitration judicial proceeding going to the issue of arbitrators' fees. That assumption is reflected in the Court's decision. It is true that permitting such discovery, in a pre-arbitration judicial proceeding, is at tension with one of the principal aims of the FAA -- to trade the "'procedures and opportunity for review of the courtroom for the simplicity, informality, and expedition of arbitration.'" Gilmer, 500 U.S. at 31. But it must be remembered that, when arbitration involves federal statutory claims (as opposed to purely commercial disputes), the objectives of the FAA must be balanced with the goal of ensuring that the public rights of the statutory claimant are not compromised. The Supreme Court has made clear that federal statutory claims may be arbitrated pursuant to pre-dispute agreements; it has, however, qualified its approval of arbitration, in the context of federal statutory claims, with the critical caveat that the claimant must be able to "'vindicate [his or her] statutory cause of action in the arbitral forum,'" thereby ensuring that "'the statute will continue to serve both its remedial and deterrent function.'" Id. at 28. Further, the specter of protracted collateral litigation on the fees issue can be easily avoided by the arbitration proponent -- in this case, the employer. The employer can simply state in the agreement that the arbitrator's fees will be borne by the employer, not the claimant. Such an agreement would ensure that the claimant is not denied "access to a neutral forum in which to enforce [statutory] protections." Cole, 105 F.3d at 1482-85 (dismissing the concern that requiring the employer to pay the full share of the arbitrator's fees raises "the possibility of arbitrators systematically favoring employers"). The Commission fears that some employers are reluctant to take this simple step because they want to use arbitration procedures as a way of warding off discrimination claims. In other words, they hope to dissuade claimants from coming forward by deliberately creating the specter of liability for hefty arbitration costs and fees. The rights of a statutory claimant should not be hostage to the employer's self-serving decision to allocate a portion of the arbitrator's fees to the claimant.<1> III. REMAND FOR FURTHER FACTUAL INQUIRY IS THE PROPER REMEDY IN THIS CASE, GIVEN THE FACT THAT THE ARBITRATION AGREEMENT, BY ITS VERY TERMS, PRESUMPTIVELY REQUIRES THE FEDERAL STATUTORY CLAIMANT TO PAY ONE-HALF OF THE ARBITRATOR'S FEES. Based on the forgoing, it is clear that the proper course in this case is to remand for further factual inquiry on the issue of arbitrators' fees. The arbitration agreement in this case is explicit. It states that the arbitration "expenses" will be paid "by the parties as set forth in the applicable AAA rules." Those rules, in turn, provide that the arbitrator's fees are to be "'borne equally by the parties.'" The AAA rules do leave some wiggle room, stating that the 50-50 split can be modified if the parties "agree otherwise" or the law "provides otherwise." Nonetheless, the AAA rules, explicitly incorporated into the arbitration agreement, presumptively require the federal statutory claimant to pay one-half of the arbitrator's fees. The agreement in this case falls squarely within Green Tree's burden-shifting framework. In Green Tree, the Supreme Court stated that, once the statutory claimant satisfies her threshold burden of presenting evidence of the "likelihood" of incurring "prohibitive" arbitration expense, "the party seeking arbitration must come forward with contrary evidence." 121 S. Ct. at 522-23. Arguably, the existence of a fee-allocation provision in an arbitration agreement, explicitly assigning a portion of the arbitrator's fees to the statutory claimant, suffices to meet the claimant's threshold burden, thus shifting the burden to the arbitration proponent to adduce "contrary evidence." The arbitration proponent could put in its own evidence on the fees issue, leaving the court to sort through the competing proofs and rule on the enforceablity of the agreement. Or, the arbitration proponent could agree to pay all of the arbitrator's fees (an option that appears to be available under the agreement in this case). At the very least, the existence of a fee-allocation provision of this nature would be sufficient to trigger the claimant's discovery rights. Based on that discovery, the claimant could make the type of evidentiary showing required to block enforcement of the arbitration agreement. In this case, it could be argued that, by pointing to the fee-allocation provision in Scott's arbitration procedures, Blair satisfied her threshold burden of demonstrating the likelihood of incurring prohibitive expense, thus shifting the burden to Scott to put in contrary evidence. Not having set forth any rebuttal evidence or offered to shoulder the full amount of the arbitrator's fees, Scott would have defaulted in its burden to present contrary evidence, thus requiring the court to deny enforcement of the agreement. This, however, would be unfair to Scott, which did not have the benefit of the Green Tree decision at the time the issue was litigated in the district court. The better course, under these circumstances, is to give both parties a fair opportunity to present evidence on the fees issue. That opportunity would include the right to invoke discovery procedures, if necessary, to ferret out the history of fee-shifting under the AAA rules.<2> In Green Tree, the Supreme Court did not remand for further factual inquiry on the fees issue, simply holding that the claimant had failed to meet her burden of proof. See 121 S. Ct. at 522-23. The key in that case, however, was that the record revealed "only the arbitration agreement's silence on the subject." Id. at 522. It was that "silence" that led to the division on the Court. The majority believed that silence "alone" was "plainly insufficient to render [the agreement] unenforceable," because it made the risk that the claimant would be "saddled with prohibitive costs" too "speculative to justify the invalidation of [the] agreement." Id. The four dissenting judges believed that, even with a silent agreement, it was wrong to let the case go forward into arbitration without some "clarification" of the history of fee-allocation under the agreement at issue. Id. at 525 (Ginsburg, J., dissenting). Where an agreement is merely silent on the fees issue, invalidating the agreement on that basis alone requires a court to indulge a presumption against the fairness of arbitration procedures, the very thing that the FAA prevents courts from doing. 121 S. Ct. at 521-22. Where, however, an agreement explicitly requires the claimant to pay a portion of the arbitrator's fees, there is no need to indulge a presumption against arbitration; the agreement, by its very terms, puts the claimant at risk. This distinction illuminates the district court's error in this case. The district court faulted Blair for a failure of proof on the fees issue. The district court's analysis might have been correct had the agreement in this case been silent on the fees issue, as it was Green Tree. In this case, however, the agreement is not silent. The agreement presumptively requires Blair to pay one-half of the arbitrator's fee. For purposes of applying the Green Tree framework, there is a critical distinction between an agreement that is merely silent on arbitrators' fees and an agreement that, by its very terms, requires (or presumptively requires) the claimant to pay a portion of those fees. See Geiger, 2001 WL 278120, *8 n.5 (distinguishing Green Tree, which involved an arbitration agreement that was "'silen[t] on the subject' of arbitration costs" from an agreement that "place[s] the burden for at least half of the fees squarely on the shoulders of the employee/claimant"). Further, the district court appeared to focus on the wrong issue. The district court faulted Blair for failing to put in evidence concerning her ability to pay the "arbitration fees." 2001 WL 1728503, *7 (stressing that Blair's evidence failed to "assess why she cannot afford arbitration" or "whether it is or is not possible to cut back on her expenses to afford arbitration"). In Green Tree, however, the Court did not focus on the individual claimant's ability to pay. The Court focused on the "likelihood" that arbitrators' fees would be incurred. 121 S. Ct. at 522. It is that issue -- the likelihood of incurring the fees -- that is the principal focus of a pre-arbitration judicial proceeding on the fees issue. To be sure, Green Tree does stress that, to invalidate the arbitration agreement, the arbitration expense must be "prohibitive." Id. But "prohibitive" does not mean so expensive that it would quite literally preclude the individual claimant, given her personal financial circumstances, from going forward on her claim. "Prohibitive" means costs that pose a serious risk of deterring statutory claimants from pursuing their claims in arbitration because the costs imposed "are unlike anything that [they] would have to pay to pursue [their] statutory claims in court." Cole, 105 F.3d at 1484 (stressing that a statutory claimant is never required to "pay for the services of the judge assigned to hear her or his case"). Conceivably, there could be cases where the additional arbitration expense is so de minimis that requiring the claimant to incur a portion of that expense would not seriously threaten to deter the claimant from "seeking to vindicate statutory rights" in the arbitral forum. Id.; see also LaPrade v. Kidder, Peabody & Co., 2001 WL 409118, *4 (D.C. Cir. April 24, 2001) (affirming an arbitration award requiring the claimant to pay 12% of the arbitral forum fees where the 12% figure "cover[ed] only the costs associated with [the claimant's] non-statutory claims"). As a general matter, however, a statutory claimant should not be required "to pay for the services of an arbitrator when [she] would never be required to pay for a judge in court."<3> Id. CONCLUSION The Supreme Court's decision in Green Tree provides the framework for resolving the fee-allocation issue in this case. Under that framework, the proper course is to remand the case for further factual inquiry on the issue of arbitrators' fees. Respectfully Submitted, GWENDOLYN YOUNG REAMS Associate General Counsel PHILIP B. SKLOVER Associate General Counsel LORRAINE C. DAVIS Assistant General Counsel ROBERT J. GREGORY Senior Attorney EQUAL EMPLOYMENT OPPORTUNITY COMMISSION 1801 L Street, N.W. Washington, D.C. 20507 May 14, 2001 (202) 663-4059 CERTIFICATE OF COMPLIANCE I, Robert J. Gregory, hereby certify that this brief complies with the type-volume limitations imposed under F.R.A.P. 32(a)(7)(B)(i) and F.R.A.P. 29(a). The brief contains 4770 words. Robert J. GregoryCERTIFICATE OF SERVICE I, Robert J. Gregory, hereby certify that on this 14th day of May, 2001, two copies of the attached brief were sent by first-class mail, postage prepaid, to each of the following counsel of record: Ralph E. Lamar, IV The Atrium, Suite W-2 301 S. Main Street Doylestown, PA 18901 Thomas J. Barton DRINKER BIDDLE & REATH LLP One Logan Square 18th & Cherry Streets Philadelphia, PA 19103-6996 Robert J. Gregory 1 In this case, Scott chose to adopt the arbitration procedures of the AAA, which presumptively require the arbitrator's fees to be "'borne equally by the parties.'" 2000 WL 1728503, *2. As originally adopted (in 1996), the AAA procedures for employment disputes did not take a position on the fee-allocation issue. See Cole, 105 F.3d at 1480-81. The AAA has since modified its procedures to provide for fee-sharing. It is unfortunate that the AAA has chosen to take this step, since it is a common provider of arbitration services. This is of particular concern to the Commission, given the evidence of the average cost of arbitrators' fees in AAA proceedings. See id. at 1480 n.8 (noting that arbitrators' fees of "$500 or $600 per hour are not uncommon," with arbitrators' fees in the "'average'" employment case totaling anywhere from "$3,750 to $14,000"). 2 An alternative approach to fee-allocation issue in this case would be to read the arbitration agreement as assigning the full share of the arbitrator's fees to Scott. There is support for such a reading in the AAA procedures referenced in the agreement, which provide that arbitrators' fees shall be borne equally by the parties "'unless the law provides otherwise,'" the theory being that, if the law requires the employer to pay the full share of the arbitrator's fees, the law "otherwise" provides for a different allocation of fees. This approach has the advantage of resolving the fees issue, in advance of litigation, in a way that eliminates the risk of the statutory claimant being deterred from pursuing her statutory claim in arbitration. The problem with this approach is that it would perpetuate a confusing and self-defeating fee-allocation rule. If the law "provides" that arbitration fees may not be assigned to the statutory claimant, then why have a provision that presumptively requires the claimant to pay half of those fees? Under these circumstances, the better course may be to address the enforceability issue under the Green Tree framework, leaving to the Scott (and the AAA) the task of cleaning up the confusing fee-allocation provision (for future cases). 3 As pointed out in Cole, "[e]ven if an employee is not required to pay any portion of an arbitrator's fee, arbitration in a program such as the one administered by AAA is hardly inexpensive." Id. at 1484 n.12 (citing the cost of filing fees and various administrative expenses). Because many of these arbitration costs have parallels in judicial proceedings (as opposed to arbitrators' fees, which do not), the mere imposition of these costs does not as a per se matter invalidate the arbitration agreement; arbitration providers may require claimants to incur costs that are comparable to costs that would be incurred in a judicial proceeding. Nevertheless, if arbitration costs are imposed on different terms than court costs (e.g., no waiver of the costs for individuals who would qualify for in forma pauperis status in federal court), the imposition of such costs can provide the basis for invalidating the arbitration agreement. Id.