No. 09-1754 ____________________________________________ IN THE UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT ____________________________________________ ANGELA L. HALL, Plaintiff-Appellee, v. TREASURE BAY VIRGIN ISLANDS CORP., d/b/a Divi Carina Bay Casino, Defendant-Appellant. ____________________________________________ On Appeal From the United States District Court of the Virgin Islands, Division of St. Croix ____________________________________________ BRIEF OF THE EQUAL EMPLOYMENT OPPORTUNITY COMMISSION AS AMICUS CURIAE IN SUPPORT OF APPELLEE AND AFFIRMANCE ____________________________________________ JAMES L. LEE EQUAL EMPLOYMENT Deputy General Counsel OPPORTUNITY COMMISSION Office of General Counsel CAROLYN L. WHEELER 131 M St. NE, 5th Fl. Acting Associate General Counsel Washington, D.C. 20507 (202) 663-4724 LORRAINE C. DAVIS Annenoel.Occhialino@EEOC.gov Assistant General Counsel ANNE NOEL OCCHIALINO Attorney TABLE OF CONTENTS TABLE OF AUTHORITIES . . . . . . . . . . . . . . . . . .…iii STATEMENT OF INTEREST. . . . . . . . . . . . . . . . . . . 1 STATEMENT OF THE ISSUES. . . . . . . . . . . . . . . . . . 2 STATEMENT OF THE CASE. . . . . . . . . . . . . . . . . . . 3 A. Statement of the Facts. . . . . . . . . . . . 3 B. District Court Decision 5 ARGUMENT. . . . . . . . . . . . . . . . . . . . . . . . 7 THE DISTRICT COURT PROPERLY REFUSED TO ENFORCE THE ARBITRATION AGREEMENT BECAUSE IT CONTAINS MULTIPLE UNCONSCIONABLE PROVISIONS THAT TAINT ITS CENTRAL PURPOSE, RENDERING IT UNENFORCEABLE. . . . . . . . . . . . . . . . . . . . .. . . . . . 7 A. The Agreement contains multiple unconscionable provisions. . . 8 1. Procedural Unconscionability. . . . . . . . . . . . . . 9 2. Substantive Unconscionability . . . . . . . . . . . . . 10 a. The 30-day filing requirement and ban on awards of attorney's fees and costs. . . . . . . . . . . . 10 b. "Loser Pays" Arbitral Costs . . . . . . . . . . . . 13 c. Constraint Provision . . . . . . . . . . . . . . . 19 B. The multiple unconscionable provisions are not severable because they evince Divi Casino's deliberate attempt to impose an arbitration scheme designed to discourage Hall's resort to arbitration or produce results biased in its favor. . . . . . . . . . . . . . . . . . . . . . . . . . . . .25 CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30 CERTIFICATE OF COMPLIANCE. . . . . . . . . . . . . . . . . . . . . . .31 CERTIFICATE OF SERVICE . . . . . . . . . . . . . . . . . . . . . . . 32 TABLE OF AUTHORITIES Cases page(s) Alexander v. Anthony Int'l, 341 F.3d 256 (3d Cir. 2003). . . . . . . passim Alexander v. Gardner-Denver Co., 415 U.S. 36 (1974). . . . . . . . . 1 Blair v. Scott Specialty Gases, 283 F.3d 595 (3d Cir. 2002). . . 14,15,18 Christiansburg Garment Co. v. EEOC, 434 U.S. 417 (1978). . . . . . 12,27 Clayton v. Meijer, Inc., 281 F.3d 605 (6th Cir. 2002). . . . . . . . . 19 Dyer v. Grapetree Shores Inc., d/b/a Divi Carina Bay Resort & Casino, Civ No. 2003/0021 (D.V.I. Slip Op. Oct. 17, 2005) ). . . . . . . . 24 Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991). . .7,12,19,27 Giordano v. Pep Boys-Manny, Moe & Jack, Inc., No. CIV. A. 99-1281, 2001 WL 484360 (E.D. Pa. 2001). . . . . . . . 17 Green Tree Fin. Corp.-Alabama v. Randolph, 531 U.S. 79 (2000). . . . . . . . . . . . . . . . . . . . . 13,17,28 Hamilton v. Grapetree Shores, Inc., d/b/a Divi Carina Bay Resort, Civ. No. 2004/0128 (D.V.I. Slip Op. Oct. 17, 2005). . . . . . . . .24 Laborers' Int'l Union of N. Am. v. Foster Wheeler Corp., 26 F.3d 375 (3d Cir. 1994). . . . . . . . . . . . . . . . . . . . . 9 Lucey v. FedEx Ground Package Sys., Inc., No. 07-4372, 2009 WL 51644 (3d Cir. Jan. 8, 2009). . . . . . . . . . . . . . . 9 Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985). . . . . . . . . . . . . . . . . . . . . 8,12,19 Nino v. Jewelry Exch., Inc, d/b/a Diamonds Int'l & Wendy Tarapani, No. 09-1268 (3d. Cir.). . . . . . . . . . . . . . . . . . . . . . . 1 Table of Authorities (con't) Paladino v. Avnet Computer Tech., Inc., 134 F.3d 1054 (11th Cir. 1998)….19 Parilla v. IAP Worldwide Servs. VI, Inc., 368 F.3d 269 (3d Cir. 2004). . . . . . . . . . . . . . . . . . passim Plaskett v. Bechtel Int'l, Inc., 243 F. Supp. 2d 334 (D.V.I. 2003). . . 29 Spinetti v. Serv. Corp. Int'l, 324 F.3d 212 (3d Cir. 2003). . . 12,14,25 Statutes 9 U.S.C. § 1 et seq. . . . . . . . . . . . . . . . . . . . . . . . . . . 7 9 U.S.C. § 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 42 U.S.C. § 2000e et seq . . . . . . . . . . . . . . . . . . . . . . . . 1 42 U.S.C. § 2000e-5(g)(1) . . . . . . . . . . . . . . . . . . . . . . . 19 Rules and Regulations Fed. R. App. P. 29. . . . . . . . . . . . . . . . . . . . . . . . . . . 1 V.I. Code Ann. § 4. . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Other Restatement (First) of Contracts § 603. . . . . . . . . . . . . . . . . 25 Restatement (Second) of Contracts § 178. . . . . . . . . . . . . . . 10 Restatement (Second) of Contracts § 184. . . . . . . . . . . . . . . . .25 Restatement (Second) of Contracts § 206. . . . . . . . . . . . . . . 22 Restatement (Second) of Contracts § 208. . . . . . . . . . . . . . . 8,10 STATEMENT OF INTEREST The Equal Employment Opportunity Commission was established by Congress to administer, interpret, and enforce Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq. This case involves the validity and enforceability of a pre-employment arbitration agreement between an employee and her employer. Specifically, this case raises the issues of whether the arbitration agreement was procedurally and substantively unconscionable and whether the unconscionable provisions are severable from the remainder of the agreement. While there is no allegation that the agreement in any way affects the Commission's enforcement authority, the Commission has an interest in this case because "private rights of action remain [] an essential means of obtaining judicial enforcement of Title VII," as "private litigant[s] not only redress[] [their] own injur[ies] but also vindicate[] the important Congressional policy against discriminatory employment practices." Alexander v. Gardner-Denver Co., 415 U.S. 36, 45 (1974). Accordingly, the Commission respectfully offers its views to the Court. See Fed. R. App. P. 29. STATEMENT OF THE ISSUES<1> I. Whether the district court properly found that the arbitration agreement was procedurally and substantively unconscionable where the employer had excessive bargaining power and presented the agreement on a take- it-or-leave-it basis, and where the agreement included a: (1) 30-day notice provision; (2) ban on awards of attorney's fees and costs; (3) "loser pays" arbitration costs provision; and (4) "constraint provision" prohibiting the arbitrator from altering or amending any discipline imposed by the employer, even discriminatory discipline, where the arbitrator concludes that discipline was warranted. II. Whether the district court correctly determined that the unconscionable provisions were not severable where they evince the employer's deliberate attempt to impose an arbitration scheme designed to discourage the plaintiff from resorting to arbitration or to produce results biased in its favor, thereby tainting the central purpose of the agreement and rendering it unenforceable. STATEMENT OF THE CASE A. Statement of the Facts Plaintiff Angela Hall is a black West Indian female from the Virgin Islands. JA4, ¶ 2.<2> On March 1, 2000, she began working for Defendant Treasure Bay Virgin Island Corporation, d/b/a/ Divi Carino Bay Casino ("Divi Casino") as a casino cashier. JA5, ¶ 5. On Hall's first day, Divi Casino required her to attend an orientation along with fifty other new employees. JA64, ¶ 3. At the meeting, the Human Resource manager gave each employee an Hourly Employee Agreement ("Agreement"). JA65, ¶¶ 4-5. The manager told Hall that she did not have to sign the Agreement if she did not like it, but that if she did not sign it, she would not get the job. JA65, ¶ 5. "After that threat, everyone in the room, including [Hall], signed the arbitration agreement." JA65, ¶ 8. Hall signed it "only because [she] needed the job." JA65, ¶ 11. Hall's Agreement stated that she would make $8.00 per hour and obligated her to arbitrate any employment-related disputes. JA18, JA23. The Agreement also included a 30-day notice requirement for Hall to make a written request for arbitration, although this requirement did not apply to any claims Divi Casino might have against her; a ban on any award of attorney's fees and costs; and a "loser pays" provision authorizing the arbitrator to require Hall to reimburse Divi Casino for all of the arbitrator's fees and expenses, except for the arbitrator's transportation and lodging expenses. JA24-26. The Agreement additionally contained a provision stating that the arbitrator "may uphold the actions of the Company or may grant relief to Employee. If the arbitrator finds that disciplinary action was merited, the arbitrator may not alter or amend the form of disciplinary action imposed by the Company." JA26. Hall eventually worked her way up from casino cashier to Assistant Cage Manager. JA5, ¶ 8. After Divi Casino hired a new Cage Manager, who was white, Hall was disciplined and demoted from her position, which was then filled by a white female. JA5-6, ¶¶ 10-12. Hall subsequently filed a charge of discrimination with the Virgin Islands Department of Labor and the EEOC. JA6, ¶ 15. Hall continued to experience racial harassment at work and was retaliated against, and on April 27, 2005, she was constructively discharged. JA6-7, ¶¶ 16- 20. Hall filed a second charge alleging retaliation and constructive discharge. JA7, ¶ 21. Hall later filed suit claiming, inter alia, discrimination under Title VII and 42 U.S.C. § 1981 based on her sex, race, color, and national origin. JA7, JA9. Divi Casino filed a motion to compel arbitration and to stay the case pending arbitration. Hall filed a response attaching her affidavit and the rules of the American Arbitration Association ("AAA"), which apply to the Agreement, to show her inability pay for the arbitration. JA67, JA25. The AAA rules set out certain fees for employees and employers, which are in addition to the arbitrator's compensation and the cost of renting a hearing room. See JA77 ("AAA's administrative fees are based on filing and service charges. Arbitrator compensation is not included in this schedule."), at JA78 ("The hearing fees described above do not cover the rental of hearing rooms.") (emphasis added). The first category of fees are "filing fees," which impose on the employee an initial filing fee of $125. JA77. The employer's filing fee is $375 for a single arbitrator and $1,375 for a panel of arbitrators. JA77. Next, the AAA rules impose "hearing fees," which require the employer to pay $300 per day for a single arbitrator and $500 per day for a multi-arbitrator panel. JA77-78. Additional "administrative fees" ranges from $500-$13,000 depending upon the amount of the claim. Where, as in this case, no claim amount is stated, there is an "initial filing fee" of $3,250 and a "case service fee" (applicable if the case goes to hearing) of $750. JA78. B. District Court Decision The district court denied Divi Casino's motion to compel arbitration. The court first observed that a contract or provision that is both procedurally and substantively unconscionable is unenforceable. SA2. As to procedural unconscionability, which looks at the process by which an agreement is reached, the court concluded that this element was satisfied because Divi Casino had not disputed that the Agreement was a contract of adhesion. SA3. The court also concluded that the Agreement contained provisions that were substantively unconscionable, i.e., "they so unreasonably favor[ed] Divi Casino that" Hall "d[id] not truly assent" to them. SA3. As the court noted, Divi Casino had conceded that the 30-day notice requirement and the prohibition on the award of attorney's fees and costs were substantively unconscionable. SA3-SA5. Based on an individual assessment of Hall's ability to pay, the court also concluded that the "loser pays" provision was substantively unconscionable. SA5. In reaching this conclusion, the court noted that Hall had offered undisputed evidence as to the potential fees for the arbitration, although she had failed to offer evidence as to her expenses at the time she entered into the Agreement. Id. "Notwithstanding this paucity of evidence," the court found, "the loser pays provision would deter Hall, with a pay rate of $8.00 per hour, from pursuing a meritorious claim for fear of being strapped with an unmanageable financial burden." Id. (citing Alexander v. Anthony Int'l, L.P., 341 F.3d 256, 269 (3d Cir. 2003)). The court also concluded that the limitation on the arbitrator's ability to amend or alter any discipline imposed by Divi Casino precluded Hall from effectively vindicating her statutory rights by limiting her available remedies, rendering that provision substantively unconscionable. SA6-8. Finally, the court concluded that the unconscionable provisions could not be severed. As in Alexander, the court said, the Agreement "incorporates an unreasonable time limitation, a relinquishment of attorney's fees and a loser pays provision," and "also gives up the chance to receive the relief of reinstatement [] when the employee's conduct merits only a less harsh form of discipline." SA8. Noting that this Court held in Alexander that the unconscionable provisions there "‘permeate[d] the agreement . . . and thoroughly taint[ed] its central purpose of requiring the arbitration of employment disputes,'" the district court held that the unconscionable provisions in this case tainted the Agreement's central purpose, rendering it unenforceable. SA8-9 (quoting Alexander, 341 F.3d at 271). Divi Casino appealed. ARGUMENT THE DISTRICT COURT PROPERLY REFUSED TO ENFORCE THE ARBITRATION AGREEMENT BECAUSE IT CONTAINS MULTIPLE UNCONSCIONABLE PROVISIONS THAT TAINT ITS CENTRAL PURPOSE, RENDERING IT UNENFORCEABLE. The district court properly concluded that the arbitration agreement contains four unconscionable provisions, two of which even Divi Casino concedes are unconscionable, and that the unenforceable provisions cannot be severed from the remainder of the Agreement. Under the Federal Arbitration Act, 9 U.S.C. § 1 et seq., "[a] party to a valid and enforceable arbitration agreement is entitled to . . . an order compelling such arbitration." Alexander, 341 F.3d at 263; see also Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 28 (1991) (holding that statutory discrimination claims may also be subject to arbitration, but only "‘so long as 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'") (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 637 (1985)). Whether a contract is valid is a question for a court to determine under state law. Alexander, 341 F.3d at 264; see 9 U.S.C. § 2 (arbitration agreements are enforceable "save upon such grounds as exist at law or in equity for the revocation of any contract"). In the U.S. Virgin Islands, the applicable state law is the common law as expressed in the restatement of contracts. See 1 V.I. Code Ann. § 4. Pursuant to the restatement of contracts, where an arbitration agreement contains unenforceable provisions, a court must decide whether to sever the offending provisions or whether to deny enforcement of the agreement altogether. See Alexander, 341 F.3d at 270-71. A. The Agreement contains multiple unconscionable provisions. Restatement (Second) of Contracts § 208 states that "[i]f a contract or term thereof is unconscionable at the time the contract is made[,] a court may refuse to enforce the contract, or may enforce the remainder of the contract without the unconscionable term." As this Court recognized in Alexander, which also arose in the U.S. Virgin Islands, "unconscionability involves both ‘procedural' and ‘substantive' elements." Alexander, 341 F.3d at 265. Here, the district court properly determined that the Agreement is both procedurally and substantively unconscionable. 1. Procedural Unconscionability Divi Casino has not appealed from the district court's determination that the Agreement was procedurally unconscionable, which Divi Casino also conceded below. See Br. at 4; see also SA3 (noting that Divi Casino did not dispute procedural unconscionability). Accordingly, Divi Casino has waived this issue. See Laborers' Int'l Union of N. Am. v. Foster Wheeler Corp., 26 F.3d 375, 398 (3d Cir. 1994) ("[A]n issue is waived unless a party raises it in its opening brief . . . ."). Even if Divi Casino had not waived the issue, this Court's precedent dictates the conclusion that the Agreement was procedurally unconscionable because it was "prepared by the party with excessive bargaining power and presented . . . for signature on a take-it-or-leave-it basis." Alexander, 341 F.3d at 266 (agreement presented by multinational corporation on a take-it-or-leave it basis to equipment- operators with limited education and employment opportunities was procedurally unconscionable) (internal quotation marks and citation omitted); Lucey v. FedEx Ground Package Sys., Inc., 375 Fed. Appx. 875, 877-78 (3d Cir. 2009) (agreement drafted by global employer and presented on a take-it-or-leave-it basis to employees with little or no bargaining power was procedurally unconscionable). 2. Substantive Unconscionability As the district court found, the Agreement contains multiple provisions that are substantively unconscionable. "This element refers to terms that unreasonably favor one party to which the disfavored party does not truly assent." Alexander, 341 F.3d at 265; see Restatement (Second) of Contracts § 208 cmt. d ("[G]ross inequality of bargaining power together with terms unreasonably favorable to the stronger party, may confirm indications that the . . . weaker party had no meaningful choice, no real alternative, or did not in fact assent or appear to assent to the unfair terms."); Restatement (Second) of Contracts § 178(1) (a promise is unenforceable on the grounds of public policy if "interest in its enforcement is clearly outweighed in the circumstances by a public policy against the enforcement of such term[]"). Here, the Agreement contains four provisions that unreasonably favor Divi Casino and are therefore substantively unconscionable. a. The 30-day filing requirement and ban on awards of attorney's fees and costs. Divi Casino has conceded that two of the Agreement's provisions are substantively unconscionable: the 30-day filing requirement and the ban on attorney's fees and costs. See Br. at 4; SA3, SA5. Divi Casino has conceded these points with good reason. Under Title VII, an employee in the Virgin Islands has 300 days to file a charge of discrimination. Divi Casino shortened that filing time by 90%, giving its employees a mere 30 days to make their claim. In Parilla, which involved claims under both Title VII and Virgin Islands law, this Court held that a 30-day notice provision was "‘clearly unreasonable and unduly favorable to [the employer].'" Parilla v. IAP Worldwide Servs., VI, Inc., 368 F.3d 269, 277 (3d Cir. 2004) (citation omitted); see also Alexander, 341 F.3d at 266 (holding that a 30-day filing requirement was "clearly unreasonable and unduly favorable to" the employer under Virgin Islands law). As this Court explained, such a short filing period prevents an employee from bringing a well-supported claim. Alexander, 341 F.3d at 267. The unfairness of the 30-day notice provision was further compounded "by the fact that [Divi Casino] [wa]s apparently not required to provide detailed and written notice to an employee of any of its own claims within a strictly enforced thirty-day time period." Id. (emphasis added). In fact, the Agreement does not even require Divi Casino to submit an arbitration request to Hall at all. Thus, there is simply no question that the 30-day notice provision is substantively unconscionable. Similarly, there is no question that the Agreement's ban on awards of attorney's fees and costs is substantively unconscionable. In recognizing the lawfulness of pre-dispute arbitration agreements, the Supreme Court has said that "‘[b]y agreeing 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.'" Gilmer, 500 U.S. at 26 (quoting Mitsubishi, 473 U.S. at 628). The Supreme Court has also said that a prevailing plaintiff in a Title VII case "ordinarily is to be awarded attorney's fees in all but special circumstances," which comports with the critical role of attorney's fees in encouraging individuals to "vindicate ‘a policy that Congress considered of the highest priority.'" Christiansburg Garment Co. v. EEOC, 434 U.S. 417-18 (1978) (citation omitted). Accordingly, this Court has held unequivocally that provisions precluding employees from recovering their attorney's fees and costs are "unreasonably favorable" to the employer as they prevent employees from obtaining "complete compensation for any harm done and the company is able to evade full responsibility for its actions." Alexander, 341 F.3d at 267 (ban on award of attorney's fees and costs was substantively unconscionable as to Virgin Islands claims); Parilla, 368 F.3d at 279 (holding the same as to Title VII and Virgin Islands' claims); Spinetti v. Serv. Corp. Int'l, 324 F.3d 212, 216 (3d Cir. 2003) (ban on award of attorney's fees is unenforceable, as it "runs counter to statutory provisions under Title VII"). Accordingly, both the 30-day filing requirement and the ban on awards of attorney's fees and costs are substantively unconscionable and therefore unenforceable. b. "Loser Pays" Arbitral Costs Although Divi Casino has conceded that the 30-day notice provision and the ban on awards of attorney's fees and costs were substantively unconscionable, it argues on appeal that the court erred in concluding that the provision requiring the loser to pay all of the costs of arbitration, except the arbitrator's transportation and lodging, was also substantively unconscionable as applied to Hall. This argument is unavailing. In Green Tree Financial Corp.-Alabama v. Randolph, 531 U.S. 79, 92 (2000), the Supreme Court held that where "a party seeks to invalidate an arbitration agreement on the ground that arbitration would be prohibitively expensive, that party bears the burden of showing the likelihood of incurring such costs." The Supreme Court in Green Tree did not, however, address "[h]ow detailed the showing of prohibitive expense must be before the party seeking arbitration must come forward with contrary evidence," 531 U.S. at 92, and this Court has said that this burden is determined on a case-by-case basis. Alexander, 341 F.3d at 269. Review of this Court's precedent suggests that, as a general matter, plaintiffs seeking to show that arbitration would be prohibitively expensive must offer some evidence as to the cost of the arbitration but evidence as to their personal finances and expenses, while relevant, is not required. Compare Alexander, 341 F.3d at 269 (finding "loser pays" provision unconscionable based on evidence as to the rates of prospective arbitrators; reasoning that although the plaintiffs had failed to offer details as to their financial status, "as discharged refinery workers" they "clearly could not meet th[e] financial burden" of paying for the arbitration), and Spinetti, 324 F.3d at 217 (plaintiff showed arbitration would be prohibitively expensive where she offered evidence as to the prospective fees and cost of arbitration, that she had been unemployed for six months, and that her current salary failed to cover her living expenses), with Parilla, 368 F.3d at 284 (plaintiff failed to show her inability to pay arbitration costs where she "submitted no evidence of the potential costs of arbitration or her inability to pay those costs"), and Blair v. Scott Specialty Gases, 283 F.3d 595, 607-08 (3d Cir. 2002) (plaintiff failed to show arbitration would be prohibitively expensive where she offered no evidence as to the potential cost and "only conclusory assertions of financial distress without any supporting documentation"). Here, Divi Casino argues that the district court erred by "simply assum[ing] that the Loser Pays Provision is unconscionable." Br. at 7. But the district court did not merely assume this. Rather, the court based its determination on undisputed record evidence. The court specifically noted that "Hall ha[d] submitted evidence of the cost of arbitration, which Divi Casino has not disputed." SA5. And, in fact, Divi Casino has not disputed that evidence on appeal. See Br. at 6-8. Hall's evidence as to the cost of arbitration shows that if Hall's case were to be heard by a single arbitrator during a three-day hearing, the fees alone – to say nothing of the arbitrator's compensation or the cost of renting a hearing room – would total $5,400.<3> Thus, unlike other cases where the plaintiff failed to offer evidence as to the cost of arbitration, in this case Hall offered specific evidence as to part of the cost. Cf. Blair Scott, 283 F.3d at 608 (stating that the plaintiff had failed to offer "any information about the estimated cost of arbitration, such as the fees charged by AAA arbitrators in her area," and concluding that she had not shown that the costs would be prohibitive). Additionally, although Hall did not offer evidence as to the prospective rates of arbitrators, in Alexander this Court discussed evidence that the daily rate of a single arbitrator in the U.S. Virgins Islands – back in 2003 – was $800-$1000 per day, suggesting that the cost of even a three-day arbitration would be near $10,000. The district court also relied on the undisputed evidence that Hall was making just $8.00 per hour at Divi Casino when she started as a cashier. SA5. Based on Hall's starting salary, the court reasoned that "the loser pays provision would deter Hall . . . from pursuing a meritorious claim for fear of being strapped with an unmanageable financial burden." SA5. Other record evidence, which the court did not specifically cite, also supports the conclusion that the arbitration would be prohibitively expensive for Hall. First, it is undisputed that Hall is no longer employed by Divi Casino. Second, Hall's affidavit explicitly states that she cannot afford to pay the filing fee of between $500 and $13,000, and the other associated costs of arbitration, including the "case service fee" of between $750 and $3,000. JA65, ¶ 12. The district court's conclusion that the loser pays provision is substantively unconscionable as applied to Hall is supported not just by record evidence but also by Alexander. In that case this Court concluded that the plaintiffs had satisfied their burden of showing that the arbitration would be prohibitively expensive based on evidence of the rates of prospective arbitrators in the Virgin Islands, which ranged from $800/day to $1000/day, even though the plaintiffs "admittedly did not provide any detailed information about their own financial status." 341 F.3d at 269. The plaintiffs' lack of detailed financial information did not defeat their showing because they "needed the job" and one plaintiff "apparently" had three children in college to support. Id. "As discharged refinery workers," this Court explained, the plaintiffs "clearly could not meet th[e] financial burden" of paying for the arbitration. Id. Like the plaintiffs in Alexander, who offered evidence as to the prospective rates of arbitrators, in this case Hall offered evidence as to the prospective fees of the arbitration. Also like the plaintiffs in Alexander, who were "discharged refinery workers" who "needed the[ir] job[s]," id., in this case Hall is a discharged casino worker who "needed the job." JA65, ¶ 11. While it is true, as Divi Casino notes, that Hall did not submit evidence as to her current income, in Alexander this Court quoted with approval the district court's statement in Giordano v. Pep Boys- Manny, Moe & Jack, Inc., No. CIV. A. 99-1281, 2001 WL 484360, at *6 (E.D. Pa. 2001), that "‘nothing in Green Tree requires courts to undertake detailed analyses of the household budgets of low-level employees to conclude that arbitration costs in the thousands of dollars deter the vindication of employees' claims in arbitral fora.'" Alexander, 341 F.3d at 269. Moreover, in contrast to the Alexander plaintiffs, Hall even submitted an affidavit reciting the arbitration costs and specifically stating that she "cannot afford to pay the[m]." JA66, ¶ 15. Thus, Hall's evidence as to her inability to pay for the arbitration is even stronger than the plaintiffs' evidence in Alexander. This Court should also reject Divi Casino's argument on appeal that Hall failed to meet her burden of showing that the arbitration would be prohibitively expensive because, based "on information and belief," Hall "had sources of income other than her Divi Casino wages, [i.e.,] another full-time job." Br. at 6. This blithe assertion is unsupported by the record. In Green Tree the Supreme Court suggested that once a plaintiff met her burden of showing prohibitive expenses, "the party seeking arbitration must come forward with contrary evidence" to refute it. 531 U.S. at 92 (emphasis added); see Blair Scott, 283 F.3d at 607 (stating that Green Tree contemplates that once the plaintiff shows that arbitration expenses would be prohibitive, the burden shifts to the employer to show contrary evidence). To the extent that Divi Casino is attempting to counter Hall's evidence that the arbitration would be prohibitively expensive by suggesting Hall had other sources of income, that argument fails because Divi Casino has offered only assumptions, not "evidence," to meet its burden. But even assuming for the sake of argument that Hall's evidence was insufficient to meet her burden of showing that the arbitration would be prohibitively expensive, the remedy for this failure of proof would not be to order enforcement of this provision but would instead be to remand this case for limited discovery on this issue.<4> See Parilla, 368 F.3d at 284 (concluding that the plaintiff, who had failed to submit any evidence as to the prospective cost of arbitration, had not shown that the arbitration would be prohibitively expensive, but remanding to the district court for "development of a record on, and a determination of" whether she could pay); Blair Scott, 283 F.3d at 607-10 (finding that the plaintiff had failed to show an inability to pay arbitration costs but concluding that Green Tree entitled her to limited discovery). Indeed, Divi Casino's brief suggests that this would be the proper outcome, should this Court determine that Hall's evidence was insufficient. See Br. at 7 (stating that the district court "was obligated to allow the parties to develop a record" as to the unconscionability of the loser pays provision). c. Constraint Provision Contrary to Divi Casino's argument on appeal, the district court determined correctly that the constraint provision is substantively unconscionable. The arbitration of statutory claims of employment discrimination is permissible only "‘so long as the prospective litigant effectively may vindicate [his or her] statutory cause of action in the arbitral forum,'" which ensures that "‘the statute will continue to serve both its remedial and deterrent function.'" Gilmer, 500 U.S. at 28 (quoting Mitsubishi, 473 U.S. at 637). Upon a finding of unlawful discrimination, Title VII permits a court to "order such affirmative action as may be appropriate," including reinstatement, "or any other equitable relief as the court deems appropriate." 42 U.S.C. § 2000e-5(g)(1). An employee who engages in misconduct but is disciplined more harshly than other similarly-situated employees because of her race and/or sex has been discriminated against in violation of Title VII and is entitled to relief. See, e.g., Clayton v. Meijer, Inc., 281 F.3d 605, 611 (6th Cir. 2002) ("It is well established that [plaintiff] may obtain relief under Title VII, even if he engaged in serious misconduct, provided that white employees who engaged in the same conduct were either not disciplined or not disciplined as severely."). As the district court recognized, the explicit terms of the constraint provision preclude the effective vindication of Hall's Title VII rights by limiting her available remedies. Hall alleged in her complaint that Divi Casino imposed discriminatory discipline on her, meaning that she was disciplined more harshly than male and/or Caucasian employees, and that she was constructively discharged. If Hall proves these allegations, she will be entitled under Title VII to appropriate relief. The explicit terms of the constraint provision, however, preclude appropriate injunctive relief, as the provision states that the arbitrator may not "alter or amend the form of disciplinary action imposed by the Company" where the arbitrator finds that "disciplinary action was merited," i.e., that an employee engaged in some kind of misconduct warranting some sort of discipline. In other words, the constraint provision renders the arbitrator powerless to alter or amend any discipline, even if the arbitrator determines that an employee engaged in misconduct that warranted some kind of discipline but was disciplined more harshly than other employees because of her sex and/or race. The district court recognized as much, observing that "reinstatement is a preferred remedy under Title VII" but that "[i]f Divi Casino fired an employee and the arbitrator were to determine that some lesser disciplinary action was appropriate, but that discharge was not warranted . . . the arbitrator would be prevented by" the constraint provision "from providing full statutory relief," since the arbitrator would be powerless to reinstate the employee.<5> SA7. Accordingly, the constraint provision is substantively unconscionable because it limits the remedies otherwise available under Title VII, thereby undermining the remedial and deterrent purposes of the statute. See Paladino v. Avnet Computer Tech., Inc., 134 F.3d 1054, 1062 (11th Cir. 1998) (J. Cox., concurring) (stating that arbitration clause insulating the defendant from damages and equitable relief "defeats the statute's remedial purposes"). Divi Casino does not dispute on appeal that an arbitration agreement that precludes an arbitrator from altering or amending discriminatory discipline is substantively unconscionable. Instead, Divi Casino argues that the constraint provision precludes the arbitrator from altering or amending only non- discriminatory discipline. See Br. at 9-10. Divi Casino then devotes four pages of its brief to arguing strenuously that it is lawful for an arbitration agreement to preclude an arbitrator from altering or amending non-discriminatory discipline. The problem with Divi Casino's argument is that the constraint provision is not limited to situations in which the arbitrator determines that the discipline was not discriminatory. Divi Casino's spin on the constraint provision essentially rewrites it to state "[i]f the arbitrator finds that there was no discriminatory discipline, the arbitrator may not alter or amend the form of disciplinary action imposed by the Company." But this is not what the constraint provision says. Rather, it states broadly, "If the arbitrator finds that disciplinary action was merited, the arbitrator may not alter or amend the form of disciplinary action imposed by the Company." JA26 (emphasis added). Thus, the explicit terms of the Agreement tie the arbitrator's hands when it comes to correcting even discriminatory discipline, so long as there was any basis, e.g., some kind of misconduct, warranting discipline in the first place. Even if the constraint provision were deemed ambiguous, and therefore could be interpreted as Divi Casino contends, this Court should find it unconscionable. A basic principle of contract law is that "in choosing among the reasonable meanings of a[n] . . . agreement . . . that meaning is generally preferred which operates against the party who supplies the words." Restatement (Second) of Contracts, § 206. Applying that rule here, the constraint provision should be interpreted as prohibiting the arbitrator from altering or amending any discipline imposed when discipline was warranted – including discriminatory discipline – therefore compelling the conclusion that this provision is substantively unconscionable. Divi Casino also attacks the district court's conclusion that the constraint provision is substantively unconscionable by attacking Judge Finch's performance as a judge. See Br. at 17-20. Divi Casino first argues that Judge Finch's reversal rate before this Court, in other cases involving other arbitration agreements, illustrates his general hostility to arbitration and provides "ample reason[] for this Court to reverse" the decision below. Br. at 20. This argument has no place in this appeal. Judge Finch's reversal rate before this Court, in other cases involving other facts than those presented here, neither exposes his "inherent hostility to arbitration agreements" nor sheds any light on whether he properly applied the law to the facts of this case. In any event, Divi Casino's attack on Judge Finch's decision below as "expos[ing] [his] inherent hostility to arbitration agreements," Br. at 17, is particularly misplaced in light of Divi Casino's own concession that the Agreement is procedurally unconscionable and contains two terms that are substantively unconscionable (the 30-day notice provision and the ban on attorney's fees awards). Divi Casino's own brief also undermines its attempt to portray the decision below as a product of Judge Finch's animosity towards arbitration, as Divi Casino itself relies on Judge Finch's decisions in two other cases to support its argument about the loser pays provision and the severability of the unenforceable provisions. See Br. at 8-9 (citing Hamilton v. Grapetree Shores, Inc., d/b/a Divi Carina Bay Resort, Civ. No. 2004/0128 (D.V.I. Slip Op. Oct. 17, 2005)), at 22 (relying on Dyer v. Grapetree Shores Inc., d/b/a Divi Carina Bay Resort and Casino, Civ No. 2003/0021 (D.V.I. Slip Op. Oct. 17, 2005)). Divi Casino also argues that Judge Finch's "long delay in ruling on many motions to stay arbitration" evinces his "apparent hostility to arbitration agreements." Br. at 19. At the outset it is hard to see how Judge Finch's delays in deciding motions to compel arbitration illustrate his hostility to arbitration, as such delays hurt employees (who are generally eager to receive the damages and injunctive relief that will compensate them for discrimination they suffered) as much as – or more than – as they hurt employers. In any event, the existence and extent of Judge Finch's delay in deciding motions to compel arbitration in this and other cases have no bearing whatsoever on whether he properly applied the law to the facts of this case in determining that the arbitration agreement was unconscionable and that the unenforceable provisions were not severable. The length of time Judge Finch took to decide Divi Casino's motion to compel arbitration would only seem to be relevant if Divi Casino had filed a subsequent motion to dismiss on the grounds of laches or some other equitable principle. It did not. Accordingly, this Court should affirm the district court's finding that the Agreement contains four unconscionable provisions. C. The multiple unconscionable provisions are not severable because they evince Divi Casino's deliberate attempt to impose an arbitration agreement designed to discourage Hall from resorting to arbitration or produce results biased in its favor. This Court should affirm the district court's holding that the four unconscionable provisions cannot be severed from the remainder of the Agreement because they "‘thoroughly taint[] its central purpose.'" SA8 (quoting Alexander, 341 F.3d at 271). Relying on the Restatement (Second) of Contracts § 184(1), this Court has stated that severance is appropriate where the unenforceable provisions are not "‘an essential part of the agreed exchange' of promises." Spinetti, 324 F.3d at 214 ("You don't cut down the trunk of a tree because some of its branches are sickly."). Conversely, this Court has interpreted the Restatement of Contracts and other cases as standing for the rule that "a multitude of unconscionable provisions in an agreement to arbitrate will preclude severance and enforcement of arbitration if they evidence a deliberate attempt by an employer to impose an arbitration scheme designed to discourage an employee's resort to arbitration or to produce results biased in the employer's favor." Parilla, 368 F.3d at 289 (relying on the Restatement (First) of Contracts § 603, Restatement (Second) of Contracts § 184(1), and other cases); see also Alexander, 341 F.3d at 271 (holding that a multitude of unconscionable provisions tainted the arbitration agreement's central purpose and stating, "Because the sickness has infected the trunk, we must cut down the entire tree."). The mere existence of multiple unconscionable provisions does not compel a finding of serious misconduct. Parilla, 368 F.3d at 289. Instead, such a determination hinges upon "whether the number of provisions and the degree of unfairness support the inference that the employer was not seeking a bona fide mechanism for dispute resolution, but rather sought to impose a scheme that it knew or should have known would provide it with an impermissible advantage." Id. As the district court recognized, this is a case in which the entire tree must be cut down because the sickness has infected the trunk. To begin with, the extreme unfairness of the 30-day notice requirement supports the inference that the company was not seeking a bona fide alternative to litigation but rather sought to discourage Hall from asserting her rights at all. As discussed supra at 10-11, the 30-day notice requirement is ten times shorter than the 300-day deadline Title VII allows for filing a charge of discrimination with the EEOC. Certainly, Divi Casino either "knew or should have known" that giving employees such a short time in which to file a claim would discourage – or entirely foreclose – them from asserting their rights in an arbitral forum, as this punitively short deadline effectively precludes employees from contacting an attorney to discuss the merits of any claim, much less to prepare a case. See Alexander, 341 F.3d at 267 (stating that 30-day notice requirement provides "insufficient time to bring a well- supported claim"). The "unfair advantage this provision gives [Divi Casino] ‘is only compounded by the fact that [Divi Casino] is apparently not required to'" notify Hall of any claims it has against her "‘within a strictly enforced thirty-day time period.'" Parilla, 368 F.3d at 277-78 (quoting Alexander, 341 F.3d at 266). Indeed, Divi Casino's failure to apply this provision to itself suggests that it was well aware that such a draconian filing deadline was untenable. Similarly, Divi Casino's deliberate inclusion in the Agreement of the requirement that employees pay their own attorney's fees and costs, even if they win, evinces its attempt to discourage Hall's resort to arbitration. It has long been the law under Title VII that prevailing plaintiffs are presumptively entitled to attorney's fees, and the Supreme Court said long ago that pre-dispute arbitration agreements must not require a party to forego their substantive rights under the statute. See Christiansburg, 434 U.S. at 417-18; Gilmer, 500 U.S. at 26. Despite this clear precedent, Divi Casino drafted the Agreement to include a provision forcing Hall to relinquish any eligibility for attorney's fees and then told her if she didn't sign the Agreement, she wouldn't have a job. Divi Casino surely must have realized that Hall, who started off making $8 per hour, would likely be put off from asserting her right to arbitration by the knowledge that any relief she obtained would be offset – or entirely cancelled out – by the cost of her attorney's fees, even if she won. Tellingly, when Hall challenged this provision before the district court, Divi Casino did not even challenge it, implicitly acknowledging that there is no defense for having included this provision in the first place. Under these circumstances, the ban on awards of attorney's fees can only be viewed as a deliberate attempt to discourage Hall from arbitrating her claim or, if she did arbitrate, to impose a scheme that would give Divi Casino an impermissible advantage. Divi Casino's inclusion in the Agreement of the loser pays provision also evinces its attempt to discourage Hall's resort to arbitration. The Supreme Court has acknowledged that "the existence of large arbitration costs could preclude a litigant . . . from effectively vindicating her federal statutory rights in the arbitral forum." Green Tree Financial, 531 U.S. at 90. Similarly, this Court has stated that cost-splitting provisions may deter employees from asserting their right to arbitration. See Parilla, 368 F.3d at 285 n.17. Here, Hall submitted evidence showing that she cannot afford to pay the cost of the arbitration, which is certain to be thousands of dollars. Given that her starting salary was just $8 per hour, Divi Casino either knew or should have known at the time it drafted the Agreement and presented it to Hall on a take-it-or-leave it basis that arbitration would be prohibitively expensive for her, which would therefore deter her from pursuing it. Finally, the "degree of unfairness" inherent in the constraint provision also supports the inference that Divi Casino was not seeking a bona fide alternative to litigation but rather sought to stack the deck in its favor during any arbitration. As discussed at pp. 19-24, the constraint provision gives Divi Casino an impermissible advantage because it ties the arbitrator's hands when it comes to remedying discriminatory discipline, even though the hands of a federal district court judge would not be similarly tied. The inclusion of this provision therefore suggests that Divi Casino was trying to give itself an unfair advantage in the arbitration. Because the four unconscionable provisions evince Divi Casino's deliberate attempt to impose an arbitration scheme designed to discourage Hall's resort to arbitration and/or to produce results biased in its favor, the provisions are not severable. See Alexander, 341 F.3d at 270-71 (holding that 30-day notice requirement, prohibition on award of attorney's fees, "loser pays" provision, and limitation on arbitrator's ability to award full panoply of monetary damages and equitable relief tainted the central purpose of the arbitration agreement, rendering it unenforceable); Plaskett v. Bechtel Int'l, Inc., 243 F. Supp. 2d 334, 345 (D.V.I. 2003) (provisions precluding an award of attorney's fees, imposing a thirty-day filing deadline, and requiring confidentiality "strongly suggest[] a deliberate decision to use the employer's superior bargaining position to obtain an unfair advantage" and refusing to enforce arbitration agreement) (internal quotation marks and citation omitted). Accordingly, this Court should affirm the district court's denial of Divi Casino's motion to compel arbitration. CONCLUSION For the reasons discussed above, this Court should affirm the district court's denial of Divi Casino's motion to compel arbitration and should remand this case for trial. Respectfully submitted, JAMES L. LEE Deputy General Counsel CAROLYN L. WHEELER Acting Associate General Counsel LORRAINE C. DAVIS Assistant General Counsel ________________________ /s/ ANNE NOEL OCCHIALINO Attorney EQUAL EMPLOYMENT OPPORTUNITY COMMISSION Office of General Counsel 131 M St. NE, 5th Fl. Washington, D.C. 20507 (202) 663-4724 Annenoel.Occhialino@EEOC.gov CERTIFICATE OF COMPLIANCE I hereby certify that this brief complies with the type-volume requirements set forth in Federal Rules of Appellate Procedure Rule 32(a)(7)(B). This brief contains 6,861 words, from the Statement of Interest through the Conclusion, as determined by the Microsoft Word 2003 word processing program, with 14-point proportionally spaced type for text and 14-point proportionally spaced type for footnotes. The text of the E-Brief and all hard copies are identical. A virus check of the E-brief was performed using Symentac AntiVirus v. 6/14/2009 rev. 4. ________________________ /s/ ANNE NOEL OCCHIALINO Attorney EQUAL EMPLOYMENT OPPORTUNITY COMMISSION Office of General Counsel 131 M St. NE, 5th Fl. Washington, D.C. 20507 (202) 663-4724 Annenoel.Occhialino@EEOC.gov CERTIFICATE OF SERVICE I hereby certify that on October 14, 2009, ten hard copies of this brief were sent to the court and that this brief was filed electronically via CM/ECF, which will send a notification of such filing to the following counsel of record: Counsel for Plaintiff-Appellee Pamela Lynn Colon, LLC Law Offices of Pamela L. Colon 27& 28 King Cross, 1st Fl. Christiansted St. Croix, VI 00820 Counsel for Defendant-Appellant Charles E. Engeman OGELTREE, DEAKINS, NASH, SMOAK & STEWART, LLC The Tunick Building, Ste. 201 1336 Beltjen Rd. St. Thomas, VI 00802 _________________________ /s/ ANNE NOEL OCCHIALINO Attorney EQUAL EMPLOYMENT OPPORTUNITY COMMISSION Office of General Counsel 131 M St. NE, 5th Fl. Washington, D.C. 20507 (202) 663-4724 Annenoel.Occhialino@EEOC.gov *********************************************************************** <> <1> The Commission expresses no opinion on any other issues presented in this appeal. The Commission also notes that the issues presented here are similar to those presented in Nino v. Jewelry Exchange, Inc., d/b/a Diamonds Int'l & Wendy Tarapani, No. 09-1268 (3d. Cir.). <2> "JA" refers to the Joint Appendix. <3> This includes initial filing fees of $125 and $375 for the employee and employer, hearing fees of $300 per day, an additional filing fee of $3,250, and a case service fee of $750. See supra at 5. <4> Hall requested below that she be allowed to conduct limited discovery on this issue if the court determined that she had failed to show the arbitration would be prohibitively expensive. JA56. <5> As Divi Casino points out, the court's discussion on this point references both Title VII and the Virgin Islands Wrongful Discharge Act, even though Hall did not bring a claim under the Virgin Islands Wrongful Discharge Act. See JA7-15 (complaint) (alleging federal discrimination claims and other state law claims). The court's reference to the Virgin Islands Wrongful Discharge Act does not undermine the court's analysis, however, because both the state statute and Title VII provide for reinstatement.