IN THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT _________________________________________ No. 01-16542 _________________________________________ EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Plaintiff-Appellee, SAM DARMO, AMER DARMO and SAMUEL EINHORN, Intervenors-Appellees, v. PINNACLE NISSAN, INC., Defendant-Appellant. ______________________________________________ On Appeal from the United States District Court for the District of Arizona ______________________________________________ OPPOSITION OF THE PLAINTIFF-APPELLEE EQUAL EMPLOYMENT OPPORTUNITY COMMISSION TO THE APPELLANT PINNACLE NISSAN, INC.'S MOTION FOR PROCEDURAL ORDER STAYING APPEAL ______________________________________________ The Equal Employment Opportunity Commission ("Commission") hereby responds to the Appellant Pinnacle Nissan, Inc's Motion for Procedural Order Staying Appeal. For the reasons discussed below, the Commission opposes the stay. STATEMENT IN SUPPORT 1. This is an enforcement action brought by the Commission pursuant to Section 706 of Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq. ("Title VII"). The Commission alleges that the defendant, Pinnacle Nissan, Inc. ("Pinnacle"), engaged in national origin and religious discrimination in violation of Title VII. Three aggrieved individuals, allegedly victimized by Pinnacle's discrimination, have intervened in the Commission's action, as authorized under Title VII. See 42 U.S.C. § 2000e-5(f)(1). 2. This appeal stems from Pinnacle's amended motion to compel arbitration and stay the proceedings, filed in the district court on April 18, 2001. In that motion, Pinnacle sought to compel the arbitration of the intervenors' claims pursuant to pre-dispute arbitration agreements signed by the intervenors as a condition of employment. Although Pinnacle did not seek to compel arbitration with respect to the Commission's Title VII claims, Pinnacle asked the district court to stay the Commission's action, pending arbitration of the intervenors' claims. 3. By order dated June 15, 2001, the district court denied Pinnacle's motion. The district court ruled that, under binding Ninth Circuit precedent, the arbitration agreements between the intervenors and Pinnacle were unenforceable. The court cited specifically to Duffield v. Robertson Stephens & Co., 144 F.3d 1182 (9th Cir. 1998), wherein this Court "looked at the context, language and legislative history of the Civil Rights Act of 1991 to determine that ‘Congress intended to preclude compulsory arbitration of Title VII claims.'" Order (June 15, 2001) at 7 (quoting Duffield, 144 F.3d at 1199). The district court refused Pinnacle's request for a stay of the Commission's action. 4. Pinnacle filed a notice of appeal on July 13, 2001. Pinnacle filed its motion for a "procedural order" to stay the appeal on October 1, 2001.<1> Pinnacle's request for a stay centers on this Court's decision in Duffield, the decision invoked by the district court in denying Pinnacle's motion to compel arbitration. Pinnacle claims that Duffield has been "implicitly overrule[d]" by Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001). Motion for Stay at 4. According to Pinnacle, that very issue is before this Court in another pending case, Circuit City Stores, Inc. v. Ahmed, No. 98-55896, which was argued on September 26, 2001. Motion to Stay at 4. In Pinnacle's view, this Court should stay this appeal until the "issuance of [this] Court's decision in [Ahmed]." Id. at 5. 5. Pinnacle's argument assumes that this appeal turns on the continued validity of Duffield. It does not. To begin with, the intervenors have strong arguments against the enforceability of the specific arbitration agreements in this case, even assuming, contra to Duffield, that the law does not prohibit the use of mandatory arbitration agreements in all Title VII cases. The intervenors argue that the agreements at issue are "lopsided" in nature, granting Pinnacle "the exclusive power to create the list of arbitrators from which both parties subsequently select their choice of proposed arbitrator." Intervening Plaintiffs' Response in Opposition to Defendant's Motion to Compel Arbitration (May 2, 2001) at 5. Courts have invalidated arbitration agreements that give the employer the exclusive right to create the list of arbitrators from which an arbitrator is chosen in a particular case. See, e.g., Hooters of Am., Inc. v. Phillips, 173 F.3d 933, 938-39 (4th Cir. 1999) (noting that, under such an arbitration arrangement, "the selection of an impartial decision maker would be a surprising result"). The intervenors also maintain that the arbitration agreements at issue contain "crippling ‘cost-sharing' provision[s]," including provisions that require the intervenors to pay half of the arbitrator's fees, which "would make the process so costly that Intervening Plaintiffs would be forced to abandon their claims altogether." Intervening Plaintiffs' Response in Opposition to Defendant's Motion to Compel Arbitration (May 2, 2001) at 5. A number of courts have invalidated arbitration agreements that require the statutory claimant to pay a portion of the arbitrator's fees. See, e.g., Perez v. Globe Airport Sec. Servs., Inc., 253 F.3d 1280, 1285-87 (11th Cir. 2001); Shankle v. B-G Maint. Mgmt. of Colorado, Inc., 163 F.3d 1230, 1233-35 (10th Cir. 1999). Finally, the intervenors assert that they "did not knowingly agree to waive their statutory right under Title VII to a judicial forum, because [Pinnacle] affirmatively misled them of the nature of the agreement[s] it directed them to sign." Intervening Plaintiffs' Response in Opposition to Defendant's Motion to Compel Arbitration (May 2, 2001) at 8. A "knowing" waiver is a prerequisite to an enforceable arbitration agreement under controlling Ninth Circuit precedent. See, e.g., Nelson v. Cyprus Badgad Copper Corp., 119 F.3d 756, 762 (9th Cir. 1997). 6. Each of these arguments was advanced in the district court. Because it relied upon Duffield's broad prohibition against the enforcement of mandatory arbitration agreements, the district court chose not to address the intervenors' "numerous" arguments against the enforceability of the particular arbitration agreements at issue in this case. See Order (June 15, 2001) at 8 n.2. Nonetheless, those arguments were advanced below and can provide an alternative ground for affirming the district court's order, even assuming that the Duffield precedent does not hold up. See Western Ctr. for Journalism v. Cederquist, 235 F.3d 1153, 1157 (9th Cir. 2000) ("This court may affirm the judgment on grounds on which the district court has not ruled."). Under these circumstances, there is no reason to stay the appeal. 7. In any event, even assuming that the intervenors do not have viable arguments against the enforceability of the arbitration agreements at issue in this case, Pinnacle's motion ignores a critical fact. This is not a private lawsuit. This is a public enforcement action brought by the Commission. The Commission did not sign an arbitration agreement with Pinnacle. Although some courts have held that a private arbitration agreement between a charging party and an employer prevents the Commission from recovering victim-specific relief (e.g., back pay) in its enforcement action,<2> all courts agree that the Commission is free to sue on a charge and pursue a claim for broad injunctive relief, the existence of a private arbitration agreement notwithstanding. See EEOC v. Waffle House, Inc., 193 F.3d 805, 811-13 (4th Cir. 1999); EEOC v. Frank's Nursery & Crafts, Inc., 177 F.3d 448, 455-59 (6th Cir. 1999); EEOC v. Kidder, Peabody & Co., 156 F.3d 298, 301-03 (2d Cir. 1998); cf. EEOC v. Goodyear Aerospace Corp., 813 F.2d 1539, 1542-43 (9th Cir. 1987) (private settlement of a Title VII claim does not prevent the Commission from pursuing a claim for a broad injunction against future discrimination). At most, a private arbitration agreement would limit the remedial scope of a Commission action. It would not compel the Commission to arbitrate, nor would it support a stay with respect to the Commission's enforcement action. 8. Under these circumstances, the most that Pinnacle would be entitled to in the district court is a dismissal of the intervenors' claims, on the theory that any claim by the intervenors must be brought in arbitration, and a pre-trial order limiting the remedial scope of the Commission's action, on the theory that the private arbitration agreements prevent the Commission from recovering victim-specific relief.<3> But Pinnacle did not seek either of these remedies; instead, it sought to compel arbitration of the intervenors' claims while the Commission's public enforcement action was held in abeyance. There is no support in the law for such a remedy. Irrespective of whether the arbitration agreements at issue are enforceable as between the intervenors and Pinnacle, the Commission is fully entitled to pursue its claims against Pinnacle. 9. A stay of this appeal is not warranted. Even if this Court is inclined to revisit Duffield, there are strong arguments against the enforceability of the specific arbitration agreements at issue in this case. This case, moreover, is not a private Title VII lawsuit. This is a public enforcement action brought by the Commission, which is not a party to any arbitration agreement with Pinnacle. Pinnacle is not entitled to an order compelling arbitration and staying the Commission's action. This is true irrespective of the continued validity of the Duffield precedent. WHEREFORE, the Commission opposes Pinnacle's Motion for Procedural Order Staying Appeal. Respectfully Submitted, NICHOLAS M. INZEO Acting Deputy 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 October 12, 2001 (202) 663-4059 CERTIFICATE OF SERVICE I, Robert J. Gregory, hereby certify that on this 12th day of October, 2001, copies of the attached motion were sent by first- class mail, postage prepaid, to the following counsel of record: Stephen G. Montoya, Esq. 411 North Central Avenue, Suite 520 Phoenix, Arizona 85004 Lonnie J. Williams, Jr. Matthew D. Mitchell Snell & Wilmer One Arizona Center Phoenix, Arizona 85004 Robert J. Gregory ********************************************************************************* <> <1> Pinnacle is not seeking a stay of the district court litigation itself (which is on-going). Thus, as Pinnacle observes, “the litigation of this case will not be stayed pending the result of this appeal.” Motion to Stay at 4. <2> This issue has divided the circuit courts. Compare EEOC v. Frank’s Nursery & Crafts, Inc., 177 F.3d 448 (6th Cir. 1999) (private arbitration agreement imposes no constraint on the Commission; the Commission may recover victim-specific relief) with EEOC v. Waffle House, Inc., 193 F.3d 805 (4th Cir. 1999) (private arbitration agreement limits the Commission to a claim for broad injunctive relief; victim-specific relief is not available). The Supreme Court granted certiorari, in Waffle House, to resolve the circuit court conflict. See 121 S. Ct. 1401 (2001). The Supreme Court heard argument in this case on October 10, 2001. <3> Notably, if Pinnacle had filed a motion to dismiss the intervenors’ claims and to limit the remedial scope of the Commission’s action, the district court’s denial of that motion would have resulted in a non-appealable, interlocutory order. As it is, the district court’s order of June 15, 2001, is appealable, if at all, only because Pinnacle framed its motion as one to compel arbitration and stay, thus implicating the appeal provisions of the FAA. See 9 U.S.C. § 16(a)(1)(A) (permitting an interlocutory appeal from an order “refusing a stay of any action” under Section 3 of the FAA). This raises the question of whether Pinnacle has manufactured jurisdiction in this Court by styling what should been a motion to dismiss as a motion to compel arbitration and stay. See generally Central States Southeast and Southwest Areas Pension Fund v. Central Cartage Co., 84 F.3d 988, 993 (7th Cir. 1996) (FAA “does not provide jurisdiction for interlocutory appeals from a district court’s denial of a motion to compel arbitration” where the motion to compel arbitration is not cognizable under the FAA; mere fact that party styles the motion as one to compel arbitration under the FAA does not provide the court of appeals with jurisdiction).