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 Title Booker v. Robert Half International

 Argued March 10, 2005                  Decided July 1, 2005

 Subject Employment Law

                                                                                                                                                                                                                

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 United States Court of Appeals

          FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 10, 2005                    Decided July 1, 2005

                         No. 04-7089

                    TIMOTHY R. BOOKER,

                         APPELLANT

                               v.

             ROBERT  HALF  INTERNATIONAL,    INC.,

                          APPELLEE

         Appeal from the United States District Court

                 for the District of Columbia

                       (No. 01cv01127)

    Adam Augustine Carter argued the cause for appellant.

With him on the brief was R. Scott Oswald.

    Chevanniese Smith argued the cause for appellee.  With her

on the brief was Anita Barondes.

    Before: RANDOLPH and ROBERTS, Circuit Judges, and

WILLIAMS, Senior Circuit Judge.

    Opinion for the Court filed by Circuit Judge ROBERTS.

    ROBERTS,  Circuit Judge:  Statutory claims may be subject

to agreements to arbitrate, so long as the agreement does not

require the claimant to forgo substantive rights afforded under

 

                                 2

the statute.  See, e.g., Gilmer v. Interstate/Johnson Lane Corp.,

500 U.S. 20, 26 (1991); Cole v. Burns Int'l Sec. Servs., 105 F.3d

1465, 1481 (D.C. Cir. 1997).  But what should a court do when

confronted with a statutory claim and an arbitration agreement

that is unenforceable as written, because it contains a provision

purporting to limit such rights: decline to enforce the agreement

and allow the statutory claims to proceed in court, or sever the

offensive provision and require arbitration under the remainder

of the agreement?

     In this case an employee sued his employer for racial

discrimination under the District of Columbia Human Rights

Act, D.C. Code §§ 2-1401 et seq. ("DCHRA"), and the employer

sought to compel arbitration pursuant to an arbitration clause in

the employment agreement.  The arbitration clause was unen-

forceable as written because it precluded an award of punitive

damages, which are available under the D.C. statute.             The

existence of an express severability clause in the agreement, the

fact that the agreement is otherwise valid and enforceable, and

a "healthy regard for the federal policy favoring arbitration,"

Gilmer, 500 U.S. at 26 (quoting Moses H. Cone Mem. Hosp. v.

Mercury Constr. Corp., 460 U.S. 1, 24 (1983)), lead us to affirm

the decision below, severing the ban on punitive damages and

compelling arbitration.

                                 I.

     From April 1996 to February 2001, Timothy R. Booker

worked for Robert Half International, Inc. ("RHI").  Before

starting his job at RHI, Booker signed an employment agreement

containing the arbitration clause at the heart of this dispute.  The

clause states in relevant part:

     Any dispute or claim arising out of or relating to Em-

     ployee's employment or any provision of this Agreement

     . . . shall be submitted to arbitration pursuant to the com-

 

                                  3

     mercial arbitration rules of the American Arbitration

     Association.  This Agreement shall be governed by the

     United States Arbitration Act. . . . The parties agree that

     punitive damages may not be awarded in an arbitration

     proceeding required by this Agreement.

Employment Agreement ¶ 18.  The agreement also contained a

severability clause, providing that " t he provisions of this

Agreement are severable.  If any provision is found by any court

of competent jurisdiction to be unreasonable and invalid, that

determination shall not affect the enforceability of other provi-

sions."  Id. ¶ 13.

     On April 24, 2001, Booker filed suit against RHI in District

of Columbia Superior Court, alleging racial discrimination and

wrongful constructive discharge in violation of the DCHRA.

RHI responded with a letter requesting that Booker submit his

claim to arbitration as required by the employment agreement.

In subsequent negotiations with Booker's counsel over the

structure of arbitral proceedings, RHI's attorney stipulated that

arbitration would not bar an award of punitive damages,

indicated that RHI would agree to "reasonable discovery," and

suggested that the parties follow the American Arbitration

Association ("AAA") employment arbitration rules because they

provide "greater detail" on available discovery tools than the

commercial rules specified in the agreement.  May 16, 2001

Letter of Anita Barondes to R. Scott Oswald at 1; May 23, 2001

Letter of Anita Barondes to R. Scott Oswald at 1.  When Booker

nonetheless insisted on pursuing his claim in court, RHI re-

moved the case to federal district court on the basis of diversity

jurisdiction and moved to dismiss the complaint and compel

arbitration pursuant to the Federal Arbitration Act ("FAA").

9 U.S.C. §§ 1 et seq.

     Over the opposition of Booker and amicus curiae the Equal

Employment Opportunity Commission, the district court granted

 

                                 4

RHI's motion.  The court analyzed the enforceability of the

arbitration clause under the standards set forth in our decision in

Cole v. Burns International Security Services, 105 F.3d at

1479­83.  In Cole, we applied the Supreme Court's teaching in

Gilmer that claims under antidiscrimination statutes may be

subject to arbitration, so long as the claimant "effectively may

vindicate his or her  statutory cause of action in the arbitral

forum."  Gilmer, 500 U.S. at 28 (quoting Mitsubishi Motors

Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 637

(1985) (alteration in original)).  We held that the employee in

Cole could be compelled to arbitrate his Title VII claim, noting

that the arbitration agreement in that case "(1) provides for

neutral arbitrators, (2) provides for more than minimal discov-

ery, (3) requires a written award, (4) provides for all types of

relief that would otherwise be available in court, and (5) does

not require employees to pay either unreasonable costs or any

arbitrators' fees or expenses as a condition of access to the

arbitration forum."  105 F.3d at 1482.

     Booker argued for a different result in his case, asserting

that his agreement with RHI did not provide for sufficient

discovery, and noting that it plainly did not afford all the relief

that would be available in court.  The district court concluded

that the AAA commercial arbitration rules specified in the

arbitration agreement did provide for "more than minimal

discovery,"  Mem. Op. at 13­15, but agreed with Booker that the

bar on punitive damages was unenforceable.  Id. at 16­17.  It

nevertheless declined Booker's invitation to strike down the

arbitration clause in its entirety.  Looking instead to the agree-

ment's severability clause, District of Columbia contract law,

and the federal policy favoring enforcement of agreements to

arbitrate, the court concluded that the remainder of the arbitra-

tion clause was enforceable despite the invalid punitive damages

provision.  Accordingly, the district court severed the punitive

 

                                 5

damages bar and compelled arbitration.  Id. at 19­25.  Booker

appeals.

                                II.

     Recent Supreme Court decisions concerning the arbitrability

of statutory claims make clear how we are to assess the assertion

that arbitration should not be compelled because the terms of an

arbitration agreement interfere with the effective vindication of

statutory claims.  The claimant in Green Tree Financial Corp.-

Alabama v. Randolph, 531 U.S. 79 (2000), argued that she could

not be compelled to arbitrate her claim under the Truth in

Lending Act (TILA), because the arbitration agreement at issue

was silent on the subject of fees and costs.  The risk that she

might have to pay prohibitive costs if she pursued her claim in

arbitration, according to the claimant, interfered with the

vindication of her TILA claim in the arbitral forum.  Id. at 90.

The Court rejected this argument.  It 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," but held that an agree-

ment's "silence" on the issue is, on its own, "plainly insufficient

to render the agreement  unenforceable."  Id. at 90­91.  The

Court noted its "prior holdings that the party resisting arbitration

bears the burden of proving that the claims at issue are unsuit-

able for arbitration," and concluded that, by the same token, a

party seeking to invalidate an arbitration agreement on the

ground that the arbitration would be too expensive "bears the

burden of showing the likelihood of incurring such costs."  Id.

at 91­92.

     More recently, in Pacificare Health Sys., Inc. v. Book, 538

U.S. 401 (2003), the Court considered an argument that a claim

under the Racketeer Influenced and Corrupt Organizations Act

(RICO), 18 U.S.C. §§ 1961 et seq., could not be subjected to

arbitration, because the pertinent arbitration agreement pre-

 

                                 6

cluded punitive damages while RICO allows treble damages.

The Court declined to construe the agreement and determine in

advance whether the bar on punitive damages prohibited treble

damages: "we should not, on the basis of `mere speculation' that

an arbitrator might interpret these ambiguous agreements in a

manner that casts their enforceability into doubt, take upon

ourselves the authority to decide the antecedent question of how

the ambiguity is to be resolved."  538 U.S. at 406­07 (quoting

Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S.

528, 541 (1995)).  The Court compelled arbitration, and left it

for the arbitrator to decide in the first instance whether the

agreement barred treble damages under RICO.            The Court

explained that this approach was consistent with its decision in

Vimar, where it enforced a foreign arbitration clause after

holding that "mere speculation" that the foreign arbitrator

"might" apply foreign law that "might" turn out to be less

favorable than the applicable United States statute did not

"provide an adequate basis upon which to declare the relevant

arbitration agreement unenforceable."  Pacificare, 538 U.S. at

405 (citing Vimar, 515 U.S. at 541).

     We take from these recent cases two basic propositions:

first, that the party resisting arbitration on the ground that the

terms of an arbitration agreement interfere with the effective

vindication of statutory rights bears the burden of showing the

likelihood of such interference, and second, that this burden

cannot be carried by "mere speculation" about how an arbitrator

"might" interpret or apply the agreement.  We consider Booker's

claims against this background.

     A.  Booker first renews his contention that the arbitration

clause is unenforceable, quite apart from the punitive damages

issue, because it does not provide for "more than minimal

discovery." See Cole, 105 F.3d at 1482.  Under the agreement,

the AAA commercial arbitration rules are the governing

 

                                7

framework for any arbitration.  With respect to discovery, those

rules provide that " a t the request of any party or at the discre-

tion of the arbitrator, consistent with the expedited nature of

arbitration, the arbitrator may direct (i) the production of

documents and other information, and (ii) the identification of

any witnesses to be called."        AAA, Commercial Dispute

Resolution Procedures (effective Sept. 1, 2000), Rule 23(a).  

    Booker contrasts this provision with the corresponding

discovery provision in the AAA employment arbitration rules,

which we considered satisfactory in Cole.  See 105 F.3d at 1480,

1482.  Those rules gave the arbitrator "the authority to order

such discovery, by way of deposition, interrogatory, document

production, or otherwise, as the arbitrator considers necessary to

a full and fair exploration of the issues in dispute."  Id. at 1480

(quoting AAA, National Rules for the Resolution of Employ-

ment Disputes (effective June 1, 1996), Rule 7).  

    Booker also objects that the commercial rules leave the

decision to hold an arbitration management conference up to the

arbitrator, while the employment rules require such a conference;

that the commercial rules do not require that the arbitrator

hearing his claim be experienced in employment law, while the

employment rules do; and that the commercial rules lack a

counterpart to the provision in the employment rules which

specifies that the "parties shall bear the same burdens of proof

and burdens of producing evidence as would apply if the claim

had been brought in court."       AAA, National Rules for the

Resolution of Employment Disputes (effective Jan. 1, 2001),

Rule 22.  Given the critical role shifting burdens play in adjudi-

cating employment discrimination claims, see, e.g., McDonnell

Douglas Corp. v. Green, 411 U.S. 792, 802­03 (1973), Booker

contends that an arbitrator's unfamiliarity with or indifference to

such issues may not only compromise his right to requisite

 

                                  8

discovery, but also the practical availability of substantive

protections under the DCHRA.

    Although the AAA employment rules specify the discovery

mechanisms available in somewhat greater detail than do the

commercial rules, both sets of rules leave the decision about

which discovery tools to use, and in what manner, to the

discretion of the arbitrator.  Booker is concerned that he will not

have "a fair opportunity to present his  claims," Gilmer, 500

U.S. at 31, because the arbitrator might provide inadequate

discovery, might not order a needed conference, might assign

burdens of production or proof that do not vindicate statutory

rights, and so on.  Under the approach set forth in Pacificare,

Green Tree, and Vimar, such speculation about what might

happen in the arbitral forum is plainly insufficient to render the

agreement to arbitrate unenforceable.  At no point does Booker

claim that the agreement prohibits the arbitrator from affording

what Booker asserts is required; RHI's offer to follow the AAA

employment rules suggests there is no such ban.  The relative

silence of the commercial rules on the details of available

discovery or other procedural questions cannot alone invalidate

the agreement.  See Green Tree, 531 U.S. at 92.  To invalidate

the agreement on the basis of Booker's speculation would reflect

the very sort of "suspicion of arbitration" the Supreme Court has

condemned as " `far out of step with our current strong endorse-

ment of the federal statutes favoring this method of resolving

disputes.' " Gilmer, 500 U.S. at 30 (quoting  Rodriguez de

Quijas v. Shearson/American Express, Inc., 490 U.S. 477, 481

(1989)).   See Green Tree, 531 U.S. at 89 ("In considering

whether an  agreement to arbitrate is unenforceable, we are

mindful of the FAA's purpose `to reverse the longstanding

judicial hostility to arbitration agreements.' ") (quoting Gilmer,

500 U.S. at 24).

 

                                9

     B.  The parties do not dispute that the arbitration agree-

ment's bar on punitive damages is unenforceable as applied to

Booker's claim under the DCHRA.  See, e.g., Hadnot v. Bay,

Ltd., 344 F.3d 474, 478 & n.14 (5th Cir. 2003) (arbitration

agreement's bar on punitive damages unenforceable in Title VII

case).  Booker contends, however, that the district court erred in

severing the punitive damages provision and enforcing the

remainder of the agreement.  He first argues that severance and

enforcement, as opposed to striking the arbitration clause as a

whole, is inconsistent with the terms of the contract between the

parties.  See 9 U.S.C. § 2 (FAA leaves in place all protections

"that exist at law or in equity for the revocation of any con-

tract"); First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938,

944 (1995) (in deciding arbitrability, "courts generally . . .

should apply ordinary state-law principles that govern the

formation of contracts").  While acknowledging the employment

agreement's severability clause, he notes that the agreement also

stipulates that " n o provision of this agreement may be changed

or waived except by an agreement in writing signed by the party

against whom enforcement of any such waiver or change is

sought."  Employment Agreement ¶ 16.  According to Booker,

his consent is required before RHI may change the arbitration

provision by severing the ban on punitive damages, and then

enforce the arbitration provision against him.  At the very least,

he contends, the severability clause and the waiver clause

contradict each other, creating a contractual ambiguity we must

construe against the drafter, RHI.  See, e.g., Cole, 105 F.3d at

1485.  

     Booker's argument incorrectly assumes that the waiver and

severability clauses are incompatible.       See 1010 Potomac

Assocs. v. Grocery Mfrs. of Am., Inc., 485 A.2d 199, 205 (D.C.

1984) (contract "must be interpreted as a whole, giving a

reasonable, lawful, and effective meaning to all its terms");

Restatement (Second) of Contracts § 203(a) (1981) ("an

 

                                 10

interpretation which gives a reasonable, lawful, and effective

meaning to all the terms is preferred to an interpretation which

leaves a part unreasonable, unlawful, or of no effect").  What-

ever the reach of waiver clause, here the parties agreed at the

outset to allow the excision of any provision "found by any court

of competent jurisdiction to be unreasonable and invalid."

Employment Agreement ¶ 13.  As a result, the district court's

severance was a contingency contemplated by the parties at the

time of formation, rather than a modification subject to the

requirements of the waiver clause.

     We reject for similar reasons Booker's argument that

severance over his opposition was improper because District of

Columbia law requires mutual assent for any modification of a

contract.  Because Booker and RHI both signed the contract with

the severability clause, there is mutual assent to severance

according to the terms of that clause.  This is entirely consistent

with District of Columbia law, which allows courts to sever

provisions in violation of public policy, while enforcing the

remainder of the agreement.  See EDM & Assocs., Inc. v. GEM

Cellular, 597 A.2d 384, 390 (D.C. 1991); Ellis v. James V.

Hurson Assocs., Inc., 565 A.2d 615, 617 (D.C. 1989).

     Under the FAA, arbitration "is a matter of consent, not

coercion."  Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford

Jr. Univ., 489 U.S. 468, 479 (1989).  Compelling Booker to

arbitrate with the bar on punitive damages severed is entirely

consistent with the intent to arbitrate he manifested in signing

the employment agreement in the first place.  As the Eighth

Circuit recently explained in a similar case, " w e do not believe

that the severance of the provision limiting punitive damages

diminishes the claimant's  contractual intent to arbitrate

because excluding the provision only allows her the opportunity

to arbitrate her claims under more favorable terms than those to

 

                                 11

which she agreed."  Gannon v. Circuit City Stores, Inc., 262

F.3d 677, 682­83 (8th Cir. 2001).

     C.  Booker next argues that enforcing the remainder of the

arbitration clause contravenes the federal policy interest in

ensuring the effective vindication of statutory rights.           He

contends that responding to illegal provisions in arbitration

agreements by judicially pruning them out leaves employers with

every incentive to "overreach" when drafting such agreements.

If judges merely sever illegal provisions and compel arbitration,

employers would be no worse off for trying to include illegal

provisions than if they had followed the law in drafting their

agreements in the first place.  On the other hand, because not

every claimant will challenge the illegal provisions, some

employees will go to the arbitral table without all their statutory

rights.

     We have never addressed this issue, but Booker's argument

-- bolstered by support from the EEOC -- has helped persuade

some circuits to strike arbitration clauses in their entirety, rather

than simply sever offending provisions.  See Perez v. Globe

Airport Sec. Servs., Inc., 253 F.3d 1280, 1287 (11th Cir. 2001);

Shankle v. B-G Maint. Mgmt. of Colo., 163 F.3d 1230, 1235 &

n.6 (10th Cir. 1999); Graham Oil Co. v. ARCO Prods. Co., 43

F.3d 1244, 1249 (9th Cir. 1994).  Other circuits, however, have

invoked the federal policy in favor of enforcing agreements to

arbitrate to reject policy arguments like Booker's and uphold

severance of illegal provisions.  See Morrison v. Circuit City

Stores, Inc., 317 F.3d 646, 675 (6th Cir. 2003); Gannon, 262

F.3d at 682­83; see also Hadnot, 344 F.3d at 478 (severing bar

on punitive damages in arbitration clause without citing federal

policy).

     The differing results may well reflect not so much a split

among the circuits as variety among different arbitration

agreements.  Decisions striking an arbitration clause entirely

 

                                 12

often involved agreements without a severability clause, see,

e.g., Perez, 253 F.3d at 1286, or agreements that did not contain

merely one readily severable illegal provision, but were instead

pervasively infected with illegality, see, e.g., Graham Oil, 43

F.3d at 1248­49; Hooters v. Phillips, 173 F.3d 933, 938­39 (4th

Cir. 1999).  Decisions severing an illegal provision and compel-

ling arbitration, on the other hand, typically considered agree-

ments with a severability clause and discrete unenforceable

provisions, see, e.g., Morrison, 317 F.3d at 675; Gannon, 262

F.3d at 680.

     A critical consideration in assessing severability is giving

effect to the intent of the contracting parties.           See, e.g.,

Frankemuth Mut. Ins. Co. v. Escambia County, 289 F.3d 723,

728­29 (11th Cir. 2002); Transamerica Ins. Co. v. Avenell, 66

F.3d 715, 722 (5th Cir. 1995).  That was also the "preeminent

concern of Congress in passing the FAA " -- "to enforce

private agreements into which parties had entered."  Dean Witter

Reynolds Inc. v. Byrd, 470 U.S. 213, 221 (1985).   See Volt Info.

Scis., 489 U.S. at 479 ("the FAA's primary purpose" was to

"ensur e  that private agreements to arbitrate are enforced

according to their terms").  If illegality pervades the arbitration

agreement such that only a disintegrated fragment would remain

after hacking away the unenforceable parts, see, e.g., Graham

Oil, 43 F.3d at 1248­49, the judicial effort begins to look more

like rewriting the contract than fulfilling the intent of the parties.

Cf. NLRB v. Rockaway News Supply Co., 345 U.S. 71, 78 (1953)

("We  do not . . . question that there may be cases where a

forbidden provision is so basic to the whole scheme of a contract

and so interwoven with all its terms that it must stand or fall as

an entirety.  But . . . t he features to which the Board rightly

objects not only may be severed but are separated in the con-

tract.").  Thus, the more the employer overreaches, the less likely

a court will be able to sever the provisions and enforce the

 

                                 13

clause, a dynamic that creates incentives against the very

overreaching Booker fears.

    We agree with the district court that severing the punitive

damages bar and enforcing the arbitration clause was proper

here.  Not only does the agreement contain a severability clause,

but Booker identifies only one discrete illegal provision in the

agreement.  We have rejected his argument that the agreement

does not allow adequate discovery, and Booker himself acknowl-

edges that "the severance of one provision may be based on

sound case law" and that "the District Court's decision to sever

the punitive damages provision may be sound."  Reply Br. of

Appellant, at 4, 14.  This one unenforceable provision does not

infect the arbitration clause as a whole.  The district court did not

unravel "a highly integrated" complex of interlocking illegal

provisions, Graham Oil, 43 F.3d at 1248, but rather removed a

punitive damages bar that appears to have been grafted onto an

intact and functioning framework, for the AAA commercial

rules -- incorporated by reference in the clause -- already

contain provisions on remedies that do not prohibit punitive

damages.  See Commercial Rules 43­48.  Indeed, by severing a

remedial component of the arbitration clause, the district court

removed a provision generally understood as not being essential

to a contract's consideration, and thus more readily severable.

See 15 Corbin on Contracts § 89.10, at 659 (rev. ed. 2003);

Williston on Contracts § 19:69, at 543 (4th ed. 1998) (citing

Restatement (Second) of Contracts §§ 183 & cmt. a, 184).  See

also Hadnot, 344 F.3d at 478 (rejecting argument that bar on

punitive damages in arbitration clause is integral to overall

employment agreement and accordingly cannot be severed).

    The Graham Oil decision, on which Booker relies, struck

the entire arbitration agreement after noting that "the offensive

provisions clearly represent an attempt . . . to achieve through

arbitration what Congress has expressly forbidden."  43 F.3d at

 

                               14

1249; see id. ("severance is inappropriate when the entire clause

represents an `integrated scheme to contravene public policy' ")

(quoting E. Allan Farnsworth, Farnsworth on Contracts § 5.8, at

70 (1990)).  There is no evidence of that here.  At the time the

parties signed the agreement -- almost a year before Cole -- the

law of this circuit was unclear as to whether bars on punitive

damages in arbitration clauses were enforceable in this context.

Moreover, the AAA did not promulgate the employment

arbitration rules favored by Booker -- and assented to by RHI in

pre-litigation negotiations -- until after the parties signed the

employment agreement.

     By invoking the severability clause to remove a discrete

remedial provision, the district court honored the intent of the

parties reflected in the employment agreement, which included

not only the punitive damages bar but the explicit severability

clause as well.  In doing so, the court was also faithful to the

federal policy which "requires that we rigorously enforce

agreements to arbitrate."  Mitsubishi Motors, 473 U.S. at 626

(citation omitted).  For these reasons, and because Booker has

failed to offer anything beyond "mere speculation" to suggest he

would not be able effectively to vindicate his statutory claims in

arbitration, see Pacificare, 538 U.S. at 406; Vimar, 515 U.S. at

541, the judgment of the district court is

                                                       Affirmed.

 

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