Spinetti v. Service Corp

Opinions of the United
2003 Decisions States Court of Appeals
for the Third Circuit

3-31-2003

Spinetti v. Service Corp
Precedential or Non-Precedential: Precedential

Docket 01-4415

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 PRECEDENTIAL

Filed March 31, 2003

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 01-4415

MARYANN SPINETTI,
Appellant
v.
SERVICE CORPORATION INTERNATIONAL AND SERVICE
CORPORATION INTERNATIONAL OF PENNSYLVANIA
d/b/a LAFAYETTE MEMORIAL PARK

Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. No. 01-CV-1191)
District Judge: The Honorable Donetta W. Ambrose

Argued: January 14, 2003
Before: ROTH, FUENTES and ALDISERT, Circuit Judges

(Filed: March 31, 2003)

SAMUEL J. CORDES (Argued)
Ogg, Cordes, Murphy & Ignelzi
245 Fort Pitt Boulevard
Pittsburgh, PA 15222
ATTORNEY FOR APPELLANT
 2

NICHOLAS M. INZEO, Acting Deputy
General Counsel
PHILIP B. SKLOVER, Associate
General Counsel
LORRAINE C. DAVIS, Assistant
General Counsel
SUSAN R. OXFORD, Attorney
(Argued)
Equal Employment Opportunity
Commission
1801 L Street, NW
Washington, D.C. 20507
AMICUS CURIAE in support of the
Appellant
RICHARD J. ANTONELLI
ROBERT W. PRITCHARD (Argued)
Littler Mendelson, P.C.
Dominion Tower
625 Liberty Avenue, 26th Floor
Pittsburgh, PA 15222
ATTORNEYS FOR APPELLEES

OPINION OF THE COURT

ALDISERT, Circuit Judge:
This appeal by an employee from a district court order
compelling arbitration of her employment discrimination
claims requires us to determine whether the entire
arbitration agreement between her and her employer was
vitiated when the court voided the agreement’s attorney’s
fees and arbitration costs provision for offending federal
statutes and ruling case law. After making the excisions,
the court ordered the discrimination issues to arbitration.
We affirm.

I.
At tension here are two important expressions of public
policy. We must respect the “liberal federal policy favoring
 3

arbitration agreements,” Moses H. Cone Mem’l Hosp. v.
Mercury Constr. Corp., 460 U.S. 1, 24 (1983), illustrated by
the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1-16. Yet,
we must face the equally strong policies of (1) invalidating
arbitration agreements when “large arbitration costs could
preclude a litigant . . . from effectively vindicating her
federal statutory rights in the arbitral forum[,]” Green Tree
Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 90 (2000), and (2)
permitting the award of attorney’s fees to a prevailing party
pursuant to Title VII, 42 U.S.C. § 2000e-5(k), and the Age
Discrimination in Employment Act (“ADEA”), 29 U.S.C.
§§ 626(b), 216(b).
The federal policy encouraging recourse to arbitration
requires federal courts to look first to the relevant state law
of contracts, here Pennsylvania, in deciding whether an
arbitration agreement is valid under the FAA. First Options
of Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1995).
Pennsylvania courts have held that if an essential term of
a contract is deemed illegal, it renders the entire contract
unenforceable by either party. Diebler v. Chas. H. Elliot Co.,
81 A.2d 557, 560-561 (Pa. 1951) (stating that a bilateral
bargain containing both a legal and illegal promise may not
be enforced when the illegal portion is the essential
consideration for the bargain).
In light of the pro-arbitration federal policy and
Pennsylvania contract law, we believe that the make-or-
break task before us is to decide whether the stricken
portion of the employment arbitration agreement
constitutes “an essential part of the agreed exchange” of
promises. RESTATEMENT (SECOND) OF CONTRACTS § 184(1) (1981).
We conclude that it does not.
“The essence of the [disputed] contract . . . is an
agreement to settle . . . employment disputes through
binding arbitration.” Gannon v. Circuit City Stores, Inc., 262
F.3d 677, 681 (8th Cir. 2001). Accordingly, we agree with
the district court that “[t]he provisions regarding payment
of arbitration costs and attorney’s fees represent only a part
‘of [the] agreement and can be severed without disturbing
the primary intent of the parties to arbitrate their
disputes.’ ” Spinetti v. Serv. Corp. Int’l, No. 01-11911, 13 (W.
D. Pa. Nov. 15, 2001) (opinion and order of court)
 4

[hereinafter D. Op.] (quoting Gannon, 262 F.3d at 681). You
don’t cut down the trunk of a tree because some of its
branches are sickly.

II.
Appellant Maryann Spinetti began working for Service
Corporation International (“SCI”) as a sales counselor on
April 10, 1989. On May 29, 1997, SCI presented Spinetti
with a document described as a “new personnel policy,” but
labeled “Principles of Employment” (“Agreement”). The
employer told Spinetti to sign the Agreement in order to
acknowledge receipt. After a cursory review, she signed the
document, and both parties became bound by it.
Her employment was terminated on or about October 23,
2000. The circumstances underlying the termination are
irrelevant to the issue on appeal, but essentially involve
allegations that Spinetti engaged in inappropriate conduct
including treating staff abusively, throwing an object at a
co-worker and using vulgar language. She subsequently
filed this lawsuit alleging that SCI terminated her
employment because of her age and gender in violation of
Title VII of the Civil Rights Act of 1964, 42 U.S.C. §§ 2000e
et seq., and the ADEA, 29 U.S.C. §§ 621 et seq. SCI moved
to dismiss the complaint and compel arbitration.
Before the district court, Spinetti contended that the
arbitration agreement was not enforceable because it
prevented her from fully and effectively vindicating her
ADEA and Title VII rights. She grounded this argument in
the Legal Counsel/Costs provision of the arbitration
agreement which required: (1) that each party pay its own
costs and attorney’s fees, regardless of the outcome of the
arbitration; and (2) that each party pay one-half of the
compensation to be paid to the arbitrator(s), as well as one-
half of any other costs relating to the administration of the
arbitration proceeding. Agreeing with Spinetti that these
requirements offended ruling case law and federal statutes,
the district court severed the attorney’s fee and costs
provision from the arbitration agreement. However, the
district court also granted SCI’s motion to dismiss, and
compelled the parties to proceed to an arbitration which
 5

was to be governed by the remaining provisions of the
agreement, relevant case law and the statutory guidelines
of Title VII and ADEA. Spinetti appeals the district court’s
determination and argues that inasmuch as the attorney’s
fees and costs provision is deemed contrary to law, the
court should have voided the entire arbitration agreement
instead of merely trimming its offensive portions.
The district court had jurisdiction pursuant to 28 U.S.C.
§ 1331, and converted the Appellee’s Motion to Dismiss and
Compel Arbitration into a Motion for Summary Judgment.
It granted Appellee’s Motion, ordered the parties to proceed
with arbitration and instructed the court clerk to mark the
case closed. This decision is final within the meaning of
FAA, 9 U.S.C. § 16(a)(3), and we have appellate jurisdiction
pursuant to 28 U.S.C. § 1291. Green Tree, 531 U.S. at 89
(holding that an order compelling arbitration and
dismissing all other claims is final and immediately
appealable); Blair v. Scott Specialty Gases, 283 F.3d 595,
602 (3d Cir. 2002) (same). Appellant filed a timely appeal.
We review the grant of summary judgment de novo. Id. at
602-603.

III.
The Agreement was designed to resolve employment-
related disputes between SCI and its employees through
arbitration rather than courtroom litigation. With limited
exclusions, not applicable here, the Agreement stated that
“all disputes relating to any aspect of Employee’s
employment with the Company shall be resolved by binding
arbitration,” including claims brought by the employee
against SCI and claims by SCI against the employee.
Agreement from SCI Central Region on Principals of
Employment, Form: P44, 1. The Agreement directs that an
Arbitrator shall apply the statutes, rules or regulations
governing arbitrations in the state in which the employee is
or most recently was employed by SCI — in this case,
Pennsylvania. Absent such guidance, the Agreement
provided, the arbitration proceedings shall be conducted in
accordance with the employment arbitration rules of the
American Arbitration Association. “In the event of any
inconsistency between [the] Agreement and the statutes,
 6

rules or regulations to be applied, the terms of the
Agreement shall apply.” Id. at 3.
Most notably, the Agreement contains the following
provision relating to legal fees and arbitration costs:
¶4. Legal Counsel/Costs
Each party may retain legal counsel and shall pay its
own costs and attorney’s fees, regardless of the
outcome of the arbitration. Each party shall pay one-
half of the compensation to be paid to the
arbitrator(s), as well as one-half of any other costs
relating to the administration of the arbitration
proceeding (e.g., room rental, court reporter, etc.)
Id. at 2. The Agreement has no severability clause and
provides that no provision pertaining to arbitration may be
modified except by a written agreement signed by both
employee and the company.

A.
The district court properly determined that the proviso
requiring each party to pay its own attorney’s fees —
regardless of the outcome of the arbitration — runs counter
to statutory provisions under Title VII and ADEA that
permit an award of attorney’s fees and costs to a prevailing
party. 42 U.S.C. § 2000e-5(k); 29 U.S.C. §§ 626(b), 216(b);
see also Christiansburg Garment Co. v. EEOC, 434 U.S.
412, 417 (1978) (holding that under Title VII it is clear that
“a prevailing plaintiff ordinarily is to be awarded attorney’s
fees in all but special circumstances”). It is well established
that arbitration is merely a choice of dispute resolution and
does not infringe upon statutory protections. Mitsubishi
Motors Corp. v. Soler Chrysler-Plymouth Inc., 473 U.S. 614,
628 (1985). Therefore, “[i]f arbitration is to offer claimants
the full scope of remedies available under Title VII,
arbitrators in Title VII cases, just like courts, must be
guided by Christiansburg and must ordinarily grant
attorney fees to prevailing claimants” rather than be
restricted by private contractual language. Morrison v.
 7

Circuit City Stores, Inc., 2003 WL 193410, *20 n.15 (6th Cir.
Jan. 30, 2003).1

B.
The court then embarked on a fact-specific inquiry into
whether the arbitration costs facing Spinetti offended the
policy mandating that “[t]he arbitration of statutory claims
. . . be accessible to potential litigants as well as adequate
to protect the rights in question so that arbitration, like the
judicial resolution of disputes, will further broader social
purposes.” Morrison, 2003 WL 193410, *20, quoting Gilmer
v. Interstate/Johnson Lane Corp., 500 U.S. 20, 28 (1991).
We are satisfied that the district court’s analysis properly

1. Appellees submit an alternative basis for affirming the district court’s
decision. They argue that the arbitrator, and not the court, should have
been first to consider Spinetti’s challenge to the attorney’s fee provision.
A cross-appeal on this issue was not filed. Although an appellee can seek
affirmance for reasons other than those given by the district court, this
particular contention — arguing that the court did not have jurisdiction
over the basic issue on appeal — is a frontal attack on the decision,
necessitating a cross-appeal to join the issue.
Nevertheless, two glaring flaws adulterate Appellee’s argument. First,
SCI contends that our holding in Great Western Mortgage Corp. v.
Peacock, 110 F.3d 222 (3d Cir. 1997) mandates that the district court
should have deferred Spinetti’s challenge to the arbitrator. This is, in a
word, wrong. In Blair, we examined the scope of inquiry for district
courts evaluating arbitration agreements. We said that “Great Western
held that the question of whether the arbitration agreement validly
waived certain rights afforded by [state] law could be presented in the
arbitral forum, but also evaluated that claim on the merits and
concluded that the claimant had not demonstrated any [state] policy
against arbitration. Because Great Western did not foreclose the ability
of courts to examine public policy arguments, it is not in conflict with
the [Supreme Court] in Green Tree,” 283 F.3d at 611 (citations omitted).
Second, SCI argues that its Agreement would not preclude awarding of
attorney’s fees because it must be read in a manner consistent with
federal law. Such after-the-fact recognition of the mandates of Title VII
and ADEA is inconsequential when employees are faced with an
Agreement that reads “[e]ach party . . . shall pay its own attorney’s fees,
regardless of the outcome of the arbitration” and “[i]n the event of any
inconsistency between this Agreement and the statutes . . . the terms of
this Agreement shall apply.”
 8

followed the “case-by-case” teachings of Green Tree on how
to decide if a cost-splitting provision in an arbitration
agreement denies potential litigants the opportunity to
vindicate their statutory rights.
A party seeking to invalidate an arbitration agreement
because arbitration would be prohibitively expensive bears
the burden of showing this likelihood. Green Tree, 531 U.S.
at 92. Although “Green Tree does not provide us with a
standard for how detailed the showing of prohibitive
expenses must be to support the conclusion that the
provision, at minimum, is unenforceable,” several courts
have taken a stab at outlining the proper formula. Morrison,
WL 193410 at *5 (quotation omitted) (holding that potential
litigants must be given the opportunity to demonstrate that
potential costs are great enough to deter them and similarly
situated individuals from seeking to vindicate their federal
statutory rights); see also Bradford v. Rockwell
Semiconductor Sys., Inc., 238 F.3d 549, 556 (4th Cir. 2001)
(stating that the appropriate inquiry is one that focuses on
the claimant’s ability to pay the arbitration fees and costs
and whether these are substantial enough to deter the
bringing of claims). We conclude that the district court
adequately determined that Spinetti met her burden.
Spinetti was required to pay an initial, non-refundable
filing fee of $500 to the American Arbitration Association,
an additional filing fee of $2,750, a case-filing fee of $1,000,
an additional charge of $150 for each day of the hearing
and half the cost of an arbitrator. Evidence disclosed that
a mid-range arbitrator in Western Pennsylvania charges
approximately $250 an hour with a $2,000-per-day
minimum.
Although Spinetti was earning $63,000 a year when
employed by SCI, she was unemployed for six months
following her termination. When she found new
employment she says she was earning less than $300 per
week while her monthly expenses for food and rent totaled
approximately $2,000. To cover the deficit between income
and expenses, Spinetti had taken cash advances from her
credit cards. On the basis of this record, the district court
determined “that Spinetti has adequately demonstrated that
 9

the costs associated with arbitrating her claims are
prohibitive.” D. Op. at 10.
We make clear what was implicit in the district court’s
order to compel arbitration, to-wit, the court intended that
the employer pay all costs of arbitration and final
responsibility for attorney’s fees should be governed by the
appropriate statute — be it either Title VII or ADEA.
Logically, within the rubric of a disjunctive “either-or”
proposition, no other alternative can be inferred. The
disjuncts are that the employer or employee or both, must
pay. Because the court ruled out the employee on the basis
that she could not afford to pay, ergo, the employer must.
See, e.g., Giordano v. Pep Boys—Manny, Moe & Jack, Inc.,
2001 WL 484360 (E.D. Pa. Mar. 29, 2001) (holding that,
because the plaintiff could not, the defendant was to bear
the costs of arbitration in addition to the filing fees in
excess of the cost of filing a complaint in federal court).2

2. Again, Appellee challenges this determination by the district court,
and again, because SCI did not cross-appeal, the issue is not properly
before us. Nevertheless, we offer some observations. The district court’s
case-specific analysis and subsequent determination that Spinetti lacked
the ability to bear the costs of arbitration was adequate under the
teaching of Green Tree. Moreover, SCI’s offer to pay the costs of
arbitration upon proof that compelling Spinetti to pay her costs would be
prohibitively expensive is an after-the-fact offer and will be treated as
such. The Court of Appeals for the Sixth Circuit cogently explained:
In considering the ability of plaintiffs to pay arbitration costs under
an arbitration agreement, reviewing courts should not consider
after-the-fact offers by employers to pay the plaintiff ’s share of the
arbitration costs where the agreement itself provides that the
plaintiff is liable, at least potentially, for arbitration fees and costs.
The reason for this rule should be obvious. Our concern is that cost-
splitting provisions will deter potential litigants from bringing their
statutory claims in the arbitral forum. When the cost-splitting
provision is in the arbitration agreement, potential litigants who
read the arbitration agreement will discover that they will be liable,
potentially, for fees if they bring their claim in the arbitral forum
and thus may be deterred from doing so. Because the employer
drafted the arbitration agreement, the employer is saddled with the
consequences of the provision as drafted. If the provision, as
drafted, would deter potential litigants, then it is unenforceable,
regardless of whether, in a particular case, the employer agrees to
pay a particular litigant’s share of the fees and costs to avoid such
a holding. Morrison at *23.
 10

Our analysis must now turn to the federal policy favoring
arbitration.

IV.
Congress enacted the FAA “to reverse the longstanding
judicial hostility to arbitration agreements . . . and to place
arbitration agreements upon the same footing as other
contracts.” Gilmer, 500 U.S. at 24. Section 2 specifically
provides that “[a] written provision in . . . a contract
evidencing a transaction involving commerce to settle by
arbitration a controversy thereafter arising out of such
contract . . . shall be valid, irrevocable, and enforceable,
save upon such grounds as exist at law or in equity for the
revocation of any contract.” 9 U.S.C. § 2. The Act has been
interpreted to possess the primary purpose of enforcing
private contractual agreements to arbitrate. See, e.g.,
Mitsubishi, 473 U.S. at 625-626; Dean Witter Reynolds, Inc.
v. Byrd, 470 U.S. 213, 221 (1985). To that end, the Act
provides that where a party to an arbitration agreement
fails, neglects, or refuses to submit a matter to arbitration,
the other party may seek to compel arbitration. 9 U.S.C.
§ 4.
In Gilmer, the Court upheld an arbitration agreement of
a claim under the ADEA and stated that the statutory
substantive rights are unaffected by the choice of dispute
resolution. 500 U.S. at 26. The Court further noted that
“[s]o long as the prospective litigant effectively may
vindicate [his or her] statutory cause of action in the
arbitral forum, the statute will continue to serve both its
remedial and deterrent function.” Id. at 28 (quoting
Mitsubishi, 473 U.S. at 637).
Following Gilmer, federal courts continually enforced
arbitrations of employment-discrimination claims under
Title VII as well as under the ADEA. See, e.g., Gannon, 262
F.3d at 683 (Title VII); Austin v. Owens-Brockway Glass
Container, Inc., 78 F.3d 875, 882 (4th Cir. 1996), cert.
denied, 519 U.S. 980 (1996) (Title VII and ADEA); Metz v.
Merrill Lynch, Pierce, Fenner & Smith, Inc., 39 F.3d 1482,
1487 (10th Cir. 1994) (Title VII).
 11

Finally, in Circuit City Stores, Inc. v. Adams, 532 U.S. 105
(2001), the Court resolved any lingering question
concerning the FAA’s applicability to arbitration agreements
in the employment context. It held that with a limited
exception (not applicable here), arbitration agreements
covering employment-related claims fall within the FAA’s
provisions. Id. at 119 (holding that in the employment
context “only contracts of employment of transportation
workers” are exempted from the FAA’s coverage).
It is against this backdrop of federal arbitration policy
that we continue our analysis.

V.
Under the FAA, federal arbitration policy must be
implemented in lock-step with a determination of contract
validity under state law. First Options, 514 U.S. at 944. We
therefore turn to whether, under Pennsylvania contract law,
the stricken portions of the arbitration agreement can be
considered the essential part of the bargain. Diebler, 81
A.2d at 560-561. We have no difficulty in concluding that
the primary purpose of the arbitration bargain entered into
by Spinetti and SCI was not to regulate costs or attorney’s
fees. Instead, it was designed to provide a mechanism to
resolve employment-related disputes:
[W]e recognize that disputes may arise from time to
time, which must be resolved in a fair and efficient
manner. In order to ensure equitable, efficient and
cost-effective resolution of these matters, employment-
related disputes will be resolved by arbitration . . .
Form: P44, 1.
Having decided that the satellite issues of costs and
attorney’s fees may not be the tail wagging the dog, we
must now ascertain the policy of Pennsylvania courts in
granting partial enforcement of a contract. In the context of
restrictive covenants, “[c]ase law empowers Pennsylvania
courts to grant partial enforcement of an overbroad
covenant either by excising offensive portions of the
covenant or by adding language.” Bell Fuel Corp. v.
Cattolico, 544 A.2d 450, 457 (Pa. Super. Ct. 1988) (citing
 12

Sidco Paper Co. v. Aaron, 351 A.2d 250, 254 (Pa. 1976));
Barb-Lee Mobile Frame Co. v. Hoot, 206 A.2d 59, 60 (Pa.
1975) (“The man who wildly claims that he owns all the
cherry trees in the country cannot be denied protection of
the orchard in his back yard.”).
Section 603 of the RESTATEMENT (FIRST) OF CONTRACTS
provides support for Pennsylvania law:
A bargain that is illegal only because of a promise or a
provision for a condition, disregard of which will not
defeat the primary purpose of the bargain, can be
enforced with the omission of the illegal portion by a
party to the bargain who is not guilty of serious moral
turpitude unless this result is prohibited by statute.
Recovery is more readily allowed where there has been
part performance of the legal portion of the bargain.
RESTATEMENT (FIRST) OF CONTRACTS § 603 (1932). (emphasis
supplied).
Section 184 of the RESTATEMENT (SECOND) OF CONTRACTS
contains the following similar language:
(1) If less than all of an agreement is unenforceable
under the rule stated in § 178, a court may
nevertheless enforce the rest of the agreement in favor
of a party who did not engage in serious misconduct if
the performance as to which the agreement is
unenforceable is not an essential part of the agreed
exchange.
RESTATEMENT (SECOND) OF CONTRACTS § 184 (1981) (emphasis
supplied).
In Forbes v. Forbes, 48 A.2d 153, 156 (Pa. Super. Ct.
1946), the court cited § 603 of the RESTATEMENT (FIRST) OF
CONTRACTS in holding that an illegal provision collecting
wages in a family settlement contract did not defeat the
primary purpose of the agreement which was to provide for
the support and maintenance of a spouse. Similarly, in
Huber v. Huber, 470 A.2d 1385, 1389-1390 (Pa. Super. Ct.
1984), the court relied on § 184 of the RESTATEMENT (SECOND)
OF CONTRACTS in ruling that an illegal attempt to condition
enforcement of a post-nuptial agreement upon the award of
an uncontested divorce to one of the parties did not defeat
 13

the remaining provisions of a post-marital contract which
contained the essential purpose of providing support for the
couple’s children.
Although bottomed on federal law and not state law, our
teachings in Watkins v. Hudson Coal Co., 151 F.2d 311 (3d
Cir. 1945) are in total accord with Pennsylvania:
The first point has to do with the question whether the
formula and the waiver provisions which we have
found to be insufficient under the [Fair Labor
Standards] Act so completely vitiate the contract for
illegality that no reference to arbitration can be made.
We think this question must be answered in the
negative. The sufficiency of the wage formula and the
provision for waiver are entirely separable elements of
the contract between the parties. We do not refer to
arbitration the question of legality of the formula. That
is a question of law which the Court must take
responsibility in answering. All we are saying upon this
point is that the arbitration provision is not rendered
ineffective because the contract contains one clause,
setting out the formula, and another clause setting
forth a provision for waiver which we deem insufficient
under the statute.
Id. at 320.
Pennsylvania law supports the actions of the district
court in referring Spinetti’s employment discrimination
dispute to arbitration and striking the agreement’s illegal
provisions. Under Pennsylvania law, “a court of equity may
not only remove an offensive term, but may supply a new,
limiting term and enforce the covenant so modified. This
unique power to modify the parties’ contract . . . arises
from the general equity powers of the court.” Bell Fuel
Corp., 544 A.2d at 457. See also Barb-Lee Mobile Frame,
206 A.2d at 60 (“The unique virtue of equity is that it
sometimes straightens out morally damaged frames as well
as rehabilitates legally wrecked principles.”).

VI.
Not all federal courts have been as hostile to arbitration
agreements containing unenforceable clauses as Appellant
 14

would have us believe. In Cole, the court denied
enforcement to only a portion of a similar arbitration
agreement that required the employee to pay all or part of
the arbitrator’s fees. The court concluded that such an
individual provision would not be enforceable because it:
would undermine Congress’s intent [in enacting anti-
discrimination laws by preventing] employees who are
seeking to vindicate statutory rights from gaining
access to a judicial forum and then requir[ing] them 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. The court chose to construe the
ambiguous clause concerning arbitrator fees in a fashion
that imposed the duty on the employer to pay, and thus
avoided conflict with established rights of employees.
Other courts adopted an even more proactive approach
toward agreement preservation. In Gannon, the court held
that the FAA’s policy favoring the enforcement of arbitration
agreements supported its conclusion that the district court
should have severed an unenforceable provision from an
otherwise enforceable arbitration agreement. It explained
that it would be contrary to federal policy to undermine an
entire arbitration agreement based upon a single potentially
unenforceable term:
The boundaries of private arbitration agreements in the
employment context are currently being set, with the
Supreme Court only recently affirming that the FAA
extends to arbitration agreements covering employment
disputes. In an evolving climate such as this, if we
were to hold entire arbitration agreements
unenforceable every time a particular term is held
invalid, it would discourage parties from forming
contracts under the FAA and severely chill parties from
structuring their contracts in the most efficient manner
for fear that minor terms eventually could be used to
undermine the validity of the entire contract. Such an
outcome would represent the antithesis of the liberal
federal policy favoring arbitration agreements.
Gannon, 262 F.3d at 682 (citation and quotation omitted).
See also Giordano, 2001 WL 484360 at *6 (granting a
 15

motion to compel arbitration under provisions of an
arbitration agreement exclusive of an invalid sentence
stating, “[t]he Company and I shall equally share the cost
of the Arbitrator’s fee, in the amount and manner
determined by the Arbitrator”); and Zumpano v. Omnipoint
Communications, 2001 WL 43781, at *12 (E.D. Pa. Jan. 18,
2001) (stating, in dicta, that the court would nullify any
offensive portion of the arbitration agreement and compel
arbitration).
Appellant attempts to override this progressive federal
policy favoring enforcement of arbitration agreements and
the potential severance of offensive provisions by offering
two separate arguments: (1) the teaching gleaned from the
three opinions in McCaskill v. SCI Mgmt. Corp., 298 F.3d
677 (7th Cir. 2002), examining the very same Agreement,
provides persuasive authority that severance and
subsequent enforcement of the Agreement is improper; and
(2) all previous citations to circumstances in which a court
severed offending arbitration provisions and enforced the
remainder of the agreement occurred in situations where
the arbitration agreement itself contained a severance
clause.

A.
We quickly dispose of the attempt to enliven McCaskill as
an analog. There, Judge Rovner adopted the reasoning
stated in the panel’s previous opinion in McCaskill v. SCI
Mgmt. Corp., 285 F.3d 623 (7th Cir. 2002), reh. granted and
op. vacated by McCaskill, 298 F.3d 677, that the Agreement
was unenforceable on the ground that it precluded
attorney’s fees under Title VII. However, in analyzing the
holding of Graham Oil v. Arco Products Co., 43 F.3d 1244
(9th Cir. 1994), Judge Rovner cautioned that severance was
not even considered as a potential remedy: “the attorney’s
fees clause, as well as two other contravening clauses, were
not severable from the arbitration agreement as a whole —
a claim not even raised in this case and therefore not before
us here.” McCaskill, 298 F.3d at 685.3

3. Moreover, it is difficult to attribute much potency to a case in which
there were three separate opinions, and we decline to conclude that
there is any persuasive value to it because a claim of “severab[ility] . . .
[was] not even raised.” McCaskill, 298 F.3d at 685. Unlike McCaskill,
severability is the main issue before us.
 16

B.
Appellant next contends that those courts that have
severed objectionable provisions generally relied upon a
specific clause in the arbitration agreement allowing for
severability. See, e.g., Gannon, 262 F.3d at 683 n.8 (noting
that the agreement contained an explicit clause providing
for severability); Giordano, 2001 WL 484360, at *6 (same).
On this issue we turn to Pennsylvania law. None of the
cases relied on by the Appellant specifically holds that there
cannot be severance in the absence of a clause in the
contract explicitly providing for it. See, e.g., Gannon, 262
F.3d at 683 (stating, without mentioning the import of a
severability clause, that “[s]evering the . . . clause is
consistent with the terms of the contract, the intent of the
parties, [state] contract law, and the FAA’s policy favoring
the enforcement of arbitration agreements”); Giordano,
2001 WL 484360, at *6 (noting that the severability clause
is not decisive on its own, but merely leaves “little doubt”
as to the enforceability following a severance). Indeed, such
a crabbed interpretation would do violence to Pennsylvania
contract law, as evidenced by Forbes and Huber, endorsing
provisions of the RESTATEMENT OF CONTRACTS heretofore set
forth in Section V.

VII.
Both parties and the Amicus have unloaded upon us a
veritable barrage of cases from jurisdictions other than
Pennsylvania and this Court. In citing these cases, they
have not furnished much assistance in several respects.
They have (1) not explained what was the primary object of
the arbitration, (2) set forth the determinative state law
governing the severance of portions of a contract, and (3)
discussed the various provisions of the RESTATEMENT OF
CONTRACTS. What the parties actually did reminds us of the
admonition of Judge Cardozo:
[T]he work of deciding cases in accordance with
precedents . . . is a process of search, comparison, and
little more. Some judges seldom get beyond that
process in any case. Their notion of their duty is to
match the colors of the case at hand against the colors
 17

of many sample cases spread out upon their desk. The
sample nearest in shade supplies the applicable rule.
But, of course, no system of living law can be evolved
by such a process, and no judge of a high court,
worthy of his office, views the function of his place so
narrowly. If that were all there was to our calling, there
would be little of intellectual interest about it.4
An examination of the cases relied upon by the Appellant
and Amicus indicates that they emphasized only the results
of the cases. For the most part, these cases either
demonstrated that the illegal provisions constituted the
essential or primary purposes of arbitration (a situation not
before us) or failed to adhere to, or even to discuss, the
ineluctable approach to the severability of contract
provisions — a consideration of relevant state law regarding
severability of parts of a contract. Instead, the sample
nearest to the result they desired — denying arbitrability —
was offered as “the applicable rule” without discussing the
fact-driven, relevant controlling legal precepts.
For example, the following cases involved circumstances
where the illegal provisions constituted the primary or
essential purpose of the arbitration: Graham Oil, 43 F.3d at
1248-1249 (holding that multiple illegal provisions tainted
the entire purpose of the arbitration agreement); Paladino v.
Avnet Computer Technologies, Inc., 134 F.3d 1054, 1062
(11th Cir. 1998) (holding that where the challenged
provisions defeat basic remedial purposes of Title VII, the
arbitration agreement cannot be enforced); Murray v. United
Food and Commercial Workers Int’l Union, Local 400, 289
F.3d 297, 303 (4th Cir. 2002) (holding that an arbitration
agreement was unenforceable because the agreement
drafted by the employer “placed control over the selection of
the single arbitrator for employment disputes in the hands
of [the] employer”). Still other cases failed to identify or
emphasize state law or the RESTATEMENT OF CONTRACTS. See,
e.g., Shankle v. B-G Maint. Mgmt. of Colo., Inc., 1997 WL
416405 (D. Colo. Mar. 24, 1997) (failing to make any
reference to state severance law and, while citing Cole as
authority, neglecting to follow its holding).

4. BENJAMIN N. CARDOZO, THE NATURE OF THE JUDICIAL PROCESS 20-21 (1921).
 18

VIII.
Moving beyond specific case law, we turn to the
argument of the Amicus, the Equal Employment
Opportunity Commission (“EEOC”), that the employer
should not have the benefit of a sanitized arbitration
procedure stripped of the improper attorney’s fees and
arbitration costs clauses.
The EEOC primarily argues that the presence of
agreements, like that of SCI, would operate as a
disincentive to vindicate employee rights under the
relatively inexpensive arbitration procedure. The specters of
advancing four-figure arbitration costs and the payment of
one half of attorney’s fees, like those present here, it
argues, would have a daunting, discouraging and
intimidating effect on an employee standing on the lower
rungs of the economic ladder, and, therefore, the entire
arbitration agreement should be voided.
There is some surface appeal to this contention, but it
does not survive thoughtful analysis. To accept the EEOC’s
position is to throw the baby out with the bath water. It
would compel the impecunious employee to resort to the
courts — the only alternative to arbitration in dispute
adjudication. To go to court would then require the
employee to hire a lawyer, to endure the costs and delays
of discovery and to incur all the expenses of litigation. To
accept the EEOC’s submission would be to deny the
employee the real benefits of arbitration — “benefit[s] that
may be of particular importance in employment litigation,
which often involves smaller sums of money than disputes
concerning commercial contracts.” Adams, 532 U.S. at 123.
Second, the relief urged by the EEOC and the Appellant
would fly in the face of the federal pro-arbitration policy, as
heretofore set forth in detail.
Third, although we laud the Amicus’ desire to dissuade,
disincline and deter employers from inserting these illegal
provisions in their employment contracts that place
financially impaired employees at a great disadvantage, the
increasing awareness by claimants’ counsel of their
severability will at least ensure that employees who inquire
about remedies will be given appropriate advice by counsel.
 19

Moreover, in a situation where an employer had deliberately
misled an employee about the unavailability to the
employee of federally provided remedies, sanctions such as
punitive damages might be available.
* * * *
We have considered all contentions raised by the parties,
but in light of the view we take in this case, no further
discussion is necessary.
The judgment of the district court as interpreted by us
will be affirmed.

A True Copy:
Teste:

Clerk of the United States Court of Appeals
for the Third Circuit