LaPrade, Linda E. v. Kidder Peabody & Co

                  United States Court of Appeals

               FOR THE DISTRICT OF COLUMBIA CIRCUIT

       Argued February 16, 2001    Decided April 24, 2001 

                           No. 00-7082

                        Linda E. LaPrade, 
                            Appellant

                                v.

                  Kidder, Peabody & Co., Inc., 
                             Appellee

          Appeal from the United States District Court 
                  for the District of Columbia 
                         (No. 91cv03330)

     Steven W. Teppler argued the cause for appellant.  With 
him on the briefs was Frazer Walton, Jr.

     Kathy B. Houlihan argued the cause for appellee.  With 
her on the brief was Andrew J. Schaffran.

     Before:  Williams, Sentelle and Rogers, Circuit Judges.

     Opinion for the Court filed by Circuit Judge Rogers.

     Rogers, Circuit Judge:  Linda E. LaPrade appeals the 
confirmation of an arbitration award requiring her to pay a 

portion of the forum fees for arbitration of her statutory and 
non-statutory claims against her former employer.1  She con-
tends that assessment of the forum fees contravenes Cole v. 
Burns International Security Services, 105 F.3d 1465 (D.C. 
Cir. 1997), where the court held when a federal statutory 
claim is subjected to arbitration pursuant to an arbitration 
agreement executed as a condition of employment, an employ-
ee cannot be required to pay arbitration-related costs that are 
analogous to a judge's salary or expenses in a traditional 
judicial forum.  Because LaPrade has not met her burden of 
demonstrating that the arbitrators acted in manifest disre-
gard of the law, we affirm.

                                I.

     In January 1989 LaPrade began working for Kidder Pea-
body in the State of New York as an Assistant Vice President 
and Manager of the New Issue Agency Syndicate, and in July 
1989 she was promoted to Vice President, Product Manager-
Agency Bond Trading.  Her position at Kidder Peabody 
required her to be a registered representative in the securi-
ties industry, which, in turn, required that she execute a 
Uniform Application for Securities Industry Registration or 
Transfer, or "Form U-4."2  By signing the Form U-4 La-
Prade agreed to arbitrate any claims that might arise be-
tween her and Kidder Peabody.3

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     1  This case was previously before the court on a matter unrelat-
ed to the instant appeal.  See LaPrade v. Kidder, Peabody & Co., 
146 F.3d 899 (D.C. Cir. 1998).

     2  See 15 U.S.C. s 78s (1994);  17 C.F.R. s 240.15b7-1 (2000);  
NASD Regulation Rules 1031 (a)-(b), 1013(a)(2)(B), http://se 
cure.nasdr.com/wbs/NETbos.dll?RefShow?ref=NASD4;&xinfo=/go 
odbye.htm (last visited March 28, 2001).

     3  LaPrade's Form U-4 states in relevant part:

     I agree to arbitrate any dispute, claim, or controversy that may 
     arise between me and my firm, or a customer, or any other 
     person, that is required to be arbitrated under the rules, 
     constitution, or by-laws of the organizations with which I 
     register....
     
     Following a series of disagreements with her employer, 
LaPrade left Kidder Peabody in October 1991.  Thereafter, 
she sued her former employer in the United States District 
Court for the District of Columbia for breach of contract, 
fraud, and for violations of federal and state law.  Over 
LaPrade's objection, the district court granted Kidder Pea-
body's motion to stay the lawsuit pending arbitration.  The 
parties then pursued arbitration before the National Associa-
tion of Securities Dealers, Inc. ("NASD") under the terms of 
the arbitration clause contained in LaPrade's Form U-4.

     In the arbitration proceedings, LaPrade claimed gender 
discrimination under Title VII and New York state law, and 
denial of equal pay under New York state law and the 
Federal Equal Pay Act, as well as common law defamation 
and fraud.  The arbitration panel conducted seven pre-
hearing conferences and 67 hearing sessions from November 
1994 to May 1999.  In October 1999, the arbitration panel 
dismissed LaPrade's statutory claims for discrimination un-
der New York and federal law, but granted her injunctive 
relief with respect to her Form U-5 and ordered Kidder 
Peabody to pay her $65,000.00.4  The panel decision stated 
that "all other claims not specifically addressed ... are 
denied in their entirety, including defamation and fraud."  In 
addition, while ordering that "[e]ach party shall be responsi-
ble for its own attorneys' fees and other costs related to this 
arbitration," the arbitration panel assessed forum fees, total-

__________
     4  After LaPrade left the firm, Kidder Peabody filed a Uniform 
Termination Notice for Securities Industry Registration, or "Form 
U-5," stating that "[d]uring the course of an inquiry by firm 
personnel, Ms. LaPrade initially provided information which the 
firm believed to be inaccurate (inadvertently, by her account), which 
she subsequently clarified.  She was then permitted to resign."  See 
15 U.S.C. s 78o-5 (1994 & Supp. V 1999);  15 U.S.C. s 78ff(a) 
(1994);  17 C.F.R. s 400.4 (2000).  As part of the relief ordered by 
the arbitration panel, Kidder Peabody was ordered to revise the 
explanation section of the Form U-5 to read:  "During the course of 
an inquiry by firm personnel, Ms. LaPrade offered to provide her 
cooperation and information if the firm agreed to permit her to 
resign, and the firm agreed."

ing $69,800.00, save 12%, against Kidder Peabody.  See 
NASD Code of Arbitration Procedure Rule 10205(c).  Thus, 
LaPrade was ordered to pay 12%, or $8,376.00.5

     Kidder Peabody returned to the district court, filing a 
motion to lift the stay and confirm the arbitration award.  
LaPrade filed a cross motion to vacate the arbitration award 
insofar as it directed her to pay $8,376.00 in forum fees.  The 
district court confirmed the arbitration award.  Concluding 
that the law regarding the assessment and allocation of 
arbitral forum fees was neither "well defined, explicit, [nor] 
clearly applicable" to her case, the district court rejected 
LaPrade's argument that the arbitration panel had acted in 
manifest disregard of the governing law in this circuit in 
assessing and allocating arbitral fees.  In the district court's 
view Cole was not dispositive, and it followed Sobol v. Kidder, 
Peabody & Co., Inc., 49 F. Supp. 2d 208 (S.D.N.Y. 1999).  In 
Sobol the court distinguished Cole and ruled that assessment 
against a former employee of half of the arbitral forum fees 
neither offended public policy nor discouraged arbitration 
because NASD rules authorized the sharing of expenses and 
arbitration is generally less expensive than traditional litiga-
tion in court.  Id. at 224.  Finally, noting the scope of 
permissible fees identified in Cole, the district court found 
that LaPrade had not demonstrated that the panel's award 
lacked colorable support in the record.

                               II.

     It is well settled that a court's review of an arbitration 
award is limited.  In addition to the limited statutory grounds 

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     5  The arbitration panel assessed forum fees for six pre-hearing 
conferences at $300.00 each, one pre-hearing conference with the 
full panel at $1,000.00, and 67 hearing sessions at $1,000.00 per 
session.  See NASD Code of Arbitration Procedure Rule 10205(k) 
(schedule of fees).  Deducting the balances previously deposited, 
the panel directed LaPrade to pay $6,776.00, and Kidder Peabody 
to pay $50,824.00.  The assessment against LaPrade was indepen-
dent of the $250.00 non-refundable filing fee that she had previously 
paid;  the panel ordered that the filing fee be retained by NASD.

on which an arbitration award may be vacated,6 "arbitration 
awards can be vacated [only] if they are in 'manifest disre-
gard of the law,' " Cole, 105 F.3d at 1486 (quoting First 
Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 942 (1995)), 
or "if they are contrary to 'some explicit public policy' that is 
'well defined and dominant' and ascertained 'by reference to 
the laws or legal precedents.' "  Id. (quoting United Paper-
works Int'l Union v. Misco, Inc., 484 U.S. 29, 43 (1987)).  
Manifest disregard of the law "means more than error or 
misunderstanding with respect to the law."  Kanuth v. Pres-
cott, Ball & Turben, Inc., 949 F.2d 1175, 1178 (D.C. Cir. 1991) 
(citing Sargent v. Paine Webber Jackson & Curtis, Inc., 882 
F.2d 529, 532 (D.C. Cir. 1989)).  Consequently,

     to modify or vacate an award on this ground, a court 
     must find that (1) the arbitrators knew of a governing 
     legal principle yet refused to apply it or ignored it 
     altogether and (2) the law ignored by the arbitrators was 
     well defined, explicit, and clearly applicable to the case.
     
DiRussa v. Dean Witter Reynolds, Inc., 121 F.3d 818, 821 (2d 
Cir. 1997) (quotations omitted);  see also Glennon v. Dean 
Witter Reynolds, Inc., 83 F.3d 132, 136 (6th Cir. 1996).

     As the party seeking to vacate or otherwise modify the 
arbitration award, LaPrade bears the burden of demonstrat-
ing that the arbitration panel acted in manifest disregard of 
the law.  See Al-Harbi v. Citibank, N.A., 85 F.3d 680, 683 

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     6  Under the Federal Arbitration Act, 9 U.S.C. s 10 (1994), an 
arbitration award may be vacated where:

     (1) the award was procured by corruption, fraud, or undue 
     means;  (2) there was evident partiality or corruption in the 
     arbitrators, or either of them;  (3) the arbitrators were guilty of 
     misconduct in refusing to postpone the hearing, upon sufficient 
     cause shown, or in refusing to hear evidence pertinent and 
     material to the controversy;  or of any other misbehavior by 
     which the rights of any party have been prejudiced;  or (4) the 
     arbitrators exceeded their powers, or so imperfectly executed 
     them that a mutual, final, and definite award upon the subject 
     matter submitted was not made.
     
LaPrade makes no claim of such error here.

(D.C. Cir. 1996);  DiRussa, 121 F.3d at 825;  cf. Green Tree 
Fin. Corp. v. Randolph, 531 U.S. 79, ----, 121 S.Ct. 513, 522 
(Dec. 11, 2000);  Gilmer v. Interstate/Johnson Lane Corp., 500 
U.S. 20, 26 (1991).  Our review of the district court's factual 
findings in the order confirming the arbitration award is for 
clear error, while the court reviews questions of law de novo.  
See First Options, 514 U.S. at 947-48.

     In Gilmer, the Supreme Court held that federal statutory 
claims alleging age discrimination in employment could be 
subjected to compulsory arbitration pursuant to an arbitra-
tion agreement that an employee was required to sign as a 
condition of employment.  See Gilmer, 500 U.S. at 23.  Sub-
sequently, in Cole, this court was confronted with the ques-
tion "can an employer condition employment on acceptance of 
an arbitration agreement that requires the employee to sub-
mit his or her statutory claims to arbitration and then re-
quires the employee to pay all or part of the arbitrators' 
fees?"  Cole, 105 F.3d at 1483.  The district court had dis-
missed Cole's complaint alleging claims under Title VII and 
compelled arbitration pursuant to the parties' agreement.  Id. 
at 1467.  This court upheld the arbitration agreement.  Id. at 
1485.  But reasoning, in reliance on Gilmer, that there was no 
reason to conclude that the Supreme Court would have 
approved mandatory arbitration where the employee had to 
pay the cost of the arbitrator's services, id. at 1484, the court 
also concluded that "Cole could not be required to agree to 
arbitrate his public law claims as a condition of employment if 
the arbitration agreement required him to pay all or part of 
the arbitrator's fees or expenses."  Id. at 1485.  The court 
noted that the arbitration agreement executed by Cole did 
not explicitly address the issue and merely incorporated the 
American Arbitration Association rules, which were silent on 
the question of which party should bear the arbitrator's fees 
and expenses.  Id.  Thus, to uphold the validity of the 
parties' contract, the court interpreted the arbitration agree-
ment to require the former employer to pay all arbitrators' 
fees in connection with the resolution of Cole's claims.7  Id. at 
1486.

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     7  In Cole, the court defined "arbitrators' fees"

     Contrary to LaPrade's contention that the assessment of 
arbitral forum fees contravenes Cole, Cole does not bar the 
assessment of all forum fees against an employee.  In Cole 
the court explained that an employee who executed a compul-
sory arbitration provision as a condition of employment could 
be "required to assume the [reasonable] costs of filing fees 
and other administrative expenses" arising from arbitration of 
statutory claims because "parties appearing in federal court" 
may likewise be required to pay such costs.  Id. at 1484.  
Other than by misinterpreting Cole to afford her a right to 
arbitration as a virtually cost-free alternative to traditional 
court proceedings, LaPrade makes no claim that the panel 
otherwise lacked authority to assess and allocate forum fees.  
LaPrade nonetheless contends that the district court erred in 
confirming the arbitral award because the assessment of 
forum fees violates public policy by burdening the assertion of 
her federal statutory right to be free from gender discrimina-
tion.  Unfortunately for LaPrade, she has not met her burden 
of demonstrating that the arbitration panel acted in manifest 
disregard of the law or in violation of public policy.  See Al-
Harbi, 85 F.3d at 683;  DiRussa, 121 F.3d at 825;  cf. Green 
Tree, 121 S.Ct. at 522;  Gilmer, 500 U.S. at 26.

     First, LaPrade makes no showing that the arbitration 
panel, which was aware of Cole, "refused to apply [Cole] or 
ignored [Cole] altogether."  DiRussa, 121 F.3d at 821;  see 
also Kanuth, 949 F.3d at 1182.  Rather, she relies on the 
unjustified assumption that the forum fees assessed against 
her are the type of costs forbidden by Cole.8  Under the 

__________
     to include not only the arbitrator's honorarium, but also the 
     arbitrator's expenses and any other costs associated with the 
     arbitrator's services.
     
105 F.3d at 1484 n.15.

     8  At oral argument, LaPrade noted that she paid the $250.00 
filing fee and $5.00 in copying costs, that the parties paid court 
reporter fees, and that the proceedings were conducted on the 
premises of the NASD.  Consequently, LaPrade argued, because 
there were no other costs left to be paid, the forum fees assessed by 
the arbitration panel must be the type prohibited by Cole.

NASD's rules, two of the arbitrators were entitled to compen-
sation in the amount of $200.00 per hearing session while the 
chairperson of the panel was entitled to $275.00 per hearing 
session.9  Therefore, of the $1,000.00 assessed for each hear-
ing session with the full panel, $325.00 cannot be character-
ized as arbitrators' compensation.  LaPrade's assessment, in 
turn, appears to be well below that amount.10

     In any event, there is a substantial possibility that, fully 
consistent with Cole, the entire assessment against LaPrade 
covers only the costs associated with her non-statutory 
claims.  Given the lengthy nature of the parties' proceedings, 
spanning six years and involving 74 arbitral sessions, it is 
reasonable to conclude, as Kidder Peabody suggests, that the 
forum fees assessed against LaPrade were attributable to 
arbitration of her non-statutory claims.  LaPrade protests 
that Kidder Peabody's proposed reasonable conclusion is 
speculative, but she has failed to provide an evidentiary basis 
for any alternate conclusion, and it is her burden to do so.  
See Al-Harbi, 85 F.3d at 683;  DiRussa, 121 F.3d at 825;  cf. 
Green Tree, 121 S.Ct. at 522;  Gilmer, 500 U.S. at 26.

     Second, in articulating the " 'liberal federal policy favoring 
arbitration agreements,' " Gilmer, 500 U.S. at 25 (quoting 
Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 
U.S. 1, 24 (1983)), the Supreme Court explained that "so long 
as the prospective litigant effectively may vindicate his or her 
statutory cause of action in the arbitral forum, the [statutory 
right created by Congress] will continue to serve both its 
remedial and deterrent function[s]."  Id. at 28 (citing Mitsu-
bishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 
U.S. 614, 637 (1985)).  While the court in Cole declined to 
read Gilmer "as holding that an arbitration agreement is 

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     9  See NASD Code of Arbitration Procedure Rule IM-10104, at 
http://www.nasdadr.com/arb_code/arb_code#IM_10104 (last updat-
ed March 15, 2001).

     10  Kidder Peabody suggests in its brief that LaPrade's per 
session share of the non-compensation costs ($325.00, or $1,000.00 
minus a total of $675.00) is $113.19, and LaPrade does not contest 
this figure in her reply brief.

enforceable no matter what rights it waives or what burdens 
it imposes," 105 F.3d at 1482, LaPrade has not shown that the 
arbitration panel manifestly disregarded Cole in assessing a 
limited amount of forum fees against her.  LaPrade makes no 
claim that the possibility of a large assessment arising from 
arbitration of her claims prevented her from attempting to 
vindicate her rights.  See Green Tree, 121 S. Ct. at 522.  
Neither does she claim that the arbitration panel failed to 
consider the evidence that she submitted to show she was 
financially unable to pay any assessment.  That evidence 
consisted of her W-2 forms from 1993 through 1998 and a 
single commission statement for January 1999, which the 
arbitration panel might reasonably view as an incomplete 
portrait of her financial resources.  Because LaPrade has not 
demonstrated that the assessment against her runs afoul of 
the balance of public policies struck in Cole, her effort to have 
the assessment vacated on public policy grounds fails.

     Accordingly, we affirm the district court's order confirming 
the arbitration award.