UNITED STATES COURT OF APPEALS
For the Fifth Circuit
No. 97-10985
ARTHUR H WILLIAMS,
Plaintiff-Counter Defendant-Appellant,
v.
CIGNA FINANCIAL ADVISORS INCORPORATED;
CIGNA INDIVIDUAL FINANCIAL SERVICES;
Defendants-Appellees,
CONNECTICUT GENERAL LIFE INSURANCE COMPANY,
Defendant-Counter Claimant-Appellee.
Appeal from the United States District Court
for the Northern District of Texas
December 6, 1999
Before POLITZ, WIENER and DENNIS, Circuit Judges.
DENNIS, Circuit Judge:
Arthur Williams appeals from the district court’s judgment
confirming an arbitration panel’s award (1) rejecting his claims
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against defendants based on age discrimination and retaliation
under the Age Discrimination in Employment Act of 1967 (ADEA), 29
U.S.C. §§ 621 et seq., and (2) granting defendants’ counterclaim
against Williams holding him liable for and ordering him to pay
$18,945 in satisfaction of his unpaid promissory notes held by one
of the defendants. We affirm.
I. FACTUAL AND PROCEDURAL BACKGROUND
In 1987, Cigna Financial Advisors, Inc. (Cigna) hired Williams
as a Registered Representative (agent) at the age of 58. As a
condition of his employment, Williams registered with the National
Association of Securities Dealers (NASD). In doing so, he signed
a Uniform Application For Securities Industry Registration or
Transfer (U-4 Form) which provided that “any dispute, claim or
controversy that may arise between me and my firm . . . is required
to be arbitrated under the rules, constitutions, or by-laws of the
organizations with which I register.” In 1993, Williams had the
lowest sales of 15 similarly situated agents and owed Cigna $29,613
for advances on future commissions and a loan for the purchase of
a computer.
Larry Phillips, Cigna assistant regional vice-president, and
James Lasater, Cigna regional vice-president, met with Williams on
December 22, 1993. They informed Williams that, because of his
consistently unprofitable performance and growing indebtedness, he
could not continue as an active agent, unless he immediately
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reduced his debt by $18,000. Otherwise, they said he must become
a retired agent. The evidence is in dispute as to whether they
offered Williams the option of becoming a broker instead of
retiring.1 Phillips encouraged Williams to sign a form changing
his status to retired agent effective January 1, 1994. Phillips
stated that if Williams failed to elect one of the options offered,
he would be terminated. Williams said he was not willing to
retire, and he did not accept any of the options offered. The
evidence is in dispute as to whether Williams rejected the offers
at that point or simply left the meeting without indicating whether
he would accept any of them.
Williams filed a complaint with the Equal Employment
Opportunity Commission (EEOC) on January 5, 1994, claiming that he
had been discriminated against in violation of the ADEA. In his
first complaint, Williams alleged that he was given the options of
retiring or resigning during the December 22 meeting with Phillips
and Lasater. When Phillips learned of the EEOC complaint he
requested a meeting with Williams. Williams met with Phillips on
January 12, 1994, in Phillips’s office and surreptitiously recorded
their conversation. The transcript of this conversation covers
some 54 pages. Phillips acknowledged that the transcript
1
Cigna employs three types of agents: (1) active agents
receive an office, administrative support and all fringe benefits,
(2) retired agents receive an office, administrative support and
partial fringe benefits, and (3) brokers do not receive an office,
administrative support, or any fringe benefits.
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accurately reports the discussion. During this conversation,
Phillips and Williams stated their respective positions
repetitively and unyieldingly, but with little rancor. Phillips
maintained that Williams’s abysmal sales record and heavy
indebtedness to the company, and not his age, had brought about the
decision to terminate him from active agent status. Phillips told
Williams that to continue as an active agent he had to pay $18,000
on his company debt of approximately $30,000 immediately and pay an
additional $500 each month until his sales commissions increased
enough to cover his operating and office expenses. Williams said
that he thought he was being discriminated against because of his
age. He expressed his willingness to pay his debt and to work to
increase his sales. But he contended that he could not do so
unless he continued as an active agent with the full support of the
organization.
Phillips, in effect, said that the company had gone as far as
it was willing to go; that to allow Williams to maintain active
status would add to organizational expenses and increase Williams’s
debt with little prospect of a dramatic increase in his sales. In
response to Williams’s question, Phillips said it would be
acceptable for Williams to borrow $18,000 from a third person in
order to stay in active agent status with the organization. But
Williams did not pursue that idea. Instead, he said, “Well, I
don’t have anything that I can say to you that I’m going to do or
not going to do. I just want the opportunity to serve my clients
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and to make money.” At that point Phillips asked what Williams
planned to do about “this discrimination thing.” Williams said he
did not plan to stop it but to let it run its course. Phillips
responded, “Okay. What I want you to do is I want you to get all
your stuff and move all your stuff out of the office, okay, ASAP.”
When Williams asked, “Are you kicking me out?”, Phillips replied,
“Yeah. I have been planning to kick you out for about three
weeks.”
Phillips explained to Williams that as an active agent he had
been the lowest producer the previous year, that other active
agents who failed to meet production requirements were paying $500
per month, that none of them owed the company nearly as much as
Williams did, and that he did not believe Williams could pay $500
per month; but, Phillips ended up saying, “pay me and you can stay
. . . if you come clean with this deal, you pay me off, we got a
different deal. If not, leave. All I want is my money.” Phillips
refused Williams’s request that he be allowed to take his client
files, because under the agreement Williams signed the files were
CIGNA property. When Williams asked what would happen if he
continued to come into the CIGNA office and try to do business,
Phillips told him that he and his belongings would be moved out.
On January 13, 1994, Williams filed a retaliation complaint
with the EEOC. On January 14, 1994, Williams recorded a shorter
meeting he had with Phillips. Phillips asked Williams, “Have you
thought . . . of anything that you would like to get out of it that
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would cause you to drop the charge?” Williams replied, “Nothing at
the moment . . . .” Phillips agreed to give Williams assistance in
packing his property into a truck, to forward his mail and phone
calls, and to let him have access to his office during regular
hours for a period of time to tend to clients he was still seeing.
Phillips added, “We’ll do everything that we can to help you,
Arthur. I just, for the life of me, I cannot understand why you
would go down there and file that suit and put yourself through
this.”***”Because you wouldn’t have gone through this if you
wouldn’t have filed that suit.” Williams complained about not
being permitted to take his client files because of the CIGNA rules
that provided the client files were company property. Phillips
said, “Well, you can start changing these rules now. I mean, if
you want to negotiate some deal, you can start changing this stuff.
You know, as long as you got that grievance hanging over our head,
we are just going right down the policy line . . . . the ball is in
your court.”
The transcripts of Williams’s recordings of the two meetings
do not indicate that he ever offered a concrete proposal for
repayment of any of his debt or that he ever stated that he would
sign a retirement agreement.
Williams obtained an EEOC right to sue letter and brought suit
against Cigna in state court for age discrimination in violation of
the ADEA and the Texas Commission on Human Rights Act of 1983, and
for unlawful retaliation in violation of the ADEA. Cigna removed
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the case to federal court and obtained a stay pending arbitration.
The district court denied Cigna’s motion but on appeal, a prior
panel of this court reversed and remanded for entry of a stay. See
Williams v. Cigna Financial Advisors, Inc., 56 F.3d 656, 658 (5th
Cir. 1995) (holding that the dispute was arbitrable under the
arbitration agreement in the U-4 Form signed by Williams).
Williams submitted his claims to an arbitration panel pursuant to
NASD regulations. Cigna filed a counter claim based on Williams’s
debt to the company. Following the hearing, the arbitration panel
issued a written award denying Williams’s ADEA claims and awarding
Cigna $18,945 on its counterclaim. The panel’s written opinion
fully states the issues submitted and the conclusions reached, but
it gives no rationale or reasons for the decision.
Williams moved the district court to vacate the arbitration
award, and the defendants moved to have it confirmed. In its
memorandum opinion and order the district court assigned reasons
for its rejection of some of Williams’s arguments, viz., that the
arbitration award should be vacated because the panel did not give
reasons for its decision, that Williams was denied adequate
discovery or a continuance, and that the arbitrators were not
sufficiently qualified. The district court rejected Williams’s
other arguments without assigning specific reasons. After the
district court entered a final judgment, Williams appealed.
II. STANDARD OF REVIEW
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Under the FAA, review of a district court decision confirming
an arbitration award on the ground that the parties agreed to
submit their dispute to arbitration proceeds like review of any
other district court decision finding an agreement between parties,
e.g., accepting findings of fact that are not “clearly erroneous”
but deciding questions of law de novo. See First Options of
Chicago, Inc. v. Kaplan, 514 U.S. 938, 948, 115 S. Ct. 1920, 131
L.Ed.2d 985 (1995); Gateway Technologies, Inc. v. MCI
Telecommunications Corp., 64 F.3d 993, 996 (5th Cir. 1995).
Because a party who has not agreed to arbitrate normally has
a right to seek a court’s decision on the merits of his or her
dispute with another person, the party’s agreement to arbitrate
that matter under the FAA is a relinquishment of much of that
right’s practical value. See First Options, 514 U.S. at 942. “The
party still can ask a court to review the arbitrator’s decision,
but the court will set that decision aside only in very unusual
circumstances. See, e.g., 9 U.S.C. § 10 (award procured by
corruption, fraud, or undue means; arbitrator exceeded his powers);
Wilko v. Swan, 346 U.S. 427, 436-437[](1953)(parties bound by
arbitrator’s decision not in ‘manifest disregard’ of the law)[.]”
First Options, 514 U.S. at 942 (noting that Wilko was overruled on
other grounds by Rodriguiz de Quijas v. Shearson/American Express,
Inc., 490 U.S. 477, 109 S. Ct. 1917, 104 L.Ed.2d 526 (1989)).
Before First Options, the state and federal courts had begun
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to recognize nonstatutory standards of judicial review of
challenged arbitral awards under the Labor Management Relations Act
(LMRA) and the FAA, relying on the statements of the Supreme Court
in Wilko, 346 U.S. at 436-37 (award valid if not in “manifest
disregard” of the law), and United Steelworkers of America v.
Enterprise Wheel & Car Corp., 363 U.S. 593, 597, 80 S. Ct. 1358, 4
L.Ed.2d 1424 (1960)(award legitimate if “it draws its essence from
the collective bargaining agreement.”). GABRIEL M. WILNER, 1 DOMKE ON
COMMERCIAL ARBITRATION § 34:01, at 2 (Rev. ed. 1998). Most state and
federal courts recognized one or more nonstatutory grounds
warranting vacatur of an arbitral award, including: (1) the
arbitrator’s manifest disregard of the law; (2) the award’s
conflict with a strong public policy; (3) the award being arbitrary
and capricious; (4) the award being completely irrational; or (5)
the award’s failure to draw its essence from the underlying
contract. Id. § 34:07, at 14.
Panels of this circuit have recognized at least three of these
nonstatutory grounds for vacatur of arbitration awards in LMRA and
FAA cases: (1) Award contrary to public policy. See Exxon Corp. v.
Baton Rouge Oil and Chemical Workers, 77 F.3d 850, 853 (5th Cir.
1996); Gulf Coast Industrial Workers Union v. Exxon Co., U.S.A.,
991 F.2d 244, 248-55 (5th Cir.) (citing United Paperworkers
International Union v. Misco, Inc., 484 U.S. 29, 43, 108 S. Ct.
364, 98 L.Ed.2d 286 (1987)), cert. denied, 510 U.S. 965, 114 S. Ct.
441, 126 L.Ed.2d 375 (1993). (2) Arbitrary and capricious award.
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See Manville Forest Products Corp. v. United Paperworks
International Union, 831 F.2d 72, 74 (5th Cir. 1987); Safeway Stores
v. American Bakery and Confectionary Workers, Local 111, 390 F.2d
79, 82 (5th Cir. 1968). (3) Award’s failure to draw its essence
from underlying contract. See Nauru Phosphate Royalties, Inc. v.
Drago Daic Interests, Inc., 138 F.3d 160, 164 (5th Cir. 1998); Exxon
Corp. v. Baton Rouge O.C.W., 77 F.3d 850, 853 (5th Cir. 1996);
Executone Information Systems, Inc. v. Davis, 26 F.3d 1314, 1324
(5th Cir. 1994)(citing United Steelworkers of America v. Enterprise
Wheel & Car Corp., 363 U.S. 593, 597, 80 S. Ct. 1358, 1361, 4
L.Ed.2d 1424 (1960)); Anderman/Smith Operating Co. v. Tennessee Gas
Pipeline Co., 918 F.2d 1215, 1218 (5th Cir. 1990).
Prior to the Supreme Court’s decision in First Options, two
panels of this circuit declined to recognize the manifest disregard
standard in FAA cases involving commercial contract disputes
between security brokers and investors. See McIlroy v. PaineWebber
Inc., 989 F.2d 817 (5th Cir. 1993); R.M. Perez & Associates, Inc.
v. Welch, 960 F.2d 534 (5th Cir. 1992). In a third FAA case pre-
dating First Options, involving a commercial dispute between
parties to an oil purchase contract, a panel of this court stated
in dictum that judicial review of a commercial arbitration award is
limited to sections 10 and 11 of the FAA. See Forsythe
International, S.A. v. Gibbs Oil Co., 915 F.2d 1017, 1019 (5th Cir.
1990). The panel did not consider or decline to recognize a
nonstatutory basis for vacatur, because the district court had
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vacated and remanded the arbitration award for fraud and misconduct
solely on FAA statutory grounds.
Consequently, this is the first case in which we consider
recognition of the manifest disregard of the law standard in
reviewing the compulsory arbitration of an employee’s federal
statutory employment rights claim under the FAA based on the
employee’s non-collective bargaining agreement to arbitrate as a
pre-condition of his employment. And it is the first time we have
considered whether to apply the manifest disregard standard since
it was approved by the Supreme Court in First Options.
This case involves a claim under the ADEA, but our decision
will have implications for the review of arbitration claims under
the FAA involving Title VII of the Civil Rights Act of 1964 (Title
VII) and other federal employment rights statutes. Employees, as
individuals, are protected by a wide variety of rights created by
federal statutes. See IAN R. MACNEIL ET AL., 2 FEDERAL ARBITRATION LAW §
16.5.1.1, at 16:76. These include Title VII, which protects
individuals against discrimination in employment and seeks to
assure equal employment opportunities; the Fair Labor Standards Act
(FLSA), which provides employees with a judicial remedy in the
federal courts to enforce the statutory right to minimum wages and
overtime pay claims against employers; and the ADEA, which protects
employees 40 years of age or older who are fired or discriminated
against because of age. The ADEA has been called a “hybrid”
between Title VII and the FLSA, because it draws upon Title VII for
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its substantive provisions and upon the FLSA for its remedial
scheme. Id.; see Comment, The Arbitrability of ADEA Claims: Toward
an Epistemology of Congressional Silence, 23 COLUM. J.L. & SOC. PROBS.
67, 74-83 (1989).
Williams and his amici argue that we should recognize that an
arbitrator’s award under the FAA compulsorily adjudicating an
individual employee’s federal statutory employment claim may be
vacated for manifest disregard of the law because of First Options’
approval of the standard for use in all FAA cases, and because
Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 111 S. Ct.
1647, 114 L.Ed.2d 26 (1991) and its progeny require judicial
scrutiny of arbitration awards under the FAA involving ADEA and
Title VII claims sufficient to ensure that arbitrators comply with
the requirements of those federal employment anti-discrimination
statutes. We agree.
In our opinion, clear approval of the “manifest disregard” of
the law standard in the review of arbitration awards under the FAA
was signaled by the Supreme Court’s statement in First Options that
“parties [are] bound by [an] arbitrator’s decision not in ‘manifest
disregard’ of the law.” First Options, 514 U.S. at 942. Accord
Montes v. Shearson Lehman Brothers, Inc., 128 F.3d 1456, 1459 (11th
Cir. 1997); Barnes v. Logan, 122 F.3d 820 (9th Cir. 1997), cert.
denied, 118 S. Ct. 1385 (1998); Cole v. Burns International
Security Services, 105 F.3d 1465, 1486 (D.C. Cir. 1997); M & C
Corp. v. Erwin Behr GmbH & Co., KG, 87 F.3d 844 (6th Cir. 1996); see
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IAN R. MACNEIL ET AL., 4 FEDERAL ARBITRATION LAW § 40.7.1, at 40:43 (Supp.
1999)(First Options “giv[es] the Supreme Court’s seal of approval
to manifest disregard doctrine[.]”). Even before First Options,
many circuits had adopted the manifest disregard of law standard in
reviewing arbitration awards under the FAA. See United
Transportation Union Local 1589 v. Suburban Transit Corp., 51 F.3d
376 (3d Cir. 1995); Remmey v. PaineWebber, Inc., 32 F.3d 143 (4th
Cir. 1994), cert. denied, 513 U.S. 1112, 115 S. Ct. 903, 130
L.Ed.2d 786 (1995); Lee v. Chica, 983 F.2d 883 (8th Cir.), cert.
denied, 510 U.S. 906, 114 S.Ct. 287, 126 L.Ed.2d 237 (1993); Health
Services Management Corp. v. Hughes, 975 F.2d 1253 (7th Cir. 1992);
Advest, Inc. v. McCarthy, 914 F.2d 6 (1st Cir. 1990); Jenkins v.
Prudential-Bache Securities, Inc., 847 F.2d 631 (10th Cir. 1988);
Merrill Lynch, Pierce, Fenner & Smith v. Bobker, 808 F.2d 930 (2d
Cir. 1986); Bender v. Smith Barney, Harris Upham & Co., 901 F.
Supp. 863 (D.N.J. 1994), aff’d, 67 F.3d 291 (3d Cir. 1995).
Accordingly, each of the other numbered federal circuit courts and
the D.C. Circuit have recognized manifest disregard of the law as
either an implicit or nonstatutory ground for vacatur under the
FAA. See MACNEIL, supra, § 40.7.2.1.
Prior to Gilmer, three courts of appeals had barred the
enforcement of agreements in individual employment contracts
subject to the FAA to arbitrate Title VII claims. See Alford v.
Dean Witter Reynolds, Inc., 905 F.2d 104 (5th Cir. 1990), vacated,
500 U.S. 930, 111 S. Ct. 2050, 114 L.Ed.2d 456 (1991); Utley v.
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Goldman, Sachs & Co., 883 F.2d 184 (1st Cir. 1989), cert. denied,
493 U.S. 1045, 110 S. Ct. 842, 107 L.Ed.2d 836 (1990); Swenson v.
Management Recruiters International, Inc., 858 F.2d 1304 (8th Cir.),
cert. denied, 493 U.S. 848, 110 S. Ct. 143, 107 L.Ed.2d 102 (1989).
One court of appeal and a majority of district courts that had
addressed the issue had held that ADEA claims between private
employees and employers are nonarbitrable under the FAA. See
Nicholson v. CPC International, Inc., 877 F.2d 221, 333 (3rd Cir.
1989); see G. Richard Shell, ERISA and other Federal Employment
Statutes: When Is Commercial Arbitration an “Adequate Substitute”
for the Courts?, 68 TEX. L. REV. 509, 571 n.447 (1990). The
reasoning of these courts and scholarly commentators of the same
view may be paraphrased as follows: The antidiscrimination purpose
of Title VII and ADEA and the statutes’ focus on providing both
individual remedies and mechanisms for institutional reform suggest
that private arbitration of claims will conflict with the statutory
goals. Commercial arbitration is focused too narrowly on specific
transactions to give effect to the institutional goals of the
legislation. Industry customs and norms that inform commercial
arbitral decision making may be infected with the very biases the
statutes were enacted to overcome. This possibility argues
strongly for the adjudication of claims under Title VII and the
ADEA by the courts or an independent government tribunal.
“Finally, cases brought under the [statutes] are not purely
economic in nature. Rather they involve questions of personal
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dignity and worth that are precisely the kinds of ‘core value’
questions that should be reserved for a court. It is thus not
stretching too far to assume that Congress meant to forbid private
arbitration of [Title VII and ADEA] discrimination claims under the
FAA.” Shell, supra, at 568-70, 571-72; see Comment, supra, at 109-
12, 113-14.
In Gilmer, however, the Supreme Court rejected arguments based
on these reasons in holding that an employee’s ADEA claim can be
subjected to compulsory arbitration under the FAA pursuant to a
non-collective bargaining agreement to arbitrate signed by the
employee as a pre-condition of his employment. The Court agreed
that the ADEA is designed not only to address individual
grievances, but also to further important social policies. But,
the Court reasoned, the Sherman Act, the Securities Exchange Act of
1934, the Racketeer Influenced and Corrupt Organizations Act
(RICO), and the Securities Act of 1933 all are designed to advance
important public policies, and the Court had already held that
claims under them are appropriate for arbitration. Gilmer, 500
U.S. at 27.
Further, the Court based its decision on three crucial
assumptions or predictions: (1)”’[b]y agreeing to arbitrate a
statutory claim, a party does not forgo the substantive rights
afforded by the statute; it only submits to their resolution in an
arbitral, rather than a judicial, forum.’” Id. at 25 (quoting
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S.
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614, 628, 105 S. Ct. 3346, 87 L.Ed.2d 444 (1985)); (2) “‘[S]o long
as the prospective litigant 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 27
(quoting Mitsubishi, 473 U.S. at 628); and (3) “‘although judicial
scrutiny of arbitration awards necessarily is limited, such review
is sufficient to ensure that arbitrators comply with the
requirements of the statute’ at issue.” Id. at 32 n.4 (quoting
Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 232, 107
S. Ct. 2332, 96 L.Ed.2d 185 (1987)).
Following the Gilmer reasoning, most of the courts of appeals
have concluded that individual Title VII claims can be subjected to
compulsory arbitration under employees’ non-collective bargaining
agreements to arbitrate pursuant to the FAA. See Seus v. John
Nuveen & Co., 146 F.3d 175 (3d Cir. 1998), cert. denied, 119 S. Ct.
1028 (1999); Patterson v. Tenet Healthcare, Inc., 113 F.3d 832 (8th
Cir. 1997); Cole v. Burns International Security Services, 105 F.3d
1465 (D.C. Cir. 1997); Metz v. Merrill Lynch, Pierce, Fenner &
Smith, Inc., 39 F.3d 1482 (10th Cir. 1994); Bender v. A.G. Edwards
& Sons, Inc., 971 F.2d 698 (11th Cir. 1992); Willis v. Dean Witter
Reynolds, Inc., 948 F.2d 305 (6th Cir. 1991); Alford v. Dean Witter
Reynolds, Inc., 939 F.2d 229 (5th Cir. 1991). The Ninth Circuit has
held, however, that Congress in the Civil Rights Act of 1991
intended to preclude the arbitration of Title VII and, perhaps,
other civil rights claims. See Duffield v. Robertson Stephens &
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Co., 144 F.3d 1182 (9th Cir.), cert. denied, 119 S. Ct. 465 (1998).
The Supreme Court’s assumptions and predictions in Gilmer
assign heavy responsibilities to arbitrators and the federal
courts. Arbitrators have a duty to ensure that, in the prospective
subjection of federal statutory employment rights claims to
compulsory arbitration, employees will not forgo substantive
statutory rights or effective vindication of their statutory causes
of action, and the statutes will continue to serve both their
remedial and deterrent functions. The federal district courts and
courts of appeals are charged with the obligation to exercise
sufficient judicial scrutiny to ensure that arbitrators comply with
their duties and the requirements of the statutes. In other words,
the Gilmer Court anticipated that an employee’s prospective waiver
of the right to a court’s decision about the merits of his or her
future ADEA or Title VII disputes would not have the effect that it
does in ordinary commercial arbitration–“relinquishment [of] much
of that right’s practical value.” First Options, 514 U.S. at 942.
Accordingly, the judicial review of arbitral adjudication of
federal statutory employment rights under the FAA and the “manifest
disregard of the law” standard “‘must be sufficient to ensure that
arbitrators comply with the requirements of the statute’ at issue.”
Gilmer, 500 U.S. at 32 n.4 (quoting Shearson/American Express, 482
U.S. at 232); see Cole, 105 F.3d at 1487.
Williams also urges us to recognize and apply another standard
of review, viz., by analogy, the standard adopted by this court in
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Rios v. Reynolds Metals Co., 467 F.2d 54 (5th Cir. 1972), for
reviewing the determination by a district court, in deciding an
employee’s Title VII claim, whether to defer to a prior arbitration
award under a collective bargaining agreement. But the differences
between collective bargaining contract arbitration under the LMRA
and commercial arbitration under the FAA are too great for us to
easily infer that the deferral standard once used with regard to
the former is suitable as a judicial review standard with respect
to the latter. The Supreme Court’s opinions and scholarly
commentary have cogently pointed out the inherent differences in
purpose, structure, and methodology between labor and commercial
arbitration. E.g., Gilmer, 500 U.S. at 33-35; see Shell, supra, at
512 (“The differences between these two arbitration forums run
deep. Scholars have long noted two models of the arbitration
process. Under the first model, arbitration is viewed as a form of
extended negotiation between highly interdependent parties . . . .
Under the second model, arbitration is a cheap and efficient form
of trial for resolving transactional disputes. The second model
requires arbitrators to act as judges.” (footnotes omitted)). In
fact, the disparities are so great that they largely explain the
difference in attitude of the Supreme Court in permitting only
discretionary deference to labor arbitration awards under LMRA
collective bargaining agreements by courts in Title VII actions,
Alexander v. Gardner-Denver Co., 415 U.S. 36, 58, 94 S. Ct. 1011,
39 L.Ed.2d 147 (1974) (rejecting the more stringent deferral
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standard of Rios, 467 F.2d at 58), while allowing ADEA claims to be
subjected to compulsory arbitration under the FAA pursuant to a
prospective pre-employment arbitration agreement. Gilmer, 500 U.S.
at 27; see Shell, supra, at 510-40.
III. DISCUSSION
A. The Abitrators’ Adjudication of the ADEA Claim
The concept of “manifest disregard of the law” has not been
defined by the Supreme Court. The circuits have adopted various
formulations.2 As indicated by our foregoing recognition of the
standard, we agree with the D.C. Circuit that, “in this statutory
context, the ‘manifest disregard of law’ standard must be defined
in light of the bases underlying the Court’s decisions in Gilmer-
type cases.” Cole, 105 F.3d at 1487. Professors MacNeil, Speidel,
2
See, e.g., Advest Inc. v. McCarthy, 914 F.2d 6, 8-9 (1st
Cir. 1990)(“where it is clear from the record that the arbitrator
recognized the applicable law-and then ignored it”); Merrill Lynch,
Pierce, Fenner & Smith, Inc. v. Bobker, 808 F.2d 930, 933-34 (2d
Cir. 1986)(“The error must have been obvious and capable of being
readily and instantly perceived by the average person qualified to
serve as an arbitrator. Moreover, the term ‘disregard’ implies
that the arbitrator appreciates the existence of a clearly
governing legal principle but decides to ignore or pay no attention
to it.” (citations omitted)); Merrill Lynch, Pierce, Fenner &
Smith, Inc. v. Jaros, 70 F.3d 418, 421 (6th Cir. 1995)(“an
arbitration panel does not act in manifest disregard of the law
unless (1) the applicable legal principle is clearly defined and
not subject to reasonable debate; and (2) the arbitrators refused
to heed that legal principle.”); Health Services Management Corp.
v. Hughes, 975 F.2d 1253, 1267 (7th Cir. 1992)(“there must be
something beyond and different from mere error in law or failure on
the part of the arbitrators to understand or apply the law; it must
be demonstrated that the majority of arbitrators deliberately
disregarded what they knew to be the law in order to reach the
result they did.”).
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and Stipanowich have made a “modest proposal” that should prove
helpful as a basis for articulating and applying the manifest
disregard doctrine in the present context:
First, where on the basis of the information available
to the court it is not manifest that the arbitrators
acted contrary to the applicable law, the award should be
upheld.
Second, where on the basis of the information available
to the court it is manifest that the arbitrators acted
contrary to the applicable law, the award should be
upheld unless it would result in significant injustice,
taking into account all the circumstances of the case,
including powers of arbitrators to judge norms
appropriate to the relations between the parties.
MACNEIL, supra, § 40.7.2.6, at 40:95 (footnote omitted).
On the information available to us in the present case, which
includes a verbatim transcript of the proceedings, we conclude that
it is not manifest that the arbitrators acted contrary to the
applicable law in rejecting Williams’s ADEA age discrimination and
retaliation claims. Consequently, in this case, we need not
undertake the second step of the manifest disregard analysis, which
entails an inquiry into whether the award will result in
significant injustice, that comes into play only when it is
manifest that the arbitrators acted contrary to the applicable law.
The evidence solidly supports a reasonable finding that Cigna
terminated Williams’s active agent status, not because of his age,
but because of his long period of less than cost-effective sales
performance and his burgeoning indebtedness to the company
resulting from his loans against anticipated but unrealized
commissions.
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Nor is it manifest that the arbitrators acted contrary to the
applicable law in rejecting Williams’s retaliation claim.3 While
it is undisputed that Williams’s filing of an EEOC charge
constituted participation in a protected activity, a reasonable
arbitrator could have found that he did not suffer an adverse
employment action and that any disadvantage he suffered was not
causally related to his EEOC claim. At the meeting on December 22,
1993, the Cigna officers told Williams that if he could not reduce
his debt to the company by $18,000 immediately, that he must accept
the company’s offer to allow him to change to retired agent or
broker status before January 1, 1994 or his relationship with Cigna
would be terminated completely. Williams rejected Cigna’s offer of
retired agent or broker status by his failure to accept the offer
before it expired on January 1, 1994 and resulted in his absolute
termination. Because Williams filed his EEOC complaint four days
later on January 5, 1994 there is no evidence of a causal link
between his complaint and his termination.4
3
It is unlawful for an employer to retaliate against an
employee for filing a charge pursuant to the ADEA. 29 U.S.C. §
623(d). To establish a prima facie case of unlawful retaliation,
a plaintiff must show: (1) participation in a protected activity;
(2) an employment action disadvantaging the plaintiff; and (3) a
causal connection between the protected activity and the adverse
employment action. See Holt v. JTM Industries, Inc., 89 F.3d 1224,
1225-26 (5th Cir. 1996), cert. denied, 520 U.S. 1229, 117 S. Ct.
1821, 137 L.Ed.2d 1029 (1997).
4
The after-the-fact remarks by Phillips upon learning of
Williams’s ADEA claim do not evince retaliatory motive or action.
Rather, Phillips’s comments may be read as an expression of his
candid opinion that Williams had been foolish to reject Cigna’s
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Consequently, we conclude that based on the record presented
for our review it is not manifest that the arbitrators acted
contrary to the applicable law and that their award should be
upheld insofar as their rejection of the ADEA discrimination and
retaliation claims are concerned.
B. Private Arbitration Panel “Forum” Fees
Williams alternatively contends that the arbitrators’ order
that he pay $3,150 as his one-half share of the forum fees is
contrary to public policy. In support of this argument, Williams
relies on the D.C. Circuit’s interpretation of Gilmer v.
Interstate\Johnson Lane Corp., 500 U.S. 20 (1991), as holding
implicitly that as a matter of law ADEA claimants may not be forced
to pay any part of arbitrators’ fees and expenses. Cole, 105 F.3d
at 1483-86; accord Shankle v. B-G Maintenance Management of
Colorado, Inc., 163 F.3d 1230, 1235 (10th Cir. 1999). In our
opinion, however, Gilmer does not so clearly imply that no part of
arbitral forum fees may ever be assessed against federal anti-
discrimination claimants, although it plainly indicates that an
arbitral cost allocation scheme may not be used to prevent
offer of retirement status to pursue a groundless discrimination
claim; as requests that Williams drop the ADEA charges; and as
overtures of compromise or settlement of the ADEA claims. The
anti-retaliation provisions of the ADEA are not violated by an
employer’s reasonable defensive measures, requests to drop charges,
or settlement proposals, unless they harm or disadvantage the
employee. See Torres v. Pisano, 116 F.3d 625, 639-40 (2d Cir.),
cert. denied, 118 S. Ct. 563 (1997); Connell v. Bank of Boston, 924
F.2d 1169, 1178-79 (1st Cir.), cert. denied, 501 U.S. 1218, 111 S.
Ct. 2828, 115 L.Ed.2d 997 (1991).
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effective vindication of federal statutory claims. Gilmer, 500
U.S. at 28.
The Supreme Court in Gilmer made it clear that a party
agreeing to arbitrate a federal statutory claim does not forgo the
substantive rights afforded by the statute, and that claims under
federal statutes are appropriate for arbitration so long as the
prospective litigant effectively may vindicate his or her statutory
cause of action in the arbitral forum, and the statute will
continue to serve both its remedial and deterrent function.
Gilmer, 500 U.S. at 26, 28. Gilmer, and the cases upon which it
relies, make clear that whether a federal statutory claim can be
subjected to compulsory arbitration depends upon whether the
particular arbitral forum involved provides an adequate substitute
for a judicial forum in protecting the particular statutory right
at issue. See Shearson/American Express, 482 U.S. at 229; McDonald
v. City of West Branch, 466 U.S. 284, 290, 104 S. Ct. 1799, 80
L.Ed.2d 302 (1984). “In arguing that arbitration is inconsistent
with the ADEA, Gilmer . . . raise[d] a host of challenges to the
adequacy of arbitration procedures.” Gilmer, 500 U.S. at 30. The
Court rejected each of Gilmer’s arguments in whole or in
substantial part because of the particular characteristics of the
NYSE arbitral forum. The NYSE arbitration rules and judicial
review provided adequate protections against biased panels. Id.
The NYSE discovery provisions, which allowed document production,
information requests, depositions, and subpoenas would be adequate
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to allow ADEA claimants a fair opportunity to present claims. Id.
at 31. Although some arbitrators often will not issue written
opinions, the NYSE rules require that all arbitration awards be in
writing. Id. Although arbitration procedures do not provide for
class actions, the NYSE rules do not restrict the types of relief,
allowing arbitrators to fashion equitable relief, and do provide
for collective proceedings. Id. at 32. The Court in Gilmer did
not consider the question of whether an arbitration forum that
requires an ADEA claimant to pay all or part of the arbitrators’
compensation can be an adequate substitute for a judicial forum.
Evidently, Gilmer did not include a complaint about forum fees in
his host of challenges.5 In concluding its disposition of Gilmer’s
challenges to the adequacy of arbitration procedures, however, the
Gilmer Court pointed to some of the basic principles governing the
enforceability of arbitration contracts and procedures: (1)
“arbitration agreements are enforceable ‘save upon such grounds as
exist at law or in equity for the revocation of any contract.’”
Gilmer, 500 U.S. at 33 (citing 9 U.S.C. § 2); (2) “courts should
remain attuned to well-supported claims that the agreement to
arbitrate resulted from the sort of fraud or overwhelming economic
power that would provide grounds ‘for the revocation of any
5
According to the D. C. Circuit, at the time of Gilmer’s
claim, under the NYSE and NASD Rules, it was standard practice in
the securities industry for employers to pay all of the
arbitrators’ fees. See Cole, 105 F.3d at 1483 (citing Daily Lab.
Rep. (BNA) No. 93, at A-3 (May 14, 1996)).
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contract,’” id. (citing Mitsubishi, 473 U.S. at 627); and (3)
“claimed procedural inadequacies [and] claim[s] of unequal
bargaining power [are] best left for resolution in specific cases.”
Id.
Under the NASD regulations in effect at the inception of this
case, a party who files an arbitration claim is required to pay a
non-refundable filing fee and a hearing session deposit “unless
such fee or deposit is specifically waived by the Director of
Arbitration.” NASD CODE OF ARBITRATION PROCEDURE § 10205(a) (Aug.
1996). NASD regulations also direct arbitrators to “determine the
amount chargeable to the parties as forum fees and [] determine who
shall pay such forum fees.” NASD CODE OF ARBITRATION PROCEDURE, supra,
§ 10205(c).
Pursuant to these regulations, Williams paid a non-refundable
filing fee of $500 and a hearing session deposit of $1,500 prior to
the arbitration hearing. The forum fees were calculated at the
rate of $1,500 for each hearing session and $300 for each pre-
hearing conference, for a total cost of $6,300. The arbitration
panel assessed the costs of the forum fees equally between the two
sides and, after subtracting Williams’ $1,500 deposit, determined
that he owed $1,650 for forum fees.
While this case was pending, the SEC on June 29, 1998 approved
a proposed rule change offered by the NASD that abolishes mandatory
NASD arbitration of statutory employment discrimination claims.
See Self Regulatory Organizations; National Association of
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Securities Dealers, Inc.; Order Granting Approval to Proposed Rule
Change Relating to the Arbitration of Employment Discrimination
Claims, 63 Fed. Reg. 35299, 35303 (1998). The rule change became
effective on January 1, 1999. Id.; see Desiderio v. National
Association of Securities Dealers, Inc., 191 F.3d 198, 201 (2d Cir.
1999).
In the present case, Williams has not demonstrated that the
arbitrators’ order that he pay one-half of the forum fees prevented
him from having a full opportunity to vindicate his claims
effectively or prevented the arbitration proceedings from affording
him an adequate substitute for a federal judicial forum. The
evidence in this case does not indicate that Williams is unable to
pay one-half of the forum fees or that they are prohibitively
expensive for him. Cf. Shankle, 163 F.3d at 1230 (plaintiff “could
not afford such a fee”); Cole, 105 F.3d at 1484 (fees“prohibitively
expensive for an employee like Cole”). In the arbitration hearing
on October 16, 1996 Williams testified that he was making more
money than he did at Cigna and his “income so far this year is
excess of six figures.” There is no evidence that the prospect of
incurring forum fees hampered or discouraged Williams in the
prosecution of his claim. Because of NASD’s rule change abolishing
mandatory arbitration of statutory employment discrimination
claims, such causes of action arising after January 1, 1999 may be
filed in the appropriate state or federal court. Consequently, the
present case clearly does not call upon us to address the serious
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question of whether the legislative intent of employees’ anti-
discrimination statutes in general is undermined by the effects of
mandatory arbitration and arbitrators’ fees.
IV. CONCLUSION
For the reasons assigned, the judgment of the district court
upholding the arbitrators’ award is AFFIRMED.
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