United States District Court, Northern District of Illinois, Eastern Division
November 23, 1999
ALFREDA SHAW, PLAINTIFF,
DLJ PERSHING, DEFENDANT.
The opinion of the court was delivered by: Lindberg, District Judge.
MEMORANDUM OPINION AND ORDER
Defendant DLJ Pershing (Pershing) has moved pursuant to
Fed.R.Civ.P. 12(b)(1) and (6) to dismiss plaintiff Alfreda Shaw's
amended complaint and to compel arbitration. In her complaint,
Shaw alleged violations of federal civil rights statutes as well
as certain state law claims. Pershing alleges that the employment
agreement the parties entered before Shaw began working for the
company included a provision mandating that all disputes between
employer and employee, including "those concerning compensation,
benefits, or other terms or conditions of employment," be
determined by arbitration. The Seventh Circuit recently held that
"mandatory arbitration"*fn1 provisions in otherwise valid
employment contracts can be applied to Title VII claims.
Koveleskie v. SBC Capital Markets, Inc., 167 F.3d 361, 364 (7th
Cir. 1999). Pershing claims that because the employment agreement
between it and Shaw is otherwise valid under Illinois law, the
court should dismiss the complaint with prejudice and compel the
parties to proceed with arbitration.
Plaintiff responds that compelled arbitration is fundamentally
inconsistent with the purposes of the Civil Rights Act of 1866,
under which one of her claims is brought, and that the Seventh
Circuit has not addressed the question of whether such a claim is
subject to mandatory arbitration. 42 U.S.C. § 1981. Because the
legislative history of this statute indicates Congress' intent
that claims brought under it be decided by federal judges
exercising federal jurisdiction, plaintiff maintains that
mandatory arbitration is inappropriate for § 1981 actions.
An amendment to the Civil Rights Act of 1866 included in the
Civil Rights Act of 1991 (1991 CRA), contained the following
statement regarding alternative dispute resolution:
Where appropriate and to the extent authorized by
law, the use of alternative means of dispute
resolution, including settlement negotiations,
conciliation, facilitation, mediation, fact-finding,
minitrials, and arbitration, is encouraged to resolve
disputes arising under the Acts or provisions of
Federal law amended by this title.
Pub.L. No. 102-1166 § 118, 105 Stat. 1071, 1081 (1991). Plaintiff
argues that when drafting § 118, Congress rejected a version that
would have encouraged the use of ADR "in place of judicial
resolution" because it would "fly in the face of Supreme Court
decisions holding that workers have the right to go to court,
rather than being forced into compulsory arbitration, to resolve
important statutory and constitutional rights." H.R.Rep. No.
102-40, pt. 1, 102nd Cong. 1st Sess. at 104, 1991 U.S.Code Cong.
& Admin.News pp. 549, 642.
When deciding whether Title VII claims could be subject to
mandatory arbitration, the Seventh Circuit also looked to the
language of § 118. It found that the weight of authority
indicated that, in general, arbitration clauses are enforceable
unless: 1) the statute at issue precludes arbitration; 2) the
contract itself is invalid or 3) the particular arbitration
proceedings are inadequate to protect the plaintiff's rights.
Koveleskie, 167 F.3d at 364 (citing Gilmer v.
Interstate/Johnson Lane Corp., 500 U.S. 20, 111 S.Ct. 1647, 114
L.Ed.2d 26 (1991)). Plaintiff's challenge here falls under the
first exception to enforceability. She claims that the phrase "to
the extent authorized by law" in § 118 requires the court to
refer back to § 1981 itself. Because the legislative history of
that statute indicates that judicial resolution was the only
available procedure, she concludes that mandatory arbitration is
not "authorized by law" for § 1981 claims.
The Seventh Circuit, however, found in Koveleskie that the
language of § 118 "`evinces a clear Congressional intent to
encourage arbitration of Title VII and ADEA claims, not to
preclude such arbitration,' and that, with regard to the
`authorized by law' language of the 1991 CRA, `it seems most
reasonable to read this clause as a reference to the FAA [Federal
Arbitration Act].'" Id. at 365 (quoting Seus v. John Nuveen &
Co., 146 F.3d 175, 183 (3rd Cir. 1998)). Because predispute
arbitration agreements are enforceable under the FAA, such
agreements were therefore enforceable as to Title VII claims.
Considering this interpretation of § 118, which applies to "the
Acts or provisions of Federal law amended by this title," this
court can find no reason that the Seventh Circuit's reasoning in
Koveleskie as to Title VII claims would not apply with equal
force to claims brought pursuant to 42 U.S.C. § 1981, which is
another Act amended by the 1991 CRA. As § 1981 claims are often
brought in conjunction with Title VII claims, this result also
safeguards against multiple proceedings and possibly disparate
outcomes. Plaintiff's assertion that her § 1981 claim escapes the
arbitration provision of her employment contract therefore
Plaintiff's next challenge to arbitration is that the rules
applicable to the security industry have recently been changed to
preclude mandatory arbitration of statutory employment claims.
She maintains that because the employment contract at issue
states that arbitration will be governed by, "among other
things," the rules of the National Association of Securities
Dealers (NASD), which now preclude mandatory arbitration, she
should not be bound by industry standards that have been
discarded. As defendant points
out, however, the provision in the contract provides that any
dispute will be:
determined by arbitration, as authorized by the
arbitration law of the state of New York, under the
auspices and rules of the New York Stock Exchange,
Inc., if available, or if not available, of the
National Association of Securities Dealers, Inc., or
if not available, of the American Arbitration
Because the agreement contemplates alternative rules for
arbitration, the matter may still be governed by the rules of the
American Arbitration Association, which do not preclude
arbitration of statutory employment claims. The court finds,
therefore, that the arbitration provision in plaintiff's
employment contract is valid and enforceable.
ORDERED: The defendant's motion to dismiss and to compel
arbitration is granted.