United States District Court, N.D. Illinois, Eastern Division
December 13, 2005.
BENNIE GILLISPIE, JR., Plaintiff,
VILLAGE OF FRANKLIN PARK, and MICHAEL SERVINI Defendants.
The opinion of the court was delivered by: JEFFERY COLE, Magistrate Judge
MEMORANDUM OPINION AND ORDER
Background Of The Litigation
The plaintiff, an African-American employee of the Village of
Franklin Park's Streets and Sanitation Department, filed a
two-count complaint in January 2002 under 42 U.S.C. § 1983 and
Title VII of the Civil Rights Act, alleging that he was the
victim of racial harassment and discrimination at the workplace.
Gillispie v. Village of Franklin Park, No. 02 C 0148. A year
later, the parties entered into a written settlement agreement,
which provided for binding arbitration of any future employment
dispute arising out of his continued employment with the Village,
including claims of racial discrimination. The agreement provided
that the costs of the arbitration, excluding attorney's fees,
would be borne by the loser.
For a time, all was well. But then in late 2004, Mr. Gillispie
filed a complaint in the district court against the Village and
his supervisor, Michael Servini. An amended complaint followed
alleging that in violation of 42 U.S.C. §§ 1981 and 1983 the defendants
discriminated against him due to his race by subjecting him to a
hostile work environment and by retaliating against him when he
complained about it. The Village has moved to dismiss the amended
complaint, claiming there is no subject matter jurisdiction. The
motion, which cites not a single case, is based on the ipse
dixit that it is "obvious that the claims contained in
plaintiff's complaint . . . are subject to the arbitration
provision contained in the parties' settlement agreement."
(Motion to Dismiss, ¶ 4).*fn1 Mr Gillispie's response is
only slightly less laconic. It relies on a single case, which, as
will be seen, does not begin to answer the questions raised in
Mr. Gillespie's Settlement Of The Earlier Litigation
Paragraph 3 of the settlement agreement provides:
3. In further consideration of the promises made in
this Release, Gillispie agrees to the following
(a) That any dispute or claim concerning his
continued employment with the Village of Franklin
Park, or the terms, conditions, or benefits of such
employment, such as, or similar to but not exclusive
of racial harassment or failure to promote but not
based on race, including whether such dispute or
claim is arbitrable or not,*fn2 will be settled by binding arbitration, including any and
all legal theories that may be applicable, including,
but not limited to statutory violations or causes of
action which may authorize suit for any such
violations, such as or similar to but not necessarily
exclusive of, Title VII of the Civil Rights Equal Pay
Act or the Illinois Human Rights Act, but do not
include dispute involving pensions or worker
compensation claims. The arbitration proceeding
shall be conducted under the rules of the American
Arbitration Association in effect at the time a
written demand for arbitration is made. A copy of
any written demand for arbitration shall also be
served upon the Superintendent of Utilities
Department. A decision and award of the arbitrator
made under the said rules shall be exclusive, final
and binding on both parties, heirs, executors,
administrators, successors and assigns. The costs and
expenses, not inclusive of attorneys' fees, of
arbitration, shall be borne by the party who does not
prevail. (Emphasis supplied).*fn3
Mr. Gillispie does not challenge the aspect of the fee-shifting
provision that awards costs and expenses to the prevailing party.
Nor does he contend that his claims are outside the scope of what
he agreed to arbitrate. Rather, his sole argument is that the
arbitration provision is unenforceable because Paragraph 3
provides in plain and unambiguous language that he could not be
awarded attorney's fees in the arbitration, even if he were to
prevail, whereas he would be eligible for a fee award as the
prevailing party under the Civil Rights Attorneys' Fee Awards Act of 1976 if
the case were heard here.*fn4
This argument rests on a
cramped interpretation of Paragraph 3 and an impermissible
reading of McCaskill v. Management Corporation, 298 F.3d 677
(7th Cir. 2002), the sole case on which he relies.
The Federal Arbitration Act ("FAA") was enacted in 1925 and
then re-enacted and codified as Title 9 of the United States
Code. The purpose of the FAA is "`to reverse the longstanding
judicial hostility to arbitration agreements . . . and to place
them on the same footing as other contracts.'" Green Tree
Financial Corp.-Alabama v. Randolph, 531 U.S. 79, 89 (2000).
This aim requires "`rigorous enforce[ment]'" of agreements to
arbitrate in order to give effect to the contractual rights and
expectations of the parties. Shearson/American Express, Inc. v.
McMahon, 482 U.S. 220, 226 (1987). Consistent with the declared
national policy favoring arbitration, employment discrimination
claims of all kinds are arbitrable, as are other kinds of
statutory violations. See Green Tree Financial Corp.-Alabama,
531 U.S. at 89; Mastrobuono v. Shearson Lehman Hutton, Inc.,
514 U.S. 52, 62 (1995); Gilmer v. Interstate/Johnson Lane
Corp., 500 U.S. 20, 26-35 (1991).*fn5 In Gilmer, which involved a claim under the Age
Discrimination in Employment Act, the Supreme Court held that
there was no reason to treat civil rights statutes any
differently than other important statutes that may be the subject
of enforceable arbitration agreements and stressed that
pre-dispute arbitration clauses should be enforced unless the
plaintiff showed that Congress specifically intended to preclude
arbitration. 500 U.S. at 26. After Gilmer, courts began
routinely to endorse the arbitration of discrimination claims.
See Koveleskie v. SBC Capital Markets, Inc., 167 F.3d 361,
364-65 (7th Cir. 1999) (collecting cases).
The FAA provides for stays of proceedings in the district court
when an issue in the proceeding is referable to arbitration and
for orders compelling arbitration when one party has failed or
refused to comply with an arbitration agreement. 9 U.S.C. §§ 3
and 4. These provisions, the Supreme Court has stressed time and
again, manifest the liberal federal policy favoring arbitration
agreements. See Shearson/American Express, Inc.,
482 U.S. at 226. Any doubts with respect to arbitrability therefore should be
resolved in favor of arbitration. Green Tree Financial Corp. v.
Bazzle, 539 U.S. at 452; James v. McDonald's Corp.,
417 F.3d 672, 677 (7th Cir. 2005).
Although the parties have not addressed the issue, the
threshold question is the applicability of the FAA to their
settlement agreement requiring arbitration of any future
employment discrimination claims. In order for a "written
provision in any . . . contract" providing for the settlement of
future disputes by arbitration to be within the scope of the FAA,
the contract must evidence "a transaction involving commerce."
9 U.S.C. § 2. Contracts of employment, with certain exceptions not
relevant here, are covered by the Act. EEOC v. Waffle House,
534 U.S. 279, 289 (2002); Green Tree Financial Corp.-Alabama v. Randolph, 531 U.S. at 89; Gilmer, 500 U.S. at 26-35;
Koveleskie v. SBC Capital Markets, Inc., 167 F.3d at 364.
Significantly, the plaintiff does not argue that the settlement
agreement is not within the scope of the FAA. Quite apart from
any question of waiver, the settlement agreement evidences a
transaction involving commerce, for it governs "any dispute or
claim concerning [plaintiff's] continued employment with the
Village of Franklin Park or the terms, conditions, or benefits of
such employment." (Emphasis supplied). A contract that settles
a prior federal discrimination suit and that expressly governs
certain aspects of an employee's continued employment with the
employer, if not itself an employment agreement (or at least a
separate component of one), is functionally and analytically
indistinguishable from an employment contract for purposes of the
FAA, since each regulates, to varying degrees, aspects of the
parties' employment relationship. If an employment contract
involves commerce within the meaning of § 2 of the Act as it
does so, too, must the agreement in this case, especially given
the Supreme Court's conclusion that the phrase "involving
commerce," as employed in the FAA, should be given a broad
meaning, extending the federal commerce power "to the full."
Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 112 (2001);
Allied-Bruce Terminix Companies, Inc. v. Dobson, 513 U.S. 265,
277 (1995). Cf. McCaskill, 298 F.3d at 678 (the plaintiff was
required "as a condition of continued employment" to arbitrate
certain disputes).*fn6 The inclusion of a choice of law provision in Mr. Gillispie's
settlement agreement specifying that the agreement shall be
governed by an construed in accordance with the laws of the State
of Illinois (¶ 11) does not mean that the FAA is inapplicable.
Mastrobuono v. Shearson Lehman Hutton, 514 U.S. at 62. Cf.
James v. McDonald's, supra. But even if the Illinois Uniform
Arbitration Act were to control, the analysis and the result
would be no different than under the FAA. The language of the FAA
and the Illinois Uniform Arbitration Act is essentially the same.
See J & K Cement Constr., Inc. v. Montalbano Builders, Inc.,
119 Ill.App.3d 663, 668, 456 N.E.2d 889, 893 (2nd Dist.
1983); Tyco Laboratories, Inc. v. DASI Industries, Inc., No.
92-5712, 1993 WL 356929, *5 (N.D.Ill. Sept. 9, 1993). This is not
surprising as the two statutes have common origins, patterned
after the New York arbitration statute enacted in 1920. Federal
Signal Corp. v. SLC Technologies, Inc., 318 Ill.App.3d 1101,
1111, 743 N.E.2d 1066, 1074 (1st Dist. 2001); J & K Cement,
119 Ill.App.3d at 668, 456 N.E.2d at 893. See also Manos v.
Geissler, 321 F.Supp.2d 588, 591-92 (S.D.N.Y. 2004) (comparing
FAA with New York's similar arbitration provision).
Indeed, the state courts interpreting Illinois' arbitration
statute look for guidance to federal court decisions interpreting
similar provisions of the FAA. See Federal Signal Corp.,
318 Ill.App.3d at 1111, 743 N.E.2d at 1074. Furthermore, the state
policy favoring arbitration mirrors the federal policy favoring
this method of dispute resolution. Transamerica Financial
Resources, Inc. v. Rondini, 189 Ill.App.3d 853, 855,
545 N.E.2d 789, 791 (2nd Dist. 1989). In short, whether the FAA or the
Illinois Uniform Arbitration Act applies, the result would be the
Mr. Gillispie's settlement agreement with the Village provided,
in somewhat inverted language, that the prevailing party in the
arbitration was entitled to the costs and expenses of
arbitration, excluding attorney's fees. At one time, questions
existed regarding the enforceability of an arbitration clause
where the contract of employment contained a cost-shifting
provision. The First, Fifth, and Seventh Circuits had held that a
cost-shifting provision did not automatically render an
arbitration agreement unenforceable. See Rosenberg v. Merrill
Lynch, Pierce, Fenner & Smith, Inc., 170 F.3d 1, 15-16 (1st
Cir. 1999); Williams v. Cigna Fin. Advisors Inc., 197 F.3d 752,
764 (5th Cir. 1999); Koveleskie v. SBC Capital Markets,
Inc., 167 F.3d at 366. The District of Columbia Circuit and the
Tenth Circuit took a different view, refusing to enforce such
agreements on the ground that they effectively denied the Title
VII plaintiff a forum to vindicate his claims. See, e.g., Cole
v. Burns Int'l Sec. Services, 105 F.3d 1465, 1484-85 (D.C. Cir.
1997); Shankle v. B-G Maint. Mgmt. of Colorado, Inc.,
163 F.3d 1230, 1234-35 (10th Cir. 1999). Similarly, the Eleventh
Circuit refused to enforce an arbitration agreement that
potentially imposed "high costs" on the employee, holding that
such an agreement undermines the policies that support Title VII.
Paladino v. Avnet Computer Technologies, Inc., 134 F.3d 1054,
1062 (11th Cir. 1998).
In Green Tree Financial Corp.-Alabama v. Randolph, supra, the
Supreme Court underscored the strong federal preference for
arbitration of disputes, even where arbitration might involve
shifting of arbitration costs or fees. There, the Court rejected
the Eleventh Circuit's conclusion that an arbitration agreement
that is silent as to fees and costs is unenforceable because of
the "risk" that plaintiff might be saddled with prohibitive
arbitration expenses. While acknowledging that, "[i]t may well be
that the existence of large arbitration costs could preclude a
litigant . . . from effectively vindicating her federal statutory rights in the arbitral forum," the Court held that the
potential financial burden on the plaintiff was "too speculative"
to invalidate the arbitration agreement before it.
531 U.S. at 90-91. Significantly, the Court made clear that the party seeking
to avoid arbitration has the burden to show the likelihood of
prohibitive expenses. Unsupported statements regarding the costs
involved are insufficient to sustain that burden. Id. at 91 n.
6. See also James v. McDonald's, 417 F.3d at 679(plaintiff
failed to demonstrate that the expenses she necessarily and
definitely would incur would be prohibitive).
In the instant case, it has not even been suggested that the
cost-shifting provision of Mr. Gillispie's settlement agreement
will preclude him from vindicating those claims. If he prevails
in the arbitration, the validity, vel non, of the
non-prevailing party clause in the parties' arbitration agreement
will be academic. Musnick v. King Motor Co. of Fort Lauderdale,
325 F.3d 1255, 1261 (11th Cir. 2003). If he loses, there will
be time enough to raise the validity, as applied, of the
cost-shifting provisions before the arbitrator. See Carbajal v.
H & R Block Tax Services, Inc., 372 F.3d 903, 905 (7th Cir.
2004) ("the arbitrator rather than the court determines the
validity of these ancillary provisions); Musnick,
325 F.3d at 1261 and id. at n. 7.
We come then to Mr. Gillispie's only argument, which appears to
run this way: Since McCaskill v. Management Corporation,
298 F.3d 677 (7th Cir. 2002) held that where the plain terms of
an agreement requiring arbitration of a federal discrimination
claim clearly prohibit the recovery of attorney's fees, the
arbitration clause in this case must likewise be unenforceable.
The objections to this conclusion are many. Although Mr.
Gillispie ignores what actually occurred in McCaskill and the
Village's response brief ignores the case in its entirety it is
vital to note at the outset that, as the Eleventh Circuit has remarked, the issue of the validity of an arbitration clause that
precludes an award of attorney's fees in arbitration to a
prevailing civil rights plaintiff was not "decid[ed]" in
McCaskill. See Musnick, 325 F.3d at 1259 n. 3. There was no
opinion of the court: all three members of the panel filed
separate opinions on very different grounds.
We begin, as we must, with a consideration of the facts of
McCaskill and the instant case, "at least as an hypothesis to
test the validity of the conclusions. . . ." Douglas v. City of
Jeanette, 319 U.S. 157, 166 (1943) (Jackson, J., dissenting).
After being employed by the defendant for a year, the plaintiff
in McCaskill was required to sign a document, "as a condition
of continued employment," that included an arbitration provision
providing that each party would bear his or her own legal fees
and costs in any ensuing arbitration, "regardless of the outcome
of the arbitration." Each party was also to pay half of the
arbitration costs including the arbitrator's fee.
298 F.3d at 678, 684. When Ms. McCaskill filed a sexual harassment suit in
the district court under 42 U.S.C. § 1981, the court granted a
motion to compel arbitration and dismissed the matter. On appeal,
the issues were reduced to one, namely the attorney's fees clause
in the arbitration agreement. 298 F.3d at 679-80.
For Judge Bauer, the case turned on defense counsel's
concession during oral argument that the arbitration provision
At oral argument, [defendant] conceded that the
agreement is unenforceable if construed to limit
[plaintiff's] ability to recover attorney's fees
(provided she prevails) under Title VII. The
agreement clearly bars the plaintiff's ability to
recover any attorney's fees, and because [defendant]
conceded the agreement is therefore unenforceable, we
need not proceed any further into an examination of
whether Title VII's fee-shifting provisions override
an arbitration agreement. The verbal admission by
SCI's counsel at oral argument is a binding judicial
admission, the same as any other formal concession
made during the course of proceedings. The agreement
prohibits the recovery of attorney's fees in any situation, thus, based on
[defendant's] concession, we find that the
arbitration clause is unenforceable.
298 F.3d at 680 (Citations omitted) (Parenthesis in original)
Judge Rovner concurred in the judgement reversing and remanding
the case, but concluded that the court was not bound to accept
SCI's counsel's concession, even if it were deemed a judicial
admission, which she emphatically disputed. Id. at 681-82. She
went on to conclude that a clause in a contract that precludes an
award of attorney's fees in arbitration deprives the plaintiff of
remedies essential to fulfill the remedial and deterrent
functions of Title VII and thus is unenforceable. Id. at 685.
But Judge Rovner's opinion advocating an automatic rule of
unenforceability was hers alone. Judge Manion wrote separately in
dissent, concluding that the court of appeals lacked jurisdiction
over the appeal.
Judge Rovner conceded that her position was, as she put it,
"recently . . . challenged" in Metro East Center for
Conditioning and Health v. Qwest Communications Internat'l,
Inc., 294 F.3d 924 (7th Cir. 2002). She acknowledged that
Metro East concluded that since plaintiffs may forego
attorney's fees under 42 U.S.C. § 1988 the statutory
authorization for any fee award to Mr. Gillispie employees can
contract away their statutory remedies including the right to
attorney's fees under other statutes. However, she concluded that
attorney's fees under Title VII were not waivable since they were
an integral part of the remedies necessary to obtain compliance
with civil rights laws. But so, too, and no less integral, are
the provisions of 42 U.S.C. § 1988, whose title, "Proceedings in
Vindication of Civil Rights," demonstrates the importance
Congress attributed to it and the purpose Congress sought to
achieve through its enactment. The Supreme Court has made clear that the fees authorized by §
1988 are an integral part of the remedies necessary to obtain
compliance with the civil rights laws. See Evans v. Jeff D.,
475 U.S. 717, 731 (1986); Maine v. Thiboutot, 448 U.S. 1, 9-11
(1980); Dennis v. Higgins, 498 U.S. 439, 464 (1991) (Kennedy,
J., dissenting).*fn7 Like Title VII's built in fee-award
provision, § 1988 authorizes a court, in its discretion, to award
attorney's fees as part of the costs in any action or proceeding
to enforce a provision of §§ 1981-1986 of Title 42 and Title VI
of the Civil Rights Act of 1964 (42 U.S.C. § 2000d, et seq.) or
42 U.S.C. 13981. Both bestow on the prevailing party (generally
plaintiffs) a statutory eligibility for not an automatic
entitlement to an award of attorney's fees. Section 1988,
however, does "not prevent the party from waiving this
eligibility. . . ." Jeff D., 475 U.S. at 730. The statute and
its legislative history nowhere suggest that Congress intended to
forbid all waivers of attorney's fees "even those insisted upon
by a civil rights plaintiff in exchange for some other relief to
which he is indisputably not entitled. . . ." Id. at 731.
Congress expected fee-shifting to attract competent counsel to
represent citizens deprived of their civil rights; "it neither
bestowed fee awards upon attorneys nor render them non-waivable
or non-negotiable. . . ." Id. at 731-32. In fact, the Court
went on, "we believe that a general proscription against
negotiated waiver of attorney's fees in exchange for a settlement
on the merits would itself impede vindication of civil rights, at
least in some cases, by reducing the attractiveness of
settlement." Id. at 732.
It is difficult to identify a principled basis on which to
distinguish Title VII's fee award provision from those in § 1988.
If attorney's fees under § 1988 can be presently waived as part
of the settlement of an extant civil rights case (as in Jeff
D.), it is difficult to identify what principle or interest is
fostered by prohibiting a civil rights plaintiff (like Mr. Gillispie) from
agreeing to waive future fees as a condition of a present
settlement in the event that the parties again become embroiled
in civil rights litigation. Indeed, the arguments for prohibition
are stronger in the former situation than in the latter. In a
case like Mr. Gillispie's, there is a good deal of economic logic
to the hunter's adage that a bird in the hand is worth two in the
bush: In exchange for the immediacy and certainty of a monetary
settlement which may be substantial and to which the plaintiff
indisputably is not entitled the eligibility for a future fee
award in a case that may never come to be is relinquished.
In the instant case, there is no mandatorily imposed blanket
waiver required as a condition of employment the situation that
so troubled Judge Rovner. 298 F.3d at 686.*fn8 Rather, under
the guiding hand of counsel, Mr. Gillispie made a voluntary
decision about his own economic destiny and opted for the
certainty of an immediate, substantial settlement. He cannot now
retain the benefits of his bargain and avoid the consequences of
that volitional choice, especially in the absence of any argument
or showing that it somehow precludes him from vindicating his
rights under §§ 1981 and 1983. Cf. Green Tree Financial
Corp.-Alabama v. Randolph, 531 U.S. at 90; Musnick,
325 F.3d at 1259-60. Thus, even accepting Judge Rovner's concurrence as
Seventh Circuit precedent does not result in an invalidation of
the arbitration clause in this case.
But there is an even more compelling reason it cannot in any
event control this case. Unlike McCaskill, the recovery of
attorney's fees is not only not plainly prohibited by the text of
the agreement, it is allowed. Mr. Gillispie's response brief
contains no analysis of his settlement agreement, and it makes not the slightest attempt to explain how it precludes, plainly
(or otherwise), an award of attorney's fees in his favor if he
were to prevail in the arbitration. The cost-shifting provision
in the last sentence of Paragraph 3(a) of Mr. Gillispie's
settlement agreement cannot be read in isolation without regard
to the earlier sentence in the same paragraph that provides that
the arbitration "shall be conducted under the rules of the
American Arbitration Association." Sentences in a paragraph, no
less than isolated words in a sentence, take their meaning from
the company they keep, for "it is a `fundamental principle of . . .
language itself that the meaning of a word cannot be determined
in isolation but must be drawn from the context in which it is
used.'" Textrom Lycoming Reciprocating Engine Division v. United
Automobile, Aerospace & Agricultural Implement Workers of America
Intern. Union, 523 U.S. 653, 657 (1998). See also Scalia, A
Matter of Interpretation: Federal Courts and the Law, 135 (1997)
("The principle determinant of meaning is context. . . .").
Under the American Arbitration Association's National Rules for
the Resolution of Employment Disputes, an arbitrator "may grant
any remedy or relief that the arbitrator deems just and
equitable, including any remedy or relief that would have been
available to the parties had the matter been heard in court."
(www.adr.org) (Emphasis supplied). In addition to this capacious
grant of remedial authority which is plainly sufficient to
allow an award of attorney's fees the AAA Rules explicitly
provide that "[t]he arbitrator shall have the authority to
provide for the reimbursement of representative's fees, in whole
or in part, as part of the remedy, in accordance with applicable
Paragraph 11 of the settlement agreement provides that it is to
be construed under Illinois law. Under Illinois contract law, a
writing is interpreted as a whole, and a contract should be read
to give effect to all its provisions and to render them
consistent with each other. Mastrobuono, 514 U.S. at 59, 63-64; Leahy Realty Corp. v. American Snack Foods Corp.,
253 Ill.App.3d 233, 246-47, 625 N.E.2d 956, 966 (2nd Dist. 1993).
Thus, when the last sentence of Paragraph 2 is read in
conjunction with the earlier sentence in that paragraph making
applicable the AAA Rules, it is immediately apparent that the
parties contemplated that attorney's fees would be available to
Mr. Gillispie if he were to prevail.*fn9 This is precisely
the interpretive problem that confronted the Supreme Court in
There, the parties' agreement contained a choice of law
provision specifying New York law. New York law prohibited an
award of punitive damages by arbitrators, but not by judges. In
Illinois, unlike New York, judges and arbitrators are empowered
to award attorney's fees. The agreement also contained a
provision requiring arbitration in accordance with NASD rules.
While those rules unlike the AAA rules in this case did not
clearly authorize an arbitrator to award punitive damages, they
were broad enough at least to contemplate such a remedy.
514 U.S. at 60-61. Thus, the text of the arbitration clause, the Court
held, did not support indeed it contradicted the conclusion
that the parties agreed to foreclose claims for punitive damages.
Id. at 61. The Court held that the dispute was arbitrable. The
same analysis governs this case.
By excluding attorney's fees from the mandatory cost-shifting
clause perhaps because of the concerns raised by McCaskill
itself the parties manifestly intended that Mr. Gillispie not
be automatically saddled with attorney's fees of the Village in
the event he lost the arbitration. It is a non-sequitur, however, to reason from this that the parties intended to
preclude Mr. Gillispie from even being eligible for an attorney's
fee award if he were to prevail. The language chosen by the
parties simply does not support that conclusion.*fn10
Moreover, it would be incongruous to suggest that having selected
arbitration rules that allow for a fee award, the parties
intended just a few lines later to have also excluded the
possibility that the Village would have to pay in the event it
lost the arbitration. A contrary interpretation "sets up the two
clauses in conflict with one another: one foreclosing [attorney's
fees], the other allowing them. This interpretation is untenable"
and is contrary to basic principles of contract construction
under Illinois law. Mastrobuono, 514 U.S. at 64.
Judge Easterbrook's opinion for a unanimous panel in Metro
East Center for Conditioning and Health v. Qwest Communications
Internat'l, Inc., 294 F.3d 924 (7th Cir. 2002) applies here
[I]t is almost never right to read legal language as
self-defeating. The district judge understood the
clause as saying: `Every dispute must be arbitrated,
provided however that no such dispute is arbitrable.'
Why would someone put such a clause in a tariff, a
contract, or any other document. People draft
documents to achieve some objective, and although
the meaning of words can be elusive even after taking
into account both linguistic and economic contexts,
and some words may turn out to be redundant or
otherwise carry no weight. It is not sensible to
construe a substantial passage of a legal text as
pointless. When one sentence seems to cancel out the
rest of a sub-section, it is essential to ask whether
that sentence must devastate its surrounding
language. Is there no alternative reading of either
the contract or the [Federal] Arbitration Act that
will enable the whole clause to survive?" Id. at 926 (Emphasis in original).
As in Metro East, "[i]t isn't hard to think of one." Id.
The parties intended that the costs and expenses of arbitration
but not legal fees should be borne by the loser in the
arbitration, while the legal fees were to be determined by the
arbitrator as a matter of discretion, just as would occur were
the case to be in the district court. This construction not only
makes sense and accords with basic principles of contract
construction under Illinois law, but is, more importantly,
faithful to the federal policy that seeks to encourage
arbitration, and that requires that "[a]ny doubts with respect to
arbitrability therefore should be resolved in favor of
arbitrability." James v. McDonald's, supra.
In Livingston v. Associates Finance, Inc., 339 F.3d 553
(7th Cir. 2003), the Seventh Circuit had occasion to consider
whether a similar reference to arbitration rules there, the
AAA's commercial arbitration rules limited the plaintiff's
right to attorney's fees under the pertinent statute. Given the
fact that the arbitration rule in Livingston provided that the
arbitrator's award "may include . . . an award of attorney's fees
if . . . it is authorized by law or their arbitration agreement,"
the court refused to invalidate the arbitration provision. Id.
at 558. Quoting the Supreme Court, the Seventh Circuit explained:
"`[T]here is no reason to assume at the outset that arbitrators
will not follow the law; although judicial scrutiny of
arbitration awards necessarily is limited, such review is
sufficient to ensure that arbitrators comply with the
requirements of the statute.'" Id. at 558 (quoting
Shearson/Am. Express, Inc. v. McMahon, 482 U.S. 220, 232
(1987)). So, too, here. There is no reason to assume that the
arbitrators will not follow the law in Mr. Gillispie's
arbitration, in light of the AAA's rules authorizing an award of
attorney's fees and the applicable federal law, which allows an
award to a prevailing party. See Koveleskie v. SBC Capital
Markets, Inc., 167 F.3d at 366; Owner-Operator Independent
Drivers Association, Inc. v. Swift Transportation Co., Inc. (AZ), 288 F.Supp.2d 1033, 1037
(D.Ariz. 2003); Wilks v. Pep Boys, 241 F.Supp.2d 860, 864
Since the settlement agreement, properly construed, empowers an
arbitrator to award attorney's fees to Mr. Gillispie if he were
to prevail, there is no basis to invalidate the arbitration
clause in the settlement agreement.
Assuming for the moment that the settlement agreement bars an
award of attorney's fees to Mr. Gillispie no matter the outcome
of the arbitration and that it is analytically inconsequential
that the preclusion stemmed from his voluntary waiver as part of
a settlement agreement of an earlier case, the question that is
presented in stark relief is whether such a bar renders invalid
an agreement to arbitrate a federal civil rights claim. Judge
Rovner certainly appeared to think so, at least under Title VII
and in the factual context presented by McCaskill. See also,
Spinetti v. Service Corp. Int'l., 324 F.3d 212, 216 (3d Cir.
2003) ("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."); Morrison v.
Circuit City Stores, Inc., 317 F.3d 646, 673 n. 15 (6th Cir.
2003) (by implication).
However, Judge Easterbrook's opinion for the unanimous panel in
Metro East points in a different direction. As discussed
earlier, its carefully considered analysis of whether parties can
contract to waive statutory entitlements, including eligibility
for a fee award, concluded that they could. He canvassed a number
of cases and areas in which individuals daily waive "the most
fundamental rights," including constitutional rights, "in
exchange for employment." 294 F.3d at 928. The opinion pointed
out that the Supreme Court held in Jeff D. that plaintiffs may forego
attorney's fees under 42 U.S.C. § 1988 the source of any
entitlement to a fee award in light of the claims in this case
and that it is possible to waive an entire civil-rights claim:
"waiver of fee-shifting is a subset of that broader agreement."
294 F.3d at 929.
Judge Rovner characterized this as dicta. 298 F.3d at 685.
The definitions of dicta are somewhat inconsistent, vague and
circular. United States v. Crawley, 837 F.2d 291, 292 (7th
Cir. 1988) (Posner, J.). The Seventh Circuit in Crawley
suggested that "instead of asking what the word `dictum' means
we ask what reasons there are against a court's giving weight to
a passage found in a previous opinion." The chief reason for
disregarding dictum is that being unnecessary to the outcome of
the earlier case it was perhaps not as fully considered as it
would have been if it were essential to the outcome. Id. The
panel's discussion of the question in Crawley, was not
perfunctorily considered. More importantly, it has been cited
approvingly by the Seventh Circuit in the post-McCaskill case
of Carbajal v. H & R Block Tax Services, supra. There, the
arbitration provision required each party to bear their own
attorney's fees regardless of who prevailed, even though the Fair
Debt Collection Practices Act authorized an award of attorney's
fees to the prevailing party. 372 F.3d at 906. Citing Metro
East, the opinion held that an arbitration clause is not
incompatible with federal law because it requires the litigants
to bear their own attorney's fees, even though the statute
entitles a prevailing party to recover attorney's fees. The court
held that no general doctrine of federal law prevents parties
from waiving statutory rights in exchange for other things they
value more. Id. at 906.
For the foregoing reasons and treating the motion as one to
compel arbitration, the Village's motion  is GRANTED, and the
plaintiff is ordered to proceed to arbitration, if he chooses to
pursue his present claims. Questions of the validity of any cost or fee-shifting
provision that the arbitrator concludes exists shall be for the
arbitrator to decide. See Musnick v. King Motor Co. of Fort
Lauderdale, 325 F.3d at 1261; Carbajal v. H & R Block Tax
Services, Inc., 372 F.3d at 907 ("whether any particular federal
statute overrides the parties' autonomy and makes a given
entitlement non-waivable is a question for the
arbitrator.").*fn11 The balance of the case is stayed
pending arbitration. See Oldroyd v. Elmira Savings Bank, FSB,
134 F.3d 72, 75 (2nd Cir. 1998).
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