First Circuit: Participating In EEOC Investigation Is Not Waiver of Right to Arbitrate (Web)
March 21, 2005
In Marie v. Allied Home Mortgage Corp., 2005 WL605034 (1st Cir.), the court addressed two issues of first impression in the First Circuit following the U.S. Supreme Court’s decisions in Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (2002) and Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444 (2003). First, the Court looked at whether in light of Supreme Court precedent, compliance with a limitations period in an arbitration clause and whether a party had waived its right to arbitrate were issues for the arbitrator. Second, after ruling that the first issue was for the arbitrator while the second was not, the Court held that participation in an EEOC investigation by an employer was not tantamount to a waiver of the right to arbitration.
Claimant filed a claim of sexual harassment with the EEOC. After the EEOC’s investigation had found no basis to the claimant’s sexual harassment claim because the abuse she suffered was based on her uncoerced relationship with her superior and not on her gender per se, she filed a lawsuit in state court against her former superior and employer alleging violations of Title VII as well as other claims. After removing the case to federal court, the employer moved to stay the proceedings and compel arbitration. The District Court denied the motion on the grounds that the employer had failed to comply with a limitations period in the arbitration clause. The employer did not appeal this order but instead moved to dismiss the complaint as untimely or for reconsideration of the order denying the motion to compel. Both motions were denied by the District Court and the employer appealed.
The First Circuit first dismissed Marie’s argument that it could not properly take jurisdiction because only the motion for reconsideration and not the underlying order was appealed and the notice of appeal was not timely as to the first order. The motion for reconsideration tolled the time for filing an appeal and therefore, the Court held, the appeal was timely.
On the merits, the Court began its examination with the limitations issue, and after describing the Supreme Court precedent, found that a contractual time limitation was of the type of “procedural questions” described in Howsam as presumptively for the arbitrator to decide.
The waiver issue required more analysis. Marie’s argument was essentially that the employer’s participation in the EEOC proceedings without initiating arbitration during or after the proceedings but doing so only in response to her court case, was conduct inconsistent with a future desire to arbitrate. The Court noted that pre-Howsam/Green Tree, it had a long history of deciding such claims itself. The Eighth Circuit has recently ruled that waiver is now an issue for the arbitrators, Nat’l Am. Ins. Co. v. Transamerica Occidental Life Ins. Co., 328 F.3d 462, 466 (2003), while the Fifth Circuit has held that it is for the court, Tristar Fin. Ins. Agency, Inc. v. Equicredit Corp. of Am., 97 Fed. Appx. 462, 464 (2004).
In deciding to side with the Fifth Circuit, the Court drew upon the language of Section 3 of the Federal Arbitration Act (“FAA”), which provides for a stay if the applicant is not “in default in proceeding with such arbitration”. The Court interpreted this as a statutory command to decide the waiver issue itself and noted that the Supreme Court has often said that Section 4 should be interpreted together with Section 3, so the lack of similar language there was not a problem. The First Circuit also referred extensively to commentary on the Revised Uniform Arbitration Act (“RUAA”) which states that waiver is an issue for the courts, noting that the Supreme Court in Howsam had also relied on the RUAA.
Finally, the Court found that for reasons of efficiency it made sense for the court to decide issues of waiver, especially since most such arguments arose in the context of a pending court case.
The Court was not persuaded by Marie’s argument that waiver was an issue of arbitrability and the contract specifically provided for the arbitrators to decide their own arbitrability. Citing various secondary sources, the Court found that “arbitability” in its ordinary meaning refers to the scope of the arbitration clause and would not ordinarily be intended to encompass the question of conduct by waiver. A clearer indication would be necessary for the court to refer the issue to the arbitrator.
As to the underlying merits, the Court found no need for the employer to file a demand for arbitration either during or after the EEOC proceedings as a precautionary measure but that the ends of both the FAA and Title VII were served by the employer waiting until the complainant had filed suit to raise the arbitration claim.
Lastly, the Court instructed the District Court that it could dismiss the matter rather than stay it if all claims were arbitrable. On this point, contrast Lloyd v. Hovsena, 369 F.3d 263 (3d Cir. 2004)(holding that the court has no power to dismiss but may only stay proceedings notwithstanding that all claims are arbitrable).
The case is available at 2005 WL 605034.