Punitive Damages: D.C. Circuit Severs Clause Barring Punitive Damages (Web)
July 7, 2005
Booker v. Robert Half International, Inc. (D.C. Cir., July 1, 2005). The D.C. Circuit court held that where an arbitration agreement contains an unenforceable provision that bars punitive damages, a court may sever the offensive provision and require arbitration under the remainder of the agreement.
Booker sued his former employer, Robert Half International (RHI) for racial discrimination under the District of Columbia Human Rights Act. RHI sought to compel arbitration pursuant to an arbitration clause in the employment agreement. The employment agreement also contained a severability clause.
Booker argued that compelling arbitration would interfere with the effective vindication of his statutory claim. The Circuit Court referred to the recent Supreme Court decisions, Green Tree Financial Corp.-Alabama v. Randolph and Pacificare Health Sys., Inc. v. Book, to offer two propositions. First, the party resisting arbitration on the ground that the terms of an arbitration agreement interfere with the effective vindication of statutory right bears the burden of showing the likelihood of such interference. Second, the burden cannot be carried by “mere speculation” about how an arbitrator might interpret or apply the agreement.
The court held that the provisions regarding, inter alia, discovery, burden of proof and qualification of arbitrators did not on their face prevent plaintiff from vindicating statutory rights. Further, the risk that the provisions might interfere with his rights was merely speculative. The provision that barred recovery of punitive damages did interfere with plaintiff’s rights, but could be severed by use of the severability clause. The Court noted a possible circuit split on this issue between the Ninth, Tenth and Eleventh Circuits (which struck entire arbitration agreements) and the Sixth and Eight Circuits (which did not).
The decision is available at: http://caselaw.lp.findlaw.com/data2/circs/dc/047089a.pdf.