Booker v. Robert Half International

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 10, 2005
Decided July 1, 2005
No. 04-7089

**************************************
TIMOTHY R. BOOKER,
APPELLANT
v.
ROBERT HALF INTERNATIONAL, INC.,
APPELLEE
**************************************
Appeal from the United States District Court
for the District of Columbia
(No. 01cv01127)

Adam Augustine Carter argued the cause for appellant.
With him on the brief was R. Scott Oswald.

Chevanniese Smith argued the cause for appellee. With her
on the brief was Anita Barondes.

Before: RANDOLPH and ROBERTS, Circuit Judges, and
WILLIAMS, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge ROBERTS.

ROBERTS, Circuit Judge: Statutory claims may be subject
to agreements to arbitrate, so long as the agreement does not
require the claimant to forgo substantive rights afforded under
the statute. See, e.g., Gilmer v. Interstate/Johnson Lane Corp.,
500 U.S. 20, 26 (1991); Cole v. Burns Int’l Sec. Servs., 105 F.3d
1465, 1481 (D.C. Cir. 1997). But what should a court do when
confronted with a statutory claim and an arbitration agreement
that is unenforceable as written, because it contains a provision
purporting to limit such rights: decline to enforce the agreement
and allow the statutory claims to proceed in court, or sever the
offensive provision and require arbitration under the remainder
of the agreement?

In this case an employee sued his employer for racial
discrimination under the District of Columbia Human Rights
Act, D.C. Code §§ 2-1401 et seq. (“DCHRA”), and the employer
sought to compel arbitration pursuant to an arbitration clause in
the employment agreement. The arbitration clause was unenforceable
as written because it precluded an award of punitive
damages, which are available under the D.C. statute. The
existence of an express severability clause in the agreement, the
fact that the agreement is otherwise valid and enforceable, and
a “healthy regard for the federal policy favoring arbitration,”
Gilmer, 500 U.S. at 26 (quoting Moses H. Cone Mem. Hosp. v.
Mercury Constr. Corp., 460 U.S. 1, 24 (1983)), lead us to affirm
the decision below, severing the ban on punitive damages and
compelling arbitration.

I.

From April 1996 to February 2001, Timothy R. Booker
worked for Robert Half International, Inc. (“RHI”). Before
starting his job at RHI, Booker signed an employment agreement
containing the arbitration clause at the heart of this dispute. The
clause states in relevant part:

Any dispute or claim arising out of or relating to Employee’s
employment or any provision of this Agreement
. . . shall be submitted to arbitration pursuant to the commercial arbitration rules of the American Arbitration
Association. This Agreement shall be governed by the
United States Arbitration Act. . . . The parties agree that
punitive damages may not be awarded in an arbitration
proceeding required by this Agreement.

Employment Agreement ¶ 18.

The agreement also contained a severability clause, providing that “[t]he provisions of this Agreement are severable. If any provision is found by any court of competent jurisdiction to be unreasonable and invalid, that
determination shall not affect the enforceability of other provisions.”
Id. ¶ 13.

On April 24, 2001, Booker filed suit against RHI in District
of Columbia Superior Court, alleging racial discrimination and
wrongful constructive discharge in violation of the DCHRA.
RHI responded with a letter requesting that Booker submit his
claim to arbitration as required by the employment agreement.
In subsequent negotiations with Booker’s counsel over the
structure of arbitral proceedings, RHI’s attorney stipulated that
arbitration would not bar an award of punitive damages,
indicated that RHI would agree to “reasonable discovery,” and
suggested that the parties follow the American Arbitration
Association (“AAA”) employmentarbitration rules because they
provide “greater detail” on available discovery tools than the
commercial rules specified in the agreement. May 16, 2001
Letter of Anita Barondes to R. Scott Oswald at 1; May 23, 2001
Letter of Anita Barondes to R. Scott Oswald at 1. When Booker
nonetheless insisted on pursuing his claim in court, RHI removed
the case to federal district court on the basis of diversity
jurisdiction and moved to dismiss the complaint and compel
arbitration pursuant to the Federal Arbitration Act (“FAA”).
9 U.S.C. §§ 1 et seq.

Over the opposition of Booker and amicus curiae the Equal
Employment Opportunity Commission, the district court granted
RHI’s motion. The court analyzed the enforceability of the
arbitration clause under the standards set forth in our decision in
Cole v. Burns International Security Services, 105 F.3d at
1479–83. In Cole, we applied the Supreme Court’s teaching in
Gilmer that claims under antidiscrimination statutes may be
subject to arbitration, so long as the claimant “effectively may
vindicate [his or her] statutory cause of action in the arbitral
forum.” Gilmer, 500 U.S. at 28 (quoting Mitsubishi Motors
Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 637
(1985) (alteration in original)). We held that the employee in
Cole could be compelled to arbitrate his Title VII claim, noting
that the arbitration agreement in that case “(1) provides for
neutral arbitrators, (2) provides for more than minimal discovery,
(3) requires a written award, (4) provides for all types of
relief that would otherwise be available in court, and (5) does
not require employees to pay either unreasonable costs or any
arbitrators’ fees or expenses as a condition of access to the
arbitration forum.” 105 F.3d at 1482.

Booker argued for a different result in his case, asserting
that his agreement with RHI did not provide for sufficient
discovery, and noting that it plainly did not afford all the relief
that would be available in court. The district court concluded
that the AAA commercial arbitration rules specified in the
arbitration agreement did provide for “more than minimal
discovery,” Mem. Op. at 13–15, but agreed with Booker that the
bar on punitive damages was unenforceable. Id. at 16–17. It
nevertheless declined Booker’s invitation to strike down the
arbitration clause in its entirety. Looking instead to the agreement’s
severability clause, District of Columbia contract law,
and the federal policy favoring enforcement of agreements to
arbitrate, the court concluded that the remainder of the arbitration
clause was enforceable despite the invalid punitive damages
provision. Accordingly, the district court severed the punitive
damages bar and compelled arbitration. Id. at 19–25. Booker
appeals.

II.

Recent Supreme Court decisions concerning the arbitrability
of statutory claims make clear how we are to assess the assertion
that arbitration should not be compelled because the terms of an
arbitration agreement interfere with the effective vindication of
statutory claims. The claimant in Green Tree Financial Corp.-
Alabama v. Randolph, 531 U.S. 79 (2000), argued that she could
not be compelled to arbitrate her claim under the Truth in
Lending Act (TILA), because the arbitration agreement at issue
was silent on the subject of fees and costs. The risk that she
might have to pay prohibitive costs if she pursued her claim in
arbitration, according to the claimant, interfered with the
vindication of her TILA claim in the arbitral forum. Id. at 90.
The Court rejected this argument. It recognized 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,” but held that an agreement’s
“silence” on the issue is, on its own, “plainly insufficient
to render [the agreement] unenforceable.” Id. at 90–91. The
Court noted its “prior holdings that the party resisting arbitration
bears the burden of proving that the claims at issue are unsuitable
for arbitration,” and concluded that, by the same token, a
party seeking to invalidate an arbitration agreement on the
ground that the arbitration would be too expensive “bears the
burden of showing the likelihood of incurring such costs.” Id.
at 91–92.

More recently, in Pacificare Health Sys., Inc. v. Book, 538
U.S. 401 (2003), the Court considered an argument that a claim
under the Racketeer Influenced and Corrupt Organizations Act
(RICO), 18 U.S.C. §§ 1961 et seq., could not be subjected to
arbitration, because the pertinent arbitration agreement pre6
cluded punitive damages while RICO allows treble damages.
The Court declined to construe the agreement and determine in
advance whether the bar on punitive damages prohibited treble
damages: “we should not, on the basis of ‘mere speculation’ that
an arbitrator might interpret these ambiguous agreements in a
manner that casts their enforceability into doubt, take upon
ourselves the authority to decide the antecedent question of how
the ambiguity is to be resolved.” 538 U.S. at 406–07 (quoting
Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S.
528, 541 (1995)). The Court compelled arbitration, and left it
for the arbitrator to decide in the first instance whether the
agreement barred treble damages under RICO. The Court
explained that this approach was consistent with its decision in
Vimar, where it enforced a foreign arbitration clause after
holding that “mere speculation” that the foreign arbitrator
“might” apply foreign law that “might” turn out to be less
favorable than the applicable United States statute did not
“provide an adequate basis upon which to declare the relevant
arbitration agreement unenforceable.” Pacificare, 538 U.S. at
405 (citing Vimar, 515 U.S. at 541).

We take from these recent cases two basic propositions:
first, that the party resisting arbitration on the ground that the
terms of an arbitration agreement interfere with the effective
vindication of statutory rights bears the burden of showing the
likelihood of such interference, and second, that this burden
cannot be carried by “mere speculation” about how an arbitrator
“might” interpret or apply the agreement. We consider Booker’s
claims against this background.

A. Booker first renews his contention that the arbitration
clause is unenforceable, quite apart from the punitive damages
issue, because it does not provide for “more than minimal
discovery.” See Cole, 105 F.3d at 1482. Under the agreement,
the AAA commercial arbitration rules are the governing
framework for any arbitration. With respect to discovery, those
rules provide that “[a]t the request of any party or at the discretion
of the arbitrator, consistent with the expedited nature of
arbitration, the arbitrator may direct (i) the production of
documents and other information, and (ii) the identification of
any witnesses to be called.” AAA, Commercial Dispute
Resolution Procedures (effective Sept. 1, 2000), Rule 23(a).
Booker contrasts this provision with the corresponding
discovery provision in the AAA employment arbitration rules,
which we considered satisfactory in Cole. See 105 F.3d at 1480,
1482. Those rules gave the arbitrator “the authority to order
such discovery, by way of deposition, interrogatory, document
production, or otherwise, as the arbitrator considers necessary to
a full and fair exploration of the issues in dispute.” Id. at 1480
(quoting AAA, National Rules for the Resolution of Employment
Disputes (effective June 1, 1996), Rule 7).

Booker also objects that the commercial rules leave the
decision to hold an arbitration management conference up to the
arbitrator, while the employment rules require such a conference;
that the commercial rules do not require that the arbitrator
hearing his claim be experienced in employment law, while the
employment rules do; and that the commercial rules lack a
counterpart to the provision in the employment rules which
specifies that the “parties shall bear the same burdens of proof
and burdens of producing evidence as would apply if [the claim]
had been brought in court.” AAA, National Rules for the
Resolution of Employment Disputes (effective Jan. 1, 2001),
Rule 22. Given the critical role shifting burdens play in adjudicating
employment discrimination claims, see, e.g., McDonnell
Douglas Corp. v. Green, 411 U.S. 792, 802–03 (1973), Booker
contends that an arbitrator’s unfamiliarity with or indifference to
such issues may not only compromise his right to requisite
discovery, but also the practical availability of substantive
protections under the DCHRA.

Although the AAA employment rules specify the discovery
mechanisms available in somewhat greater detail than do the
commercial rules, both sets of rules leave the decision about
which discovery tools to use, and in what manner, to the
discretion of the arbitrator. Booker is concerned that he will not
have “a fair opportunity to present [his] claims,” Gilmer, 500
U.S. at 31, because the arbitrator might provide inadequate
discovery, might not order a needed conference, might assign
burdens of production or proof that do not vindicate statutory
rights, and so on. Under the approach set forth in Pacificare,
Green Tree, and Vimar, such speculation about what might
happen in the arbitral forum is plainly insufficient to render the
agreement to arbitrate unenforceable. At no point does Booker
claim that the agreement prohibits the arbitrator from affording
what Booker asserts is required; RHI’s offer to follow the AAA
employment rules suggests there is no such ban. The relative
silence of the commercial rules on the details of available
discovery or other procedural questions cannot alone invalidate
the agreement. See Green Tree, 531 U.S. at 92. To invalidate
the agreement on the basis of Booker’s speculation would reflect
the very sort of “suspicion of arbitration” the Supreme Court has
condemned as “ ‘far out of step with our current strong endorsement
of the federal statutes favoring this method of resolving
disputes.’ ” Gilmer, 500 U.S. at 30 (quoting Rodriguez de
Quijas v. Shearson/American Express, Inc., 490 U.S. 477, 481
(1989)). See Green Tree, 531 U.S. at 89 (“In considering
whether [an] agreement to arbitrate is unenforceable, we are
mindful of the FAA’s purpose ‘to reverse the longstanding
judicial hostility to arbitration agreements.’ ”) (quoting Gilmer,
500 U.S. at 24).

B. The parties do not dispute that the arbitration agreement’s
bar on punitive damages is unenforceable as applied to
Booker’s claim under the DCHRA. See, e.g., Hadnot v. Bay,
Ltd., 344 F.3d 474, 478 & n.14 (5th Cir. 2003) (arbitration
agreement’s bar on punitive damages unenforceable in Title VII
case). Booker contends, however, that the district court erred in
severing the punitive damages provision and enforcing the
remainder of the agreement. He first argues that severance and
enforcement, as opposed to striking the arbitration clause as a
whole, is inconsistent with the terms of the contract between the
parties. See 9 U.S.C. § 2 (FAA leaves in place all protections
“that exist at law or in equity for the revocation of any contract”);
First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938,
944 (1995) (in deciding arbitrability, “courts generally . . .
should apply ordinary state-law principles that govern the
formation of contracts”). While acknowledging the employment
agreement’s severability clause, he notes that the agreement also
stipulates that “[n]o provision of this agreement may be changed
or waived except by an agreement in writing signed by the party
against whom enforcement of any such waiver or change is
sought.” Employment Agreement ¶ 16. According to Booker,
his consent is required before RHI may change the arbitration
provision by severing the ban on punitive damages, and then
enforce the arbitration provision against him. At the very least,
he contends, the severability clause and the waiver clause
contradict each other, creating a contractual ambiguity we must
construe against the drafter, RHI. See, e.g., Cole, 105 F.3d at
1485.

Booker’s argument incorrectly assumes that the waiver and
severability clauses are incompatible. See 1010 Potomac
Assocs. v. Grocery Mfrs. of Am., Inc., 485 A.2d 199, 205 (D.C.
1984) (contract “must be interpreted as a whole, giving a
reasonable, lawful, and effective meaning to all its terms”);
Restatement (Second) of Contracts § 203(a) (1981) (“an
interpretation which gives a reasonable, lawful, and effective
meaning to all the terms is preferred to an interpretation which
leaves a part unreasonable, unlawful, or of no effect”). Whatever
the reach of waiver clause, here the parties agreed at the
outset to allow the excision of any provision “found by any court
of competent jurisdiction to be unreasonable and invalid.”
Employment Agreement ¶ 13. As a result, the district court’s
severance was a contingency contemplated by the parties at the
time of formation, rather than a modification subject to the
requirements of the waiver clause.

We reject for similar reasons Booker’s argument that
severance over his opposition was improper because District of
Columbia law requires mutual assent for any modification of a
contract. Because Booker and RHI both signed the contract with
the severability clause, there is mutual assent to severance
according to the terms of that clause. This is entirely consistent
with District of Columbia law, which allows courts to sever
provisions in violation of public policy, while enforcing the
remainder of the agreement. See EDM & Assocs., Inc. v. GEM
Cellular, 597 A.2d 384, 390 (D.C. 1991); Ellis v. James V.
Hurson Assocs., Inc., 565 A.2d 615, 617 (D.C. 1989).

Under the FAA, arbitration “is a matter of consent, not
coercion.” Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford
Jr. Univ., 489 U.S. 468, 479 (1989). Compelling Booker to
arbitrate with the bar on punitive damages severed is entirely
consistent with the intent to arbitrate he manifested in signing
the employment agreement in the first place. As the Eighth
Circuit recently explained in a similar case, “[w]e do not believe
that the severance of the provision limiting punitive damages
diminishes [the claimant’s] contractual intent to arbitrate
because excluding the provision only allows her the opportunity
to arbitrate her claims under more favorable terms than those to
which she agreed.” Gannon v. Circuit City Stores, Inc., 262
F.3d 677, 682–83 (8th Cir. 2001).

C. Booker next argues that enforcing the remainder of the
arbitration clause contravenes the federal policy interest in
ensuring the effective vindication of statutory rights. He
contends that responding to illegal provisions in arbitration
agreements by judicially pruning them out leaves employers with
every incentive to “overreach” when drafting such agreements.
If judges merely sever illegal provisions and compel arbitration,
employers would be no worse off for trying to include illegal
provisions than if they had followed the law in drafting their
agreements in the first place. On the other hand, because not
every claimant will challenge the illegal provisions, some
employees will go to the arbitral table without all their statutory
rights.

We have never addressed this issue, but Booker’s argument
— bolstered by support from the EEOC — has helped persuade
some circuits to strike arbitration clauses in their entirety, rather
than simply sever offending provisions. See Perez v. Globe
Airport Sec. Servs., Inc., 253 F.3d 1280, 1287 (11th Cir. 2001);
Shankle v. B-G Maint. Mgmt. of Colo., 163 F.3d 1230, 1235 &
n.6 (10th Cir. 1999); Graham Oil Co. v. ARCO Prods. Co., 43
F.3d 1244, 1249 (9th Cir. 1994). Other circuits, however, have
invoked the federal policy in favor of enforcing agreements to
arbitrate to reject policy arguments like Booker’s and uphold
severance of illegal provisions. See Morrison v. Circuit City
Stores, Inc., 317 F.3d 646, 675 (6th Cir. 2003); Gannon, 262
F.3d at 682–83; see also Hadnot, 344 F.3d at 478 (severing bar
on punitive damages in arbitration clause without citing federal
policy).

The differing results may well reflect not so much a split
among the circuits as variety among different arbitration
agreements. Decisions striking an arbitration clause entirely
often involved agreements without a severability clause, see,
e.g., Perez, 253 F.3d at 1286, or agreements that did not contain
merely one readily severable illegal provision, but were instead
pervasively infected with illegality, see, e.g., Graham Oil, 43
F.3d at 1248–49; Hooters v. Phillips, 173 F.3d 933, 938–39 (4th
Cir. 1999). Decisions severing an illegal provision and compelling
arbitration, on the other hand, typically considered agreements
with a severability clause and discrete unenforceable
provisions, see, e.g., Morrison, 317 F.3d at 675; Gannon, 262
F.3d at 680.

A critical consideration in assessing severability is giving
effect to the intent of the contracting parties. See, e.g.,
Frankemuth Mut. Ins. Co. v. Escambia County, 289 F.3d 723,
728–29 (11th Cir. 2002); Transamerica Ins. Co. v. Avenell, 66
F.3d 715, 722 (5th Cir. 1995). That was also the “preeminent
concern of Congress in passing the [FAA]” — “to enforce
private agreements into which parties had entered.” Dean Witter
Reynolds Inc. v. Byrd, 470 U.S. 213, 221 (1985). See Volt Info.
Scis., 489 U.S. at 479 (“the FAA’s primary purpose” was to
“ensur[e] that private agreements to arbitrate are enforced
according to their terms”). If illegality pervades the arbitration
agreement such that only a disintegrated fragment would remain
after hacking away the unenforceable parts, see, e.g., Graham
Oil, 43 F.3d at 1248–49, the judicial effort begins to look more
like rewriting the contract than fulfilling the intent of the parties.
Cf. NLRB v. Rockaway News Supply Co., 345 U.S. 71, 78 (1953)
(“We do not . . . question that there may be cases where a
forbidden provision is so basic to the whole scheme of a contract
and so interwoven with all its terms that it must stand or fall as
an entirety. But . . . [t]he features to which the Board rightly
objects not only may be severed but are separated in the contract.”).
Thus, the more the employer overreaches, the less likely
a court will be able to sever the provisions and enforce the
clause, a dynamic that creates incentives against the very
overreaching Booker fears.

We agree with the district court that severing the punitive
damages bar and enforcing the arbitration clause was proper
here. Not only does the agreement contain a severability clause,
but Booker identifies only one discrete illegal provision in the
agreement. We have rejected his argument that the agreement
does not allow adequate discovery, and Booker himself acknowledges
that “the severance of one provision may be based on
sound case law” and that “the District Court’s decision to sever
the punitive damages provision may be sound.” Reply Br. of
Appellant, at 4, 14. This one unenforceable provision does not
infect the arbitration clause as a whole. The district court did not
unravel “a highly integrated” complex of interlocking illegal
provisions, Graham Oil, 43 F.3d at 1248, but rather removed a
punitive damages bar that appears to have been grafted onto an
intact and functioning framework, for the AAA commercial
rules — incorporated by reference in the clause — already
contain provisions on remedies that do not prohibit punitive
damages. See Commercial Rules 43–48. Indeed, by severing a
remedial component of the arbitration clause, the district court
removed a provision generally understood as not being essential
to a contract’s consideration, and thus more readily severable.
See 15 Corbin on Contracts § 89.10, at 659 (rev. ed. 2003);
Williston on Contracts § 19:69, at 543 (4th ed. 1998) (citing
Restatement (Second) of Contracts §§ 183 & cmt. a, 184). See
also Hadnot, 344 F.3d at 478 (rejecting argument that bar on
punitive damages in arbitration clause is integral to overall
employment agreement and accordingly cannot be severed).
The Graham Oil decision, on which Booker relies, struck
the entire arbitration agreement after noting that “the offensive
provisions clearly represent an attempt . . . to achieve through
arbitration what Congress has expressly forbidden.” 43 F.3d at
1249; see id. (“severance is inappropriate when the entire clause
represents an ‘integrated scheme to contravene public policy’ ”)
(quoting E. Allan Farnsworth, Farnsworth on Contracts § 5.8, at
70 (1990)). There is no evidence of that here. At the time the
parties signed the agreement — almost a year before Cole — the
law of this circuit was unclear as to whether bars on punitive
damages in arbitration clauses were enforceable in this context.
Moreover, the AAA did not promulgate the employment
arbitration rules favored by Booker — and assented to by RHI in
pre-litigation negotiations — until after the parties signed the
employment agreement.

By invoking the severability clause to remove a discrete
remedial provision, the district court honored the intent of the
parties reflected in the employment agreement, which included
not only the punitive damages bar but the explicit severability
clause as well. In doing so, the court was also faithful to the
federal policy which “requires that we rigorously enforce
agreements to arbitrate.” Mitsubishi Motors, 473 U.S. at 626
(citation omitted). For these reasons, and because Booker has
failed to offer anything beyond “mere speculation” to suggest he
would not be able effectively to vindicate his statutory claims in
arbitration, see Pacificare, 538 U.S. at 406; Vimar, 515 U.S. at
541, the judgment of the district court is Affirmed.