McCaskill, Gloria v. SCI Mgmt Corp ( 2002 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 00-2839
GLORIA J. McCASKILL,
Plaintiff-Appellant,
v.
SCI MANAGEMENT CORPORATION, SCI ILLINOIS
SERVICES, INCORPORATED, doing business as
EVERGREEN CEMETERY, SAM SMITH, et al.,
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 00 C 1543--Suzanne B. Conlon, Judge.
ARGUED JANUARY 26, 2001--DECIDED April 4, 2002
Before BAUER, MANION, and ROVNER, Circuit
Judges.
ROVNER, Circuit Judge. Gloria McCaskill
filed suit in federal court against SCI
Management Corporation, Evergreen
Cemetery, Sam Smith, and Patrick Comer
(collectively "SCI") alleging that she
was terminated from her position at SCI
in violation of Title VII, 42 U.S.C. sec.
2000e et seq. She further alleges denial
of her contract rights in violation of 42
U.S.C. sec. 1981, violation of the
Illinois Wage Payment and Collection Act,
820 ILS 115/1 et seq., and tortious
interference with contract. The facts
underlying those claims are irrelevant to
the issues on appeal, but essentially
involve allegations that McCaskill
forwarded complaints of sexual harassment
from her subordinates to her supervisor,
who was the alleged harasser, and to the
general manager, and that she was denied
compensation owed to her and eventually
terminated as a result.
SCI moved to dismiss the complaint and
compel arbitration pursuant to the
Federal Arbitration Act ("FAA"), 9 U.S.C.
sec. 1 et seq., and the Illinois Uniform
Arbitration Act ("IUAA"), 710 ILCS 5/2 et
seq. SCI asserts that McCaskill signed an
agreement providing that all employment
disputes shall be resolved through
binding arbitration. Although
acknowledging the applicability of the
arbitration provision, McCaskill asserts
that the arbitration agreement is not
enforceable because it prevents her from
fully and effectively vindicating her
Title VII rights. She grounds this
argument in a provision in the
arbitration agreement which (1) requires
each party to pay its own costs and
attorneys’ fees regardless of the outcome
and (2) mandates that each party shall
pay one-half of the compensation to be
paid to the arbitrator as well as one-
half of any other costs of arbitration.
Because we agree that the attorney’s fee
provision renders the agreement
unenforceable in this Title VII action,
we need not consider the argument
regarding the costs. We note that the
parties had initially challenged the
ability of this court to hear this case,
with SCI arguing that this court lacked
jurisdiction over the district court’s
order compelling arbitration based on the
distinction between an "embedded" and an
"independent" proceeding. Since that
time, however, the Supreme Court resolved
the matter in Green Tree Financial Corp.-
Alabama v. Randolph, 531 U.S. 79 (2000),
rejecting the embedded/independent
distinction. At oral argument, the
parties agreed that the jurisdictional
issue is resolved by Green Tree.
The dissent, however, raises a distinct
challenge to this court’s jurisdiction,
arguing that the district court did not
actually dismiss the case, and that we
must remand in order for the court to
determine whether to dismiss or stay the
proceeding in compelling arbitration. We
certainly agree with the dissent that the
district court should have made clear its
intent to dismiss this case, and that
jurisdiction hinges on whether the case
was in fact dismissed. A remand in this
case, however, is pointless because all
parties agree that the district court
dismissed the case. The appellees asked
the court to compel arbitration and
dismiss the case, and no party requested
that the case be stayed. Accordingly, the
court could not have intended to grant a
stay; in compelling arbitration, it could
only have dismissed the case. The parties
agree that the case is dismissed, and
therefore there seems little point in a
remand. Where the intent of the court to
dismiss the case is clear, we have
appellate jurisdiction. See Kaplan v.
Shure Bros., Inc., 153 F.3d 413, 417 (7th
Cir. 1998) (appellate court had jurisdic
tion even though minute order stated that
case was dismissed without prejudice,
where record read as a whole evidenced
clear intent to end the entire case);
Spitz v. Tepfer, 171 F.3d 443, 447-48
(7th Cir. 1999) (finding jurisdiction
even though district court order granting
summary judgment did not mention the
injunction request, where plaintiff
failed to pursue injunctive relief and
"tenor of summary judgment opinion
reflects the trial court’s intent to
dispose of all the issues in the
lawsuit"; court’s failure to explicitly
address the injunction request "is the
sort of technical defect that does not
upset the order’s finality, for it is
clear that the court implicitly found
against Spitz on this claim.").
The dissent cites ITOFCA, Inc. v.
MegaTrans Logistics, Inc., 235 F.3d 360,
363 (7th Cir. 2000), for the proposition
that parties cannot agree to
jurisdiction, and an attorney’s assertion
at oral argument cannot create appellate
jurisdiction. The case, however,
recognizes that such representations can
indeed determine appellate jurisdiction.
In that case, the court was deprived of
appellate jurisdiction because
counterclaims had been dismissed "without
prejudice," and thus could be refiled at
any time. The court refused to find
appellate jurisdiction based on the
parties’ mere representation that such
jurisdiction existed, because it was
inconsistent with the law. Id. at 363.
The ITOFCA panel further stated, however,
that it asked MegaTrans’ attorneys at
oral argument if they would represent to
the court that MegaTrans would not refile
the counterclaims. Id. at 365. The court
stated that "[h]ad MegaTrans done so, we
could have treated the district court’s
dismissal of the counterclaims as having
been with prejudice, thus winding up the
litigation and eliminating the bar to our
jurisdiction." Id. Because MegaTrans was
unwilling to so represent, we lacked
appellate jurisdiction. Id. ITOFCA thus
establishes that the representations by
the parties can indeed impact our
determination of appellate jurisdictions.
Here, the parties agree that the case is
dismissed, and the record supports that
representation. Given that no request for
a stay was before it, the court could not
have intended a stay rather than a
dismissal Accordingly, we have appellate
jurisdiction and turn to the validity of
the arbitration agreement.
The arbitration agreement at issue here
provides for the arbitration of a number
of employment-related disputes, including
those based on harassment or
discrimination. It excludes other types
of claims likely to be brought by SCI,
such as disputes related to
noncompetition or confidentiality
agreements, and "any claim by the Company
against the Employee which is based upon
fraud, theft or other dishonest conduct
of employee." Agreement para. 2. The
arbitration agreement further specifies
as follows:
Each party may retain legal counsel and
shall pay its own costs and attorneys’
fees, regardless of the outcome of the
arbitration. Each party shall pay one-
half of the compensation to be paid to
the arbitrator(s), as well as one-half of
any other costs relating to the
administration of the arbitration
proceeding (e.g. room rental, court
reporter, etc.).
Agreement, para. 4. Some courts have
refused to enforce arbitration agreements
which mandate that the parties each pay
half the costs of arbitration, while
others have considered whether the cost-
shifting provision renders the
arbitration proceedings inaccessible for
that individual. See, e.g., Green Tree,
531 U.S. 79; Brown v. Wheat First
Securities, Inc., 257 F.3d 821 (D.C. Cir.
2001); Bradford v. Rockwell Semiconductor
Systems, Inc., 238 F.3d 549 (4th Cir.
2001); Rosenberg v. Merrill Lynch,
Pierce, Fenner & Smith, 170 F.3d 1 (1st
Cir. 1999); Koveleskie v. SBC Capital
Markets, Inc., 167 F.3d 361 (7th Cir.
1999); Shankle v. B-G Maintenance
Management of Colorado, Inc., 163 F.3d
1230 (10th Cir. 1999); Cole v. Burns
International Security Services, Inc.,
105 F.3d 1465 (D.C. Cir. 1997). We need
not address the issue here, however,
because the attorney’s fees provision
renders the agreement unenforceable.
In Gilmer v. Interstate Johnson Lane
Corp., 500 U.S. 20, 26 (1991), the
Supreme Court held that claims under fed
eral statutes may be appropriate for
arbitration as long as the litigant may
effectively vindicate her statutory cause
of action in the arbitral forum, and the
statute will continue to serve its
remedial and deterrent purposes. Williams
v. Cigna Financial Advisors Inc., 197
F.3d 752, 763 (5th Cir. 1999). See also
Equal Employment Opportunity Commission
v. Waffle House, ___ U.S. ___, 122 S. Ct.
754, 761 (2002) (narrowly construing
impact of arbitration agreement to hold
that the existence of an arbitration
agreement between private parties does
not affect the EEOC’s right to seek all
remedies). One of the remedies provided
by Title VII is that attorney’s fees may
be awarded to a prevailing plaintiff, 42
U.S.C. sec. 2000e-5(k), and we noted in
Dunning v. Simmons Airlines, Inc., 62
F.3d 863, 872 (7th Cir. 1995), that
aprevailing party should ordinarily
recover attorney’s fee absent special
circumstances rendering such an award
unjust. In Dunning, we emphasized the
importance of the fees provision to the
purposes of Title VII:
Attorney’s fees in Title VII litigation
are not limited to a proportion of the
monetary damages assessed in the case
because, as Congress has recognized, a
plaintiff in any civil rights suit acts
"not for himself alone but also as a
’private attorney general,’ vindicating a
policy that Congress considered of the
highest importance." [citations omitted]
. . . . A rule of proportionality would
make it difficult, if not impossible, for
individuals with meritorious civil rights
claims but relatively small potential
damages to obtain redress from the
courts. This is totally inconsistent with
Congress’ purpose in enacting sec. 1988.
Congress recognized that private-sector
fee arrangements were inadequate to
ensure sufficiently vigorous enforcement
of civil rights. In order to ensure that
lawyers would be willing to represent
persons with legitimate civil rights
grievances, Congress determined that it
would be necessary to compensate lawyers
for all time reasonably expended on a
case.
Id. at 873 n.13. The right to attorney’s
fees therefore is integral to the
purposes of the statute and often is
central to the ability of persons to seek
redress from violations of Title VII. In
recognition of the importance of the
attorney’s fees provisions to the
remedial and deterrent effect of Title
VII, counsel for SCI conceded at oral
argument that if we construe the
arbitration agreement as not allowing the
arbitrator to award attorney’s fees, then
the agreement deprives the plaintiff of
remedies under Title VII and is
unenforceable.
The attorney’s fees provision in the
arbitration agreement quite plainly does
just that. It mandates that each party
shall pay its own attorney’s fees
regardless of the outcome of the
arbitration. SCI attempts to avoid that
plain language with a novel
interpretation. According to SCI, the
provision regulates only what McCaskill
is responsible for paying, not what she
may be awarded, and thus it is possible
for an arbitrator to award her attorneys’
fees consistent with the arbitration
agreement, as long as she uses that award
to pay her attorneys. That defies the
plain meaning of the words. SCI has
identified no other context in which a
court would hold that a provision
requiring a person to pay her own
attorney’s fees actually means the
opposing party may be required to pay the
fees to her, and then she must pay her
own attorney. The provision obviously
means that neither party can be required
to pay the attorney’s fees of the other
party, either directly or through the
straw-man approach advocated by SCI.
In fact, the Ninth Circuit reached that
conclusion regarding a similar clause in
Graham Oil Co. v. ARCO Products Co., a
Div. of Atlantic Richfield Co., 43 F.3d
1244 (9th Cir. 1994). The arbitration
agreement in Graham Oil was part of a
distributor agreement with a franchisee,
and provided that each party would bear
its own attorney’s fees. Id. at 1247. The
court recognized that franchisees may
agree to an arbitral forum for resolving
statutory disputes, but stated that they
may not be forced "to surrender the
statutorily-mandated rights and benefits
that Congress intended them to possess."
Id. The court held that the attorney’s
fees clause purported to forfeit the
statutorily-mandated right to recover
attorney’s fees provided under the
Petroleum Marketing Practices Act (PMPA).
Id. It further noted that the right to
attorney’s fees was important to the
effectuation of the PMPA’s policies,
specifically the purpose of deterring a
franchiser from improperly contesting
meritorious claims, and accordingly held
that the clause contravened the PMPA. Id.
at 1248. The court then held that the
attorney’s fees clause, as well as two
other contravening clauses, were not
severable from the arbitration agreement
as a whole--a claim not even raised in
this case and therefore not before us
here.
Similar to Graham Oil, the clause here
purports to forfeit McCaskill’s statutory
right to attorney’s fees, a remedy that
we have already recognized is essential
to fulfill the remedial and deterrent
functions of Title VII. Because the
provision prevents her from effectively
vindicating her rights in the arbitral
forum by preemptively denying her
remedies authorized by Title VII, the
arbitration agreement is unenforceable.
The district court’s order compelling
arbitration is REVERSED, and the case
REMANDED for further proceedings
consistent with this opinion.
MANION, Circuit Judge, dissenting. The
court has concluded that the arbitration
clause is unenforceable because it
preempts certain rights McCaskill has
under Title VII. At some point this could
be a valid issue on appeal, but not yet.
Although the district court granted the
SCI’s motion to compel arbitration, it
neither dismissed nor stayed the pending
action. The court acknowledges that the
parties initially challenged appellate
jurisdiction, and notes that the issue
has been resolved by the Supreme Court’s
decision in Green Tree Fin. Corp. -
Alabama, et al. v. Randolph, 531 U.S. 79
(2000). Reasoning that the district court
"could only have dismissed the case," it
concludes that we have jurisdiction to
review a district court’s decision that
dismisses a case after ordering the
parties to arbitrate. It then proceeds to
address the merits of this case. After
carefully reviewing the district court’s
opinion, it is clear to me that the
district court did not dismiss this case,
and therefore its order is not a final
decision under Green Tree and 28 U.S.C.
sec. 1291. I, therefore, respectfully
dissent.
Longstanding federal policy strongly
favors arbitration. Green Tree, 531 U.S.
at 91 (citing Moses H. Cone Mem’l Hosp.
v. Mercury Constr. Corp., 460 U.S. 1, 24
(1983)). Section 16 of the Federal
Arbitration Act ("FAA") governs appellate
review of arbitration orders. It
provides, in relevant part, that an
appeal may be taken from "a final
decision with respect to an arbitration .
. . ." 9 U.S.C. sec. 16(a)(3). In
addition, an appeal may not be taken from
an interlocutory order "compelling
arbitration . . . ." 9 U.S.C. sec.
16(b)(3). The FAA does not define the
term "final decision." In Green Tree, the
Supreme Court interpreted the phrase
according to its well-established, plain
meaning, i.e., a decision which "ends the
litigation on the merits and leaves
nothing more for the court to do but
execute the judgment." 531 U.S. at 86
(citations omitted). In addressing a
district court’s order compelling
arbitration and dismissing the case with
prejudice, the Supreme Court held that
such an order is a "final decision" and
thus is immediately appealable pursuant
to the FAA. Id. The Court noted, however,
that if a district court enters a stay
instead of a dismissal, that order is not
a final, appealable decision under the
FAA. Id. at 87, n.2./1 See Salim
Oleochemicals v. M/V Shropshire, 278 F.3d
90 (2d Cir. 2002) (order compelling
arbitration and dismissing without
prejudice was an appealable decision
under the FAA); ATAC Corp. v. Arthur
Treacher’s, Inc., 280 F.3d 1091 (6th Cir.
2002) (order staying proceedings pending
arbitration not appealable under the
FAA); Interactive Flight Tech., Inc. v.
Swissair Swiss Air Transp. Co., Ltd., 249
F.3d 1177 (9th Cir. 2001) (order
compelling arbitration and dismissing
case without prejudice appealable under
the FAA); Employers Ins. of Wausau v.
Bright Metal Specialties, Inc., 251 F.3d
1316 (11th Cir. 2001) (order compelling
arbitration and dismissing the case
deemed appealable under the FAA).
Here, notwithstanding the court’s
assumption to the contrary, the district
court did not actually dismiss the case.
The court maintains that a remand in this
case is "pointless because all parties
agree that the district court dismissed
the case." See ante at 3. But the
district court did not dismiss the case.
Nevertheless, the court concludes
thatbecause the appellees requested the
district court to compel arbitration and
dismiss the case, and because neither
party requested that the case be stayed,
"the [district] court could not have
intended to grant a stay; in compelling
arbitration, it could only have dismissed
the case." Id. Not so. The district court
clearly could have ordered a stay. 9
U.S.C. sec. 3. Yet, this court’s
conclusion appears to suggest that,
notwithstanding the absence of any
language in the district court’s opinion
indicating an intention to dismiss the
suit, we, as the reviewing court, should
infer the district court’s intent to
dismiss solely because a litigant
requested that such an action be taken.
Given the Supreme Court’s recent (and
heightened) sensitivity to jurisdictional
issues, it is inappropriate to assume the
finality of a district court decision
when there is no basis for doing so. See,
e.g., Steel Co. v. Citizens for a Better
Env’t, 523 U.S. 83, 94 (1998) (holding
that "’[w]ithout jurisdiction the court
cannot proceed at all in any cause.
Jurisdiction is power to declare the law,
and when it ceases to exist, the only
function remaining to the court is that
of announcing the fact and dismissing the
cause.’") (citation omitted).
Furthermore, neither Kaplan v. Shure
Bros., Inc., 153 F.3d 413 (7th Cir.
1998), nor Spitz v. Tepfer, 171 F.3d 443
(7th Cir. 1999), supports the court’s
decision to assume jurisdiction in this
case. These cases are entirely
distinguishable from the situation before
us on appeal. In Kaplan and Spitz, the
district courts’ opinions provided some
basis for inferring dismissals in those
cases. See Kaplan, 153 F.3d at 417 (no
amendment to complaint possible); Spitz,
171 F.3d at 447-48 (counterclaim
dismissed, other issues final). In this
case, there is nothing in the district
court’s opinion that would allow us to
infer that the court intended to dismiss
the case. SCI filed a motion to compel
arbitration and to dismiss the case. The
district court’s order, however, merely
compelled arbitration. The order does not
address, in any manner whatsoever, SCI’s
request for a dismissal of the case.
While it is true that SCI’s attorney
stated at oral argument that the district
court’s opinion effectively dismissed the
case, it is well settled that parties
cannot agree to jurisdiction, nor can an
attorney’s assertion at oral argument
create appellate jurisdiction. See
ITOFCA, Inc. v. MegaTrans Logistics,
Inc., 235 F.3d 360, 363 (7th Cir. 2000).
Rather, we have consistently held that
"[i]t is our threshold and independent
obligation to make that determination
even [when] both parties agreeably
[consider an] order to be final and
appealable." ITOFCA, 235 F.3d at 363
(citations omitted).
Finally, the court’s interpretation of
our decision in ITOFCA is incomplete. As
we indicated in that case, litigants can
impact this court’s determination of
appellate jurisdiction by representing to
the court that they would not refile
their claims (thereby effecting a
voluntary dismissal with prejudice). That
decision to forego further proceedings is
entirely within their control and
discretion (an agreement the ITOFCA
litigants refused to make). Of course an
agreement before this court not to refile
would be irrevocable once relied upon in
the appellate opinion. A litigant’s
representations are irrelevant, however,
when an appellate court is seeking to
determine whether a district court
dismissed a lawsuit, an action that is
solely within the control and discretion
of that court.
Without a dismissal of the underlying
case, the district court’s order
compelling arbitration remains an
interlocutory order under Section
16(b)(3) of the FAA. Under Green Tree, we
are not permitted to exercise
jurisdiction over this case until the
district court enters a dismissal. Of
course, as previously noted, the district
court may also grant a stay under Section
3 of the FAA, in which case we would not
have jurisdiction since it would not be
appealable. 9 U.S.C. sec.16(b)(1); Green
Tree, 531 U.S. at 87 n.2./2 In any
case, it is incumbent upon district
courts to fully address and clearly
dispose of a motion filed by a litigant
for the parties’ benefit, to conserve its
own judicial resources and to aid this
court on review. See Salim Oleochemicals,
278 F.3d at 93 (urging "district courts
in these circumstances to be as clear as
possible about whether they truly intend
to dismiss an action or mean to grant a
stay . . . or whether they mean to do
something else entirely."). See also
Dustrol, Inc. v. Champagne-Webber, Inc.,
2002 WL 122500, * 4 (N.D. Tex. Jan. 24,
2002) (citing Green Tree, district court
clearly states that "the court dismisses
this case because there are no longer any
unadjudicated claims presently before the
court.").
Accordingly, I conclude that we lack
appellate jurisdiction over this case and
would have therefore remanded the case
back to the district court for further
disposition or clarification of its
order. Without jurisdiction, we may not
proceed to opine on the validity of the
arbitration agreement.
FOOTNOTES
/1 In resolving questions of finality, we have asked
whether an appeal is from an "embedded" (those
involving a request for arbitration and other
relief) or "independent" (a request to order
arbitration solely) proceeding. Previously, an
order compelling arbitration in an independent
proceeding was appealable, whereas one in an
embedded proceeding was interlocutory. See Naple-
ton v. General Motors Corp., 138 F.3d 1209, 1212
(7th Cir. 1998). The Supreme Court, however,
rejected this distinction in Green Tree, 531 U.S.
at 88.
/2 I pause to take note of an issue left unresolved
by the Supreme Court in Green Tree, i.e., whether
a district court may dismiss a case under the FAA
at all. Green Tree, 531 U.S. at 87 n.2 (declining
to address whether district court should have
entered a stay rather than a dismissal). The
plain language of the FAA gives a court only the
power to grant a stay. See 9 U.S.C. sec. 3. In
contrast, nothing in the FAA refers to the dis-
trict court’s power to dismiss a case. See also
Stephen H. McClain, Under a New Supreme Court
Decision, Litigants Seeking Arbitration of a
Dispute can Control the Timing of an Appeal, 48-
Aug. Fed. Law. 22, 25 (2001) (noting that, during
oral argument of Green Tree, some of the justices
questioned whether or not a stay was required
under the FAA). This court has also questioned
whether there is any statutory authority for
dismissing a case when compelling arbitration.
See Kroll v. Doctor’s Assoc., Inc., 3 F.3d 1167,
1172 (7th Cir. 1993). The uncertainty surrounding
a district court’s ability, or authority, to
dismiss a case under the FAA, is yet another
reason to decline jurisdiction over this appeal.