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U.S. 9th Circuit Court of Appeals
DUFFIELD v ROBERTSON, STEPHENS & CO.
9715698
TONYJA DUFFIELD, Plaintiff-Appellant, No. 97-15698 v. D.C. No. ROBERTSON STEPHENS & COMPANY, C-95-0199-EFL a partnership; ROBERTSON STEPHENS OPINION & COMPANY, a corporation, Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of California
Eugene F. Lynch, District Judge, Presiding
Argued and Submitted
March 9, 1998--San Francisco, California
Filed May 8, 1998
Before: William C. Canby, Jr. and Stephen Reinhardt,
Circuit Judges, and Jane A. Restani,
Court of International Trade Judge.*
Opinion by Judge Reinhardt
SUMMARY
_________________________________________________________________
_________________________________________________________________
COUNSEL
Michael Rubin (argued), Jeffrey B. Demain, Altshuler, Ber-
zon, Nussbaum, Berzon & Rubin, San Francisco, California;
Cliff Palefsky, McGuinn, Hillsman & Palefsky, San Fran-
cisco, California, for the plaintiff-appellant.
Daniel H. Bookin, F. Curt Kirscner, Jr. (argued), David B.
Newdorf, O'Melveny & Myers, San Francisco, California, for
the defendants-appellees.
Robert M. Loeb (argued), C. Gregory Stewart, J. Ray Terry,
Jr., Gwendolyn Young Reams, Vincent J. Blackwood, Robert
J. Gregory (on the brief), for amicus curiae Equal Employ-
ment Opportunity Commission, Washington, D.C., in support
of the plaintiff-appellant.
David E. Feller, Berkeley, California, David T. Weckstein,
San Diego, California, for amicus curiae The National Acad-
emy of Arbitrators, in support of the plaintiff-appellant.
John M. True, III, Rudy, Exelrod, Zeiff & True, San Fran-
cisco, California, for amicus curiae National Employment
Lawyers Association, in support of the plaintiff-appellant.
Elaine R. Jones, NAACP Legal and Educational defense
Fund, New York, New York; Judith L. Lichtman, Women's
Legal defense Fund, Washington, D.C.; Thomas J. Hender-
son, Lawyers' Committee for Civil Rights Under the Law,
Washington, D.C.; Eva Jefferson Paterson, Lawyers' Com-
mittee for Civil Rights of the San Francisco Bay Area, San
Francisco, California, for amicus curiae in support of the
plaintiff-appellant.
Paul D. Carrington, Duke University School of Law, Jean R.
Sternlight, Florida State University College of Law, Richard
C. Reuben, Stanford Center on Conflict and Negotiation,
Katherine Van Wezel Stone, Cornell Law School, for amicus
curiae Concerned Legal Scholars, in support of the plaintiff-
appellant.
William J. Emanuel, Michael L. Wolfram, John S. Battenfeld,
Morgan, Lewis & Brockius, Los Angeles, California, for
amicus curiae The Employers Group, in support of the
defendants-appellees.
Samuel Estreicher, New York University School of Law, for
amicus curiae California Employment Law Council, in sup-
port of the defendants-appellees.
Robert E. Williams, Ann Elizabeth Reesman, Erin Quinn
Gery, McGuiness & Williams, Washington, D.C., for amicus
curiae Equal Employment Advisory Counsel, in support of
the defendants-appellees.
Gary R. Siniscalco, Lisa K. McClelland, Orrick, Herrington &
Sutcliffe, San Francisco, California, for amicus curiae
Securities Industry Association, in support of the defendants-
appellees.
_________________________________________________________________
OPINION
REINHARDT, Circuit Judge:
This case presents the issue whether employers may require
as a mandatory condition of employment in a certain profes-
sion -- here, broker-dealer in the securities industry -- that
all employees waive their right to bring Title VII and other
statutory and non-statutory claims in court and instead agree
in advance to submit all employment-related disputes to bind-
ing arbitration. We hold that, under the Civil Rights Act of
1991, employers may not by such means compel individuals
to waive their Title VII right to a judicial forum. At the same
time, we hold that because no state action is involved there is
no constitutional bar to employers requiring employees to
agree in advance to arbitrate state-law tort and contract claims
(other than for violation of a state civil rights law).
I
Like every individual who wishes to work in the United
States as a broker-dealer in the securities industry, Tonyja
Duffield was required, as a condition of employment man-
dated by the national securities exchanges, to waive her right
to a judicial forum to resolve all "employment related" dis-
putes and to agree instead to arbitrate any such disputes under
the exchanges' rules. Prospective employees must satisfy this
condition by signing the industry's Uniform Application for
Securities Industry Registration or Transfer, commonly
known as Form U-4, which registers them with all of the
securities exchanges with which their employers are mem-
bers. Paragraph 5 of Form U-4, the arbitration clause, reads
as follows:
I agree to arbitrate any dispute, claim or controversy
that may arise between me and my firm, or a cus-
tomer, or any other person, that is required to be
arbitrated under the rules, constitutions, or by-laws
of the organizations with which I register, as indi-
cated in item 10 as may be amended from time to
time.
Because Robertson Stephens & Co. is a member of the New
York Stock Exchange ("NYSE") and the National Associa-
tion of Securities Dealers ("NASD"), Duffield's "item 10"
listed both of those organizations, and the form obligated her
to abide by their rules, constitutions, and by-laws.
Both the NYSE and the NASD have rules that compel
employees to arbitrate any employment-related dispute at the
request of their employers. NYSE Rule 347 provides:
Any controversy between a registered representative
and any member or member organization arising out
of the employment or termination of employment of
such registered representative by and with such
member or member organization shall be settled by
arbitration, at the instance of any such party, in
accordance with the arbitration procedure prescribed
elsewhere in these rules.
The NASD Code of Arbitration Procedure, as amended in
1993, provides:
[A]ny dispute, claim, or controversy arising out of or
in connection with the business of any member of
the Association, or arising out of the employment or
termination of associated person(s) with any mem-
bers . . . shall be arbitrated.
Id. at Part 1, S 1.1 After signing her Form U-4 in 1988, Duf-
field began working as a broker-dealer for Robertson Ste-
phens.
In January, 1995, Duffield brought suit in federal court,
alleging sexual discrimination and sexual harassment in viola-
tion of Title VII of the Civil Rights Act of 1964, as amended,
42 U.S.C. S 2000e et seq., and California's Fair Employment
and Housing Act (FEHA), breach of contract, deceit, inten-
tional infliction of emotional distress, and negligent infliction
of emotional distress. As a threshold matter, she requested a
declaratory judgment stating that securities industry employ-
ees cannot be compelled to arbitrate their employment dis-
putes under the arbitration provision in Form U-4. She made
five specific arguments in this regard: (1) that the
"compulsory" arbitration requirement mandated by Form U-4
does not constitute a voluntary agreement to arbitrate within
the meaning of Title VII; (2) that signing Form U-4 does not
constitute a "knowing" agreement to arbitrate within the
meaning of Title VII; (3) that the NYSE's arbitration system
fails adequately to protect employees' substantive Title VII
rights; (4) that Form U-4 is an unconscionable contract of
adhesion because it forces her to arbitrate her Title VII claims
under an inadequate arbitration system; and (5) that the indus-
try's mandatory arbitration requirement constitutes an uncon-
stitutional condition of employment. Only in connection with
her final argument did Duffield contest the arbitrability of her
state law and contract claims.
After allowing extensive discovery on the securities indus-
try's arbitration system, the district court rejected each of
Duffield's arguments. It first denied her motion for summary
judgment on her declaratory relief claim, and later granted
Robertson Stephens' motion to compel arbitration of all of her
substantive claims. The court declined to enter final judgment
pursuant to Fed. R. Civ. P. 54(b) on Duffield's declaratory
judgment claim, but certified both of its orders for immediate
appeal pursuant to 28 U.S.C. S 1292(b).
On appeal, Duffield renews all five of her arguments
below. We review de novo both the district court's denial of
Duffield's motion for summary judgment, Curnow v. Ridge-
crest Police, 952 F.2d 321, 323 (9th Cir. 1991), and its order
compelling arbitration. Zolezzi v. Dean Witter Reynolds, Inc.,
789 F.2d 1447, 1449 (9th Cir. 1986). In Part II, we address
Duffield's contentions that are unique to her Title VII claims,
and in Part III we consider her constitutional challenge to
Form U-4.
II
The security industry's Form U-4 requires employees to
submit to a system that is most fittingly described as
"compulsory arbitration." Throughout this opinion when we
use the term "compulsory arbitration," we generally refer to
the system under which employers compel their prospective
employees as a condition of employment to waive their rights
to litigate future employment-related disputes in a judicial
forum (although the term applies as well to employees sub-
jected to such a requirement for the first time during the
course of their employment); under Form U-4, as in many
other form or standard agreements, future employment-related
disputes include, among others, all claims of discrimination
that may arise under civil rights or other statutes. By compul-
sory arbitration, we do not, however, include systems under
which employees agree, or otherwise elect, after disputes have
arisen to submit them to arbitration. Nor do we include, for
purposes of this opinion, agreements in which at the time of
hiring employers give prospective employees the choice to
opt in advance for arbitration of all future employment-related
disputes or for retention of their statutory right to litigate such
disputes. In short, we refer to an arbitration agreement as
"compulsory" when individuals must sign an agreement waiv-
ing their rights to litigate future claims in a judicial forum in
order to obtain employment with, or continue to work for, the
employer. The question of the enforceability of such agree-
ments ordinarily arises when, during the course of employ-
ment, an event then occurs that causes an employee to claim
that his rights have been violated, and the employer, relying
on the provisions of the waiver, seeks to compel the unwilling
employee to arbitrate the claim.2
In this case, Duffield argues that she may not be compelled
to arbitrate her statutory claims of sexual discrimination and
sexual harassment under the waiver mandated by Form U-4.3
We consider her argument in two steps. First, we describe the
historical and statutory evolution of the arbitrability of
employment discrimination claims. Second, in light of that
background, we evaluate Duffield's specific argument that the
Civil Rights Act of 1991, Pub. L. No. 102-166, 105 Stat.
1071, precludes compulsory arbitration of Title VII claims.
A
The Supreme Court has long recognized that in enacting
Title VII Congress envisioned that decisions and remedies
from the federal courts would play a unique and indispensable
role in advancing the social policy of deterring workplace dis-
crimination on the basis of race, sex, and national origin. See
McKennon v. Nashville Banner-Publishing Co., 115 S. Ct.
879, 884-85 (1995) ("[t]he private litigant who seeks redress
for his or her injuries vindicates both the deterrence and com-
pensation objectives of the [anti-discrimination statutes]");
Kremer v. Chemical Constr. Corp.,
456 U.S. 461, 468
(1982)
(stating that "the federal courts were entrusted with the ulti-
mate enforcement responsibility" under Title VII); Barrentine
v. Arkansas-Best Freight Sys.,
450 U.S. 728, 750
(1981) (Bur-
ger, C.J., dissenting) (stating that federal courts should not
defer to arbitration of Title VII claims "reached by the same
combination of forces that had long perpetuated invidious
discrimination"); Albermarle Paper Co. v. Moody, 422 U.S.
405, 417-18 (1975) (stating that federal court relief under
Title VII not only compensates victims but vindicates broader
public interest in deterring future discrimination); Alexander
v. Gardner-Denver Co.,
415 U.S. 36
, 44-45, 49-50 (1974)
(describing congressional intent to assign "federal courts [the]
plenary powers to secure compliance with Title VII"). Most
notably, in 1974, the Court unanimously held in Alexander v.
Gardner-Denver that an arbitration clause contained in a col-
lective bargaining agreement could not bar a plaintiff from
seeking Title VII remedies in federal court. "The purpose and
procedures of Title VII," the Court explained,"indicate that
Congress intended federal courts to exercise final responsibil-
ity for enforcement of Title VII; deferral [under any standard
of review] to arbitral decisions would be inconsistent with
that goal." Id. at 56. The Court unanimously reaffirmed this
reasoning two years later in Chandler v. Roudebush, 425 U.S.
840 (1976), extending Gardner-Denver to cover federal
employees, and again in 1984 in McDonald v. City of West
Branch,
466 U.S. 284, 290
(1984), stating without qualifica-
tion that Gardner-Denver established that arbitration "cannot
provide an adequate substitute for a judicial proceeding in
protecting the federal statutory" rights embodied in Title VII.
Prior to 1991, therefore, "[Gardner-Denver ] was widely
interpreted as prohibiting any form of compulsory arbitration
of Title VII claims." Prudential Ins. Co. v. Lai, 42 F.3d 1299,
1303 (9th Cir. 1994) (collecting cases). Even as arbitration
became increasingly popular in the 1980's, every circuit court
to address the issue held firm in refusing to enforce any agree-
ment -- in the collective bargaining context or otherwise --
that required employees to resolve discrimination claims
through binding arbitration. See, e.g., Alford v. Dean Witter
Reynolds, Inc., 905 F.2d 104, 105-08 (5th Cir. 1990); Utley v.
Goldman Sachs & Co., 883 F.2d 184, 185-87 (1st Cir. 1989);
Swenson v. Management Recruiters Int'l, Inc., 858 F.2d 1304,
1305-07 (8th Cir. 1988); Rosenfeld v. Department of Army,
769 F.2d 237, 239 (4th Cir. 1985); EEOC v. Children's Hosp.
Medical Ctr., 719 F.2d 1426, 1431 (9th Cir. 1983) (en banc)
(Fletcher, J., concurring). The circuit courts read Gardner-
Denver as sending a simple message: Title VII is different.
Thus, while the Supreme Court espoused in other contexts a
"liberal federal policy favoring arbitration, " Moses H. Cone
Mem'l Hosp. v. Mercury Constr. Corp.,
460 U.S. 1
, 24
(1983), the Eighth Circuit held, in an opinion typical of those
issued by the federal courts:
Although [Gardner-Denver] involves a collective
bargaining agreement, and not commercial arbitra-
tion under the FAA [Federal Arbitration Act, 9
U.S.C. SS 1-14], this fact should not change the
Court's analysis. The [Gardner-Denver ] Court was
well aware that federal policy favors arbitration.
That decision turned not on the fact that a collective
bargaining agreement was involved, but instead on
the unique nature of Title VII claims.
. . . .
We conclude that in the passage of Title VII it was
the congressional intent that arbitration is unable to
pay sufficient attention to the transcendent public
interest in the enforcement of Title VII.
Swenson, 858 F.2d at 1306-07; see also Utley, 883 F.2d at
187 (holding that in enacting Title VII Congress had "clearly"
intended to preclude binding arbitration); Rosenfeld, 769 F.2d
at 239 (stating that the "plain lesson" of Gardner-Denver is
that Congress entrusted the final resolution of Title VII claims
to the federal courts). As we succinctly put it a few years ago,
Gardner-Denver simply "precluded Title VII cases from
being subjected to compulsory arbitration." Nghiem v. NEC
Electronic, Inc., 25 F.3d 1437, 1441 (9th Cir. 1994).
In 1991, however, the Supreme Court held in Gilmer v.
Interstate/Johnson Lane Corp.,
500 U.S. 20
(1991), that
employees could be required under Form U-4 and NYSE Rule
347 to arbitrate age discrimination claims brought under the
Age Discrimination in Employment Act of 1967 (ADEA), 29
U.S.C. S 621 et seq. Without discussing the similarities or dif-
ferences between the ADEA and Title VII, the Court distin-
guished Gardner-Denver on the ground that it involved a
collective bargaining agreement rather than an individual
agreement to arbitrate. See
500 U.S. at 34
-35. The Court rea-
soned that "[a]lthough all statutory claims may not be appro-
priate for arbitration," individual agreements to arbitrate such
claims should be placed on the same footing as other individ-
ual arbitration agreements "unless Congress itself has evinced
an intention [discoverable in a statute's text, legislative his-
tory, or through an inherent conflict between arbitration and
the purpose of the statute] to preclude a waiver of judicial
remedies for the statutory rights at issue." Id. at 24-26. Find-
ing no such congressional intention evidenced by any inherent
conflict between the ADEA's underlying purposes and arbi-
tration, the Court upheld the enforceability of Form U-4 in
that circumstance.4
The Court's decision in Gilmer made it plain that its previ-
ous decisions finding arbitration generally inconsistent with
the purposes of Title VII are now insufficient to "show[ ] that
Congress in enacting Title VII intended to preclude arbitration
of claims under the Act." Mago v. Shearson Lehman Hutton
Inc., 956 F.2d 932, 934 (9th Cir. 1992). In the post-Gilmer
era, if courts are to hold that an act precludes arbitration of
claims to which it gives rise, a more concrete showing is
required, including a scrupulous examination of Congress'
actions and intent. Further, in examining congressional legis-
lation, it is now incumbent upon courts to consider whether
Congress intended to preclude every form of arbitration of
claims arising under a particular statute, or whether it
intended to preclude only certain forms of arbitration agree-
ments.
[1] Almost simultaneously with the Court's issuance of
Gilmer, Congress enacted the Civil Rights Act of 1991, and,
fortuitously, for the first time spoke directly to the arbitration
of Title VII claims. While the Act was primarily designed to
"overrule" hostile Supreme Court decisions in order to make
discrimination claims easier both to bring and to prove in fed-
eral courts, and while it increased substantially the procedural
rights and remedies available to Title VII plaintiffs in federal
courts, it also stated that the parties could, " [w]here appropri-
ate and to the extent authorized by law," opt to pursue alterna-
tive dispute resolution, including arbitration, to resolve their
Title VII disputes. Pub. L. 102-166, S 118, reprinted in notes
to 42 U.S.C. S 1981 (emphasis added).
In the wake of the 1991 Act, we have ruled that claimants
who do not "knowingly" agree to arbitrate Title VII claims
cannot be required to submit to arbitration. See Prudential
Ins. Co. v. Lai, 42 F.3d 1299 (9th Cir. 1994), cert. denied, 116
S. Ct. 61 (1995). On the other hand, we also held in Nghiem
that plaintiffs who "voluntarily initiate[ ] binding arbitration"
of their Title VII claims are "bound by the arbitrator's
decision." 25 F.3d at 1439-40. "Once a claimant submits to
the authority of the arbitrator and pursues arbitration," we
explained, "he cannot suddenly change his mind and assert
lack of authority." Id. at 1440. We therefore rejected the argu-
ment that simply because the 1991 Act's amendments to Title
VII provide for the right to jury trial, that right evinces a con-
gressional intent to allow claimants to escape the binding
effect of arbitrations that they initiated. See 25 F.3d at 1441.
However, neither in Nghiem nor in any other prior case have
we ever been required to consider the effect of the 1991 Act
on the much more difficult question before us today: the
enforceability of compulsory arbitration provisions that, as a
condition of employment, compel persons to forego their stat-
utory right to judicial relief with respect to future claims of
Title VII discrimination, and to submit all such future claims
to binding arbitration.
B
Duffield argues that Congress' intent to preclude the com-
pulsory arbitration of Title VII claims is conclusively demon-
strated in the text and/or legislative history of the Civil Rights
Act of 1991, as well as by an examination of its purposes.
That express congressional intent, Duffield contends, clearly
serves to distinguish post-1991 Title VII claims from the pre-
1990 ADEA claim that the Supreme Court found arbitrable in
Gilmer.5 The EEOC, in a Notice dated July 10, 1997 and in
an amicus brief filed in this case, has adopted this same position.6
We agree with Duffield and the EEOC and hold that under the
Civil Rights Act of 1991 employees may not be required, as
a condition of employment, to waive their right to bring future
Title VII claims in court.7
As Gilmer pointed out, the standard governing the enforce-
ability of arbitration agreements under the FAA is well estab-
lished. "Having made the bargain to arbitrate, the party should
be held to it unless Congress itself has evinced an intention
to preclude a waiver of judicial remedies for the statutory
rights at issue." Mitsubishi Motors Corp. v. Soler Chrysler-
Plymouth, Inc.,
473 U.S. 614, 628
(1985). The burden, there-
fore, is on Duffield to demonstrate that "Congress intended to
preclude a waiver of a judicial forum for [Title VII] claims"
in the manner mandated by Form U-4. Gilmer,
500 U.S. at 26
.
"If such an intention exists, it will be discoverable in the text
of [the act at issue], its legislative history, or an `inherent con-
flict' between arbitration and the [act's] underlying purposes."
Id. at 26 (emphasis added); accord Mitsubishi, 473 U.S. at
628; see also Block v. Community Nutrition Inst., 467 U.S.
340, 344 (1984) ("[A]ll presumptions used in interpreting
statutes[ ] may be overcome by specific language or specific
legislative history that is a reliable indicator of legislative
intent.").
Congress declared as the 1990's dawned that "[n]ow --
when more women and minorities are needed in the labor
market to maintain the health and vitality of our economy --
is the time to restore the strength of federal equal employment
protection." H.R. Rep. No. 40(I), 102d Cong., 1st Sess. 15-16
(1991), reprinted in 1991 U.S.C.C.A.N. 549, 553-54. It there-
fore drafted the legislation that became the Civil Rights Act
of 1991. The Act had two primary goals: (1) to "restore . . .
civil rights laws" by "overruling" a series of 1989 Supreme
Court decisions that Congress thought represented an unduly
narrow and restrictive reading of Title VII, see id. at 30;
Landgraf v. USI Film Prods.,
511 U.S. 244, 250
-51 (1994)
(listing those decisions), and (2) to "strengthen " Title VII by
making it easier to bring and to prove lawsuits, and by
increasing the available judicial remedies so that plaintiffs
could be fully compensated for injuries resulting from dis-
crimination. Among other things, the 1991 Act provided for
the first time a right to damages and to trial by jury and
expanded Title VII's fee-shifting provisions. See H.R. Rep.
No. 40(I) at 30; H.R. Rep. No. 40(II) at 1-4, 102d Cong., 1st
Sess. 78 (1991), reprinted in 1991 U.S.C.C.A.N. 694, 694-96.
In the context of the Act's significant enlargement of the
substantive and procedural rights of victims of employment
discrimination, Congress also included what Chief Judge Pos-
ner has termed "a polite bow to the popularity of`alternate
dispute resolution.' " Pryner v. Tractor Supply Co., 109 F.3d
354, 363 (7th Cir. 1997), cert. denied, 118 S. Ct. 294 (1998).
Section 118 of the 1991 Act provides that: "Where appropri-
ate and to the extent authorized by law, the use of alternative
means of dispute resolutions including, . . . arbitration is
encouraged to resolve disputes arising under the Acts or pro-
visions of Federal law amended by this Title." Pub. L. 102-
166, S 118, reprinted in notes to 42 U.S.C. S 1981 (emphasis
added). Notwithstanding the inclusion of this innocuous-
appearing section in a statute providing for a vast strengthen-
ing of employees' rights, Robertson Stephens argues that the
plain language of the section evinces a congressional intent to
allow -- indeed, to "encourage" -- the use of a process
whereby employers condition employment on their prospec-
tive employees' agreeing to waive their rights to bring Title
VII claims in federal (and state) court. By the time Congress
passed the 1991 Act (but after it was drafted and reported out
by the House Education and Labor Committee8), the argument
goes, compulsory arbitration of all employment discrimina-
tion claims, including Title VII claims, was "authorized by
law" -- that is, by Gilmer -- because the ADEA is similar to
Title VII. Therefore, Robertson Stephens contends, compul-
sory arbitration must be included among the procedures that
Congress intended to "encourage" in the 1991 Act.
We are the first circuit court to consider the "plain text"
argument that Robertson Stephens makes in the context of an
individual agreement that requires as a condition of employ-
ment the arbitration of Title VII claims.9 District courts have
split on the question. Compare Rosenberg v. Merrill Lynch,
Pierce, Fenner & Smith, Inc., _______ F. Supp. _______, No. Civ.A.
96-12267-NG, 1998 WL 81907 (D. Mass. Jan. 26, 1998)
(holding that 1991 Act precludes compulsory arbitration of
Title VII claims under Form U-4) with Johnson v. Hubbard
Broad., Inc., 940 F. Supp. 1447, 1457-58 (D. Minn. 1996)
(reaching opposite conclusion despite noting indications to
the contrary in the Act's legislative history) and EEOC v.
Frank's Nursery & Crafts, Inc., 966 F. Supp. 500, 504 (E.D.
Mich. 1997) (holding that compulsory arbitration of Title VII
claims, "notwithstanding the legislative history of [the 1991
Act], do[es] not violate federal law or policy"). Two circuits
have accepted a version of Robertson Stephens' argument in
cases involving significantly different circumstances. Both
cases arose under the Americans with Disabilities Act (ADA),
which has an arbitration section similar to the 1991 Act's.10
The first case did not involve either an employment agree-
ment or a compulsory waiver, see Bercovitch v. Baldwin
School, Inc., 133 F.3d 141, 148-50 (1st Cir. 1998) (conclud-
ing that plain language of the ADA allows enforcement of
voluntary, prospective agreement to arbitrate ADA claim
against school), and the second, while it involved an employ-
ment contract, appears to have involved a voluntary agree-
ment, see Miller v. Public Storage Mgmt., Inc., 121 F.3d 215
(5th Cir. 1997) (enforcing arbitration clause to which the
employee agreed at a performance review, while holding that
the plain text of the ADA refutes the contention that
"Congress did not intend for arbitration clauses to prevent
individuals from bringing suit for ADA violations"). Those
cases are readily distinguishable on their facts. There is a third
and more troubling case, however -- a case that involves a
collective bargaining agreement and that conflicts directly
with Gardner-Denver. See Austin v. Owens-Brockway Glass
Container, Inc., 78 F.3d 875, 880-82 (4th Cir.) (holding that
employees can be compelled to submit ADA and Title VII
claims to binding arbitration pursuant to collective bargaining
agreement), cert. denied, 117 S. Ct. 432 (1996). In that case,
a divided panel of the Fourth Circuit in fact flatly rejected
Gardner-Denver, which in our view circuit courts are not free
to do. See Agostini v. Felton, 117 S. Ct. 1997, 2017 (1997)
(reaffirming that circuit courts must always follow directly
binding Supreme Court decisions). The Fourth Circuit also
ignored the reasoning of eight Justices on the subject of statu-
tory analysis, relied on a separate opinion by Justice Scalia,
and partially on the basis of that reasoning decided to disre-
gard the legislative history of the 1991 Civil Rights Act. See
id. at 882 (quoting Thompson v. Thompson,
484 U.S. 174
, 188
(1988) (Scalia, J., concurring)).11 We respectfully conclude
that the Fourth Circuit simply misconstrued the controlling
law.12
[2] At the outset, we note that Robertson Stephens' con-
struction of S 118 is at odds with Congress' directive to read
Title VII broadly so as to best effectuate its remedial pur-
poses. In passing the 1991 Act, Congress explicitly directed
courts "that when the statutory terms in [Title VII] are suscep-
tible to alternative interpretations, the courts are to select the
construction which most effectively advances the underlying
congressional purpose" of the Act. H.R. Rep. No. 40(I) at 88;
accord Dennis v. Higgins,
498 U.S. 439, 443
(1991) (civil
rights statutes should be construed broadly). The purpose of
the Act was uniformly to expand employees' rights and "to
increase the possible remedies available to civil rights
plaintiffs." Lai, 42 F.3d at 1304 (emphasis added). It thus
would be "at least a mild paradox," Pryner, 109 F.3d at 363,
to conclude that in the very Act of which the "primary
purpose" was "to strengthen existing protections and remedies
available [to employees under Title VII]," H.R. Rep. No.
40(II) at 1, Congress "encouraged" the use of a process
whereby employers condition employment on their prospec-
tive employees' surrendering their rights to a judicial forum
for the resolution of all future claims of race or sex discrimi-
nation and force those employees to submit all such claims to
compulsory arbitration.13 It seems far more plausible that
Congress meant to encourage voluntary agreements to arbi-
trate -- agreements such as those that employers and employ-
ees enter into after a dispute has arisen because both parties
consider arbitration to be a more satisfactory or expeditious
method of resolving the disagreement.
Upon a careful reading of S 118 in context, moreover, it is
difficult to escape the conclusion that the text of the section
is, at a minimum, ambiguous -- and that, at a maximum, it
stands for a proposition that differs significantly from the one
advanced by Robertson Stephens. When "examin[ing] the lan-
guage of the governing statute," we must not be guided by "a
single sentence or member of a sentence, but look[ ] to the
provisions of the whole law, and to its object and policy."
John Hancock Mut. Life Ins. Co. v. Harris Trust & Savings
Bank,
510 U.S. 86, 94
-95 (1993) (quoting Kelly v. Robinson,
479 U.S. 36, 43
(1986) (in turn quoting Offshore Logistics,
Inc. v. Tallentire,
477 U.S. 207, 222
(1986) (other quotation
marks and citations omitted))); see also Bailey v. United
States, 116 S. Ct. 501, 506 (1995) ("We consider not only the
bare meaning of the word but also its placement and purpose
in the statutory scheme."). That arbitration is "encouraged"
obviously means only that parties are encouraged to arbitrate
within the statutory boundaries Congress contemplated.
Indeed, it would seem entirely disingenuous to fasten onto
that one word and conclude that Congress was boundlessly in
favor of all forms of arbitration, regardless of the desires or
interests of the persons whose rights the Civil Rights Act of
1991 was designed to protect.
[3] The phrase "[w]here appropriate and to the extent
authorized by law" is the critical statutory language; it pro-
vides the section's substantive limitations. While the phrase,
if read out of context, is opaque, in the context of the statute
and its "object and policy," John Hancock,
510 U.S. at 94
-95,
it tells us much about what Congress actually intended. For
starters, following the Supreme Court, we are "reluctan[t] to
treat statutory terms as surplusage." Babbitt v. Sweet Home
Chapter,
515 U.S. 687, 698
(1995); see also Mackey v. Lanier
Collection Agency & Serv.,
486 U.S. 825
, 837 & n.11 (1988)
(citing cases holding same). We therefore presume that Con-
gress' qualifiers of "where appropriate" and "to the extent
authorized by law," S 118, set forth separate and distinct limi-
tations on the conditions and circumstances under which the
arbitration process may be invoked to resolve Title VII
claims. See Bailey, 116 S. Ct. at 507 ("assum[ing] that Con-
gress used two terms because it intended each term to have a
particular, nonsuperfluous meaning"). The presence of the
limiting phrase "where appropriate" at the very least refutes
the argument that "to the extent authorized by law" means
that Congress intended either to encourage all forms of arbi-
tration or to encourage the use of arbitration under all condi-
tions and circumstances that might otherwise be lawful.
Rather, it seems clear that Congress intended to encourage
arbitration only under circumstances or conditions it deemed
to be both legally permissible and appropriate.
[4] While the words "where appropriate," standing by
themselves, give us little clue as to the circumstances under
which Congress deemed arbitration to be "appropriate," or, as
the dictionary defines the term, "proper, fitting " or "specially
suitable," 1 The New Shorter Oxford English Dictionary 103,
def'n 1 (4th ed. 1993), we can glean at least a reasonable
understanding of Congress' intent from examining the pur-
pose and objective of the 1991 Act, that purpose and objective
being to expand employees' rights and remedies under Title
VII. "Where appropriate," as used in the Act, would appear
to mean where arbitration furthers the purpose and objective
of the Act -- by affording victims of discrimination an
opportunity to present their claims in an alternative forum, a
forum that they find desirable -- not by forcing an unwanted
forum upon them. See, e.g., John Hancock,
510 U.S. 86
, 94-
95 (1993) (courts should construe statutes guided by the
"object and policy" of the whole law); United States v.
Qualls, _______ F.3d _______, No. 95-50378, 1998 WL 149393, at *2
(9th Cir. Apr. 2, 1998) (en banc) (same).
[5] Likewise, S 118's other qualifier, the phrase "to the
extent authorized by law," does not automatically lend itself
to a fixed definition. It most likely codifies the "law" as Con-
gress understood it at the time it either drafted or passed the
provision. As the Supreme Court has stated, we should
"examine initially" the statute "with an eye toward determin-
ing Congress' perception of the law that it was shaping or
reshaping." Thompson v. Thompson,
484 U.S. 174
, 180
(1988) (emphasis added); see also Brown v. GSA, 425 U.S.
820, 828 (1976) (applying this principle to congressional
amendments to Title VII). The overwhelming weight of the
law at the time Congress drafted S 118, and it was reported
out of the House Education and Labor Committee, was to the
effect that compulsory agreements to arbitrate Title VII
claims were unenforceable. In other words, such agreements
were not "authorized by law." To the contrary, the law at that
time prohibited employers from compelling employees to
arbitrate Title VII claims pursuant to collective bargaining
agreements, "in large part" because of the Court's recognition
of the critical role that Congress envisioned for the indepen-
dent federal judiciary in advancing Title VII's societal goal.
See McDonald,
466 U.S. at 289
; Gardner-Denver, 415 U.S.
at 56. Although the Supreme Court had adopted in contexts
outside of employment discrimination a "liberal federal policy
favoring arbitration agreements," Moses H. Cone, 460 U.S. at
24, it had done even that only under the explicit assumption
that these agreements constituted "freely negotiated choice-
of-forum clauses." Mitsubishi,
473 U.S. at 628
, 631; see also,
e.g., id. (stating that "nothing . . . prevents a party from
excluding statutory claims from the scope of an agreement to
arbitrate"); Rodriguez de Quijas v. Shearson/American
Express, Inc.,
490 U.S. 477, 483
-84 (1989) (upholding agree-
ment to arbitrate because it "broadened" plaintiff's right to
select a forum for resolving disputes); Volt Info. Sciences, Inc.
v. Board of Trustees,
489 U.S. 468, 479
(1989) ("Arbitration
under the [FAA] is a matter of consent, not coercion."). Per-
haps most important, as of the time S 118 was drafted and
reported out of the House Education and Labor Committee,
the circuit courts, without exception, had "widely interpreted"
Title VII as prohibiting "any form of compulsory arbitration,"
including in individual employment cases. Lai, 42 F.3d at
1303 (emphasis added); see also supra at 8-10 (gathering
cases). Certainly when Congress wrote the 1991 Act, it could
not have been expected to be better able than the circuit courts
to predict the Supreme Court's narrowing of Gardner-Denver.
Cf. Thompson,
484 U.S. at 180
(assuming Congress' view of
the law to be the lower courts' consensus where the Supreme
Court had not spoken to the contrary).
By the time the 1991 Act was actually passed, the law had
become less clear. The Court's decision in Gilmer was issued
just before the 1991 Act was officially enacted, leaving room
for the possible inference that S 118 intended to codify that
decision also. Yet even if such an inference might have been
permissible under other circumstances, at the time the 1991
Act was enacted it was still at least an open question whether
Gilmer applied to Title VII claims. The Gilmer opinion itself
is silent regarding any comparison between Title VII and the
ADEA. The ADEA shares many of the substantive provisions
of Title VII, but its remedial and procedural provisions were
originally modeled after the Fair Labor Standards Act
(FLSA), 29 U.S.C. S 201 et seq., not Title VII. Lorillard v.
Pons,
434 U.S. 575, 578
-84 (1978); see also McKennon, 513
U.S. 352, 357 (1995) (noting that even after the ADEA's
enforcement was transferred to the EEOC its procedural pro-
visions follow the FLSA and are distinct from those of Title
VII). In fact, the Court had held that because of the "crucial"
differences between the procedural provisions in the ADEA
and Title VII, any attempt to divine congressional intent in
this area by comparing the two statutes "is misplaced."
Lorillard,
434 U.S. at 584
-85. While, in the absence of further
guidance from Congress itself, there could be room for doubt
over its intent with respect to the effect of the phrase "to the
extent authorized by law" on Title VII's procedural rules,
when the phrase is read in light of the other qualifying phrase
and in light of the objectives and purposes of the 1991 Act it
seems far more likely that Congress was referring to the
Gardner-Denver line of cases than to Gilmer .
[6] Any doubt on this point, however, is resolved by even
a cursory glance at S 118's legislative history. That history
makes it clear that there is no need to hypothesize over
whether Congress intended to include Gilmer within its defi-
nition of what was "authorized by law." It is evident from the
legislative history that the answer to that inquiry is a resound-
ing "no." Congress in no way intended to incorporate
Gilmer's holding into Title VII, or to authorize compulsory
arbitration of Title VII claims. In fact, its clearly expressed
intent was precisely the opposite.
The legislative history of S 118 unambiguously confirms
that Congress sought to codify the law as it stood at the time
the section was drafted, and eliminates any possibility that
Congress intended to write Gilmer into Title VII law or to
leave the question of which forms of arbitration were permis-
sible to the whims and presumptions of future court decisions.
Specifically, the committee reports and the floor statements
describing S 118 -- which we have already held in Lai
demonstrate Congress' intent in passing the 1991 Act, see 42
F.3d at 1304-05 -- plainly demonstrate that in allowing arbi-
tration only "[w]here appropriate and to the extent authorized
by law" Congress intended to adopt Gardner-Denver's firm
rule precluding enforcement of compulsory agreements to
arbitrate future Title VII claims, not Gilmer 's possible valida-
tion of such agreements. In fact, given the possible ambiguity
in the literal language of the statutory phrases that relate spe-
cifically to arbitration, it is the unusual force and clarity of the
statute's legislative history that is ultimately dispositive in
this case.
[7] "In surveying legislative history, [the Supreme Court
has] repeatedly stated that the authoritative source for finding
the Legislature's intent lies in the Committee Reports on the
bill, which `represen[t] the considered and collective under-
standing of those Congressmen involved in drafting and
studying the proposed legislation.' " Garcia v. United States,
469 U.S. 70, 76
(1984) (quoting Zuber v. Allen,
396 U.S. 168
,
186 (1969)). This is especially true when, as in this case, the
Committee reports were published before Congress' votes on
the bill. The House Committee on Education and Labor, in its
report on H.R. 1, the bill that became the Civil Rights Act of
1991, "explained that the purpose of [S 118] was to increase
the possible remedies available to civil rights plaintiffs." Lai,
42 F.3d at 1304. The Committee report states:
The Committee emphasizes . . . that the use of alter-
native dispute mechanisms is . . . intended to supple-
ment, not supplant, the remedies provided by Title
VII. Thus, for example, the committee believes that
any agreement to submit disputed issues to arbitra-
tion, whether in the context of collective bargaining
or in an employment contract, does not preclude the
affected person from seeking relief under the
enforcement provisions of Title VII. This view is
consistent with the Supreme Court's interpretation of
Title VII in Alexander v. Gardner-Denver Co., 415
U.S. 36 (1974). The Committee does not intend this
section to be used to preclude rights and remedies
that would otherwise be available.
H.R. Rep. No. 40(I) at 97 (emphasis added), quoted in Lai, 42
F.3d at 1304. The Committee's explanation of S 118 echoed
exactly the Conference Report's description of the same (ver-
batim) section in the Civil Rights Act of 1990, which Presi-
dent Bush vetoed for other reasons. In that report, the
Conference Committee explained that "any agreement to sub-
mit disputed issues to arbitration . . ., in an employment con-
tract, does not preclude the affected person from seeking
relief under the enforcement provisions of Title VII." H.R.
Conf. Rep. No. 755, 101st Cong., 2d Sess. 26 (1990). These
statements make it clear that even though Gardner-Denver's
literal holding applied only to collective bargaining agree-
ments, Congress intended that the decision's rule against
compulsory arbitration of Title VII claims be applicable to all
"employment contract[s]." In other words, Congress con-
cluded that all such mandatory agreements as conditions of
employment were, at the very least, "inappropriate," and thus
unenforceable.
[8] Lest there be any doubt as to the intended meaning of
the Act's arbitration provision, Congress in fact specifically
rejected a proposal that would have allowed employers to
enforce "compulsory arbitration" agreements. It did so in the
most emphatic terms, explaining that:
H.R. 1 includes a provision encouraging the use of
alternative means of dispute resolution to supple-
ment, rather than supplant, the rights and remedies
provided by Title VII. The Republican substitute,
however, encourages the use of such mechanisms "in
place of judicial resolution." Thus, under the latter
proposal employers could refuse to hire workers
unless they signed a binding statement waiving all
rights to file Title VII complaints. Such a rule would
fly in the face of Supreme Court decisions holding
that workers have the right to go to court, rather
than being forced into compulsory arbitration, to
resolve important statutory and constitutional rights,
including equal opportunity rights. See, e.g., Alexan-
der v. Gardner-Denver Co.,
415 U.S. 36
(1974);
McDonald v. City of West Branch,
466 U.S. 284
(1984). American workers should not be forced to
choose between their jobs and their civil rights.
H.R. Rep. No. 40(I) at 104 (emphasis added). This rejection
of the "Republican" proposal provides still further "strong
evidence" of Congress' intent, Thompson,
484 U.S. at 185
, to
preclude compulsory arbitration of civil rights claims and to
"encourage" only voluntary agreements -- agreements that do
not require potential employees to waive their right to litigate
in a judicial forum as a mandatory condition of employment.
This part of the Committee report also eliminates any possi-
bility that S 118 was in any way a product of legislative com-
promise that was not meant to advance the overall purposes
of the Act.
That Gilmer turned out to undermine some of Congress'
preferred Supreme Court decisions, of course, in no way
alters Congress' expressed intent, in drafting S 118, to codify
its position that "compulsory arbitration" of Title VII claims
was not "authorized by law," and that compelling employees
to forego their rights to litigate future Title VII claims as a
condition of employment was not "appropriate. " Indeed, Con-
gress' reading of Gardner-Denver and McDonald was -- as
the Court remarked regarding Congress' understanding of a
different facet of Title VII law that it amended--
entirely reasonable. Whether [Congress'] under-
standing [of the law] was in some ultimate sense
incorrect is not what is important in determining the
legislative intent in amending the 1964 Civil Rights
Act . . . . For the relevant inquiry is not whether Con-
gress correctly perceived the state of the law, but
rather what its perception of the law was.
Brown,
425 U.S. at 828
(footnote omitted); see also Blan-
chard v. Bergeron,
489 U.S. 87, 91
-93 (1989) (holding that
Congress codified the holdings of three cases when a Com-
mittee report cited those cases and said that they "correctly
applied" its view of the law). And, as we have said many
times before, so long as there is no constitutional infirmity,
Congress' intended meaning of terms reigns supreme in the
statutory arena. See, e.g., Arriaga-Barrientos v. INS, 937 F.2d
411, 414-15 (9th Cir. 1991) (holding that even if courts are
"sympathetic" to a policy argument contrary to a statute's
requirements, "we lack the legitimate authority to undermine
legitimate congressional will"). When Congress codifies the
policy of certain of the courts' holdings, we are bound to fol-
low the dictates of those cases regardless of whether we think
they were correctly decided, and regardless of whether they
are subsequently limited or overruled.
The Committee's view of S 118 was reiterated by key con-
gressmen in the floor debates, who repeatedly stated that
S 118 encouraged arbitration only "where parties knowingly
and voluntarily elect to use those methods." 137 Cong. Rec.
S15478 (daily ed. Oct. 30, 1991) (statement of Sen. Dole); see
also 137 Cong. Rec. H9548 (daily ed. Nov. 7, 1991) (state-
ment of Rep. Hyde) (explaining that S 118 encourages arbitra-
tion where "the parties knowingly and voluntarily elect" to
submit to such procedures). The most informed and important
statements were made by Representative Edwards, the Chair-
man of the House Committee on Education and Labor. Repre-
sentative Edwards unequivocally explained during the debate
immediately prior to the Act's passage that the provision was
"intended to be consistent with . . . Gardner-Denver." 137
Cong. Rec. H9530 (daily ed. Nov. 7, 1991) (statement of Rep.
Edwards). The Chairman added, so as to make the point per-
fectly clear:
This section contemplates the use of voluntary arbi-
tration to resolve specific disputes after they have
arisen, not coercive attempts to force employees in
advance to forego statutory rights. No approval
whatsoever is intended of the Supreme Court's
recent decision in Gilmer . . . , or any application or
extension of it to Title VII.
Id. (emphasis added).14 Finally, President Bush echoed Con-
gress' understanding of the arbitration section in signing the
Act, stating that "section 118 encourages voluntary
agreements between employers and employees to rely on
alternative mechanisms such as mediation and arbitration."
Statement of the President of the United States, Signing Cere-
mony, Pub. L. No. 102-166 (Nov. 21, 1991), reprinted in
1991 U.S.C.C.A.N. 768, 769 (emphasis added). No state-
ments were made in reports, on the floor, or by the President
that contradicted this basic understanding.15
Robertson Stephens' principal response to the force of the
Act's legislative history is that we should disregard entirely
the evidence of Congress' intent and hold instead that, even
though Congress did not intend to adopt Gilmer, the language
of S 118 must be read as doing so.16 Under Robertson Ste-
phens' reading of S 118, the phrase "to the extent authorized
by law" would be simply an elastic phrase, not expressly
adopting or rejecting any Supreme Court case, but expanding
and contracting with the ebb and flow of court decisions.
Thus, Robertson Stephens would have us conclude that
although S 118 was intended by its drafters, and understood
by both the Democratic and Republican members of both
Committees that considered the bill, to preclude compulsory
arbitration of Title VII claims -- an intention unequivocally
reiterated throughout the floor debates -- the section, without
a single word being changed, nevertheless was instanta-
neously transmogrified, and took on exactly the opposite
meaning, on the day the Court's decision in Gilmer was
announced. Any such "through the looking glass " construc-
tion would entail a gross perversion of the legislative process.
In essence, confronted with the legislative history, Robert-
son Stephens retreats to its "plain meaning" theory, urging us
to construe the words "to the extent authorized by law" as
encouraging the use of all lawful forms of arbitration at all
times and under all circumstances. But "the meaning of statu-
tory language, plain or not, depends on context. " Brown v.
Gardner,
513 U.S. 115, 118
(1994) (quoting King v. St. Vin-
cent's Hosp.,
502 U.S. 215, 221
(1991)). And, as we
explained previously, the phrase's actual meaning, when
viewed in the context of the remainder of the Act, is at the
least ambiguous, and at the most quite different from that
which Robertson Stephens urges. Robertson Stephens' argu-
ment ignores not only the purposes and objectives of the 1991
Act, but also the fact that the statute contains an express limi-
tation in addition to the phrase "to the extent authorized by
law" -- the limitation "where appropriate " -- which must be
read along with it. Thus, even if an elastic interpretation of "to
the extent authorized by law" would otherwise be reasonable,
Robertson Stephens' construction would deprive the phrase
"where appropriate" of any content whatsoever. If we are to
give those additional words of limitation meaning, as the
Supreme Court tells us we must, see, e.g., Bailey, 116 S. Ct.
at 507; Babbitt,
515 U.S. at 698
, they must be construed as
incorporating Congress' purposes and objectives as expressed
in the 1991 Act, see, e.g., John Hancock,
510 U.S. at 94
-95
(collecting cases holding that courts must interpret terms of
statute consistent with the act's "object and policy") --
namely, as increasing the rights and remedies afforded to vic-
tims of discrimination.
In the end, what is perhaps the most compelling reason for
rejecting Robertson Stephens' argument is the specific
instruction in Gilmer and several preceding arbitration cases
to look to the statute's terms and to "its legislative history,"
as well as its underlying purpose, in determining whether
Congress "evinced an intention to preclude a waiver of judi-
cial remedies" in the particular circumstances. Gilmer, 500
U.S. at 26 (quoting Mitsubishi,
473 U.S. at 628
) (emphasis
added); accord Shearson/American Express, Inc. v.
McMahon,
482 U.S. 220, 226
-27 (1987). Whatever role we
should generally assign to legislative history, our duty when
we try to discern whether Congress intended to preclude a
waiver of a judicial forum with respect to claims arising under
a particular statute is clear. Such an intent, the Court has
expressly and repeatedly held, may be discerned in the text of
the relevant act or in its legislative history, as well as in any
inherent conflict between the statutory purposes and arbitra-
tion. Id. Not a single word in the 1991 Act's legislative his-
tory suggests that Congress intended to make the validity of
requiring the arbitration of Title VII claims dependent on
future court decisions. To the contrary, the legislative history
of the Act makes it absolutely clear that Congress intended
S 118 to codify the Gardner-Denver approach to compulsory
arbitration agreements and to preclude the enforceability of
such agreements with respect to Title VII claims. Congress
"perce[ived] the state of the law," Brown,
425 U.S. at 828
, as
forbidding such agreements and, at the very least, viewed
them as wholly "[in]appropriate." It specifically rejected a
proposal that would have allowed them to be enforced. It
thought, mistakenly or not, that the use of compulsory arbitra-
tion provisions would, in the House Committee's resounding
and unequivocal words, "force[ ] American workers to choose
between their jobs and their civil rights." H.R. Rep. No. 40(I)
at 104. To force such a choice was certainly not the purpose
or intent of Congress in passing the Civil Rights Act of 1991.17
[9] In view of the fact that "the context, language, and [leg-
islative] history of" the 1991 Act "together make out a con-
clusive case," Thompson,
484 U.S. at 187
, that Congress
intended to preclude compulsory arbitration of Title VII
claims, we think it inescapable that Form U-4 is unenforce-
able as applied to such claims. Form U-4 compels precisely
what Congress intended to prohibit in the 1991 Act: manda-
tory requirements under which prospective employees agree
as a condition of employment to surrender their rights to liti-
gate future Title VII claims in a judicial forum and accept
arbitration instead. Because every employer in the securities
industry requires its employees to sign Form U-4, the form is
especially violative of Congress' limitations. Form U-4 is a
take-it-or-leave-it offer for anyone wishing to work anywhere
in the United States as a broker-dealer in that industry. It
forces individuals like Duffield to opt for one of two
"choices": sign Form U-4 or seek another profession. This
sort of dilemma is fundamentally at odds with a provision of
the Civil Rights Act of 1991, S 118, that was intended to help
deter employment discrimination by increasing claimants'
choice of fora. Cf. Bercovitch, 133 F.3d at 150 (enforcing
arbitration agreement between parents and school as applied
to ADA claim because it was purely "voluntary, " but suggest-
ing that "involuntary" agreements, or agreements that individ-
uals had no "influence over," would be unenforceable).
[10] In holding that Form U-4 is unenforceable as applied
to Title VII claims, we do not, of course, mean to suggest that
Congress sought in the 1991 Act to preclude employees from
agreeing after a claim has arisen to submit the dispute to
arbitration.18 Indeed, employees in many instances may
believe that arbitration is preferable to protracted and expen-
sive litigation and will willingly make that choice. Because of
the legal community's recently increased faith in arbitration,
those plaintiffs are now "encouraged" to resolve their employ-
ment disputes in that manner, and if they choose to do so, they
are bound by the arbitrator's decision. See Nghiem, 25 F.3d
at 1440. The contract before us, however, requires compul-
sory arbitration in every sense of the word, and it is contracts
of that nature we are compelled to hold unenforceable under
the Civil Rights Act of 1991.
We recognize that, as the Supreme Court has stated, agree-
ments to arbitrate must generally be treated not as
"forego[ing] the substantive rights afforded by [a] statute,"
but rather as merely changing the forum in which they are
protected. Gilmer,
500 U.S. at 26
(quoting Mitsubishi, 473
U.S. at 628). Yet even assuming that the general federal pol-
icy in favor of arbitration would ordinarily apply to the com-
pulsory arbitration of civil rights claims, we are not free to
apply that policy here. Where Congress has manifested its
intent, with regard to arbitration questions and otherwise, the
Supreme Court has made it abundantly clear that the judiciary
is not free to "legislate" its own contrary preferences. See,
e.g., Brogan v. United States, 118 S. Ct. 805, 811-12 (1998)
(stating that "[c]ourts may not create their own limitations on
legislation, no matter how alluring the policy arguments for
doing so"); Negonsott v. Samuels,
507 U.S. 99, 104
(1993)
("[A court's] task is to give effect to the will of Congress
[when] its will has been expressed in reasonably plain
terms."); Gilmer,
500 U.S. at 26
(directing courts to follow
congressional intent in arbitration context); Rodriguez de Qui-
jas,
490 U.S. at 483
-84 (same). Whether or not permitting
compulsory arbitration of Title VII claims is "more desirable
than" the ban that Congress has imposed on such practice,
"the proper venue for resolving that issue remains on the floor
of Congress." Lexecon, Inc. v. Milberg Weiss Bershad Hynes
& Lerach, 118 S. Ct. 956, 964 (1998). For now, at least, Con-
gress has resolved the question in favor of preserving the right
of victims of employment discrimination to seek their remedy
in the federal courts.
III
Duffield also argues that she cannot be required to arbitrate
her claims because the arbitration agreement imposes an
unconstitutional condition of employment. This argument,
unlike the one we have just considered, is applicable to her
state tort and contract claims as well as to her claims that her
civil rights have been violated. The argument is, in essence,
that Form U-4 requires Duffield to forfeit her Fifth Amend-
ment right to due process, her Seventh Amendment right to a
jury trial, and her right to an Article III judicial forum. While
this argument was not raised or addressed by the Court in
Gilmer, it would, if meritorious, render Form U-4 unenforce-
able as applied to all of Duffield's underlying claims for
relief. The district court found it unmeritorious, holding that
the essential prerequisite of state action was lacking. We
agree.
[11] A threshold requirement of any constitutional claim is
the presence of state action. This requirement, however, does
not restrict the application of the Constitution solely to gov-
ernmental entities. Private entities like the NYSE and the
NASD may be held to constitutional standards if their actions
are "fairly attributable" to the state. Lugar v. Edmonson Oil
Co.,
457 U.S. 922, 936
(1982). The Supreme Court has estab-
lished three criteria for satisfying this standard:
First, [t]he mere fact that a business is subject to
state regulation does not by itself convert its action
into that of the State . . . . The complaining party
must also show that there is a sufficiently close
nexus between the State and the challenged action of
the regulated entity so that the action may fairly be
treated as that of the State itself. The purpose of this
requirement is to assure that constitutional standards
are invoked only when it can be said that the State
is responsible for the specific conduct of which the
plaintiff complains. . . .
Second, . . . a State normally can be held responsi-
ble for a private decision only when it has exercised
coercive power or has provided such significant
encouragement, either overt or covert, that the
choice must in law be deemed that of the State. Mere
approval or acquiescence in the initiatives or a pri-
vate party is not sufficient to justify holding the State
responsible for those initiatives . . . .
Third, the required nexus may be present if the
private party has exercised powers that are tradition-
ally the exclusive prerogative of the State.
Blum v. Yaretsky,
457 U.S. 991, 1004
-05 (1982) (internal quo-
tations and citations omitted). Duffield asserts that state action
is independently present under each test. We do not agree.
A
Duffield's first argument is that state action is present
because "federal law requires all broker-dealers to register
with a national securities exchange (i.e., the NYSE or
NASD), and to abide by the rules of that exchange -- includ-
ing its mandatory arbitration rules -- as a condition of their
continued employment." Appellant's Brief at 43. Robertson
Stephens counters this argument by pointing out that federal
law did not require broker-dealers to register with a national
securities exchange until 1993, five years after Duffield
signed her Form U-4. Therefore, it asserts, no federal law
"required" Duffield to sign the form in 1988. Robertson Ste-
phens is correct.
[12] The rules of NASD and the NYSE are not fairly attrib-
utable to the government unless they carry the force of federal
law. And prior to 1993, no federal statute or regulation
required Duffield to register with the securities exchanges,
much less to sign Form U-4 or to arbitrate employment dis-
putes. See Association of Inv. Brokers v. SEC, 676 F.2d 857,
861-62 (D.C. Cir. 1982). Thus, when Duffield signed her
Form U-4 in 1988 and thereby waived her rights to litigate
employment-related disputes in a judicial forum, she did not
do so because of any state action.19
[13] In 1993, however, the Securities and Exchange Com-
mission (SEC) adopted a regulation that required all broker-
dealers to be registered with at least one of the securities orga-
nizations of which Duffield's firm was a member -- i.e., the
NASD and the NYSE -- before effecting any securities trans-
action. See 17 C.F.R. S 240.15b7-1 (adopted May 11, 1993).
That registration regulation, like the SEC's registration regu-
lation at issue in Blount v. SEC, 61 F.3d 938 (D.C. Cir. 1995),
cert. denied, 116 S. Ct. 1351 (1996), "operates not as a private
compact among brokers and dealers but as federal law." Id. at
941. Hence, to borrow Blount's reasoning, as a government-
mandated "condition to any participation in a . .. securities
career," the current requirement that new employees register
with a national securities exchange "constitutes government
action of the purest sort." Id.
[14] Duffield attempts to take advantage of this new regula-
tion by arguing that its registration requirement was a govern-
mentally imposed condition of her continuing employment
and that Robertson Stephens did not invoke the arbitration
clause until 1995 when it moved to compel arbitration. State
action can be present, however, only to the extent that there
is "a sufficiently close nexus between the State and the
challenged action," Jackson v. Edison Co.,
419 U.S. 345
, 351
(1974) (emphasis added); the action that Duffield challenges
in her constitutional claims is the requirement that she waive
her right to litigate employment-related disputes. Since agree-
ments to arbitrate are "valid, irrevocable, and enforceable," 9
U.S.C. S 2 (emphasis added), to the same extent as any other
contract, see Gilmer,
500 U.S. at 24
, it is immaterial that years
after Duffield signed her Form U-4 containing the arbitration
provision, federal law required other employees like her to
register with securities exchanges or even that it compelled
her to remain registered. No federal law required Duffield to
waive her right to litigate employment-related disputes by
signing the Form U-4 in 1988, and no state action is present
in simply enforcing that agreement. Insofar as Duffield argues
that the "challenged action" is the requirement that she actu-
ally arbitrate her lawsuit, that requirement is found in her pri-
vate contract, not in federal law.20
B
[15] Duffield next argues that because the NYSE and
NASD are required to obtain SEC approval before their rules
may go into effect, see 15 U.S.C. SS 78f(a), (b), 78o-3(a), (b),
and because the SEC has exercised influence over such rules,
the government may fairly be said to be encouraging the man-
datory arbitration requirement. We previously have recog-
nized that
the [SEC] has virtually plenary authority over the
arbitration procedures adopted by the national secur-
ities exchanges and securities associations. See
Shearson/American Express, Inc. v. McMahon, 107
S. Ct. 2332, 2341 (1987). This authority includes the
power to "abrogate, add to, and delete from" the
arbitration rules adopted by such bodies if necessary
or appropriate to protect rights created by the Securi-
ties Acts. Id.; 15 U.S.C. S 78s(c) (1982).
Cohen v. Wedbush, Noble, Cooke, Inc., 841 F.2d 282, 286
(9th Cir. 1988). We conclude here, however, that the SEC has
not exercised sufficient influence over the compulsory arbitra-
tion requirement in Form U-4, the NASD procedures, or
NYSE rules to deem that requirement the choice of the state.
[16] The touchstone of state action in the context of gov-
ernmental oversight is whether the government has moved
beyond mere approval of private action into the realm of
"encouragement, endorsement, and participation " of that
action. Skinner v. Railway Labor Executives' Ass'n, 489 U.S.
602, 615-16 (1989); see also Blum,
457 U.S. at 1004
(stating
that state action is present when "the government has pro-
vided such significant encouragement, either overt or covert,
that the [private party's] choice must be deemed that of the
State"). The SEC has thus far failed to cross that line with
regard to the NASD's and NYSE's compulsory arbitration
requirements. "To begin with the obvious, there is nothing in
the [Securities Exchange Act of 1934] and there is no Com-
mission rule or regulation that specifies arbitration as the
favored means of resolving employer-employee disputes."
Merrill Lynch, Pierce, Fenner & Smith v. Ware, 414 U.S.
117, 135-36 (1973). No SEC rule or action that has been cal-
led to our attention encourages the NASD or the NYSE to
compel arbitration. This puts the role of the SEC in a critically
different light than that of the Federal Railroad Administra-
tion in Skinner, which drafted regulations making plain its
"strong preference for [drug] testing," explicitly conferred on
railroads the authority to conduct such tests, required railroads
and employees to perform such tests, and codified its right to
receive certain biological samples. See
498 U.S. at 615
.
[17] The SEC's role to date of approving the exchanges'
rules and conducting oversight of their procedures has been
no more aggressive than that of the Public Utilities Commis-
sion in Jackson v. Metropolitan Edison Co.,
419 U.S. 345
(1974). In that case, a private utility was required by the
state's regulatory scheme to obtain approval of its business
practices from the utility commission. When those practices
were challenged, the Court declined to find state action, rea-
soning that "where the commission has not put its weight on
the side of the proposed practice by ordering it, . . . [its] fail-
ure to overturn this practice" does not make its action "state
action" for purposes of constitutional inquiries. Id. at 357.
Duffield has pointed to numerous instances of the SEC's
oversight and development of the exchanges' arbitration rules
and procedures, but she has failed to put forth any example of
governmental encouragement or endorsement of the compul-
sory arbitration requirement itself. Thus, the SEC's involve-
ment is insufficient under Skinner, Blum, and Jackson to
render the industry's overall requirement that its employees
submit to arbitration in lieu of court proceedings fairly attrib-
utable to the state.
C
[18] Duffield's last argument is that the NASD and NYSE
are invoking governmental authority because through their
arbitration system they are "perform[ing] the government
function of enforcing and adjudicating Title VII. " Appellant's
Brief at 53. This argument is contrary to the established law
of this circuit. We have long held that, since dispute resolu-
tion is not an "exclusive" governmental function, neither pri-
vate arbitration nor the judicial act of enforcing it under the
FAA constitutes state action. See, e.g., FDIC v. Air Florida
Sys., Inc., 822 F.2d 833, 842 n.9 (9th Cir. 1987). The 1991
Civil Rights Act's allowance of voluntary, private arbitration
agreements forecloses the assertion that civil rights statutes
should be exempted from this general rule.
IV
Duffield has met her burden of showing that Congress
intended in enacting the Civil Rights Act of 1991 to preclude
the compulsory arbitration of Title VII disputes. Form U-4 is,
therefore, unenforceable with respect to her Title VII and
FEHA claims. Because no state action was involved in Duf-
field's mandatory waiver, however, there is no constitutional
bar to enforcing Form U-4 with respect to her state tort and
contract claims. Accordingly, the district court's order com-
pelling arbitration is AFFIRMED IN PART and REVERSED
IN PART. The district court's denial of Duffield's motion for
summary judgment on her declaratory relief claim is
AFFIRMED IN PART and REVERSED IN PART. The case
is REMANDED for further proceedings consistent with this
opinion.
AFFIRMED IN PART; REVERSED IN PART; AND
REMANDED. the end
_______________________________________________________________
FOOTNOTES
*Honorable Jane A. Restani, Judge, United States Court of International
Trade, sitting by designation.
1 After Duffield filed her opening brief in this case, the NASD voted to
eliminate its mandatory arbitration requirement with regard to civil rights
claims. The organization's proposal, which cannot be formally imple-
mented until the Securities and Exchange Commission approves it, wouldmandate three basic changes in the current rule: (1) it would "permit
employees to choose between entering into private arbitration agreements
with their employers, or reserving the right to file a case in federal or state
court for statutory discrimination claims"; (2) it would guarantee height-
ened procedural protections in arbitration by requiring forums that satisfy
the standards in the ABA's "Due Process Protocol"; and (3) it would pro-
vide "enhanced disclosure [of the arbitration rules] to employees." NASD
Proposes Eliminating Mandatory Arbitration of Employment Discrimina-
tion Claims for Registered Brokers, NASD Press Release, August 7, 1997;
see also Deborah Lohse, NASD Votes to End Arbitration Rule in Cases of
Bias, Wall St. J., August 8, 1997, at B14 (reporting NASD policy change,
but noting that "mandatory arbitration is apt to continue, industry experts
say, because the NASD is not forbidding firms from including arbitration
requirements in their employment contracts"). This probable change in
NASD's rules in no way affects the dispute in this case, however. Further-
more, nothing in the record suggests that the NYSE is reconsidering its
rule.
2 We do not in this opinion consider the enforceability of an arbitration
award in instances in which an employee has submitted the dispute to arbi-
tration without challenging the enforceability of the arbitration agreement.
See, e.g., Nghiem v. NEC Electronic, 25 F.3d 1437 (9th Cir. 1994).
3 Duffield's sexual discrimination and sexual harassment claims under
Title VII appear to be identical to those she brings under the FEHA.
Because "[p]arallel state anti-discrimination laws are explicitly made part
of Title VII's enforcement scheme," FEHA claims are arbitrable to the
same extent as Title VII claims. Prudential Ins. Co. v. Lai, 42 F.3d 1299,
1303 n.1 (9th Cir. 1994) (citing Kremer v. Chemical Constr. Corp., 456
U.S. 461, 477 (1982); Salgado v. Atlantic Richfield, 823 F.2d 1322, 1326
(9th Cir. 1987)).
4 Gilmer argued only that there was an inherent conflict between the
ADEA and arbitration and did not contend that the text or legislative his-
tory of the ADEA evinced a congressional intent to preclude arbitration.
See
500 U.S. at 26
.
5 After the Supreme Court granted certiorari in Gilmer, Congress
amended the ADEA to provide that all waivers of rights under the Act,
apparently including the right to a jury trial, 29 U.S.C. S 626(c), must be
"knowing and voluntary." See Older Workers Benefit Protection Act of
1990, Pub. L. 101-433, 104 Stat. 983 (1990); 29 U.S.C. S 626(f)(1); Oubre
v. Entergy Operations, Inc., 118 S. Ct. 838, 841 (1998). A waiver is not
considered knowing and voluntary if the individual waives "rights or
claims that may arise after the date the waiver is executed." 29 U.S.C.
S 626(f)(1)(C). The Supreme Court did not, however, consider this new
statutory language in Gilmer. Thus, current ADEA claims may require dif-
ferent treatment.
6 We have never stated what level of deference is due a "notice," as
opposed to a guideline or a policy statement, by the EEOC. The Supreme
Court has generally advised that "the level of deference afforded will
depend on the thoroughness evident in [the EEOC's ] consideration, the
validity of its reasoning, its consistency with earlier and later pronounce-
ments, and all those factors which give it power to persuade, if not
control." EEOC v. Arabian American Oil Co.,
499 U.S. 244, 257
(1991)
(internal quotations omitted). The import of the Court's statement seems
to be that we should defer to "notices" insofar as they represent reasonable
interpretations of Title VII. See EEOC v. Commercial Office Prods. Co.,
486 U.S. 107, 115
(1988) (deferring to EEOC's position on issue that
apparently was not formalized in any document outside of the litigation at
issue because it represented a reasonable interpretation of Title VII). That
is the procedure we have adopted regarding other agency's notices inter-
preting statutes under their jurisdiction, see Alexander v. Glickman, _______
F.3d _______, _______, No. 96-17054, 1998 WL 125109, at *3-*4 (9th Cir. Mar.
23, 1998), and that is the course we follow here.
7 Because we hold that the 1991 Act precludes compulsory arbitration,
we do not reach Duffield's claims that she did not knowingly agree to
arbitrate her Title VII claims and that the NYSE arbitration system fails
adequately to protect her statutory rights. While we have spoken previ-
ously in Lai and Renteria v. Prudential Ins. Co., 113 F.3d 1104 (9th Cir.
1997), regarding the 1991 Act's "knowing" requirement, the parties in this
case have emphasized the importance of the compulsory arbitration issuein se, and have vigorously contested that question throughout this proceed-
ing. Likewise, several amici and the EEOC have urged that we determine
the validity of compulsory arbitration provisions as applied to Title VII
claims. Every amici, in fact, has addressed that issue, and we agree that
the case is more appropriately resolved on that ground. Lastly, we need
not consider Duffield's claim that Form U-4 is a contract of adhesion that
is either unconscionable or beyond her reasonable expectations, see Doc-
tor's Assocs., Inc. v. Casarotto, 116 S. Ct. 1652, 1656 (1996); Graham v.
Scissor-Tail, Inc., 28 Cal. 3d 807, 817 (1981), because she makes that
argument also only with respect to her Title VII (and FEHA) claims.
8 There was no Senate Committee Report, although another House Com-
mittee subsequently approved the identical bill without change. See H.R.
Rep. No. 40(II) at 1, 102d Cong., 1st Sess. 78 (1991), reprinted in 1991
U.S.C.C.A.N. 694, 694 (Judiciary Committee).
9 The only other circuit opinions to address the enforceability of individ-
ual employment agreements containing prospective waivers of the right to
bring Title VII claims in court since the 1991 Act became effective, do
not, for various reasons, consider the effect of the Act. See Paladino v.
Avnet Computer Techs., Inc., 134 F.3d 1054 (11th Cir. 1998); Cole v.
Burns Int'l Security Servs., 105 F.3d 1465 (D.C. Cir. 1997); Rojas v. TK
Communications, Inc., 87 F.3d 745 (5th Cir. 1996).
10 Section 12212 of the ADA, which was passed in 1990, tracks almost
verbatim S 118 of the 1991 Civil Rights Act. See 42 U.S.C. S 12212. Italso has a legislative history similar to S 118 of the 1991 Civil Rights Act,
indicating that Congress intended to codify in the ADA the protections of
the Court's holding in Gardner-Denver. See, e.g., H.R. Conf. Rep. No.
596, 101st Cong., 2d Sess. 89 (1990), reprinted in 1990 U.S.C.C.A.N.
565, 598 ("It is the intent of the conferees that the use of these alternative
dispute resolution procedures is completely voluntary."); H.R. Rep. No.
101-485(III) (1990), reprinted in 1990 U.S.C.C.A.N. 445, 499 (explaining
that arbitration provision is intended to be consistent with Gardner-
Denver); see also infra at 26-31 (describing the 1991 Act's legislative his-
tory). It is also noteworthy that the Court had not yet even decided Gilmer
when the ADA was enacted.
11 Interestingly, when the District of Minnesota held that the 1991 Act
did not prevent employers from compelling the arbitration of Title VII
claims under Form U-4, it used the same approach as the Fourth Circuit
-- that is, it ignored an opinion signed by eight Justices and relied solely
on a lone concurrence by Justice Scalia to disregard the 1991 Act's Com-
mittee Reports. See Johnson, 940 F. Supp. at 1458 (citing Blanchard v.
Bergeron,
489 U.S. 87, 98
-99 (1989) (Scalia, J., concurring)).
12 The Supreme Court recently granted certiorari in Wright v. Universal
Maritime Serv. Corp., 121 F.3d 702 (4th Cir. 1997) (table), cert. granted,
118 S. Ct. 1162 (1998), to consider whether the Fourth Circuit was correct
in holding, in line with Austin but contrary to seven other circuits, that
Gardner-Denver is no longer the law. See 66 U.S.L.W. 3571 (March 3,
1998); Coleman v. Houston Lighting & Power Co., 984 F. Supp. 576, 582
(S.D. Tex. 1997) (listing circuits that disagree with the Fourth Circuit).
13 It would also be at least a mild paradox to interpret S 118 as encourag-
ing compulsory arbitration, when the section's other "encouraged" types
of alternative dispute resolution -- "settlement negotiations, conciliation,
facilitation, mediation, factfinding, [and] minitrials" -- are all consensual.
Section 118; see Babbitt v. Sweet Home Chapter,
515 U.S. 687
, 698 n.11
(1995) (stating that courts should, if possible, read a string of terms in a
statute consistently so that they "reflect[ ] the broad purpose of the Act").
14 In view of Congress' repeated and unyielding pronouncements in the
legislative histories of the ADA and the Civil Rights Act of 1991 that it
sought to codify the Court's decision in Gardner-Denver, not Gilmer, we
have some difficulty in understanding the Fourth Circuit's conclusion,
after quickly discussing the Acts' legislative histories, that it "[does] not
think that Congress intended to return to [Gardner-Denver]." Austin, 78
F.3d at 882. That conclusion is contrary to the import of every statement
congressional committees and members of Congress made during the
Acts' legislative processes and overlooks the fact that Gilmer was not
even decided when the ADA was enacted.
15 In fact, that Congress declined to allow agreements to arbitrate Title
VII claims as a condition of employment is made even more clear by the
dissenting views on the bill expressed in the Committee minority report
(authored by Rep. Hyde). In discussing the arbitration provision, the dis-
sent lamented that, because S 118 encouraged only "voluntary" agree-
ments, it was "nothing more than an empty promise " to those who wished
to encourage arbitration of more Title VII claims. H.R. Rep. No. 40(II) at
78. If the arbitration provision had been thought to allow ex ante waivers
as a condition of employment, there would have been absolutely no basis
for the dissent's vigorous complaints.
16 Robertson Stephens' other response to the legislative history is that
even if it demonstrates that Congress intended to allow the enforcement
only of "voluntary" agreements to arbitrate Title VII claims, Duffield's
decision to sign Form U-4 was purely voluntary as that term is commonly
understood. Whatever the merit of this dubious assertion, it is irrelevant
here because our task is not to divine a literal meaning of the word
"voluntary." Rather, it is to discover congressional intent. And, as we have
explained in the text, Congress' intent was to preclude the enforceability
of arbitration agreements imposed as a condition of employment.
17 We recognize that an argument can be made that by its preference for
Gardner-Denver, Congress intended only to preclude the use of adverse
arbitration awards as a bar to the prosecution of Title VII actions. We con-
clude, however, for the reasons set forth in the text, that Congress did not
wish to force victims of discrimination to submit to compulsory arbitration
if they preferred to assert their Title VII claims directly in a judicial forum.
To the contrary, we believe it clear that Congress intended that Title VII
claimants have the right to go straight to court. See Pryner, 107 F.3d at
364-65; Varner v. National Super Markets, Inc., 94 F.3d 1209, 1213 (8th
Cir. 1996), cert. denied, 117 S. Ct. 946 (1997). Moreover, in this circuit
we are precluded from adopting such a construction by Nghiem, in which
we held that a Title VII claimant who voluntarily initiates arbitration pro-
ceedings is bound by an unfavorable award and may not thereafter seek
to litigate his claim. See 25 F.3d at 1439-41.
18 Furthermore, as we noted earlier, we express no view on the alterna-
tive procedure suggested in the proposed NASD rule change whereby
individuals would be given the option at the time of employment to choose
arbitration or litigation as the method of resolving future discrimination
claims. See supra at 6 & n.1.
19 Duffield's attempt to skirt this fact by asserting that prior to 1993 she
was required by NYSE Rule 345(a) to register with an exchange and that
federal law obligated each exchange to enforce its own rules, see 15
U.S.C. S 78(g)(1), is unavailing. That a NYSE rule, rather than any federal
mandate, required Duffield to register with the exchange, removes the
government's "responsibility" for the imposition of the arbitration require-
ment. See Blum,
457 U.S. at 1004
.
20 As described supra in note 1, the NASD recently has voted to abolish
its mandatory arbitration requirement with regard to employment discrimi-
nation claims. If the SEC refuses to approve this change for some reason,
then state action might be present, because the government would be exer-
cising at the least "significant encouragement " over the private entity's
actions. Blum,
457 U.S. at 1004
-05. To date, however, the SEC has only
acquiesced to NASD's and NYSE's mandatory arbitration rules. See infra
section III.B.
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