No. ANHEUSER-BUSCH, INC., Defendant - Petitioner, JOANN MELENA, Plaintiff - Respondent.
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1 No. ANHEUSER-BUSCH, INC., Defendant - Petitioner, v. JOANN MELENA, Plaintiff - Respondent. On Petition for Leave to Appeal From the Appellate Court of Illinois, Fifth District (No ) (Chapman, Donovan, Hopkins, JJ). There heard on appeal from the Circuit Court of the Second Judicial Circuit of Jefferson County, Illinois (No. 03-L-37), The Honorable George Timberlake, Judge Presiding MEMORANDUM OF THE EQUAL EMPLOYMENT ADVISORY COUNCIL AS AMICUS CURIAE IN SUPPORT OF THE PETITION FOR LEAVE TO APPEAL Ann Elizabeth Reesman McGUINESS, NORRIS & WILLIAMS, LLP 1015 Fifteenth Street, N.W. Suite 1200 Washington, DC (202) Attorneys for Amicus Curiae
2 TABLE OF CONTENTS INTEREST OF THE AMICUS CURIAE...1 STATEMENT OF FACTS...2 SUMMARY OF REASONS FOR GRANTING THE PETITION...4 REASONS FOR GRANTING THE PETITION...6 I. THE DECISION BELOW CONFLICTS DIRECTLY WITH RULINGS OF THE UNITED STATES SUPREME COURT ON AN ISSUE OF SUBSTANTIAL IMPORTANCE TO THE EMPLOYMENT COMMUNITY...6 II. RULES THAT IMPOSE GREATER RESTRICTIONS ON AGREEMENTS TO ARBITRATE THAN EXIST FOR OTHER CONTRACTS SUBSTANTIALLY UNDERMINE EMPLOYERS EFFORTS TO DEVELOP AND ENFORCE UNIFORM ADR PROCEDURES...9 A. Nationwide Employers Have A Substantial Interest In Maintaining Uniform Dispute Resolution Procedures...9 B. The Appellate Court Overlooked The Benefits Of Arbitration To Employees...10 CONCLUSION ii -
3 TABLE OF AUTHORITIES CASES Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001)... 2, 6, 9, 10 Cole v. Burns International Security Services, 105 F.3d 1465 (D.C. Cir. 1997) Doctor's Associates, Inc. v. Casarotto, 517 U.S. 681 (1996)... 5, 6, 7 EEOC v. Luce, Forward, Hamilton, & Scripps, 345 F.3d 742 (9th Cir. 2003)... 8, 9 EEOC v. Waffle House, 534 U.S. 279 (2002)... 2 Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991)... 2 Green Tree Financial Corp. v. Bazzle, 539 U.S. 444 (2000)... 2 Green Tree Financial Corp. v. Randolph, 531 U.S. 79 (2000)... 2 Koveleskie v. SBC Capital Markets, Inc., 167 F.3d 361 (7th Cir. 1999)... 8 Perry v. Thomas, 482 U.S. 483 (1987)... 7 Southland Corp. v. Keating, 465 U.S. 1 (1984)... 5, 6, 7 STATUTES Federal Arbitration Act, 9 U.S.C. 1 et seq... 5, 6 9 U.S.C Illinois Workers' Compensation Act, 820 Ill. Comp. Stat. 305/1 et seq... 4 OTHER AUTHORITIES American Arbitration Association, National Rules for the Resolution of Employment Disputes (eff. Jan. 1, 2004) Database of Federal Trial Statistics Lewis Maltby, Employment Arbitration: Is It Really Second Class Justice?, Dispute Resolution Magazine (Fall 1999)... 11, 12, 13 - iii -
4 Mei L. Bickner et al., Developments in Employment Arbitration, Dispute Resolution Journal (Jan. 1997) Richard A. Bales, Compulsory Arbitration: The Grand Experiment in Employment (Cornell Univ. Press 1997)... 12, 13 Table C-10, Administrative Office of the United States Courts (Mar. 31, 2004) Toby Brink, Alternative Dispute Resolution: Pros and Cons, Connecticut Employment Law Letter (Mar. 2000) iv -
5 The Equal Employment Advisory Council respectfully submits this memorandum amicus curiae contingent upon the granting of the accompanying motion for leave. The memorandum supports the Petition for Leave to Appeal. INTEREST OF THE AMICUS CURIAE The Equal Employment Advisory Council (EEAC) is a nationwide association of employers organized in 1976 to promote sound approaches to the elimination of discriminatory employment practices. Its membership comprises a broad segment of the business community and includes 330 of the nation s largest private sector corporations. EEAC s directors and officers include many of industry s leading experts in the field of equal employment opportunity. Their combined experience gives EEAC an unmatched depth of knowledge of the practical, as well as legal, considerations relevant to the proper interpretation and application of equal employment policies and requirements. EEAC s members are firmly committed to the principles of nondiscrimination and equal employment opportunity. Many of EEAC s members have contracts with their employees governing some or all of the terms and conditions of employment. Some of these contracts include agreements to arbitrate disputes arising out of the employment relationship. EEAC s members, the vast majority of which conduct business in multiple states, including Illinois, have an ongoing interest in preserving the uniform enforceability of agreements calling for arbitration of employment-related disputes. Arbitration is a flexible, efficient, and effective alternative means of resolving discrimination claims and other employment-related issues. Agreements to arbitrate, like other privately negotiated contracts, afford parties to a dispute the right to establish clear standards and criteria
6 against which their future conduct will be judged. It follows, then, that such agreements must be strictly enforced in the same manner and to the same extent as any other valid contract. Thus, the issues presented in this appeal are extremely important to the nationwide constituency that EEAC represents. Contrary to the guiding principles established by the U.S. Supreme Court, the court below improperly failed to enforce an agreement to arbitrate employment disputes in the same manner as it would any other contract. In so doing, it created a rule of law that differs from that established in the federal courts, as well as in the courts of this State relating to the enforcement of other kinds of contracts. Ultimately, it undermined severely the federal public policy favoring private arbitration of disputes. Because of its interest in this subject, EEAC has filed amicus curiae briefs in numerous cases before the U.S. Supreme Court and others supporting the enforceability of private agreements to arbitrate. 1 EEAC thus is familiar with the legal and public policy issues presented to the Court in this case. Because of its significant experience in these matters, EEAC is uniquely situated to brief this Court on the importance of the issues beyond the immediate concerns of the parties to the case. STATEMENT OF FACTS Defendant-Petitioner Anheuser-Busch, Inc. hired Respondent-Plaintiff Joann Melena in 1999 to work in its promotional products group (PPG) distribution center in Mt. Vernon, Illinois. In 2000, Anheuser-Busch adopted a new multi-step process for 1 E.g., Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991); Green Tree Fin. Corp. v. Randolph, 531 U.S. 79 (2000); Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001); EEOC v. Waffle House, 534 U.S. 279 (2002); Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444 (2003)
7 resolving employee disputes, entitled the Dispute Resolution Program (DRP). Mandatory, binding arbitration is the final step of the process. The DRP covers all employment-related disputes, including claims of retaliation for legally-protected activities such as the claim involved here. Arbitrators are chosen jointly by the parties. Employees have the right to be represented by counsel, and the same remedies are available in arbitration as would be in court. The company covers all costs of arbitration fee other than a $125 filing fee paid by the employee. The company adopted the DRP by mailing comprehensive written materials to employees, including Melena, in February The materials, including a DRP Guide, DRP Policy Statement, and DRP Highlights, explained how the DRP process worked. The DRP Policy Statement explained that (b)y continuing or accepting an offer of employment with Anheuser-Busch Companies, Inc, or any of its subsidiary companies ( A-B or the company ), all employees to whom this policy is applicable agree as a condition of employment to submit all covered claims to the DRP and to accept an arbitrator s award as the final, binding and exclusive determination of all covered claims. (A8) (Def. Ex. A, p.1). Also, the DRP Guide states that (b)y accepting an offer of employment or by continuing employment with Anheuser-Busch company on or after the effective date of the DRP, new or current employees agree, as a condition of employment, that all covered claims are subject to the DRP. (A9) (Def. Ex. B, p.2). On February 23, 2000, representatives of Anheuser-Busch s corporate office did a presentation for PPG Mt. Vernon employees, including a question and answer session. The company also put up posters with information about the DRP throughout the facility. The DRP took effect April 1, 2000 for PPG Mt. Vernon employees
8 Melena also received a new company handbook, which includes a description of the DRP, in April She signed a written receipt and acknowledgement form, promising to abide by company policies, on April 27, Melena suffered a work-related injury on September 11, and filed a claim for workers compensation with the Illinois Industrial Commission. She began receiving temporary total disability payments. Eventually, she exhausted her available leave from Anheuser-Busch, and the company terminated her employment on March 15, On May 8, 2003, Melena filed suit against Anheuser-Busch, contending that the company had discharged her in retaliation for filing a claim number the Illinois Workers Compensation Act (820 Ill. Comp. Stat. 305/1 et seq.). The company moved to compel arbitration pursuant to the DRP. The circuit court denied the motion, and the company took an interlocutory appeal. On September 22, 2004, the Appellate Court of Illinois, Fifth District affirmed the circuit court s decision. Anheuser-Busch petitioned this Court for leave to appeal, and EEAC sought leave to appear as amicus curiae and to file this brief in support of that petition. SUMMARY OF REASONS FOR GRANTING THE PETITION The decision below conflicts directly with rulings of the United States Supreme Court on an issue of substantial importance to the employment community. The Appellate Court, Fifth District, ruled that an agreement to arbitrate is not knowing and voluntary when it is presented as a condition of employment. Accordingly, the court below held private agreements to arbitrate to a higher standard of enforceability than is - 4 -
9 generally applicable to other private contracts, contrary to the Federal Arbitration Act (FAA), 9 U.S.C. 1 et seq. Under the U.S. Supreme Court s decisions in Southland Corp. v. Keating, 465 U.S. 1 (1984) and Doctor s Associates, Inc. v. Casarotto, 517 U.S. 681 (1996), a state law, whether statutorily or judicially created, that imposes greater burdens on the enforceability of mandatory agreements to arbitrate than apply to other types of contracts is incompatible with, and therefore is preempted by, the FAA. The rule adopted by the court below is not one of general applicability, but is directed specifically at agreements to arbitrate that require employees to waive their right to pursue claims in a judicial forum. Thus, it is quite remarkable and stands in direct conflict with the Supreme Court s declaration time and again that agreements to arbitrate are to be enforced to the same extent and degree as are other valid contracts. As a direct consequence of the Appellate Court s ruling on this issue, many employers are constrained in their ability to enforce agreements to arbitrate in a uniform and consistent manner. Nationwide employers have a substantial interest in maintaining uniform dispute resolution procedures. The prospect of having to litigate, from state to state, the enforceability of their arbitration agreements creates a chilling effect on employers efforts to establish binding arbitration programs, and significantly undercuts the strong federal policy, as repeatedly endorsed by the Supreme Court, favoring private arbitration of employment disputes. Moreover, in its zeal to deliver Melena from the supposed evils of arbitration, the district court below completely overlooked the possibility that it might actually be more beneficial to her to arbitrate her claim than to litigate it. Plaintiffs are more likely to be - 5 -
10 heard in arbitration than in court, and more likely to win. In addition, arbitration is less costly, and far more expeditious, than taking a case to court. For this reason, the United States Supreme Court observed in Circuit City Stores, Inc. v. Adams, 532 U.S. 105, (2001), there are real benefits to the enforcement of arbitration provisions. Since the decision below substantially undermines all of these important considerations, the Petition for Leave to Appeal should be granted. REASONS FOR GRANTING THE PETITION I. THE DECISION BELOW CONFLICTS DIRECTLY WITH RULINGS OF THE UNITED STATES SUPREME COURT ON AN ISSUE OF SUBSTANTIAL IMPORTANCE TO THE EMPLOYMENT COMMUNITY In refusing to enforce an agreement to arbitrate because it was presented as a condition of employment, the court below applied a different, more stringent rule than is generally applicable to other contracts under Illinois state law. Its decision thus impermissibly conflicts with the U.S. Supreme Court s seminal decisions in Southland Corp. v. Keating, 465 U.S. 1 (1984), and Doctor s Associates, Inc. v. Casarotto, 517 U.S. 681 (1996), and should be reversed. In Southland Corp. v. Keating, 465 U.S. 1 (1984), the U.S. Supreme Court ruled that a state law requiring resolution by judicial forum of all applicable claims and thus precluding the enforcement of valid mandatory arbitration agreements impermissibly conflicts with, and is preempted by, the Federal Arbitration Act, 9 U.S.C. 1 et seq. In so doing, the Court relied on the plain language of Section 2 of the FAA, which provides that agreements to arbitrate shall be valid, irrevocable, and enforceable, save upon such - 6 -
11 grounds as exist at law or in equity for the revocation of any contract. 9 U.S.C. 2. It observed: We discern only two limitations on the enforceability of arbitration provisions governed by the Federal Arbitration Act: they must be a part of a written contract evidencing a transaction involving commerce and such clauses may be revoked upon grounds as exist at law or in equity for the revocation of any contract. 465 U.S. at (footnote omitted). The Court thus concluded, In enacting [Section] 2 of the federal Act, Congress declared a national policy favoring arbitration and withdrew the power of the states to require a judicial forum for the resolution of claims which the contracting parties agreed to resolve by arbitration. Id. at 10. The Court reiterated this principle in Perry v. Thomas, 482 U.S. 483, 492 n.9 (1987)(citations omitted): [S]tate law, whether of legislative or judicial origin, is applicable if that law arose to govern issues concerning the validity, revocability, and enforceability of contracts generally. A state-law principle that takes its meaning precisely from the fact that a contract to arbitrate is at issue does not comport with this requirement of 2. A court may not, then, in assessing the rights of litigants to enforce an arbitration agreement, construe that agreement in a manner different from that in which it otherwise construes nonarbitration agreements under state law. In Doctor s Associates, Inc. v. Casarotto, 517 U.S. 681 (1996), the U.S. Supreme Court ruled that only generally applicable contract defenses, such as fraud, duress, or unconscionability, may be applied to invalidate arbitration agreements without contravening U.S. at 687. There, the Court considered the validity of a Montana state law that imposed a special notice requirement for all contracts subject to arbitration. Because this special notice requirement applied only to agreements to arbitrate, and not any contract, the Court concluded that the requirement is thus inconsonant with, and is therefore preempted by, the federal law. Id. at
12 In contrast, the court below refused to enforce an agreement to arbitrate because the court disapproved of the common and lawful practice of making the agreement a condition of employment. Adopting a controversial minority rule borrowed from the U.S. Court of Appeals for the Ninth Circuit, the court below insisted that assent to an arbitration agreement must be knowing and voluntary and then interpreted the term voluntary in a fashion far narrower than that applied to other contracts. The court below insisted that the economic realities involved negated any element of choice that Melena may have had. Based on this narrow interpretation, the court below concluded that Melena had not actually agreed to arbitrate her employment disputes. The Appellate Court s view violates the settled law that contracts of arbitration may not be held to standards higher than other contracts. Illinois law does not require that the choice offered a party to enter into a contract be their first, or even their second choice. See, e.g., Koveleskie v. SBC Capital Mkts, Inc., 167 F.3d 361, 367 (7th Cir. 1999) (noting that Illinois law does not void contracts where parties have unequal bargaining power, even if a contract is a so-called take-it-or-leave-it deal ). If that were not the case, many standard agreements that regularly are offered to individuals by large companies with non-negotiable terms such as insurance policies, mortgages, and the like could not be enforced. As a practical matter, employers always have the right to establish, and change, the terms and conditions of employment: hours of work, rates of pay, job assignments, and so forth. Seen for what it is, the district court s holding actually is an attack on the requirement of a pre-arbitration agreement as a condition of employment, a practice that is in fact now universally accepted by the federal courts. See, e.g., EEOC v. Luce, - 8 -
13 Forward, Hamilton, & Scripps, 345 F.3d 742 (9th Cir. 2003) (en banc). Accordingly, the Petition for Leave to Appeal should be granted in this case. II. RULES THAT IMPOSE GREATER RESTRICTIONS ON AGREEMENTS TO ARBITRATE THAN EXIST FOR OTHER CONTRACTS SUBSTANTIALLY UNDERMINE EMPLOYERS EFFORTS TO DEVELOP AND ENFORCE UNIFORM ADR PROCEDURES A. Nationwide Employers Have A Substantial Interest In Maintaining Uniform Dispute Resolution Procedures The decision of the court below holding an agreement to arbitrate to different, and higher, standards than other contracts creates substantial uncertainty in an area of law that is of great importance to the business community. EEAC member companies, many of which conduct business in Illinois and numerous states, are strongly committed to equal employment opportunity and seek to establish and enforce internal policies that are consistent with federal and state employment non-discrimination laws. This commitment extends to the prompt and effective resolution of employment disputes using arbitration and other forms of alternative dispute resolution. A number of EEAC member companies thus have adopted company-wide policies requiring the use of arbitration to resolve all employment-related disputes. As the Supreme Court observed in Circuit City Stores, Inc. v. Adams, 532 U.S. 105, (2001), there are real benefits to the enforcement of arbitration provisions. In particular, [a]rbitration agreements allow parties to avoid the costs of litigation, a benefit that may be of particular importance in employment litigation. Id. at 123. Thus, to exempt employment contracts from coverage under the FAA would call into doubt the efficacy of alternative dispute resolution procedures adopted by many of the - 9 -
14 Nation s employers, in the process undermining the FAA s proarbitration purposes and breeding litigation from a statute that seeks to avoid it. Id. (internal quotation and citation omitted). The decision below creates for multistate employers the real possibility that their programs will not be enforced uniformly for all of their employees. Indeed, employers are all but assured that their arbitration agreements, while valid in most other states, will be deemed unenforceable in Illinois. As a consequence, employees who are located in Illinois and are subject to agreements to arbitrate will not be required to submit their work-related disputes to arbitration, while their colleagues employed elsewhere will be so bound. The prospect of having to litigate, from state to state, the enforceability of their arbitration agreements creates a chilling effect on employers efforts to establish binding arbitration programs, and significantly undercuts the strong federal policy, as repeatedly endorsed by the Supreme Court, favoring private arbitration of employment disputes. B. The Appellate Court Overlooked The Benefits Of Arbitration To Employees Moreover, in its zeal to deliver Melena from the supposed evils of arbitration, the district court below completely overlooked the possibility that it might actually be more beneficial to her to arbitrate her claim than to litigate it. Plaintiffs in federal employment litigation win only about 40 percent of jury verdicts. 2 And only a tiny fraction of cases even reach a jury. Employers win 98 percent of cases which are resolved through 2 Database of Federal Trial Statistics, available at (results of trials from )
15 summary judgment. Lewis Maltby, Employment Arbitration: Is It Really Second Class Justice?, Dispute Resolution Magazine (Fall 1999), at 23, 24. Despite these odds, a prospective plaintiff in an employment-related lawsuit still has to anticipate fees and expenses as a cost of pursuing litigation. As noted above, the federal statutes prohibiting employment discrimination provide an award of attorney s fees only for the prevailing plaintiff, and few plaintiffs prevail. As a result, plaintiffs in employment-related cases must either pay their litigation expenses out of pocket or find an attorney willing to take the case on a contingent fee basis, which may be difficult given the limited chance of success. For many individuals, the costs involved in litigation may be prohibitive. Employees are much more likely to get their day in court in arbitration than they are in the judicial system. Arbitration also offers employees a guarantee that there will be a hearing on the merits of their claims; no such guarantee exists in litigation where relatively few employees survive the procedural hurdles necessary to take a case to trial in the federal courts. Cole v. Burns Int l Sec. Servs., 105 F.3d 1465, 1488 (D.C. Cir. 1997). They are also more likely to get an explanation of the outcome in arbitration, since most employer-sponsored arbitration programs, as well as the applicable American Arbitration Association Rules, require the arbitrator to produce a written opinion. Mei L. Bickner et al., Developments in Employment Arbitration, Disp. Resol. J. (Jan. 1997) available in WESTLAW Find 52-JANDRJ8, at *81; American Arbitration Ass n, National Rules for the Resolution of Employment Disputes (Jan. 1, 2004), Rule 34.c. A jury, of course, does not do so
16 Not only are employees more likely to be heard in arbitration - but also, they are more likely to succeed. Partly because arbitration procedures typically do not provide for summary judgment, far more employees win in arbitration than in court, and overall, employees who take their disputes to arbitration collect more than those who go to court. Maltby at 24. Moreover, the speed with which disputes are resolved through arbitration far outpaces the judicial system. The federal courts take an average of 23 months to complete a civil case through jury trial, although ten percent of cases take more than 46 months. Table C-10 3, Administrative Office of the United States Courts (Mar. 31, 2004). An arbitration award usually is issued within nine months after the time an arbitrator is selected. Toby Brink, Alternative Dispute Resolution: Pros and Cons, Conn. Emp. L. Ltr. (Mar. 2000) available in WESTLAW Find 8 NO. 3 SMCTEMPLL 3. The alacrity benefits both sides, but particularly employees, who typically can less afford a lengthy battle. Most employees simply cannot afford to pay the attorney s fees and costs that it takes to litigate a case for several years. Even when an employee is able to engage an attorney on a contingency fee basis... the employee nonetheless often must pay for litigation expenses, and put working and personal life on hold until the litigation is complete. Richard A. Bales, Compulsory Arbitration: The Grand Experiment in Employment (Cornell Univ. Press 1997), at As a practical matter, [a]rbitration thus provides access to a forum for adjudicating employment disputes for employees whom the litigation system has failed. Bales at 159 (footnote omitted). 3 U.S. District Courts - Time Intervals From Filing to Trial of Civil Cases in Which A Trial Was Completed, by District, During the 12-Month Period Ending June 30,
17 Procedural rights, such as the right to trial by jury, extensive (and often excessive) discovery, and formal rules of procedure and evidence, mean little to employees who cannot find an attorney to take their case, and who, therefore, feel that the doors to justice are closed to them. Arbitration gives these employees a ready opportunity to have their claims heard. Id. Over the years, there have been many things which everyone knew were true that turned out to be wrong. The idea that employees are better off in court than in arbitration may well be one of them. Maltby at 24. For these reasons, this Court should review and reverse the decision below. CONCLUSION For the foregoing reasons, and the reasons set out in the Petition, we respectfully request that the Court allow the Petition. Respectfully submitted, Dated: October 26, 2004 Ann Elizabeth Reesman McGUINESS, NORRIS & WILLIAMS, LLP 1015 Fifteenth Street, N.W. Suite 1200 Washington, DC (202) Attorneys for Amicus Curiae
18 CERTIFICATE OF SERVICE I, Ann Elizabeth Reesman, the undersigned attorney, hereby certify that I caused three true and correct copies of the Memorandum Of The Equal Employment Advisory Council As Amicus Curiae In Support Of The Petition For Leave To Appeal to be served on counsel of record for each party listed below, by providing the same to Federal Express on this 26th day of October 2004, for next day delivery. Ann Elizabeth Reesman Gary L. Bement Bement & Stubblefield, P.C. 28 Bronze Pointe Belleville, IL Lisa K. Franke Dede K. Zupanci Burroughs, Hepler, Broom, MacDonald, Hebrank & True, LLP 103 W. Vandalia Street, Suite 300 Edwardsville, IL Philip J. Rarick Supreme Court Justice 333 Salem Place Suite 170 Fairview Heights, IL 62208
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