Booker v. Robert Half International

United States Court of Appeals

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

Appeal from the United States District Court
for the District of Columbia
(No. 01cv01127)

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

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

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

Opinion for the Court filed by Circuit Judge ROBERTS.

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

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


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

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

Employment Agreement ¶ 18.

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

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

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

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


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

More recently, in Pacificare Health Sys., Inc. v. Book, 538 U.S. 401 (2003), the Court considered an argument that a claim under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961 et seq., could not be subjected to arbitration, because the pertinent arbitration agreement pre6 cluded punitive damages while RICO allows treble damages. The Court declined to construe the agreement and determine in advance whether the bar on punitive damages prohibited treble damages: “we should not, on the basis of ‘mere speculation’ that an arbitrator might interpret these ambiguous agreements in a manner that casts their enforceability into doubt, take upon ourselves the authority to decide the antecedent question of how the ambiguity is to be resolved.” 538 U.S. at 406–07 (quoting Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528, 541 (1995)). The Court compelled arbitration, and left it for the arbitrator to decide in the first instance whether the agreement barred treble damages under RICO. The Court explained that this approach was consistent with its decision in Vimar, where it enforced a focial effort begins to look more like rewriting the contract than fulfilling the intent of the parties. Cf. NLRB v. Rockaway News Supply Co., 345 U.S. 71, 78 (1953) (“We do not . . . question that there may be cases where a forbidden provision is so basic to the whole scheme of a contract and so interwoven with all its terms that it must stand or fall as an entirety. But . . . [t]he features to which the Board rightly objects not only may be severed but are separated in the contract.”). Thus, the more the employer overreaches, the less likely a court will be able to sever the provisions and enforce the clause, a dynamic that creates incentives against the very
overreaching Booker fears.

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

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