• Ninth Circuit Panel Overrules Duffield, Clearing the Way for Uniform Nationwide Enforcement of Pre-Dispute Arbitration Agreements
  • May 6, 2003
  • Law Firm: Orrick, Herrington & Sutcliffe LLP - San Francisco Office
  • In a closely-watched case with a highly anticipated outcome, a three-judge panel of the U.S. Court of Appeals for the Ninth Circuit has overruled that court's 1998 decision in Duffield v. Robertson Stephens & Co., 144 F.3d 1182 (9th Cir. 1998), which forbade enforcement of pre-dispute arbitration agreements with respect to Title VII claims. In EEOC v. Luce, Forward, Hamilton & Scripps, 2002 WL 2004340 (9th Cir. Sept. 3, 2002), the court held that Duffield - and the hostility toward pre-dispute arbitration agreements on which the decision was based - cannot withstand the Supreme Court's recent endorsement of employment arbitration, and was therefore no longer "good law."

    Barring en banc review by the full Ninth Circuit, the panel's 2-1 decision places the court in line with each of the other federal appellate courts that has considered whether Title VII permits enforcement of mandatory pre-dispute arbitration agreements. Duffield had been roundly criticized by these and other courts (including the California Supreme Court), and the panel's majority seemed relieved to rid the court of Duffield's "ignominious" distinction.

    While one Circuit panel cannot ordinarily overrule the decision of an earlier panel, the Luce Forward court relied on the U.S. Supreme Court's decision in Circuit City Stores v. Adams, 532 U.S. 105 (2001), which, it said, had "so directly undermined the reasoning behind Duffield, that we conclude it has lost its status as valid precedent." In Circuit City, the Court described the "real benefits to the enforcement of arbitration provisions," especially in employment cases. That reasoning, according to Luce Forward, effectively announced the end of Duffield:

    Although Circuit City did not repudiate Duffield by name, the Supreme Court's language and reasoning decimated Duffield's conclusion that Congress intended to preclude compulsory arbitration of Title VII claims. In particular, Circuit City's unambiguous proclamation that "arbitration agreements can be enforced under the FAA without contravening the policies of congressional enactments giving employees specific protection against discrimination prohibited by federal law" cannot be reconciled with Duffield's holding that Congress intended Title VII, one such "congressional enactment," to preclude compulsory arbitration of discrimination claims.

    Duffield's demise had been long predicted, even by other Ninth Circuit panels. The practical effect of Luce Forward will be to remove the continuing cloud on pre-dispute arbitration agreements in California and other Western states. Employers in those states can now feel free to require their employees, as a condition of employment, to agree to arbitrate all employment-related claims, including those arising under Title VII. In Luce Forward itself, the court upheld the termination of a law firm employee based on his refusal to sign the employer's mandatory arbitration agreement.

    Of course, as the court reminded employers, such agreements still must "comply with traditional principles of contract law." But as long as employers are careful to ensure that arbitration agreements contain sufficient due process protections for employees to vindicate their statutory rights, courts in the Ninth Circuit, as elsewhere, should have little trouble holding that employees can be required, as a mandatory condition of employment, to forego a judicial forum in favor of arbitration.

    The full text of the opinion is located at: http://www.ca9.uscourts.gov/ca9/newopinions.nsf/E9C571F39150FF1B88256C290056416C/$file/0057222.pdf