Cooper v. MRM Investment

In Cooper v. MRM Investment, the Sixth Circuit held that employment arbitration provisions are fully enforceable under the Federal Arbitration Act (FAA).

The Court explained:

At common law, American courts were loathe to order specific enforcement of an agreement to arbitrate, adopting the "jealous notion held by the common law courts of England that arbitration agreements were nothing less than a drain on their own authority to settle disputes." Raasch v. NCR Corp., 254 F. Supp. 2d 847, 853 (S.D. Ohio 2003) (citing Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 219-20 n.6, 84 L. Ed. 2d 158, 105 S. Ct. 1238 (1985)). In response, Congress enacted the Federal Arbitration Act, 9 U.S.C. § 1 et seq. ("the FAA"), "to place arbitration agreements upon the same footing as other contracts." Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24, 114 L. Ed. 2d 26, 111 S. Ct. 1647 (1991).

The FAA expresses a strong public policy favoring arbitration of a wide class of disputes. It provides, in part:

A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction … shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

9 U.S.C. § 2 (emphasis added); see also 9 U.S.C. § 1 (excepting some disputes arising out of employment in interstate transportation). Thus, generally applicable state-law contract defenses like fraud, forgery, duress, mistake, lack of consideration or mutual obligation, or unconscionability, may invalidate arbitration agreements. See Doctor's Assocs. v. Casarotto, 517 U.S. 681, 687, 134 L. Ed. 2d 902, 116 S. Ct. 1652 (1996) (citations omitted); Perry v. Thomas, 482 U.S. 483, 492 n.9, 96 L. Ed. 2d 426, 107 S. Ct. 2520 (1987); Fazio v. Lehman Bros., Inc., 340 F.3d 386, 393-94 (6th Cir. 2003). "The federal policy favoring arbitration, however, is taken into consideration even in applying ordinary state law." Garrett v. Hooters-Toledo, 295 F. Supp. 2d 774, 779 (N.D. Ohio 2003) (citing Inland Bulk Transfer Co. v. Cummins Engine Co., 332 F.3d 1007, 1014 (6th Cir. 2003) (internal citation omitted)).

The Supreme Court has roundly endorsed arbitration and explained its benefits in the employment law context:

We have been clear in rejecting the supposition that the advantages of the arbitration process somehow disappear when transferred to the employment context. Arbitration agreements allow parties to avoid the costs of litigation, a benefit that may be of particular importance in employment litigation, which often involves smaller sums of money than disputes concerning commercial contracts. These litigation costs to parties (and the accompanying burden to the Courts) would be compounded by the difficult choice-of-law questions that are often presented in disputes arising from the employment relationship … and the necessity of bifurcation of proceedings in those cases where state law precludes arbitration of certain types of employment claims but not others. The considerable complexity and uncertainty that [a broader reading of § 1's exclusion] would introduce into the enforceability of arbitration agreements in employment contracts would call into doubt the efficacy of alternative dispute resolution procedures adopted by many of the Nation's employers, in the process undermining the FAA's proarbitration purposes and breeding litigation from a statute that seeks to avoid it. The Court has been quite specific in holding 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; as we noted in Gilmer, 500 U.S. at 26, by agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute; it only submits to their resolution in an arbitral, rather than a judicial, forum.

Circuit City Stores v. Adams, 532 U.S. 105, 122-23, 149 L. Ed. 2d 234, 121 S. Ct. 1302 (2001) (citations and internal quotations omitted). Indeed, Title VII claims may be subjected to binding arbitration. See Willis v. Dean Witter Reynolds, Inc., 948 F.2d 305, 310 (6th Cir. 1991); cf. Cosgrove v. Shearson Lehman Bros., 1997 U.S. App. LEXIS 392, No. 95-3432, 1997 WL 4783, at *2 (6th Cir. Jan. 6, 1997) (same for ADEA claims); Bailey v. Ameriquest Mortgage Co., 346 F.3d 821, 822 (8th Cir. 2003) (same for FLSA claims). The question before the court, then, is whether there are "grounds … at law or in equity" for the revocation or non-enforcement of the agreement. See 9 U.S.C. § 2.

Cooper v. MRM Inv. Co., 367 F.3d 493, 498-99 (6th Cir. 2004).