Opinions of the United 2004 Decisions States Court of Appeals for the Third Circuit
5-13-2004
Lloyd v. Hovensa Precedential or Non-Precedential: Precedential
Docket No. 03-1502
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Recommended Citation "Lloyd v. Hovensa" (2004). 2004 Decisions. Paper 664. http://digitalcommons.law.villanova.edu/thirdcircuit_2004/664
This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova University School of Law Digital Repository. It has been accepted for inclusion in 2004 Decisions by an authorized administrator of Villanova University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu. PRECEDENTIAL Lee J. Rohn UNITED STATES COURT K. Glenda Cameron (Argued) OF APPEALS Law Offices of Lee J. Rohn FOR THE THIRD CIRCUIT 1101 King Street - Suite 2 Christiansted St. Croix, USVI 00820 NOS. 03-1502 and 03-1592 Attorneys for Bruno Lloyd Appellant/Cross-Appellee
BRUNO LLOYD Charles E. Engeman Appellant in No. 03-1502 David J. Comeaux (Argued) Ogletree, Deakins, Nash, Smoak & v. Stewart The Tunick Building - Suite 202 HOVENSA, LLC; WYATT, V.I., INC. 1336 Beltjen Road St. Thomas, USVI 00802 Attorneys for Wyatt, V.I., Inc. Appellee/Cross-Appellant BRUNO LLOYD Linda J. Blair v. Rachel L. Witty (Argued) Bryant, Barnes & Moss HOVENSA, LLC.; WYATT, V.I., INC. 1134 King Street - 2nd Floor Wyatt, V.I., Inc. Christiansted Appellant in No. 03-1592 St. Croix, USVI 00820 Attorneys for HOVENSA, LLC ____________ Appellee
On Appeal From the District Court of the Virgin Islands (D.C. Civil Action No. 02-cv-00121) OPINION OF THE COURT District Judge: Hon. Raymond L. Finch
Argued December 10, 2003 STAPLETON, Circuit Judge: BEFORE: NYGAARD, BECKER and STAPLETON, Circuit Judges Bruno Lloyd appeals from an order of the District Court of the Virgin Islands (Opinion Filed: May 13, 2004) compelling arbitration of his claims against Wyatt, V.I., Inc. (“Wyatt” or “Cross-Appellant”) and HOVENSA, LLC time, HOVENSA awarded a contract to (“HOVENSA”; collectively, “Appellees”) Wyatt, a newly created subsidiary of Wyatt pursuant to the Federal Arbitration Act Field Services Company (“Wyatt Field (“FAA”), 9 U.S.C. § 1 et seq. Wyatt Services”), for services that Jacobs/IMC cross-appeals from the District Court’s had been performing. Lloyd was then order insofar as it denied Wyatt’s motion informed by Jacobs/IMC that he would be for a stay of the proceedings on Lloyd’s laid-off when Jacobs/IMC’s contract claims pending arbitration. expired on December 31, 2001.1 After Wyatt was awarded the new contract, it Lloyd, who applied for employment at filled positions in its upper management Wyatt, brought suit against Appellees with persons on the continental United alleging, inter alia, discriminatory conduct States who were already employed by its in violation of Title VII of the Civil Rights parent corporation, Wyatt Field Services. Act of 1964, 42 U.S.C. § 2000e et seq. These persons, according to Lloyd, were Invoking the provisions of an arbitration predominantly white. agreement entered into as a condition of Lloyd’s application, Appellees filed a In January 2002, Wyatt began to hire motion to compel arbitration of Lloyd’s between 300 and 400 people in the Virgin claims and to stay the proceedings pending Islands. Also in January 2002, Wyatt arbitration. The District Court granted began requiring all applicants to sign a Appellees’ motion to compel arbitration, Dispute Resolution Agreement (“DRA”) but dismissed the case with prejudice as a condition of having their applications rather than granting a stay. For the reasons considered. App. at 196. The DRA states, that follow, we will reverse the District in relevant part: Court’s order and remand with instructions to enter an order consistent with this I recognize that differences may opinion. arise between W yatt and me in relation to my application for I. employment. Both Wyatt and I agree to resolve any and all claims, Lloyd worked for more than twelve disputes or controversies arising out years as a boilermaker and pipefitter for of or relating to my application or various contractors at the HOVENSA candidacy for employment, the terms refinery in St. Croix, Virgin Islands. Although the contractors for maintenance 1 According to Lloyd, it was the custom and repairs changed over these years, at the HOVENSA refinery that the former Lloyd remain ed em ployed at the employees of the outgoing contractor HOVENSA refinery. In November 2001, would be offered employment or Lloyd was working for Jacobs/IMC, one of transferred to the incoming contractor, but the contractors at the refinery. At that Wyatt did not adhere to that custom.
2 and conditions of my employment, Rules 17, 18, and 34 with respect to and any claims arising from or confidentiality, AAA Rule 7 with respect relating to the employment to discovery procedure, and the DRA’s relationship exclusively by final and fee-s plitti n g p r o v i s i o n w e r e a ll binding arbitration before a neutral unconscionable and against public policy. arbitrator pursuant to the American Lloyd also requested that the District Court Arbitration Association’s National allow him further discovery based on his Rules for the Resolution of belief that Wyatt’s use of the DRA only in Employment Disputes [(“AAA the Virgin Islands was motivated by bad Rules”)] . . . . This agreement faith or an otherwise improper motive. He extends to disputes with or claims claimed that, if Wyatt had indeed against W ya t t V .I . , I n c., discriminated against Black or Hispanic HOVENSA, L.L.C., and any of their Virgin Islanders through the use of the related or affiliated companies, DRA, then the DRA would be violative of entities, or individuals (as intended federal and Virgin Islands law and third party beneficiaries). unenforceable as a matter of public policy.
App. at 37. On November 18, 2002, Wyatt filed a reply to Lloyd’s memorandum opposing On January 9, 2002, Lloyd applied for arbitration and HOVENSA filed a notice employment with Wyatt and signed the of joinder, thereby joining Wyatt’s motion DRA. He was not hired. Lloyd thereafter to compel arbitration. The District Court filed this action against both Wyatt and held a hearing on the motion on January HOVENSA. The complaint alleged: (1) 14, 2003, at which the testimony of several violation of the Federal Civil Rights Act of witnesses was taken. 1967; (2) violation of Titles 10 and 24 of the Virgin Islands Code; (3) wrongful After the evidentiary hearing, the discharge by HOVENSA; (4) breach of an District Court granted Wyatt’s motion to implied contract of good faith and fair compel arbitration and dismissed the dealing by HOVENSA; and (5) negligent complaint with prejudice. The District and/or intentional infliction of emotional Court held that AAA Rules 17, 18, and 34, distress. Lloyd requested punitive as well as incorporated into the DRA , were as compensatory damages. unconscionable. In addition, the District Court denied Lloyd’s request for discovery On September 27, 2002, Wyatt filed a on his theory that Wyatt used the DRA in motion to compel arbitration, pursuant to a racially discriminatory manner. The the DRA, and to stay the proceedings District Court noted that Lloyd had never pending arbitration. Lloyd opposed this filed a motion for an order to conduct motion, arguing that the agreement to discovery, in accordance with Fed. R. Civ. arbitrate was unenforceable because AAA P. 7(b) or Local R. Civ. P. 7.1, during the
3 nearly three months between his October this case under 28 U.S.C. §§ 1331 and 48 21, 2002 mem orandum opp osing U.S.C. § 1612(a), because the case arose arbitration and the evidentiary hearing. under, inter alia, Title VII, 42 U.S.C. §§ The District Court further held that the 2000e, et seq. The District Court most Lloyd had shown was that Wyatt exercised supplemental jurisdiction over differentiated between applicants on the Lloyd’s Virgin Islands claims pursuant to basis of residency and nothing more. 28 U.S.C. § 1367 and 48 U.S.C. § 1612(a). Accordingly, the District Court found that the DRA had not been used as a tool of We have jurisdiction over this appeal unlawful discrimination. Finally, the and cross-appeal pursuant to 9 U.S.C. § District Court severed the confidentiality 16(a)(3) because the District Court’s order provisions of AAA Rules 17, 18 and 34 constituted a final decision with respect to from the DRA and granted Wyatt and an arbitration. See Green Tree Fin. Corp.- H O V E N SA ’s m o t i o n to c o m p e l Ala. v. Randolph, 531 U.S. 79, 88-89 arbitration. Rather than stay the (2000). 3 We recognize that a district proceedings pending arbitration, however, court’s order compelling arbitration is the District Court dismissed the action usually an interlocutory order that cannot with prejudice because it found all of be appealed. See 9 U.S.C. § 16(b)(2). 4 In Lloyd’s claims to be arbitrable and thus this case, however, the District Court both left no claims for adjudication by the compelled the parties to arbitrate their District Court. 2 Lloyd filed a timely notice dispute and also dismissed the matter with of appeal and Wyatt subsequently filed a prejudice. In Green Tree, the Supreme notice of cross-appeal. Court also considered an order compelling arbitration and dismissing the plaintiff’s II. case with prejudice, and, applying the well-established meaning of the term The District Court had jurisdiction over “final decision,” ruled that such order plainly dispose[s] of the entire case 2 The District Court also held that (1) the DRA’s fee-splitting provision, because 3 9 U.S.C. § 16(a)(3) provides that “an it provided that Lloyd would not have to appeal may be taken from a final decision pay any fees upon demonstrating financial with respect to an arbitration that is subject hardship to the arbitrator, was not to this title.” unconscionable, (2) AAA Rule 7’s 4 d i s c o v e r y p r o c e d u r e s w e r e no t 9 U.S.C. § 16(b)(2) provides that unconscionable, and (3) that the DRA was “[e]xcept as otherwise provided in section not unconscionable solely because of the 1292(b) of title 28, an appeal may not be existence of unequal bargaining power. taken from an interlocutory order . . . These rulings are not at issue in this appeal directing arbitration to proceed under or cross-appeal. section 4 of this title.”
4 on the merits and le[aves] no part of III. it pending before the court. The FAA does permit parties to We first address the issue of whether arbitration agreements to bring a the District Court erred in dismissing separate proceeding in a district Lloyd’s complaint with prejudice rather court to enter judgment on an than staying the proceedings pending arbitration award once it is made (or arbitration. On cross-appeal, Wyatt argues to vacate or modify it), but the that pursuant to § 3 of the FAA, 9 U.S.C. existence of that remedy does not § 3, the District Court was required to vitiate the finality of the District grant Appellees’ motion to stay the Court’s resolution of the claims in litigation of Lloyd’s claims pending the the instant proceeding. 9 U.S.C. §§ outcome of the arbitration and that the 9, 10, 11. The District Court’s order dismissal of Lloyd’s case was therefore was therefore “a final decision with improper.6 respect to an arbitration” within the meaning of § 16(a)(3), and an Courts of Appeals have reached appeal may be taken. different resolutions of the issue of whether a District Court has discretion to 531 U.S. at 86. Accordingly, we have deny a motion for a stay pending before us a final appealable order that we arbitration and dismiss a complaint where may address on the merits.5 it finds all claims before it to be arbitrable. Compare Choice Hotels Intern., Inc. v. 5 BSR Tropicana Resort, Inc., 252 F.3d 707, We note that although the District 709-10 (4th Cir. 2001) (“Notwithstanding Court’s order in this case granted the the terms of § 3, however, dismissal is a dismissal with prejudice, the District proper remedy when all of the issues Court’s opinion stated that the matter presented in a lawsuit are arbitrable.”), and would be dismissed without prejudice. See Green v. Ameritech Corp., 200 F.3d 967, App. at 15, 16. This disparity, however, 973 (6th Cir. 2000) (“The weight of does not affect our appellate jurisdiction. authority clearly supports dismissal of the See Blair v. Scott Specialty Gases, 283 case when all of the issues raised in the F.3d 595, 602 (3d Cir. 2002) (holding that the jurisdictional ruling in Green Tree, where the action had been dismissed with from an order refusing a stay of any action prejudice, applies equally to a case that under section 3 of this title.”). was dismissed without prejudice). 6 Moreover, we note that, while In construing the language of the FAA, Wyatt does not rely on it, appellate our review is plenary. See Shenango Inc. jurisdiction over the cross-appeal may be v. Apfel, 307 F.3d 174, 192 n.19 (3d Cir. exercised pursuant to 9 U.S.C. § 2002) (“The standard of review in cases of 16(a)(1)(A) (“An appeal may be taken statutory construction is plenary.”).
5 district court must be submitted to any issue referable to arbitration.”), and Bercovitch v. Baldwin arbitration under a n School, Inc., 133 F.3d 141, 156 & n.21 agreement in writing for (1st Cir. 1998) (remanding a case to the such arbitration, the court in District Court to decide whether to dismiss which such suit is pending, or stay, depending upon whether all issues upon being satisfied that the before the court are arbitrable), and Alford issue involved in such suit v. Dean Witter Reynolds, Inc., 975 F.2d or proceeding is referable to 1161, 1164 (5th Cir. 1992), and Sparling arbitration under such an v. Hoffman Const. Co., Inc., 864 F.2d 635, a greement, shall o n 638 (9th Cir. 1988), with Adair Bus Sales, application of one of the Inc. v. Blue Bird Corp., 25 F.3d 953, 955 parties stay the trial of the (10th Cir. 1994) (holding that where a action until such arbitration defendant moved for a stay pending has been had in accordance arbitration under 9 U.S.C. § 3, the District with the terms of the court erred in instead entering a dismissal agreement, providing the and the proper course would have been to applicant for the stay is not enter the stay). We have not heretofore in default in proceeding had occasion to resolve the issue.7 Today, with such arbitration. we side with those courts that take the Congressional text at face value. 9 U.S.C. § 3 (emphasis added).
Section 3 of the FAA provides: In accordance with the Supreme Court’s instruction in Green Tree, we apply the If any suit or proceeding be “the plain language of the statutory text” in brought in any of the courts interpreting the FAA. See 531 U.S. at 88 of the United States upon (holding that the plain meaning of the term “final decision” in 9 U.S.C. § 16(a)(3) 7 must be applied). Here, the plain language We have twice commented on the of § 3 affords a district court no discretion issue in dicta, see Seus v. John Nuveen & to dismiss a case where one of the parties Co., 146 F.3d 175, 179 (3d Cir. 1998) and applies for a stay pending arbitration. The Blair, 283 F.3d at 601. In neither of those directive that the Court “shall” enter a stay cases, however, did a party argue that a simply cannot be read to say that the Court stay rather than a dismissal should have shall enter a stay in all cases except those been entered and the Court accordingly in which all claims are arbitrable and the had no occasion to decide whether Section Court finds dismissal to be the preferable 3 is mandatory. Our comments with approach. On the contrary, the statute respect to that issue are thus not clearly states, without exception, that precedential. Marianna v. Fisher, 338 whenever suit is brought on an arbitrable F.3d 189, 201 (3d Cir. 2003).
6 claim, the Court “shall” upon application arbitration. For example, the FAA allows stay the litigation until arbitration has been arbitrating parties to return to court for concluded. In this case, Wyatt requested a resolution of disputes regarding the stay of the proceeding as part of his motion appointment of an arbitrator or the filling to compel arbitration. Accordingly, we of an arbitrator vacancy, 9 U.S.C. § 5. hold that the District Court was obligated Similarly, parties may ask the court to under 9 U.S.C. § 3 to grant the stay once it compel the attendance of witnesses, or to decided to order arbitration. punish the witnesses for contempt, 9 U.S.C. § 7. Then, after an arbitration We are free to disregard an award is rendered, a party is entitled to unambiguous directive of Congress only in seek relief in the District Court in the form the rare instances where failing to do so of a judgment on the award or an order produces a nonsensical result that could vacating or modifying the award. See 9 not have been intended. Mitchell v. Horn, U.S.C. §§ 9, 10, 11. If the plaintiff’s case 318 F.3d 523, 535 (3d Cir. 2003) (“We do has been dismissed rather than stayed, the not look past the plain meaning [of parties will have to file a new action each statutory language] unless it produces a time the Court’s assistance is required, result ‘demonstrably at odds with the with the attendant risk of having their case intentions of its drafters’ . . . or an assigned to a new judge. On the other outcome ‘so bizarre that Congress could hand, if the court enters a stay of the action not have intended it.’”). This is not one of and retains jurisdiction, then proceedings those rare exceptions. Congress adopted under §§ 5, 7, 9, 10, or 11 may be the FAA to establish, promote and expedited, as the parties may simply return facilitate a national policy strongly the to the same district judge presiding favoring arbitration as a process for over the plaintiff’s case. resolving disputes. Alexander v. Anthony Int’l, L.P., 341 F.3d 256, 263 (3d Cir. There is an even more important reason, 2003). Holding that Congress intended to however, to hold that Congress meant deprive the District Court of discretion to exactly what it said. Whenever a party is deny a stay produces results that subjected to litigation on any issue and is effe ctively prom ote an d fac ilitate found to be entitled to arbitrate that issue, arbitration. § 3 of the FAA, as we have noted, mandates that a stay be entered by the Contrary to Lloyd’s suggestion, the District Court. The effect of that stay is District Court has a significant role to play twofold: it relieves the party entitled to under the FAA even in those instances in arbitrate of the burden of continuing to which the District Court orders the litigate the issue while the arbitration arbitration of all claims. Even in those process is on-going, and it entitles that instances, the parties are entitled to seek party to proceed immediately to arbitration the Court’s assistance during the course of without the delay that would be occasioned
7 by an appeal of the District Court’s order While it is true that the suggested to arbitrate. Under § 16 of the FAA, 9 exception would extend only to cases U.S.C. § 16, whenever a stay is entered where the claim subject to arbitration is under § 3, the party resisting arbitration is not asserted along with other non- expressly denied the right to an immediate arbitrable claims – that is, where all appeal.8 The legislative scheme of the asserted claims are arbitrable – none of the FAA thus reflects a policy decision that, if courts that have been willing to endorse it a district court determines that arbitration has suggested a reason why Congress of a claim is called for, the judicial might have wanted a party entitled to system’s interference with the arbitral arbitration to be subjected to an immediate process should end unless and until there is appeal or not depending on how his a final award. adversary has chosen to draft his complaint. If an exception to the mandate of § 3 were to be fashioned, thus giving the In short, a literal reading of § 3 of the District Court discretion to dismiss the FAA not only leads to sensible results, it action rather than enter a stay, a party who also is the only reading consistent with the has been held entitled to arbitration would statutory scheme and the strong national be deprived of an important benefit which policy favoring arbitration. Accordingly, the FAA intended him to have – the right the District Court erred in refusing to enter to proceed with arbitration without the a stay order. substantial delay arising from an appeal. Stated conversely, the effe ct of Although we agree with Wyatt that the recognizing an exception to the mandatory District Court’s order dismissing Lloyd’s directive of § 3 is to give the District Court case must be reversed, we reject the the power to confer a right to an argument that reversal would, in turn, immediate appeal that would not otherwise deprive us of jurisdiction to hear the merits exist. of Lloyd’s appeal. Relying in part on Green Tree, 531 U.S. at 87 n.2, Wyatt suggests that if we vacate the District 8 Court’s dismissal, we would be left with Under 9 U.S.C. § 16(a)(1)(A) & (B), a an unappealable interlocutory order. This party may seek immediate appeal of an argument misconstrues Green Tree. In order refusing a to grant a stay under § 3 that case, the Supreme Court noted that of the FAA or an order denying a petition “[h]ad the District Court entered a stay to compel arbitration under § 4. Under 9 instead of a dismissal . . . , that order U.S.C. § 16(b)(1) & (2), however, an would not be appealable.” Id. (emphasis appeal may not be taken (except as added). In this case, however, the District provided by 28 U.S.C. § 1292(b)) from an Court did not enter a stay. Wyatt’s interlocutory order granting a stay under § argument assumes that a conclusion that 3 or compelling arbitration under § 4.
8 the District Court should have entered a agreement. Failure to raise these matters stay is tantamount to the conclusion that in the District Court should be excused, the District Court did enter a stay. This is Lloyd insists, because “standing” to simply not the case. As we have noted arbitrate is a jurisdictional matter that can supra, the order before us is a final be raised at any stage of the proceedings decision that is appealable under 9 U.S.C. and because, in any event, finding a waiver § 16(a)(3). would result in manifest injustice.9 We are unpersuaded. While it is clear that a court in this procedural context has jurisdiction to It is true that our case law, as well as the address the merits of the appeal, it may decisions of other courts, has often choose to defer to the FAA’s policy referred to a party’s “standing” to compel f a v o r i n g e x p e d i t i o u s ar b i t r a t i o n arbitration. See, e.g., In re Prudential Ins. proceedings and decline to do so when it Co. of Am. Sales Practice Litig. All Agent believes addressing the merits will prolong Actions, 133 F.3d 225, 229 (3d Cir. 1998); the ultimate resolution of the dispute. See, Britton v. Co-op Banking Group, 916 F.2d e.g., Adair Bus Sales, 25 F.3d at 955. 1405, 1413 (9th Cir. 1990). Lloyd is Here, however, we are called upon to mistaken, however, in equating the exercise our discretion after this appeal has doctrine of Article III constitutional been fully briefed and argued, and in a standing with the “standing” required to context where resolution of the merits is compel arbitration in this case. In order likely to advance, rather than prolong, the for there to be Article III standing, there ultimate resolution of the dispute by must be a “case or controversy.” That is, arbitration. We will therefore proceed to the following three elements must be consider the merits of Lloyd’s appeal. present:
IV. 9 Lloyd also contends that he had no opportunity to raise these matters in the Lloyd argues before us for the first District Court, pointing to the fact that time that HOVENSA failed to demonstrate HOVENSA did not join in Wyatt’s motion that it was an intended third party to compel arbitration until after Lloyd had beneficiary of the DRA. It follows, filed his memorandum in opposition according to Lloyd, that HOVENSA failed thereto. Nearly two months elapsed, to affirmatively show that it had however, between HOVENSA’s initial “standing” to compel arbitration. In his reliance on the DRA and the oral argument reply brief, Lloyd adds that HOVENSA on the motion to arbitrate. Lloyd, clearly lacks standing to compel arbitration accordingly, had ample opportunity to of certain of his claims against it because dispute HOVENSA’s status as an intended those claims predate the DRA and, beneficiary of the DRA and to challenge accordingly, fall outside the scope of that the arbitrability of his claims against it.
9 First, the plaintiff must have manifest injustice argument. It well may suffered an injury in fact – an be that some of his claims against invasion of a legally protected HOVENSA are not within the scope of the interest which is (a) concrete and arbitration clause, but the FAA’s scheme particularized, and (b) actual or for the ex peditio us and efficient imminent, not conjectural or disposition of disputes by arbitration hypothetical. Second, there must would be frustrated if parties were not be a causal connection between the required to put their arbitrability claims on injury and the conduct complained the table when the District Court is called of – the injury has to be fairly . . . upon to address such issues. We believe it trace[able] to the challenged action is not manifestly unjust to require parties of the defendant, and not . . . th[e] to do so when the only consequence of a result [of] the independent action of waiver is an alternative form of dispute some third party not before the resolution and no loss of substantive court. Third, it must be likely, as rights. See Mitsubishi Motors Corp. v. opposed to merely speculative, that Soler Chrysler-Plymouth, Inc., 473 U.S. the injury will be redressed by a 614, 628 (1985) (“By agreeing to arbitrate favorable decision. a statutory claim, a party does not forgo the substantive rights afforded by the Lujan v. Defenders of Wildlife, 504 U.S. statute; it only submits to their resolution 555, 560-61 (1992) (citations and internal in an arbitral, rather than a judicial, forum. quotations and footnote omitted). Here, It trades the procedures and opportunity the party invoking federal jurisdiction was for review of the courtroom for the Lloyd, and his complaint presented the simplicity, informality, and expedition of District Court with a “case or controversy” arbitration.”). that has not yet been resolved. Thus, the District Court properly exercised its Our Circuit adheres to a “well jurisdiction. The issues that Lloyd seeks to established principle that it is inappropriate raise before us relate only to whether for an appellate court to consider a HOVENSA has or does not have a contention raised on appeal that was not c o n t r a c t- b a s e d d e f e n s e r e q u i r i n g initially presented to the district court.” In arbitration rather than litigation of those re City of Phila. Litig., 158 F.3d 723, 727 claims. That issue is not a jurisdictional (3d Cir. 1998) (citing Armbruster v. one. See Prudential Ins. Co. of Am., 133 Unisys Corp., 32 F.3d 768, 772 n.4 (3d F.3d at 229 (referring to the contractual Cir. 1994); Frank v. Colt Indus., Inc., 910 standing of a party to arbitrate its claims); F.2d 90, 99-100 (3d Cir. 1990)). Paul Revere Variable Annuity Ins. Co. v. Accordingly, we decline to sustain Lloyd’s Zang, 248 F.3d 1, 5 n.2 (1st Cir. 2001).
Nor are we impressed with Lloyd’s
10 “standing to arbitrate” arguments.10 challenges the District Court’s holding that AAA Rules 17, 18, and 34, which govern V. the confidentiality of certain aspects of the arbitration, are unconscionable and Finally, we address two arguments unenforceable. We exercise plenary relating to the enforceability of the DRA. review over questions regarding the First, Lloyd challenges the District Court’s validity and enforceability of an agreement holding that the DRA was not used in a to arbitrate. Alexander, 341 F.3d at 263. discriminatory manner against public However, “to the extent that the district policy.11 Second, Wyatt’s cross-appeal court predicated its decision on findings of fact, our standard of review is whether those findings were clearly erroneous.” 10 As we have noted, the DRA allows Medtronic AVE, Inc. v. Advanced HOVENSA, as an intended beneficiary, to Cardiovascular Sys., Inc., 247 F.3d 44, 53- compel arbitration of claims arising out of 54 (3d Cir. 2001) (citing Kaplan v. First Lloyd’s employment and employment Options of Chicago, Inc., 19 F.3d 1503, application. While Lloyd urges that we 1509 (3d Cir. 1994)). should remand for fact finding on whether the parties intended HOVENSA to be a A. third party beneficiary, he has not made a proffer of evidence which would tend to Lloyd’s primary argument on appeal is show an intent contrary to that reflected on that Wyatt used the DRA in a the face of the DRA. discriminatory manner as part of a 11 “purposeful scheme to contravene Lloyd also argues that, even if unambiguous Virgin Islands public policy, HOVENSA were an intended third-party as reflected by the V.I. Civil Rights Act, beneficiary of the DRA, the provision 10 V.I.C. § 3.” Appellant’s Br. at 12. granting it such status is unconscionable. Lloyd bases this claim on his assertion that He contends that the provision is Wyatt, by requiring Virgin Islands workers unreasonably one-sided because while he to sign the DRA as a condition of is bound to arbitrate claims against employment, uses “place of residence” as HOVENSA, the provision does not require a “proxy” for race, color and national Wyatt to arbitrate claims against HOVENSA; nor does the DRA allow Lloyd to compel arbitration of any claims but not vice versa. See Restatement that HOVENSA may have against him. (Second) of Contracts § 304 (1981). We As an initial matter, we note that this need not address the issue, however, argument appears to be a challenge to the because it was never presented to the fundamental principle of contract law that District Court and was therefore waived. an intended beneficiary to a contract may See In re City of Phila. Litig., 158 F.3d at enforce a promise made by the promisor, 727.
11 origin. Alternatively, Lloyd alleges that Lloyd also cites Title VII and the Virgin the DRA has a disparate impact upon Islands Civil Rights Act, 10 V.I. Code Blacks and Hispanics who predominate in Ann. § 1 et seq., as illustrative of a strong the Virgin Islands workforce. As a result, federal and local public policy against he urges, the DRA is unenforceable under employment discrimination.13 the generally applicable contract defense that use of the agreement contravenes Significantly, Lloyd does not allege that public policy. Lloyd also claims that the any particular promise or term in the DRA District Court erred in not allowing him an was discriminatory. Rather, he claims that opportunity to conduct discovery into this Wyatt used the DRA in a discriminatory issue. manner. Even assuming, however, that § 178 of the Restatement may be applied to Lloyd’s generally applicable contract a facially neutral contract, Lloyd’s defense relies on § 178(1) of the argument must still fail as he has proffered Restatement (Second) of Contracts, which no evidence that Wyatt’s use of the DRA provides: was in any way discriminatory.
A promise or other term of an Lloyd’s argument is based solely on two agreement is unenforceable on facts: (1) that Wyatt began using the DRA grounds of public policy if after its upper management was hired; and legislation provides that it is (2) that Wyatt’s parent company, Wyatt unenforceable or the interest in its Field Services, does not use the DRA. enforcement is clearly outweighed Wyatt does not contest these facts. in the circumstances by a public Instead, it admits that it began using the policy against the enforcement of DRA in the Virgin Islands in January such terms.12 2002. Wyatt responds, however, that this
13 Lloyd further cites, for the first time 12 Wyatt argues on appeal that Lloyd on appeal, 24 V.I. Code Ann. § 74a(b), waived his public policy argument by not which provides that “[a]n employer subject relying on § 178 of the Restatement to this chapter may not require an (Second) of Contracts in the District Court. employee to arbitrate a dispute as a While it is true that Lloyd never condition of employment.” Section 74a specifically relied upon the Restatement, was enacted on September 18, 2002, one he nonetheless expressly argued that the month before Lloyd filed his memorandum DRA was applied in a discriminatory in opposition to Wyatt’s motion to compel manner and unenforceable as a matter of arbitration. Lloyd did not, however, bring public policy. He therefore preserved the this statute to the attention of the District argument for appeal and we will address it Court as a source of public policy and we on the merits. therefore need not address it.
12 timing explains why its upper management well established that the scope and conduct employees, who were hired before January of discovery are within the sound 2002, were not required to sign the DRA. discretion of the trial court and that after The record indicates that all persons who final judgment of the district court or final applied for employment at Wyatt after agency order, our review is confined to January 2002 were obligated to sign the determining if that discretion has been DRA. Wyatt proffered that the reason it abused.” (citations omitted))). Lloyd began using the DRA was concern for the argues that the District Court erred in not high cost of employee litigation claims in considering his request to conduct the Virgin Islands. It adds that its parent discovery, but he does not cite any motion does not, and has not, engaged in any that the court denied or allege that he was business in the Virgin Islands. Lloyd has deprived of the opportunity to conduct not addressed Wyatt’s explanations or discovery on his own. The Federal Rules claimed that they are pretextual. of Civil Procedure allow for numerous discovery mechanisms that do not require The burden of proving a generally leave of the court. See Fed. R. Civ. P. applicable contract defense lies with the 30(a)(1) (oral depositions), 31(a)(1) party challenging the contract provision. (written depositions), 33(a ) Cf. Harris v. Green Tree Fin. Corp., 183 (interrogatories), 34(b) (production of F.3d 173, 181 (3d Cir. 1999) (“The party documents). Lloyd does not state whether challenging a contract provision as he ever attempted to use any of these unconscionable generally bears the burden avenues of discovery to support his claim. of proving unconscionability.”); E. Allen We therefore reject his assignment of Farnworth, Farnsworth on Contracts § error. 4.28 & n.14 (3d ed. 1999) (“The party asserting the defense of unconscionability B. must prove it.”). Here, Lloyd has failed to present any evidence in attempting to meet On cross-appeal, Wyatt argues that the this burden. We will therefore affirm the District Court erred in holding that the District Court’s holding that the DRA was confidentiality provisions of AAA Rules not unenforceable as violative of public 17, 18, and 34, as incorporated in the policy. DRA, were unconscionable and severable from the remainder of the DRA. We With respect to Lloyd’s assignment of recently addressed an identical issue in error regarding his request for discovery, Parilla v. IAP Worldwide Services VI, Inc., we review a district court’s denial of a ___ F.3d ___ (3d Cir. 2004) and concluded discovery motion for an abuse of that the district court in that case had erred discretion. See Seus, 146 F.3d at 178 in hold ing the se A AA Ru les (citing Marroquin-Manriquez v. I.N.S., unconsc i o n a b le . The factual 699 F.2d 129, 134 (3d Cir. 1983) (“It is circumstances in this case are substantially
13 the same as those in Parilla and the parties have also presented substantially the same arguments that were presented in that case. For the reasons given in Parilla, we hold that the District Court’s ruling on this issue was in error. Accordingly, AAA Rules 17, 18, and 34 should not have been held unconscionable or severed from the DRA.
VI.
For the reasons set forth above, we will reverse the District Court’s order and will remand with instructions to enter an order compelling arbitration pursuant to the Dispute Resolution Agreement, as written, and staying the proceedings in this case pending arbitration.
LLOYD v. HOVENSA – NOS. 03-1502 AND 03-1592
BECKER, Circuit Judge, concurring: I join Parts I, II, and III of the majority’s opinion in full. I concur in Parts IV and V with the understanding that this case, because it raises substantial and unresolved questions of considerable importance to those involved in employment litigation in the Virgin Islands, is the rare one in which we will exercise our discretion to address the merits of a decision that should have resulted in a stay pending arbitration, rather than dismissal.