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Clinton Cole v. Burns International Security Services

Court of Appeals for the D.C. Circuit
323 U.S. App. D.C. 133, 105 F.3d 1465 (1997)
ELI5:

Rule of Law:

A mandatory arbitration agreement required as a condition of employment is enforceable for statutory claims, but it cannot require an employee to pay for the arbitrator's services. If such an agreement is silent or ambiguous regarding the payment of arbitrator's fees, it will be interpreted to require the employer to bear the cost.


Facts:

  • Clinton Cole worked as a security guard for LaSalle and Partners.
  • In 1991, Burns International Security Services took over LaSalle's contract and required all employees to sign a 'Pre-Dispute Resolution Agreement' as a condition of employment.
  • The agreement stipulated that if an employee sued Burns, the company had the option to compel binding arbitration for any dispute, including claims of discrimination.
  • The agreement stated, 'YOU WILL NOT BE OFFERED EMPLOYMENT UNTIL THIS FORM IS SIGNED AND RETURNED BY YOU.'
  • Cole signed the agreement on August 5, 1991, and began working for Burns.
  • The agreement did not specify which party was responsible for paying the arbitrator's fees.
  • In October 1993, Burns fired Cole.

Procedural Posture:

  • Clinton Cole filed a complaint against Burns International Security Services in the U.S. District Court for the District of Columbia, alleging violations of Title VII.
  • Burns filed a motion to compel arbitration and dismiss the complaint, citing the Pre-Dispute Resolution Agreement signed by Cole.
  • The District Court, a trial court, granted Burns's motion, compelling arbitration and dismissing Cole's complaint.
  • The District Court found that the agreement was not exempt from the Federal Arbitration Act (FAA) and was an enforceable contract.
  • Cole (Appellant) appealed the District Court's decision to the U.S. Court of Appeals for the D.C. Circuit, with Burns as the Appellee.

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Issue:

Is a mandatory arbitration agreement, imposed as a condition of employment, enforceable when it requires an employee to arbitrate statutory discrimination claims but is silent on who must pay the arbitrator's fees?


Opinions:

Majority - Chief Judge Edwards

Yes, a mandatory arbitration agreement is enforceable under these circumstances if it is interpreted to require the employer to pay all arbitrator fees and expenses. The court held that while statutory claims may be subject to mandatory arbitration under the Federal Arbitration Act (FAA), employees cannot be forced to pay for the arbitrator's services as a condition of vindicating their statutory rights. The court reasoned that requiring an employee to pay fees ranging from $500 to $1,000 or more per day would create a prohibitive barrier to access, effectively preventing the employee from pursuing their claims. Because the agreement drafted by Burns was ambiguous on the allocation of fees, the court applied principles of contract interpretation, construing the agreement against the drafter and in favor of a lawful construction. Therefore, to be enforceable, the agreement must be read to require Burns to pay all arbitrator compensation.


Concurring-in-part-and-dissenting-in-part - Circuit Judge Henderson

Yes, the arbitration agreement is binding, but the majority errs by rewriting its terms regarding costs. The dissent argues that the majority engages in 'pure judicial fee shifting' without support from the FAA, precedent, or the agreement itself. The issue of costs was never raised by the parties and was improperly addressed by the court sua sponte. Furthermore, the majority misinterprets the incorporated American Arbitration Association (AAA) rules, which expressly grant the arbitrator the authority to allocate costs in the final award. By preemptively assigning all costs to the employer, the court usurps the arbitrator's role and improperly reforms the contract instead of enforcing it as written.



Analysis:

This case significantly builds on the Supreme Court's holding in Gilmer by addressing the critical issue of cost allocation in mandatory employment arbitration. The D.C. Circuit established a crucial, pro-employee protection, ruling that an employer cannot shift the arbitrator's fees to an employee when arbitration is a condition of employment. This decision created a new floor of procedural fairness for arbitrating statutory claims, preventing employers from using high costs as a tool to deter employees from vindicating their rights. The ruling heavily influences the drafting of arbitration agreements, effectively requiring employers to explicitly assume responsibility for arbitrators' fees to ensure enforceability.

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