Filed: May 13, 2004
Latest Update: Mar. 02, 2020
Summary: 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of the United 2004 Decisions States Court of Appeals for the Third Circuit 5-13-2004 Lloyd v. Hovensa Precedential or Non-Precedential: Precedential Docket No. 03-1502 Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2004 Recommended Citation "Lloyd v.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 Stat
Summary: 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of the United 2004 Decisions States Court of Appeals for the Third Circuit 5-13-2004 Lloyd v. Hovensa Precedential or Non-Precedential: Precedential Docket No. 03-1502 Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2004 Recommended Citation "Lloyd v.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 State..
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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Precedential or Non-Precedential: Precedential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
Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2004
Recommended Citation
"Lloyd v. Hovensa" (2004). 2004 Decisions. Paper 664.
http://digitalcommons.law.villanova.edu/thirdcircuit_2004/664
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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.
14
