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Garcia v. Houston NW Medical, 95-20481 (1996)

Court: Court of Appeals for the Fifth Circuit Number: 95-20481 Visitors: 4
Filed: Apr. 23, 1996
Latest Update: Mar. 02, 2020
Summary: IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT _ No. 95-20481 _ CATALINA GARCIA; AGNES L MANNING; DONNA R. BROWN; JACQUELINE R GIBSON Plaintiffs - Appellees, v. HOUSTON NORTHWEST MEDICAL CENTER INC Defendant - Appellant - GENEVA CHATMAN Plaintiff - Appellee v. HOUSTON NORTHWEST MEDICAL CENTER INC Defendant - Appellant - MARY J WRIGHT Plaintiff - Appellee v. HOUSTON NORTHWEST MEDICAL CENTER INC Defendant - Appellant - THERESA KENNEY; RONALD DOLBY; JANIS FOSTER; STELLA CHAMBERS; ELTON
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          IN THE UNITED STATES COURT OF APPEALS

                  FOR THE FIFTH CIRCUIT

                  _____________________

                      No. 95-20481
                  _____________________


     CATALINA GARCIA; AGNES L MANNING; DONNA R. BROWN;
     JACQUELINE R GIBSON

                          Plaintiffs - Appellees,

     v.

     HOUSTON NORTHWEST MEDICAL CENTER INC

                          Defendant - Appellant

     ------------------------------

     GENEVA CHATMAN

                          Plaintiff - Appellee

     v.

     HOUSTON NORTHWEST MEDICAL CENTER INC

                          Defendant - Appellant

     ------------------------------

     MARY J WRIGHT

                          Plaintiff - Appellee

     v.

     HOUSTON NORTHWEST MEDICAL CENTER INC

                          Defendant - Appellant

     ------------------------------

     THERESA KENNEY; RONALD DOLBY; JANIS FOSTER; STELLA
     CHAMBERS; ELTON CRAWFORD; CYNTHIA EDWARDS; GLORIA
     ROBERTS FORD; GLORIA HERRERA; DUANA HILL; ANGELA
JACKSON; VICKIE MOORE HARRIS; LA RHONDA PETITT; SOCCORA
     DAVID POWELL; ANA RIVAS; HORTENCIA ROSALES; ADELINA
     SERRATO; MARILYN SIMMONS; VERONDA HEARNE STEWART;
SHARON STEWART; MARTHA VALLEJO; JANICE WEBSTER; MELROSE
WEDDERBURN; PAULA SAMUELS; SHELLENA WOFFORD; SHIRLEY
BOLDEN; DORIS DURHAM; FRED GARZA; JUDY LAWSON; ESTER
MORRIS; DONNA OWENS; JOSEPH OZENNE; JEAN RUNCIE;

                    Plaintiffs - Appellees

v.

HOUSTON NORTHWEST MEDICAL CENTER INC

                    Defendant - Appellant

------------------------------

WILLIE J SKIPPER

                    Plaintiff - Appellee

v.

HOUSTON NORTHWEST MEDICAL CENTER INC

                    Defendant - Appellant

------------------------------

PATRICIA REYES; DELINDA ROGERS; ANTHONY SMITH; CYNTHIA
VAUGHN; MANUELA SILVA; CAROLYN MCCRAY; SHARI PATTERSON;
VESHAE WILLIS; LUPE STOUGHTON; BETTY HOPSON; KATIE
VASSER; DIANE HAYNES; JANE DOE; THELMA DEMERY; REA
MACHETTE; JOAN PRINCE; LOTTIE SEWELL; EULA SHORTER;
EDDIE SIMLIN; GEORGE SINGLETON; EUNICE TAYLOR;

                    Plaintiffs - Appellees

v.

HOUSTON NORTHWEST MEDICAL CENTER INC

                    Defendant - Appellant

------------------------------

HATTIE D FREENY

                    Plaintiff - Appellee

v.

HOUSTON NORTHWEST MEDICAL CENTER INC


                      2
                      Defendant - Appellant

------------------------------

MARTHA UDDIN

                      Plaintiff - Appellee

v.

HOUSTON NORTHWEST MEDICAL CENTER INC

                      Defendant - Appellant

------------------------------

VICKIE HARRIS-MOORE

                      Plaintiff - Appellee

v.

HOUSTON NORTHWEST MEDICAL CENTER INC

                      Defendant - Appellant

------------------------------

PAMELA C MOSQUERA; SHARON BOOKMAN; MIGUEL MARTINEZ;
VANESSA MARTIN; CARMEN MERCHAN; BENNIE STEWART; SAKENNA
REED; BETTY SHEPARD; GLORIA SPURLOCK

                      Plaintiffs - Appellees

V.

HOUSTON NORTHWEST MEDICAL CENTER INC

                      Defendant - Appellant

------------------------------

ELEANOR C TONGEE

                      Plaintiff - Appellee

v.

HOUSTON NORTHWEST MEDICAL CENTER INC

                      Defendant - Appellant


                        3
     ------------------------------

     MARIE H MCCULLOUGH

                          Plaintiff - Appellee

     v.

     HOUSTON NORTHWEST MEDICAL CENTER INC

                          Defendant - Appellant

     ------------------------------

     PEGGY MIGGINS

                          Plaintiff - Appellee

     v.

     HOUSTON NORTHWEST MEDICAL CENTER INC

                          Defendant - Appellant

     ------------------------------

     GAMSTER W FRANKLIN; CLAUDETTE B WAIR; ANNETTE REED
     SURGERS; VERONICA THOMAS; KEITH A DENMAN; CHERYL
CHATMAN; GERTRUDE M PERRY; CAROL BEATRICE JOHNSON-
GREENE; MARGARET WILLIAMS; FURNELL BROWN; JOYCE A
SCOTT; ANN HUTCHINS; MARILYN ROBERTS; JUDY EDISON

                          Plaintiffs - Appellees

     v.

     HOUSTON NORTHWEST MEDICAL CENTER INC

     -------------------------------

     DAVID SALDANA

                          Plaintiffs - Appellees

     v.

     HOUSTON NORTHWEST MEDICAL CENTER INC

                          Defendant - Appellant




                            4
_________________________________________________________________

           Appeal from the United States District Court
                for the Southern District of Texas
_________________________________________________________________
                           April 5, 1996
Before KING, WIENER, and BENAVIDES, Circuit Judges.

PER CURIAM:*

     Houston Northwest Medical Center (the "Hospital") appeals

the order denying its motion to stay the action brought by the

appellees pending arbitration.   For the reasons assigned, we

vacate and remand.



I.   FACTUAL AND PROCEDURAL BACKGROUND

     On October 4, 1984, EEOC Commissioner Fred W. Alvarez filed

an administrative charge of discrimination against the Hospital.

The resulting investigation culminated in a decision by the EEOC

finding reasonable cause to believe that certain allegations in

the charge were true.

     The EEOC entered into a conciliation agreement (the

"Agreement") with the Hospital on May 25, 1990.    The Agreement

was intended to remain in effect for three years.    It contained

two primary components:   affirmative action and reporting

requirements, and procedures for evaluating individual claims of

disparate treatment and implementing appropriate remedies if the

claimants met the specified criteria.    The section of the

     *
        Pursuant to Local Rule 47.5, the court has determined
that this opinion should not be published and is not precedent
except under the limited circumstances set forth in Local Rule
47.5.4.

                                 5
Agreement that outlined the individual claims procedure included

an arbitration clause providing that, "[i]f any dispute arises

between the Company and the Commission in determining the

validity of a claim, an independent Arbitrator shall make the

final and binding determination."

     The Agreement also contained a separate section addressing

dispute resolution.   The dispute resolution section began with a

subsection stating, "[i]f any dispute arises between the Company

and the Commission . . . the Arbitrator(s) shall make the final

binding determination by reference to the standards of review set

forth herein."   The dispute resolution section went on in another

subsection to provide that "[i]t is expressly agreed that if

either party concludes that this Agreement has been materially

breached, that party may bring an action in the appropriate

federal court to specifically enforce this Agreement."   This

provision was followed by a series of conditions, including

communication of a notice of noncompliance by the party alleging

breach of the Agreement to the other party and attempted dispute

resolution through "discussion, conference, investigation,

correspondence, and other appropriate means," which were required

to be satisfied before either party could bring suit on the

Agreement.

     Pursuant to the terms of the Agreement, the Hospital

identified 2,887 members of the aggrieved class covered by the

Commissioner's charge, mailed notices to them explaining their

rights under the Agreement, and provided the EEOC with


                                 6
information on each class member.    Of this group, 369 persons

filed claims under the Agreement.    In June 1994, the EEOC

concluded that the Hospital had breached the Agreement and

responded by issuing Notices of Right to Sue to the class members

previously named by the Hospital.

     On July 1, 1994, Catalina Garcia, who had previously

received notice that she was part of the aggrieved class under

the Commissioner's charge and had filed a claim under the

Agreement, filed a complaint in federal district court alleging

that the Hospital had discriminated against her and a class of

similarly situated persons in violation of Title VII, 42 U.S.C. §

2000e et seq., and 42 U.S.C. § 1981.    Two months later, Garcia

amended the complaint to include Donna R. Brown, Jacqueline R.

Gibson, and Agnes L. Manning as named plaintiffs.    She later

amended her complaint a second time to include a breach of

contract claim based upon the Agreement.

     The Hospital filed a motion to stay the litigation pending

arbitration pursuant to § 3 of the Federal Arbitration Act, 9

U.S.C. § 1 et seq.   Without addressing its merits, the district

court denied the motion.1   Upon several motions by the Hospital,

the district court subsequently consolidated the actions of all

individuals who had brought racial and national origin

discrimination claims against the Hospital (collectively


     1
          The district court later stated, "It's not that I don't
think it's meritorious; it's that I can't determine whether or
not it's meritorious under the circumstances, at this point
anyway."

                                 7
"appellees") with the action by Garcia, Brown, Gibson, and

Manning designated as lead case.

      Prior to consolidation, Garcia, Brown, Gibson, and Manning

had moved for class certification, and class certification

hearings were held in November 1994.     In spite of the Hospital's

opposition to class certification, the court certified three

classes of plaintiffs:     African-Americans and Hispanics denied

employment, African-Americans and Hispanics denied promotions,

and African-Americans terminated allegedly because of their race.

The certified classes were broader than the class covered by the

Agreement, because, in addition to those covered by the

Agreement, the certified classes included persons denied

promotions and persons denied employment or terminated after the

Agreement became effective on July 26, 1990.

      The Hospital renewed its motion for a stay pending

arbitration.     The court denied the motion, and the Hospital

timely appealed.



II.   ANALYSIS

      The district court's order denying the Hospital's motion to

stay litigation of this action pending arbitration consisted of

one sentence and contained no factual conclusions or legal

analysis.   As such, the order is effectively unreviewable.

Without expressing any opinion as to the proper resolution of the

Hospital's motion, we vacate the district court's order and




                                   8
remand with instructions to reconsider and provide detailed

reasons for whatever conclusion the court ultimately reaches.

     In order to be reviewable, the district court's ruling on

the Hospital's motion to stay must address two primary issues.

First, it must determine arbitrability, i.e., the scope of the

Agreement and whether its arbitration provisions bind any of the

class members with respect to their contractual or statutory

claims.   Second, the court must address the appellees' argument

that the arbitration provisions of the Agreement did not survive

the Agreement's termination.

     A.   Scope of the Agreement

     Resolution of the Hospital's motion will require a detailed

series of conclusions relating to the scope of the Agreement and

the meaning and effect of its dispute resolution provisions.

     Under the FAA, the scope of the Agreement is governed by

state contract law to the extent that the applicable state

contract law does not treat arbitration agreements any

differently than other contracts.      See Perry v. Thomas, 
482 U.S. 483
, 492 n.9 (1987); Progressive Cas. Ins. Co. v. C.A.

Reasegurado Nacional De Venezuela, 
991 F.2d 42
, 46 (2nd Cir.

1993).    "When deciding whether the parties agreed to arbitrate a

certain matter . . ., courts generally . . . should apply

ordinary state-law principles that govern the formation of

contracts."    First Options of Chicago, Inc. v. Kaplan, 
115 S. Ct. 1920
, 1924 (1995).   In determining the scope and effect of the




                                   9
Agreement, the district court should analyze the appellees'

contract and statutory claims independently.

           1.   Contract claims

     Given that the Agreement is a contract between the EEOC and

the Hospital, any recovery on the part of the appellees under the

Agreement will be predicated upon a determination that the

appellees are third party beneficiaries of the contract.      Under

Texas contract law, third party beneficiaries of a contract may

acquire no greater rights than the promisee under the contract.

See S & H Supply Co. v. Hamilton, 
418 S.W.2d 489
, 493 (Tex.

1967).   The third party beneficiary stands in the shoes of the

contracting party in seeking performance.      United States v.

Industrial Crane & Mfg. Corp., 
492 F.2d 772
, 774 (5th Cir. 1974).

Thus, if the district court determines that any of the appellees

are third party beneficiaries of the Agreement, then it must

determine the scope of the EEOC's rights under the Agreement in

order to determine whether arbitration is a condition precedent

to the recovery of those appellees under the Agreement.

     A determination of the arbitrability of the appellees'

claims under the Agreement will require the resolution of a

number of subsidiary issues.      First, the district court must

determine the scope and effect of each of the arbitration

provisions in the Agreement, bearing in mind that it should avoid

interpreting any provision of the contract in a manner that

renders any other provision meaningless.      See R & P Enterprises




                                   10
v. LaGuarta, Gavrel, & Kirk, Inc., 
596 S.W.2d 517
, 518-19 (Tex.

1980).

     Second, as noted above, the dispute resolution portion of

the Agreement contained a provision outlining the parties' rights

to sue for breach of the Agreement.    The district court must

determine whether the EEOC's right to sue for breach of the

Agreement under this provision, as opposed to its obligation to

arbitrate under other provisions of the Agreement, also

constitutes a right for the appellees to sue for breach of the

Agreement as third party beneficiaries.



          2.   Statutory claims

     In determining whether any of the appellees' statutory

claims under Title VII and § 1981 are arbitrable, the district

court should express its interpretation of the language of § 102

D of the Agreement, which provides that

     [t]his agreement resolves all issues between the Commission
     and . . . [the Hospital] arising out of charge numbers
     064850084 and 064841059 as to acts and practices occurring
     prior to the effective date of this agreement.

The court should determine (1) whether any of the statutory

claims constitute "issues between the Commission" and the

Hospital arising out of the identified charges, and (2) whether

the Agreement is legally capable of binding the appellees with

respect to their attempts to vindicate their statutory rights.



                a.   Title VII



                                  11
     In determining the legal effect of the Agreement on the

appellees' Title VII claims, the court should bear in mind that a

ripe Title VII action requires the filing of an administrative

charge of discrimination with the EEOC and a timely claim in

federal district court once the EEOC issues a Notice of Right to

Sue. See BARBARA L. SCHLEI & PAUL GROSSMAN, EMPLOYMENT DISCRIMINATION LAW

1092-93 (2d ed. 1990).      Before issuing a Notice of Right to Sue,

the EEOC must attempt conciliation with the party against whom

the charge is made.     29 C.F.R. § 1601.26 (1994).       However, a

conciliation agreement cannot bind the charging party unless the

charging party agrees to it.       Flowers v. Local No. 6, Laborers

Int'l Union of North America, 
431 F.2d 205
, 207 (7th Cir. 1970).

     In this case, the charging party was the EEOC Commissioner

rather than a private party.       The appellees' Title VII claims are

made pursuant to the Commissioner's charge.2         As such, the

district court must determine whether any of the appellees are

restricted in bringing those claims by virtue of the arbitration

provisions in the Agreement.       Furthermore, the district court

must evaluate the appellees' right to sue (as distinguished from

being compelled to arbitrate) in light of the provision in the




     2
          The EEOC's administrative regulations provide that,
"[w]here the Commission has found reasonable cause to believe
that Title VII . . . has been violated, has been unable to obtain
voluntary compliance with Title VII . . ., and where the
Commission has decided not to bring a civil action against the
respondent, it will issue a notice of right to sue to . . . any
member of the class" covered by the charge. 29 C.F.R. §
1601.28(b) (1994).

                                    12
dispute resolution section of the Agreement that defines the

EEOC's right to sue for breach of the Agreement.



               b.   Section 1981

     The district court must also determine whether any of the

appellees' § 1981 claims are arbitrable under the Agreement.

Section 1981 claims are not subject to the administrative

requirements of Title VII.   Johnson v. Railway Express Agency,

Inc. 
421 U.S. 454
, 460 (1975).     Nevertheless, some courts have

held that § 1981 claims fall within the ambit of arbitration

clauses in employment contracts.        See, e.g., Williams v. Katten,

Muchin & Zavis, 
837 F. Supp. 1430
, 1436-37 (N.D. Ill. 1993).

However, in such situations, the party who was forced to

arbitrate the § 1981 claim was a party to the employment contract

in question, and this is not the case with the appellees and the

Agreement.

     Regardless of the district court's legal conclusion on the

arbitrability of the appellees' § 1981 claims, the court will

have discretion to stay the § 1981 claims because the discovery

related to those claims will be virtually identical to that

necessary for the Title VII claims and claims under the

Agreement.   In re Complaint of Hornbeck Offshore (1984) Corp.,

981 F.2d 752
, 755 (5th Cir. 1993).

     Should the district court determine that any of the claims

in question, statutory or contractual, fall within the purview of

the arbitration provisions of the Agreement, then it lacks


                                   13
discretion to deny a stay pending arbitration as to those claims.

Midwest Mechanical Contractors, Inc. v. Commonwealth Constr. Co.,

801 F.2d 748
, 751 (5th Cir. 1986).    When the issues in a case

fall within the scope of a written arbitration agreement, § 3 of

the FAA mandates a stay of legal proceedings.    
Hornbeck, 981 F.2d at 754
.



     B.   Survival of the arbitration clause

     The appellees contend that the arbitration provisions of the

Agreement no longer have any legal effect because they expired

along with the Agreement in 1993.    The court must determine

whether this issue--the continued legal effect of the arbitration

clause after the termination of the Agreement--is a matter for

judicial resolution or resolution through arbitration.     See First

Options; Prima Paint Corp. v. Flood & Conklin Mfg. Co., 
388 U.S. 395
(1967); Mesa Operating Ltd. Partnership v. Louisiana

Intrastate Gas Corp., 
797 F.2d 238
(5th Cir. 1986) .

     If the court decides that the issue of whether the

arbitration provisions survived the termination of the Agreement

is a matter for judicial resolution, then it may find an analysis

of case law surrounding expired collective bargaining agreements

to be a useful starting point in resolving the issue.    In the

context of collective bargaining agreements, the Supreme Court

has held that "structural provisions relating to remedies and

dispute resolution--for example, an arbitration provision--may in

some cases survive in order to enforce duties arising under the


                                14
contract . . . .     [The Court presumes] as a matter of contract

interpretation that the parties did not intend a pivotal dispute

resolution provision to terminate for all purposes upon the

expiration of the agreement."     Litton Fin. Printing Div. v. NLRB,

501 U.S. 190
, 208 (1991).     Rebutting this presumption that an

arbitration clause survives the termination of the underlying

collective bargaining agreement requires either express rebuttal

or rebuttal by clear implication from the language of the

agreement.    Nolde Bros., Inc. v. Local No. 358, Bakery and

Confectionery Workers Union, 
430 U.S. 243
, 255 (1977).     If the

court ultimately decides to resolve the issue of whether the

arbitration provisions survived the termination of the Agreement,

then it should determine whether presumptions similar to those

that operate in interpreting collective bargaining agreements

also apply in interpreting Title VII conciliation agreements.

       Because the EEOC was a principal architect of the Agreement,

the district court would be well advised to request the

submission of an amicus brief from the EEOC establishing its

position on the questions of law at issue in the resolution of

the Hospital's motion to stay pending arbitration.     To say the

least, the court is entitled to the benefit of the EEOC's

considered views on those questions.



III.    CONCLUSION

       For the reasons outlined above, we VACATE the district

court's order and REMAND with instructions to the district court


                                  15
to reconsider its order and provide legal analysis and factual

conclusions sufficient to facilitate effective review.




                               16

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