Daniel C. Murray v. United Food and Commercial Workers International Union, Local 400, et al.

Daniel C. Murray ("Murray") brought this action against his
employer, the United Food & Commercial Workers Union, Local 400
("Local 400"), and Donald Cash ("Cash"), a union managerial
employee, alleging that they discriminated against him on the basis
of his race in violation of Title VII of the Civil Rights Act of 1964,
see 42 U.S.C.A. SS 2000e - 2000e-17 (West 1994 & Supp. 2001), and
42 U.S.C.A. S 1981 (West 1994), when they terminated him from his
employment. Murray also alleged a pendent state law claim for defamation against Local 400 and its organizing director, Christian Sauter
("Sauter"), arising from alleged defamatory statements made by
Sauter after Murray was fired. The district court granted defendants'
motion to dismiss and to compel arbitration of Murray's discrimination claim, and granted defendants' motion to dismiss Murray's defamation claim pursuant to Federal Rule of Civil Procedure 12(b)(6) for
failure to state a claim upon which relief could be granted. We reverse
and remand.

Local 400 of the United Food & Commercial Workers Union is a
labor union representing approximately 40,000 members, many of
whom are employed in retail food stores. In February 1997, Murray
took a leave of absence from his position as a produce clerk at Giant
Food, Inc., and began working full-time as a union organizer for
Local 400. As a condition of his employment with Local 400, Murray
was required to sign an agreement containing the following arbitration clause:

All Representatives are employed under the terms of the
Bylaws of Local 400. Any claims of . . . discrimination
which . . . ha[ve] not been properly remedied through [Local
400's internal discrimination complaint process], shall be
determined and adjudicated through final and binding arbitration. A single arbitrator shall be chosen by the alternate
strike method from a list of arbitrators provided by the
[Local 400] President's office. Such arbitrator shall not
have the authority to alter[,] change or diminish any power,
right or authority granted to the President or Acting President of Local 400 under the terms and conditions of the
Bylaws of Local 400.

J.A. 79 (emphasis added).

On June 29, 1998, Local 400 and Donald Cash informed Murray
that his employment with Local 400 would be terminated effective
July 11, 1998. Murray returned to his position at Giant Food and, on
July 10, 1998, instituted this action against Local 400 and Cash under
Title VII and S 1981. Murray, a 42-year-old white male, alleged that
Local 400 and Cash, who is African American, terminated "his
employment on account of his race even though he is qualified for
that employment, and . . . defendants plan to retain similarly situated
African American employees because of their race." J.A. 8. Among
other relief, Murray sought reinstatement to his position as a union
organizer and monetary damages.

In September 1998, Murray amended his complaint to add Christian Sauter, Local 400's Organizing Director, as a defendant and
asserted a state law defamation claim against Local 400 and Sauter.
Murray alleged that Sauter defamed him after he was terminated from
his position as a union organizer with Local 400 by telling one or
more Giant Food employees that Murray "was not a good organizer."
J.A. 230.

Defendants filed a motion to dismiss and to compel arbitration of
Murray's discrimination claim, as well as a motion to dismiss Murray's defamation claim for failure to state a claim for relief under
Maryland law. The district court granted both motions, holding that
(1) the discrimination claim was subject to the arbitration agreement
between Local 400 and Murray, and (2) Sauter's statements failed to
state an actionable defamation claim under Maryland law. The district
court subsequently denied Murray's motion to reconsider, and the
parties proceeded to arbitration of Murray's discrimination claim.

At the conclusion of arbitration, the single arbitrator ruled in favor
of Local 400 and Cash, concluding that Murray had failed to establish
a prima facie case of unlawful discrimination and, in any event, that
Local 400 had articulated legitimate nondiscriminatory reasons for
Murray's discharge. The district court then confirmed the award and
entered final judgment. Murray now appeals the district court's grant
of defendants' motion to dismiss and to compel arbitration of his dis-
crimination claim, as well as the district court's dismissal of his defa-
mation claim under Rule 12(b)(6).

* * *

The Federal Arbitration Act ("FAA"), 9 U.S.C.A. SS 1-16 (West
1999) represents "a liberal federal policy favoring arbitration agree-
ments," Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460
U.S. 1, 24 (1983), in order "`to reverse the longstanding judicial hos-
tility to arbitration agreements . . . and to place arbitration agreements
upon the same footing as other contracts,'" Green Tree Fin. Corp.-
Alabama v. Randolph, 531 U.S. 79, 89 (2000) (alteration in original)
(quoting Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24
(1991). "Pursuant to th[is] liberal policy,`any doubts concerning the
scope of arbitral issues should be resolved in favor of arbitration,
whether the problem at hand is the construction of the contract lan-
guage itself or an allegation of waiver, delay, or a like defense to
arbitrability.'" O'Neil v. Hilton Head Hosp., 115 F.3d 272, 273-74
(4th Cir. 1997) (quoting Moses H. Cone, 460 U.S. at 24-25). When
parties have entered into a valid and enforceable agreement to arbi-
trate their disputes and the dispute at issue falls within the scope of
that agreement, the FAA requires federal courts to stay judicial proceedings, see 9 U.S.C.A. S 3, and compel arbitration in accordance
with the agreement's terms, see 9 U.S.C.A. S 4.

It is settled that the provisions of the FAA, and its policy favoring
the resolution of disputes through arbitration, apply to employment
agreements to arbitrate discrimination claims brought pursuant to fed-
eral statutes, including Title VII of the Civil Rights Act. See Circuit
City Stores, Inc. v. Adams, 532 U.S. 105, 109 (2001); Hooters of Am.,
Inc. v. Phillips, 173 F.3d 933, 937 (4th Cir. 1999). Such an agreement
is enforceable because "`[b]y agreeing to arbitrate a statutory claim,
a party does not forgo the substantive rights afforded by the statute;
it only submits to their resolution in an arbitral, rather than judicial,
forum.'" Hooters, 173 F.3d at 937 (quoting Gilmer, 500 U.S. at 26).
If "the prospective litigant effectively may vindicate his or her statu-
tory cause of action in the arbitral forum," the claim is appropriately
subjected to arbitration in lieu of litigation. Green Tree, 531 U.S. at
89 (internal quotation marks and alteration omitted).

The strength of this well-established policy favoring the enforce-
ment of valid arbitration agreements, however, does not end our
inquiry. Rather, courts are called upon to determine whether the par-
ticular dispute at issue is one to be resolved through arbitration. In
doing so, "we engage in a limited review to ensure that the dispute
is arbitrable -- i.e., that a valid agreement to arbitrate exists between
the parties and that the specific dispute falls within the substantive
scope of that agreement." Hooters, 173 F.3d at 938 (internal quotation
marks omitted). Although "highly circumscribed," the "judicial
inquiry . . . is not focused solely on an examination for contractual
formation defects such as lack of mutual assent and want of consider-
ation." Id. Rather, the FAA specifically contemplates that parties may
also seek revocation of an arbitration agreement "under `such grounds
as exist at law or in equity,' including fraud, duress, and unconsciona-
bility." Sydnor v. Conseco Fin. Servicing Corp., 252 F.3d 302, 305
(4th Cir. 2001) (quoting 9 U.S.C.A. S 2). And, of course, agreements
to arbitrate federal statutory claims, such as those pursued under Title
VII, may be revoked if the prospective litigant demonstrates that it
cannot "effectively . . . vindicate his or her statutory cause of action
in the arbitral forum." Green Tree, 531 U.S. at 89 (internal quotation
marks and alteration omitted); cf. Bradford v. Rockwell Semiconduc-
tor Sys., Inc., 238 F.3d 549, 556 (4th Cir. 2001) ("[T]he crucial
inquiry . . . is whether the particular claimant has an adequate and
accessible substitute forum in which to resolve his statutory rights.
. . .").

* * *

Click the case caption above for the full text of the Court's opinion.

For the foregoing reasons, we reverse the district court's decision
granting defendants' motion to dismiss Murray's Title VII claim and
compelling arbitration, reverse the district court's decision granting
defendants' motion to dismiss Murray's state law defamation claim,
and remand this matter for further proceedings.

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