Gilmer v. Interstate/Johnson Lane Corp.

The FAA generally makes written arbitration provisions in contracts involving commerce valid and enforceable, subject to ordinary contract defenses. Although FAA § 1 excludes specified employment contracts, Gilmer had not raised that provision in the lower courts or in his certiorari petition. The Court therefore declined to decide the broader question whether § 1 excludes all employment contracts from the FAA.

In any event, the Court concluded that the particular agreement being enforced was not a contract of employment. Gilmer’s arbitration promise appeared in his registration application with the securities exchanges, and the record did not show a written arbitration provision in his employment agreement with Interstate. Following the statute’s language and the prevailing lower-court view, the Court held that § 1 did not exempt this registration-based agreement.

The FAA embodies a strong federal policy favoring arbitration and places arbitration agreements on the same footing as other contracts. Statutory claims are generally arbitrable: agreeing to arbitrate changes the forum for resolving a claim, not the substantive statutory rights the claimant may assert. The party resisting arbitration bears the burden of showing that Congress intended to prohibit waiver of a judicial forum.

Congressional intent to displace the FAA may appear in a statute’s text, legislative history, or an inherent conflict between arbitration and the statute’s purposes. Gilmer conceded that the ADEA’s text and legislative history contained no express bar to arbitration. The Court found no inherent conflict either.

The ADEA serves important public purposes by prohibiting arbitrary age discrimination and promoting employment decisions based on ability rather than age. But judicial litigation, like arbitration, ordinarily resolves a dispute between particular parties. The fact that a statute also advances public policies does not itself make its claims nonarbitrable, so long as the claimant can effectively vindicate the statutory cause of action in arbitration.

Arbitration would not disable the EEOC from enforcing the ADEA. A worker subject to an arbitration agreement may still file an EEOC charge, and the EEOC may investigate information from any source and bring its own enforcement actions, including actions seeking broad equitable or class-wide relief. The ADEA does not require EEOC participation in every employment dispute, and its direction that the agency use conciliation, conference, and persuasion is compatible with out-of-court resolution.

The ADEA’s availability of a judicial forum did not itself establish a protected right never to arbitrate. Congress did not expressly forbid nonjudicial resolution, including when it later amended the ADEA. The statute’s flexible enforcement structure, its encouragement of informal resolution, and its grant of concurrent state and federal jurisdiction did not conflict with allowing parties to choose arbitration.

The Court rejected a presumption that arbitrators will be biased or unable to apply statutory law. NYSE rules required disclosure of arbitrators’ backgrounds, allowed peremptory and for-cause challenges, and required disclosure of circumstances affecting impartiality. In addition, the FAA permits a court to vacate an award for evident partiality or corruption. Gilmer made no case-specific showing that these safeguards were inadequate.

Although arbitral discovery may be narrower than federal-court discovery, Gilmer did not demonstrate that the NYSE procedures—providing for document production, information requests, depositions, and subpoenas—would prevent fair presentation of an age-discrimination claim. Parties who arbitrate trade some courtroom procedures and appellate review for arbitration’s relative simplicity, informality, and speed; arbitrators’ freedom from formal evidentiary rules partly offsets narrower discovery.

The Court also found inadequate Gilmer’s concerns that arbitral awards lack written explanations, public visibility, appellate review, or capacity for broad relief. NYSE rules required written awards that identified the parties, summarized the issues, and described the relief, and awards were publicly available. Arbitrators could grant equitable relief, and NYSE rules allowed collective proceedings. Even if class procedures were unavailable in a particular arbitration, the ADEA’s authorization of collective actions did not establish that individual arbitration was forbidden.

Unequal bargaining power does not, by itself, invalidate an arbitration agreement. The FAA permits invalidation on generally applicable contract grounds, such as fraud, coercion, or overwhelming economic power sufficient to revoke a contract. But Gilmer, an experienced businessman, did not show that he was coerced or defrauded into accepting the registration agreement.

Gardner-Denver held that an employee who had arbitrated a grievance under a collective-bargaining agreement could still bring a Title VII action. The Court there emphasized that contractual rights under a collective-bargaining agreement are distinct from statutory civil-rights claims, and that the labor arbitrator had authority to interpret the contract rather than to decide the independent statutory claim.

Barrentine and McDonald likewise addressed whether prior union-based arbitration foreclosed later litigation of statutory rights. Those cases did not decide whether an agreement expressly requiring arbitration of statutory claims was enforceable. Because the employees in those cases had not agreed to arbitrate their statutory claims, the prior arbitration could not preclude later judicial actions on those claims.

The collective-bargaining setting also raised a concern absent here: a union’s duty to represent the entire bargaining unit may diverge from an individual employee’s statutory interests. Gilmer’s agreement was individual, and this case arose under the FAA’s pro-arbitration framework. The Court therefore treated the earlier cases’ skepticism about arbitration as inapplicable to this agreement.