06-3047-cv
Pyett v. Penn Bldg. Co.

                               UNITED STATES COURT OF APPEALS
                                  FOR THE SECOND CIRCUIT
                                               August Term, 2006

(Argued: June 27, 2007                                                          Decided: August 1, 2007)

                                Docket Nos 06-3047-cv(L), 06-3106-cv(CON)

STEVEN PYETT , THOM AS O’CONNELL , and MICHAEL PHILLIPS,

                  Plaintiffs-Appellees,

                  v.

PENNSYLVANIA BUILDING COMPANY, 14 PENN PLAZA, LLC, and TEMCO SERVICE INDUSTRIES,
INC .,

                  Defendants-Appellants.

Before: CABRANE S and RAGGI, Circuit Judges, and KORMAN ,1 District Judge.

         Defendants in an employment discrimination suit appeal from an order of the United States

District Court for the Southern District of New York (Naomi Reice Buchwald, Judge) denying their

motion to compel arbitration to resolve plaintiffs’ age discrimination claims in accordance with the

collective bargaining agreement between plaintiffs’ union and their employer. The District Court

concluded that the arbitration clause in the collective bargaining agreement was unenforceable under

Rogers v. New York University, 220 F.3d 73 (2d Cir. 2000).

         Affirmed.


                                                     JEFFREY L. KREISBERG , Kreisberg & Maitland, LLP,
                                                     New York, NY, for Plaintiffs-Appellees.

                                                     PAUL SALVATORE (Daniel Halem, Brian Rauch, on the
                                                     brief), Proskauer Rose LLP, New York, NY, for
                                                     Defendants-Appellants.



         1
            The Honorable Edward R. Korman, of the United States District Court for the Eastern District of New
York, sitting by designation.
                                                James F. Berg, Howard Rothschild, Realty Advisory
                                                Board on Labor Relations, Inc., New York, NY, for
                                                Amicus Curiae Realty Advisory Board on Labor Relations,
                                                Inc. in support of Defendants-Appellants.

                                                Robin S. Conrad, Shane Brennan, National Chamber
                                                Litigation Center, Inc., Washington, DC, Samuel
                                                Estreicher, Todd Geremia, Jones Day, New York,
                                                NY, for Amicus Curiae Chamber of Commerce of the United
                                                States in support of Defendants-Appellants.

JOSÉ A. CABRANES, Circuit Judge:

        In this appeal, defendants challenge an order of the United States District Court for the

Southern District of New York (Naomi Reice Buchwald, Judge) denying their motion to compel

arbitration of plaintiffs’ age discrimination claims in accordance with the collective bargaining

agreement between plaintiffs’ union and their employer. Defendants argue that the District Court,

which relied on the Supreme Court’s decision in Alexander v. Gardner-Denver Co., 415 U.S. 36 (1974),

and our Court’s decision in Rogers v. New York University, 220 F.3d 73 (2d Cir. 2000), failed to take

into account the Supreme Court’s decisions in Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20

(1991), and Wright v. Universal Maritime Service Corp., 525 U.S. 70 (1998). We disagree, and reaffirm

our decision in Rogers that mandatory arbitration clauses in collective bargaining agreements are

unenforceable to the extent they waive the rights of covered workers to a judicial forum for federal

statutory causes of action.

                                          BACKGROUND

        The following facts are not disputed by the parties.

        Plaintiffs are employees of Temco Services Industries (“Temco”), a building service and

cleaning contractor. Before August 2003, they worked as night watchmen in a commercial office

building owned by Pennsylvania Building Company and 14 Penn Plaza LLC (jointly, the

“Company”). Since that time, they have been working as night porters and light duty cleaners in the

same building.

                                                   -2-
        Plaintiffs are members of Local 32BJ of the Service Employees International Union

(“Union”), and they are covered by the collective bargaining agreement (“CBA”) between the Union

and the Realty Advisory Board on Labor Relations, Inc. (“RAB”), the multi-employer bargaining

association of the New York City real estate industry. The CBA contains a mandatory arbitration

clause for discrimination claims, which provides as follows: 2

                         There shall be no discrimination against any present or future
                 employee by reason of race, creed, color, age, disability, national origin, sex,
                 union membership, or any characteristic protected by law, including, but not
                 limited to, claims made pursuant to Title VII of the Civil Rights Act, the
                 Americans with Disabilities Act, the Age Discrimination in Employment Act,
                 the New York State Human Rights Law, the New York City Human Rights
                 Code, New Jersey Law Against Discrimination, New Jersey Conscientious
                 Employee Protection Act, Connecticut Fair Employer Practices Act, or any
                 other similar laws, rules or regulations. All such claims shall be subject to the
                 grievance and arbitration procedure (Articles V and VI [of the CBA]) as the
                 sole and exclusive remedy for violations. Arbitrators shall apply appropriate
                 law in rendering decisions based upon claims of discrimination.

        In or about August 2003, the Company engaged Spartan Security, a security services

contractor and affiliate of Temco, to provide certain security personnel, including night watchmen,

for the building. Spartan brought in new employees, and plaintiffs, who had been employed as night

watchmen, were reassigned to different locations and less desirable positions as night porters and

light duty cleaners within the building.

        Plaintiffs filed grievances with the Union under the CBA. They claimed that, as the only

building employees over the age of 50, they were wrongfully transferred and denied overtime in

violation of various provisions of the CBA, including the provision that prohibited discrimination

on the basis of age. Plaintiffs’ grievances were submitted to arbitration before the Contract

Arbitrator, Earl Pfeffer, who held hearings on eight occasions between February 2, 2004 and March

7, 2005. Shortly after arbitration began, the Union declined to pursue plaintiffs’ claims of wrongful


        2
            From 1999 on, each CBA between the Union and the RAB has included a mandatory arbitration clause for
discrimination claims.

                                                       -3-
transfer and age discrimination, electing to pursue only the claims regarding denial of overtime on

behalf of all plaintiffs and wrongful denial of promotion on behalf of plaintiff Pyett. According to

plaintiffs, the Union’s counsel explained to them that “since the Union had consented to Spartan

Security being brought into the building,” the Union could not contest their replacement as night

watchmen by personnel of Spartan Security. On August 10, 2005, the Contract Arbitrator issued his

Opinion and Award, denying plaintiffs’ arbitrated claims in their entirety.

        On May 26, 2004, while the arbitration was ongoing, but after the Union declined to submit

the age discrimination claims, plaintiffs filed charges of discrimination with the Equal Employment

Opportunity Commission (“EEOC”). The EEOC issued a Dismissal and Notice of Rights on June

29, 2004 for plaintiffs Phillips and O’Connell and on September 14, 2004 for plaintiff Pyett. In each

case, the EEOC determined that its “review of the evidence . . . fail[ed] to indicate that a violation

ha[d] occurred,” and notified each plaintiff of his right to sue. On September 23, 2004, plaintiffs

commenced this action against the Company and Temco in the District Court, pursuing those

claims that the Union did not submit to arbitration. Plaintiffs alleged that they had been transferred

from their positions and replaced by younger security officers in violation of the Age Discrimination

in Employment Act (“ADEA”), 29 U.S.C. § 621 et seq., the New York State Human Rights Law,

N.Y. Exec. Law § 290 et seq., and the New York City Administrative code, N.Y.C. Admin. Code § 8-

107.

        Defendants moved for dismissal for failure to state a claim upon which relief can be granted,

pursuant to Fed. R. Civ. P. 12(b)(6), and, in the alternative, to compel arbitration, pursuant to 9

U.S.C. §§ 3 and 4. In an order dated May 31, 2006, the District Court denied both motions. With

respect to defendants’ motion to compel arbitration, the District Court referred to its decision in

Granados v. Harvard Maintenance, Inc., No. 05 Civ. 5489, 2006 U.S. Dist. LEXIS 6918 (S.D.N.Y. Feb.

22, 2006), where it “concluded based largely on binding Second Circuit precedent that even a clear


                                                   -4-
and unmistakable union-negotiated waiver of a right to litigate certain federal and state statutory

claims in a judicial forum is unenforceable.” Pyett v. Pennsylvania Building Co., 04 Civ. 7536, 2006 U.S.

Dist. LEXIS 35952, *11 (S.D.N.Y. June 1, 2006). In Granados, the District Court relied principally

on our Court’s opinions in Fayer v. Town of Middlebury, 258 F.3d 117 (2d Cir. 2001), and Rogers.3 The

District Court recognized the distinction our Court has drawn between arbitration clauses in

individual contracts, which are governed by a line of Supreme Court cases represented by Gilmer v.

Interstate/Johnson Lane Corp., 500 U.S. 20 (1991), and arbitration clauses in CBAs, which are governed

by a line of Supreme Court cases represented by Alexander v. Gardner-Denver Co., 415 U.S. 36 (1974).

See Granados, 2006 U.S. Dist. LEXIS 6918, at *11-14 (citing Fayer, 258 F.3d at 122). The District

Court, following Rogers, held that union-negotiated waivers of statutory rights in CBAs were

unenforceable and denied defendants’ motion to dismiss. Id. at *15-22. Pursuant to 9 U.S.C. §

16(a)(1)(A) and (B), defendants timely appealed the District Court’s May 31, 2006 order denying

their motion to compel arbitration.

                                                      DISCUSSION

          Defendants argue that Rogers left open the question of whether an arbitration clause in a

CBA that clearly waives a covered worker’s right to a judicial forum with respect to statutory claims

is enforceable. They contend that such waivers are enforceable under Gilmer, which, they argue,


          3
             Gardner-Denver held that a collective bargaining agreement could not waive covered workers’ rights to a
judicial forum for causes of action created by Congre ss— in that case, a cau se of action created by Title V II. See Gardner-
Denver, 413 U.S. at 49-51. Gilmer held that an individual employee who had agreed individually to waive his right to a
federal forum could be com pelled to arbitrate a federal age discrim ination claim. See Gilmer, 500 U.S. at 33-35. In Wright,
the Supreme Court held that a collective bargaining agreement could not waive covered employees’ “rights to a judicial
foru m for federal claims of em ployment d iscrim ination” absen t a “clear and unm istakable w aiver” of those rights. Id. at
82. It declined to resolve the tension between Gardner-Denver and Gilmer, however, instead deciding that it would “not
reach the question whether such a [clear and unm istakable] waiver would be enforceable.” Id.

         In Rogers, we applied Wright to hold that an arbitration provision in a collective bargaining agreement could not
waive an em ployee’s right to assert loca l, state, an d federal statutory em ployment d iscrim ination claims in fed eral court.
See 220 F.3d at 75-77. In Fayer, we held that, under Wright, a collective bargaining agreement could not bar a covered
employee from pursuing a First Amendm ent claim in federal court because it did not clearly and unmistakably waive the
em ployee’s right to pursue the claim. See 258 F.3d at 123.



                                                               -5-
overturned the holding in Gardner-Denver. While conceding that in Gilmer the Supreme Court dealt

only with contracts signed by individuals and not CBAs, defendants claim, see Appellants’ Br. 12,

that in Wright the Supreme Court made clear its abandonment of Gardner-Denver’s rule that a union

may only “waive certain statutory rights related to collective activity, such as the right to strike,”

Gardner-Denver, 415 U.S. at 51. We disagree. Our Court in Rogers squarely decided that a union-

negotiated mandatory arbitration agreement purporting to waive a covered worker’s right to a

federal forum with respect to statutory rights is unenforceable. We took full account of both Gilmer

and Wright and concluded that the Supreme Court’s decision in Gardner-Denver remains good law.

Our conclusion in Rogers was an alternative holding, not dicta, and continues to bind our Court. In

any event, none of the cases relied upon by defendants persuades us that this holding in Rogers was

incorrect.

        In Rogers, we considered two issues: whether a mandatory arbitration clause in a CBA is

enforceable generally, and whether the language of the particular clause at issue was a “clear and

unmistakable waiver” under Wright, 525 U.S. at 80. We held first that Gardner-Denver still governed

arbitration provisions in CBAs, notwithstanding the Supreme Court’s holding in Gilmer that an

employee who agreed to waive his individual right to a federal forum could be compelled to arbitrate

an age discrimination claim. See Rogers, 220 F.3d at 75 (discussing Gilmer, 500 U.S. at 23). Second,

we held that the language of the waiver at issue in that case was not “clear and unmistakable” under

Wright. See id. at 77. We explained that Gardner-Denver had not been overruled by Wright. Rogers. at

75 (“[W]hile Wright may have called Gardner-Denver into question, it did not overrule it.”); see also

Wright, 525 U.S. at 82 (“We do not reach the question whether such a waiver [under a CBA] would

be enforceable.”).

        Defendants focus on our comment in Rogers that Wright “could be taken to suggest that,

under certain circumstances, a union negotiated waiver of an employee’s statutory right to a judicial


                                                    -6-
forum might be enforceable.” Appellants’ Br. 13 (quoting Rogers, 220 F.3d at 75). But they ignore

our holding, in reliance on Wright and Gardner-Denver, that arbitration provisions contained in a CBA,

which waive employees’ rights to a federal forum with respect to statutory claims, are unenforceable.

Defendants argue that our statements regarding the enforceability of arbitration provisions in CBAs

were dicta because we also concluded that the clause at issue in Rogers was not “clear and

unmistakable.” This argument is without merit. We explicitly stated in Rogers that “the rule in

Gardner-Denver was sufficient” to decide the case. Rogers, 220 F.3d at 75. An alternative conclusion

in an earlier case that is directly relevant to a later case is not dicta; it is an entirely appropriate basis

for a holding in the later case. Our reliance on Gardner-Denver in Rogers was an alternative holding; it

was thus not dicta. See MacDonald, Sommer & Frates v. County of Yolo, 477 U.S. 340, 346 n.4 (1986)

(“[S]ince the Superior Court did not rest its holding on only one of its two stated reasons, it is

appropriate to treat them as alternative bases of decision [rather than dicta].”); United States v. Fulks,

454 F.3d 410, 434-35 (4th Cir. 2006) (stating that an alternative conclusion in a prior case that bears

directly on a subsequent case cannot be dismissed as dicta).

         None of the other Supreme Court cases on which defendants rely casts doubt on our

holding in Rogers. For example, they draw our attention to Metropolitan Edison Co. v.. N.L.R.B., 460

U.S. 693 (1983), and Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001). Metropolitan Edison held

that union officials may be bound by union-negotiated agreements to enforce no-strike agreements,

and thus waive their right, guaranteed by the National Labor Relations Act § 8(a)(3), 29 U.S.C. §

158(a)(3), to be free of anti-union discrimination. Metropolitan Edison, 460 U.S at 708. However,

rather than supporting the notion that individual rights may be waived by CBAs, as defendants

claim, that holding is in line with the Supreme Court’s observation in Gardner-Denver that unions

“may waive certain statutory rights related to collective activity, such as the right to strike.” Gardner-Denver,




                                                        -7-
415 U.S. at 51 (emphasis added). Circuit City addressed an individual’s employment contract, rather

than a CBA, and therefore likewise does not address the issue before us now.4

          In short, there is nothing that has changed in the nine years since Wright or the seven years

since Rogers that compels us to reverse our ruling in Rogers that arbitration provisions contained in a

CBA, which purport to waive employees’ rights to a federal forum with respect to statutory claims,

are unenforceable.5

                                                      CONCLUSION

          For the foregoing reasons, the order of the District Court is affirmed.




          4
             After Wright, our sister circuits have not stepped much beyond Gardner-Denver’s holding with regard to the
enforceability of arbitration provisions in CBA s. See, e.g., O'Brien v. Town of Agawam, 350 F.3d 279, 285 (1st Cir. 2003)
(“The Wright Court declined to resolve this tension [between enforceability of mandatory arbitration clauses in individual
contracts and those in CBAs], holding that even assuming a CBA can waive an employee’s right to a federal forum, any
such waiver must at a minim um be ‘clear and unm istakable.’”); Mitchell v. Chapman, 343 F.3d 811, 824 (6th Cir. 2003)
(“Assuming arguendo, that the CBA m andates binding arbitration, it is well-established that the CBA m ust contain a ‘clear
and unmistakable waiver’ of Mitchell’s [Family and Medical Leave Act] rights to foreclose his entitlement to a judicial
foru m.”); Tice v. A m. A irlines, Inc., 288 F.3d 313, 317 (7th Cir. 2002) (citing Gard ner-Denver, but noting the ambiguity in the
CB A language); EE OC v. Ind. B ell Tel. Co., 256 F.3d 516, 522 (7th Cir. 2001) (holding that “a union cannot surrender
em ployees’ rights u nder Title VII”). But see E. A ssociated Coal Corp. v. Massey, 373 F.3d 530, 533 (4th Cir. 2004) (“[A]
union-negotiated CBA may waive an employee's statutory right to litigate his employment discrimination claims in a
judicial forum.”).

          5
             The case be fore us illustrates why the Sup rem e Court ma y be reluctant to treat arb itration provision s in
CBAs the same as arbitration provisions in individual contracts. If, as plaintiffs allege, the Union refused to submit the
wrongful transfer claims to arbitration because the Union had agreed to the new contract, the interests of the Union and
the interests of plaintiffs are clearly in conflict. See Gardner-D enver, 415 U.S. at 58 n.19 (“[T]he interests of the individual
may be subordina ted to the collective intere sts of all employees in the bargaining unit.”).



                                                               -8-
