           RECOMMENDED FOR FULL-TEXT PUBLICATION
                Pursuant to Sixth Circuit Rule 206                      2     Cooper v. MRM Investment Co., et al.         No. 02-5702
        ELECTRONIC CITATION: 2004 FED App. 0126P (6th Cir.)
                    File Name: 04a0126p.06                                                  _________________
                                                                                                 COUNSEL
UNITED STATES COURT OF APPEALS
                                                                        ARGUED: David W. Anderson, ENGLISH, LUCAS,
                  FOR THE SIXTH CIRCUIT                                 PRIEST & OWSLEY, Bowling Green, Kentucky, for
                    _________________                                   Appellants. William B. Ryan, DONATI LAW FIRM,
                                                                        Memphis, Tennessee, for Appellee. ON BRIEF: David W.
 TONYA COOPER ,                   X                                     Anderson, Regina A. Jackson, ENGLISH, LUCAS, PRIEST
              Plaintiff-Appellee, -                                     & OWSLEY, Bowling Green, Kentucky, for Appellants.
                                   -                                    William B. Ryan, DONATI LAW FIRM, Memphis,
                                   -   No. 02-5702                      Tennessee, for Appellee. Robert J. Gregory, OFFICE OF
             v.                    -                                    THE GENERAL COUNSEL, Washington, D.C., Ann
                                    >                                   Elizabeth Reesman, McGUINESS, NORRIS & WILLIAMS,
                                   ,                                    Washington, D.C., for Amici Curiae.
 MRM INVESTMENT                    -
 COMPANY , TERRY ROGERS            -                                                        _________________
 and LARRY MAYS,                   -
        Defendants-Appellants. -                                                                OPINION
                                   -                                                        _________________
                                  N
       Appeal from the United States District Court                        ALDRICH, District Judge. This appeal concerns the
     for the Middle District of Tennessee at Nashville.                 validity and enforceability of an arbitration provision in an
      No. 01-01596—John T. Nixon, District Judge.                       employment contract between plaintiff-appellee Tonya
                                                                        Cooper and defendant-appellant MRM Investment Company
                   Argued: October 23, 2003                             (“MRM”). Cooper alleges that while working as a manager
                                                                        at MRM’s restaurant, she was sexually harassed and
               Decided and Filed: May 3, 2004                           constructively discharged. She brought a Title VII action, and
                                                                        MRM moved to compel arbitration. The district court denied
    Before: KENNEDY and GIBBONS, Circuit Judges;                        the motion, holding the arbitration agreement invalid or
              ALDRICH, District Judge.*                                 unenforceable on five grounds. The district court held that
                                                                        the arbitration provision is invalid as a matter of Tennessee
                                                                        law because it is an unconscionable contract of adhesion and
                                                                        is insufficiently bilateral, and invalid as a matter of federal
                                                                        law because it did not make clear that Cooper was waiving
                                                                        her right to a jury trial. The court also opined that as a matter
                                                                        of policy, Title VII claims belong in court, not in arbitration.
    *
                                                                        For the reasons that follow, we reverse those portions of the
     The Honorab le Ann Aldrich, United States District Judge for the   district court’s judgment.
Northern District of Ohio, sitting by designation.

                                 1
No. 02-5702         Cooper v. MRM Investment Co., et al.                3    4      Cooper v. MRM Investment Co., et al.         No. 02-5702

   The district court also held that the arbitration provision is                (and, to the extent not inconsistent, the then prevailing
unenforceable, as a matter of federal common law, because it                     rules of the [FAA]) will apply.
incorporated American Arbitration Association (“AAA”)1
rules likely to impose undue costs on Cooper that she would                  J.A. 23. Compare Lee v. Red Lobster Inns of Am., No. 02-
not incur in court, rendering arbitration an ineffective forum               5188, 2004 WL 187564 (6th Cir. Jan. 27, 2004) (employee
to vindicate her rights. For the reasons that follow, we vacate              did not affirmatively agree to arbitrate her Title VII claims,
this portion of the district court’s judgment and remand for                 because she did not sign handbook sheet agreeing to
proceedings consistent with this opinion.                                    arbitration and none of the written materials distributed by the
                                                                             employer advised her that continuing her employment
                       I. BACKGROUND                                         constituted assent to the arbitration policy). The parties agree
                                                                             MRM did not separately advise Cooper that she was giving
  Terry Rogers and Larry Mays are the sole shareholders of                   up her right to a jury trial, nor did they provide her with a
MRM, which owns and operates several Kentucky Fried                          copy of the AAA’s rules. See J.A. 17-18.
Chicken/Taco Bell (“KFC”) franchises. From January 3
through August 2000, Cooper worked as an assistant manager                     As a result of sexual harassment, Cooper alleges, she was
of MRM’s KFC store in Waverly, Tennessee, at $400-450 per                    forced to quit in August 2000. She found a job at another
week plus possible bonuses. See J.A. 6-10, 17 and 90-91. On                  restaurant, where she earned $7,200 in 2001, and tended bar
January 5, 2000, MRM required her to sign a document                         part-time, earning an additional $300 to $500 per week as of
entitled “Arbitration of Employee Rights,” which provides:                   early 2002. In January 2001, Cooper filed a Charge of
                                                                             Discrimination with the EEOC, which issued a Dismissal and
  Because of the delay and expense of the court systems,                     Notice of Rights in September 2001. Cooper filed her
  KFC and I agree to use confidential binding arbitration                    complaint in December 2001. Following oral argument, the
  for any claims that arise between me and KFC, its related                  district court denied MRM’s motion to compel arbitration on
  companies, and/or their current or former employees.                       May 1, 2002. MRM appealed on May 28, 2002.
  Such claims would include any concerning
  compensation, employment (including, but not limited to                                             II. ANALYSIS
  any claims concerning sexual harassment), or termination
  of employment. Before arbitration, I agree: (i) first, to                  A. Standard of Review
  present any such claims in full written detail to KFC;
  (ii) next, to complete any KFC internal review process;                      We review de novo the district court’s holding that the
  and (iii) finally, to complete any external administrative                 arbitration agreement is invalid and unenforceable. See Great
  remedy (such as with the Equal Employment                                  Earth Cos. v. Simons, 288 F.3d 878, 888 (6th Cir. 2002). The
  Opportunity Commission). In any arbitration, the then                      court’s factual findings, by contrast, will be set aside only if
  prevailing rules of the American Arbitration Association                   they are clearly erroneous:
                                                                                 If the district court’s account of the evidence is plausible
    1
     The AAA, a non-profit public service organization, assists in the           in light of the record viewed in its entirety, the court of
design and administration of dispute resolution systems for corpo rations,       appeals may not reverse it even though convinced that
unions, government agencies, law firms and the courts. See McM ullen v.          had it been sitting as the trier of fact, it would have
Meijer, Inc., 355 F.3d 48 5, 487 n.1 (6th Cir. 2004).
No. 02-5702     Cooper v. MRM Investment Co., et al.           5   6      Cooper v. MRM Investment Co., et al.        No. 02-5702

  weighed the evidence differently. Where there are two            interstate transportation). Thus, generally applicable state-
  permissible views of the evidence, the factfinder’s choice       law contract defenses like fraud, forgery, duress, mistake, lack
  between them cannot be clearly erroneous. This is so             of consideration or mutual obligation, or unconscionability,
  even when the district court’s findings do not rest on           may invalidate arbitration agreements. See Doctor’s Assocs.
  credibility determinations, but are based instead on             v. Casarotto, 517 U.S. 681, 687 (1996) (citations omitted);
  physical or documentary evidence or inferences from              Perry v. Thomas, 482 U.S. 483, 492 n.9 (1987); Fazio v.
  other facts.                                                     Lehman Bros., Inc., 340 F.3d 386, 393-94 (6th Cir. 2003).
                                                                   “The federal policy favoring arbitration, however, is taken
Harrison v. Monumental Life Ins. Co., 333 F.3d 717, 721-22         into consideration even in applying ordinary state law.”
(6th Cir. 2003) (quoting Anderson v. City of Bessemer City,        Garrett v. Hooters-Toledo, 295 F. Supp. 2d 774, 779 (N.D.
470 U.S. 564, 573-75 (1985)).                                      Ohio 2003) (citing Inland Bulk Transfer Co. v. Cummins
                                                                   Engine Co., 332 F.3d 1007, 1014 (6th Cir. 2003) (internal
B. Arbitration Agreements are Generally Enforceable                citation omitted)).
   and are Strongly Favored
                                                                     The Supreme Court has roundly endorsed arbitration and
  At common law, American courts were loathe to order              explained its benefits in the employment law context:
specific enforcement of an agreement to arbitrate, adopting
the “jealous notion held by the common law courts of                   We have been clear in rejecting the supposition that the
England that arbitration agreements were nothing less than a           advantages of the arbitration process somehow disappear
drain on their own authority to settle disputes.” Raasch v.            when transferred to the employment context. Arbitration
NCR Corp., 254 F. Supp. 2d 847, 853 (S.D. Ohio 2003)                   agreements allow parties to avoid the costs of litigation,
(citing Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213,              a benefit that may be of particular importance in
219-20 n.6 (1985)). In response, Congress enacted the                  employment litigation, which often involves smaller
Federal Arbitration Act, 9 U.S.C. § 1 et seq. (“the FAA”), “to         sums of money than disputes concerning commercial
place arbitration agreements upon the same footing as other            contracts. These litigation costs to parties (and the
contracts.” Gilmer v. Interstate/Johnson Lane Corp., 500               accompanying burden to the Courts) would be
U.S. 20, 24 (1991). The FAA expresses a strong public                  compounded by the difficult choice-of-law questions that
policy favoring arbitration of a wide class of disputes. It            are often presented in disputes arising from the
provides, in part:                                                     employment relationship ... and the necessity of
                                                                       bifurcation of proceedings in those cases where state law
  A written provision in any maritime transaction or a                 precludes arbitration of certain types of employment
  contract evidencing a transaction involving commerce to              claims but not others. The considerable complexity and
  settle by arbitration a controversy thereafter arising out of        uncertainty that [a broader reading of § 1's exclusion]
  such contract or transaction ... shall be valid, irrevocable,        would introduce into the enforceability of arbitration
  and enforceable, save upon such grounds as exist at law or           agreements in employment contracts would call into
  in equity for the revocation of any contract.                        doubt the efficacy of alternative dispute resolution
                                                                       procedures adopted by many of the Nation’s employers,
9 U.S.C. § 2 (emphasis added); see also 9 U.S.C. § 1                   in the process undermining the FAA’s proarbitration
(excepting some disputes arising out of employment in                  purposes and breeding litigation from a statute that seeks
No. 02-5702      Cooper v. MRM Investment Co., et al.         7    8    Cooper v. MRM Investment Co., et al.         No. 02-5702

  to avoid it. The Court has been quite specific in holding        Cooper’s employment and the alleged harassment and
  that arbitration agreements can be enforced under the            discharge occurred there, and neither party expected any other
  FAA without contravening the policies of congressional           state’s law to apply.
  enactments giving employees specific protection against
  discrimination prohibited by federal law; as we noted in            The district court held that the arbitration agreement is a
  Gilmer, 500 U.S. at 26, by agreeing to arbitrate a               contract of adhesion under Tennessee law. Tennessee defines
  statutory claim, a party does not forgo the substantive          a contract of adhesion as “a standardized contract form
  rights afforded by the statute; it only submits to their         offered to consumers of goods and services on essentially a
  resolution in an arbitral, rather than a judicial, forum.        ‘take it or leave it’ basis, without affording the consumer a
                                                                   realistic opportunity to bargain and under such conditions that
Circuit City Stores v. Adams, 532 U.S. 105, 122-23 (2001)          the consumer cannot obtain the desired product or service
(citations and internal quotations omitted). Indeed, Title VII     except by acquiescing to the form of the contract.”
claims may be subjected to binding arbitration. See Willis v.      Buraczynski v. Eyring, 919 S.W.2d 314, 320 (Tenn. 1996)
Dean Witter Reynolds, Inc., 948 F.2d 305, 310 (6th Cir.            (citations omitted). The essence of adhesion is that the
1991); cf. Cosgrove v. Shearson Lehman Bros., No. 95-3432,         parties’ bargaining positions and leverage enable one party to
1997 WL 4783, at *2 (6th Cir. Jan. 6, 1997) (same for ADEA         “select and control risks assumed under the contract.” See id.;
claims); Bailey v. Ameriquest Mortgage Co., 346 F.3d 821,          see also BLACK’S LAW DICTIONARY 318 (7th ed. 1999).
822 (8th Cir. 2003) (same for FLSA claims). The question           In Buraczynski, the state Supreme Court held that an
before the court, then, is whether there are “grounds ... at law   arbitration agreement between a doctor and a patient was a
or in equity” for the revocation or non-enforcement of the         contract of adhesion where it was presented to the patient well
agreement. See 9 U.S.C. § 2.                                       after her course of treatment had begun. Emphasizing the
                                                                   special doctor-patient relationship, the court noted that if the
C. Under Tennessee Law, the Arbitration Agreement                  patient declined to sign, she would have suffered an
   was not a Contract of Adhesion                                  interruption in care and lost the opportunity to continue
                                                                   treatment with the physician whom she had come to know
  1.   Tennessee Law on Contracts of Adhesion                      and trust. See Buraczynski, 919 S.W.2d at 320.
   In Tennessee, “a contract is presumed to be made with              A contract is not adhesive merely because it is a
reference to the law of the place where it was entered into        standardized form offered on a take-it-or-leave-it basis. Even
unless it appears it was entered into in good faith with           after Buraczynski, Tennessee courts decline to find arbitration
reference to the law of some other state.” Ohio Cas. Ins. Co.      provisions adhesive where the consumer fails to prove that
v. The Travelers Indem. Ins. Co., 493 S.W.2d 465, 467 (Tenn.       refusal to sign would cause some detriment other than not
1973) (citations omitted). Tennessee generally applies the lex     being able to buy from the particular merchant (such as not
loci contractus, but sometimes it applies the law of the place     being able to obtain the goods or services elsewhere). Pyburn
of performance. See Nordahl v. Studer Revox America, Inc.,         v. Bill Heard Chevrolet, 63 S.W.3d 351 (Tenn. Ct. App.
No. 94-6336, 1996 WL 99782, at *4 (6th Cir. Mar. 5, 1996)          2001), held that an arbitration agreement between a car dealer
(citing Solomon v. FloWarr Mgmt., 777 S.W.2d 701, 705 n.5          and a buyer was not adhesive, as there was no proof that the
(Tenn. Ct. App. 1989)). The district court correctly looked to     buyer’s refusal to agree would cause some detriment other
Tennessee law, because the agreement was executed there,           than being unable to come to terms with the particular dealer.
No. 02-5702          Cooper v. MRM Investment Co., et al.    9    10       Cooper v. MRM Investment Co., et al.              No. 02-5702

Id. at 359. The court reasoned, “[i]f Defendant had refused to    told that [she] needed to sign the documents.” See J.A. 40.
sell Plaintiff the van, Plaintiff could have gone to another      But the packet of “several documents” which Cooper had to
Chevrolet dealership (or any other type of dealership for that    sign, clearly included the arbitration agreement. Attached to
matter) and obtained a van elsewhere if he considered the         the brief MRM itself filed below, was a single-page
Agreement unacceptable.” Id. at 360.                              photocopy containing the four short2 documents MRM asked
                                                                  Cooper to sign, including the arbitration agreement and the
  Similarly, in Wallace v. National Bank of Commerce, 938         sexual-harassment policy.
S.W.2d 684 (Tenn. 1997), the plaintiff contended that a
customer agreement, which imposed fees for returned checks,          In addition, the district court recalled MRM’s counsel
was a contract of adhesion. Id. at 687. The court of appeals      conceding that MRM had presented the agreement as a “take-
disagreed. The court acknowledged that the agreements had         it-or-leave-it.” See Cooper, 199 F. Supp. 2d at 778. MRM
some adhesive characteristics because they were standardized      disputes that recollection:
forms and their execution was a precondition for opening an
account. Id. at 687-88. Nonetheless, the court held, “these         MRM’s attorney stated that she was not present when the
factors standing alone are not sufficient .... [P]erhaps most       Arbitration Agreement was signed, had not discussed the
significantly, there is no showing in the record that the           issue with her clients, was in no position to advise the
customers had no realistic choice but to acquiesce in the           court exactly how the Arbitration Agreement was
imposition of the bank’s charges. There is no showing that          presented to Cooper, and upon repeated insistence by the
the fees were the same at all the defendant banks or that           court that counsel answer directly whether Cooper was
banking services could not be obtained from other                   required to sign the document, stated that she could only
institutions.” Id.                                                  assume that Cooper’s signature would have been
                                                                    required.
  2.        Analysis of Adhesion
                                                                  MRM’s Brief at 17 n.1. Here the “judge’s recollection does
       a.     Agreement was “Take-It-Or-Leave-It” Standardized    not contradict or impeach the record, but rather supplies an
              Form Prepared by MRM
  The district court found that MRM prepared the agreement,            2
a standardized form, with no negotiation or input from                   The case for enforcing the agreement is strengthened by the fact that
                                                                  it is brief and embodied in a separate document. This court has already
Cooper. See Cooper v. MRM Inv. Co., 199 F. Supp. 2d 771,          affirmed a district court’s rejection of the argument that a merchant
778-79 (M.D. Tenn. 2002); see also C & L Enters. v. Citizen       fraudulently induced consumers to sign an arbitration agreement, as “the
Band, Potawatomi Indian Tribe of Okla., 532 U.S. 411, 423         contract language was clear and una mbiguo us. The defendants presented
(2001) (characterizing adhesion contract as one where a form      the arbitration agreem ents to the plaintiffs on a separate form. The
agreement is “foisted” upon a “quiescent” party which did not     contract terms were not hidden in boilerplate language or otherw ise
prepare it). The judge also did not err in finding that Cooper    disguise d.” Stout v. Byrider, 50 F. Supp. 2d 733, 740 (N.D. Ohio 19 99),
                                                                  aff’d, 228 F.3d 709 (6th C ir. 200 0), cert. denied, 531 U .S. 1148 (200 1).
had to sign the agreement to get the job. Cooper’s affidavit      Com pare How ell v. NHC Hea lthcare-F ort San ders, 109 S.W.3d 731, 734
does not expressly allege that she was told she would not get     (Tenn. Ct. App. 2003) (arbitration clause in nursing home admission
the job if she did not sign the arbitration agreement; she says   agreement was unenforceable where, inter alia, the clause was “buried”
only that she “was presented with several documents and was       inconspicuously on page ten of eleven-page agreement), app eal denied
                                                                  (Tenn. June 30, 200 3).
No. 02-5702         Cooper v. MRM Investment Co., et al.               11     12   Cooper v. MRM Investment Co., et al.        No. 02-5702

omission to its contents. Therefore, it was permissible for                   today’s economy, the choice to ‘leave it’ often amounts to no
him to rely on his own recollections regarding the substance”                 choice at all. Indeed, if she ‘leaves it’, she probably forgoes
of the exchange. Paschen Contractors, Inc. v. Illinois State                  the opportunity for employment.” Cooper, 199 F. Supp. 2d
Toll Hy. Auth., 590 N.E.2d 539, 543 (Ill. App.), appeal                       at 778 (citation omitted). The judge relied in part on an
withdrawn, 602 N.E.2d 458 (Ill. 1992).                                        article which chronicled an increasing trend toward arbitration
                                                                              clauses in employment contracts: “[P]rospective employees
   Moreover, no transcript was made of the hearing. Cf.                       often have no choice at all -- that is, even if they decide to
Karsch v. LaBarge, 223 F.3d 859, 863 (8th Cir. 2000)                          walk away from one mandatory arbitration contract, they will
(“Walton has provided us with no transcript or other record of                often have no choice but to accept another employment
the ... hearings that might support his contention that fee                   contract that mandates arbitration as well.” Id. at 778 n.4
disgorgement was not discussed”). In the absence of a                         (citation omitted).
transcript, the Rules of Procedure allowed MRM to substitute
a written narrative of the hearing,3 but MRM did not do so.                     There was nothing wrong with referring to authorities for
Absent either type of record, the Court defers to the district                the proposition that, as a general matter, employers often
court’s recollection, and its conclusion that Cooper was                      condition employment on a commitment to arbitration.
required to sign the agreement if she wanted the job. See                     Evidence that employers around the country require such
Adair v. United States Postal Serv., No. 99-3058, 1999 WL                     agreements as a matter of course may provide context for an
1253039, at *1 (6th Cir. Dec. 13, 1999) (“the district court’s                employee’s claim that relevant employers in his locality also
rulings regarding the testimony simply cannot be reviewed                     do so. To find this contract adhesive, however, there must be
because the record does not include a trial transcript or                     evidence that Cooper would be unable to find suitable
narrative statement.”); accord SIL-FLO v. SFHC, 917 F.2d                      employment if she refused to sign MRM’s agreement. She
1507, 1517 (10th Cir. 1990) (“without a record of the                         presented no such evidence. For instance, she did not allege
proceedings below we have no option but to defer to the                       that she looked for comparable jobs but was unable to find
district court’s ruling during trial that [the] deposition did not            one. Generalizations about employer practices in the modern
violate its earlier order”).                                                  economy cannot substitute for such evidence. See Andersons,
                                                                              Inc. v. Horton Farms, 166 F.3d 308, 324 (6th Cir. 1998) (no
     b.    Cooper Failed to Show She Had No Alternatives to                   procedural unconscionability where grain seller “failed to
           the KFC Job                                                        present evidence that it searched for other alternatives and
                                                                              that there were none”).
  The last element of adhesion is the absence of a meaningful
choice for the party occupying the weaker bargaining                            Recent Tennessee decisions on the enforceability of
position. The district court opined that “[e]specially in                     exculpatory clauses illustrate the need for such party-specific
                                                                              evidence in an unconscionability analysis. In Russell v. Bray,
                                                                              a home inspection company required home-buyers to sign a
    3                                                                         form contract which limited its liability to the lesser of the
     “The stateme nt must be served on the appellee, who may serve
objections or prop osed am endments within 10 days after being served.        repair cost or refund of the inspection fee. When buyers sued
The statement and any objections or proposed amendments must then be          to invalidate the contract as violative of public policy, the
submitted to the district court for settlement and approval. As settled and   court considered six factors, three of which are relevant here:
approved, the statement must be included by the district clerk in the
record on appe al.” FED. R. APP . P. 10(c).
No. 02-5702      Cooper v. MRM Investment Co., et al.         13    14   Cooper v. MRM Investment Co., et al.         No. 02-5702

  [d.] As a result of the essential nature of the service, in the     without being required to sign a contract containing a
       economic setting of the transaction, the party invoking        similar exculpatory clause, we do not find Defendants
       exculpation possesses a decisive advantage of                  possessed a decisive advantage of bargaining strength
       bargaining strength against any member of the public           against any member of the public who sought their
       who seeks his services.                                        services. * * * Based upon the record before us, we
                                                                      find the fourth and fifth criteria are not satisfied in this
  [e.] In exercising a superior bargaining power the party            case.
       confronts the public with a standardized adhesion
       contract of exculpation, and makes no provision              Id. at 7-8 (emphasis added). Notably, Russell did not remand
       whereby a purchaser may pay additional reasonable            to afford the buyers another opportunity to present evidence
       fees and obtain protection against negligence.               on their alternatives and bargaining power. It was the buyers’
                                                                    burden to establish a basis for non-enforcement of their
  [f.] Finally, as a result of the transaction, the person or       contracts, and they had not done so.
       property of the purchaser is placed under the control of
       the seller, subject to the risk of carelessness by the          Likewise, it was Cooper’s burden to establish state law
       seller or his agents.                                        grounds for non-enforcement of her agreement with MRM;
                                                                    she failed to do so, leaving the record silent on whether other
Russell v. Bray, 116 S.W.3d 1, 5-6 (Tenn. Ct. App. 2003)            local employers might have hired her without a similar
(applying Olson v. Molzen, 558 S.W.2d 429, 431-32 (Tenn.            agreement. Cf. Beauchamp v. Great West Life Assurance Co.,
1977)); see also Childress v. Madison Cty., 777 S.W.2d 1, 4         918 F. Supp. 1091, 1098 (E.D. Mich. 1996) (reluctant to find
(Tenn. Ct. App. 1989) (applying Olson factors).                     arbitration agreement adhesive where plaintiff could work for
                                                                    other employers without signing such agreements). On such
   The Russell court found that hiring inspectors is a practical    a record, the district court could not simply assume adhesion
necessity for many home-buyers. Russell, 116 S.W.2d at 7.           and procedural unconscionability based on what job
The buyers did not provide sufficient evidence, however, on         applicants may encounter elsewhere. See, e.g., Stout, 50 F.
the parties’ relative bargaining power and their other              Supp. 2d at 740 (declining to find adhesion in contract to buy
alternatives. The court surmised that the company might have        used car, as such cars “are widely available from a huge
had superior bargaining power that enabled it to impose an          number of sellers if [the buyers] found the arbitration
adhesive exculpatory clause. Id. But the record was                 provision unacceptable”); Atlantic Pools & Spas, Inc. v.
                                                                    BellSouth Adver. & Publ’g Corp., 64 F. Supp. 2d 708, 712
  devoid of any evidence that would allow us to find these          (M.D. Tenn. 1999) (provision limiting liability for phonebook
  criteria are satisfied. Although there is evidence                misprint was not adhesive; there was no “inordinate disparity”
  Plaintiffs were given the name of another home                    in bargaining power, in light of many other modes of
  inspection service, and attempted to set up an                    advertising plaintiff could use); accord Choice Hotels
  appointment with this other inspector, there is no                Internat’l v. Chewl’s Hospitality, No. 02-1855, 2003 WL
  evidence showing whether the other inspector would                22961190, at *4 (4th Cir. Dec. 17, 2003) (franchisee properly
  have produced a contract with the same exculpatory                compelled to arbitrate where it “has not demonstrated that it
  clause. As we are unable to determine from the record             had no viable alternatives, or that it faced the possibility of
  whether Plaintiffs could have used another inspector
No. 02-5702      Cooper v. MRM Investment Co., et al.        15    16   Cooper v. MRM Investment Co., et al.        No. 02-5702

being excluded from the hotel franchise business if it had         found that people seeking jobs at a fast food restaurant have,
refused such an arbitration contract”).                            on average, a weaker bargaining position than people seeking
                                                                   white-collar jobs at, for instance, a brokerage firm: “While
D. Under Tennessee Law, the Arbitration Agreement                  this difference is not determinative, it certainly informs the
   Was Not Unconscionable                                          Court’s thinking.” Id. at 778 n.3. The judge contrasted
                                                                   brokerages because several precedents holding that
  Even if the MRM arbitration agreement were adhesive, the         employment disputes may be subject to binding arbitration
agreement was enforceable under Tennessee law unless               involved brokers. See Gilmer, 500 U.S. 20; Haskins v.
Cooper showed it was also unconscionable. “The common              Prudential Ins. Co. of Am., 230 F.3d 231 (6th Cir. 2000), cert.
law ... subjects terms in contracts of adhesion to scrutiny for    denied, 531 U.S. 1113 (2001); Willis, 948 F.2d 305.
reasonableness.” Carnival Cruise Lines v. Shute, 499 U.S.
585, 600 (1991) (Stevens, J., dissenting o.g.). Tennessee            The finding that an employee had less bargaining power is
recognizes two types of unconscionability:                         relevant to the procedural-unconscionability analysis.
                                                                   Moreover, as the district court judge implied, the disparity in
  Unconscionability may arise from a lack of a meaningful          bargaining power also informs the substantive-
  choice on the part of one party (procedural                      unconscionability analysis, because a job applicant who lacks
  unconscionability) or from contract terms that are               “leverage” may be more likely to agree to unfair terms. In a
  unreasonably harsh (substantive unconscionability). In           close case, terms bordering on substantive unconscionability
  Tennessee we have tended to lump the two together and            may look more unfair in light of circumstances suggesting
  speak of unconscionability resulting when the inequality of      that the stronger party pressed his advantage against the
  the bargain is so manifest as to shock the judgment of a         weaker party. In determining procedural unconscionability,
  person of common sense, and where the terms are so               however, the judge did not require the parties to present
  oppressive that no reasonable person would make them on          evidence on “factors bearing on the relative bargaining
  one hand, and no honest and fair person would accept them        position of the contracting parties, including their age,
  on the other.                                                    education, intelligence, business acumen and experience,
                                                                   relative bargaining power, ... [and] whether the terms were
Trinity Indus., Inc. v. McKinnon Bridge Co., 77 S.W.3d 159,        explained to the weaker party....” See Morrison v. Circuit
170-71 (Tenn. Ct. App. 2001) (citations omitted). A contract       City Stores, Inc., 317 F.3d 646, 666 (6th Cir. 2003) (en banc)
is substantively unconscionable, then, when its terms “are         (citations omitted). As the record discloses, the judge made
beyond the reasonable expectations of an ordinary person, or       no findings on those factors. Absent such findings, there was
oppressive....” Buraczynski, 919 S.W.2d at 320.                    no basis for a negative answer to “[t]he crucial question ...
                                                                   [of] whether each party to the contract, considering his
  1.   No Basis for Finding the Agreement Procedurally             obvious education or lack of it, [had] a reasonable opportunity
       Unconscionable                                              to understand the terms of the contract....” Morrison, 317
   The district court was troubled that MRM required an            F.3d at 666 (citation and internal quotation omitted).
applicant to sign an arbitration agreement “precisely at the
time that he or she is most willing to sign anything just to get
a job.” Cooper, 199 F. Supp. 2d at 780 and n.8. The judge
No. 02-5702      Cooper v. MRM Investment Co., et al.        17    18   Cooper v. MRM Investment Co., et al.        No. 02-5702

  2.   No Basis for Finding the Agreement Substantively            E. The District Court Erred in Finding the Agreement
       Unconscionable                                                 Lacked Sufficient Bilaterality
   In turn, the district court’s erroneous finding of procedural     The district court also held that “there is an insufficient
unconscionability contributed to its conclusion that the           ‘modicum of bilaterality’ present in this case.” Cooper, 199
arbitration agreement’s terms were unfair and the product of       F. Supp. 2d at 780. It reasoned that “the agreement was ...
overreaching. Aside from the lack of support for the finding       drafted by KFC, and imposed on a prospective employee
that Cooper had far inferior bargaining power, unequal             precisely at the time that he or she is most willing to sign
bargaining power alone does not render a contract                  anything just to get a job. Although the KFC Arbitration
substantively unconscionable. The Supreme Court has                Agreement binds both parties, only the Defendant is aware of
cautioned, “[m]ere inequality in bargaining power ... is not a     the ramifications of the agreement.” Id. (citation omitted).
sufficient reason to hold that arbitration agreements are never    The court erred. The district court acknowledged that the
enforceable in the employment context.” Gilmer, 500 U.S. at        MRM agreement “does contain a measure of what ... courts
33. As one court noted, “[w]hen a party ... voluntarily agrees     have termed a ‘modicum of bilaterality,’” and, unlike the
to something in an attempt to obtain employment, they are not      agreement held unconscionable in Circuit City Stores, Inc. v.
being ‘forced’ to do anything....” EEOC v. Frank’s Nursery         Adams, 279 F.3d 889 (9th Cir.), cert. denied, 535 U.S. 1112
& Crafts, 966 F. Supp. 500, 504 (E.D. Mich. 1997), rev’d           (2002), it requires both parties to arbitrate, not just the
o.g., 177 F.3d 448 (6th Cir. 1999); accord Williams v. Parkell     employee. See Cooper, 199 F. Supp. 2d at 780. Despite this,
Prods., No. 03-7164, 2003 WL 23022072, at *1 (2d Cir. Dec.         the judge found that the agreement lacked sufficient
24, 2003) (affirming order compelling arbitration of Title VII     bilaterality because “there is an asymmetry born out of a
claims and holding that threat to terminate employment if          difference in bargaining power that pervades the resulting
employee did not sign arbitration agreement did not constitute     arbitration agreement.” Id. In so doing, the judge improperly
duress).                                                           conflated the procedural unconscionability and bilaterality
                                                                   analyses.
  While the district court’s compassion for job applicants is
laudable, under its approach “practically every condition of         Even if Cooper had far less bargaining power, that would
employment would be an ‘adhesion contract’ which could not         not detract from bilaterality, because MRM has the same duty
be enforced because it would have been presented to the            to arbitrate as Cooper. See Wilks v. Pep Boys, 241 F. Supp.
employee by the employer in a situation of unequal                 2d 860, 863 (M.D. Tenn. 2003) (“the plaintiffs’ claims that
bargaining power on a ‘take it or leave it’ basis.” Morrison,      the Agreement is invalid for lack of consideration and
70 F. Supp. 2d at 823 (quoting Beauchamp, 918 F. Supp. at          because it constitutes an ‘illusory promise’ are without merit.
1098). Such a result would contravene Congress’s intent that       Both parties are bound to arbitrate claims arising in their
employment disputes be subject to valid arbitration                relationship....”).
agreements, unless excepted by FAA § 1 or rendered
unenforceable under state contract law. For these reasons, the       Moreover, the record does not support the supposition that
record does not support the conclusion that the arbitration        only MRM knew the agreement’s ramifications. Its defining
agreement was procedurally and substantively                       ramification is that the parties will submit disputes to an
unconscionable.                                                    arbitrator instead of a judge or jury. “[T]he loss of the right
                                                                   to a jury trial is a necessary and fairly obvious consequence
No. 02-5702      Cooper v. MRM Investment Co., et al.         19    20       Cooper v. MRM Investment Co., et al.                   No. 02-5702

of an agreement to arbitrate.” Burden v. Check Into Cash of         of an agreement to arbitrate.’”4 Burden, 267 F.3d at 492
Kentucky, LLC, 267 F.3d 483, 492 (6th Cir. 2001) (citation          (quoting Sydnor v. Conseco Fin. Servs. Corp., 252 F.3d 302,
omitted). Absent evidence that MRM rushed Cooper or                 307 (4th Cir. 2001)); see also Pritchard v. Dent Wizard
deceived her as to the agreement’s consequences, Burden             Internat’l Corp., 275 F. Supp. 2d 903, 918-19 (S.D. Ohio
charges her with knowledge of that central consequence.             2003) (employee unlikely to succeed on claim that his right
Compare Brennan v. Bally Total Fitness, 198 F. Supp. 2d             to jury trial superseded arbitration clauses). The Seventh
377, 383 (S.D.N.Y. 2002) (arbitration agreement was                 Amendment confers not the right to a jury trial per se, but
unenforceable where employer gave employee only fifteen             rather “only the right to have a jury hear the case once it is
minutes to review sixteen-page document and used other              determined that the litigation should proceed before a court.
high-pressure tactics).                                             If the claims are properly before an arbitral forum pursuant to
                                                                    an arbitration agreement, the jury trial right vanishes.” Bank
F. Lack of Express Waiver of Right to Jury Trial Did                One, N.A. v. Coates, 125 F. Supp. 2d 819, 834 (S.D. Miss.
   Not Render Agreement Invalid                                     2001), aff’d, No. 01-60059, 2002 WL 663804 (5th Cir. Apr.
                                                                    5, 2002); accord Marsh v. First USA Bank, 103 F. Supp. 2d
  1.   Burden (6th Cir. 2001)                                       909, 921 (N.D. Tex. 2000) (citing Geldermann, Inc. v. CFTC,
                                                                    836 F.2d 310, 323 (7th Cir. 1987)).5
  The district court contrasted the MRM agreement, which
said nothing about waiving the right to a jury trial, with the         2.     KMC (6th Cir. 1985) is Distinguishable from Burden
agreement enforced in Buraczynski. The latter alerted the                     (6th Cir. 2001), Which Governs
weaker party, in ten-point capitals printed in red ink directly
above the signature line, “BY SIGNING THIS CONTRACT                   As discussed supra, Burden mandates reversal of the
YOU ARE GIVING UP YOUR RIGHT TO A JURY OR                           holding that the agreement is invalid because it did not
COURT TRIAL ....” The district court held that the absence
of such language in the MRM agreement rendered it
unenforceable because “the waiver of any rights (substantive             4
or procedural), must be both knowing and clear. * * * If the              Wright v. Universal Maritime Servs. Corp., 525 U.S. 70 (1 998 ), is
employee is not clearly made aware of the rights she is             not to the co ntrary. Wright held only that an arbitration clause’s waiver
                                                                    of the right to a jury trial must be “clear and unmistakable” when the
waiving, that waiver is not only invalid, but the entire            clause is contained in a collective bargaining agre ement (“CB A”). Id. at
agreement is rendered unduly oppressive.” Cooper, 199 F.            80. See also Am . Heritage Life Ins. Co. v. O rr, 294 F.3d 702 , 710 (5th
Supp. 2d at 775, 779.                                               Cir. 200 2), cert. denied, 537 U.S. 110 6 (2003 ) (citation omitted ); see, e.g .,
                                                                    Knox v. Wheeling-Pittsburgh Steel Corp., 899 F. Supp. 1529, 1537 (N.D.
  This Court, however, has flatly rejected the claim that an        W .Va. 1995). Cooper does not contend that her employment was covered
arbitration agreement must contain a provision expressly            by a CBA. Nor has Cooper denied that the FAA applies to her arbitration
                                                                    agree ment with M RM .
waiving the employee’s right to a jury trial. Without
discussion, we stated, “As to the failure of the arbitration             5
                                                                           Of the Circuits to squarely address the issue, all four share the view
clause to include a jury waiver provision, ‘the loss of the right   we expressed in Burden. See Melton v. Philip Morris Inc., No. 01-35883,
to a jury trial is a necessary and fairly obvious consequence       2003 WL 21774035 , at *2 (9th Cir. M ay 7, 2003 ); American Heritage,
                                                                    294 F.3d at 710-11 ; Snowden v. CheckPoint Check Cashing, 290 F.3d
                                                                    631, 638 (4th Cir. 2002); Koveleskie v. SB C Capita l Ma rkets, 167 F.3d
                                                                    361 , 368 (7th C ir.), cert. denied, 528 U.S. 811 (1999).
No. 02-5702      Cooper v. MRM Investment Co., et al.       21    22       Cooper v. MRM Investment Co., et al.              No. 02-5702

contain an express waiver of Cooper’s right to a jury trial.      148 B.R. 288, 290 (Bankr. S.D. Ohio 1992).6 Implied
For that proposition, the district court relied on a pre-Burden   overrulings, however, are disfavored. See id. at 290-91
panel decision: K.M.C. Co. v. Irving Trust Co., 757 F.2d 752      (citation omitted); accord United States v. Rodriguez, 311
(6th Cir. 1985). In KMC, the parties’ contract contained a        F.3d 435, 439 (1st Cir. 2002), cert. denied, 538 U.S. 937
clause waiving the right to a jury trial. Nonetheless, when       (2003). When possible, we will distinguish seemingly
KMC sued for breach, the judge ordered a jury trial. He           inconsistent decisions rather than find an overruling by
found that before the parties signed the contract, a              implication. See, e.g., Mfrs.’ Indus. Relations Ass’n v. East
representative of defendant told the plaintiff’s president that   Akron Casting Co., 58 F.3d 204, 210 (6th Cir. 1995). Indeed,
“absent fraud, which was not present ..., the waiver provision    Burden is distinguishable from KMC in three respects.
would not be enforced.” The defendant appealed, contending
that the judge should have enforced the waiver of the right to       First, KMC’s seeming endorsement of the knowing and
a jury trial. We held that the waiver was unenforceable           voluntary standard was dictum. The panel held, “Those cases
because it was not knowing and voluntary. See id. at 754-55.      in which the validity of a contractual waiver of jury trial has
                                                                  been in issue have overwhelmingly applied the knowing and
  At first blush KMC seems to conflict with our later decision    voluntary standard. We are of the opinion that the Magistrate
in Burden. Both were panel decisions, and we have never           [Judge] was correct in applying the knowing and voluntary
addressed en banc the issue on which they seem to conflict.       standard in this instance.” See KMC, 757 F.2d at 756
Under the law-of-the-circuit doctrine, only the Court sitting     (emphasis added and citations omitted). In light of the rest of
en banc may overrule published circuit precedent, absent an       the panel’s analysis, its careful inclusion of the phrase “in this
intervening Supreme Court decision or a change in the             instance” is significant. Such language suggests a decision
applicable law. See Walker v. Bain, 257 F.3d 660, 680 (6th        limited to the peculiar facts of the case. The court went on to
Cir. 2001) (Daughtrey, J., concurring in part and dissenting in   explain that a determination of the standard governing
part o.g.); Armco Employees Indep. Fed’n v. AK Steel Corp.,       contractual waiver of the right to jury trial, was not essential
252 F.3d 854, 860 n.2 (6th Cir. 2001) (citing 6TH CIR. R.         to its decision:
206(c)).
                                                                    In any event, whether the appropriate standard is that
  A sister Circuit also allows the overruling of precedent “in      K.M.C.’s waiver must have been knowing and voluntary,
extremely rare circumstances, where non-controlling but             or merely ‘clear,’ we conclude that if in fact it was
persuasive case law suggests such a course.” United States v.       represented to K.M.C.’s president Butler before the
Chhien, 266 F.3d 1, 11 (1st Cir. 2001). The Fourth Circuit          signing of the financing agreement that the jury waiver
decision we relied on in Burden could be viewed as such             provision would not be enforced under circumstances
“non-controlling but persuasive case law.” If so, Burden            such as those in the instant case, neither standard is met.
could have overruled KMC without expressly saying so.
“Precedent-making decisions may ... be overruled ... by
implication so that a later decision overrules prior decisions
which conflict with it whether such prior decisions are or are         6
not mentioned.” See Star Bank, N.A. v. Reveal (In re Reveal),           Cf. Watt v. Alaska, 451 U.S. 259, 285 (1981) (Stewart, J.,
                                                                  dissenting) (referring to the “e stablished rule o f statutory construction”
                                                                  leges posteriores, priores contrarias abrogant, subsequent laws repeal
                                                                  prior conflicting ones).
No. 02-5702      Cooper v. MRM Investment Co., et al.          23    24    Cooper v. MRM Investment Co., et al.         No. 02-5702

Id. at 757 (citations omitted). Because KMC did not decide           damages, depriving the employee of a remedy she could seek
whether a knowing and voluntary standard governs                     in court. See id. at 685-88.
contractual waivers of the right to jury trial, it did not
foreclose our decision in Burden.                                       None of the grounds that justified non-enforcement in
                                                                     Trumbull obtains here. As to mutuality of obligation, the
   Second, KMC based its refusal to enforce the waiver on its        MRM agreement obligates both parties to arbitrate and does
finding that the defendant promised the plaintiff, before they       not give MRM the right to change the agreement unilaterally.
signed, that the waiver would not be enforced under the              As to the “clear” or “knowing and voluntary” character of the
circumstances. The court emphasized, “K.M.C. is not                  waiver of a judicial forum, the MRM agreement is short, clear
claiming that it did not intend to waive jury trial but              and embodied in a separate document, not buried in a lengthy
inadvertently failed to object to the waiver provision in the        handbook which addresses issues not affecting Cooper’s
contract before signing it; [rather,] it claims that it objected     rights. Moreover, unlike Trumbull, the MRM agreement
strenuously and was assured that the provision would only            specifically advised Cooper that she would be required to
apply in narrow circumstances.” Id. n.6. By contrast, neither        arbitrate sexual-harassment claims. Lastly, the MRM
Burden nor Cooper was led to believe she would not be held           agreement does not restrict the arbitrator’s authority to award
to the letter of the agreement. Third, even if KMC announced         punitive damages or any other remedy Cooper might obtain
a rule that a contractual waiver of the right to a jury trial must   in court.
be “knowing and voluntary” or “clear,” Burden is consistent
with that rule. As we held in Burden, a party who enters an          G. District Court’s Statement that Title VII Claims
arbitration agreement necessarily consents to the clear and             Belong in Federal Court
obvious consequence: the surrender of his right to go to trial.
Burden, 267 F.3d at 492.                                               The district court acknowledged that employers face many
                                                                     non-meritorious claims and that arbitration can offer greater
   In addition to KMC, the district judge relied on Trumbull v.      efficiency and convenience than litigation. Without citing
Century Marketing Corp., 12 F. Supp. 2d 683 (N.D. Ohio               authority, however, the district court expressed hostility to the
1998). There a woman sued her former employer for sexual             arbitration of employment discrimination claims:
harassment in violation of Title VII, and the employer
invoked an arbitration clause contained in the employee                These cases do not ‘clog’ the federal docket – they
handbook. The court held the clause unenforceable on three             belong in federal court. Employees must not be forced
grounds: (1) there was no mutuality of obligation, because             to either forgo employment or forgo their right to a day
the handbook authorized the employer to “modify, augment,              in court, and Courts must not use the perceived problems
delete, or revoke any and all policies” therein at any time;           associated with employment discrimination [cases] to
(2) the employee did not knowingly waive her right to                  prevent employees, and society at large, from vindicating
litigate, because the clause occupied less than two pages of a         the rights that Congress enshrined in the Civil Rights
sixty-page handbook, was not set apart from provisions which           Acts.
did not affect her rights, and said nothing about arbitrating
statutory claims as opposed to contractual disputes; and             Cooper, 199 F. Supp. 2d at 779 n.7. Yet the Supreme Court
(3) the clause barred the arbitrator from awarding punitive          holds that “having made the bargain to arbitrate, the party
                                                                     should be held to it unless Congress itself has evinced an
No. 02-5702      Cooper v. MRM Investment Co., et al.       25    26     Cooper v. MRM Investment Co., et al.        No. 02-5702

intention to preclude a waiver of judicial remedies for the       was potentially valid: under the AAA rules incorporated in
statutory rights at issue.” Gilmer, 500 U.S. at 26 (citation      the agreement, arbitration could be prohibitively expensive,
omitted). The district court did not adduce evidence of a         deterring employees like Cooper from attempting to vindicate
Congressional intent to prohibit employees from waiving a         their rights. As a matter of public policy, the court rightly
judicial forum for discrimination or harassment claims, and       rejected MRM’s argument that the agreement was enforceable
we find none.                                                     because it is willing to pay Cooper’s arbitration costs. An
                                                                  employee should not have to “jump through hoops” to show
   On the contrary, the 1991 Amendments to Title VII              arbitration is too costly, only to have the employer jettison the
“evince[] a clear congressional intent to make arbitration an     unduly burdensome cost-splitting provision when it is
alternative method of dispute resolution.” Rajjak v. McFrank      challenged.
& Williams, No. 01 Civ. 0493, 2001 WL 799766, at *2 n.2
(S.D.N.Y. July 13, 2001) (citation omitted). The amendment          The AAA has since amended its rules, however, to hold
provided, in part, “Where appropriate and to the extent           employers responsible in the first instance for all expenses
authorized by the law, the use of alternative means of dispute    except a small filing fee and costs for the employee’s
resolution including ... arbitration, is encouraged to resolve    witnesses. This may make it more difficult for Cooper to
disputes arising under the Acts or provisions of Federal law      show her likely arbitration costs are prohibitively high, as she
amended by this title.” DeGaetano v. Smith Barney, No. 95         must to invalidate the agreement under Green Tree Finance
Civ. 1613,1996 WL 44226, at *5 (S.D.N.Y. Feb. 5, 1996)            Corp. of Alabama v. Randolph, 531 U.S. 79 (2000) and
(quoting Civil Rights Act of 1991, § 118, Pub. L. No. 102-66,     Morrison v. Circuit City, 317 F.3d 646 (6th Cir. 2003) (en
nn. after 42 U.S.C.A. § 1981). Accordingly, we decided that       banc).
Congress did not intend to exclude Title VII claims from
arbitration. See Willis, 948 F.2d at 310. Nonetheless, the          1.    When Arbitration Costs Render an Arbitration
district court indulged its belief that employers should not be           Agreement Unenforceable
allowed to require arbitration of statutory discrimination
claims. That belief is incompatible with the strong                 In Green Tree Finance Corp. of Alabama v. Randolph, 531
congressional policy favoring arbitration. As this Court has      U.S. 79 (2000), the Supreme Court adopted a case-by-case
held, “the fact that some of plaintiff’s claims are based upon    approach to determining whether an arbitration agreement’s
Title VII, a federal civil-rights statute, does not affect the    cost-splitting provision denies potential litigants the
enforceability of the arbitration agreement. It is well-settled   opportunity to vindicate their rights. “[W]here ... a party
that statutory claims may be the subject of an arbitration        seeks to invalidate an arbitration agreement on the ground that
agreement enforceable under the FAA.” Cosgrove, No. 95-           arbitration would be prohibitively expensive, that party bears
3432, 1997 WL 4783, at *2 (citing Gilmer, 500 U.S. at 26).        the burden of showing the likelihood of incurring such costs.”
                                                                  Id. at 92. The agreement before the Court said nothing about
H. Was the Agreement Invalid Because Arbitration                  arbitration costs, and the employee produced little evidence
   Would Be Prohibitively Expensive?                              on the costs she was likely to incur and whether she could
                                                                  afford them. Accordingly, the Court found the plaintiff had
  Unlike the findings that the agreement was adhesive,            not met her burden of proving she would actually bear
unconscionable, and insufficiently bilateral, the district        prohibitive costs if required to arbitrate. The Court held,
court’s other basis for finding the agreement unenforceable
No. 02-5702      Cooper v. MRM Investment Co., et al.        27   28   Cooper v. MRM Investment Co., et al.         No. 02-5702

  It may well be that the existence of large arbitration costs      cost-splitting provision on similarly situated [potential]
  could preclude a litigant such as Randolph from                   litigants, as opposed to its effect merely on the actual
  effectively vindicating her federal statutory rights in the       plaintiff in the given case.
  arbitral forum. But the record does not show that
  Randolph will bear such costs if she goes to arbitration.                                  * * *
  Indeed, [the record] contains hardly any information on
  the matter. * * * The record reveals only the                     A particular plaintiff may be determined to pursue his or
  arbitration agreement’s silence on the subject, and that          her claims, regardless of costs. But a court considering
  fact alone is plainly insufficient to render it                   whether a cost-splitting provision is enforceable should
  unenforceable. The “risk” that Randolph will be saddled           consider similarly situated potential litigants, for whom
  with prohibitive costs is too speculative to justify the          costs will loom as a larger concern, because it is, in large
  invalidation of an arbitration agreement.                         part, their presence in the system that will deter
                                                                    discriminatory practices. Nothing in Green Tree
                              ...                                   suggests that a case-by-case analysis should not treat
                                                                    similar cases similarly.
  To invalidate the agreement on that basis would
  undermine the “liberal federal policy favoring arbitration        For this reason, if the reviewing court finds that the
  agreements.” It would also conflict with our prior                cost-splitting provision would deter a substantial
  holdings that the party resisting arbitration bears the           number of similarly situated potential litigants, it
  burden of proving that the claims at issue are unsuitable         should refuse to enforce the cost-splitting provision in
  for arbitration.                                                  order to serve the underlying functions of the federal
                                                                    statute. In conducting this analysis, the reviewing court
Id. at 91-92 (citations omitted). Because the employee made         should define the class of such similarly situated
no showing about his likely arbitration costs, the Court            potential litigants by job description and socioeconomic
declined to specify “[h]ow detailed the showing of prohibitive      background. It should take the actual plaintiff’s income
expense must be before the party seeking arbitration must           and resources as representative of this larger class’s
come forward with contrary evidence ....” Id. at 92. Further        ability to shoulder the costs of arbitration.
guidance is available from our subsequent en banc decision
in Morrison v. Circuit City, where we declared,                   Morrison, 317 F.3d at 663 (emphasis added); see also
                                                                  DeOrnellas v. Aspen Square Mgmt., 295 F. Supp. 2d 753
  We hold that potential litigants must be given an               (E.D. Mich. 2003) (holding arbitration agreement’s cost-
  opportunity, prior to arbitration on the merits, to             sharing provision unenforceable under Morrison).
  demonstrate that the potential costs of arbitration are
  enough to deter them and similarly situated individuals           The court must evaluate the likely cost of arbitration not in
  from seeking to vindicate their federal statutory rights in     absolute terms, but relative to the likely costs of litigation.
  the arbitral forum. Our approach differs from the case-         The up-front expense of litigation is often minimal, because
  by-case approach advocated in Bradford [v. Rockwell             many employee-plaintiffs can secure a contingency fee
  Semiconductor Systems, 238 F.3d 549, 556 (4th Cir.              agreement where counsel advances discovery costs and defers
  2001)] by looking to the possible “chilling effect” of the      collection of fees until judgment. See Morrison, 317 F.3d at
No. 02-5702       Cooper v. MRM Investment Co., et al.         29    30     Cooper v. MRM Investment Co., et al.       No. 02-5702

664. Conversely, a plaintiff “forced to arbitrate a typical          did not err in determining that Cooper was likely to incur
$60,000 employment discrimination claim will incur costs ...         significant up-front costs under the then prevailing AAA rules
that range from three to nearly fifty times the basic costs of       which she would not incur in court. This comports with our
litigating in a judicial, rather than arbitral, forum.” Id. at 669   comment that “many, if not most” employment plaintiffs who
(citation omitted). Furthermore, because Title VII allows            litigate their claims will be represented under contingency
compensatory damage awards up to $300,000, the costs of              agreements, paying neither fees nor costs until and unless
arbitrating such a claim will range “higher and higher.” Id.         they secure judgment. See Morrison, 317 F.3d at 664.
   Finally, the analysis of likely arbitration costs must              Nor did the district court err in finding such costs would
consider only “up-front” costs, not the lower cost that may          deter many employees in Cooper’s circumstances from
ultimately result if the arbitrator relieves the employee of         arbitrating their claims. We predicted, after all, that courts
costs presumptively imposed by AAA rules (e.g., if the               would regularly find arbitration costs too high to permit
employee prevails on the merits). See id. at 664. After all,         enforcement of a lower- or middle-income employee’s duty
it is the out-of-pocket costs an employee considers when             to arbitrate. The courts “will find, in many cases, that high-
deciding whether he can afford arbitration:                          level managerial employees and others with substantial means
                                                                     can afford the costs of arbitration, thus making cost-splitting
  The issue is whether the terms of the arbitration                  provisions in such cases enforceable. In the case of other
  agreement itself would deter a substantial number of               employees, however, this standard will render cost-splitting
  similarly situated employees from bringing their claims            provisions unenforceable in many, if not most, cases.” Id. at
  in the arbitral forum, and thus the court must consider the        665 (emphasis added and citations omitted).
  decision-making process of these potential litigants. In
  many cases, if not most, employees considering the                   3.    District Court Properly Rejected MRM’s Offer to Pay
  consequences of bringing their claims in the arbitral                      Cooper’s Arbitration Costs
  forum will be inclined to err on the side of caution,
  especially when the worst-case scenario would mean not                The Cooper-MRM agreement contained no provision
  only losing on their substantive claims but also the               stating that an invalid or unenforceable clause could be
  imposition of the costs of the arbitration.                        severed. The district court held that, in the absence of a
                                                                     severability provision, it could not enforce the clause
Id. at 664-65 (emphasis added) (citations omitted).                  requiring arbitration while simultaneously invalidating the
                                                                     cost-splitting provision (and allowing MRM to relieve Cooper
  2.   The Employee’s Likely Up-Front Costs under the                of her contractual obligation to pay some arbitration costs
       Former AAA Rules                                              would effectively treat the arbitration cost-splitting provision
                                                                     was invalid). The court’s ruling on this issue was sound
  The district court found that Cooper earned $7,253.74 in           under both Tennessee law and federal common law.
2001 and that she “and others similarly situated, often cannot
afford to pay the high costs of arbitration.” See Cooper, 199          Under Tennessee law, the court could not make a new
F. Supp. 2d at 781. There is no suggestion that Cooper has           contract for the parties by adding a term, such as a
undisclosed assets or sources of income, or that her income          severability clause. See Central Adjustment Bureau, Inc. v.
has increased to a meaningful extent. Accordingly, the court         Ingram, 678 S.W.2d 28, 37 (Tenn. 1984) (cited in Warren v.
No. 02-5702         Cooper v. MRM Investment Co., et al.                 31     32       Cooper v. MRM Investment Co., et al.               No. 02-5702

Metropolitan Gov’t of Nashville & Davidson Cty., 955                            unilateral amendment of the agreement. See Popovich v.
S.W.2d 618, 623 (Tenn. Ct. App. 1997)). The Court could                         McDonald’s Corp., 189 F. Supp. 2d 772, 779 (N.D. Ill. 2002)
not invent a severability clause in order to “red-line” the cost-               (accepting defendant’s offer to pay all arbitration costs,
splitting provision while enforcing the clause requiring                        contrary to contract, would effectively allow it to unilaterally
Cooper to arbitrate in the first place.7                                        modify contract).
   The district court’s decision on this issue was also sound as                                        III. CONCLUSION
a matter of federal public policy. As the Eleventh Circuit
reasoned, “To sever the costs and fees provision and force the                     For the foregoing reasons, we reverse on all issues except
employee to arbitrate a Title VII claim despite the employer’s                  one: whether the likely costs of arbitration are so high that
attempt to limit the remedies available would reward the                        they will deter Cooper or similarly situated employees from
employer for its actions and fail to deter similar conduct by                   exercising their right to arbitrate. On that issue we vacate and
others.” Perez v. Globe Airport Sec. Servs., 253 F.3d 1280,                     remand for the court to analyze the likely arbitration costs
1287 (11th Cir. 2001), vac’d by 294 F.3d 1275 (11th Cir.                        under the AAA’s rules prevailing on the date that MRM filed
2002). But see Gannon v. Circuit City Stores, 262 F.3d 677,                     its motion in district court to compel Cooper to arbitrate.8
683 n.8 (8th Cir. 2001) (questioning Perez). Under the
contrary approach, an employer “will not be deterred from
routinely inserting such a deliberately illegal clause into the
arbitration agreement it mandates for its employees if it
knows that the worst penalty for such illegality is the
severance of the clause after the employee has litigated the
matter.” Brief of Amicus Curiae EEOC at 14-15 (citation
omitted). Our en banc decision in Morrison made clear that
the district court’s decision to reject MRM’s offer to pay was
the proper course. See Morrison, 317 F.3d at 676-77; accord
Gourley v. Yellow Transp., 178 F. Supp. 2d 1196, 1203-1205
(D. Colo. 2001) (rejecting employer’s offer to waive a
contractual cost-splitting provision).
  Moreover, MRM’s offer was an impermissible attempt to
vary the terms of a contract. There was neither a meeting of
the minds nor consideration to support such a post hoc

    7                                                                                8
      Similarly, the Supreme Court has held, “What States may not do is               Under our decision in Morrison v. Circu it City Stores, Inc., 317 F.3d
decide that a co ntract is fair enough to enforce all its basic terms (price,   646 (6th Cir. 2003) (en banc), the relevant co sts are C oop er’s out-of-
service, credit), but not fair enough to enforc e its arbitra tion clau se.”    pocket costs, without reference to the possibility that she may later recoup
Allied-Bruce Terminix Cos., Inc. v. Dobson, 513 U.S. 265, 281 (1995)            some of them. Hence the district court shall consider neither the
(quoted in Pyburn v. Bill Heard Chevrolet, 63 S .W .3d 3 51, 3 57 (Tenn. Ct.    arbitrator’s possible award of fees and expenses to Cooper pursuant to the
App.), appeal denied (Tenn. 2001 )).                                            AAA Rules, nor M RM ’s offer to pay Coo per’s arbitration costs.
