The full case caption appears at the
end of this opinion. Flaum, Circuit Judge. Circuit City Stores, Inc.(“Circuit City”) appeals from the districtcourt’s denial of its motion to dismiss and tocompel arbitration of Michelle Michalski’sdiscrimination claim under Title VII of the CivilRight Act of 1964 (“Title VII”), 42 U.S.C.sec.sec. 2000 et seq. We now reverse and remand,holding that the arbitration agreement enteredinto by the parties supersedes Michalski’s rightto pursue her discrimination claim in federalcourt. I. BACKGROUND Michelle Michalski was employed by Circuit Cityfrom 1993 to 1997. In 1995, Circuit Cityinstituted its Associate Issue Resolution Program(“AIRP”) which asked all employees to agree tohave any employment related disputes, includingTitle VII discrimination suits, decided inbinding arbitration instead of litigation. TheAIRP automatically applied to all employeesunless they sent a special opt-out form toCircuit City headquarters within thirty days ofsigning an acknowledgment form indicating receiptof the AIRP material. Michalski did not opt outof the program. On May 21, 1997, Michalski was fired. Claimingher termination was based on the fact that shewas pregnant, Michalski filed suit under TitleVII in federal court on May 12, 1998. To preserveher rights, she simultaneously filed a request toarbitrate on the same day. In response, CircuitCity moved the district court to either stay theproceeding or dismiss Michalski’s complaint andcompel arbitration pursuant to the AIRP and theFederal Arbitration Act. The district courtdenied Circuit City’s motion, holding thatMichalski was not bound by the AIRP because theagreement to arbitrate failed “for want ofcompliance with basic contract law.”Specifically, the district court reasoned thatbecause Circuit City gave up nothing, andpromised to do nothing for Michalski in exchangefor her agreeing to be bound by the AIRP, therewas no consideration sufficient to support avalid contract. Circuit City now appeals. II. ANALYSIS As an initial matter, we find jurisdiction forthis appeal under section 16(a)(1)(C) of theFederal Arbitration Act (“FAA”), which providesthat appeal may be taken from an order denying amotion to compel arbitration. 9 U.S.C. sec.16(a)(1)(C); see also Koveleskie v. SBC Capitalmarkets, Inc., 167 F.3d 361, 363 (7th Cir. 1999). This case presents two questions: first, whetheremployees can agree in advance to arbitrate TitleVII claims and second, whether consideration wasgiven by Circuit City in exchange for Michalski’spromise to arbitrate. A. Arbitration of Title VII claims. Michalski first asserts that the strong federalpolicy behind Title VII precludes mandatoryarbitration of civil rights claims. However, thisargument was explicitly rejected in this circuitby our decision in Koveleskie v. SBC Capitalmarkets, Inc., 167 F.3d 361, 365 (7th Cir. 1999),in which we held that Congress did not intendTitle VII to preclude enforcement of pre-disputearbitration agreements such as the one used byCircuit City. In Koveleskie, the plaintiff, a securitiesindustry analyst, was required as a condition ofher employment to sign an agreement to arbitrateall future employment disputes, including TitleVII discrimination claims. She challenged theenforceability of the pre-dispute arbitrationagreement, as it applied to employmentdiscrimination claims. We found, as have mostother circuits, that Congress did not intend toprohibit the use of pre-dispute arbitrationagreements for resolution of Title VII claims.Id.; see also Seus v. John Nuveen & Co., 146 F.3d175, 182 (3rd Cir. 1998); Patterson v. TenetHealthcare, Inc., 113 F.3d 832 (8th Cir. 1997)(holding that Title VII claims are subject topre-dispute arbitration agreements under theFAA); Cole v. Burns International SecurityServices, 105 F.3d 1465 (D.C. Cir. 1997)(affirming an order compelling arbitration ofTitle VII claims where an employee signed amandatory arbitration agreement as a condition ofhis employment); Metz v. Merrill Lynch, Pierce,Fenner & Smith, Inc., 39 F.3d 1482 (10th Cir.1994) (holding that Title VII claims are subjectto mandatory arbitration); Bender v. A.G. Edwards& Sons, Inc., 971 F.2d 698 (11th Cir. 1992)(holding that Title VII claims are subject tosecurities industry compulsory arbitration);Willis v. Dean Witter Reynolds, Inc., 948 F.2d305 (6th Cir. 1991); Alford v. Dean WitterReynolds, Inc., 939 F.2d 229 (5th Cir. 1991)(holding that Title VII claims can be subject tocompulsory arbitration). Thus, this claim isforeclosed by our recent decision in Koveleskie. What makes Michalski’s case even less compellingis that, unlike the plaintiff in Koveleskie whowas required to sign the arbitration agreement asa condition of her employment, Michalski had anopt-out provision. She was free not to arbitrate;she was given a choice and she chose–by notsigning the opt-out provision–to be bound by theAIRP. It does not follow that this court wouldinvalidate an arbitration agreement such as thisone, when we have previously held that a non-optional, mandatory arbitration agreement isvalid. Thus, Michalski’s argument that Title VIIprecludes arbitrations agreements such as theAIRP fails in the face of binding precedent tothe contrary. B. Consideration. The district court found inadequateconsideration to support Michalski’s agreement toarbitrate because Circuit City had not promisedto give anything up. An agreement to arbitrate is treated like anyother contract: “In determining whether a validagreement arose between the parties, a federalcourt should look to the state law thatordinarily governs the formation of contracts.”Koveleskie v. SBC Capital markets, Inc., 167 F.3d361, 367-8 (7th Cir. 1999) (citing Gibson v.Neighborhood Health Clinics, Inc., 121 F.3d 1126,1130 (7th Cir. 1997)). In the present case, welook to the contract law of Wisconsin, the statewhere the employment and termination took place.Id. at 368; Gibson, 121 F.3d at 1130 (citingFirst Options of Chicago, Inc. v. Kaplan, 514U.S. 938, 944 (1995)). In order for a contract tobe enforceable under Wisconsin law, there must beconsideration, NBZ, Inc. v. Pilarski, 520 N.W.2d93, 96 (Wis. Ct. App. 1994), which may be eithera detriment to the promisor or a benefit to thepromisee. Lovett v. Mt. Senario College, Inc.,454 N.W.2d 356, 358 (Wis. Ct. App. 1990). In reaching its decision, the district courtrelied on our decision in Gibson, 121 F.3d 1126,in which we held that a lack of considerationrendered an employee’s promise to submit claimsto arbitration unenforceable. 121 F.3d 1126. InGibson, the plaintiff signed a contract providedby her employer which stated, “I agree to thegrievance and arbitration provisions set forth inthe Associates Policy Manual” (the “Manual”). Id.at 1128. The Manual, which was not given toGibson at the time she signed the contract,specifically stated that all disputes, includingTitle VII claims, were subject to arbitration,but also stated that “it does not constitute acontract or promise of any kind” on the part ofthe employer. Id. at 1128. Thus, the employer wasnot bound by the Manual’s terms. This court foundthat because Gibson was not given a copy of theManual at the time she signed the contract, andbecause she never signed the Manual, there was noconsideration in the form of a promise by theemployer in exchange for Gibson’s agreement toarbitrate. Additionally, this court found thatGibson’s promise to arbitrate was not supportedby consideration in the form of her employer’spromise to hire her or to continue to employ her.Id. at 1131. The present case is distinguishable from ourdecision in Gibson because, as the appellantpoints out, Circuit City’s promise to be bound bythe arbitration process itself serves as mutualconsideration here. Although the particular sheetthat the employee signed did not state that theemployer would be bound by arbitration, otherinformation in the AIRP packet givencontemporaneously to Michalski clearly indicatedsuch a promise by Circuit City. Similarly, in Koveleskie, the plaintiffchallenged the enforcement of a pre-disputearbitration agreement on the grounds that therewas inadequate consideration to support theemployee’s promise to arbitrate. 167 F.3d at 366.We held that the plaintiff’s contract with heremployer was supported by adequate considerationfor two reasons. First, we found sufficientconsideration from the fact that the plaintiffpromised to arbitrate all future disputes inexchange for the company’s promise to employ her.Id. at 368. Second, we noted that both partieswere bound by the terms of the agreement. Id. In a relatively recent case similar to thepresent one, the Fourth Circuit held that underthe AIRP, Circuit City’s promise to be bound bythe process and results of arbitration ofemployee disputes was sufficient consideration.Johnson v. Circuit City, 148 F.3d 373, 378 (4thCir. 1997). That court rejected the notion thatCircuit City must also agree to submit its claimsagainst the employee to arbitration. Id. at 379.While in Johnson, Circuit City stated that itagreed to be bound by arbitration in the samedocument which contained the signature of theemployee, id. at 375, here the employer’scommitment to arbitrate is found in the materialgiven to Michalski along with the AIRP. Theimplication that both parties agreed to bindingarbitration is evident from a reading of theaccompanying Associate Issue Resolution Handbook.The section of the Handbook entitled “BINDINGARBITRATION OF LEGAL DISPUTES,” under thesubsection “What is arbitration?,” states “Inarbitration, you and the company agree to submita legal dispute to an arbitrator who . . .renders a final, binding decision to your legalclaim.” We conclude that this description ofarbitration, in the context of this case, clearlyindicates a mutual promise to arbitrate, bindingboth parties, and constitutes sufficientconsideration. III. CONCLUSION We hold that the district court erred indenying the defendant’s motion to compelarbitration of Michalski’s discrimination claims.For all the reasons stated herein, the order ofthe district court is Reversed and this case isRemanded for further proceedings consistent withthis opinion. ROVNER, Circuit Judge, dissenting. Paying homageto “a basic tenet of contract law,” we recognizedin Gibson that an employer must have given someconsideration in exchange for an employee’spledge to arbitrate if the agreement is to beenforced against her. Gibson v. NeighborhoodHealth Clinics, Inc., 121 F.3d 1126, 1130 (7thCir. 1997) (applying Indiana law); see alsoLarimer v. Dayton Hudson Corp., 137 F.3d 497, 502(7th Cir. 1998) (applying Wisconsin law); Levinv. Perkins, 107 N.W.2d 492, 495 (Wis. 1961);Gustafson v. Physicians Ins. Co. of Wis., 588N.W.2d 363, 367 (Wis. App. 1998). Thus, CircuitCity can hold Michalski to her promise only tothe extent that the company suffered a detrimentor conferred some benefit upon Michalski inexchange for her agreement to forgo judicialresolution of her claims. Gibson, 121 F.3d at1130; see also First Wis. Nat’l Bank of Milwaukeev. Oby, 188 N.W.2d 454, 457 (Wis. 1971)(collecting cases); Lovett v. Mt. SenarioCollege, Inc., 454 N.W.2d 356, 358 (Wis. App.1990). In fact, Circuit City surrendered nothingat all. My colleagues read into the arbitrationagreement a promise by Circuit City to be boundby the results of any arbitration proceeding andcite that as sufficient consideration. Ante at 6;see Gibson, 121 F.3d at 1131. But that promise,I believe, has no more substance than a chimera. On the single sheet of paper that Michalskisigned there can be found no undertaking byCircuit City. That document–styled as the”Associate Receipt of Issue Resolution Package”–in the first instance reflects Michalski’s reviewof a video about the company’s arbitrationprogram and her receipt of certain writtenmaterials–copies of the Associate IssueResolution Handbook, the Circuit City DisputeResolution Rules and Procedures, and the CircuitCity Arbitration Opt-Out Form. It goes on toevidence Michalski’s understanding thatparticipation in the arbitration program isvoluntary but that she was obliged to completeand return the opt-out form in the event she didnot wish to participate. Finally, it sets forththe following acknowledgment by Michalski: “Iunderstand that if I do not mail the [opt-out]Form within 30 calendar days, I will be requiredto arbitrate all employment-related legaldisputes I may have with Circuit City.” Nowhereon the page, however, is there any indication ofwhat Circuit City would or would not do inexchange for Michalski’s decision not to opt-outof the arbitration program. The acknowledgmentdoes not purport to incorporate the terms ofeither the Handbook or the Rules and Procedures.Indeed, Michalski–the only signatory–simplyacknowledged that she would be required toarbitrate, but not pursuant to any of the rulesor procedures set forth elsewhere. ContrastJohnson v. Circuit City Stores, Inc., 148 F.3d373, 375 (4th Cir. 1998) (both applicant andCircuit City signed a dispute resolutionagreement providing that “Circuit City agrees tofollow this Dispute Resolution Agreement and theDispute Resolution Rules and Procedures inconnection with the Associate whose signatureappears above”).
[FOOTNOTE 1] My colleagues locate a promise by Circuit Cityto arbitrate in the separate Associate IssueResolution Handbook of which Michalskiacknowledged receipt. Ante at 6. I am inclined tothink that the more pertinent document in thisregard is the Circuit City Dispute ResolutionRules and Procedures (upon which Circuit Cityitself relies, see Circuit City Br. 24-25 andReply Br. 12), for by their own express terms itis those Rules and Procedures which governarbitrations between the company and itsemployees. See Rule 1 (Purpose). The Handbook, bycontrast, describes the arbitration program inonly the most general terms. Even the referenceto the binding nature of the arbitration that mycolleagues reference does not make clear uponwhom the arbitration is binding. The Rules aremuch more explicit in this respect: The award rendered by the Arbitrator shall befinal and binding as to both the Associate andthe Company. Either party may appeal theArbitrator’s decision to a court in accordancewith the appeal procedures of the FederalArbitration Act, 9 U.S.C. sec. 1 et seq., or theUniform Arbitration Act of Virginia, 8.01-581.01et seq. Rule 17 (Appeal Rights). What the Rules and Procedures also make clear,however, is that Circuit City remains free toalter the terms and conditions of the arbitrationprogram: Circuit City may alter or terminate the Agreementand these Dispute Resolution Rules and Procedureson December 31st of any year upon giving 30calendar days written notice to Associates,provided that all claims arising beforealteration or termination shall be subject to theAgreement and corresponding Dispute ResolutionRules and Procedures in effect at the time theclaim arose. An Associate shall be deemed to haveaccepted a modification or termination of theDispute Resolution Agreement or the Rules andProcedures by accepting or continuing employmentwith Circuit City after receiving notice of suchmodification or termination. Rule 19 (Termination or Modification of Dispute ResolutionAgreement or Dispute Resolution Rules and Procedures).Circuit City has thus reserved the power torewrite any of the Rules and Procedures,including the Rule addressing the binding natureof the arbitration. The company could, in otherwords, revoke its own promise to abide theresults of arbitration, leaving Michalski nochoice other than to quit if she did not approvethe change. Had Circuit City and the employeesigned a contract in which each agreed toarbitrate, as they did in Johnson, that scenariowould be foreclosed to the company. But herethere is no such document. The only agreement byCircuit City to arbitrate is one found in theRules and Procedures, which can be modified bythe company at will. The putative consideration for Michalski’sconsent to arbitrate was therefore whollyillusory. Circuit City retained the authority toalter the ground rules and declare, if it wished,that arbitration would be binding upon theemployee but not the company. It suffered nodetriment nor conferred any benefit uponMichalski in exchange for her agreement toarbitrate. That is true notwithstanding theprovision deeming an employee to have “accepted”any subsequent modification in the Rules andProcedures by continuing to work for Circuit Cityafter the change was announced. See Rule 19,supra. For having lured Michalski into theagreement to arbitrate with one inducement (amutual promise to arbitrate), Circuit City cannotthen retract that inducement and offer another inits stead (continued employment). That kind of”bait and switch” maneuver has no place in thelaw of contracts, particularly where theemployee’s civil rights are concerned. Whatever advantages it may offer employees,arbitration is not without its limitations. Asthe Equal Employment Opportunity Commission hasrecognized, there are aspects of arbitration thatarguably give employers–particularly large,national employers like Circuit City whicharbitrate on a frequent basis–a distinctadvantage in that arena. See EEOC Notice No.915.002 (July 10, 1997)http://www.eeoc.gov/docs/mandarb.txt . A choiceto resolve one’s Title VII claims outside of thecourtroom–if it is made freely and in return foradequate consideration– commands our deference. But courts should be ever mindful that Congress,in enacting Title VII, thought it necessary toprovide a judicial forum for the ultimateresolution of discriminatory employment claims.It is the duty of courts to assure the fullavailability of this forum. Alexander v. Gardner-Denver Co., 415 U.S. 36, 60n.21, 94 S. Ct. 1011, 1025 n.21 (1974). We musttherefore exercise vigilance in ascertaining thatthe arbitration agreements that employers seek toenforce against their employees constitute valid,enforceable contracts. The agreement at issuehere lacks the rudimentary element ofconsideration. Michalski promised to arbitrateher claims against Circuit City, but in return”Circuit City promised nothing,” as JudgeReynolds recognized below. R. 18 at 2. I wouldtherefore affirm his decision to deny the motionto stay this suit or compel arbitration. I respectfully dissent. :::FOOTNOTES:::
FN1Circuit City requires only its applicants foremployment to sign an agreement in which the(prospective) employee affirmatively agrees toarbitrate. Those like Michalski, who were alreadyemployed with the company when it implemented thearbitration program, were automatically deemedparticipants unless they elected to opt out.Thus, only Michalski’s written acknowledgment ofthe opt-out alternative coupled with her failureto exercise that option evidence her agreement toarbitrate. See Gibson, 121 F.3d at 1132 (Cudahy,J., concurring) (“It seems to me that a knowingand voluntary waiver [of a judicial forum] wouldrequire at the least, a single and explicitcontractual document.”).
MICHELLE L. MICHALSKI, Plaintiff-Appellee, v. CIRCUIT CITY STORES, INC., Defendant-Appellant. No. 98-3023 United States Court of Appeals for the Seventh Circuit Appeal from the United States District Courtfor the Eastern District of Wisconsin. No. 98-C-0442–John W. Reynolds, Judge. Argued January 7, 1999–Decided May 5, 1999 Before Flaum, Easterbrook and Rovner, Circuit Judges.
