A recently published decision of the U.S. Court of Appeals for the Sixth Circuit (which includes Michigan), Scovill v. WSYX/ABC, continues the ongoing process of addressing procedural questions affecting the enforceability of arbitration agreements. Scovill focused on two such questions: first, the severability of illegal provisions in an arbitration agreement; second, the division of responsibility between courts and arbitrators for deciding whether agreements that are alleged to contain illegal provisions may nonetheless proceed to arbitration.

Scovill was a news anchor/reporter whose employment contract with WSYX contained a binding arbitration provision. Scovill resisted the station's effort to compel arbitration of his age discrimination claim, asserting that several illegal provisions rendered the agreement unenforceable. The trial court held that three provisions could not be enforced: (1) a costshifting provision that required the unsuccessful litigant to bear the entire cost of the arbitration; (2) a remedies provision that limited the remedies available to a prevailing employee; and (3) an evidentiary provision that stated in essence that, if the arbitrator was satisfied that the employee did engage in the complained-of misconduct, the arbitrator must uphold the action taken by the employer as a result. The trial court then "severed" these provisions, enforced the remainder of the arbitration agreement, and dismissed the court proceeding.

Scovill's employment agreement contained two severability clauses which stated that any part of the agreement (or the arbitration provision) could be declared to be invalid or unenforceable without affecting the enforceability of the remaining parts of the agreement (or arbitration clause). The Sixth Circuit affirmed the trial court's ruling severing the challenged provisions as consistent with both the parties' intent and prior Sixth Circuit caselaw - in particular Morrison v. Circuit City Stores, Inc.

The Sixth Circuit also rejected Scovill's contention that the trial court should have held the agreement unconscionable and thus unenforceable as a whole. Noting that in assessing unconscionability courts consider, among other factors, the parties' "age, education, intelligence, business acumen and experience, relative bargaining power [and] who drafted the contract," the Sixth Circuit concluded that Scovill was a college-educated, experienced professional who had previously signed an employment contract for a different job that included a similar arbitration provision, who acknowledged reading the agreement, and who asked questions about the agreement.

In a cross-appeal, WSYX raised an issue new to the Sixth Circuit, arguing that severing the challenged provisions was inconsistent with the U.S. Supreme Court's 2003 decision in PacifiCare Health-Systems, Inc. v. Book. In PacifiCare, the Supreme Court declined to decide prior to arbitration whether a provision limiting a party's rights to less than the full range of remedies under RICO was enforceable, because it was unclear how the arbitrator would construe an ambiguous provision. The Court gave that interpretative decision to the arbitrator in the first instance, and left open the possibility that, if the arbitrator interpreted the agreement in a way that violated a party's rights, the resulting award could be vacated.

WSYX argued that under PacifiCare the decision regarding the enforceability of the cost-shifting provision and the evidentiary standard should have been given to the arbitrator in the first instance. The Sixth Circuit held that the cost-shifting provision required no interpretation and that the PacifiCare approach consequently did not apply. The court felt, however, that the evidentiary standard could be read two ways, one permissible and one not. Accordingly, PacifiCare applied and the trial court should "have left interpretation of this provision to the arbitrator subject to review after arbitration."

Noel D. Massie

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