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Justices Rule Arbitration Preempts Suits in Bias Cases : Courts: Rights lawyers fear that more employers will demand such clauses. It could affect age, sex, race claims.

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TIMES STAFF WRITER

Employees claiming discrimination do not have a right to take their case to court if they have signed contracts agreeing to binding arbitration, the Supreme Court said Monday in a decision with the potential to curb civil rights litigation.

The decision was in an age discrimination suit involving a 62-year-old man who, like all registered stockbrokers, had signed a standard contract that says all disputes with employers will be arbitrated. The court ruled that the man’s discrimination complaint “can be subjected to compulsory arbitration.”

Civil rights attorneys saw the 7-2 ruling as ominous, saying they feared the ruling would lead other industries to require arbitration clauses. If so, employees would be stripped of their previously assumed right to a court hearing in discrimination cases.

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“This decision slams the courthouse door on the employees in an entire industry,” said Richard Seymour, staff counsel for the Lawyers Committee for Civil Rights Under Law.

Although the ruling dealt with an age discrimination complaint, its reasoning would apply to complaints involving race or sex discrimination, he said. “It’s hard to say what it means for other industries, but it shows again (that) this court is not too concerned about civil rights claims,” Seymour said.

But business attorneys saw the ruling as an opportunity. Employers, upset by the high cost of litigation, have looked to arbitration as a quicker and cheaper alternative. Typically, it takes years for a civil rights claim to be decided in a federal court, but arbitrators usually deliver a decision within a few months.

“We think arbitration is the way to solve these disputes,” said Stephen Bokat, general counsel for the U.S. Chamber of Commerce. “There is less procedural wrangling. It takes less time to get a decision. It can be an enormous cost savings for business.”

In March, the Bush Administration urged Congress to amend the federal anti-discrimination laws to “encourage” binding arbitration as an alternative to lawsuits. “In light of the litigation crisis facing this country . . . there is no reason to disfavor the use of such forums,” the Administration said.

In speeches and other comments, the conservative members of the Supreme Court also have complained about the clogged courts and urged alternative ways of settling disputes.

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The Federal Arbitration Act of 1925 said arbitration clauses written into contracts “shall be valid, irrevocable and enforceable.” This law formed the basis for the decision upholding the arbitration clause that securities industry employees are required to sign.

In recent years, binding arbitration has been used often to settle commercial disputes. Until Monday, the high court had never said it could also be used as a substitute for a court hearing in civil rights cases.

Civil rights lawyers cited the following concerns about the court’s decision:

--Unlike a court proceeding, employees going before an arbitrator are usually not given the right to obtain company documents, which could prove a pattern of discrimination.

--Often, complaints are handled on an individual basis. By contrast, lawsuits often become large class actions, so that the decision affects far more employees.

--Arbitration is often held behind closed doors, and a written decision not issued. Again, the result is that a decision in favor of an employee does not affect others, and the offender is less likely to suffer the same degree of adverse publicity.

--Arbitrators may be biased in favor of an industry, civil rights attorneys say.

The case arose in 1987 when Robert Gilmer of Charlotte, N.C., then age 62, was dismissed as a financial services manager by his employer, Interstate/Johnson Lane Corp. He was replaced by a 28-year-old woman he had trained. When he was hired six years earlier, Gilmer had been required to register as a stock trader with the New York Stock Exchange and sign a standard agreement in which he “agreed to arbitrate any dispute, claim or controversy” arising from his employment.

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After his dismissal, Gilmer filed suit under the federal Age Discrimination in Employment Act of 1967. But his employer countered by invoking the arbitration clause. A federal judge, as well as an appeals court, ruled for the employer.

The high court agreed to hear the appeal (Gilmer vs. Interstate/Johnson Lane, 90-18) to decide whether civil rights claims may be subjected to binding arbitration.

Gilmer’s attorney contended that he had not entered into the contract freely because it was required of all employees.

“Mere inequality in bargaining power, however, is not sufficient reason” to void the arbitration clause, Justice Byron R. White wrote for the court. “There is no indication that Gilmer, an experienced businessman, was coerced or defrauded into agreeing to the arbitration clause . . . .”

Justices John Paul Stevens and Thurgood Marshall dissented.

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