Why Sexy Citibank Ex-Employee Can't Sue

A mandatory arbitration clause is keeping Debrahlee Lorenzana out of court.

ByALICE GOMSTYN <br/> ABC NEWS Business Unit
June 03, 2010, 6:54 PM

June 4, 2010 &#151; -- It's the kind of case that's prompted provocative headlines across the country: A beautiful woman, Debrahlee Lorenzana, is claiming that one of the country's biggest banks, Citigroup, fired her for being too attractive.

In a lawsuit, Lorenzana, who worked at a Citibank branch in New York, also alleges that she wasn't allowed to wear clothing similar to that of her female co-workers because her figure made wearing such attire "too distracting" to her male colleagues.

Citi has said the lawsuit is "without merit," that it would mount a "vigorous" defense and that Citi "is committed to fostering a culture of inclusion and providing a respectful environment in the workplace."

Buried beneath the attention-grabbing allegations, meanwhile, is a legal detail that means a lot for many workers, not just the attractive ones: Thanks to something known as a mandatory arbitration clause, Lorenzana likely will not have her day in court.

When she first began work at Citi in September 2008, the employment documents she signed included one stipulating that any employment disputes be resolved through arbitration, not in court.

Companies have increasingly begun mandating that employment disputes be resolved through arbitration. An alternative to litigation, arbitration allows for disputes to be decided by a third party, known as an arbitrator, instead of a court.

In arbitration, as in court hearings, witnesses still make depositions and evidence is still presented by both sides, but the process is less formal than a trial and is held in a private setting. That means, some legal experts say, that it can be concluded more quickly and cheaply than a trial.

Some arbitration advocates argue that, by virtue of their experience, arbitrators are more likely to issue fairer, more just decisions than juries.

But Lorenzana's lawyer, Jack Tuckner, said he and his client would have preferred a jury trial. For one thing, he said, arbitrators -- sometimes former judges or lawyers -- may be more jaded and conservative than a jury. He also questioned whether arbitrators, who often are paid by the companies requiring arbitration, are ever truly impartial.

Jurors, he said, "come from all walks of life" and are therefore "better equipped at determining the facts" -- including what monetary damages, if any, should be awarded.

"A jury will act [more] with their heart and their emotions than an arbitrator ever will," he said. "You're far less likely to ever see a penny of punitive [damages] with an arbitrator."

A 'Watershed' for Mandatory Arbitration

The fact that Lorenzana essentially signed away her right to sue in court didn't come to Tuckner's attention until after they filed a lawsuit against Citi.

"She had no idea that she was signing into that when she took her job," he said. It's the type of agreement, he said, that many employees will sign without a second thought as part of the flood of paperwork that comes with a new job.

While labor unions typically negotiate arbitration standards as part of their contracts, the use of mandatory arbitration to resolve disputes between a company and a nonunion employee was pioneered by Wall Street.

Arbitration long has been the norm for how brokers resolve disputes over trades. But in 1991, then-brokerage firm Interstate/Johnson Lane argued that mandatory arbitration policies for brokers extended to claims of age discrimination and that a broker who had sued the firm for age discrimination had to take his case to arbitration.

The Supreme Court agreed.

It was "a watershed" moment, said David Sherwyn, an associate law professor at Cornell University's School of Hotel Administration who specializes in employment arbitration. "Employers said, 'Wow, we can do this.' "

Sherwyn, an arbitration supporter, said that while employment discrimination court cases often last years and can cost half a million dollars or more in legal fees, arbitration proceedings can be concluded in a matter of months for a fraction of that amount.

For employees, he said, arbitration may be a better alternative because while large corporations can often afford to keep paying their lawyers to sustain long-brewing legal battles, employees often can't.

"Huge megafirms -- they can beat the crap out of you and keep you going forever," he said. Under arbitration, "they can't big-firm you to death."

Less Media Attention for Arbitration

Then there are the employees who can't afford lawyers at all or can't find a lawyer to take their cases. For them, arbitration is the only option.

"Advocates of arbitration say some justice is better than no justice," said Lisa Blomgren Bingham, a professor who studies arbitration at the Indiana University of School of Public and Environmental Affairs.

But Blomgren Bingham, who considers herself neither an opponent nor proponent of arbitration, said there are questions over whether the public suffers when a dispute is decided in private arbitration proceedings rather than in a public courtroom.

The former tends to draw far less publicity than the latter -- a boon, Sherwyn said, to any corporation that wants to avoid airing "dirty laundry" before a courtroom full of reporters and members of the public.

But Blomgren Bingham said arbitration scholars often will cite the landmark 1954 Supreme Court Case of Brown v. the Board of Education, in which the court declared racial segregation at public schools unconstitutional, as a reason why a lack of publicity is dangerous.

"What if Brown v. Board of Education had gone to arbitration? We wouldn't know about it," she said. "It might have covered one school district if the proponents of desegregation won but it certainly wouldn't have set a national precedent. It wouldn't have set any kind of precedent at all."

Aside from issues of legal precedent, there is also -- more importantly, for some -- the issue of final monetary awards.

Lorenzana's lawyer, Tuckner, and others believe that a jury would award more cash for damages than an arbitrator.

But Sherwyn and Blomgren Bingham agree that it's difficult to reach an overarching conclusion on who is likely to give bigger awards because each case is unique and hard to compare to any other. How do you, for instance, compare the results of a weak employment claim that went to arbitration and a strong employment claim that went to court?

"At the end of the day, we put all the stuff together and we try to judge wins, losses and awards, but there are always different cases," Sherwyn said.

Lawyer: 'She Still Has a Case'

Disputes that begin in arbitration do sometimes find their way to court. An employee can appeal an arbitrator's opinion if there is reason to believe the employer's arbitration process somehow didn't comply with various standards set in U.S. case law, Blomgren Bingham said.

In 1999, for instance, an appeals court ruled that the restaurant chain Hooters could not force a former employee to take her sexual discrimination claim to arbitration because Hooters had "set up a dispute resolution process utterly lacking in therudiments of even-handedness," according to the court ruling.

Among the court's concerns: that Hooters had too much control over the selection of an arbitrator and that it could change the arbitration rules at without disclosing that to employees.

Other reasons that arbitration cases end up in court involve allegations of collusion or fraud, Blomgren Bingham said. But, she added, courts won't overturn arbitration decisions if the only arguments for it are that the arbitrator himself made an error with respect to the law or a fact.

"The standards of review are very, very limited," she said.

For now, Tuckner is working with Citigroup to choose an arbitrator and has hope that the arbitration will yield an award for Lorenzana.

"She still has a case," he said.

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