and 03-1592 BRUNO LLOYD v. Hovensa, LLC

PRECEDENTIAL
UNITED STATES COURT
OF APPEALS
FOR THE THIRD CIRCUIT
NOS. 03-1502 and 03-1592
BRUNO LLOYD
Appellant in No. 03-1502
v.
HOVENSA, LLC; WYATT, V.I., INC.
BRUNO LLOYD
v.
HOVENSA, LLC.; WYATT, V.I., INC.
Wyatt, V.I., Inc.
Appellant in No. 03-1592
____________
On Appeal From the District Court
of the Virgin Islands
(D.C. Civil Action No. 02-cv-00121)
District Judge: Hon. Raymond L. Finch
Argued December 10, 2003
BEFORE: NYGAARD, BECKER and
STAPLETON, Circuit Judges
(Opinion Filed: May 13, 2004)
Lee J. Rohn
K. Glenda Cameron (Argued)
Law Offices of Lee J. Rohn
1101 King Street - Suite 2
Christiansted
St. Croix, USVI 00820
Attorneys for Bruno Lloyd
Appellant/Cross-Appellee
Charles E. Engeman
David J. Comeaux (Argued)
Ogletree, Deakins, Nash, Smoak &
Stewart
The Tunick Building - Suite 202
1336 Beltjen Road
St. Thomas, USVI 00802
Attorneys for Wyatt, V.I., Inc.
Appellee/Cross-Appellant
Linda J. Blair
Rachel L. Witty (Argued)
Bryant, Barnes & Moss
1134 King Street - 2nd Floor
Christiansted
St. Croix, USVI 00820
Attorneys for HOVENSA, LLC
Appellee
OPINION OF THE COURT
STAPLETON, Circuit Judge:
Bruno Lloyd appeals from an order of
the District Court of the Virgin Islands
compelling arbitration of his claims
against Wyatt, V.I., Inc. (“Wyatt” or

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“Cross-Appellant”) and HOVENSA, LLC
(“HOVENSA”; collectively, “Appellees”)
pursuant to the Federal Arbitration Act
(“FAA”), 9 U.S.C. § 1 et seq. Wyatt
cross-appeals from the District Court’s
order insofar as it denied Wyatt’s motion
for a stay of the proceedings on Lloyd’s
claims pending arbitration.
Lloyd, who applied for employment at
Wyatt, brought suit against Appellees
alleging, inter alia, discriminatory conduct
in violation of Title VII of the Civil Rights
Act of 1964, 42 U.S.C. § 2000e et seq.
Invoking the provisions of an arbitration
agreement entered into as a condition of
Lloyd’s application, Appellees filed a
motion to compel arbitration of Lloyd’s
claims and to stay the proceedings pending
arbitration. The District Court granted
Appellees’ motion to compel arbitration,
but dismissed the case with prejudice
rather than granting a stay. For the reasons
that follow, we will reverse the District
Court’s order and remand with instructions
to enter an order consistent with this
opinion.
I.
Lloyd worked for more than twelve
years as a boilermaker and pipefitter for
various contractors at the HOVENSA
refinery in St. Croix, Virgin Islands.
Although the contractors for maintenance
and repairs changed over these years,
Lloyd remain ed em ployed at the
HOVENSA refinery. In November 2001,
Lloyd was working for Jacobs/IMC, one of
the contractors at the refinery. At that
time, HOVENSA awarded a contract to
Wyatt, a newly created subsidiary of Wyatt
Field Services Company (“Wyatt Field
Services”), for services that Jacobs/IMC
had been performing. Lloyd was then
informed by Jacobs/IMC that he would be
laid-off when Jacobs/IMC’s contract
expired on December 31, 2001.1 After
Wyatt was awarded the new contract, it
filled positions in its upper management
with persons on the continental United
States who were already employed by its
parent corporation, Wyatt Field Services.
These persons, according to Lloyd, were
predominantly white.
In January 2002, Wyatt began to hire
between 300 and 400 people in the Virgin
Islands. Also in January 2002, Wyatt
began requiring all applicants to sign a
Dispute Resolution Agreement (“DRA”)
as a condition of having their applications
considered. App. at 196. The DRA states,
in relevant part:
I recognize that differences may
arise between W yatt and me in
relation to my application for
employment. Both Wyatt and I agree
to resolve any and all claims,
disputes or controversies arising out
of or relating to my application or
candidacy for employment, the terms
1According to Lloyd, it was the custom
at the HOVENSA refinery that the former
employees of the outgoing contractor
would be offered employment or
transferred to the incoming contractor, but
Wyatt did not adhere to that custom.

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3
and conditions of my employment,
and any claims arising from or
relating to the employment
relationship exclusively by final and
binding arbitration before a neutral
arbitrator pursuant to the American
Arbitration Association’s National
Rules for the Resolution of
Employment Disputes [(“AAA
Rules”)] . . . . This agreement
extends to disputes with or claims
a g a i n s t W y a t t V . I . , I n c . ,
HOVENSA, L.L.C., and any of their
related or affiliated companies,
entities, or individuals (as intended
third party beneficiaries).
App. at 37.
On January 9, 2002, Lloyd applied for
employment with Wyatt and signed the
DRA. He was not hired. Lloyd thereafter
filed this action against both Wyatt and
HOVENSA. The complaint alleged: (1)
violation of the Federal Civil Rights Act of
1967; (2) violation of Titles 10 and 24 of
the Virgin Islands Code; (3) wrongful
discharge by HOVENSA; (4) breach of an
implied contract of good faith and fair
dealing by HOVENSA; and (5) negligent
and/or intentional infliction of emotional
distress. Lloyd requested punitive as well
as compensatory damages.
On September 27, 2002, Wyatt filed a
motion to compel arbitration, pursuant to
the DRA, and to stay the proceedings
pending arbitration. Lloyd opposed this
motion, arguing that the agreement to
arbitrate was unenforceable because AAA
Rules 17, 18, and 34 with respect to
confidentiality, AAA Rule 7 with respect
to discovery procedure, and the DRA’s
fee-s plitti n g p r o v i s i o n w e r e a ll
unconscionable and against public policy.
Lloyd also requested that the District Court
allow him further discovery based on his
belief that Wyatt’s use of the DRA only in
the Virgin Islands was motivated by bad
faith or an otherwise improper motive. He
claimed that, if Wyatt had indeed
discriminated against Black or Hispanic
Virgin Islanders through the use of the
DRA, then the DRA would be violative of
federal and Virgin Islands law and
unenforceable as a matter of public policy.
On November 18, 2002, Wyatt filed a
reply to Lloyd’s memorandum opposing
arbitration and HOVENSA filed a notice
of joinder, thereby joining Wyatt’s motion
to compel arbitration. The District Court
held a hearing on the motion on January
14, 2003, at which the testimony of several
witnesses was taken.
After the evidentiary hearing, the
District Court granted Wyatt’s motion to
compel arbitration and dismissed the
complaint with prejudice. The District
Court held that AAA Rules 17, 18, and 34,
as incorporated into the DRA, were
unconscionable. In addition, the District
Court denied Lloyd’s request for discovery
on his theory that Wyatt used the DRA in
a racially discriminatory manner. The
District Court noted that Lloyd had never
filed a motion for an order to conduct
discovery, in accordance with Fed. R. Civ.
P. 7(b) or Local R. Civ. P. 7.1, during the

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4
nearly three months between his October
21, 2002 mem orandum opp osing
arbitration and the evidentiary hearing.
The District Court further held that the
most Lloyd had shown was that Wyatt
differentiated between applicants on the
basis of residency and nothing more.
Accordingly, the District Court found that
the DRA had not been used as a tool of
unlawful discrimination. Finally, the
District Court severed the confidentiality
provisions of AAA Rules 17, 18 and 34
from the DRA and granted Wyatt and
H O V EN SA ’s m o t i o n to c o m p e l
arbitration. Rather than stay the
proceedings pending arbitration, however,
the District Court dismissed the action
with prejudice because it found all of
Lloyd’s claims to be arbitrable and thus
left no claims for adjudication by the
District Court.2 Lloyd filed a timely notice
of appeal and Wyatt subsequently filed a
notice of cross-appeal.
II.
The District Court had jurisdiction over
this case under 28 U.S.C. §§ 1331 and 48
U.S.C. § 1612(a), because the case arose
under, inter alia, Title VII, 42 U.S.C. §§
2000e, et seq. The District Court
exercised supplemental jurisdiction over
Lloyd’s Virgin Islands claims pursuant to
28 U.S.C. § 1367 and 48 U.S.C. § 1612(a).
We have jurisdiction over this appeal
and cross-appeal pursuant to 9 U.S.C. §
16(a)(3) because the District Court’s order
constituted a final decision with respect to
an arbitration. See Green Tree Fin. Corp.-
Ala. v. Randolph, 531 U.S. 79, 88-89
(2000).3 We recognize that a district
court’s order compelling arbitration is
usually an interlocutory order that cannot
be appealed. See 9 U.S.C. § 16(b)(2).4 In
this case, however, the District Court both
compelled the parties to arbitrate their
dispute and also dismissed the matter with
prejudice. In Green Tree, the Supreme
Court also considered an order compelling
arbitration and dismissing the plaintiff’s
case with prejudice, and, applying the
well-established meaning of the term
“final decision,” ruled that such order
plainly dispose[s] of the entire case
2The District Court also held that (1)
the DRA’s fee-splitting provision, because
it provided that Lloyd would not have to
pay any fees upon demonstrating financial
hardship to the arbitrator, was not
unconscionable, (2) AAA Rule 7’s
d i s c o v e r y p r o c e d u r e s w e r e no t
unconscionable, and (3) that the DRA was
not unconscionable solely because of the
existence of unequal bargaining power.
These rulings are not at issue in this appeal
or cross-appeal.
39 U.S.C. § 16(a)(3) provides that “an
appeal may be taken from a final decision
with respect to an arbitration that is subject
to this title.”
49 U.S.C. § 16(b)(2) provides that
“[e]xcept as otherwise provided in section
1292(b) of title 28, an appeal may not be
taken from an interlocutory order . . .
directing arbitration to proceed under
section 4 of this title.”

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5
on the merits and le[aves] no part of
it pending before the court. The
FAA does permit parties to
arbitration agreements to bring a
separate proceeding in a district
court to enter judgment on an
arbitration award once it is made (or
to vacate or modify it), but the
existence of that remedy does not
vitiate the finality of the District
Court’s resolution of the claims in
the instant proceeding. 9 U.S.C. §§
9, 10, 11. The District Court’s order
was therefore “a final decision with
respect to an arbitration” within the
meaning of § 16(a)(3), and an
appeal may be taken.
531 U.S. at 86. Accordingly, we have
before us a final appealable order that we
may address on the merits.5
III.
We first address the issue of whether
the District Court erred in dismissing
Lloyd’s complaint with prejudice rather
than staying the proceedings pending
arbitration. On cross-appeal, Wyatt argues
that pursuant to § 3 of the FAA, 9 U.S.C.
§ 3, the District Court was required to
grant Appellees’ motion to stay the
litigation of Lloyd’s claims pending the
outcome of the arbitration and that the
dismissal of Lloyd’s case was therefore
improper.6
Courts of Appeals have reached
different resolutions of the issue of
whether a District Court has discretion to
deny a motion for a stay pending
arbitration and dismiss a complaint where
it finds all claims before it to be arbitrable.
Compare Choice Hotels Intern., Inc. v.
BSR Tropicana Resort, Inc., 252 F.3d 707,
709-10 (4th Cir. 2001) (“Notwithstanding
the terms of § 3, however, dismissal is a
proper remedy when all of the issues
presented in a lawsuit are arbitrable.”), and
Green v. Ameritech Corp., 200 F.3d 967,
973 (6th Cir. 2000) (“The weight of
authority clearly supports dismissal of the
case when all of the issues raised in the
5We note that although the District
Court’s order in this case granted the
dismissal with prejudice, the District
Court’s opinion stated that the matter
would be dismissed without prejudice. See
App. at 15, 16. This disparity, however,
does not affect our appellate jurisdiction.
See Blair v. Scott Specialty Gases, 283
F.3d 595, 602 (3d Cir. 2002) (holding that
the jurisdictional ruling in Green Tree,
where the action had been dismissed with
prejudice, applies equally to a case that
was dismissed without prejudice).
Moreover, we note that, while
Wyatt does not rely on it, appellate
jurisdiction over the cross-appeal may be
exercised pursuant to 9 U.S.C. §
16(a)(1)(A) (“An appeal may be taken
from an order refusing a stay of any action
under section 3 of this title.”).
6In construing the language of the FAA,
our review is plenary. See Shenango Inc.
v. Apfel, 307 F.3d 174, 192 n.19 (3d Cir.
2002) (“The standard of review in cases of
statutory construction is plenary.”).

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6
district court must be submitted to
arbitration.”), and Bercovitch v. Baldwin
School, Inc., 133 F.3d 141, 156 & n.21
(1st Cir. 1998) (remanding a case to the
District Court to decide whether to dismiss
or stay, depending upon whether all issues
before the court are arbitrable), and Alford
v. Dean Witter Reynolds, Inc., 975 F.2d
1161, 1164 (5th Cir. 1992), and Sparling
v. Hoffman Const. Co., Inc., 864 F.2d 635,
638 (9th Cir. 1988), with Adair Bus Sales,
Inc. v. Blue Bird Corp., 25 F.3d 953, 955
(10th Cir. 1994) (holding that where a
defendant moved for a stay pending
arbitration under 9 U.S.C. § 3, the District
court erred in instead entering a dismissal
and the proper course would have been to
enter the stay). We have not heretofore
had occasion to resolve the issue.7 Today,
we side with those courts that take the
Congressional text at face value.
Section 3 of the FAA provides:
If any suit or proceeding be
brought in any of the courts
of the United States upon
any issue referable to
a r b i t r a t i o n u n d e r a n
agreement in writing for
such arbitration, the court in
which such suit is pending,
upon being satisfied that the
issue involved in such suit
or proceeding is referable to
arbitration under such an
a g r e e m e n t , s h a l l o n
application of one of the
parties stay the trial of the
action until such arbitration
has been had in accordance
with the terms of the
agreement, providing the
applicant for the stay is not
in default in proceeding
with such arbitration.
9 U.S.C. § 3 (emphasis added).
In accordance with the Supreme Court’s
instruction in Green Tree, we apply the
“the plain language of the statutory text” in
interpreting the FAA. See 531 U.S. at 88
(holding that the plain meaning of the term
“final decision” in 9 U.S.C. § 16(a)(3)
must be applied). Here, the plain language
of § 3 affords a district court no discretion
to dismiss a case where one of the parties
applies for a stay pending arbitration. The
directive that the Court “shall” enter a stay
simply cannot be read to say that the Court
shall enter a stay in all cases except those
in which all claims are arbitrable and the
Court finds dismissal to be the preferable
approach. On the contrary, the statute
clearly states, without exception, that
whenever suit is brought on an arbitrable
7We have twice commented on the
issue in dicta, see Seus v. John Nuveen &
Co., 146 F.3d 175, 179 (3d Cir. 1998) and
Blair, 283 F.3d at 601. In neither of those
cases, however, did a party argue that a
stay rather than a dismissal should have
been entered and the Court accordingly
had no occasion to decide whether Section
3 is mandatory. Our comments with
respect to that issue are thus not
precedential. Marianna v. Fisher, 338
F.3d 189, 201 (3d Cir. 2003).

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claim, the Court “shall” upon application
stay the litigation until arbitration has been
concluded. In this case, Wyatt requested a
stay of the proceeding as part of his motion
to compel arbitration. Accordingly, we
hold that the District Court was obligated
under 9 U.S.C. § 3 to grant the stay once it
decided to order arbitration.
We are free to disregard an
unambiguous directive of Congress only in
the rare instances where failing to do so
produces a nonsensical result that could
not have been intended. Mitchell v. Horn,
318 F.3d 523, 535 (3d Cir. 2003) (“We do
not look past the plain meaning [of
statutory language] unless it produces a
result ‘demonstrably at odds with the
intentions of its drafters’ . . . or an
outcome ‘so bizarre that Congress could
not have intended it.’”). This is not one of
those rare exceptions. Congress adopted
the FAA to establish, promote and
facilitate a national policy strongly
favoring arbitration as a process for
resolving disputes. Alexander v. Anthony
Int’l, L.P., 341 F.3d 256, 263 (3d Cir.
2003). Holding that Congress intended to
deprive the District Court of discretion to
deny a stay produces results that
effectively prom ote an d fac ilitate
arbitration.
Contrary to Lloyd’s suggestion, the
District Court has a significant role to play
under the FAA even in those instances in
which the District Court orders the
arbitration of all claims. Even in those
instances, the parties are entitled to seek
the Court’s assistance during the course of
arbitration. For example, the FAA allows
arbitrating parties to return to court for
resolution of disputes regarding the
appointment of an arbitrator or the filling
of an arbitrator vacancy, 9 U.S.C. § 5.
Similarly, parties may ask the court to
compel the attendance of witnesses, or to
punish the witnesses for contempt, 9
U.S.C. § 7. Then, after an arbitration
award is rendered, a party is entitled to
seek relief in the District Court in the form
of a judgment on the award or an order
vacating or modifying the award. See 9
U.S.C. §§ 9, 10, 11. If the plaintiff’s case
has been dismissed rather than stayed, the
parties will have to file a new action each
time the Court’s assistance is required,
with the attendant risk of having their case
assigned to a new judge. On the other
hand, if the court enters a stay of the action
and retains jurisdiction, then proceedings
under §§ 5, 7, 9, 10, or 11 may be
expedited, as the parties may simply return
the to the same district judge presiding
over the plaintiff’s case.
There is an even more important reason,
however, to hold that Congress meant
exactly what it said. Whenever a party is
subjected to litigation on any issue and is
found to be entitled to arbitrate that issue,
§ 3 of the FAA, as we have noted,
mandates that a stay be entered by the
District Court. The effect of that stay is
twofold: it relieves the party entitled to
arbitrate of the burden of continuing to
litigate the issue while the arbitration
process is on-going, and it entitles that
party to proceed immediately to arbitration
without the delay that would be occasioned

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8
by an appeal of the District Court’s order
to arbitrate. Under § 16 of the FAA, 9
U.S.C. § 16, whenever a stay is entered
under § 3, the party resisting arbitration is
expressly denied the right to an immediate
appeal.8 The legislative scheme of the
FAA thus reflects a policy decision that, if
a district court determines that arbitration
of a claim is called for, the judicial
system’s interference with the arbitral
process should end unless and until there is
a final award.
If an exception to the mandate of § 3
were to be fashioned, thus giving the
District Court discretion to dismiss the
action rather than enter a stay, a party who
has been held entitled to arbitration would
be deprived of an important benefit which
the FAA intended him to have – the right
to proceed with arbitration without the
substantial delay arising from an appeal.
Stated conversely, the effe ct of
recognizing an exception to the mandatory
directive of § 3 is to give the District Court
the power to confer a right to an
immediate appeal that would not otherwise
exist.
While it is true that the suggested
exception would extend only to cases
where the claim subject to arbitration is
not asserted along with other non-
arbitrable claims – that is, where all
asserted claims are arbitrable – none of the
courts that have been willing to endorse it
has suggested a reason why Congress
might have wanted a party entitled to
arbitration to be subjected to an immediate
appeal or not depending on how his
adversary has chosen to draft his
complaint.
In short, a literal reading of § 3 of the
FAA not only leads to sensible results, it
also is the only reading consistent with the
statutory scheme and the strong national
policy favoring arbitration. Accordingly,
the District Court erred in refusing to enter
a stay order.
Although we agree with Wyatt that the
District Court’s order dismissing Lloyd’s
case must be reversed, we reject the
argument that reversal would, in turn,
deprive us of jurisdiction to hear the merits
of Lloyd’s appeal. Relying in part on
Green Tree, 531 U.S. at 87 n.2, Wyatt
suggests that if we vacate the District
Court’s dismissal, we would be left with
an unappealable interlocutory order. This
argument misconstrues Green Tree. In
that case, the Supreme Court noted that
“[h]ad the District Court entered a stay
instead of a dismissal . . . , that order
would not be appealable.” Id. (emphasis
added). In this case, however, the District
Court did not enter a stay. Wyatt’s
argument assumes that a conclusion that
8Under 9 U.S.C. § 16(a)(1)(A) & (B), a
party may seek immediate appeal of an
order refusing a to grant a stay under § 3
of the FAA or an order denying a petition
to compel arbitration under § 4. Under 9
U.S.C. § 16(b)(1) & (2), however, an
appeal may not be taken (except as
provided by 28 U.S.C. § 1292(b)) from an
interlocutory order granting a stay under §
3 or compelling arbitration under § 4.

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9
the District Court should have entered a
stay is tantamount to the conclusion that
the District Court did enter a stay. This is
simply not the case. As we have noted
supra, the order before us is a final
decision that is appealable under 9 U.S.C.
§ 16(a)(3).
While it is clear that a court in this
procedural context has jurisdiction to
address the merits of the appeal, it may
choose to defer to the FAA’s policy
f a v o r i n g e x p e d i t i o u s ar b i t r a t i o n
proceedings and decline to do so when it
believes addressing the merits will prolong
the ultimate resolution of the dispute. See,
e.g., Adair Bus Sales, 25 F.3d at 955.
Here, however, we are called upon to
exercise our discretion after this appeal has
been fully briefed and argued, and in a
context where resolution of the merits is
likely to advance, rather than prolong, the
ultimate resolution of the dispute by
arbitration. We will therefore proceed to
consider the merits of Lloyd’s appeal.
IV.
Lloyd argues before us for the first
time that HOVENSA failed to demonstrate
that it was an intended third party
beneficiary of the DRA. It follows,
according to Lloyd, that HOVENSA failed
to affirmatively show that it had
“standing” to compel arbitration. In his
reply brief, Lloyd adds that HOVENSA
clearly lacks standing to compel arbitration
of certain of his claims against it because
those claims predate the DRA and,
accordingly, fall outside the scope of that
agreement. Failure to raise these matters
in the District Court should be excused,
Lloyd insists, because “standing” to
arbitrate is a jurisdictional matter that can
be raised at any stage of the proceedings
and because, in any event, finding a waiver
would result in manifest injustice.9 We are
unpersuaded.
It is true that our case law, as well as the
decisions of other courts, has often
referred to a party’s “standing” to compel
arbitration. See, e.g., In re Prudential Ins.
Co. of Am. Sales Practice Litig. All Agent
Actions, 133 F.3d 225, 229 (3d Cir. 1998);
Britton v. Co-op Banking Group, 916 F.2d
1405, 1413 (9th Cir. 1990). Lloyd is
mistaken, however, in equating the
doctrine of Article III constitutional
standing with the “standing” required to
compel arbitration in this case. In order
for there to be Article III standing, there
must be a “case or controversy.” That is,
the following three elements must be
present:
9Lloyd also contends that he had no
opportunity to raise these matters in the
District Court, pointing to the fact that
HOVENSA did not join in Wyatt’s motion
to compel arbitration until after Lloyd had
filed his memorandum in opposition
thereto. Nearly two months elapsed,
however, between HOVENSA’s initial
reliance on the DRA and the oral argument
on the motion to arbitrate. Lloyd,
accordingly, had ample opportunity to
dispute HOVENSA’s status as an intended
beneficiary of the DRA and to challenge
the arbitrability of his claims against it.

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First, the plaintiff must have
suffered an injury in fact – an
invasion of a legally protected
interest which is (a) concrete and
particularized, and (b) actual or
imminent, not conjectural or
hypothetical. Second, there must
be a causal connection between the
injury and the conduct complained
of – the injury has to be fairly . . .
trace[able] to the challenged action
of the defendant, and not . . . th[e]
result [of] the independent action of
some third party not before the
court. Third, it must be likely, as
opposed to merely speculative, that
the injury will be redressed by a
favorable decision.
Lujan v. Defenders of Wildlife, 504 U.S.
555, 560-61 (1992) (citations and internal
quotations and footnote omitted). Here,
the party invoking federal jurisdiction was
Lloyd, and his complaint presented the
District Court with a “case or controversy”
that has not yet been resolved. Thus, the
District Court properly exercised its
jurisdiction. The issues that Lloyd seeks to
raise before us relate only to whether
HOVENSA has or does not have a
c o n t r a c t- b a s e d d e f e n s e r e q u i r i n g
arbitration rather than litigation of those
claims. That issue is not a jurisdictional
one. See Prudential Ins. Co. of Am., 133
F.3d at 229 (referring to the contractual
standing of a party to arbitrate its claims);
Paul Revere Variable Annuity Ins. Co. v.
Zang, 248 F.3d 1, 5 n.2 (1st Cir. 2001).
Nor are we impressed with Lloyd’s
manifest injustice argument. It well may
be that some of his claims against
HOVENSA are not within the scope of the
arbitration clause, but the FAA’s scheme
for the ex peditious and efficient
disposition of disputes by arbitration
would be frustrated if parties were not
required to put their arbitrability claims on
the table when the District Court is called
upon to address such issues. We believe it
is not manifestly unjust to require parties
to do so when the only consequence of a
waiver is an alternative form of dispute
resolution and no loss of substantive
rights. See Mitsubishi Motors Corp. v.
Soler Chrysler-Plymouth, Inc., 473 U.S.
614, 628 (1985) (“By agreeing to arbitrate
a statutory claim, a party does not forgo
the substantive rights afforded by the
statute; it only submits to their resolution
in an arbitral, rather than a judicial, forum.
It trades the procedures and opportunity
for review of the courtroom for the
simplicity, informality, and expedition of
arbitration.”).
Our Circuit adheres to a “well
established principle that it is inappropriate
for an appellate court to consider a
contention raised on appeal that was not
initially presented to the district court.” In
re City of Phila. Litig., 158 F.3d 723, 727
(3d Cir. 1998) (citing Armbruster v.
Unisys Corp., 32 F.3d 768, 772 n.4 (3d
Cir. 1994); Frank v. Colt Indus., Inc., 910
F.2d 90, 99-100 (3d Cir. 1990)).
Accordingly, we decline to sustain Lloyd’s

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“standing to arbitrate” arguments.10
V.
Finally, we address two arguments
relating to the enforceability of the DRA.
First, Lloyd challenges the District Court’s
holding that the DRA was not used in a
discriminatory manner against public
policy.11 Second, Wyatt’s cross-appeal
challenges the District Court’s holding that
AAA Rules 17, 18, and 34, which govern
the confidentiality of certain aspects of the
arbitration, are unconscionable and
unenforceable. We exercise plenary
review over questions regarding the
validity and enforceability of an agreement
to arbitrate. Alexander, 341 F.3d at 263.
However, “to the extent that the district
court predicated its decision on findings of
fact, our standard of review is whether
those findings were clearly erroneous.”
Medtronic AVE, Inc. v. Advanced
Cardiovascular Sys., Inc., 247 F.3d 44, 53-
54 (3d Cir. 2001) (citing Kaplan v. First
Options of Chicago, Inc., 19 F.3d 1503,
1509 (3d Cir. 1994)).
A.
Lloyd’s primary argument on appeal is
that Wyatt used the DRA in a
discriminatory manner as part of a
“purposeful scheme to contravene
unambiguous Virgin Islands public policy,
as reflected by the V.I. Civil Rights Act,
10 V.I.C. § 3.” Appellant’s Br. at 12.
Lloyd bases this claim on his assertion that
Wyatt, by requiring Virgin Islands workers
to sign the DRA as a condition of
employment, uses “place of residence” as
a “proxy” for race, color and national
10As we have noted, the DRA allows
HOVENSA, as an intended beneficiary, to
compel arbitration of claims arising out of
Lloyd’s employment and employment
application. While Lloyd urges that we
should remand for fact finding on whether
the parties intended HOVENSA to be a
third party beneficiary, he has not made a
proffer of evidence which would tend to
show an intent contrary to that reflected on
the face of the DRA.
11Lloyd also argues that, even if
HOVENSA were an intended third-party
beneficiary of the DRA, the provision
granting it such status is unconscionable.
He contends that the provision is
unreasonably one-sided because while he
is bound to arbitrate claims against
HOVENSA, the provision does not require
Wyatt to arbitrate claims against
HOVENSA; nor does the DRA allow
Lloyd to compel arbitration of any claims
that HOVENSA may have against him.
As an initial matter, we note that this
argument appears to be a challenge to the
fundamental principle of contract law that
an intended beneficiary to a contract may
enforce a promise made by the promisor,
but not vice versa. See Restatement
(Second) of Contracts § 304 (1981). We
need not address the issue, however,
because it was never presented to the
District Court and was therefore waived.
See In re City of Phila. Litig., 158 F.3d at
727.

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origin. Alternatively, Lloyd alleges that
the DRA has a disparate impact upon
Blacks and Hispanics who predominate in
the Virgin Islands workforce. As a result,
he urges, the DRA is unenforceable under
the generally applicable contract defense
that use of the agreement contravenes
public policy. Lloyd also claims that the
District Court erred in not allowing him an
opportunity to conduct discovery into this
issue.
Lloyd’s generally applicable contract
defense relies on § 178(1) of the
Restatement (Second) of Contracts, which
provides:
A promise or other term of an
agreement is unenforceable on
grounds of public policy if
legislation provides that it is
unenforceable or the interest in its
enforcement is clearly outweighed
in the circumstances by a public
policy against the enforcement of
such terms.12
Lloyd also cites Title VII and the Virgin
Islands Civil Rights Act, 10 V.I. Code
Ann. § 1 et seq., as illustrative of a strong
federal and local public policy against
employment discrimination.13
Significantly, Lloyd does not allege that
any particular promise or term in the DRA
was discriminatory. Rather, he claims that
Wyatt used the DRA in a discriminatory
manner. Even assuming, however, that §
178 of the Restatement may be applied to
a facially neutral contract, Lloyd’s
argument must still fail as he has proffered
no evidence that Wyatt’s use of the DRA
was in any way discriminatory.
Lloyd’s argument is based solely on two
facts: (1) that Wyatt began using the DRA
after its upper management was hired; and
(2) that Wyatt’s parent company, Wyatt
Field Services, does not use the DRA.
Wyatt does not contest these facts.
Instead, it admits that it began using the
DRA in the Virgin Islands in January
2002. Wyatt responds, however, that this
12Wyatt argues on appeal that Lloyd
waived his public policy argument by not
relying on § 178 of the Restatement
(Second) of Contracts in the District Court.
While it is true that Lloyd never
specifically relied upon the Restatement,
he nonetheless expressly argued that the
DRA was applied in a discriminatory
manner and unenforceable as a matter of
public policy. He therefore preserved the
argument for appeal and we will address it
on the merits.
13Lloyd further cites, for the first time
on appeal, 24 V.I. Code Ann. § 74a(b),
which provides that “[a]n employer subject
to this chapter may not require an
employee to arbitrate a dispute as a
condition of employment.” Section 74a
was enacted on September 18, 2002, one
month before Lloyd filed his memorandum
in opposition to Wyatt’s motion to compel
arbitration. Lloyd did not, however, bring
this statute to the attention of the District
Court as a source of public policy and we
therefore need not address it.

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timing explains why its upper management
employees, who were hired before January
2002, were not required to sign the DRA.
The record indicates that all persons who
applied for employment at Wyatt after
January 2002 were obligated to sign the
DRA. Wyatt proffered that the reason it
began using the DRA was concern for the
high cost of employee litigation claims in
the Virgin Islands. It adds that its parent
does not, and has not, engaged in any
business in the Virgin Islands. Lloyd has
not addressed Wyatt’s explanations or
claimed that they are pretextual.
The burden of proving a generally
applicable contract defense lies with the
party challenging the contract provision.
Cf. Harris v. Green Tree Fin. Corp., 183
F.3d 173, 181 (3d Cir. 1999) (“The party
challenging a contract provision as
unconscionable generally bears the burden
of proving unconscionability.”); E. Allen
Farnworth, Farnsworth on Contracts §
4.28 & n.14 (3d ed. 1999) (“The party
asserting the defense of unconscionability
must prove it.”). Here, Lloyd has failed to
present any evidence in attempting to meet
this burden. We will therefore affirm the
District Court’s holding that the DRA was
not unenforceable as violative of public
policy.
With respect to Lloyd’s assignment of
error regarding his request for discovery,
we review a district court’s denial of a
discovery motion for an abuse of
discretion. See Seus, 146 F.3d at 178
(citing Marroquin-Manriquez v. I.N.S.,
699 F.2d 129, 134 (3d Cir. 1983) (“It is
well established that the scope and conduct
of discovery are within the sound
discretion of the trial court and that after
final judgment of the district court or final
agency order, our review is confined to
determining if that discretion has been
abused.” (citations omitted))). Lloyd
argues that the District Court erred in not
considering his request to conduct
discovery, but he does not cite any motion
that the court denied or allege that he was
deprived of the opportunity to conduct
discovery on his own. The Federal Rules
of Civil Procedure allow for numerous
discovery mechanisms that do not require
leave of the court. See Fed. R. Civ. P.
30(a)(1) (oral depositions), 31(a)(1)
( w r i t t e n d e p o s i t i o n s ) , 3 3 ( a )
(interrogatories), 34(b) (production of
documents). Lloyd does not state whether
he ever attempted to use any of these
avenues of discovery to support his claim.
We therefore reject his assignment of
error.
B.
On cross-appeal, Wyatt argues that the
District Court erred in holding that the
confidentiality provisions of AAA Rules
17, 18, and 34, as incorporated in the
DRA, were unconscionable and severable
from the remainder of the DRA. We
recently addressed an identical issue in
Parilla v. IAP Worldwide Services VI, Inc.,
___ F.3d ___ (3d Cir. 2004) and concluded
that the district court in that case had erred
i n h o l d i n g t h e s e A A A R u l e s
u n c o n s c i o n a b l e . T h e f a c t u a l
circumstances in this case are substantially

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the same as those in Parilla and the parties
have also presented substantially the same
arguments that were presented in that case.
For the reasons given in Parilla, we hold
that the District Court’s ruling on this issue
was in error. Accordingly, AAA Rules 17,
18, and 34 should not have been held
unconscionable or severed from the DRA.
VI.
For the reasons set forth above, we will
reverse the District Court’s order and will
remand with instructions to enter an order
compelling arbitration pursuant to the
Dispute Resolution Agreement, as written,
and staying the proceedings in this case
pending arbitration.
LLOYD v. HOVENSA – NOS. 03-1502
AND 03-1592
BECKER, Circuit Judge, concurring:
I join Parts I, II, and III of the
majority’s opinion in full. I concur in
Parts IV and V with the understanding that
this case, because it raises substantial and
unresolved questions of considerable
importance to those involved in
employment litigation in the Virgin
Islands, is the rare one in which we will
exercise our discretion to address the
merits of a decision that should have
resulted in a stay pending arbitration,
rather than dismissal.

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