Supreme Court Denies Certiorari Of Second Circuit Opinion Requiring Class-Based Arbitration
"Stolt Who . . . .?"
If you've heard a rushing sound in your ears the last few months, it may be the rug being pulled out from under employers who thought they finally had clarity on the legal status of class arbitration. (Or, it may be a serious medical condition, so you should probably get it checked.) On the heels of the National Labor Relations Board's decision to dip its toe—or, more aptly, to do a giant-sized cannon ball—into the class arbitration waters (which we wrote about here), the Supreme Court's denial of certiorari in Jock v. Sterling Jewelers, Inc.pdf. has introduced further uncertainty regarding the import of recent Supreme Court authority.
The Jock case’s procedural history reads like it was dreamt up for a law school exam by the oddball Civil Procedure professor that everyone tries to avoid. The case had its genesis in the dark days before the Supreme Court decided Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 130 S. Ct. 1758 (2010). The plaintiffs in Jock (see our post on the decision here) were a group of female sales employees who sought to bring a class arbitration against Sterling Jewelers on claims of gender discrimination. The arbitrator determined that the arbitration agreement between the defendant and its employees permitted class arbitration because there was no express prohibition on class-based relief. The arbitrator therefore permitted the arbitration to proceed on a class basis at least to the class certification phase.
The employer filed in federal court to vacate the arbitrator’s decision. At the time (June 2009), the Second Circuit’s opinion in Stolt-Nielsen had not yet been cleansed from the annals of good law by the Supreme Court’s subsequent wisdom. Thus, because the arbitrator’s analysis largely comported with the Second Circuit’s Stolt-Nielsen opinion, the district court denied the employer’s motion to vacate, and the employer appealed to the Second Circuit. One would expect, however, that this appeal felt much like going to tattle on a bully and finding his father on the front porch in boxers and a dirty sleeveless t-shirt opening his fourth beer at 10:00 am.
And then, the Supreme Court sprinkled its magic pixie dust on the storyline. It reversed the Second Circuit in Stolt-Nielsen and found that the availability of class relief in arbitration cannot be inferred from the fact that the arbitration agreement is silent on this issue. The employer’s spirits must have been further buoyed when it was able to stay its appeal and get a decision from the district court finding that the arbitrator’s decision on class relief could not survive the Supreme Court’s reasoning in Stolt-Nielsen. Indeed, the employer likely felt as though it had stood up to the bully and won.
But, that’s when the bully’s dad decided to put down his beer, come off the front porch, and take matters into his own hands.
The Second Circuit found that Stolt-Nielsenshould be read only as reaffirming the principle that "arbitration is a matter of consent, not coercion." The Second Circuit then noted that Sterling Jewelers had executed the same arbitration agreement with all putative class members, and therefore was obligated to arbitrate all of their claims. From there, the court made the inferential leap that class arbitration must be proper because all of the claims were arbitrable. (Hey, we just report the cases, we don’t decide ‘em.) While it has now become too difficult for the author to continue the metaphor of the bully and his beer-drinking father, suffice it to say that the employer filed for certiorari with the Supreme Court and must have at least felt cautiously optimistic regarding its chances.
But, no! The Supreme Court denied certiorari, so Jock remains the law at least in the Second Circuit. Taken in conjunction with the NLRB’s D.R. Horton decision, this is troubling to say the least. Under Jock, an employer risks class arbitration if it does not expressly disclaim the availability of class-based relief. But, under D.R. Horton, the employer may commit an unfair labor practice if its arbitration agreement contains an express class waiver.
Ladies and gentlemen, if you’ll look out the window to your left, you’ll see a rock. And, over there on your right, you’ll see a hard place.
The Bottom Line: Though the law on class arbitration appeared for a moment to be moving toward clarity, it may be too soon to get our hopes up.