In a sex discrimination case we have been following for almost six years, the Second Circuit has added a measure of rationality by vacating a lower court opinion that would have permitted an arbitrator’s certification of a class that included approximately 44,000 absent class members who had not consented to join.

The three-judge panel in Jock v. Sterling Jewelers, Inc., No. 15-3947 (2d Cir., July 24, 2017), vacated District Judge Jed Rakoff’s November 15, 2015 opinion which upheld that portion of a Class Determination Award that would bind absent class members who did not consent to be bound. See District Court Opinion and Order at 3-4. Judge Rakoff had found:

“. . . defendant’s argument on this point is foreclosed by earlier rulings in the case. The Second Circuit in [a 2011 Opinion, (“Jock I”)] stated that ‘there is no question that the issue of whether the agreement permitted class arbitration was squarely presented to the arbitrator’. All members of the class certified by the Arbitrator signed the . . . agreements; the arbitrator interpreted these agreements to permit class arbitration; and the Second Circuit upheld the Arbitrator’s authority to do so.” Id. at 4.

The Second Circuit, in a summary order, thought otherwise. The panel cast the issue as “whether the arbitrator had the authority to certify a class that included absent class members, i.e., employees other than the named plaintiffs and those who have opted into the class.” It then examined and rejected the bases for the district court opinion. First, the Second Circuit found its earlier decision, Jock I, “did not squarely address whether the arbitrator had the power to bind absent class members given that they, unlike the parties here, never consented to the arbitrator determining whether class arbitration was permissible under the agreement in the first place.”

Second, the court found that Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064 (2013), “does not suggest otherwise.” There the Supreme Court examined only the issue of whether an arbitrator to whom the parties submitted the question acted appropriately in determining that an agreement provided for class arbitration. In the panel’s view this was similar to the issue addressed by the appellate court in Jock I. Yet, Oxford Health Plans did not address whether the arbitrator “also has the authority to certify a class containing absent class members.”

The Second Circuit also rejected Judge Rakoff’s contention that Justice Alito’s concurrence in Oxford Health Plans provided support for its position. While Justice Alito did join the majority opinion as to whether “the availability of class arbitration [was] a question the arbitrator should decide. He expressed skepticism, however, on “how an arbitrator’s decision to conduct class proceedings could bind absent class members who have not authorized the arbitrator to decide on a classwide basis which arbitration procedures are to be used.” 133 S. Ct at 2072. So, Justice Alito did not address the issue before the Second Circuit in Jock II.

Accordingly, the Second Circuit vacated and remanded the district court’s opinion to determine whether the arbitrator exceeded her powers “in certifying a class that contained class members who have not opted in.”

One can only wish that the Second Circuit included greater analysis in its opinion, particularly involving some of the more potentially troublesome class arbitration procedural issues. For example, could absent class members claim the benefit of a final award against Sterling but “. . . disavow any final award in Sterling’s favor claiming they were never parties to the arbitration, never consented to the Arbitrator’s authority, and therefore [were] not bound.” (Brief of Appellant at 26). And, why was this a “summary order” and not a published opinion? As detailed by the 2015 district court opinion, this action was initially filed in March, 2008 and the motion to refer the matter to arbitration was granted in June, 2008. But, despite proceedings before the Arbitrator as well as the district and appellate courts, it is still unresolved. Clearly, the presence of class-related arbitration issues, has consumed much of the courts’ and litigants’ time.

Bottom Line: The Second Circuit has again returned this case to the district court. This time Judge Rakoff must decide if the arbitrator exceeded her authority when certifying a class with absent members who did not consent to the procedure.