Tag Archives: FAA

NLRB: Class Action Bans Unlawfully Restrict NLRA Protected Rights to Engage in Concerted Activity

D.R. Horton Inc. and Michael Cuda.  Case 12-CA-25764

This case was before the NLRB on Michael Cuda’s challenge to D.R. Horton’s class/collective action waiver, which Cuda was required to sign as a condition of his employment.  Specifically the certified question was “whether an employer violates Section 8(a)(1) of the National Labor Relations Act when it requires employees covered by the Act, as a condition of their employment, to sign an agreement that precludes them from filing joint, class, or collective claims addressing their wages, hours or other working conditions against the employer in any forum, arbitral or judicial.”  The NLRB held that such an agreement unlawfully restricts employees’ Section 7 right to engage in concerted action for mutual aid or protection, notwithstanding the Federal Arbitration Act (FAA), which generally makes employment-related arbitration agreements judicially enforceable.”

The NLRB stressed that arbitration agreements are not per se unenforeceable.  However, whether the class/collective action mechanism is used in arbitration or in a court of law, the NLRB held that it must be available to employees.

Rejecting D.R. Horton’s contention that the NLRB’s holding was inconsistent with prior U.S. Supreme Court jurisprudence, the NLRB explained:

“The Respondent and some amici further argue that holding that the MAA violates the NLRA would be inconsistent with two recent Supreme Court decisions stat-ing that a party cannot be required, without his consent, to submit to arbitration on a classwide basis. See Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 130 S.Ct. 1758, 1775–1776 (2010) (arbitration panel exceeded its authority by permitting class antitrust claim when commercial shipping charter agreement’s arbitration clause was silent on class arbitration); AT&T Mobility v. Concepcion, 131 S.Ct. 1740, 1751–1753 (2011) (claim that class-action waiver in consumer arbitration agreement was unconscionable under state law was preempted by FAA). Neither case is controlling here. Neither involved the waiver of rights protected by the NLRA or even employment agreements. Furthermore, AT&T Mobility involved a conflict between the FAA and state law, which is governed by the Supremacy Clause, whereas the present case involves the argument that two federal statutes conflict.  Finally, nothing in our holding here requires the Respondent or any other employer to permit, participate in, or be bound by a class-wide or collective arbitration proceeding.  We need not and do not mandate class arbitration in order to protect employees’ rights under the NLRA.  Rather, we hold only that employers may not compel employees to waive their NLRA right to collectively pursue litigation of employment claims in all forums, arbitral and judicial. So long as the employer leaves open a judicial forum for class and collective claims, employees’ NLRA rights are preserved without requiring the availability of classwide arbitration. Employers remain free to insist that arbitral proceedings be conducted on an individual basis.”

Click D.R. Horton Inc. and Michael Cuda. Case 12-CA-25764 to read the entire Decision and Order.

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S.D.N.Y.: Because FLSA Collective Action Is Not A Class Action, FLSA Collective Action Subject To Arbitration Despite FINRA Rule Prohibiting Class Actions

Velez v. Perrin Holden & Davenport Capital Corp.

Plaintiff brought this action alleging violations of the Fair Labor Standards Act (“FLSA”) and the New York Labor Law (“NYLL”) on behalf of himself and other similarly situated stock brokers employed or formerly employed by defendant Perrin Holden & Davenport Capital Corp. (“PHD Capital”) and its officers and owners. Plaintiff sought designation of the case as as a collective action pursuant to FLSA section 216 for his FLSA claims and as a class action pursuant to Fed.R.Civ.P. 23 for his state law claims.

Defendants moved to dismiss the complaint pursuant to Fed.R.Civ.P. 12(b)(6) or, in the alternative, to compel arbitration pursuant to the Federal Arbitration Act (“FAA”), 9 U.S .C. §§ 3, 4, on the ground that Plaintiff had agreed to arbitrate his FLSA claims at the time he was hired.   In line with other courts that have decided the issue, the court held that a “collective action” is not encompassed within the term “class action” as that term is used in FINRA’s rules, and thus compelled arbitration of Velez’s FLSA claims, allowing for a collective action in FINRA arbitration.

After finding  that the Plaintiff’s claims were subject to arbitration, the court then discussed whether, under FINRA rules banning class actions, Plaintiff could proceed with an FLSA collective action.  Reasoning he could the court explained:

“FINRA Rule 13200 mandates arbitration of disputes between the parties “except as otherwise provided.” (FINRA Rule 13200, Ex. B to Declaration of Matthew D. Kadushin dated Aug. 27, 2010 (“Kadushin Decl.”).) Notably, FINRA Rule 13204 prohibits arbitration of “class action claims.” (FINRA Rule 13204, Ex. A to Kadushin Decl.) It is thus uncontested that Velez’s state law claims-which plaintiff has asserted as a class action pursuant to Fed.R.Civ.P. 23-are ineligible for arbitration. The parties dispute, however, whether that exemption of class action claims from arbitration also applies to plaintiff’s FLSA collective action claims. While defendants contend that collective actions are distinct from class actions and therefore subject to FINRA arbitration, Velez argues that the phrase “class action” in FINRA Rule 13204 encompasses a collective action and therefore collective action claims are not arbitrable. Velez looks to the interpretation by FINRA staff members of FINRA’s rules to support his position.

Every court to address whether an FLSA collective action is arbitrable pursuant to FINRA’s rules has found in favor of arbitrability.  See Gomez v. Brill Securities, Inc., No. 10 Civ. 3503, 2010 WL 4455827 (S.D.N.Y. Nov. 2, 2010); Suschil v. Ameriprise Financial Servs., Inc., No. 07 Civ. 2655, 2008 WL 974045, at *5 (N.D.Ohio Apr. 7, 2008); Chapman v. Lehman Bros., Inc., 279 F.Supp.2d 1286, 1290 (S.D.Fla.2003). This Court agrees with its sister district courts.

FINRA Rule 13204 clearly states that “[c]lass action claims may not be arbitrated” under FINRA’s Code of Arbitration Procedure. However, that rule says nothing about collective action claims. Although collective and class actions have much in common, there is a critically important difference: collective actions are opt-in actions, i.e., each member of the class must take steps to opt in to the action in order to participate in it, whereas class actions are opt-out actions, i.e., class members automatically participate in a class action unless they take affirmative steps to opt out of the class action. Collective actions bind only similarly situated plaintiffs who have affirmatively consented to join the action.

Velez urges the Court to defer to the opinions of FINRA staff who have issued letters construing collective actions to come within the ambit of class actions for the purposes of FINRA arbitration. (See, e.g., Letter from Jean I. Feeney, NASD Assistant General Counsel, dated Sept. 21, 1999, Ex. C. to Kadushin Decl.; Letter from George H. Friedman, NASD Executive Vice President, Dispute Resolution, Director of Arbitration, dated Oct. 10, 2003, Ex. D to Kadushin Decl.) However, those letters do not contain any substantial analysis, and the Feeney letter itself includes the disclaimer that “the opinions expressed herein are staff opinions only and have not been reviewed or endorsed by the Board of Directors of [the] NASD.” Moreover, FINRA’s website specifically states that “[s]taff-issued interpretive letters express staff views and opinions only and are not binding on FINRA and its Board.” (FINRA-Interpretive Letters, Ex. 1 to Affirmation of Emily A. Hayes dated Sept. 9, 2010). Such “staff opinion letters are not the sort of agency interpretation that is entitled to deference by this Court.” Gomez, 2010 WL 4455827 at *1; see also Auer v. Robbins, 519 U.S. 452, 461 (1997); Skidmore v. Swift & Co., 323 U.S. 134 (1944). If FINRA wanted to prohibit arbitration of collective action claims, FINRA is certainly able to amend its rules to do so. See FINRA Rulemaking Process, available at http://www.finra.org/In dustry/Regulation/FINRARules/RulemakingProcess (Feb. 2, 2010); see also Gomez, 2010 WL 4455827 at *2.

As noted above, the parties here have agreed in writing to arbitrate certain disputes as required by FINRA. In light of other district court opinions, this Court’s own interpretation of FINRA rules, and the federal policy favoring arbitration as an alternative forum in which to resolve disputes, this Court finds that FLSA collective actions are within the scope of the parties’ agreement to arbitrate. In addition, no congressional intent precludes arbitration of the federal FLSA claims. See, e.g., Gomez, 2010 WL 4455827 at *2; Coheleach v. Bear, Stearns & Co., 440 F.Supp.2d 338, 240 (S.D.N.Y.2006).”

Accordingly, defendants’ motion was granted to the extent that the court compelled arbitration of Plaintiff’s FLSA claims.

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D.Mass.: Skycaps’ State Law Claims Preempted By Airline Deregulation Act Of 1978 (ADA)

Travers v. JetBlue Airways Corp.

Skycaps, who assist airline passengers with the curbside check-in of their luggage, receive most of their compensation in the form of tips paid by the passengers. The plaintiffs, past and present skycaps for JetBlue Airways Corporation (“JetBlue”), accuse the airline of diverting tip revenue to itself by its imposition of a $2 fee assessed for each bag checked at the curbside (the “curbside check-in fee”). According to the plaintiffs, passengers erroneously believe the $2 fee goes directly to the skycaps because it is cash only, physically collected by the skycaps, and in an amount typically (that is, historically) given as a tip. The plaintiffs allege that the curbside check-in fee has caused their compensation to decrease dramatically because few passengers give a tip in addition to the $2 fee.

The amended complaint asserted claims under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201, the Massachusetts Minimum Wage Law, Mass. Gen. Laws ch. 151, §§ 1, 7, the Massachusetts Tips Law, Mass. Gen. Laws ch. 149, § 152A, and state common law claims for tortious interference with contractual and/or advantageous relations and unjust enrichment/quantum meruit. JetBlue has moved to dismiss all state law claims as expressly preempted by the Airline Deregulation Act of 1978 (“ADA”), 49 U.S.C. § 41713(b) (1), or impliedly preempted by the Federal Aviation Act (“FAA”), 49 U.S.C. § 49191 et seq. Alternatively, JetBlue moves to dismiss the tortious interference and unjust enrichment claims for failure to state a claim.

The Court discussed preemption under the ADA in general stating, “All preemption challenges “ultimately turn[ ] on congressional intent,” Good v. Altria Group, Inc., 501 F.3d 29, 33 (1st Cir.2007), and the “primary indicator of intent is the text of the congressional act claimed to have the preemptive effect,” id. at 34.

The ADA’s preemption provision states: “[A] State … may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of an air carrier….” 49 U.S.C. § 41713(b)(1) (emphasis added). Relying on the words “related to,” the Supreme Court has emphasized that the ADA expresses a broad preemptive purpose. Morales v. Trans World Airlines, Inc., 504 U.S. 374, 384 (1992); see Altria Group, Inc. v. Good, 129 S.Ct. 538, 547 (2008) (recognizing the “unusual breadth of the ADA’s preemption provision”). State law claims are “related to” an airline’s prices, routes, or services, and thus preempted, if the state law either, on its face, “explicitly refers to” or, in application, has a “significant effect” on an airline’s prices, routes, or services. Buck v. Am. Airlines, Inc., 476 F.3d 29, 34 (1st Cir.2007); United Parcel Serv., Inc. v. Flores-Galarza, 318 F.3d 323, 335 (1st Cir.2003). On the other hand, state law claims having only a “tenuous, remote, or peripheral” relationship to an airline’s prices, routes, or services are not preempted. Morales, 504 U.S. at 390. Evaluation of this relationship centers “on the effect that the state law has on airline operations,” not on “the state’s purpose for enacting the law.” N.H. Motor Transp. Ass’n v. Rowe, 448 F.3d 66, 78 (1st Cir.2006) (emphasis in original).”

Turning to the facts in the case before it, the Court said, “[t]he question here, therefore, boils down to this: Are the plaintiffs’ state law claims “related to” JetBlue’s prices, routes, or services? The answer seems obvious. The plaintiffs seek to impose liability under the Massachusetts statutory and common law claims for JetBlue’s action in setting (and collecting) a price for a service provided to its customers. To avoid liability under the state claims, JetBlue would have to alter its decisions about its price and services. Potential liability under the state claims, therefore, is a means by which the State effectively regulates JetBlue’s price and service with respect to curbside check-in.

The plaintiffs’ own argument necessarily acknowledges that their claims “relate to” JetBlue’s price for the curbside baggage check-in. They claim not to challenge the existence of JetBlue’s curbside check-in fee, but only the manner in which the fee is collected (i.e., cash-only, by the skycaps, and in an amount typically given as a tip). Two alternatives, which preserve skycap tip income, are proposed by the plaintiffs: JetBlue could charge the $2 fee either when passengers purchase their tickets or during self-check-in, and then list the charges as “baggage handling fees” on the passengers’ receipts. (See Pls.’ Opp’n to Def. JetBlue Airways Corp.’s Mot. to Dismiss 10 n.8.) To propose these two alternatives is to implicitly acknowledge that their state law claims are a vehicle for regulating JetBlue’s assessment and collection of a fee for the curbside check-in service. The question, however, is not whether such regulation would be beneficial or desirable, but whether it is permitted in light of the ADA’s broad preemption of any state regulation of an airline’s “prices” or “services.”

Furthermore, any argument that the state law claims here have no more than a “tenuous, remote, or peripheral” relationship to JetBlue’s prices or services is belied by the plaintiffs’ own complaint. They seek not only money damages for past wrongs, but also injunctive relief “ordering Defendants to cease their violations of the law.”(Am.Compl.10.) Whether indirectly, by threat of liability for money damages, or directly, by injunctive order, the plaintiffs’ broader goal is to compel JetBlue to change its practices with respect to the imposition and collection of the curbside check-in fee. That relationship to JetBlue’s prices and services is not “tenuous, remote, or peripheral.

In sum, the ADA preempts the plaintiffs’ state law claims. The defendant’s Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(6) ( dkt. no. 46) is GRANTED. Counts II-V of the amended complaint are dismissed as against JetBlue.”

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