Tag Archives: Sutter

D.N.J.: District Court Denies Motion to Vacate Clause Construction Permitting Arb to Proceed on Class Basis, Where Contract Was Silent as to Class Issues; U.S.S.C. to Take Up Issue

Opalinski v. Robert Half Intern., Inc.

Another court, this one within the Third Circuit (which had previously ruled on the issue), has held that an arbitrator does not exceed his or her authority when the arbitrator permits FLSA claims to proceed on a class-wide basis, in the face of an arbitration agreement that the parties stipulate is “silent” as to class issues. Determining that same was permissible under Stolt-Nielsen and under principles of New Jersey contract law, the court explained:

At issue here is whether the Award should be vacated because the Arbitrator exceeded her powers by finding that the Agreements allow for class arbitration. Defendants contend that the Arbitrator’s finding was erroneous and violates Supreme Court precedent. See Stolt–Nielsen v. AnimalFeeds Int’l Corp., –––U.S. ––––, 130 S.Ct. 1758, 176 L.Ed.2d 605 (2010) (finding that arbitration panel exceeded its powers by imposing its own policy choice instead of interpreting and applying the agreement of the parties, and explaining that a party cannot be compelled to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so). Defendants note that the Agreements did not expressly authorize class arbitration and argue that an agreement to arbitrate does not implicitly authorize class arbitration, nor does the non-existence of an express class action waiver imply that the parties agreed upon class arbitration.

Defendants’ arguments are unpersuasive particularly given the binding precedent of Sutter v. Oxford Health Plans LLC, 675 F.3d 215 (3d Cir.2012), which is directly on point. In light of Stolt–Nielsen, the Third Circuit Court of Appeals in Sutter evaluated an arbitrator’s decision that class arbitration was allowed under a contract that was silent on the issue of class arbitration. The court explained that while “Stolt–Nielsen does prohibit an arbitrator from inferring parties’ consent to class arbitration solely from their failure to preclude that procedure,” it did not establish a rule that class arbitration is only allowed where an arbitration agreement expressly provides for class arbitration procedures. Sutter, 675 F.3d at 222, 224 . Instead, an arbitrator can interpret an arbitration clause to allow for class arbitration, even if the clause does not expressly provide for it, if the arbitrator articulates a contractual basis for that interpretation. Id. at 224. The arbitrator in Sutter examined the parties’ intent and used contract interpretation principles to reach his conclusion. He described the text of the arbitration clause—which provided that “no civil action concerning any dispute arising under this [a]greement shall be instituted before any court”—as broad and embracing all conceivable court actions including class actions. He further explained that an express carve-out for class arbitration would be required to negate this reading of the clause. Id. at 218. When reviewing the award, the court explained that the arbitrator had the authority to find for class arbitration because such a finding had a contractual basis. Id. at 223–24.

In light of binding Third Circuit authority and basic principles of New Jersey law regarding contract interpretation, the court held that the arbitrator was within her powers to hold that the arbitration of plaintiff’s claims could proceed on a class-wide basis, in the absence of an explicit class-waiver in the arbitration agreement.

Click Opalinski v. Robert Half Intern., Inc. to read the entire Opinion & Order.

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Significantly, within days of the Opalinkski decision, the Supreme Court agreed to take up this very issue. To that end, the Supreme Court accepted cert of the Sutter case, on which the Opalinski relied. The question certified by the Supreme Court is:

Whether an arbitrator acts within his powers under the Federal Arbitration Act (as the Second and Third Circuits have held) or exceeds those powers (as the Fifth Circuit has held) by determining that parties affirmatively “agreed to authorize class arbitration,” Stolt-Nielsen, 130 S. Ct. at 1776, based solely on their use of broad contractual language precluding litigation and requiring arbitration of any dispute arising under their contract.

Click Oxford Health Plans LLC v. Sutter to read more about the Supreme Court’s decision to accept cert.

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