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D.Minn.: Where Agreement Silent As to Collective Action, Case May Proceed on Collective Basis in Arbitration
Mork v. Loram Maintenance of Way, Inc.
This case was before the court on the defendant’s motion to compel arbitration on an individual basis. While, the parties were in agreement that the case should be remanded to arbitration, the salient issue before the court was whether the arbitration agreement- silent on the issue of collective/class proceedings- allowed for collective treatment of the case. The court held that the parties had agreed to collective treatment of claims by the agreement’s silence. Thus, the case was remanded to arbitration, but to be treated as a collective action.
Initially the court held that, based on the absence of clear authority one way or another from the Supreme Court, the court had the authority to decide whether the case could proceed on a collective basis. Having made this decision, it proceeded into its analysis.
Discussing the standard it would apply, the court explained:
“The scope of an arbitration agreement is determined with reference to the agreement of the parties as evidenced by the terms of “the arbitration agreement itself or [based on] some background principle of contract law that would affect its interpretation.” See AT & T Mobility LLC v. Concepcion, 131 S.Ct. 1740, 1750 (2011). The Court must “give effect to the contractual rights and expectations of the parties.” Stolt–Nielsen, 130 S.Ct. at 1774 (citation omitted); see Mitsubishi Motors Corp. v. Soler Chrysler–Plymouth, Inc., 473 U.S. 614, 626 (1985) (“as with any other contract, the parties’ intentions control”). Imposition of a particular type of arbitration cannot be based solely “on policy judgments.” Concepcion, 131 S.Ct. at 1750. Like any contract dispute, however, ambiguities in the agreement must be construed against the drafter. See, e.g., Advantage Consulting Group, Ltd. v. ADT Sec. Sys., Inc., 306 F.3d 582, 588 (8th Cir.2002).
In facing the question of whether to compel collective versus individual arbitration, the Court must therefore determine what the parties agreed to in the Arbitration Clause. A mere agreement to arbitrate, without more, does not imply agreement to collective arbitration. Cf. Stolt–Nielsen, 130 S.Ct. at 1775. This approach is consistent with Eighth Circuit precedent in the context of class arbitrations, Dominium Austin Partners, L.L.C. v. Emerson, 248 F.3d 720, 728–29 (8th Cir.2001), and consolidation of individual arbitrations, Baesler v. Cont’l Grain Co., 900 F.2d 1193, 1195 (8th Cir.1990). In Emerson and Baesler, the Eighth Circuit held that an arbitration agreement must provide for the type of arbitration which is sought to be compelled by the Court.
Loram urges a restrictive reading of Baesler, Emerson, and Stolt–Nielsen which would require explicit reference to, and acceptance of, collective arbitration in order for Mork’s claim to proceed on a collective basis. Those cases do not stand for such a strict standard. In Stolt–Nielsen, the Supreme Court’s statement that an intention to authorize class arbitration cannot be “infer[red] solely from the fact of the parties’ agreement to arbitrate,” Stolt–Nielsen, 130 S.Ct. at 1775 (emphasis added), indicates that such an intention may be inferred and need not be explicitly stated. The majority in Stolt–Nielsen therefore “[did] not insist on express consent to class arbitration.” Id. at 1783 (Ginsburg, J., dissenting). Accordingly, “Stolt–Nielsen does not foreclose the possibility that parties may reach an ‘implicit’—rather than express—‘agreement to authorize class-action arbitration.’ “ Jock v. Sterling Jewelers Inc., 646 F.3d 113, 123 (2d Cir.2011); see Jones v. St. Paul Cos ., Inc., 495 F.3d 888, 893 (8th Cir.2007) (“[F]ederal courts are bound by the Supreme Court’s considered dicta almost as firmly as by the Court’s outright holdings, particularly when … [the dicta] is of recent vintage and not enfeebled by any [later] statement.”) (internal quotation marks and citations omitted).
In sum, the question before the Court is not whether the Arbitration Clause used the precise words “collective arbitration.” Rather, the Court must determine whether the Arbitration Clause evinces sufficient indicia of agreement between the parties that a claim within its scope may proceed on a collective basis. In doing so, the Court must keep in mind that Loram drafted the language of the Arbitration Clause and, therefore, that ambiguities must be construed against it. Advantage Consulting, 306 F.3d at 588.
The Court notes that the test from Stolt–Nielsen stated here may be more stringent that the appropriate test for contracts of adhesion. See Stolt–Nielsen, 130 S.Ct. at 1783 (Ginsburg, J., dissenting) (“[T]he Court apparently spares from its affirmative-authorization requirement contracts of adhesion presented on a take-it-or-leave-it basis.”). Because the Court concludes that the Arbitration Clause does affirmatively authorize collective arbitration, there is no need to address whether the CAA was a contract of adhesion and therefore subject to a less stringent standard. The Court notes, however, that the parties here, unlike those in Stolt–Nielsen, are not both “sophisticated business entities” with comparable bargaining power, see id. at 1775, and the CAA appears to have been a “take-it-or-leave-it” boilerplate contract.”
The court then applied its standard and held that the silence of the parties on the collective issue demonstrated the indicia that the parties agreed to collective arbitration:
“While the parties distinguish between “express” and “implied” agreement to collective arbitration, as discussed above, the relevant question is whether there exists sufficient indicia that the parties agreed to undertake collective arbitration in the event of an employment dispute. While the Arbitration Clause does not refer explicitly to collective claims, the Court concludes that it does authorize such claims to proceed before an arbitrator.
To begin, the Arbitration Clause applies to “claims or disputes of any nature arising out of or relating to the employment relationship” and “statutory claims … arising out of or resulting from [Mork’s] employment with Loram.” (CAA ¶ 8 (emphasis added).) Mork’s claim that he and similarly situated coworkers were deprived of overtime pay is undisputedly related to “the employment relationship” and his FLSA claim is “statutory.” An action arising from FLSA violations “may be maintained against any employer … in any Federal or State court of competent jurisdiction by any one or more employees for and in behalf of himself or themselves and other employees similarly situated.” 29 U.S.C. § 216(b) (emphasis added). Thus, Mork has a statutory right to bring a FLSA claim on behalf of himself and similarly situated Field Application Technicians, and such a claim arises out of his employment relationship with Loram.
Loram contends that Mork’s ability to bring a claim on behalf of similarly situated employees is foreclosed because the Arbitration Clause’s references to potential arbitral parties include only Loram and Mork. For example, the Arbitration Clause provides that the arbitrator will have “exclusive authority to resolve any dispute or claim relating to, arising out of, or resulting from my employment with Loram” and the “statutory claims” covered by the Arbitration Clause are those “arising out of or resulting from my employment with Loram or the formation or the termination of my employment with Loram.” (CAA ¶ 8 (emphasis added).) These statements, Loram argues, show that the Arbitration Clause does not authorize collective arbitrations.
The Court is not persuaded that the Arbitration Clause’s particular reference to disputes between Mork and Loram must be read to preclude a collective claim. Mork’s FLSA claim is no less a claim “arising out of [his] employment with Loram” because it implicates similarly situated employees. The FLSA claim remains “his.” Viewed in even the most charitable light, Loram’s argument only creates some amount of ambiguity in the Arbitration Clause—ambiguity that must be resolved in Mork’s favor. Advantage Consulting, 306 F.3d at 588.
The conclusion that the Arbitration Clause permits collective arbitration is also supported by the contrast between its broad delegation of “any claims and disputes” to arbitration and its exclusion of only “claims or disputes [arising out of the CAA], or the breach, termination or invalidity thereof.” (CAA ¶ 8.) By negative implication, collective arbitration—a type of arbitration not expressly excluded—can be presumed to be covered by the wide ranging terms of the Arbitration Clause, particularly in light of the factors already discussed.
The Court further notes that the Arbitration Clause provides that arbitration be conducted in accordance with model rules provided by the American Arbitration Association (“AAA”) “in force at the time of the claim or dispute” and that the AAA “shall administer any such arbitration.” (CAA ¶ 8.) The AAA’s “Policy on Class Arbitrations” states that the AAA will “administer demands for class arbitration … if (1) the underlying agreement specifies that disputes arising out of the parties’ agreement shall be resolved by arbitration in accordance with any of the Association’s rules, and (2) the agreement is silent with respect to class claims, consolidation or joinder of claims.” See American Arbitration Association, Policy on Class Arbitrations, July 14, 2005, available at http://www.adr.org/sp.asp?id=25967. Even as interpreted by Loram, the Arbitration Clause in this case satisfies both criteria.
While this AAA policy was promulgated after the execution of the Arbitration Clause, the parties here agreed to be bound by the AAA rules in force “at the time of the claim or dispute.” (CAA ¶ 8.) The parties thus intended to be bound by future iterations of those rules. Loram’s decision to follow and abide by AAA rules therefore lends further support to the Court’s conclusion that the Arbitration Clause authorizes collective arbitration.
It is important to note that Mork has not moved the Court to consolidate otherwise independent actions into a single proceeding as was the case in Baesler, 900 F.3d at 1194–95. Rather, Mork seeks to proceed with a single, statutorily prescribed collective claim. Consolidation is a method by which a Court may efficiently resolve otherwise legally independent claims which happen to share a common question of law or fact. See Fed.R.Civ.P. 42(a). A FLSA collective action, in contrast, is a mechanism in which one claim can vindicate the rights of many. If Mork were seeking consolidated treatment of independent claims brought by employees, the Court would hesitate in considering those claims as “arising out of or resulting from [Mork’s] employment with Loram.” (See CAA ¶ 8.)
The Court also notes that some of the concerns raised by the Supreme Court about class arbitration are not present in the sort of collective arbitration sought by Mork. For one, a FLSA collective action is unlike a class action under Rule 23 of the Federal Rules of Civil Procedure because similarly situated employees must always “opt-in” to a FLSA action. See 29 U.S.C. § 216(b). Worries about an arbitrator “adjudicat[ing] the rights of absent parties” without affording them the full panoply of protections provided in court are therefore greatly diminished. See Stolt–Nielsen, 130 S.Ct. at 1776.
Finally, while fully cognizant that policy judgments may not be dispositive in this legal analysis, see Concepcion, 131 S.Ct. at 1750, the Court would be remiss if it did not briefly address the consequences of adopting a rule that an arbitration agreement cannot allow for collective or class arbitration except where the agreement explicitly uses and ratifies those precise terms. Such a rule would lead to great uncertainty, calling into question the countless arbitration agreements that have been executed in the shadow of a less stringent rule. Moreover, the adoption of such a rule would likely prevent the vindication of workers’ basic rights under the FLSA. See Sutherland v. Ernst & Young LLP, 768 F.Supp.2d 547, 553–54 (S.D.N.Y.2011).”
Click Mork v. Loram Maintenance of Way, Inc. to read the entire Memorandum of Law and Order.
E.D.N.Y.: Where Agreement to Arbitrate Is Silent As To Class Arbitration, Arbitrator Not Court to Decide Class Arbitrability Issue
Guida v. Home Savings of America, Inc.
Plaintiffs brought this putative class action on behalf of themselves, and on behalf of individuals similarly situated, against Defendants, asserting claims under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§ 201 et. seq., and related New York state wage and labor laws. Defendants moved to dismiss plaintiffs’ complaint, and compel arbitration on an individual basis pursuant to the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1 et. seq. While Plaintiffs agreed to arbitrate the dispute, they argued that the arbitrator should decide whether the arbitration can proceed on a class basis, because the arbitration agreement was silent on the issue of class arbitration. The court agreed and held that while the parties were required to arbitrate the dispute, the determination of whether or not the arbitration should proceed on a class basis is for the arbitrator to make in the first instance.
Discussing the relevant provisions of the agreement(s) to arbitrate, the court explained:
“The terms of the Alternative Dispute Resolution Agreement are identical for all of the plaintiffs. The following are relevant portions from the Alternative Dispute Resolution Agreements:
I understand that Home Savings of America makes available arbitration for resolution of employment disputes that are not otherwise resolved by internal policies or procedures.
I agree that if I am unable to resolve any dispute through the internal policies and procedures of Home Savings … I will arbitrate … any legal claim that I might have against Home Savings … or its employees, in connection with my employment or termination of employment … whether arising out of issues or matters occurring before the date of this Agreement or after such date.
I agree to abide by and accept the final decisions of the arbitration panel as ultimate resolution of any disputes or issues for any and all events that arise out of employment or termination of employment.
I agree that the Employee Dispute Resolution Rules of the American Arbitration Association will apply to any resolution of any such matters. In exchange for the benefits of arbitration, I agree that the arbitrator will only have the power to grant those remedies available in court, under applicable law.”
In light of the silence as to class arbitration, the court held that the issue was one for the arbitrator, not the court to decide. The court reasoned that Supreme Court jurisprudence supported this holding, because the issue was one of substantive interpretation of the contract language and not merely a procedural issue:
“This Court concludes, in light of StoltNielsen and Bazzle, that the ability of a class to arbitrate a dispute where the parties contest whether the agreement to arbitrate is silent or ambiguous on the issue is a procedural question that is for the arbitrator to decide. Even though Bazzle does not have the full weight of Supreme Court precedent, it is nevertheless instructive. See, e.g., Barbour v. Haley, 471 F.3d 1222, 1229 (11 th Cir.2006) (“Plurality opinions are not binding on this court; however, they are persuasive authority.”); Galli v. N.J. Meadowlands Comm’n, 490 F.3d 265, 274 (3d Cir.2007) (concluding that dicta in Supreme Court opinions has persuasive value). The Second Circuit found Bazzle persuasive, as have other courts prior to Stolt–Nielsen. See Vaughn v. Leeds, Morelli & Brown, P.C., 315 F. App’x 327, 329 (2d Cir.2009) (concluding that the district court “properly compelled arbitration on the question of the arbitrability of class claims under the Settlement Agreement[,]” citing Bazzle and Howsam); JSC Surgutneftegaz v. President & Fellows of Harvard College, 04 Civ. 6069(RMB), 2007 U.S. Dist. LEXIS 79161, at *6 (S.D.N.Y. Oct. 11, 2007) (citing Bazzle for the proposition that “arbitrators are well situated to answer the question whether contracts forbid[ ] class arbitration” (quotation marks omitted)); Scout. com, LLC v. Bucknuts, LLC, No. C07–1444 RSM, 2007 WL 4143229, at *5 (W.D.Wa. Nov.16, 2007) (concluding that, in light of Bazzle, it was for the arbitrator to decide the procedural question of whether the plaintiffs can arbitrate as a class (collecting cases)). Furthermore, many courts since Stolt–Nielsen have continued to follow Bazzle’s conclusion that the ability to arbitrate on a class basis is a procedural question left for the arbitrator to decide. This Court finds the Third Circuit’s opinion in Vilches v. The Travelers Companies, Incorporated, No. 10–2888, 2011 U.S.App. LEXIS 2551 (3d Cir. Feb. 9, 2011), particularly instructive. In Vilches, the Third Circuit reconciled Bazzle and StoltNielsen as follows:
Although contractual silence [on the issue of arbitration on a class basis] has often been treated by arbitrators as authorizing class arbitration, Stolt–Nielsen suggests a return to the pre-Bazzle line of reasoning on contractual silence, albeit decided by an arbitrator, because it focuses on what the parties agreed to—expressly or by implication.
Id. at *12–13 n. 3. The Third Circuit concluded that the ability of the plaintiffs to proceed on a class basis in arbitration was essentially a question of “what kind of arbitration proceeding the parties agreed to [,]” id. at *10 (emphasis in original) (citing Bazzle), and went on to conclude that “[w]here contractual silence is implicated, the arbitrator and not a court should decide whether a contract was indeed silent on the issue of class arbitration, and whether a contract with an arbitration clause forbids class arbitration.” Id. at *11 (quotation marks omitted) (citing StoltNielsen, 130 S.Ct. at 1771–72, describing the plurality opinion in Bazzle). In Vilches, the agreement in question “did not expressly reference class or collective arbitration or any waiver of the same.” Id. at *3. The parties debated whether a revised arbitration policy including a class arbitration waiver applied to plaintiffs but agreed that plaintiffs’ causes of action alleged in the complaint otherwise fell under the purview of the arbitration agreement. Id. at *3–6, *9–10. The court in Vilches referred the “questions of whether class arbitration was agreed upon to the arbitrator.” Id. This Court similarly concludes that Stolt–Nielsen and Bazzle are reconcilable and that arbitrating on a class basis is a procedural question that is for the arbitrators to decide in accordance with the Supreme Court’s analysis in Stolt–Nielsen, which provides a framework for the arbitrator’s analysis of the issue.
Nor is Vilches alone in its conclusion. There are a number of cases in addition to Vilches in which courts have concluded, subsequent to Stolt–Nielsen, that the ability of plaintiffs to arbitrate on a class basis is an issue to be determined by the arbitrator. See, e.g., Aracri v. Dillard’s Inc., No. 1:10cv253, 2011 WL 1388613, at * 4 (S.D.Ohio Mar.29, 2011) (concluding that “it is not for this Court, but for an arbitrator to decide whether class arbitration is forbidden under the Arbitration Agreement and Dillard’s Rules of Arbitration” where the arbitration agreement did not explicitly mention class arbitration but the parties contested whether Dillard’s Rules, to which all arbitration claims were subject, provided for class arbitration); Smith v. The Cheesecake Factory Restaurants, Inc., No. 3:06–00829, 2010 U.S. Dist. LEXIS 121930, at *7 (M.D.Tenn. Nov. 16, 2010) (concluding that “whether the parties agreed to class arbitration is to be resolved by the arbitrator[,]” citing Stolt–Nielsen and Bazzle); Fisher v. General Steel Domestic Sales, LLC, No. 10–cv–1509–WYD–BNB, 2010 U.S. Dist. LEXIS 108223, at *6–7 (D.Col. Sept. 22, 2010) (where parties agreed that plaintiffs’ claims were subject to arbitration but were contesting whether the agreement in question permitted class arbitration, “based on the plain language of Stolt–Nielsen, it is clear that an arbitrator may, as a threshold matter, appropriately determine whether the applicable arbitration clause permits the arbitration to proceed on behalf of or against a class” (quotation marks omitted)). See also Clark v. Goldline Int’l, Inc., No. 6:10–cv–01884 (JMC), 2010 U.S. Dist. LEXIS 126192, at *21–22 (D.S.C. Nov. 30, 2010) (“[T]he court notes that whether a class is appropriately certified in this case or otherwise is yet to be determined. Second, whether the Account Agreement precludes any putative classmember from bringing a claim has no bearing on the validity or enforceability of the arbitration provisions. Such issues raised by Plaintiffs must be determined by an arbitrator, not this court.” (citing Bazzle)). But see Chen–Oster v. Goldman, Sachs & Co., No. 10 Civ. 6950(LBS)(JCF), 2011 U.S. Dist. LEXIS 46994, at *10 (S.D.N.Y. Apr. 28, 2011) (concluding that the ability to arbitrate on a class basis requires a “determination of the scope and enforceability of the arbitration clause, and therefore the issue is appropriately characterized as a dispute over arbitrability[,]” further noting that this question “fits into the narrow circumstances where contracting parties would likely have expected a court to have decided the gateway matter[,]” relying on Stolt–Nielsen’s emphasis that Bazzle was solely a plurality opinion).”
Interestingly, the court also addressed and rejected Defendants’ argument that the Supreme Court’s recent holding in AT & T Mobility LLC v. Concepcion stood for the proposition that the issue of whether or not to arbitrate on a class basis is not a procedural issue, which would have allowed the court to decide the issue.
Click Guida v. Home Savings of America, Inc. to read the entire Memorandum and Order.