Dec. 11 2012

U.S. Supreme Court to Again Address Class Action Waivers in Arbitration Agreements

Topics: Arbitration Agreements, Class Actions, Court Decisions

On Friday, the United States Supreme Court granted review in Oxford Health Plans, LLC v. Sutter, which presents the question of whether class wide or collective arbitration may be imposed where the parties' arbitration agreement is silent on the issue of class claims.  In the Oxford Health case, the Third Circuit upheld an arbitrator's determination that the arbitration agreement permitted claims to be resolved on a class basis in arbitration.  Many readers of this blog are probably scratching their heads reading this, thinking that the Supreme Court already resolved this issue (and favorably for employers) a couple of years ago in Stolt-Nielsen v. AnimalFeeds International.   Those thoughts are well taken.  In Stolt-Nielsen, the Supreme Court held that arbitration fundamentally is a matter of contract and that a party to an arbitration agreement could not be compelled to arbitrate claims on a class or collective basis "unless there is a contractual basis for concluding the parties agreed to do so."  In the Stolt-Nielsen case, the parties stipulated that their arbitration agreement was silent on the issue of class arbitration and that there was not any agreement to arbitrate on a class basis.  As such, the Supreme Court in that case did not analyze what contractual circumstances would be sufficient to conclude that the parties agreed to arbitrate on a class basis.   Since Stolt-Nielsen, a split has developed among the circuit courts, with the Second and Third Circuits holding that an agreement may be inferred from other language in the agreement, and the Fifth Circuit rejecting that reasoning and holding that there must be more explicit language authorizing class arbitration in order for an agreement to be found.  With its grant of review in the Oxford Health case, the Supreme Court is expected to resolve this conflict and provide more clarity in this oft-litigated area.

California employers should also be aware that the California Supreme Court has several cases pending review that address the enforceability of class action waivers in employment arbitration agreements in California.  Additionally, the NLRB's anti-class waiver decision in D.R. Horton is similarly pending review.  For now, employers should stay the course and continue including express class waiver language in their arbitration agreements pending further guidance from the courts in this unsettled area. 

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About the Editor

Robin Largent represents employers, including major food and retail companies, in all types of employment litigation: wrongful termination, retaliation, breach of contract, wage and hour (California Labor Code) and unfair competition. She also regularly counsels and advises California employers on issues of compliance with California and federal employment laws.
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