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11th Circuit Upholds Arbitrator’s Order Allowing Collective Arbitration

The 11th Circuit’s ruling of October 22, 2013 on collective arbitration should be of interest to employees and employers, especially in light of recent decisions enforcing arbitration agreements even in cases in which doing so would appear to deprive the claimant of a statutory right to engage in a collective or class action (see, e.g. American Express Co. et al. v. Italian Colors Restaurant et. al., 133 S. Ct. 2304 (2013); Sutherland v. Ernst & Young LLP, 2013 WL 4033844 (2d Cir. Aug. 9, 2013); and Raniere v. Citigroup lnc., 2013 U.S. App. LEXIS 16765 (2d Cir. Aug. 12, 2013); see also discussion in  the October 2013 issue of  CPR’s Alternatives [subscription required]).

In Directv, LLC v. Arndt, No. 13-1003, 2013 U.S. App. LEXIS 21387 (11th Cir. Oct. 22, 2013), a Fair Labor Standards Act (FLSA) claim for failure to pay employees minimum wage and required overtime, employees Arndt, et al initiated a collective or class arbitration against employer Directv with the American Arbitration Association (AAA), on behalf of themselves and all other similarly situated employees.

Although the arbitration provision in the claimants’ employment agreements contained an express waiver of “civil action and a jury trial,” it neither provided for nor waived the right to class arbitration. The arbitrator issued an order acknowledging her duty to examine the terms of the agreements to determine whether the parties had agreed to collective arbitration of FLSA claims. She concluded that the plain language of the agreements allowed employees to assert their rights on a collective basis.

Characterizing the arbitrator’s order as an award, Directv brought a District Court action to vacate it pursuant to §10(a) of the Federal Arbitration Act (FAA). The district court found that the arbitrator had exceeded her powers in ordering collective arbitration because, according to Stolt-Nielsen S. A. v. AnimalFeeds Int'l Corp., 559 U.S. 662 (2010), parties must consent to class arbitration and the agreement’s silence on this issue did not equate to consent. Finding that Directv and its employees had not consented to collective arbitration, the district court granted the petition to vacate and ordered arbitration to proceed on an individual, bilateral basis, Directv, Inc. v. Arndt, No. 1:12-cv-03233-JOF, 2012 U.S. Dist. LEXIS 185158 (N.D. Ga. Nov. 30, 2012)[subscription required].

On appeal, the 11th Circuit overturned the district court’s ruling, reasoning that, in Stolt-Nielsen both parties had stipulated to their lack of agreement on collective arbitration, whereas in Directv, there remained scope for the arbitrator to determine whether the agreements could plausibly afford a basis for finding consent to collective arbitration based on the text of the agreements, and the arbitrator had fulfilled her interpretive role in this connection. Pursuant to the standards of Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064 (2013), and as elaborated in S. Commc’ns Servs v. Thomas, 720 F.3d 1352 (11th Cir. 2013), “[…] ‘if the arbitrator (even arguably) interpreted the parties' contract, a court must end its inquiry and deny a §10(a) motion for vacatur.’” Directv, LLC v. Arndt, No. 13-1003, 2013 U.S. App. LEXIS 21387, at *8 (11th Cir. Oct. 22, 2013)(citing Thomas, 720 F.3d 1352). The court recalled the Oxford Health Plans admonition that the arbitrator’s award “may have been ugly,” “mistaken, incorrect, or” even in “manifest disregard of the law” nevertheless, “those are not grounds for vacating the award,” Id. at *10.

Like American Express and its progeny, this is a pro-arbitration decision, but rather than further enabling employers to shield themselves from class and collective actions by means of arbitration agreements, it suggests that federal courts will not second guess an arbitral tribunal’s determination that an arbitration agreement provides – even implicitly – for class arbitration.

-- Libbie Richards, CPR Legal Intern