Opinion ID: 1036963
Heading Depth: 2
Heading Rank: 2

Heading: The Class Action Waiver Must Be Enforced

Text: The FAA, which was “enacted in 1925 in response to judicial hostility to arbitration agreements,” Concepcion, 131 S. Ct. at 1745, provides that: A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract. 9 U.S.C. § 2. In analyzing this provision of the FAA, the Supreme Court has remarked on several occasions that it establishes “‘a liberal federal policy favoring arbitration agreements,’” CompuCredit Corp. v. Greenwood, 132 S. Ct. 665, 669 (2012) (quoting Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)), and that arbitration agreements should be enforced according to their terms “unless the FAA’s mandate has been ‘overridden by a contrary congressional command,’” id. (quoting Shearson/American Express Inc. v. McMahon, 482 U.S. 220, 226 (1987)). In American Express Co. v. Italian Colors Restaurant, 133 S. Ct. 2304 (2013), the Court recently reminded lower courts to 8 “rigorously enforce arbitration agreements according to their terms, including terms that specify with whom [the parties] choose to arbitrate their disputes, and the rules under which that arbitration will be conducted.” Id. at 2309 (internal quotation marks and citations omitted; emphasis and brackets in original). Consistent with the Supreme Court’s recent analysis in Italian Colors, we first consider whether the FLSA contains a “contrary congressional command” barring waivers of class arbitration. Because no “contrary congressional command” exists, we then proceed to analyze Sutherland’s argument that she cannot “effectively vindicate” her rights in an individual arbitration, inasmuch as such a proceeding would be “prohibitively expensive.” i. The FLSA Does Not Contain a “Contrary Congressional Command” As in the antitrust context, “[n]o contrary congressional command requires us to reject the waiver of class arbitration” in the FLSA context. Id. Although we have not directly or specifically addressed whether an employee’s ability to proceed collectively under the FLSA can be waived in an arbitration agreement, every Court of Appeals to have considered this issue has concluded that the FLSA does not preclude the waiver of collective action claims. See Owen v. Bristol Care, Inc., 702 F.3d 1050, 1055 (8th Cir. 2013); Carter v. Countryside Credit Indus., Inc., 362 F.3d 294, 298 (5th Cir. 2004); Adkins v. Labor Ready, Inc., 303 F.3d 496, 503 (4th Cir. 2002).5 We agree with this consensus among our sister Circuits for multiple reasons. First, the text of the FLSA does not “‘envinc[e] an intention to preclude a waiver’ of classaction procedure.” Italian Colors, 133 S. Ct. at 2309 (quoting Mitsubishi Motors Corp. v. Soler Chrysler- 5 All but one district court in this Circuit has reached the same conclusion. See, e.g., Dixon v. NBCUniversal Media, LLC, --- F. Supp. 2d ----, 2013 WL 2355521, at -11 (S.D.N.Y. 2013); Ryan v. JPMorgan Chase & Co., --- F. Supp. 2d. ----, 2013 WL 646388, at  (S.D.N.Y. 2013); Torres v. United Healthcare Servs., Inc., --- F. Supp. 2d ----, 2013 WL 387922, at  & n.2 (E.D.N.Y. 2013). But see Raniere v. Citigroup Inc., 827 F. Supp. 2d 294, 311 (S.D.N.Y. 2011). At least two district courts outside of this Circuit have been also been summarily affirmed on this point of law. See Vilches v. Travelers Co., 413 F. App’x 487, 494 n.4 (3d Cir. 2011) (non-precedential summary order); Horenstein v. Mortg. Market, Inc., 9 F. App’x 618, 619 (9th Cir. 2001) (non-precedential summary order). 9 Plymouth, Inc., 473 U.S. 614, 628 (1985) (alteration in original)). Sutherland argues to the contrary, asserting that Section 16(b) of the FLSA creates a “right” to bring a collective action because the statute provides that “[a]n action to recover the liability . . . 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 or other employees similarly situated,” 29 U.S.C. § 216(b) (emphasis supplied). See Sutherland Br. 43. But Sutherland’s argument neglects the fact that § 216(b) also requires an employee with a FLSA claim to affirmatively opt-in to any collective action. 29 U.S.C. § 216(b) (“No employee shall be a party plaintiff to any such action unless he gives his consent in writing to become such a party and such consent is filed in the court in which such action is brought.”). As the Eighth Circuit noted in Owen, “[e]ven assuming Congress intended to create some ‘right’ to class actions, if an employee must affirmatively opt in to any such class action, surely the employee has the power to waive participation in a class action as well.”6 702 F.3d at 1052-53. Second, Supreme Court precedents inexorably lead to the conclusion that the waiver of collective action claims is permissible in the FLSA context. In Concepcion, the Court held that the FAA preempted a California judicial rule regarding the unconscionability of class arbitration waivers in consumer contracts because “[r]equiring the availability of classwide arbitration [would] interfere[ ] with fundamental attributes of arbitration and thus create[ ] a scheme inconsistent with the FAA.” 131 S. Ct. at 1748. Moreover, in Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991), the Court upheld the waiver of a collective action provision in the Age Discrimination in Employment Act (“ADEA”), 29 U.S.C. § 621 et seq. Gilmer, 500 U.S. at 32. In doing so, the Court 6 Our conclusion that nothing in the text of the FLSA prevents an employee from waiving his or her ability to proceed collectively under the FLSA is reinforced by our earlier decision referring to the FLSA collective action “right” as a “procedural mechanism[ ].” Shahriar v. Smith & Wollensky Rest. Grp., Inc., 659 F.3d 234, 244 (2d Cir. 2011). We have previously explained that the procedural “right” to proceed collectively presupposes, and does not create, a nonwaivable, substantive right to bring such a claim.” See Parisi, 710 F.3d at 488. Indeed, as the Supreme Court noted in Italian Colors, “[o]ne might respond, perhaps, that federal law secures a nonwaivable opportunity to vindicate federal policies by satisfying the procedural strictures of Rule 23 or invoking some other informal class mechanism in arbitration. But we have already rejected that proposition . . . .” 133 S. Ct. at 2310 (citing Concepcion, 131 S. Ct. at 1748). 10 noted that “even if the arbitration could not go forward as a class action or class relief could not be granted by the arbitrator, the fact that the [ADEA] provides for the possibility of bringing a collective action does not mean that individual attempts at conciliation were intended to be barred.” Id. (internal quotation marks omitted; alteration in original)).7 For these reasons, the FLSA does not include a “contrary congressional command” that prevents the underlying arbitration agreement from being enforced by its terms.8 ii. Sutherland Is Not Prevented from Effectively Vindicating Her Rights by Pursuing Arbitration on an Individual Basis “Our finding of no ‘contrary congressional command’ does not end the case” because Sutherland invokes the “judge-made” exception to the FAA which “allow[s] courts to invalidate agreements that prevent the ‘effective vindication’ of a federal statutory right.”9 Italian Colors, 133 S. Ct. at 2310. In particular, Sutherland argues that pursuing individual arbitration would be 7 Although Sutherland asks us to limit the scope of Gilmer, see Sutherland Br. 51-52, we see no valid basis upon which to do so, especially considering that the Supreme Court referred to Gilmer with approval in Italian Colors, noting that “[i]n Gilmer, we had no qualms in enforcing a class waiver in an arbitration agreement even though the federal statute at issue, the [ADEA], expressly permitted collective actions. We said that statutory permission did ‘not mean that individual attempts at conciliation were intended to be barred.’” Italian Colors, 133 S. Ct. at 2311 (quoting Gilmer, 500 U.S. at 32) (citations omitted). 8 One of Sutherland’s alternative arguments for affirming the District Court is that the National Labor Relations Board, in In re D.R. Horton, Inc., 357 NLRB No. 184 (Jan 3. 2012), held that a waiver of the right to pursue a FLSA claim collectively in any forum violates the National Labor Relations Act (“NLRA”). Like the Eighth Circuit, however, we decline to follow the decision in D.R. Horton. Even assuming that “D.R. Horton addressed the more limited type of class waiver present here, we still would owe no deference to its reasoning.” Owen, 702 F.3d at 1053-54; see also Hoffman Plastic Compounds, Inc. v. NLRB, 535 U.S. 137, 144 (2002) (“[W]e have accordingly never deferred to the Board’s remedial preferences where such preferences potentially trench upon federal statutes and policies unrelated to the NLRA.”). Moreover, In re D.R. Horton may have been decided by the National Labor Relations Board without a proper quorum. See Canning v. NLRB, 705 F.3d 490, 499 (D.C. Cir. 2013) (holding that the President’s “appointments [of three NLRB members] were constitutionally invalid and the Board therefore lacked a quorum”), cert. granted, 133 S. Ct. 2861(Mem.) (2013). 9 In describing the “effective vindication doctrine,” the Court remarked that the doctrine “originated as dictum in Mitsubishi Motors, where we expressed a willingness to invalidate, on ‘public policy’ grounds, arbitration agreements that ‘operat[e] . . . as a prospective waiver of a party’s right to pursue statutory remedies.” Italian Colors, 133 S. Ct. at 2310 (quoting Mitsubishi Motors, 473 U.S. at 637 n.19) (alterations and emphasis in original). The Court went on to note that although “[s]ubsequent cases have similarly asserted the existence of an ‘effective vindication’ exception, . . . [all of those cases] have similarly declined to apply it to invalidate the arbitration agreement at issue.” Id. 11 “prohibitively expensive” because the recovery she seeks is dwarfed by the costs of individual arbitration. See Sutherland Br. 26-34. Despite the obstacles facing the vindication of Sutherland’s claims, the Supreme Court’s recent decision in Italian Colors, which reversed our decision in In re American Express Merchants’ Litigation, 667 F.3d 204 (2d Cir. 2012) (“Amex III”), see note 2, ante, compels the conclusion that Sutherland’s class-action waiver is not rendered invalid by virtue of the fact that her claim is not economically worth pursuing individually. Although the “effective vindication doctrine” could be used to invalidate “a provision in an arbitration agreement forbidding the assertion of certain statutory rights . . . . [and] would perhaps cover filing and administrative fees attached to arbitration that are so high as to make access to the forum impractical,” Italian Colors, 133 S. Ct. at 2310-11 (relying on Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 90 (2000)), plaintiffs cannot use the doctrine to invalidate class-action waiver provisions by showing that “they ha[d] no economic incentive to pursue their [FLSA] claims individually in arbitration,” id. at 2310. In other words, “the fact that it is not worth the expense involved in proving a statutory remedy does not constitute the elimination of the right to pursue that remedy.”10 Id. at 2311. Accordingly, in light of the Supreme Court’s holding that the “effective vindication doctrine” cannot be used to invalidate class-action waiver provisions in circumstances where the 10 The Supreme Court explained that: [t]he class action waiver merely limits arbitration to the two contracting parties. It no more eliminates those parties’ right to pursue their statutory remedy than did federal law before its adopting of the class action for legal relief in 1938 . . . . Or, to put it differently, the individual suit that was considered adequate to assure “effective vindication” of a federal right before adoption of class-action procedures did not suddenly become “ineffective vindication” upon their adoption. Italian Colors, 133 S. Ct. at 2311. 12 recovery sought is exceeded by the costs of individual arbitration, we are bound to conclude that Sutherland’s arguments are insufficient to invalidate the class-action waiver provision at issue here.11