Court Opinion

ID: 9877393
Source: CourtListenerOpinion
Date Created: 2023-09-27 16:01:13.658145+00
Date Added: 2024-06-11T07:47:22.456685
License: Public Domain

Andrias, J.
(dissenting in part). I agree with the majority that any alleged commission reversals and charge-backs plaintiffs experienced were provided for in their contracts with defendants as part of their agreed-upon measure of compensation, and therefore were not illegal deductions from wages under Labor Law § 193 (see Pachter v Bernard Hodes Group, Inc., 10 NY3d 609 [2008]). I also agree with the majority that the record demonstrates conclusively that plaintiffs Johnson and Kartal were outside salespeople (see Gold v New York Life Ins. Co., 730 F3d 137 [2d Cir 2013]). However, because I believe that the provisions in Kartal’s contract that require employees to waive class and collective proceedings and resolve employment-related disputes through individual arbitration are enforceable under the Federal Arbitration Act (FAA) (9 USC § 1 et seq.), and are not prohibited by the National Labor Relations Act (NLRA) (29 USC § 151 et seq.), I dissent in part.
The FAA “reflects a legislative recognition of the desirability of arbitration as an alternative to the complications of litigation. The Act, reversing centuries of judicial hostility to arbitration agreements, was designed to allow parties to avoid the costliness and delays of litigation, and to place arbitration agreements upon the same footing as other contracts” (Genesco, Inc. v T. Kakiuchi & Co., Ltd., 815 F2d 840, 844 [2d Cir 1987] [internal quotation marks and citations omitted]).
In conformity with the legislative intent, the “principal purpose” of the FAA is to “ensur[e] that private arbitration agreements are enforced according to their terms” (Volt Information Sciences, Inc. v Board of Trustees of Leland Stanford *229Junior Univ., 489 US 468, 478 [1989]; see also Rent-A-Center, West, Inc. v Jackson, 561 US 63, 67 [2010]). Toward this end, section 2, the Act’s “primary substantive provision” (Moses H. Cone Memorial Hospital v Mercury Constr. Corp., 460 US 1, 24 [1983]), states:
“A written provision in . . .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 USC § 2).
The “saving clause” of section 2 “permits agreements to arbitrate to be invalidated by generally applicable contract defenses, such as fraud, duress, or unconscionability, but not by defenses that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue” (AT&T Mobility LLC v Concepcion, 563 US 333, 339 [2011] [internal quotation marks omitted]). The application of the FAA to statutory claims may also be precluded where “the FAA’s mandate has been overridden by a contrary congressional command” (CompuCredit Corp. v Greenwood, 565 US 95, 98 [2012] [internal quotation marks omitted]). “The burden is on the party opposing arbitration ... to show that Congress intended to preclude a waiver of judicial remedies for the statutory rights at issue” (Shearson/American Express Inc. v McMahon, 482 US 220, 227 [1987]).
The National Labor Relations Board (NLRB) has adopted the position that arbitration agreements that waive an employee’s right to pursue legal claims in any judicial or arbitral forum on a collective or class action basis are unenforceable because they conflict with sections 7 and 8 of the NLRA (29 USC §§ 157, 158 [a] [1]), which, respectively, guarantee employees the right “to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection,” and prohibit employers from “interfering] with [or] restraining]” employees’ section 7 rights. However, as the majority observes, the United States Courts of Appeals that have ruled on the issue are divided as to whether section 7 qualifies as a contrary congressional command sufficient to overcome the FAA’s mandate that an arbitration agreement be enforced according to its terms.
The Second, Fifth and Eighth Circuits have rejected the NLRB’s position and have enforced the class or collective ac*230tion waivers under the FAA and/or the Fair Labor Standards Act (FLSA) (29 USC § 201 et seq.) (see Sutherland v Ernst & Young LLP, 726 F3d 290, 297 n 8 [2d Cir 2013]; D.R. Horton, Inc. v National Labor Relations Bd., 737 F3d 344, 362 [5th Cir 2013]; Cellular Sales of Missouri, LLC v National Labor Relations Bd., 824 F3d 772, 776 [8th Cir 2016]).1
In Sutherland, the Second Circuit held that nothing in the FLSA’s text or legislative history indicated a congressional intent to forbid enforcement of class waiver clauses in mandatory arbitration agreements. In so ruling, the court found that “the FLSA collective action ‘right’ ” is merely procedural in nature (Sutherland, 726 F3d at 297 n 6) and rejected the plaintiffs contention that it should defer to the NLRB’s rationale (id. at 297 n 8).
In D.R. Horton, the Fifth Circuit held that a class action is a procedural device used to bring substantive claims rather than a substantive right in and of itself, and that “[n]either the NLRA’s statutory text nor its legislative history contains a congressional command against application of the FAA” (D.R. Horton, 737 F3d at 361). Noting that the NLRB’s position would effectively impose an across-the-board ban on class waivers, the court observed that “[a]s Concepcion [AT&T Mobility LLC v Concepcion, 563 US 333 (2011), supra] held as to classwide arbitration, requiring the availability of class actions interferes with fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA” (id. at 360 [internal quotation marks omitted]). Consequently, the NLRB could not disregard the FAA’s command that arbitration agreements be enforced according to their terms — including those limiting the availability of class procedures.
In Cellular Sales, the Eighth Circuit, reaffirming its decision in Owen v Bristol Care, Inc. (702 F3d 1050 [8th Cir 2013]), found that the NLRA did not suffice to override the mandate of the FAA in favor of individual arbitration (824 F3d at 776).
The Seventh and Ninth Circuits have reached the opposite conclusion, holding that a class or concerted action waiver in an employment agreement conflicts with the right to engage in collective activity under sections 7 and 8 of the NLRA, which *231they deemed a substantive right (see Morris v Ernst & Young, LLP, 834 F3d 975, 983 [9th Cir 2016], cert granted 580 US —, 137 S Ct 809 [2017]; Lewis v Epic Sys. Corp., 823 F3d 1147 [7th Cir 2016], cert granted 580 US —, 137 S Ct 809 [2017]).
The majority believes that we should follow Lewis and Morris, which will be reviewed by the United States Supreme Court, as the more persuasive authority.21 do not agree.
While Lewis and Morris adopt the NLRB’s position, the NLRB has no special expertise in, and is not charged with administering, the FAA, and this Court need not defer to its conclusion that the right at stake is “substantive” for FAA purposes (see e.g. Hoffman Plastic Compounds, Inc. v NLRB, 535 US 137, 143-144 [2002]). Rather, to determine whether a contrary congressional command exists, we must look to “the text of the [NLRA], its legislative history, or an ‘inherent conflict’ between arbitration and the [NLRA’s] underlying purposes” (Gilmer v Interstate/Johnson Lane Corp., 500 US 20, 26 [1991]). Congress must demonstrate its intent to supersede the FAA with “clarity” (CompuCredit, 565 US at 103).
Here, Kartal has not met her burden of showing that Congress intended her employment claims to fall outside the FAA (see Walthour v Chipio Windshield Repair, LLC, 745 F3d 1326, 1331 [11th Cir 2014], cert denied 573 US —, 134 S Ct 2886 [2014]). “Neither the NLRA’s statutory text nor its legislative history contains a congressional command against application of the FAA,” and there is no “inherent conflict between the FAA and the NLRA’s purpose” (D.R. Horton, 737 F3d at 361). Although the NLRA gives employees a right to bargain collectively, the statute does not expressly give employees the right to arbitrate or litigate disputes as a class or collective action, and the legislative history lacks any indication of a congressional command precluding courts from enforcing collective-action waivers according to their terms. Without explicit authorization of collective actions in the text of the statute or discussion of class actions in the legislative history of the Act, there is no support for the majority’s position that the NLRA prohibits enforcement of an arbitration provision with a class action waiver provision.
*232Moreover, “the right to bring a collective action on behalf of others” is a “litigation mechanism,” and therefore a mere procedural right (Walthour, 745 F3d at 1337). As the United States Supreme Court explained in Mitsubishi Motors Corp. v Soler Chrysler-Plymouth, Inc. (473 US 614 [1985]), “By agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute; it only submits to their resolution in an arbitral, rather than a judicial, forum” (id. at 628; Joseph v Quality Dining, Inc., 2017 WL 1062480, *6, 2017 US Dist LEXIS 40604, *19 [ED Pa, Mar. 21, 2017, Civil Action No. 16-1907] [“Even concerted, collective activity generally speaking should be understood as a method, a means, a procedure for securing the other underlying rights, entitlements, and interests that employees wish to pursue — such as the fair, legal use of tip pooling to compensate servers paid nominally below the minimum wage that is the real substantive right in this case”]).
Significantly, the United States Supreme Court has interpreted the FAA’s saving clause narrowly. As the Fifth Circuit observed in D.R. Horton, “ Tn every case the Supreme Court has considered involving a statutory right that does not explicitly preclude arbitration, it has upheld the application of the FAA’ ” (737 F3d at 357 n 8, quoting Walton v Rose Mobile Homes LLC, 298 F3d 470, 474 [5th Cir 2002]; see also American Express Co. v Italian Colors Restaurant, 570 US —, —, 133 S Ct 2304, 2311-2312 [2013] [waiver of class arbitration is enforceable under the FAA even when the plaintiff’s cost of individually arbitrating a federal statutory claim exceeds the potential recovery]; AT&T Mobility LLC v Concepcion, 563 US at 339 [the FAA reflects both a “liberal federal policy favoring arbitration” agreements and the “fundamental principle that arbitration is a matter of contract” (internal quotation marks omitted)]; DIRECTV, Inc. v Imburgia, 577 US —, —, 136 S Ct 463, 471 [2015]; Begonja v Vornado Realty Trust, 159 F Supp 3d 402, 410 [SD NY 2016] [“the Supreme Court has recently held, for there to be a waiver of statutory rights, the right to pursue statutory claims must be blocked. It is not enough that the process of bringing such claims in arbitration would be prohibitively expensive or otherwise impracticable”]). Indeed, “the fact that certain litigation devices may not be available in an arbitration is part and parcel of arbitration’s ability to offer simplicity, informality, and expedition, characteristics that generally make arbitration an attractive vehicle for the resolution *233of low-value claims” (Walthour, 745 F3d at 1337 [internal quotation marks omitted]).
Furthermore, prohibiting class arbitration waivers would discourage arbitration in general, to an extent that is impermissible under the FAA (D.R. Horton at 359-360). As the Supreme Court found in Concepcion, “Requiring the availability of class-wide arbitration interferes with fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA” (563 US at 344).
In adopting the contrary position, the majority notes that in Patterson v Raymours Furniture Co., Inc. (659 Fed Appx 40, 43 [2d Cir 2016], petition for cert filed Sept. 26, 2016), the Second Circuit stated that “[i]f we were writing on a clean slate, we might well be persuaded, for the reasons forcefully stated in Chief Judge Wood’s and Chief Judge Thomas’s opinions in Lewis and Morris, to join the Seventh and Ninth Circuits and hold that the EAP’s waiver of collective action is unenforceable.” However, despite the reservations expressed in Patterson, the Second Circuit has not overruled Sutherland (726 F3d 290), and courts within the Second Circuit and elsewhere continue to follow it (see e.g. Mumin v Uber Tech., Inc., 2017 WL 934703, 2017 US Dist LEXIS 34008 [ED NY, Mar. 7, 2017, Nos. 15-CV-6143 (NGG) (JO), 15-CV-7387 (NGG) (JO)]; Kai Peng v Uber Techs., Inc., 2017 WL 722007, *16-17, 2017 US Dist LEXIS 25840, *41-44 [ED NY, Feb. 23, 2017, No. 16-CV-545 (PKC) (RER)]; Joseph v Quality Dining, Inc., 2017 WL 1062480, *7, 2017 US Dist LEXIS 40604, *20-21 [ED Pa, Mar. 21, 2017, Civil Action No. 16-1907] [“The Court declines to follow recent out-of-Circuit decisions holding such a waiver void under the NLRA and instead considers more persuasive the holdings of the Fifth Circuit and other courts that enforce class arbitration waivers under the FAA”]; Kobren v A-1 Limousine Inc., 2016 WL 6594075, *4, 2016 US Dist LEXIS 154012, *11 [D NJ, Nov. 7, 2016, Civil Action No. 16-516-BRM-DEA] [“absent binding authority to the contrary, this Court agrees with the reasoning of the Second, Fifth, and Eight(h) Circuits that there is no Inherent conflict’ between the FAA and NLRA, particularly in light of the strong public policy considerations underlying the FAA and the general understanding that the NLRA permits and requires arbitration in labor disputes”]).
Accordingly, Kartal’s arbitration agreement should be enforced according to its terms, and the IAS court’s order should be affirmed.
*234Acosta, P.J., and Mazzarelli, J., concur with Moskowitz, J.; Friedman and Andrias, JJ., dissent in part in an opinion by Andrias, J.
Order, Supreme Court, New York County, entered on or about September 4, 2015, modified, on the law, to grant the motion for summary judgment dismissing the second, third, and fourth causes of action as to all plaintiffs, and to deny the motion to compel Kartal to arbitrate, and otherwise affirmed, without costs.

. The Supreme Courts of California and Nevada have also upheld class waivers in employment arbitration agreements (see Iskanian v CLS Transp. Los Angeles, LLC, 59 Cal 4th 348, 365-374, 327 P3d 129, 137-143 [2014], cert denied 574 US —, 135 S Ct 1155 [2015]; Tollman v Eighth Jud. Dist. Ct., 359 P3d 113, 122-123 [Nev 2015]).

. Lewis and Morris have been consolidated for oral argument for the Supreme Court’s October 2017 Term. The question presented is whether the collective-bargaining provisions of the NLRA prohibit the enforcement under the FAA of an agreement requiring an employee to arbitrate claims against an employer on an individual, rather than a collective, basis.