Jose Vilches v. The Travelers Companies, Inc
413 F. App'x 487
| 3rd Cir. | 2011Background
- Vilches, Sheehan, and Costeira (Travelers employees) filed a class/collective wage action in New Jersey state court for unpaid overtime under FLSA and NJWHL; Travelers removed it to district court and moved to compel individual arbitration.
- At hiring, Vilches agreed that arbitration would be the exclusive forum for employment disputes under a broad arbitration clause covering statutory rights and related claims, with Travelers retaining authority to amend the policy.
- In April 2005, Travelers updated the Arbitration Policy to expressly prohibit class or collective arbitration; the policy was distributed to Vilches and they were informed it could be updated with notice.
- Vilches admitted they agreed to arbitrate but argued the 2005 amendment prohibiting class arbitration did not bind them or was unconscionable; Travelers argued the amendment bound all employed under the policy.
- The district court granted summary judgment, finding notices and assents sufficient to waive class arbitration; the court ordered individual arbitral proceedings.
- On appeal, the Third Circuit vacated the district court’s order to compel class arbitration and referred the issue of whether class arbitration was agreed to arbitration, while addressing unconscionability and upholding that the arbitration agreement remained intact.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the class arbitration waiver is enforceable against Vilches. | Vilches contends the 2005 waiver binding them is unconscionable or not assented to. | Travelers asserts Vilches assented via notices, continual employment, and annual acknowledgments, binding the waiver. | Waiver not conclusively unconscionable; refer to arbitrator to determine class arbitration viability. |
| Whether the district court should have decided the class-arbitration issue or referred it to arbitration. | District court could decide based on contract interpretation and waiver avoidance. | Arbitrator should decide whether contract permits class arbitration under silence or amendment. | Issue to be determined by arbitrator; district court erred in deciding the class-arbitration question itself. |
| Whether the 2005 amended policy is unconscionable under New Jersey law. | Timing, language, and format render waiver procedurally/substantively unconscionable. | Waiver is not substantively oppressive and procedural deficiencies are absent given notice and sophistication. | Waiver not unconscionable; not unduly oppressive given context and notice. |
| Whether the original arbitration agreement covers all disputes and thus governs the class-arbitration question. | Amendment to policy may not alter core agreement to arbitrate all disputes. | Original agreement to arbitrate remains, and the amendment addresses only the available arbitration mechanism. | Arbitration clause covers all disputes; arbitrator decides subsequent class-arbitration issues. |
Key Cases Cited
- Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758 (U.S. 2010) (contractual silence on class arbitration must be decided by arbitrator)
- Puleo v. Chase Bank USA, N.A., 605 F.3d 172 (3d Cir. 2010) (arbitrability and standard for arbitration orders; doubts resolved in movant’s favor)
- Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444 (U.S. 2003) (arbitrability and class arbitration when contract silent on class procedures)
- Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (U.S. 1991) (employment contracts and arbitration as a principle tool)
- Muhammad v. County Bank of Rehoboth Beach, Del., 912 A.2d 88 (Del. 2006) (class-arbitration waiver in consumer context; unconscionability considerations)
- Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758 (U.S. 2010) (arbitration agreements do not imply class arbitration absent clear intent)