Michelle Richards v. Ernst & Young, LLP
734 F.3d 871
9th Cir.2013Background
- Michelle Richards, a former Ernst & Young (E&Y) employee, sued E&Y on state wage-and-hour claims; her case was consolidated with an earlier suit by two other former employees (Ho and Fernandez).
- E&Y moved to compel arbitration after the Supreme Court decided AT&T Mobility v. Concepcion (2011), invoking an arbitration agreement that bars class/arbitration proceedings.
- The district court denied E&Y’s motion, finding E&Y waived its right to arbitrate by failing to assert it earlier in the consolidated litigation and by participating in pretrial proceedings.
- The district court also certified a class with Richards as representative; the Ninth Circuit considered the validity of compelling arbitration and its effect on class certification.
- On appeal, the Ninth Circuit reviewed waiver de novo, applying the three-part Fisher test: (1) knowledge of the right, (2) acts inconsistent with it, and (3) prejudice to the opposing party.
- The Ninth Circuit reversed: it found Richards failed to prove prejudice from E&Y’s delay, and therefore E&Y had not waived arbitration; it vacated the class certification order because the arbitration agreement precluded class arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did E&Y waive its contractual right to arbitrate? | Richards: E&Y waited to move to compel arbitration until after Concepcion and after participating in litigation, so it waived arbitration. | E&Y: Timely invoked arbitration after Concepcion; participation did not prejudice Richards and thus did not constitute waiver. | Reversed; no waiver because Richards failed to show prejudice. |
| Did pre-motion litigation (discovery, briefing) cause prejudice supporting waiver? | Richards: Discovery and litigation costs during the delay prejudiced her; some claims were dismissed. | E&Y: Costs were caused by plaintiff’s choice of forum; discovery did not yield information that wouldn’t be available in arbitration; dismissals weren’t on the merits (or were standing issues). | Rejected; expenses not shown to be prejudicial and dismissals were not merits rulings. |
| Could Richards rely on the NLRB’s D.R. Horton decision to invalidate the arbitration agreement’s class waiver? | Richards: D.R. Horton supports that collective-action waivers violate the NLRA and render arbitration agreement unenforceable. | E&Y: Horton is inapplicable; courts should follow FAA and Supreme Court precedent enforcing arbitration agreements per their terms. | Not considered—argument not raised below; courts generally decline to defer to D.R. Horton given Supreme Court FAA precedent. |
| Effect on class certification if arbitration compelled? | Richards: Class should remain because class relief necessary and arbitration unenforceable as to class waiver. | E&Y: Arbitration agreement prohibits class arbitration; compelling arbitration precludes class certification. | Compel arbitration and vacate class certification because arbitration agreement precludes class arbitration. |
Key Cases Cited
- Fisher v. A.G. Becker Paribas Inc., 791 F.2d 691 (9th Cir. 1986) (establishes three-part waiver test for arbitration)
- Oscar v. Alaska Dep’t of Educ. & Early Dev., 541 F.3d 978 (9th Cir. 2008) (distinguishes dismissal without prejudice from merits dismissal)
- Equity Lifestyle Props., Inc. v. Cnty. of San Luis Obispo, 548 F.3d 1184 (9th Cir. 2008) (standing and jurisdictional questions precede merits)
- AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011) (courts must enforce arbitration agreements according to their terms)
- Am. Express Co. v. Italian Colors Rest., 133 S. Ct. 2304 (2013) (reiterates rigorous enforcement of arbitration agreements and limits on judicially-created exceptions)