444 F.Supp.3d 593
S.D.N.Y.2020Background
- Plaintiffs (field technicians) filed an FLSA collective and Rule 23 class action; conditional certification motion was filed May 15, 2019 and granted (as to NYC FTs) on Nov. 22, 2019.
- On Aug. 22, 2019, ASI implemented a Statute of Limitations Agreement and an Arbitration Agreement requiring employees to sign as a condition of continued employment; the arbitration clause covered FLSA claims.
- The agreements did not disclose the pending litigation or that signing would forfeit the right to participate in the collective action; employees felt pressured to sign quickly.
- Defense counsel (Ira Sturm) drafted and was closely involved in the rollout; email and deposition evidence show managers urged rapid collection of signatures and discussed stopping likely opt-ins.
- After a court conference and expedited discovery, ASI altered its messaging to say signing was not required; nevertheless nearly all targeted employees signed.
- The Court held ASI’s communications were misleading and coercive, ruled the Arbitration Agreement unenforceable as to putative plaintiffs in this litigation, granted corrective notice, and declined to enter an overbroad protective order.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of post-filing arbitration agreements against putative opt-in plaintiffs | O'Conner: Agreements procured without disclosing pending suit and under coercion; unenforceable as to putative members | ASI: Epic Systems requires enforcement of arbitration agreements; NLRB/Cordúa matters preempt or control | Court: Agreements unenforceable as to putative plaintiffs here (misleading/coercive rollout; unconscionable nondisclosure) |
| Court authority to invalidate arbitration for notice process protection | Plaintiffs: Court has supervisory authority over communications in collective actions (Hoffmann-La Roche) | ASI: Preemption/NLRB exclusive jurisdiction; First Amendment limits; plaintiffs lack equitable standing | Court: District court has authority; NLRB/ preemption arguments rejected; corrective relief appropriate |
| Applicability of contract-defenses to arbitration clauses (fraud/duress/unconscionability) | Plaintiffs: State contract law defenses apply; adhesion/unconscionability where material facts (pending suit) omitted | ASI: Epic Systems forecloses such challenges in employment context | Court: Epic Systems does not bar generally applicable contract defenses; unconscionability and coercion can invalidate arbitration |
| Request for broad protective order barring future ASI communications | Plaintiffs: Complete restriction needed to prevent further coercive contacts | ASI: Communication ban infringes employer rights and is overbroad | Court: Denied—order would be overbroad and impractical for current employees; narrower corrective notice ordered |
Key Cases Cited
- Hoffmann-La Roche Inc. v. Sperling, 493 U.S. 165 (1989) (district courts have discretionary authority to oversee notice-giving in collective actions)
- Gulf Oil Co. v. Bernard, 452 U.S. 89 (1981) (court authority to manage class action communications and enter protective orders)
- Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018) (arbitration agreements generally enforceable but subject to ordinary contract defenses)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) (arbitration is a matter of contract)
- Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985) (courts must apply ordinary contract defenses to arbitration agreements)
- Nicosia v. Amazon.com, Inc., 834 F.3d 220 (2d Cir. 2016) (threshold question to arbitrate determined by state contract law principles)
- In re Currency Conversion Fee Antitrust Litig., 361 F. Supp. 2d 237 (S.D.N.Y. 2005) (misleading communications and omission of material facts can render arbitration clauses unenforceable)
- Billingsley v. Citi Trends, Inc., [citation="560 F. App'x 914"] (11th Cir. 2014) (coerced signing of arbitration agreements can be invalidated to allow opt-in plaintiffs to join)
- JLM Indus., Inc. v. Stolt-Nielsen SA, 387 F.3d 163 (2d Cir. 2004) (adhesion contract and unconscionability principles)
- Brookhaven Hous. Coal. v. Solomon, 583 F.2d 584 (2d Cir. 1978) (arbitration clauses may be unenforceable if inclusion resulted from fraud or coercion)