JetBlue Airways Corporation, Appellant-Respondent, v Robert M. Stephenson et al., Respondents-Appellants
Supreme Court, Appellate Division, First Department, New York
April 7, 2011
931 N.Y.S.2d 284
JetBlue Airways Corporation, Appellant-Respondent, v Robert M. Stephenson et al., Respondents-Appellants. [931 N.Y.S.2d 284]
The pilots contend that JetBlue breached section 3A of their employment agreements. Respondents (hereinafter referred to as the pilots) filed a single demand for arbitration with the AAA on behalf of all of the pilots.1 On June 22, 2010, JetBlue commenced this proceeding seeking: (1) to compel individual arbitration
The pilots moved to dismiss the petition. They argued that the employment agreements could not be read to prohibit collective arbitration. They asserted that a single breach of contract issue applied identically to all, and that it would be wasteful to require hundreds оf separate arbitration proceedings to resolve an issue that could be disposed of in just one proceeding. The pilots also argued that the FAA did not apply, as their job description fell under an exemption in section 1 of the act for “any other class of workers engaged in foreign or interstate commerce” (
The IAS court held that the FAA governed the dispute, and remanded the matter to the AAA to determine whether the employment agreements permitted collective arbitration under the AAA rules, New York law and the FAA. The IAS court found the FAA applied because, while JetBlue transported both passengers and cаrgo, the facts demonstrated that JetBlue “primarily” moved passengers. The court noted that various courts had interpreted the act to exempt only workers primarily engaged in the transportation of goods. The court further found that the FAA governed the employment agreements as to procedure, and that Nеw York law was the substantive law to be applied. The court denied JetBlue‘s petition for a preliminary injunction and a stay of collective arbitration, as well as to compel individual arbitrations, based on its finding that the availability of collective arbitration was a procedural issue for the arbitrator to determine, not an issue of arbitratibility for the court to decide.
It must first be determined whether the FAA applies here. That statute expressly exempts from its purview the “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce” (
In arguing that the FAA does not apply, the pilots rely on Lepera v ITT Corp. (1997 WL 535165, 1997 US Dist LEXIS 12328 [ED Pa 1997]). In that case, the district court found that a pilot whose primary responsibility was to transport corporate еxecutives in a private jet was not subject to the act. The court stated that “[i]t is simply nonsensical to exclude from coverage those workers engaged in the direct transportation of goods, but not those engaged in the direct transportation of persons” (1997 WL 535165, *7, 1997 US Dist LEXIS 12328, *20). However, in Kowalewski v Samandarov (590 F Supp 2d 477 [SD NY 2008]), a case decided later, after the Suprеme Court‘s holding in Circuit City, car service drivers were not deemed to be exempt from the FAA. In that case, the drivers argued that they were exempt because they transported passengers only. The district court noted the Circuit City Court‘s emphasis on goods, in determining what types of workers are exempt from the act, and found that the focus should be placed on the primary purpose of the industry in which the worker toils. Since the primary purpose of the car service industry did not involve the movement of goods, the court found that such drivers were not exempt from the act (590 F Supp 2d at 483-485).
We agree with the IAS court that Kowalewski is much more persuasive authority than Lepera. Although the latter case expressly found that the exemption applied to рilots who, like the JetBlue pilots here, primarily carried passengers, it was decided before Circuit City. Accordingly, the Lepera court did not, as the Kowalewski court did, have the benefit of the Supreme Court‘s teaching that the exemption applied to employees involved primarily in the transportation of goods. Since the pilots in this case are engaged in an industry which is primarily concerned with the transportation of passengers, we find that the FAA applies to this dispute.
Next we must consider whether the court or the arbitrators will decide if the arbitrations must be individual or may be held jointly. New York State courts have long held that all issues surrounding
Who should decide whether the employment agreements permitted collective, or joint, arbitration, depends on whether it is a procedural or “gateway” issue. If it is a procedural issue, the arbitrator should decide. On the other hand, if it is a “gateway” question, going to arbitrability, a court should decide (see Howsam v Dean Witter Reynolds, Inc., 537 US 79, 83-84 [2002]). In Green Tree Financial Corp. v Bazzle (539 US 444 [2003]), a four-justice plurality of the United States Supreme Court held that where the question is whether collective arbitration is permissible, it is a procedural matter and thus for the arbitrators. In Bazzle, the respondents secured a large arbitration award in a proceeding that had been certified by the court as a class arbitration. The petitioner contended that the arbitration agreement expressly prohibited class arbitrations (539 US at 449). The Supreme Court plurality rejected the petitioner‘s construction of the arbitration clause, but remanded the question to the arbitrator to determine whether the pаrties’ agreement permitted class arbitration (id. at 451-452). The plurality noted that the agreement broadly called for “all disputes” relating to the contract to be arbitrated (id. at 451), and further stated:
“In certain limited circumstances, courts assume that the parties intended courts, not arbitrators, to decide a particular arbitration-relatеd matter (in the absence of clear and unmistakable evidence to the contrary). These limited instances typically involve matters of a kind that contracting parties would likely have expected a court to decide. They include certain gateway matters, such as whether the parties have a valid аrbitration
agreement at all or whether a concededly binding arbitration clause applies to a certain type of controversy . . . “The question here—whether the contracts forbid class arbitration—does not fall into this narrow exception. It concerns neither the validity of the arbitration clause nor its applicability to the underlying dispute between the parties . . . Rather the relevant question here is what kind of arbitration proceeding the parties agreed to. That question . . . concerns contract interpretation and arbitration procedures. Arbitrators are well situated to answer that question” (id. at 452-453 [internal quotation marks, citations and brackets omitted]).
JetBlue asserts that because only a plurality of the Supreme Court decided Bazzle, it does not control. Rather, JetBlue relies on the Supreme Court‘s discussion in Stolt-Nielsen (559 US at 662, 130 S Ct at 1758). In that case, the Supreme Court reviewed an arbitration panel‘s decision that an agreement to arbitrate betweеn the parties contemplated class arbitration, even though the agreement was silent on that point. The Supreme Court, in discussing the propriety of the arbitrators’ having considered the issue in the first place, called into question the extent to which both parties, in maintaining that the question was for the arbitrators, should rely оn Bazzle. The Stolt-Nielsen Court emphasized that only a plurality of the Court in Bazzle supported the proposition that the question of whether an arbitration agreement permits class arbitration is for the arbitrator, and not the court, to decide. However, the Supreme Court in Stolt-Nielsen ultimately avoided answering the question, noting that the parties had stipulated that the arbitrators should make that determination (559 US at 662, 130 S Ct at 1770-1772).
The Stolt-Nielsen Court did, however, decide that the arbitrators in that case incorrectly construed the parties’ agreement as permitting class arbitration. The Court stated that “[a]n implicit agreement to authorize class-action arbitration . . . is not a term that the arbitrator may infer solely from the fact of the parties’ agreement to arbitrate. This is so because class-action arbitration changes the nature of arbitration to such a degree that it cannot be presumed the parties consented to it by simply agreeing to submit their disputes to an arbitrator” (559 US at 685, 130 S Ct at 1775). The Supreme Court further stated that “fundamental changes [are] brought about by the shift from bilatеral arbitration to class-action arbitration” (559 US at 686, 130 S Ct at 1776). These include that the latter “no longer resolves a single dispute between the parties to a single agreement, but instead resolves many disputes between hundreds or perhaps even thousands of parties,” that the AAA‘s Class Rules
While there is no binding precedent from the United States Supreme Court holding that an arbitrator should decide whether collective arbitration is permissible, there is likewise no authority requiring a court to decide the question as a “gateway” issue. As noted above, the category of gateway issues is a narrow one limited to questions that involve the enforceability of an arbitration agreement, its applicability to a particular dispute, the parties’ compliance with the agreement and the timeliness of a claim (Matter of County of Rockland [Primiano Constr. Co.], 51 NY2d 1, 6 [1980], supra). No such threshold question is involved in this dispute. Instead, the issue here is a procedural one that has “grow[n] out of the dispute” (Stolt-Nielsen, 559 US at 685, 130 S Ct at 1775 [internal quotation marks omitted]), since it concerns not whether the parties agreed to arbitrate the dispute in question, but the manner in which the arbitration should proceed.
JetBlue argues that, just as the Supreme Court in Stolt-Nielsen found that the agreement at issue there could not be construed by any reasonable arbitrator to permit class arbitration, here we should declare that the agreement does not permit collective arbitration. The pilots counter by arguing that Stolt-Nielsen does not control this case because class arbitration, which they are not seeking, is unique. They characterize their demand as one for joint, or collective, arbitration, which they maintain is far different than class arbitration. Indeed, they claim that the procedural mechanism they seek contains none of the “fundamental changes” from bilateral arbitration identified by the Court in Stolt-Nielsen.
The pilots are correct. Class arbitration and the collective proceeding that the pilots have demanded here are so fundamentally different that Stolt-Nielsen does not dictate the result. In the colleсtive arbitration sought here, unlike in a class arbitration, all of the affected pilots are actual parties. Further, in a class proceeding, common issues need only “predominate” over issues that are unique to individual members; identity of issues is not required (Friar v Vanguard Holding Corp., 78 AD2d 83, 98 [1980]). Here, there is only one straightforward question that needs to be аnswered by the arbitration panel, and its disposition will equally affect each and every pilot. Thus, because
Finally, we do not agree with JetBlue that a court should decide whether the collective arbitration sought by the pilots violated the forum selection clause in their employment agreements. That provision requires that arbitration take place before “a single arbitrator in the city where the Pilot‘s base of operations is located.” The pilots persuasively argue that they may unilaterally waive the forum clause because it was designed exclusively for their benefit. Indeed, the pilots assert that the clause was included in the agreements to conform with the law of the various states where JetBlue bases its operations. Certain of those states require employees to be given the option of arbitrating disputes in a local forum so as to balance the playing field with their employer. JetBlue does not deny that the forum clause was negotiated for this purpose only. Thus, we reject its position that it could not be unilaterally waived by the pilots and that it is a gateway issue that the court should have considered.
We have considered JetBlue‘s remaining contentions and find them unavailing.
Concur—Mazzarelli, J.P., Catterson, Manzanet-Daniels and Román, JJ.
[Prior Case History: 31 Misc 3d 1241(A), 2010 NY Slip Op 52405(U).]