Jock v. Sterling Jewelers Inc.Jock v. Sterling Jewelers Inc.
Before: HALL AND CARNEY, Circuit Judges, AND KOELTL, District Judge.*
The arbitrator certified a class of Sterling Jewelers Inc. employees that included employees who did not affirmatively opt in to the arbitration proceeding. The District Court held that the arbitrator exceeded her authority in purporting to bind those absent class members to class arbitration because the arbitrator erred in determining that the arbitration agreement permits class arbitration. We hold that the arbitrator was within her authority in purporting to bind the absent class members to class proceedings because, by signing the operative arbitration agreement, the absent class members, no less than the parties, bargained for the arbitrator‘s construction of their agreement with respect to class arbitrability. We therefore reverse the judgment of the District Court. Because the issue of whether the arbitrator exceeded her authority in certifying an opt-out, as opposed to a mandatory, class is not before us in this appeal, we remand the case to the District Court to reexamine that issue in the first instance.
REVERSED AND REMANDED.
JOSEPH M. SELLERS, Kalpana Kotagal, Shaylyn Cochran, Cohen Milstein Sellers & Toll PLLC, Washington, DC; Sam J. Smith, Loren B. Donnell, Burr & Smith LLP, St. Petersburgh, FL; Thomas A. Warren, Thomas A. Warren Law Offices, P.L., Tallahassee, FL; Jessica Ring Amunson, Benjamin M. Eidelson, Jenner & Block LLP, Washington, DC, for Plaintiffs-Counter-Defendants-Appellants.
GERALD L. MAATMAN, JR., David Bennet Ross, Lorie E. Almon, Daniel B. Klein, Seyfarth Shaw LLP, New York, NY; Jeffrey S. Klein, Gregory Silbert, Weil, Gotshal & Manges LLP, New York, NY, for Defendant-Counter-Claimant-Appellee.
This is an appeal from the District Court‘s January 15, 2018 opinion and order vacating the arbitrator‘s certification of a class of Defendant-Counter-Claimant-Appellee‘s employees insofar as the class included employees who did not affirmatively opt in to the specific arbitration proceeding before the arbitrator. The District Court held that the arbitrator, Kathleen A. Roberts, exceeded her authority in purporting to bind those absent class members to class arbitration because the arbitrator erred in determining that the arbitration agreement permits class arbitration. We hold that the arbitrator‘s determination that the agreement permits class arbitration binds the absent class members because, by signing the RESOLVE Agreement, they, no less than the parties, bargained for the arbitrator‘s construction of that agreement with respect to class arbitrability. We therefore reverse the judgment of the District Court. The issue of whether the arbitrator exceeded her authority in certifying an opt-out, as opposed to a mandatory, class is not before us in this appeal, however. We therefore remand this case to the District Court to decide that issue in the first instance after allowing the parties an opportunity to present their renewed arguments with respect to that issue.
I.
Laryssa Jock (“Jock“) and her co-Plaintiffs-Counter-Defendants-Appellants (collectively, “Appellants“) are a group of current and former retail sales employees of Defendant-Counter-Claimant-Appellee Sterling Jewelers Inc. (“Sterling“).1 Jock filed the instant suit in 2008, alleging that she and other female employees were paid less than their male counterparts, on account of their gender, in violation of
All Sterling employees were required, as a condition of employment, to sign a “RESOLVE Program” agreement (“RESOLVE Agreement“) mandating that they participate in arbitration. J. App. 129. Under the RESOLVE Agreement, employees “waiv[e] [their] right to obtain any legal or equitable relief . . . through any government agency or court, and . . . also waiv[e] [their] right to commence any court action. [They] may, however, seek and be awarded equal remedy through the RESOLVE Program.” Id. The RESOLVE Agreement also provides that “[t]he Arbitrator shall have the power to award any types of legal or equitable relief that would be available in a court of competent jurisdiction[,]” and that any claim arising thereunder will be arbitrated “in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association.” Id.
II.
This is the fourth time this case has come before this Court. See Jock v. Sterling Jewelers Inc., 646 F.3d 113 (2d Cir. 2011) (”Jock I“); Jock v. Sterling Jewelers Inc., 703 F. App‘x 15 (2d Cir. 2017) (summary order) (”Jock II“); Jock v. Sterling Jewelers Inc., 691 F. App‘x 665 (2d Cir. 2017) (summary order) (”Jock III“).
In Jock I, the arbitrator issued an award in favor of the then-named plaintiffs, construing the RESOLVE Agreement to permit classwide arbitration. The District Court vacated that award, concluding that
Following our decision in Jock I, the arbitrator issued a class certification determination that certified a class of approximately 44,000 women, comprising the then-254 plaintiffs as well as other individuals who had neither submitted claims nor opted in to the arbitration proceeding (“the absent class members“). The arbitrator certified the class only with respect to Appellants’ Title VII disparate impact claims for declaratory and injunctive relief.2 The District Court denied Sterling‘s motion to vacate the class determination award, reasoning that Sterling‘s argument that the arbitrator had exceeded her powers in “purporting to bind absent class members who did not express their consent to be bound” was “foreclosed” by this Court‘s holding in Jock I that “there is no question that the issue of whether the agreement permitted class arbitration was squarely presented to the arbitrator.” Jock v. Sterling Jewelers, Inc., 143 F. Supp. 3d 127, 128-29 (S.D.N.Y. 2015) (internal quotation marks omitted).
Sterling appealed from the District Court‘s decision, and in Jock II this Court reversed and remanded, clarifying that Jock I “did not squarely address whether the arbitrator had the power to bind absent class members to class arbitration given that they, unlike the parties here, never consented to the arbitrator determining whether class arbitration was permissible under the agreement in the first place.” 703 F. App‘x at 17. The Jock II panel identified the question to be considered on remand, and one not considered in Oxford Health Plans LLC v. Sutter, 569 U.S. 564 (2013), as “whether an arbitrator, who may decide . . . whether an arbitration agreement provides for class procedures because the parties ‘squarely presented’ it for decision, may thereafter purport to bind non-parties to class procedures on this basis.” 703 F. App‘x at 18.3
This appeal followed.
III.
“In considering a challenge to a district court‘s decision to vacate a portion of an arbitration award, we review its legal rulings de novo and its findings of fact for clear error.” ReliaStar Life Ins. Co. of New York v. EMC Nat‘l Life Co., 564 F.3d 81, 85 (2d Cir. 2009).
Courts are empowered to vacate arbitration awards only “where the arbitrator[] exceeded [his or her] powers, or so imperfectly executed them that a mutual, final and definite award upon the subject matter submitted was not made.”
bargain[] for [an] arbitrator‘s construction of their agreement, an arbitral decision even arguably construing or applying the contract must stand, regardless of a court‘s view of its (de)merits. Only if the arbitrator acts outside the scope of his contractually delegated authority—issuing an award that simply reflects his own notions of economic justice rather than drawing its essence from the contract—may a court overturn his determination.
Oxford Health, 569 U.S. at 569 (internal quotation marks, citations, and alterations omitted); accord Stolt-Nielsen, 559 U.S. at 672. The focus of our inquiry under Section 10(a)(4) is “‘whether the arbitrator[] had the power, based on the parties’ submissions or the arbitration agreement, to reach a certain issue, not whether the arbitrator[] correctly decided that issue.‘” Jock I, 646 F.3d at 122 (quoting DiRussa v. Dean Witter Reynolds Inc., 121 F.3d 818, 824 (2d Cir. 1997)).
IV.
The District Court‘s decision rests on the premise that, because the absent class members did not affirmatively opt in to the arbitration proceeding and thereby consent to the arbitrator‘s authority to decide whether the RESOLVE Agreement permits class procedures, our usual deferential standard of review does not apply. In other words, as Sterling argues:
It is one thing for this Court to sustain an incorrect arbitral ruling on a question properly submitted to the Arbitrator by parties who agreed to be bound by the Arbitrator‘s decision. It is another thing altogether to sustain an incorrect decision granting the Arbitrator authority over absent class members who did not submit that question to her. . . . [T]he
Arbitrator‘s decision that she had authority over absent class members cannot be upheld on the ground that, despite being wrong, it was nonetheless within her authority.
Appellee Letter Br. (May 17, 2019), at 4. The District Court concluded that the individuals who did not affirmatively opt in to the arbitration proceeding did not agree to permit class procedures by virtue of having signed RESOLVE Agreements because “[p]lainly it is the law of the case that the Arbitrator does not have the authority, based on the agreement, to certify” a class. Sp. App. 6. The District Court thus relied on its original view that the arbitrator wrongly interpreted the RESOLVE Agreement to permit class procedures. That view is not, however, “the law of the case,” because this Court vacated the District Court‘s earlier decision that had reached that conclusion. Jock I, 646 F.3d 113. In Jock I, we had no occasion to decide whether the arbitrator “got it right” given our conclusion that such determination was not one for the courts to make. Id. at 124. The District Court further determined that the fact that the named plaintiffs and Sterling had submitted the class arbitrability question to the arbitrator also did not give the arbitrator the authority to certify the class. In doing so, the District Court relied on its own prior conclusion that the arbitrator‘s interpretation was “wrong as a matter of law.” Sp. App. 8. That logic was largely based on Justice Alito‘s concurrence in Oxford Health, which states that an arbitrator‘s “erroneous interpretation” of a contract that does not authorize class procedures cannot bind absent class members who have “not authorized the arbitrator to make that determination.” 569 U.S. at 574.
Appellants argue that the absent class members have, in fact, authorized the arbitrator to determine whether the RESOLVE Agreement permits class procedures. They contend that because all Sterling employees signed the RESOLVE Agreement, all Sterling employees “agreed that, if any of them initiated a putative class proceeding, the arbitrator in that proceeding would be empowered to decide class-arbitrability—and, if he or she found it appropriate, to certify a class encompassing other employees’ claims.” Appellant Br. 23. According to Appellants, the District Court erred by “never ask[ing] what authority absent class members conferred on Arbitrator Roberts by joining the RESOLVE Program,” a question that is a matter of contract interpretation. Id. at 26
We agree with Appellants. Although the absent class members have not affirmatively opted in to this arbitration proceeding, by signing the RESOLVE Agreement, they consented to the arbitrator‘s authority to decide the threshold question of whether the agreement permits class arbitration. As the arbitrator reasoned, “[i]t is undisputed that each of the absent class members signed the RESOLVE arbitration agreement, which clearly provides for the application of the [American Arbitration Association (‘AAA‘)] Rules.” J. App. 603; see id. at 129. The AAA Supplementary Rules for Class Arbitration (“Supplementary Rules“) apply to “any dispute arising out of an agreement that provides for arbitration pursuant to” the AAA rules “where a party submits a dispute to arbitration on behalf of . . . a class or purported class.” Id. at 434 (Supplementary Rule 1(a) (2010)). The Supplementary Rules provide that “the arbitrator shall determine as a threshold matter . . . whether the applicable arbitration clause permits the arbitration to proceed on behalf of . . . a class.” Id. at 434-35 (Supplementary Rule 3 (2010)). The RESOLVE Agreement‘s incorporation
Further supporting the conclusion that absent class members authorized the arbitrator to decide whether the arbitration may proceed on a class basis, the RESOLVE Agreement provides that “[q]uestions of arbitrability” and “procedural questions” “shall be decided by the arbitrator.” J. App. 132.5 The Supreme Court has suggested, and this Court has assumed without deciding, that the availability of classwide arbitration is a “question of arbitrability.” Oxford Health, 133 S. Ct. at 2068 n.2; Sappington, 884 F.3d at 394. The parties in this case have at times assumed that the availability of class procedures is a “procedural question.” See Appellant Br. 3-4; J. App. 208-210 (Sterling Mem. of Law (May 19, 2008)). Regardless of whether the availability of class procedures is a question of arbitrability or merely a procedural question, it is a question for the arbitrator to decide under the terms of the RESOLVE Agreement.
That conclusion is consistent with Ohio law, which governs our interpretation of the RESOLVE Agreement. See J. App. 130. Under Ohio law, the issue of whether an arbitration agreement permits class procedures is a “question of arbitrability” that is presumptively for a court to decide. Shakoor v. VXI Glob. Sols., 35 N.E.3d 539, 547 (Ohio Ct. App. 2015). But a question of arbitrability “is to be decided by the arbitrator” when the parties to an agreement “have clearly and unmistakably vested the arbitrator with the authority to decide the issue of arbitrability.” Belmont Cnty. Sheriff v. Fraternal Order of Police, Ohio Labor Council, Inc., 820 N.E.2d 918, 921 (Ohio 2004); cf. Shakoor, 35 N.E.3d at 548-50 (agreement did not provide evidence sufficiently clear and unmistakable to overcome presumption that questions of arbitrability are for court to decide). The RESOLVE Agreement “clearly and unmistakably” provides that “[q]uestions of arbitrability . . . shall be decided by the arbitrator.” Belmont Cnty. Sheriff, 820 N.E.2d at 921; J. App. 132.
Because the absent class members, no less than the parties, thus “bargained for the arbitrator‘s construction of their agreement” with respect to class arbitrability, the arbitrator acted within her authority in purporting to bind the absent class members to class procedures. Oxford Health, 569 U.S. at 569 (internal quotation marks omitted). By virtue of the absent class members’ contractually expressed consent, they, like the parties,
The District Court‘s contrary conclusion is understandable in light of this Court‘s framing of the issue in Jock II. In Jock II, we stated that Jock I “did not squarely address whether the arbitrator had the power to bind absent class members to class arbitration given that they, unlike the parties here, never consented to the arbitrator determining whether class arbitration was permissible under the agreement in the first place.” 703 F. App‘x at 17. That observation referred to the fact that the absent class members, unlike the 254 plaintiffs, did not affirmatively opt in to the proceeding in which the question was submitted to the arbitrator. Our use of “consent” as a shorthand for that fact may well have obscured the possibility that the absent class members consented in a different way to the arbitrator‘s authority to decide class arbitrability.
That those absent class members did not expressly submit themselves to this particular arbitrator‘s authority does not alter our analysis. Class actions that bind absent class members as part of mandatory or opt-out classes are routinely adjudicated by arbitrators and in our courts. See Supplementary Rule 4;
Nor is our decision inconsistent with the principles affirmed in Porzig v. Dresdner, Kleinwort, Benson, N. Am. LLC, 497 F.3d 133 (2d Cir. 2007). In Porzig, we held that an arbitration panel was without jurisdiction to order a party‘s lawyer to pay back to the party, Porzig, the lawyer‘s contingency fee, reasoning that neither Porzig nor his lawyer had agreed to arbitrate a dispute over their fee contract. We explained that “a party cannot be forced to arbitrate any dispute that it has not obligated itself, by contract, to submit to arbitration,” and that an arbitration panel “may not exceed the power granted to it
Finally, because our decision rests in part on our reasoning in Jock I, we address Sterling‘s argument that Jock I is no longer good law in light of the Supreme Court‘s recent decision in Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407 (2019).7 In Lamps Plus, the Supreme Court held that “an ambiguous agreement can[not] provide the necessary ‘contractual basis’ for compelling class arbitration.” 139 S. Ct. at 1415. Lamps Plus does not undermine our reasoning in Jock I. First, a crucial difference between the two cases is that the parties in Lamps Plus “agreed that a court, not an arbitrator, should resolve the question about class arbitration.” Id. at 1417 n.4. The class arbitrability decision in Lamps Plus was therefore subject to de novo scrutiny rather than the deferential standard of review that circumscribes courts’ review of arbitrators’ decisions. Second, Lamps Plus leaves undisturbed the proposition, affirmed in Stolt-Nielsen, that an arbitration agreement may be interpreted to include implicit consent to class procedures. Our reasoning in Jock I is, moreover, fully consistent with the Supreme Court‘s decision in the more analogous case of Oxford Health, 569 U.S. 564.
Having determined that the arbitrator acted within her authority in purporting to bind the absent class members to class proceedings, we note that it remains to be decided whether the arbitrator exceeded her authority in certifying an opt-out, as opposed to a mandatory, class for injunctive and declaratory relief. In the decision that we vacated in Jock II, the District Court held that in so doing the arbitrator exceeded her authority. See Jock, 143 F. Supp. 3d at 130-34. Applying the appropriate Section 10(a)(4) standard, the District Court concluded that under Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011), the arbitrator acted “outside her authority” and “in manifest disregard of the law” by providing putative class members with the opportunity to opt out. Id. at 130, 133. The correctness of that conclusion is not before us in this appeal. See Appellant Br. 30 n.13; Appellee Br. 9 n.2. We therefore remand this case to the District Court with directions to decide that issue after allowing the parties an opportunity to present renewed argument in light of any subsequent developments in the law.
V.
We have considered all of Sterling‘s remaining arguments and conclude that they are without merit. The judgment of the District Court is reversed, and the case is remanded for further proceedings consistent with this opinion.