Gibbons Law Alert
On December 3, 2013, the Fifth Circuit Court of Appeals reversed the decision of the National Labor Relations Board (the “Board” or “NLRB”) in D.R. Horton, Inc. and held that D.R. Horton’s arbitration agreement prohibiting class or collective action claims did not violate the National Labor Relations Act (“NLRA”). In so holding, the court found that the Board did not give proper weight to the Federal Arbitration Act (“FAA”).
The question concerning the enforceability of class action waivers in arbitration agreements to foreclose an employee’s ability to litigate collective actions under the Fair Labor Standards Act (“FLSA”) has been answered affirmatively in New York by the Second Circuit Court of Appeals. On October 15, 2013, the Second Circuit rejected a rehearing petition from Stephanie Sutherland, a former Ernst & Young LLP employee, who challenged a class action wavier in an arbitration agreement that barred her from pursuing a collective action for overtime pay under the FLSA. The decision lets stand the Circuit Court’s August 9th panel ruling that an employee can be required as a condition of employment to waive, pursuant to an arbitration agreement, the right to bring a collective or class action.
Purchasers of units in planned real estate developments, such as condominium complexes, often enter into purchase agreements with the developer that contain arbitration provisions requiring the purchasers to arbitrate any claims they may have arising out of the construction and sale of the unit. In Hudson Tea Buildings Condo Assoc. v Block 268 LLC, the New Jersey Appellate Division recently considered questions over the enforceability of such provisions in a lawsuit involving some claims that were subject to the arbitration provision and some that were not.
Last week, a National Labor Relations Board Administrative Law Judge (the “ALJ”) found that a Missouri cellphone retailer violated the National Labor Relations Act (the “NLRA”) by requiring, as a condition of employment, its sales representative employees to enter into arbitration agreements mandating that all employment disputes be subject to individual arbitration. In doing so, the ALJ rejected the employer’s argument that the Supreme Court’s recent decision in American Express Co. v. Italian Colors Restaurant, 133 S. Ct. 2304 (2013), supported enforcement of the arbitration agreement. In American Express Co., the Court held that class action waivers in arbitration agreements are enforceable under the Federal Arbitration Act (“FAA”), even when the plaintiff’s cost of individually arbitrating a federal statutory claim is prohibitively expensive.
In Mortensen v. Bresnan Communications, LLC, the plaintiffs filed a putative class action against Bresnan Communications alleging violations of various federal and Montana state laws in connection with targeted advertising that they received as customers of high-speed, broadband Internet service. When signing up for the service, the plaintiffs had entered into a subscriber agreement that contained a mandatory arbitration provision and designated the application of New York law to all disputes. Applying the U.S. Supreme Court’s 2011 decision in AT&T Mobility LLC v. Concepcion, the Ninth Circuit found that the Federal Arbitration Act (“FAA”) preempted a Montana state law that the District Court had relied on to invalidate the mandatory arbitration clause.
In Allied Professionals Insurance Co. v. Jodar, New Jersey’s Appellate Division affirmed a trial court order denying enforcement of an arbitration choice-of-forum provision in a medical malpractice insurance contract. The decision is notable because it broadly interprets prior Appellate Division case law, reaches a contrary result to a recent Law Division case where the issue went unchallenged, and paves the way for further extension of the result.
In its recent decision in SBRMCOA, LLC v. Bayside Resort, Inc., the Third Circuit clarified when challenges to a contract containing an arbitration clause must be arbitrated and when they must be decided by a court. Emphasizing that the relevant distinction is between challenges to a contract’s validity, which are subject to arbitration, and challenges to a contract’s formation, which generally are not, the Court concluded that a claim that a contract was coerced must be arbitrated, but a claim that a contract was beyond a signatory’s authority or ultra vires requires judicial determination.
In its recent opinion in In re: Pharmacy Benefit Managers Antitrust Litigation, the Third Circuit held that a defendant waived its right to arbitration after “actively” and “aggressively” litigating an antitrust dispute for ten months, even though no discovery had taken place. Emphasizing that no one factor is determinative, the Third Circuit’s holding is somewhat of a departure from prior cases finding waiver, which “uniformly featured significant discovery activity in the District Court.”
The District of New Jersey recently held that a binding arbitration procedure contained in an employee handbook and the corresponding waiver in a signed acknowledgement form were enforceable despite a disclaimer in the handbook declaring the document to be unenforceable as a contract. In Brooks v. Brookdale Senior Living Communities, Inc., No. 12-CV-2821 (RBK/AMD) (D.N.J. Dec. 20, 2012), the defendant employer moved to dismiss the employee’s complaint and compel arbitration on the grounds that the employer had a binding arbitration procedure in its handbook and the employee executed a waiver of her right to sue the employer in court under two New Jersey statutes.
The amended Rules Governing the Courts of the State of New Jersey will take effect on September 4, 2012. Among the more important amendments are those concerning a party’s ability to appeal an arbitration order. Typically, only final orders that conclude a litigation as to all parties and all issues are immediately appealable. But, as a result of amendments made in 2010, the current version of Rule 2:2-3(a) expands the notion of a final order in the context of orders compelling arbitration, providing that “an order compelling arbitration, whether the action is dismissed or stayed, shall also be deemed a final judgment of the Court for appeal purposes.” The New Jersey Supreme Court in GMAC v. Pittella, 205 N.J. 572 (2011), expanded that Rule still further by holding that “orders compelling or denying arbitration are deemed final and appealable as of right as of the date entered.” To implement that decision, Rule 2:2-3(a) has been amended to state that “any order either compelling arbitration, whether the action is dismissed or stayed, or denying arbitration shall also be deemed a final judgment of the Court for appeal purposes.” An amendment to Rule 2:9-1(a) will permit the Trial Court to retain jurisdiction, pending appeal, over other parties and claims that remain in that court.