In a recent decision (Jock v. Sterling Jewelers Inc., No. 18-153-cv (2d Cir. Nov. 18, 2019)), the United States Court of Appeals for the Second Circuit held that an arbitrator’s determination of class arbitrability binds even non-party class members who did not affirmatively opt in to the arbitration proceeding.

In 2008, the lead plaintiff filed the underlying lawsuit, alleging that Sterling Jewelers Inc. (“Sterling”) paid her and other female employees less than their male counterparts on account of their gender, in violation of Title VII of the Civil Rights Act of 1964 and the Equal Pay Act. All Sterling employees signed an arbitration agreement as a condition of employment that provided that all claims will be arbitrated “in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Associations” (the “AAA”). The case was therefore sent to arbitration.

During the underlying arbitration and three appeals that reached the Second Circuit, the arbitrator 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 district court vacated the class certification on the grounds that it had previously decided that the arbitration agreement did not authorize class procedures and, even if the arbitrator’s “erroneous interpretation” of the agreement could bind the approximately 250 named plaintiffs who had “authorized the arbitrator to make that determination,” that interpretation could not bind the remaining, absent class members.

In the fourth appeal of this case, the Second Circuit reversed the district court’s decision that the arbitrator exceeded her authority in purporting to bind absent class members to class arbitration because the AAA 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.” Therefore, the court reasoned, the arbitration agreement’s incorporation of the AAA Rules “serves as clear and unmistakable evidence of the parties’ intent to delegate such issues to an arbitrator.” Accordingly, the absent class members’ signing of the arbitration agreement contractually expressed consent to the arbitrator’s “construction of their agreement.”

Under the deferential standard of review that empowers district courts to vacate an arbitration award (9 U.S.C. § 10(a)(4)), the Second Circuit held that the district court improperly decided the merits of the arbitrator’s class certification decision when the court was limited only to deciding whether the arbitrator had the authority to determine class procedures with respect to the absent class members.

The case was, however, remanded to the district court to decide the issue of whether the arbitrator exceeded her authority in certifying an opt-out, as opposed to a mandatory, class for injunctive and declaratory relief. Specifically, the district court was instructed to consider whether the arbitrator had acted “outside her authority” and “in manifest disregard of the law” by providing putative class members with the opportunity to opt out of the proceedings.


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