Ninth Circuit Holds that Class Action Waiver in Arbitration Agreement Is Enforceable

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On August 21, 2013, the U.S. Court of Appeals for the Ninth Circuit became the fifth circuit court to hold that class action waivers in arbitration agreements are enforceable in the context of wage and hour class action claims. Following closely on the heels of the Second Circuit, the Ninth Circuit held in Richards v. Ernst & Young LLP that the class action waiver provision of Ernst & Young's arbitration agreement barred a state law class action alleging unpaid compensation. The court also vacated the lower court's order certifying a class of plaintiffs.

Dealing yet another blow to the National Labor Relations Board's decision in D.R. Horton, Inc., in which the NLRB found that class action waivers violated federal labor law, the Ninth Circuit joined other circuits in holding that the National Labor Relations Act does not vitiate the enforceability of such waivers. Despite the overwhelming tide against its decision in D.R. Horton among federal courts, the NLRB continues to follow that precedent, with an administrative law judge ruling on the same day as the Richards decision that a class action waiver in an arbitration agreement used by JP Morgan violated the NLRA.

The Ninth Circuit also rejected the plaintiff's attempt to avoid the class action waiver by arguing that Ernst & Young waited too long to raise that defense. Ernst & Young explained that it waited to raise the defense because, prior to the U.S. Supreme Court's decision in AT&T Mobility v. Concepcion, courts in the Ninth Circuit found such waivers unconscionable. After Concepcion clarified federal policy favoring enforcement of arbitration agreements, Ernst & Young asserted the defense.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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