Class Claim Arbitration Waivers Win Big in Ninth Circuit

by Sherman & Howard L.L.C.

In two cases from the Ninth Circuit Court of Appeals on June 23, 2014, arbitration agreements won big on the class-claims waiver issue.  This is good news for the employers operating in the Ninth Circuit, and California in particular.

Davis v. Nordstrom, Inc., No. 12-17403.  Nordstrom’s dispute resolution program required employees to arbitrate individual claims but allowed class claims to proceed to litigation in court.  Nordstrom agreed to provide employees with 30 days’ notice of any substantive changes before enforcing the new terms.  In light of AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), which held that arbitration agreements containing a waiver of class claims were enforceable (overturning an earlier California Supreme Court case), Nordstrom revised its arbitration provision to require employees to arbitrate nearly all claims individually, effectively precluding most class action lawsuits.  Nordstrom issued letters to its employees notifying them of the change and enclosing the revised agreement.  Several weeks later, an employee brought wage-related claims against Nordstrom on behalf of herself and several others.  Nordstrom, relying on the new arbitration policy, moved to compel individual arbitration, and the district court denied the motion.  On appeal, the Ninth Circuit reversed in favor of Nordstrom.  It ruled that Nordstrom complied with the agreement’s prescribed method of notice—30 days’—and that such notice was reasonable under California law.  The Ninth Circuit also ruled that Nordstrom was not required to expressly inform employees that their continued employment after receiving the policy modification letter constituted acceptance of the new policy terms.

Johnmohammadi v. Bloomingdale’s, Inc., No. 12-55578.  An employee brought state law claims against Bloomingdale’s to recover unpaid overtime wages on behalf of herself and others.  Bloomingdale’s removed the case to federal court and then moved to compel individual arbitration pursuant to its dispute resolution program.  Upon her hire, the employee had received information on the dispute resolution program including an opt-out form to be returned within 30 days.  She did not return the form.  The district court compelled individual arbitration despite the employee’s challenging the class waiver provision.  The employee argued the class waiver was unenforceable under the Norris-LaGuardia Act (providing for freedom from interference of concerted activities) and the National Labor Relations Act (same).  The Ninth Circuit affirmed the district court, holding that Bloomingdale’s did not interfere with, restrain, or coerce the employee in the exercise of her right to file a class action.  First, Bloomingdale’s did not require the employee to accept a class-action waiver as a condition of her employment, because it allowed her the option to opt-out of the dispute resolution program at the beginning of her employment.  Bloomingdale’s also did not express or imply any threats of termination or retaliation if she decided to opt out of arbitration.  Finally, Bloomingdale’s did not coerce the employee in the exercise of her right to class litigation—it merely gave her a choice.  The Ninth Circuit also rejected the employee’s argument that the right to participate in class litigation is unwaiveable, as well as her argument that Bloomingdale’s dispute resolution program offer was akin to cases wherein an employer unlawfully offers its employees a benefit in exchange for the employees’ agreement to refrain from protected activity.

Since Concepcion, arbitration agreements routinely contain class-waiver provisions.  Just as routinely, though, litigants make new and different arguments to get around the clear federal policy in favor of enforcing arbitration agreements.  These two cases may sound the death knell of challenges to class claim waivers in the Ninth Circuit.

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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