Federal Court Deals Setback to Employers Seeking to Strip Employees’ Class Claims Through Arbitration

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Federal Court Deals Setback to Employers Seeking to Strip Employees’ Class Claims Through Arbitration

Federal Court Deals Setback to Employers Seeking to Strip Employees’ Class Claims Through Arbitration

Today, the United States District Court for the Central District of California, Hon. Josephine Staton, ruled in favor of Plaintiffs Kenneth Lee and Mark Thompson, denying Defendant JP Morgan Chase & Co.’s motion to compel arbitration on an individual basis. The Court’s decision is a victory for employees generally who seek to challenge improper pay practices on a class or collective basis. The case is Lee, et al. v. JPMorgan Chase & Co., et al. (No. 13-CV-511-JLS).

JPMorgan Chase’s motion arose after both parties had agreed that the merits of the case – whether Appraisers in the commercial lending division of JPMorgan Chase were improperly denied overtime pay – should be decided by an arbitrator. The arbitration agreements signed by some of the Plaintiffs stated that “[a]ny and all disputes that involve or relate in any way to [the employee’s] employment” would be submitted to arbitration, but the agreements did not discuss class-wide or collective claims. The issue presented to the Court was who should decide whether the Plaintiffs’ arbitration claims could proceed on a class-wide basis: the Court itself, or the arbitrator. JPMorgan Chase argued that the Court should decide the issue and should hold that the language of the Arbitration Agreements required each of the Plaintiffs to pursue his claims in an individual arbitration, rather than as part of a class-wide arbitration. The Court rejected JPMorgan Chase’s argument.

In ruling for Plaintiffs, the Court held that whether the Plaintiffs could proceed on a class-wide basis was a “procedural” question within the scope of the arbitrator’s authority to decide, not a question of “arbitrability” (i.e., whether the dispute was subject to arbitration in the first place), which would have been a question for the Court to decide. The Court noted that the U.S. Supreme Court had recently described this particular issue as an open question, see Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064, 1068 n.2 (2013), but the Court found guidance in an earlier Supreme Court decision, Green Tree Financial Corp. v. Bazzle, 539 U.S. 444 (2003) (plurality), and a decision from the Third Circuit Court of Appeals, Vilches v. Travelers Companies, Inc., 413 F. App’x 487 (3d Cir. 2011).

Today’s decision reinforces this blog’s prior view (expressed here and here) that employers that seek to compel class cases into arbitration should be careful what they wish for: they may escape Court litigation only to find themselves bearing the considerable cost of class-wide and/or multiple individual arbitrations.

Bryan Schwartz Law, P.C. represents the Plaintiffs in Lee, along with the firm of Goldstein, Borgen, Dardarian & Ho.

The Court’s order is available here. For more information about this case on behalf of commercial appraisers and review appraisers, or generally about class actions seeking wages, please contact Bryan Schwartz.

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