District Court May Not Decide Whether The Arbitrator "Got It Right"
On March 19, 2012, the United States Supreme Court denied a petition for a writ of certiorari in an interesting employment company-wide gender discrimination case. Sterling Jewelers Inc. v. Jock, 646 F.3d 113 (2nd Cir. 2011), cert. den., 2012 WL 3356. The denial of certiorari is not a ruling on the merits, but it does leave standing the 2nd Circuit opinion in the case decided before a panel of Judges Winter, Pooler, and Hall. Judge Winter dissented.
This case, brought by a group of retail sales employees, has followed a twisted path. The employees sued their employer over discriminatory promotion and compensation policies that allegedly denied promotional opportunities to female employees and paid them less than their male counterparts.
The matter was submitted to arbitration. The arbitrator found that the employees could seek to certify a class. USDC Judge Jed S. Rakoff denied the employer's motion to vacate the arbitration award, and the employer appealed. The Court of Appeals then allowed the district court to reconsider its determination in light of Stolt-Nielsen S.A. v. AnimalFeeds International Corp., 130 S.Ct. 1758 (2010). After reconsideration, the district court granted the employer's motion to vacate the arbitration award on the ground that the arbitrator had exceeded her authority. The employees appealed, the Court of Appeals reversed and remanded, and now the Supreme Court has denied the employer's petition for writ of certiorari.
At issue in the Court of Appeals opinion was the arbitrator's determination that the employees could seek to certify a class, despite the fact that the arbitration agreement said nothing explicit about class arbitration. The arbitrator found that under the then existing state of the law, a class action was a possibility.
After being forced to reconsider the matter, the district court concluded that Stolt-Nielsen was controlling. In that case, there was "silence" about class arbitration, and the Supreme Court concluded that silence was not enough to show an intent to allow arbitration by a class. Judge Rakoff found Stolt-Nielsen to be determinative.
The Court of Appeals, however, concluded that the district court did not apply "the appropriate level of deference when reviewing the arbitration award." "Under our precedent," the majority explained, "it is not for the district court to decide whether the arbitrator 'got it right' when the question has been properly submitted to the arbitrator and neither the law nor the agreement categorically bar her from deciding that issue."
Side-stepping the binding effect of Stolt-Nielsen required some footwork by the Court of Appeals. For one thing, Stolt-Nielsen was decided by the Supreme Court too late for the arbitrator to rely on – so the arbitrator didn’t have to rely on it. Also, according to the Court of Appeals, the “silence” in Stolt-Nielsen actually involved a "stipulation" that there was no agreement to arbitrate, rather than a different expression of "silence" from which an arbitrator could still find an "implied" agreement to arbitrate. (Apparently there is more than one way to be silent).
In the future, the impact of Sterling Jewelers may be circumscribed. First, some employment contracts will expressly address the class arbitration issue. Second, Stolt-Nielsen has been decided; going forward, it is precedent, unless it can be effectively distinguished from the particular facts of the case. Finally, in Sterling Jewelers, the arbitrator only found that it was possible under the arbitration agreement to certify a class, not that there was a certified class. After Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541 (2011), which will also need to be considered going forward, class certification has become more difficult in company-wide gender discrimination cases.
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