Murphy (Oil)’s Law: Any class action that can be individually arbitrated, will be individually arbitrated

By: Ryan McGinty

Arbitration agreements, used to avoid the often heightened costs associated with litigation in a courtroom, are not uncommon in the world of commercial disputes and employment contracts.[1]  A major form of alternative dispute resolution (“ADR”), employers have abandoned what was initially a voluntary process.[2] The new desire was for a more deliberate forced arbitration clause, which has become a necessary condition for many formal employment agreements.[3]  In 2011, and again in 2015, the Supreme Court reaffirmed a company’s right to bar consumers from uniting together in a class action suit against the company, as permitted by the Federal Arbitration Act of 1925 (“FAA”).[4]  This blog post is concerned with the future applicability of that bar or waiver power as a means to block employee’s collective action suits distinguished from class actions without the employer-employee relation.[5]

Specifically, the issue surrounding arbitration agreements has been reignited in conjunction with the still pending change to the U.S. Supreme Court, which last month agreed to review the validity of class action waiver clauses in employer-employee arbitration agreements.[6] In doing so, our nation’s highest court granted petitions for writ of certiorari in three major cases; Epic Systems Corp. v. Lewis,[7] Ernst & Young v. Morris,[8] and the Fifth Circuit appeal of NLRB v. Murphy Oil USA Inc.[9]

Focusing on the controversial Murphy Oil decision, the question presented is whether or not courts will follow this case as appropriate precedent after its upcoming review with the addition of a new Supreme Court Justice?  After the National Labor Relations Board (“NLRB”) concluded that Murphy Oil had “unlawfully required employees at its Alabama facility to sign an arbitration agreement waiving their right to pursue class and collective actions,” Murphy Oil successfully petitioned the Court which reversed the Board’s ruling in part. [10] With reference to a D.R. Horton analysis,[11] the NLRB was found to have disregarded conflicting evidence and previous rulings before it originally held that Murphy Oil violated section 8(a)(1) of the National Labor Relations Act (“NLRA”).[12]  Creating a further split from the Seventh and Ninth Circuits, the Fifth Circuit Court reasoned that arbitration agreements must be enforced under the FAA since the later enacted NLRA does not contain any overriding congressional mandate as it pertains to arbitrations.[13]  On review, the court will hone in on the legality of companies to include collective action waivers that force plaintiffs to sue individually.[14]  The problem, many argue, is that without larger collective action, corporations will not change their behavior in bad faith.[15]

Currently, eight justices are sitting on the high court, split 4-4 between writing opinions with a more liberal verse conservative brush.[16] Without Justice Antonin Scalia, who authored the 5-4 opinion in AT&T Mobility v. Concepcion,[17] employers are left wondering whether the new Supreme Court Justice will follow in Scalia’s footsteps while inevitably ending the 4-4 deadlock we have become familiar with.[18] If confirmed in time, the conservative approach carried out famously by Scalia may be echoed by a ninth justice to apply not only to consumers but collective action by employees on a federal level.[19]  According to Gerald Maatman, co-chair of the class action defense group at Seyfarth Shaw, “[f]or many CFO’s, this may be the most important thing happening on the law front in 2017.”[20]

President Donald Trump promptly moved to nominate Tenth Circuit Judge Neil M. Gorsuch to fill the vacant Supreme Court seat.[21]  At age forty-nine, Judge Gorsuch has a disciplined approach to labor issues, but has considered the NLRB statutory interpretation to be expansive in certain cases, and might be inclined to favor employers if present during a review of Murphy Oil.[22]  Professor Sample from the Maurice A. Deane School of Law at Hofstra University, has touched on the nomination of Gorsuch calling him a “cautious, very careful, very studious [and] scholarly jurist.”[23]  Further, Professor Sample notes that the consequences of what he has deemed an inevitable confirmation will shape the Supreme Court for decades, especially with how the Supreme Court sits with Justice Ginsberg turning eighty-four and Justice Kennedy entertaining the possibility of stepping down.[24] Presumably, Gorsich being a Trump-nominated justice will be pro-business and uphold the Murphy Oil reversal.[25] This potential change of law would give large companies huge leverage in employer-employee relations, and will essentially stop plaintiff’s lawyers from bringing larger class action cases.[26] Only time will tell if employees will lose the right to act collectively in employment disagreements, so stay tuned.

 

 

[1] Arbitration Agreements, Work Place Fairness (Last visited Feb. 11, 2017) http://www.workplacefairness.org/forced-arbitration-agreements.

[2] Id.

[3] Id.

[4] David McCann, Can Companies Bar Workers from Filing Class-Action Claims?, CFO (Feb. 2, 2017) http://ww2.cfo.com/legal/2017/02/can-companies-bar-workers-from-class-action-claims-arbitration/.

[5] Id.

[6] Jessica Karmasek, SCOTUS To Decide Arbitration Issue; Unclear If Trump Pick Will Be On Bench In Time, FORBES (Jan. 29, 2017) http://www.forbes.com/sites/legalnewsline/2017/01/19/scotus-to-decide-arbitration-issue-unclear-if-trump-pick-will-be-on-bench-in-time/#fd741437ccb9.

[7] Lewis v. Epic Sys. Corp., 823 F.3d 1147 (7th Cir. 2016), cert. granted, No. 16-285, 2017 WL 125664 (U.S. Jan. 13, 2017) ( stating that health care software company agreement, requiring certain groups of employees to bring “wage-and-hour claims” though individual arbitration only, violated NLRA and is unenforceable under FAA.).

[8] Morris v. Ernst & Young, LLP, 834 F.3d 975 (9th Cir. 2016), cert. granted, No. 16-300, 2017 WL 125665 (U.S. Jan. 13, 2017).

[9] Karmasek, supra note 5.

[10] Murphy Oil USA, Inc. v. N.L.R.B., 808 F.3d 1013 (5th Cir. 2015), cert. granted, No. 16-307, 2017 WL 125666 (U.S. Jan. 13, 2017).

[11] In Re D. R. Horton, Inc., 357 NLRB 2277 (2012) (holding that an arbitration agreement under which employees were required to waive their right to bring a class action violated NLRA).

[12] 29 U.S.C. §§ 151-169 (stating that agreements which “requir[ed] . . . employees to agree to resolve all employment-related claims through individual arbitration” were not lawful).

[13] Murphy Oil, 808 F.3d 1013, 1016.

[14] Karmasek, supra note 5.

[15] McCann, supra note 3.

[16] Karmasek, supra note 5.

[17] Karmasek, supra note 5 (citing AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 131 S. Ct. 1740 (2011)). This is touted as a “game-changer” for class action suits that ruled in favor of companies requiring consumers to bring claims solely through individual arbitration.

[18] Karmasek, supra note 5.

[19] Karmasek, supra note 5.

[20] McCann, supra note 3.

[21] Ilyse Schuman & Michael J. Lotito, Who is Neil Gorsuch and Where Does He Stand on Labor and Employment Issues?, LITTLER (Jan. 31, 2017) https://www.littler.com/publication-press/publication/who-neil-gorsuch-and-where-does-he-stand-labor-and-employment-issues.

[22] Id.

[23] Marvin Scott, News Closeup: A look at Trump’s travel ban and pick for Supreme Court Justice, PIX11 (Feb. 4, 2017) http://pix11.com/2017/02/04/news-closeup-a-look-at-trumps-travel-ban-and-pick-for-supreme-court-justice/.

[24] Id.

[25] Schuman & Lotito, supra note 21.

[26] McCann, supra note 3.

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