Arbitration

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Parties now have an opportunity to seek review of unfavorable arbitration awards before an appellate arbitral panel, pursuant to the Optional Appellate Arbitration Rules (Rules), recently released by the American Arbitration Association, effective November 1, 2013. This alert takes a look at the new rules, which describe the process and requirements for parties wishing to…

In a 2-1 decision, the California Court of Appeal held that representative actions under California’s Private Attorney General Act (PAGA) may not be waived in mandatory, pre-dispute employment arbitration agreements. (Brown v. Ralphs Grocery Co., Cal. Ct. App., No. B222689. This decision comes as something of a surprise in light of the U.S. Supreme Court’s recent ruling in AT&T Mobility, LLC v. Concepcion (2011) 563 U.S. __, 131 S. Ct. 1740 [pdf], which held that the Federal Arbitration Act (FAA) preempts state law and that class-action waiver provisions in California consumer arbitration agreements are generally enforceable (see prior blog post).

In recent years the U.S. Supreme Court has consistently favored arbitration against efforts to limit it, so long as the parties’ intent to arbitrate is clear.  In 14 Penn Plaza v. Pyett, in which Proskauer represented the Petitioner, the Court held that parties to a collective bargaining agreement can require bargaining unit members to arbitrate discrimination claims if the agreement clearly calls for arbitration of such claims.  Then, last year, in Stolt-Nielsen v. AnimalFeeds, the Court authorized class arbitrations, again so long as the parties clearly agreed.

Continuing on our recent theme of conflicting rules on class issues, Judge Kimba Wood of the Southern District of New York ruled March 3 (PDF) that Ernst & Young could not enforce a provision in its employment contracts with its accountants that waived class claims and required claims against E&Y, including overtime claims, to be arbitrated.  Judge Wood held that wage and hour claims can’t, as a practical matter, be litigated except on a class basis, because the amount of any individual’s claim is too small to interest a plaintiff’s attorney, and the expenditure on fees would not be justified.  Since the FLSA permits recovery of attorneys’ fees, that argument would not seem to carry much weight, but E&Y’s arbitration agreement made fee awards and their amount discretionary with the arbitrator, imposing more of a burden on the plaintiff.