Arbitrator had authority to make class action determination

This case involves people who worked for Sterling Jewelers who claim the company discriminated against them the basis of gender by paying them less money than male workers. The problem for the employees is that they signed an arbitration agreement when they commenced employment with Sterling. That arbitration agreement has been the subject of extensive litigation over the years, and this is the fourth time this case has reached the Court of Appeals, which issued its first ruling in this dispute in 2011. The litigation is still raging, as demonstrated by this opinion.

The case is Jock v. Sterling Jewelers, Inc., issued on November 18. The arbitration clauses are called RESOLVE agreements. Employers like arbitration because they are less expensive to litigate than full-blown lawsuits, as they proceed more quickly than federal or state court cases, and the disputes are resolved by an arbitrator, not some sympathetic jury who might throw the book at the employer and then issue a huge damages award on the theory that management has deep pockets.

This time around, the dispute concerns what to do about the arbitrator's determination that the RESOLVE agreement prohibits class arbitration. That's another reason management likes arbitration agreements. They usually prohibit class litigation and instead require the disgruntled employee to litigate her case individually, which is more burdensome for the employee who does not have strength in numbers. In this appeal, management says the arbitrator improperly interpreted the RESOLVE agreement to allow for a class action. From that argument, management asserts that employees who did affirmatively opt in to the arbitration proceeding are not part of the class.

So the appeal boils down to whether the arbitrator had any authority to find that the RESOLVE agreement authorizes class actions. The plaintiffs argue that since all Sterling employees signed that agreement, they agreed that, if any of them initiated a class proceeding, the arbitrator in that particular proceeding would be empowered to decide class arbitrability and, if she deemed it appropriate, to certify a class encompassing other employees' claims.

The Court of Appeals (Hall, Carney and Koeltl [D.J.]) agrees with the employees. A general rule in arbitration cases is that courts do not like to second-guess arbitrator judgments and rulings. The whole point of arbitration is to keep the case out of court. If courts second-guess arbitration rulings, that defeats the purpose of arbitration, which is to streamline disputes. While the district court in this case rejected the arbitrator's judgment on the class action issue, the Court of Appeals revives it. The reasoning is in two parts:

First, "Although the absent class members have not affirmatively opted in to this arbitration proceeding, by signing the RESOLVE Agreement, they consented to the arbitrator’s authority to decide the threshold question of whether the agreement permits class arbitration."

Second, "Further supporting the conclusion that absent class members authorized the arbitrator to decide whether the arbitration may proceed on a class basis, the RESOLVE Agreement provides that '[q]uestions of arbitrability' and 'procedural questions' 'shall be decided by the arbitrator.'” The Supreme Court has assumed without deciding that "the availability of classwide arbitration is a 'question of arbitrability."