18‐153 Jock v. Sterling Jewelers Inc.

In the United States Court of Appeals For the Second Circuit

August Term, 2017

Argued: May 7, 2018 Decided: November 18, 2019

Docket No. 18‐153‐cv

LARYSSA JOCK, CHRISTY CHADWICK, MARIA HOUSE, DENISE MADDOX, LISA MCCONNELL, GLORIA PAGAN, JUDY REED, LINDA RHODES, NINA SHAHMIRZADI, LEIGHLA SMITH, MARIE WOLF, DAWN SOUTO‐COONS,

Plaintiffs‐Counter‐Defendants ‐ Appellants,

JACQUELYN BOYLE, LISA FOLLETT, KHRISTINA RODRIGUEZ, KELLY CONTRERAS,

Plaintiffs‐Counter‐Defendants,

v.

STERLING JEWELERS INC.,

Defendant‐Counter‐Claimant ‐ Appellee.

Appeal from the United States District Court for the Southern District of New York No. 08‐cv‐2875, Rakoff, Judge. Before: HALL AND CARNEY, Circuit Judges, AND KOELTL, District Judge.*

The arbitrator certified a class of Sterling Jewelers Inc. employees that included employees who did not affirmatively opt in to the arbitration proceeding. The District Court held that the arbitrator exceeded her authority in purporting to bind those absent class members to class arbitration because the arbitrator erred in determining that the arbitration agreement permits class arbitration. We hold that the arbitrator was within her authority in purporting to bind the absent class members to class proceedings because, by signing the operative arbitration agreement, the absent class members, no less than the parties, bargained for the arbitrator’s construction of their agreement with respect to class arbitrability. We therefore reverse the judgment of the District Court. Because the issue of whether the arbitrator exceeded her authority in certifying an opt‐out, as opposed to a mandatory, class is not before us in this appeal, we remand the case to the District Court to reexamine that issue in the first instance.

REVERSED AND REMANDED.

JOSEPH M. SELLERS, Kalpana Kotagal, Shaylyn Cochran, Cohen Milstein Sellers & Toll PLLC, Washington, DC; Sam J. Smith, Loren B. Donnell, Burr & Smith LLP, St. Petersburgh, FL; Thomas A. Warren, Thomas A. Warren Law Offices, P.L., Tallahassee, FL; Jessica Ring Amunson, Benjamin M. Eidelson, Jenner & Block LLP, Washington, DC, for Plaintiffs‐Counter‐Defendants‐Appellants.

GERALD L. MAATMAN, JR., David Bennet Ross, Lorie E. Almon, Daniel B. Klein, Seyfarth Shaw LLP, New York, NY; Jeffrey S. Klein, Gregory Silbert, Weil, Gotshal & Manges LLP, New York, NY, for Defendant‐Counter‐Claimant‐Appellee.

*Judge John G. Koeltl of the United States District Court for the Southern District of New York, sitting by designation.

2 HALL, Circuit Judge:

This is an appeal from the District Court’s January 15, 2018 opinion and

order vacating the arbitrator’s certification of a class of Defendant‐Counter‐

Claimant‐Appellee’s employees insofar as the class included employees who did

not affirmatively opt in to the specific arbitration proceeding before the arbitrator.

The District Court held that the arbitrator, Kathleen A. Roberts, exceeded her

authority in purporting to bind those absent class members to class arbitration

because the arbitrator erred in determining that the arbitration agreement permits

class arbitration. We hold that the arbitrator’s determination that the agreement

permits class arbitration binds the absent class members because, by signing the

RESOLVE Agreement, they, no less than the parties, bargained for the arbitrator’s

construction of that agreement with respect to class arbitrability. We therefore

reverse the judgment of the District Court. The issue of whether the arbitrator

exceeded her authority in certifying an opt‐out, as opposed to a mandatory, class

is not before us in this appeal, however. We therefore remand this case to the

District Court to decide that issue in the first instance after allowing the parties an

opportunity to present their renewed arguments with respect to that issue.

3 I.

Laryssa Jock (“Jock”) and her co‐Plaintiffs‐Counter‐Defendants‐Appellants

(collectively, “Appellants”) are a group of current and former retail sales

employees of Defendant‐Counter‐Claimant‐Appellee Sterling Jewelers Inc.

(“Sterling”).1 Jock filed the instant suit in 2008, alleging that she and other female

employees were paid less than their male counterparts, on account of their gender,

in violation of Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., and

the Equal Pay Act,

(d).

All Sterling employees were required, as a condition of employment, to sign

a “RESOLVE Program” agreement (“RESOLVE Agreement”) mandating that they

participate in arbitration. J. App. 129. Under the RESOLVE Agreement,

employees “waiv[e] [their] right to obtain any legal or equitable relief . . . through

any government agency or court, and . . . also waiv[e] [their] right to commence

any court action. [They] may, however, seek and be awarded equal remedy

through the RESOLVE Program.”

The RESOLVE Agreement also provides

that “[t]he Arbitrator shall have the power to award any types of legal or equitable

1The underlying facts are set forth in Jock v. Sterling Jewelers Inc.,

(2d Cir. 2011), and are briefly recited here only for orientation and as relevant to the instant appeal.

4 relief that would be available in a court of competent jurisdiction[,]” and that any

claim arising thereunder will be arbitrated “in accordance with the National Rules

for the Resolution of Employment Disputes of the American Arbitration

Association.”

II.

This is the fourth time this case has come before this Court. See Jock v.

Sterling Jewelers Inc.,

(2d Cir. 2011) (“Jock I”); Jock v. Sterling Jewelers

Inc.,

(2d Cir. 2017) (summary order) (“Jock II”); Jock v. Sterling

Jewelers Inc.,

(2d Cir. 2017) (summary order) (“Jock III”).

In Jock I, the arbitrator issued an award in favor of the then‐named plaintiffs,

construing the RESOLVE Agreement to permit classwide arbitration. The District

Court vacated that award, concluding that under Stolt‐Nielsen S.A. v. AnimalFeeds

Int’l Corp.,

(2010), “the arbitrator’s construction of the RESOLVE

agreements as permitting class certification was in excess of her powers.” Jock I,

(quoting Jock v. Sterling Jewelers, Inc.,

(S.D.N.Y. 2010)). We reversed, holding that the District Court impermissibly

substituted its own legal analysis for that of the arbitrator instead of focusing its

inquiry on whether the arbitrator was permitted to reach the question of class

5 arbitrability that had been submitted to her by the parties.

at 123–24. We

explained, furthermore, that the arbitrator had a colorable justification under the

law to reach the decision she did. We distinguished Stolt‐Nielsen on the ground

that the parties in Stolt‐Nielsen stipulated that their arbitration agreement

contained “no agreement” on the issue of class arbitration, whereas the plaintiffs

in this case merely conceded that there was no explicit agreement to permit class

arbitration, thus leaving open the possibility of an “implied agreement to permit

arbitration.” Id. at 119, 124.

Following our decision in Jock I, the arbitrator issued a class certification

determination that certified a class of approximately 44,000 women, comprising

the then‐254 plaintiffs as well as other individuals who had neither submitted

claims nor opted in to the arbitration proceeding (“the absent class members”).

The arbitrator certified the class only with respect to Appellants’ Title VII disparate

impact claims for declaratory and injunctive relief.2 The District Court denied

2The arbitrator denied the motion for class certification with respect to Appellants’ Equal Pay Act claims, reasoning that the Equal Pay Act, unlike Title VII, provides for its own opt‐in class procedures. The arbitrator also declined to certify a Title VII damages class, reasoning that monetary claims could not “be fairly adjudicated on a representative basis” because each employee’s “eligibility will vary depending on their individual employment history, and the facts pertaining to similarly‐situated males during their employment.” J. App. at 594. 6 Sterling’s motion to vacate the class determination award, reasoning that Sterling’s

argument that the arbitrator had exceeded her powers in “purporting to bind

absent class members who did not express their consent to be bound” was

“foreclosed” by this Court’s holding in Jock I that “there is no question that the

issue of whether the agreement permitted class arbitration was squarely presented

to the arbitrator.” Jock v. Sterling Jewelers, Inc.,

, 128–29 (S.D.N.Y.

2015) (internal quotation marks omitted).

Sterling appealed from the District Court’s decision, and in Jock II this Court

reversed and remanded, clarifying that Jock I “did not squarely address whether

the arbitrator had the power to bind absent class members to class arbitration

given that they, unlike the parties here, never consented to the arbitrator

determining whether class arbitration was permissible under the agreement in the

first place.”

. The Jock II panel identified the question to be

considered on remand, and one not considered in Oxford Health Plans LLC v. Sutter,

(2013), as “whether an arbitrator, who may decide . . . whether an

arbitration agreement provides for class procedures because the parties ‘squarely

presented’ it for decision, may thereafter purport to bind non‐parties to class

7 procedures on this basis.”

. 3

On remand, the District Court vacated the arbitrator’s class determination

ruling. The District Court’s reasoning was twofold. First, it determined that the

RESOLVE Agreement did not give the arbitrator the authority to certify the class

because the District Court “considered the question of whether the RESOLVE

agreement authorizes class procedures in 2010 and decided that it does not.” Sp.

App. 6. Second, the fact that “the named plaintiffs and the defendant submitted

the question of whether the RESOLVE Agreement allowed for class procedures to

the Arbitrator” also did not give the arbitrator such authority. Id. at 7. The District

Court reasoned that, even if the arbitrator’s “erroneous interpretation” of the

RESOLVE Agreement could bind the 254 plaintiffs who had “authorized the

arbitrator to make that determination” by submitting the question to her or opting

into the proceeding, that erroneous interpretation could not bind absent class

members. Id. at 8 (quoting Oxford Health,

(Alito, J., concurring)).

This appeal followed.

3Jock III dismissed an appeal from the District Court’s decision that it lacked jurisdiction to consider Sterling’s motion to vacate an interim decision of the arbitrator.

.

8 III.

“In considering a challenge to a district court’s decision to vacate a portion

of an arbitration award, we review its legal rulings de novo and its findings of fact

for clear error.” ReliaStar Life Ins. Co. of New York v. EMC Nat’l Life Co.,

(2d Cir. 2009).

Courts are empowered to vacate arbitration awards only “where the

arbitrator[] exceeded [his or her] powers, or so imperfectly executed them that a

mutual, final and definite award upon the subject matter submitted was not

made.”

(a)(4). This is an extremely deferential standard of review.

See Stolt‐Nielson,

. When parties

bargain[] for [an] arbitrator’s construction of their agreement, an arbitral decision even arguably construing or applying the contract must stand, regardless of a court’s view of its (de)merits. Only if the arbitrator acts outside the scope of his contractually delegated authority—issuing an award that simply reflects his own notions of economic justice rather than drawing its essence from the contract— may a court overturn his determination.

Oxford Health,

(internal quotation marks, citations, and alterations

omitted); accord Stolt‐Nielson,

. The focus of our inquiry under

Section 10(a)(4) is “‘whether the arbitrator[] had the power, based on the parties’

submissions or the arbitration agreement, to reach a certain issue, not whether the

9 arbitrator[] correctly decided that issue.’” Jock I,

(quoting DiRussa v.

Dean Witter Reynolds Inc.,

(2d Cir. 1997)).

IV.

The District Court’s decision rests on the premise that, because the absent

class members did not affirmatively opt in to the arbitration proceeding and

thereby consent to the arbitrator’s authority to decide whether the RESOLVE

Agreement permits class procedures, our usual deferential standard of review

does not apply. In other words, as Sterling argues:

It is one thing for this Court to sustain an incorrect arbitral ruling on a question properly submitted to the Arbitrator by parties who agreed to be bound by the Arbitrator’s decision. It is another thing altogether to sustain an incorrect decision granting the Arbitrator authority over absent class members who did not submit that question to her. . . . [T]he Arbitrator’s decision that she had authority over absent class members cannot be upheld on the ground that, despite being wrong, it was nonetheless within her authority.

Appellee Letter Br. (May 17, 2019), at 4. The District Court concluded that the

individuals who did not affirmatively opt in to the arbitration proceeding did not

agree to permit class procedures by virtue of having signed RESOLVE Agreements

because “[p]lainly it is the law of the case that the Arbitrator does not have the

authority, based on the agreement, to certify” a class. Sp. App. 6. The District

Court thus relied on its original view that the arbitrator wrongly interpreted the

10 RESOLVE Agreement to permit class procedures. That view is not, however, “the

law of the case,” because this Court vacated the District Court’s earlier decision

that had reached that conclusion. Jock I,

. In Jock I, we had no occasion

to decide whether the arbitrator “got it right” given our conclusion that such

determination was not one for the courts to make.

. The District Court

further determined that the fact that the named plaintiffs and Sterling had

submitted the class arbitrability question to the arbitrator also did not give the

arbitrator the authority to certify the class. In doing so, the District Court relied

on its own prior conclusion that the arbitrator’s interpretation was “wrong as a

matter of law.” Sp. App. 8. That logic was largely based on Justice Alito’s

concurrence in Oxford Health, which states that an arbitrator’s “erroneous

interpretation” of a contract that does not authorize class procedures cannot bind

absent class members who have “not authorized the arbitrator to make that

determination.”

.

Appellants argue that the absent class members have, in fact, authorized the

arbitrator to determine whether the RESOLVE Agreement permits class

procedures. They contend that because all Sterling employees signed the

RESOLVE Agreement, all Sterling employees “agreed that, if any of them initiated

11 a putative class proceeding, the arbitrator in that proceeding would be empowered

to decide class‐arbitrability—and, if he or she found it appropriate, to certify a

class encompassing other employees’ claims.” Appellant Br. 23. According to

Appellants, the District Court erred by “never ask[ing] what authority absent class

members conferred on Arbitrator Roberts by joining the RESOLVE Program,” a

question that is a matter of contract interpretation.

at 26

We agree with Appellants. 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. As the arbitrator

reasoned, “[i]t is undisputed that each of the absent class members signed the

RESOLVE arbitration agreement, which clearly provides for the application of the

[American Arbitration Association (‘AAA’)] Rules.” J. App. 603; see id. at 129. The

AAA Supplementary Rules for Class Arbitration (“Supplementary Rules”) apply

to “any dispute arising out of an agreement that provides for arbitration pursuant

to” the AAA rules “where a party submits a dispute to arbitration on behalf of . . .

a class or purported class.” Id. at 434 (Supplementary Rule 1(a) (2010)). The

Supplementary Rules provide that “the arbitrator shall determine as a threshold

12 matter . . . whether the applicable arbitration clause permits the arbitration to

proceed on behalf of . . . a class.” Id. at 434–35 (Supplementary Rule 3 (2010)). The

RESOLVE Agreement’s incorporation of the AAA Rules evinces agreement to

have the arbitrator decide the question of class arbitrability. See Wells Fargo

Advisors, LLC v. Sappington,

(2d Cir. 2018) (when parties to an

agreement explicitly incorporate rules that empower an arbitrator to decide an

issue, “the incorporation serves as clear and unmistakable evidence of the parties’

intent to delegate such issues to an arbitrator” (internal quotation marks

omitted)).4

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.” J. App. 132.5 The Supreme Court

4 It is of no moment that the Supplementary Rules also provide that “the arbitrator should not consider the existence of these Supplementary Rules, or any other AAA rules, to be a factor either in favor of or against permitting the arbitration to proceed on a class basis.” J. App. 435 (Supplementary Rule 3). Here, we address whether the absent class members authorized the arbitrator to decide the threshold question of class arbitrability; we do not review the arbitrator’s determination that the arbitration may proceed on a class basis. 5 The sole exception to that delegation of authority is the provision that if a party

initiates a lawsuit, “a court may decide procedural questions that grow out of the 13 has suggested, and this Court has assumed without deciding, that the availability

of classwide arbitration is a “question of arbitrability.” Oxford Health,

n.2; Sappington,

. The parties in this case have at times assumed

that the availability of class procedures is a “procedural question.” See Appellant

Br. 3–4; J. App. 208–210 (Sterling Mem. of Law (May 19, 2008)). Regardless of

whether the availability of class procedures is a question of arbitrability or merely

a procedural question, it is a question for the arbitrator to decide under the terms

of the RESOLVE Agreement.

That conclusion is consistent with Ohio law, which governs our

interpretation of the RESOLVE Agreement. See J. App. 130. Under Ohio law, the

issue of whether an arbitration agreement permits class procedures is a “question

of arbitrability” that is presumptively for a court to decide. Shakoor v. VXI Glob.

Sols.,

, 547 (Ohio Ct. App. 2015). But a question of arbitrability “is to

be decided by the arbitrator” when the parties to an agreement “have clearly and

unmistakably vested the arbitrator with the authority to decide the issue of

arbitrability.” Belmont Cnty. Sheriff v. Fraternal Order of Police, Ohio Labor Council,

Inc.,

(Ohio 2004); cf. Shakoor, 35 N.E.3d at 548–50 (agreement

dispute and bear on the final disposition of the matter.” J. App. 132. That exception does not affect our analysis here. 14 did not provide evidence sufficiently clear and unmistakable to overcome

presumption that questions of arbitrability are for court to decide). The RESOLVE

Agreement “clearly and unmistakably” provides that “[q]uestions of

arbitrability . . . shall be decided by the arbitrator.” Belmont Cnty. Sheriff,

; J. App. 132.

Because the absent class members, no less than the parties, thus “bargained

for the arbitrator’s construction of their agreement” with respect to class

arbitrability, the arbitrator acted within her authority in purporting to bind the

absent class members to class procedures. Oxford Health,

(internal

quotation marks omitted). By virtue of the absent class members’ contractually

expressed consent, they, like the parties, may be bound by the arbitrator’s

determination that the RESOLVE Agreement permits class procedures regardless

of whether that determination is, as the District Court believes, “wrong as a matter

of law.” Sp. App. 8. That is, our reasoning in Jock I applies with equal force to the

absent class members. It is not for us, as a court, to decide whether the arbitrator’s

class certification decision was correct on the merits of issues such as commonality

and typicality. We merely decide that the arbitrator had the authority to reach

such issues even with respect to the absent class members.

15 The District Court’s contrary conclusion is understandable in light of this

Court’s framing of the issue in Jock II. In Jock II, we stated that Jock I “did not

squarely address whether the arbitrator had the power to bind absent class

members to class arbitration given that they, unlike the parties here, never

consented to the arbitrator determining whether class arbitration was permissible

under the agreement in the first place.”

. That observation

referred to the fact that the absent class members, unlike the 254 plaintiffs, did not

affirmatively opt in to the proceeding in which the question was submitted to the

arbitrator. Our use of “consent” as a shorthand for that fact may well have

obscured the possibility that the absent class members consented in a different

way to the arbitrator’s authority to decide class arbitrability.

That those absent class members did not expressly submit themselves to this

particular arbitrator’s authority does not alter our analysis. Class actions that bind

absent class members as part of mandatory or opt‐out classes are routinely

adjudicated by arbitrators and in our courts. See Supplementary Rule 4; Fed. R.

Civ. P. 23; Wal‐Mart Stores, Inc. v. Dukes,

, 361–63 (2011). Since the

RESOLVE Agreement provides for “the arbitrator” to decide the question of class

arbitrability, J. App. 132, it must mean, as Appellants state, that if any Sterling

16 employee initiates a putative class proceeding, “the arbitrator in that proceeding

[will] be empowered to decide class‐arbitrability—and, if he or she [finds] it

appropriate, to certify a class encompassing other employees’ claims.” Appellant

Br. 23. To hold otherwise would be inconsistent with the nature of class litigation

and would in effect negate the power of the arbitrator to decide the question of

class arbitrability.6

Nor is our decision inconsistent with the principles affirmed in Porzig v.

Dresdner, Kleinwort, Benson, N. Am. LLC,

(2d Cir. 2007). In Porzig, we

held that an arbitration panel was without jurisdiction to order a party’s lawyer to

pay back to the party, Porzig, the lawyer’s contingency fee, reasoning that neither

Porzig nor his lawyer had agreed to arbitrate a dispute over their fee contract. We

explained that “a party cannot be forced to arbitrate any dispute that it has not

obligated itself, by contract, to submit to arbitration,” and that an arbitration panel

6 This logic has implicitly underpinned decisions holding that because an arbitrator was within his authority in determining that class procedures were permitted under an agreement, it followed that the arbitrator was within his authority to certify a class. See, e.g., Long John Silver’s Rests., Inc. v. Cole,

(4th Cir. 2008); Jock,

. In Jock II, we found this logic insufficient to uphold the arbitrator’s class determination award because we determined, in light of the Supreme Court’s decision in Oxford Health, that there was an unsettled question as to whether an arbitrator’s authority to bind absent class members necessarily followed from her authority to determine that an agreement permitted class procedures. 17 “may not exceed the power granted to it by the parties in the contract.” Porzig,

(internal quotation marks omitted). Here, the absent class members

have “obligated [themselves], by contract, to submit to arbitration” the question

of class arbitrability.

Indeed, our conclusion that the absent class members

may be bound by the arbitrator’s class arbitrability determination rests on the fact

that the “self‐limiting agreement between consenting parties” in this case

authorizes the arbitrator to decide that question.

Finally, because our decision rests in part on our reasoning in Jock I, we

address Sterling’s argument that Jock I is no longer good law in light of the

Supreme Court’s recent decision in Lamps Plus, Inc. v. Varela,

(2019).7

In Lamps Plus, the Supreme Court held that “an ambiguous agreement can[not]

provide the necessary ‘contractual basis’ for compelling class arbitration.”

. Lamps Plus does not undermine our reasoning in Jock I. First, a crucial

difference between the two cases is that the parties in Lamps Plus “agreed that a

court, not an arbitrator, should resolve the question about class arbitration.”

at

1417 n.4. The class arbitrability decision in Lamps Plus was therefore subject to de

7 Because this Court was aware that the Supreme Court’s decision in Lamps Plus would deal with class arbitrability issues similar to the ones presented in this case, we deferred issuing an opinion until Lamps Plus was decided. 18 novo scrutiny rather than the deferential standard of review that circumscribes

courts’ review of arbitrators’ decisions. Second, Lamps Plus leaves undisturbed the

proposition, affirmed in Stolt‐Nielsen, that an arbitration agreement may be

interpreted to include implicit consent to class procedures. Our reasoning in Jock

I is, moreover, fully consistent with the Supreme Court’s decision in the more

analogous case of Oxford Health,

.

Having determined that the arbitrator acted within her authority in

purporting to bind the absent class members to class proceedings, we note that it

remains to be decided whether the arbitrator exceeded her authority in certifying

an opt‐out, as opposed to a mandatory, class for injunctive and declaratory relief.

In the decision that we vacated in Jock II, the District Court held that in so doing

the arbitrator exceeded her authority. See Jock, 143 F. Supp. 3d at 130–34. Applying

the appropriate Section 10(a)(4) standard, the District Court concluded that under

Wal–Mart Stores, Inc. v. Dukes,

(2011), the arbitrator acted “outside her

authority” and “in manifest disregard of the law” by providing putative class

members with the opportunity to opt out. Id. at 130, 133. The correctness of that

conclusion is not before us in this appeal. See Appellant Br. 30 n.13; Appellee Br.

9 n.2. We therefore remand this case to the District Court with directions to decide

19 that issue after allowing the parties an opportunity to present renewed argument

in light of any subsequent developments in the law.

V.

We have considered all of Sterling’s remaining arguments and conclude that

they are without merit. The judgment of the District Court is reversed, and the

case is remanded for further proceedings consistent with this opinion.

20