D.R. Horton, Inc. v. Nat'l Labor Relations Bd.

CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)
Citation737 F.3d 344
Docket NumberNo. 12–60031.,12–60031.
PartiesD.R. HORTON, INCORPORATED, Petitioner/Cross–Respondent v. NATIONAL LABOR RELATIONS BOARD, Respondent/Cross–Petitioner.
Decision Date03 December 2013

OPINION TEXT STARTS HERE

Ronald Wayne Chapman, Jr., Ogletree, Deakins, Nash, Smoak & Stewart, P.C., Dallas, TX, Bernard Phillip Jeweler, Ogletree Deakins, P.C., Washington, DC, Christopher Charles Murray, Esq., Ogletree Deakins, P.C., Indianapolis, IN, Michael M. Shetterly, Attorney, Mark M. Stubley, Ogletree Deakins, P.C., Greenville, SC, for Petitioner/Cross–Respondent.

Linda Dreeben, Esq., Deputy Associate General Counsel, Ruth E. Burdick, Supervisory Attorney, Kira Dellinger Vol, National Labor Relations Board, Beth S. Brinkmann, Esq., U.S. Department of Justice, Washington, DC, for Respondent Cross–Petitioner.

Petitions for Review of an Order of the National Labor Relations Board.

Before KING, SOUTHWICK, and GRAVES, Circuit Judges.

LESLIE H. SOUTHWICK, Circuit Judge:

The National Labor Relations Board held that D.R. Horton, Inc. had violated the National Labor Relations Act by requiring its employees to sign an arbitration agreement that, among other things, prohibited an employee from pursuing claims in a collective or class action. On petition for review, we disagree and conclude that the Board's decision did not give proper weight to the Federal Arbitration Act. We uphold the Board, though, on requiring Horton to clarify with its employees that the arbitration agreement did not eliminate their rights to pursue claims of unfair labor practices with the Board.

FACTS AND PROCEDURAL HISTORY

Horton is a home builder with operations in over twenty states. In 2006, Horton began requiring all new and existing employees to sign, as a condition of employment, what it called a Mutual Arbitration Agreement. Three of its provisions are at issue in this appeal. First, the agreement provides that Horton and its employees “voluntarily waive all rights to trial in court before a judge or jury on all claims between them.” Second, having waived their rights to a judicial proceeding, Horton and its employees agreed that “all disputes and claims” would “be determined exclusively by final and binding arbitration,” including claims for “wages, benefits, or other compensation.” Third, Horton and its employees agreed that “the arbitrator [would] not have the authority to consolidate the claims of other employees” and would “not have the authority to fashion a proceeding as a class or collective action or to award relief to a group or class of employees in one arbitration proceeding.”

These provisions meant that employees could not pursue class or collective claims in an arbitral or judicial forum. Instead, all employment-related disputes were to be resolved through individual arbitration.

Michael Cuda worked for Horton as a superintendent from July 2005 to April 2006; he signed a Mutual Arbitration Agreement. In 2008, Cuda and a nationwide class of similarly situated superintendents sought to initiate arbitration of their claims that Horton had misclassified them as exempt from statutory overtime protections in violation of the Fair Labor Standards Act (“FLSA”). Horton responded that the arbitration agreement barred pursuit of collective claims, but invited Cuda and the other claimants to initiate individual arbitration proceedings. Cuda then filed an unfair labor practice charge, alleging that the class-action waiver violated the National Labor Relations Act (NLRA).

On January 3, 2011, an administrative law judge held that the Mutual Arbitration Agreement violated Sections 8(a)(1) and (4) of the NLRA 1 because its language would cause employees reasonably to believe they could not file unfair labor practice charges with the Board. On January 3, 2012, the Board issued a decision by two of its members—Chairman Mark Gaston Pearce and Member Craig Becker. Their order upheld the ALJ's determination that the Mutual Arbitration Agreement violated Section 8(a)(1) because employees would reasonably interpret its language as precluding or restricting their right to file charges with the Board.2 The panel also determined, contrary to the ALJ's decision, that the agreement violated Section 8(a)(1) because it required employees to waive their right to maintain joint, class, or collective employment-related actions in any forum. The panel ordered Horton to rescind or revise the agreement to clarify that employees were not prohibited from filing charges with the Board, nor were they prohibited from resolving employment-related claims collectively or as a class. Horton filed a timely petition for review of the panel's decision, and the Board cross-applied for enforcement of the panel's order.

DISCUSSION

This court will uphold the Board's decision “if it is reasonable and supported by substantial evidence on the record considered as a whole.” Strand Theatre of Shreveport Corp. v. NLRB, 493 F.3d 515, 518 (5th Cir.2007); see also29 U.S.C. § 160(e). “Substantial evidence is such relevant evidence as a reasonable mind would accept to support a conclusion.” J. Vallery Elec., Inc. v. NLRB, 337 F.3d 446, 450 (5th Cir.2003) (quotation marks omitted). In light of the Board's expertise in labor law, we will defer to plausible inferences it draws from the evidence, even if we might reach a contrary result were we deciding the case de novo. Id. This deference extends to both the Board's “findings of facts and its application of the law.” Id. While the Board's legal conclusions are reviewed de novo, Strand, 493 F.3d at 518, its interpretation of the NLRA will be upheld “so long as it is rational and consistent with the Act.” Litton Fin. Printing Div., a Div. of Litton Bus. Sys., Inc. v. NLRB, 501 U.S. 190, 201, 111 S.Ct. 2215, 115 L.Ed.2d 177 (1991) (quotation marks omitted).

I. Issues Regarding Composition of Board
A. Validity of Recess Appointment of Board Member

Late in the process for our review of these rulings, a sister circuit issued an opinion that, were we to adopt its reasoning, might result in our holding that the Board's rulings are of no effect because one of its members was improperly appointed. See Noel Canning v. NLRB, 705 F.3d 490 (D.C.Cir.2013), cert. granted––– U.S. ––––, 133 S.Ct. 2861, 186 L.Ed.2d 908 (U.S. June 24, 2013) (No. 12–1281).3 The D.C. Circuit vacated the order of a three-member panel of the Board based on its determination that the recess appointments of the panel members were invalid. Id. at 499. The Recess Appointments Clause of the Constitution empowers the President to “fill up all Vacancies that may happen during the Recess of the Senate.” U.S. Const. art. II, § 2, cl. 3. The court held that the clause applies only to recesses that occur between the two annual sessions of Congress, not recesses within a session. Noel Canning, 705 F.3d at 503. Because the appointments were not made during an intersession recess, they were invalid. Id. at 507.

The court also addressed whether the vacancies were invalid because they did not “happen” during a Senate recess. Id. Examining different possible definitions of “happen,” the court held that a vacancy happens “only when it first arises, demonstrating that the Recess Appointments Clause requires that the relevant vacancy arise during the recess.” Id. Consequently, the court held that the appointments were also invalid because the vacancies pre-existed the recess in which the appointments were made. Id. at 514.

Although Noel Canning is not binding on this court, it calls into question the constitutionality of Member Becker's recess appointment and the resulting validity of the Board's order. Horton, though, has never challenged the constitutionality of Member Becker's appointment. It has argued instead that Member Becker's appointment expired before the decision was issued. In light of Noel Canning, we asked the parties to submit new briefing regarding whether, for jurisdictional reasons, we must consider the constitutionality of Member Becker's appointment. We conclude that we do not.

First, the NLRA's jurisdictional statement supports the conclusion that we are not deprived of appellate jurisdiction because of defects in a Board order:

The Board shall have power to petition any court of appeals of the United States ... for the enforcement of such order.... Upon the filing of such petition, the court.... shall have jurisdiction of the proceeding and of the questiondetermined therein, and shall have power ... to make and enter a decree enforcing, modifying and enforcing as so modified, or setting aside in whole or in part the order of the Board.

29 U.S.C. § 160(e) (emphasis added). This court's jurisdiction is derived from the Board's filing of a petition, not from the validity of the Board's underlying decision.

Second, challenges under the Appointments Clause are “nonjurisdictional structural constitutional objections” that are within a court's discretion to consider. Freytag v. Commissioner, 501 U.S. 868, 878–79, 111 S.Ct. 2631, 115 L.Ed.2d 764 (1991). In Freytag, the Supreme Court considered a belated challenge to a special trial judge's appointment, but made clear that doing so was a discretionary exercise appropriate only in “rare cases.” Id. at 879, 111 S.Ct. 2631. Applying that decision, both the Sixth and the Eighth Circuits have determined that challenges to the Board's composition are nonjurisdictional. See NLRB v. RELCO Locomotives, Inc., 734 F.3d 764, 793–96 (8th Cir.2013); GGNSC Springfield LLC v. NLRB, 721 F.3d 403, 406–07 (6th Cir.2013); see also Intercollegiate Broad. Sys., Inc. v. Copyright Royalty Bd., 574 F.3d 748, 755–56 (D.C.Cir.2009) (declining to consider constitutional challenge to copyright royalty judges' appointment).4

Third, the Noel Canning court itself did not hold that the constitutional issues implicated subject matter jurisdiction. Rather, it first resolved the appellant's statutory arguments. See Noel Canning, 705 F.3d at 493. Had the court considere...

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