Jock v. Sterling Jewelers, Inc.

• Decision Date: 15 November 2015
• Docket Number: No. 08 Civ. 2875(JSR).,08 Civ. 2875(JSR).
• Citation: 143 F.Supp.3d 127
• Parties: Laryssa JOCK, et al., Plaintiffs, v. STERLING JEWELERS, INC., Defendant.
• Court: U.S. District Court — Southern District of New York

143 F.Supp.3d 127

Laryssa JOCK, et al., Plaintiffs,

v.STERLING JEWELERS, INC., Defendant.

No. 08 Civ. 2875(JSR).

United States District Court, S.D. New York.

Signed Nov. 15, 2015.

John Douglas Richards, Pomerantz LLP, New York, NY, Joseph M. Sellers, Kalpana Kotagal, Shaylyn Cochran, Cohen Milstein Sellers & Toll PLLC, Washington, DC, Loren B. Donnell, Sam J. Smith, Burr & Smith, Tampa, FL, Thomas Warren, Thomas A. Warren Law Offices, P.L., Tallahassee, FL, for Plaintiffs.

Gerald Leonard Maatman, Jr., Seyfarth Shaw LLP, Chicago, IL, for Defendant.

OPINION AND ORDER

JED S. RAKOFF

, District Judge.

On March 18, 2008, plaintiffs Laryssa Jock et al. filed suit in this Court on behalf of themselves and all persons similarly situated, alleging sex discrimination in the promotion and compensation policies and practices of defendant Sterling Jewelers, Inc. ("Sterling"). See Complaint, Dkt. 1. On May 5, 2008, plaintiffs moved to refer the matter to arbitration, pursuant to the "RESOLVE" dispute resolution agreement signed by Sterling's employees. See Memorandum of Points and Authorities in Support of Plaintiffs' Motion to Refer to Arbitration and Stay the Litigation, Dkt. 26. The Court granted this motion in an order dated June 18, 2008. Dkt. 52. Since then, however, the matter has been the subject of interminable litigation (familiarity with which is here presumed) before the Arbitrator, this Court, and the Second Circuit Court of Appeals. Regretfully, the matter is still not at an end.

Most recently, following over three years of discovery and other proceedings before the Arbitrator, the Arbitrator, on February 2, 2015, issued a Class Determination Award that, in relevant part, certified a class for the adjudication of plaintiffs' Title VII disparate impact claims with respect to declaratory and injunctive relief, but declined to certify plaintiffs' Title VII disparate impact claims with respect to monetary damages or plaintiffs' Title VII disparate treatment claims. See Declaration of Gerald L. Maatman, Jr., Exhibit 1 ("Class Determination Award") at 118. As discussed below, this much was unassailable. But the Arbitrator went further and permitted members of the class to opt out from the putative declaratory and injunctive relief. This, regretfully, exceeded her authority, as well as manifestly disregarding settled law.

Pending at present before this Court is the motion of defendant Sterling to vacate the Arbitrator's Class Determination Award on the grounds that the Arbitrator exceeded her authority by, first, "purporting to bind absent class members who did not express their consent to be bound" and, second, "permitting opt-out rights in a mandatory Rule 23(b)(2)

class." See Defendant's Memorandum of Law in Support of Its Motion to Vacate the Arbitrator's Class Determination Award ("Defs. Br.") at i. The Federal Arbitration Act provides that a district court may vacate an arbitration award "(1) where the award was procured by corruption, fraud, or undue means; (2) where there was evident partiality or corruption in the arbitrators ...; (3) where the arbitrators were guilty of misconduct ... or (4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made." 9 U.S.C. § 10(a)

. Courts read 9 U.S.C. § 10(a)(4) very narrowly. See, e.g., ReliaStar Life Ins. Co. of N.Y. v. EMC Nat. Life Co., 564 F.3d 81, 86 (2d Cir.2009) ("If the parties agreed to submit an issue for arbitration, we will uphold a challenged award as long as the arbitrator offers a barely colorable justification for the outcome reached." (internal quotation marks omitted)). In addition, however, the Second Circuit has recognized "a judicially-created ground [for vacatur], namely that an arbitral decision may be vacated when an arbitrator has exhibited a manifest disregard of law." Jock v. Sterling Jewelers Inc., 646 F.3d 113, 121 (2d Cir.2011).¹

With respect to its first ground for vacatur, Sterling contends that the Arbitrator lacked authority to certify a class that included approximately 44,000 alleged class members (who were current and former female employees of defendant Sterling), beyond the 254 plaintiffs who filed opt-in notices to join the proceeding or were represented by Cohen Milstein Sellers & Toll, PLLC and its co-counsel in the arbitration proceeding. See Defs. Br. at 4–6 & 4 n. 9. According to Sterling, individuals other than these 254 plaintiffs have not consented to join the class arbitration, and an opt-out notice to those individuals would not create consent. Defs. Br. at 5. Defendant further argues that absent class members may then seek to collaterally attack the arbitration, forcing Sterling to face numerous individual claims. Defs. Br. at 7–8.

The Court finds, however, that defendant's argument on this point is foreclosed by earlier rulings in this case. The Second Circuit stated in Jock v. Sterling Jewelers Inc., 646 F.3d 113 (2d Cir.2011)

that "there is no question that the issue of whether the agreement permitted class arbitration was squarely presented to the arbitrator." Jock, 646 F.3d at 124. "Agreement" here refers to the RESOLVE agreements between Sterling and its employees, id., assent to which was a mandatory condition of employment. Id. at 116. All members of the class certified by the Arbitrator signed the RESOLVE agreements; the Arbitrator interpreted these agreements to permit class arbitration; and the Second Circuit upheld the Arbitrator's authority to do so. Given that holding, this Court sees no basis for vacating the Class Determination Award on the ground that the Arbitrator has now exceeded her authority in purporting to bind absent class members.²

As to defendant's second challenge to the arbitration award, however, the Court agrees that the Arbitrator acted outside her authority in certifying an opt-out class for injunctive and declaratory relief in the Class Determination Award.³ As detailed below, the Arbitrator purported to certify the class under Rule 23(b)(2)

. But it is settled law that, as the Supreme Court most recently stated in Wal–Mart Stores, Inc. v. Dukes, 564 U.S. 338, 131 S.Ct. 2541, 2558, 180 L.Ed.2d 374 (2011), "Rule [23] provides no opportunity for (b)(1) or (b)(2) class members to opt out." But even if one were to accept plaintiffs' dubious claim that the Arbitrator could be said to have certified the class on grounds other than Rule 23(b)(2), see Opposition to Defendant's Motion to Vacate the Arbitrator's Class Determination Award ("Pl. Opp. Br.") at 11, the Court would still hold that the Arbitrator exceeded her authority in permitting class members to opt out of injunctive and declaratory relief that necessarily affects all class members.

To elaborate, Rule 23(b)(2)

describes a type of class action in which "the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole." Fed.R.Civ.P. 23(b)(2). In Wal–Mart v. Dukes, the Supreme Court stated that "[c]lasses certified under (b)(1) and (b)(2)" are "mandatory classes: The Rule provides no opportunity for (b)(1) or (b)(2) class members to opt out, and does not even oblige the District Court to afford them notice of the action." Wal–Mart, 131 S.Ct. at 2558. The Supreme Court reasoned that in the case of 23(b)(2) classes, "the relief sought must perforce affect the entire class at once." Id.

It is clear from the Arbitrator's award that her purported basis for permitting opt-outs was pursuant to Rule 23(b)(2)

. Although she also mentioned AAA Supplementary Rule 4, she stated that "AAA Supplementary Rule 4 essentially tracks the requirements of Fed.R.Civ.P. 23" and that "[i]n this case Claimants seek certification of their claims for declaratory and injunctive relief pursuant to Rule 23(b)(2) and certification of their claims for monetary damages pursuant to Rule 23(b)(3)." Class Determination Award at 6. The Arbitrator then granted class certification for plaintiffs' Title VII disparate impact claims with respect to declaratory and injunctive relief and denied class certification with respect to plaintiffs' claims for monetary damages. See id. at 8; see also id. at 118. The clear inference is that the 23(b)(2) class was the one certified.

Confirming this point, the Arbitrator, in summarizing her award, stated: "I find that the adjudication of Claimants' Title VII disparate impact claims with respect to declaratory and injunctive relief may be maintained as a class arbitration pursuant to AAA Supplementary Rule 4

and Rule 23(b)(2) and Rule 23(c)(4). Claimants' motion for class certification of their Title VII disparate impact claims with respect to monetary damages pursuant to AAA Supplementary Rule 4 and Rule 23(b)(3) is denied." id. at 8, see also id. at 118. Further, the Arbitrator indicated that "I have determined that this case may proceed as a class action solely with respect to Claimants' disparate impact claims for declaratory and injunctive relief, based upon Rule 23(b)(2) and Rule 23(c)(4)." Id. at 103.

Having thus certified only a 23(b)(2) class, the Arbitrator then went on to write that, even though "[t]he members of the proposed class are unlikely to have any interest in individually controlling the prosecution of Claimants' claims for declaratory and injunctive relief," "to the extent a putative class member wishes to do so, she will be afforded an opportunity to opt out of the class arbitration." Class Determination Award at 109–10. The Arbitrator also directed counsel to submit a proposed form of opt-out notice, id. at 118. It is clear, therefore, that the Arbitrator purported to permit opt-outs from a Rule 23(b)(2)

class. But she had no power to do so, as the relief sought in the certification of a Rule 23(b)(2) class "must perforce affect the entire class at once." Wal–Mart, 131 S.Ct....