Laryssa Jock v. Sterling Jewelers Inc.

• Citation: 725 F.Supp.2d 444
• Decision Date: 26 July 2010
• Docket Number: No. 08 Civ. 2875(JSR).,08 Civ. 2875(JSR).
• Parties: Laryssa JOCK, et al., Plaintiffs, v. STERLING JEWELERS, INC., Defendant.
• Court: U.S. District Court — Southern District of New York

725 F.Supp.2d 444

Laryssa JOCK, et al., Plaintiffs,

v.STERLING JEWELERS, INC., Defendant.

No. 08 Civ. 2875(JSR).

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

July 26, 2010.

Jenny Rae Yang, Joseph M. Sellers, Sahar Aziz, Cohen, Milstein, Hausfeld & Toll, PLLC, Washington, D.C., DC, Loren B. Donnell, Sam J. Smith Burr & Smith, LLP, Tampa, FL, Lynda J. Grant, Cohen, Milstein, Hausfeld & Toll, P.L.L.C., New York, NY, Thomas Warren, Thomas A. Warren Law Offices, P.L., Tallahassee, FL, for Plaintiffs.

Gerald Leonard Maatman, Jr., Seyfarth Shaw LLP, Chicago, IL, Stephen S. Zashin, Zashin & Rich Co., L.P.A., Cleveland, OH, for Defendant.

MEMORANDUM ORDER

JED S. RAKOFF, District Judge.

By an Opinion and Order dated December 28, 2009 (the “December 28 Order,” reported at 677 F.Supp.2d 661), the Court denied the motion of defendant Sterling Jewelers, Inc. (“Sterling”) to vacate the arbitrator's determination that the arbitration agreements between Sterling and its employees, including the plaintiffs in the above-captioned class action lawsuit, permitted class arbitration of plaintiffs' employment discrimination claims. On January 26, 2010, Sterling filed a notice of appeal of the December 28 Order. That appeal is presently pending before the Second Circuit. Thereafter, Sterling, pursuant to Federal Rule of Civil Procedure 62.1, filed a motion in this Court seeking an “indicative ruling” as to whether the Court would reconsider its December 28 Order in light of the Supreme Court's recent decision in Stolt-Nielsen, S.A. v. AnimalFeeds International Corp., --- U.S. ----, 130 S.Ct. 1758, 176 L.Ed.2d 605 (2010). The Court received full briefing on this motion and held oral argument on June 30, 2010. For the following reasons, the Court hereby indicates that if jurisdiction were restored, it would reconsider its December 28 Order and vacate the arbitrator's ruling permitting class arbitration.

By way of background, in June 1998 Sterling put in place a three-step program called “RESOLVE,” which provides an alternative dispute resolution mechanism for employment disputes and which requires arbitration of such disputes after the employee in question exhausts certain preliminary “steps.” See December 28 Order, 677 F.Supp.2d at 663. Thereafter, the plaintiffs in this action, who are current and former female Sterling employees, brought this class action lawsuit alleging that Sterling discriminated against them in pay and promotion on the basis of their gender, in violation of Title VII, 42 U.S.C. § 2000e et seq., and the Equal Pay Act, 29 U.S.C. § 206(d), and then moved to refer this dispute to arbitration. Sterling objected to that motion on the ground that the Court, rather than the arbitrator, should resolve certain preliminary issues, including whether the arbitration clauses permit class arbitration. The Court nonetheless referred these matters to the arbitrator (former Magistrate Judge Kathleen A. Roberts), finding that the parties' contract granted the Court discretion to refer such issues to the arbitrator and that it made good sense for the arbitrator to decide these issues in the first instance. Jock v. Sterling Jewelers, Inc., 564 F.Supp.2d 307, 311 (S.D.N.Y.2008).

The parties then briefed the issue of class arbitrability to the arbitrator. Sterling argued, among other things, that certain provisions of the RESOLVE agreements, including requirements that each arbitration be held near where the employee worked and that the arbitrator apply local law, were incompatible with class arbitration. The plaintiffs responded chiefly by arguing that under then-applicable Second Circuit precedent, where, as in the RESOLVE agreements, the arbitration clauses do not expressly preclude class arbitration, class arbitration may be permitted. See Stolt-Nielsen SA v. AnimalFeeds Int'l Corp., 548 F.3d 85, 101 (2d Cir.2008), rev'd, --- U.S. ----, 130 S.Ct. 1758, 176 L.Ed.2d 605 (2010).

On June 1, 2009, the arbitrator ruled that the RESOLVE agreements did not prohibit class arbitration, and for that reason allowed class arbitration to proceed. Pursuant to the choice-of-law clause contained in the agreements, this ruling (as amended, the “June 1 Award”) applied Ohio law to the issue of whether class claims were authorized under the arbitration contract, and noted that the question of whether class arbitration is permitted by an agreement that does not expressly so provide had not been addressed by the Ohio courts. The arbitrator then reasoned:

Under Ohio law, contracts are to be interpreted so as to carry out the intent of the parties, as that intent is evidenced by the contractual language. Skivolocki v. East Ohio Gas Co., 38 Ohio St.2d 244, 247 (1974). “The law will not insert by construction for the benefit of one of the parties an exception or condition which the parties either by design or neglect have omitted from their own contract.” Montgomery v. Bd. of Educ. of Liberty Township, Union Cty., 102 Ohio St. 189, 193 (1921).

Applying these principles, I find that the RESOLVE Arbitration Agreements do not prohibit class claims.

Sterling argues that RESOLVE's unique contractual provisions for local venues, the application of local laws, and the selection of locally-licensed arbitrators establish that the parties never intended class arbitration of employee claims. Sterling further argues that ignoring the terms of RESOLVE that are inconsistent with class arbitration would “rewrite” the parties' Agreement.

I note at the outset that the very concept of intent is problematic in the context of a contract of adhesion. Because this contract was drafted by Sterling and was not the product of negotiation, it was incumbent on Sterling to ensure that all material terms, especially those adverse to the employee, were clearly expressed. Notably, Sterling acknowledges ... that it has deliberately not revised the RESOLVE Arbitration Agreement to include an express prohibition, despite numerous arbitral decisions that class claims are permitted in the absence of an express prohibition. Under these circumstances, construing the Agreement to contain a waiver of a significant procedural right would impermissibly insert a term for the benefit of one of the parties that it has chosen to omit from its own contract. Montgomery, 102 Ohio St. at 193 ; cf. Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. [52] 53, 64 [115 S.Ct. 1212, 131 L.Ed.2d 76] (1995). ¹

I further find that agreeing to a step process for individual claims does not manifest an intent to waive the right to participate in a collective action, where, as here, the Agreement expressly gives the Arbitrator the “power to award any types of legal or equitable relief that would be available in a court of competent jurisdiction.”

Sterling Rule 62.1 Mem., 5/13/10, Ex. A (June 1 Award), at 4-5. Accordingly, the arbitrator concluded that the RESOLVE agreements could not be construed to prohibit class arbitration.

On June 30, 2009, Sterling filed a motion before this Court to vacate the June 1 Award. Sterling also moved to stay arbitration proceedings pending the Supreme Court's decision in Stolt-Nielsen S.A. v. AnimalFeeds International Corp., which presented the question of whether permitting class arbitration where the relevant arbitration clauses were “silent” on class arbitration was consistent with the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq. This Court denied the motion to stay for the reason, among others, that the Supreme Court's “eventual decision might be distinguishable on the basis that the agreements in Stolt-Nielsen arose in the maritime context, were standard industry contracts, and/or were entered into by sophisticated commercial parties.” December 28 Order, 677 F.Supp.2d at 667-78. ² Applying the then-binding Second Circuit decision in Stolt-Nielsen, the Court denied the motion to vacate the June 1 Award, holding that the arbitrator's determination was not in excess of her powers or in “manifest disregard” of the law. Id. at 665-67.

On April 27, 2010, the Supreme Court issued its decision in Stolt-Nielsen, reversing the Second Circuit decision relied upon by this Court in the December 28 Order and by the arbitrator in her June 1 Award. The opinion of the Court held that the arbitration panel in Stolt-Nielsen exceeded its powers by “simply ... impos[ing] its own view of sound policy regarding class arbitration” rather than “interpret[ing] and enforc[ing] [the] contract.” 130 S.Ct. at 1767-68. This holding was founded on the “basic precept” that arbitration “ ‘is a matter of consent, not coercion.’ ” Id. at 1773 (quoting Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468, 479, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989)). Thus, the Court held that the arbitrator's task is to “to give effect to the intent of the parties” with respect to their agreement to arbitrate, including their specification of “ with whom they choose to arbitrate their disputes.” Id. at 1774-75.

The parties in Stolt-Nielsen stipulated that they had reached “no agreement” on the issue of class arbitration. Id. at 1775. The Supreme Court held that the arbitration panel there impermissibly required Stolt-Nielsen, S.A., the party seeking to avoid class arbitration, to “establish that the parties to the charter agreements intended to preclude class arbitration.” Id. (internal quotation marks omitted). In passages highly relevant to the instant motion, the Supreme Court reasoned as follows:

An implicit agreement to authorize class-action arbitration ... is not a term that the arbitrator may infer solely from the fact of the parties' agreement to arbitrate. This is so because class-action arbitration changes the nature of arbitration to such a degree that it cannot be presumed the parties consented to it by simply agreeing to submit their disputes to an arbitrator. In bilateral arbitration, parties forgo the procedural rigor and appellate review of the...