Long John Silver's Restaurants, Inc. v. Cole

• Decision Date: 20 January 2006
• Docket Number: Civil Action No. 6:05-3039-HFF.
• Citation: 409 F.Supp.2d 682
• Court: U.S. District Court — District of South Carolina
• Parties: LONG JOHN SILVER'S RESTAURANTS, INC. and Long John Silver's, Inc., Movants, v. Erin COLE, Nick Kaufman, and Victoria McWhorter, Respondents.

409 F.Supp.2d 682

LONG JOHN SILVER'S RESTAURANTS, INC. and Long John Silver's, Inc., Movants, v. Erin COLE, Nick Kaufman, and Victoria McWhorter, Respondents.

Civil Action No. 6:05-3039-HFF.

United States District Court, D. South Carolina, Greenville Division.

January 20, 2006.

Frank S. Holleman, III, Henry L. Parr, Jr., J. Theodore Gentry, Wyche Burgess Freeman and Parham, Greenville, SC, Robert P. Davis, Mayer Brown and Rowe, Washington, DC, William Douglas Smith, Johnson Smith Hibbard and Wildman, Spartanburg, SC, for Plaintiff.

Brian P. Murphy, Murphy and Grow Law Offices, Greenville, SC, Darrell L. West, Morris Reid Estes, Jr., Stewart Estes and Donnell, Nashville, TN, for Defendant.

Gary Elmore Clary, pro se.

George John Conits, U.S. Attorneys Office, Greenville, SC, for Amicus.

MEMORANDUM OPINION AND ORDER

FLOYD, District Judge.

I. INTRODUCTION

This is an action to vacate a class determination award of an arbitrator who determined that Respondents would be representative plaintiffs of an opt-out class. The Court has jurisdiction over this action pursuant to 28 U.S.C. § 1332. Currently pending before the Court is Movants' motion to vacate the arbitrator's decision. For the reasons stated below, the Court will deny the motion.

II. FACTUAL AND PROCEDURAL HISTORY

Respondent Erin Cole, Respondent Nick Kaufman, and Respondent Victoria McWhorter (collectively "Respondents") are former employees of Movant Long John Silver's Restaurants, Inc. and Movant Long John Silver's, Inc. (collectively "Movants"). During the tenure of Respondents' employment, Movants instituted a mandatory arbitration procedure covering certain disputes between themselves and their employees. Subsequently, on December 19, 2003, Respondents initiated a collective arbitration proceeding before the American Arbitration Association (AAA) in which they alleged that Movants had violated the Fair Labor Standards Act ("FLSA" or "the Act"), 29 U.S.C. § 201 et seq., by failing to pay Respondents and similarly-situated employees overtime pay which they were due. Initially, the arbitrator necessarily conducted a "clause construction hearing" in which he determined that the arbitration agreement between Movants and Respondents permits Respondents to bring their claims in a class proceeding. Movants, arguing that FLSA § 16(b)'s provisions permitting employees to bring collective actions are procedural and waivable, asked this Court to vacate the arbitrator's clause construction award. The Court, however, dismissed the action for lack of jurisdiction. Cole v. Long John Silver's Restaurants, Inc., 388 F.Supp.2d 644 (D.S.C.2005).

While Movants' motion to vacate the arbitrator's clause construction award was pending before the Court, the arbitrator issued a class determination partial final award in which he determined that Respondents would be representative plaintiffs in an opt-out class which would be composed of current and former employees of Movants who have potential FLSA claims. Movants now bring this action requesting that the Court vacate the arbitrator's decision to certify an opt-out class.

III. STANDARD OF REVIEW

It is well settled that a court's review of an arbitration award "is among the narrowest known to the law." United States Postal Service v. Am. Postal Workers Union, AFL-CIO, 204 F.3d 523, 527 (4th Cir.2000) (internal quotation marks omitted). "A court sits to `determine only whether the arbitrator did his job-not whether he did it well, correctly, or reasonably, but simply whether he did it.'" Id. (quoting Mountaineer Gas Co. v. Oil, Chem. & Atomic Workers Int'l Union, 76 F.3d 606, 608 (4th Cir.1996)). "[A]s long as the arbitrator is even arguably construing or applying the contract and acting within the scope of his authority, that a court is convinced he committed serious error does not suffice to overturn his decision." United Paperworkers Int'l Union, AFL-CIO v. Misco, Inc., 484 U.S. 29, 38, 108 S.Ct. 364, 98 L.Ed.2d 286 (1987). Thus, the Court's review of the arbitrator's decision to certify an opt-out class is extremely narrow in scope.¹

IV. DISCUSSION

Movants assert two bases in support of their motion to vacate the arbitrator's class determination award. First, Movants contend that the arbitrator acted in manifest disregard of the law and, second, Movants claim that the arbitrator exceeded the scope of his authority. The Court finds that neither argument supports vacatur.

A. Manifest Disregard of the Law

A court's authority to vacate actions of an arbitrator which are in manifest disregard of the law is clearly established. E.g., Apex Plumbing Supply, Inc. v. U.S. Supply Co., 142 F.3d 188, 193 (4th Cir.1998); Gallus Invs., L.P. v. Pudgie's Famous Chicken, Ltd., 134 F.3d 231, 233-34 (4th Cir.1998). In exercising this authority, however, a court must proceed cautiously, as a "court's belief that an arbitrator misapplied the law will not justify vacation of an arbitral award." Remmey v. PaineWebber, Inc., 32 F.3d 143, 149 (4th Cir.1994). Instead, a court may vacate an award only where a party has shown "that the arbitrator[][was] aware of the law, understood it correctly, found it applicable to the case before [him], and yet chose to ignore it in propounding [his] decision." Id. (citing National Wrecking Co. v. Int'l Bhd. of Teamsters, Local 731, 990 F.2d 957, 961 (7th Cir.1993); Folkways Music Publishers, Inc. v. Weiss, 989 F.2d 108, 111-12 (2d Cir.1993)). Persuasive authority also indicates that a court's authority to vacate is contingent upon the law allegedly ignored bearing the status of a clearly established governing principle. See, e.g., Halligan v. Piper Jaffray, Inc., 148 F.3d 197, 202 (2d Cir.1998) (noting that in order to vacate a court must find that "the law ignored by the arbitrators was well defined, explicit, and clearly applicable to the case."); Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Jaros, 70 F.3d 418, 421 (6th Cir.1995) ("[A]n arbitration panel does not act in manifest disregard of the law unless (1) the applicable legal principle is clearly defined and not subject to reasonable debate; and (2) the arbitrators refused to heed that legal principle[.]"); Health Services Management Corp. v. Hughes, 975 F.2d 1253, 1267 (7th Cir.1992) ("[T]here must be something beyond and different from mere error in law or failure on the part of the arbitrators to understand or apply the law; it must be demonstrated that the majority of the arbitrators deliberately disregarded what they knew to be the law in order to reach the result they did[.]"); Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Bobker, 808 F.2d 930, 933-34 (2d Cir.1986) ("The error must have been obvious and capable of being readily and instantly perceived by the average person qualified to serve as an arbitrator. Moreover, the term `disregard' implies that the arbitrator appreciates the existence of a clearly established governing legal principle but decides to ignore or pay no attention to it.").

In the instant case, Movants contend that FLSA § 16(b) requires that collective actions brought under the Act be certified using opt-in class procedures. Movants base this contention on the following language from § 16(b):

An action to recover [under the Act] may be maintained against any employer in any federal or state court of competent jurisdiction by any one or more employees for and in behalf of himself or themselves and other employees similarly situated. No employee shall be a party plaintiff to any such action unless he gives his consent in writing to become such a party and such consent is filed in the court in which such action is brought.

In Movants' view, this section of the FLSA provides employees with a substantive right to consent to any action filed on their behalf under the Act. This right, Movants maintain, cannot be waived in an arbitration agreement and, thus, continues to apply with full force in private arbitration proceedings.

This language cannot bear the import that Movants assign to it. As an initial matter, Movants fail to present — and the Court fails to find — any authority for the proposition that the "consent in writing" requirement applies in arbitration proceedings. This absence of authority, taken alone, weakens Movants' argument that the arbitrator disregarded a clear governing principle of law. In addition, the language of the FLSA itself lacks the clarity which Movants would read into it. While § 16(b) does mandate the use of an opt-in procedure in class actions, it speaks of those actions and the written consent of class members being filed in "court[s] of competent jurisdiction." Although the statutory reference to "court[s]" does not entirely foreclose the possibility that the statute's requirements might apply in arbitration, it supplies uncertainty to the question of whether Congress intended the consent in writing requirement to govern arbitration proceedings as well as actions in court. In the face of the uncertainty of the statute's reach and the lack of interpretative authority on point, the Court cannot say that a clear principle of law bound the arbitrator in this case.

Even if FLSA § 16(b) qualifies as a clearly established principle requiring the use of opt-in classes in arbitration, the arbitrator did not disregard or ignore the statute in making his class determination award. Indeed, the arbitrator explicitly referred to § 16(b) in his award and balanced Movants' argument that the statute requires an opt-in class against Respondents' position that the arbitration agreement incorporates AAA rules providing for an opt-out class. (Mov. Mem. Supp. M. Vac. Ex. 1 at 4-11.) Further, the arbitrator specifically noted Movants' argument that the consent in writing requirement is a substantive right and referenced Supreme Court precedent which reconciles the need to preserve substantive statutory rights with the necessity that parties be held to their agreements to arbitrate. Id. at 8 (citi...