Opalinski v. Robert Half Int'l Inc.

• Decision Date: 30 July 2014
• Docket Number: No. 12–4444.,12–4444.
• Parties: David OPALINSKI; James McCabe, on behalf of themselves and all others similarly situated v. ROBERT HALF INTERNATIONAL INC; Robert Half Corporation; Appellants.
• Court: U.S. Court of Appeals — Third Circuit

761 F.3d 326

David OPALINSKI; James McCabe, on behalf of themselves and all others similarly situated

v.ROBERT HALF INTERNATIONAL INC; Robert Half Corporation; Appellants.

No. 12–4444.

United States Court of Appeals,Third Circuit.

Argued April 7, 2014.

Opinion filed: July 30, 2014.

Richard L. Alfred, Esquire, (Argued), Patrick J. Bannon, III, Esquire, Carla J. Easton, Esquire, James M. Hlawek, Esquire, Seyfarth Shaw LLP, Boston, MA, Christopher H. Lowe, Esquire, Seyfarth Shaw LLP, Alexander Wood, Esquire, Paul Hastings, New York, N.Y., James M. Harris, Esquire, Seyfarth Shaw LLP, Los Angeles, CA, Adam N. Saravay, Esquire, McCarter & English, Newark, NJ, for Appellants.

Shannon Liss–Riordan, Esquire, (Argued), Lichten & Liss–Riordan, P.C., Boston, MA, Anthony L. Marchetti, Jr., Esquire, Marchetti Law, P.C., Cherry Hill, NJ, for Appellees.

Before: AMBRO, JORDAN, and ROTH, Circuit Judges.

OPINION OF THE COURT

AMBRO, Circuit Judge.

We consider whether a district court, rather than an arbitrator, should decide if an agreement to arbitrate disputes between the parties to that agreement also authorizes classwide arbitration. Because of the fundamental differences between classwide and individual arbitration, and the consequences of proceeding with one rather than the other, we hold that the availability of classwide arbitration is a substantive “question of arbitrability” to be decided by a court absent clear agreement otherwise.

I. Background

Plaintiffs David Opalinski and James McCabe (sometimes collectively referred to as “Appellees”), former employees of Robert Half International, Inc. (“RHI”), bring this action on behalf of themselves and other individuals, alleging that RHI failed to pay them overtime and improperly classified them as overtime-exempt employees in violation of the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et seq. Both McCabe and Opalinski signed employment agreements that contained arbitration provisions. They provide that “[a]ny dispute or claim arising out of or relating to Employee's employment, termination of employment or any provision of this Agreement” shall be submitted to arbitration. Neither agreement mentions classwide arbitration.

RHI moved to compel arbitration of Opalinski and McCabe's claims on an individual basis. In October 2011, the District Court granted the motion in part, thus compelling arbitration but holding that the propriety of individual (also known as bilateral) versus classwide arbitration was for the arbitrator to decide (the “October 2011 Order”). The Court subsequently entered an order terminating the case. Rather than immediately appealing the October 2011 Order, RHI proceeded with the arbitration process and did not return to the District Court until the arbitrator issued a partial award and ruled that the employment agreements permitted classwide arbitration. RHI then moved the District Court to vacate the arbitrator's partial award. The District Court denied the motion to vacate (the “December 2012 Order”).

RHI appeals the December 2012 Order. The crux of the appeal, however, is not the underlying issue whether the employment agreements between the parties permit classwide as opposed to only bilateral arbitration. Rather, the question before us is who decides—that is, should the availability of classwide arbitration have been decided by the arbitrator or by the District Court?

II. Jurisdiction and Standard of Review

The District Court had jurisdiction over this action per 28 U.S.C. § 1331 because Plaintiffs brought claims under the FLSA. We have jurisdiction under 9 U.S.C. § 16(a)(1)(D) (“An appeal may be taken from ... an order ... confirming or denying confirmation of an award or partial award[.]”).

Appellees argue that this appeal is untimely because although RHI styles it as one based on the District Court's December 2012 Order denying its motion to vacate, the appeal actually challenges only the October 2011 Order's holding that the availability of classwide arbitration is a question for the arbitrator. The October 2011 Order, Appellees contend, was a final decision that was immediately appealable on an interlocutory basis, and RHI's attempt now to appeal the merits of that decision is untimely. SeeFed. R.App. P. 4(a)(1)(A) (party seeking to appeal a final decision must file notice of appeal within 30 days of entry of the judgment or order appealed from).

The Federal Arbitration Act “preserves immediate appeal of any ‘final decision with respect to an arbitration,’ ... whether the decision is favorable or hostile to arbitration.” Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 86, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000) (quoting 9 U.S.C. § 16(a)(3)). A “final decision” is one that “ends the litigation on the merits and leaves nothing more for the court to do but execute the judgment.” Id. (quotation marks and citation omitted). Here the October 2011 Order was not a final decision because it effected only a non-final, administrative closure, and explicitly acknowledged the potential need for further litigation before the District Court. Freeman v. Pittsburgh Glass Works, LLC, 709 F.3d 240, 247 (3d Cir.2013) (“administrative closings are not final orders”). RHI timely appealed the District Court's final decision—the December 2012 Order—and we have jurisdiction to consider this appeal.

“On appeal from a district court's ruling on a motion to confirm or vacate an arbitration award, we review its legal conclusions de novo and its factual findings for clear error.” Sutter v. Oxford Health Plans LLC, 675 F.3d 215, 219 (3d Cir.2012), aff'd, ––– U.S. ––––, 133 S.Ct. 2064, 186 L.Ed.2d 113 (2013).

III. Discussion

We decide first what arguments we may properly consider on this appeal. Appellees contend that because RHI did not argue in its Motion to Vacate that the District Court (and not the arbitrator) should have determined the permissibility of classwide arbitration, it has waived its right to raise that argument in this appeal. However, waiver, which is intended to protect litigants from unfair surprise and prevent district courts from being reversed on grounds that were never argued before them, does not apply in this instance. Appellees were well aware of RHI's argument that the District Court, not the arbitrator, should decide the availability of classwide arbitration: the Court expressly addressed the issue in its October 2011 Order, RHI objected to the arbitrator's determination whether classwide arbitration was permissible throughout the arbitration proceedings, and RHI did flag the “who decides” issue in its Motion to Vacate by reminding the Court that “from the outset [RHI] has maintained that the class action issue is for this Court to decide.” Thus, our addressing the issue on appeal prejudices neither Appellees nor the District Court.

We proceed to the merits of the case and consider whether, in the context of an otherwise silent contract, the availability of classwide arbitration is to be decided by a court rather than an arbitrator. The analysis is twofold. We decide whether the availability of classwide arbitration is a “question of arbitrability.” See Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002) (internal quotation marks and citation omitted). If yes, it is presumed that the issue is “for judicial determination unless the parties clearly and unmistakably provide otherwise.” Id. (internal quotation marks, citations, and alteration omitted). If the availability of classwide arbitration is not a “question of arbitrability,” it is presumptively for the arbitrator to resolve. See First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944–45, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1994).

A. Is the availability of classwide arbitration a “question of arbitrability”?

“[A]rbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.” Howsam, 537 U.S. at 83, 123 S.Ct. 588 (internal quotation marks and citation omitted). While federal policy favors arbitration agreements, an arbitrator has the power to decide an issue only if the parties have authorized the arbitrator to do so. Because parties frequently disagree whether a particular dispute is arbitrable, courts play a limited threshold role in determining “whether the parties have submitted a particular dispute to arbitration, i.e., the ‘ question of arbitrability[.]’ ” Id. at 83, 123 S.Ct. 588 (emphasis in original).

“Questions of arbitrability” are limited to a narrow range of gateway issues. They may include, for example, “whether the parties are bound by a given arbitration clause” or “whether an arbitration clause in a concededly binding contract applies to a particular type of controversy.” Id. at 84, 123 S.Ct. 588. On the other hand, questions that the parties would likely expect the arbitrator to decide are not “questions of arbitrability.” Id. Those include “ ‘procedural’ questions that grow out of the dispute and bear on its final disposition[,]” as well as allegations of waiver, delay, or similar defenses to arbitrability. Id.

The Supreme Court has not yet decided whether the availability of class arbitration is a “question of arbitrability.” In Green Tree Financial Corp. v. Bazzle, 539 U.S. 444, 123 S.Ct. 2402, 156 L.Ed.2d 414 (2003), a plurality of the Court concluded that the availability of classwide arbitration was not a question of arbitrability because “it concerns neither the validity of the arbitration clause nor its applicability to the underlying dispute between the parties ... [, but only] contract interpretation and arbitration procedures.” Id. at 451, 452–53, 123 S.Ct. 2402.

Subsequent Supreme Court decisions, however, cast doubt on the Bazzle plurality's decision. In Stolt–Nielsen S.A. v. AnimalFeeds International Corp., 559 U.S. 662, 130 S.Ct. 1758, 176 L.Ed.2d 605 (2010), the Court specifically noted that “only the plurality” in Bazz...