# Amicus Curiae Brief — Epic Sys. Corp. v. Lewis, 138 S. Ct. 42 (2017) (No. 16-285)

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0699%3A05

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2017

## Text

supreme Court, U.S.
FILED

RECORD

| wer No. 16-285 OCT - 3 20%
BRIEFS ee OFFICE OF THE CLERK __

IN THE

Supreme Court of the United States

EPIC SYSTEMS CORPORATION,
Petitioner,

JACOB LEWIS,
Respondent.

On a Petition for Writ of Certiorari to the
United States Court of Appeals
for the Seventh Circuit

—_ @ cereeenenee

BRIEF AMICUS CURIAE OF
ATLANTIC LEGAL FOUNDATION
IN SUPPORT OF PETITIONER

— —_—— @ —___ --—- — —

MARTIN S. KAUFMAN

Counsel of Record
ATLANTIC LEGAL FOUNDATION
2039 PALMER AVENUE, #104
LARCHMONT, NY 10538
(914) 834-3322
mskaufman@atlanticlegal.org
ATTORNEYS FOR
ATLANTIC LEGAL FOUNDATION

October 2016

i
QUESTION PRESENTED

Whether an agreement that requires an
employer and an employee to _ resolve
employment-related disputes through individual
arbitration, and waive class and collective
proceedings, is enforceable under the Federal
Arbitration Act, notwithstanding the provisions of
the National Labor Relations Act.

ii

CORPORATE DISCLOSURE STATEMENT

Pursuant to Rule 29.6 of the Rules of this
Court, amicus curiae Atlantic Legal Foundation
states that Atlantic Legal Foundation is a not-for-
profit corporation incorporated under the laws of
the Commonwealth of Pennsylvania. It has no
shareholders, parents, subsidiaries or affiliates.

TABLE OF CONTENTS

Page
QUESTION PRESENTED.................. i
CORPORATE DISCLOSURE STATEMENT. . ii
py | 8 6 OP SY, sa ge iv
INTEREST OF AMICUS CURIAE........... 1
PRELIMINARY STATEMENT. ............. 3
i eae Mains o's « 656 bce 5
SUMMARY OF ARGUMENT. .............. NS)
FE EER en Ee Eee ae re 10
I. There is an acknowledged and
indisputable split of authority
among the circuits on the
question presented................ 10
Il. The question presented is
exceptionally important and warrants
a he anak pe eee oe bok 20
It]. The seventh circuit’s decision is
SSA SERPS Mig ese A ee 20

Sir so ki ko ilne bene aena ven 4a 24

lv
TABLE OF AUTHORITIES
Page(s)
CASES:

American Express Co. v. Italian Colors
Restaurant, 133 S. Ct. 2304 (2013)... . passim
AT&T Mobility LLC v. Concepcion,

BR passim
Cellular Sales of Missouri, LLC v. NLRB,
824 F.3d 772 (8th Cir. 2016).......... 15, 16

Citi Trends, Inc. v. NLRB, No. 15-60913,

2016 WL 4245458, at *1 (5th Cir.

Aug. 10, 2016) (per curiam)(unpublished).. 12
CompuCredit Corp. v. Greenwood,

So Be ee passim
D.R. Horton, Inc. v. NLRB,

737 F.3d 344 (5th Cir. 2013). ........ passim
D.R. Horton, Inc., 357 N.L.R.B. 2277

ete wie ee eee ae i eee dviak & passim
DIRECTV, INC. v. Imburgia,

es ee I, wo 6 66 006 0p oe 00s 2,21
Gilmer v. Interstate/Johnson Lane Corp.,

Se I, nc a oe ceive ence ses 21, 23
Killion v. KeHE Distribs., LLC,

761 F.3d 574 (6th Cir. 2014). ............ 18

Lewis v. Epic Systems Corp..,
823 F.3d 1147 (7th Cir. 2016),
petition for cert. pending,
No. 16-285 (filed Sept. 3, 2016)....... passim

Vv

TABLE OF AUTHORITIES (cont'd)

Page(s)
CASES (cont’d):
Mitsubishi Motors Corp. v. Soler Chrysler-
Plymouth, Inc., 473 U.S. 614 (1985). ...... 21
Moses H. Cone Memorial Hospital v. Mercury
Construction Corp..,

ee See 20, 21
Murphy Oil USA, Inc.,
361 N.L.R.B. No. 72 (2014). .......... 13, 14

Murphy Oil, U.S.A., Inc. v. NLRB,
808 F.3d 1013 (5th Cir. 2015),
petition for cert. pending, No. 16-307

EE passim
NLRB v. Murphy Oil, No. 16-307 petition
rene 3, 4, 15, 20

Owen v. Bristol Care, Inc.,

702 F.3d 1050 (8th Cir. 2013). .. 15, 16, 17, 19
PJ Cheese, Inc. v. NLRB, No. 15-60610,

2016 WL 3457261, at *1 (5th Cir.

June 16, 2016) (per curiam).............. 12
Shearson/American Express Inc. v. McMahon,

a as eevee stew c pen 21
Stolt-Nielsen S.A. v. AnimalFeeds International

Corp., 559 U.S. 662 (2010)............... 21
Sutherland v. Ernst & Young LLP,

726 F.3d 290 (2d Cir. 2013)........... 17, 19

United Steelworkers of Am. v. Warrior &
Gulf Navigation Co.,
ee 23-24

vi
TABLE OF AUTHORITIES (cont’d)
Page(s)

CASES (cont’d):
Walthour v. Chipio Windshield Repair, LLC,

745 F.3d 1326 (11th Cir. 2014). .......... 18
STATUTES:
Credit Repair Organizations Act,

26 WG. BRP 6 cect ie wenn 22, 23

15 U.G. © BG oc vc ee ccseecvusenen 23
Fair Labor Standards Act,

F gtk fom Sy rats: passim
Federal Arbitration Act, 9 U.S.C. 1-16. .. passim

Fy otk fk retell passim
National Labor Relations Act,

aie hee 8: | re.” passim

C7, SPUBG 0268. ...... chokes 22

5 al, 20 VEL. § UGGS... os ec educueen 7

]

INTEREST OF AMICUS CURIAE'

The Atlantic Legal Foundation is a non-profit
public interest law firm founded in 1976 whose
mandate is to advocate and protect the principles
of less intrusive and more accountable
government, a market-based economic system, and
individual rights. It seeks to advance this goal
through litigation and other public advocacy and
through education. Atlantic Legal Foundation’s
board of directors and legal advisory council
consist of legal scholars, corporate legal officers,
private practitioners, business executives, and
prominent scientists. Atlantic Legal’s directors and
advisors are familiar with the role arbitration
clauses play in the contracts entered into between
companies and between companies and consumers.
Some of Atlantic Legal’s directors and advisers
have decades of experience with arbitration — as
legal counsel, as arbitrators, and as members or
supporters of organizations that administer

' Pursuant to Rule 37.2(a), amicus has given notice of
intent to file this brief to all parties more than 10 days
before this brief was filed. All parties have consented to the
filing of this brief.; the consents have been lodged with the
Clerk.

Pursuant to Rule 37.6, amicus affirms that no counsel
for any party authored this brief in whole or in part, and no
counsel or party made a monetary contribution intended to
fund the preparation or submission of this brief. No person
other than amici curiae nor their counsel made a monetary
contribution to the preparation or submission of this brief.

2

arbitration regimes. They are familiar with the
benefits of arbitration, especially the role of
arbitration (and other “alternative dispute
resolution” mechanisms) in facilitating business
and commerce and in alleviating the burdens on
courts and parties.

The abiding interest of the Foundation in the
promotion of arbitration as an efficient alternative
to protracted litigation is exemplified by its
participation as amicus or as counsel for amicus
in numerous cases before this Court, involving
arbitration issues, including American Express Co.
v. Italian Colors Restaurant, 133 S. Ct. 2304 (2013)
and DIRECTV, INC. v. Imburgia, 136 S. Ct. 463
(2015).

There is aclear, acknowledged, and undisputed
circuit split The federal courts of appeals are
divided as to whether the National Labor
Relations Act, 29 U.S.C. et seg. (NLRA) overrides
the Federal Arbitration Act, 9 U.S.C. §§ 1, et seq.
(“FAA”)’s presumption that arbitration agreements
are enforceable as written. The two circuits that
have held arbitration agreements in the labor-
relations context are unenforceable acknowledge a
clear circuit split and all of the petitioners in the
three cases now pending before the Court that
raise this issue — employers and the NLRB alike -
agree that there is a serious and direct circuit
split.

Amicus also believes that the decision of the
Court of Appeals for the Seventh Circuit in this
case is inconsistent with the purposes of the FAA

3

and both the long-standing and recent teaching of
this Court regarding arbitration, and is in direct
conflict with decisions of at least three other
Circuits.

The decision below, if allowed to stand, will
deter many employers from _ incorporating
arbitration as a dispute resolution mechanism in
their dealings with employees, thus frustrating a
fundamental purpose of the FAA.

PRELIMINARY STATEMENT

The Supreme Court is being asked to resolve a
clear circuit split arising from contrary conclusions
drawn recently by several circuits about whether
class and collective action waivers in employment
arbitration agreements violate the National Labor
Relations Act, and whether the NLRA overrides
the Federal Arbitration Act in three petitions for
certiorari filed in September 2016, namely the
instant case as well as Ernst & Young, LLP v.
Morris, No. 16-300, (filed Sept. 8, 2016) and NLRB
v. Murphy Oil, No. 16-307 (filed Sept. 9, 2016). The
fact that three petitions have been filed with the
Court in such a two week period, involving very
similar legal and factual issues, and that petitions
have been filed by both employers and the NLRB,
indicates the importance of the issues and the
importance of the Court determining the scope of
employers’ and employees’ rights under the two
federal statutory schemes at issue as applied to
arbitration agreements that contain a waiver of

4

the right to engage in class litigation or class
arbitration.

The FAA establishes a presumption in favor of
enforcing arbitration agreements as written that
can be overcome by another statute, but only if
that statute is a “congressional command” that is
contrary to the FAA’s mandate.

The Ninth Circuit in Morris v. Ernst & Young,
LLP, No. 13-16599, 2016 WL 4433080 (9th Cir.
Aug. 22, 2016), petition for cert. pending, No.
16-300 (filed Sept. 8, 2016), and Seventh Circuit in
this case held that the NLRA is a “congressional
command” that creates an exception to the FAA’s
promotion of arbitration as a preferred means of
dispute resolution. The Fifth Circuit, in Murphy
Oil, U.S.A., Inc. v. NLRB, 808 F.3d 1013 (5th Cir.
2015), petition for cert. pending, No. 16-307 (filed
Sept. 9, 2016) held that the NLRA is not an
unambiguous “congressional command,” and that
it did not fall within the FAA’s “saving clause” of
“jNegality.”

Petitioners in all three cases — employers and
the NLRB (charged with protecting the interests of
employees) — argue in strikingly similar language
that the issue whether an employer can lawfully
require its employees to sign agreements
mandating individual arbitration of workplace
disputes “is an important and recurring question”
about the federal policy encouraging arbitration
embodied in the Federal Arbitration Act and the
scope of employees’ rights under the NLRA. See
NLRB Petition in No. 16-307 at 9; see also Ernst

5

& Young Petition in No. 16-330 at 10 and Epic
Petition in this case at 4.

The employer petitioners in the cases arising
from the decisions of the Seventh and Ninth
Circuits — the case at bar and Ernst & Young v.
Morris, No. 16-330 — diverge from the NLRB
primarily in their respective positions on the
substantive issue in each case.

The outcome of these cases has far-reaching
implications for employers and employees across
the United States. If the Seventh and Ninth
Circuits’ rule stands, employers doing business in
those circuits will be subject to a different legal
regime than employers with employees in the
Second, Fifth, and Eighth Circuits, and even
employers in those circuits face the real threat of
enforcement action by the NLRB before
administrative tribunals until the Supreme Court
establishes a uniform nationwide rule.

BACKGROUND

Epic Systems is a Wisconsin-based developer of
computer software for recording, organizing,
storing and sharing healthcare data. Epic
employees develop, install, and maintain the
software.

In April 2014, Epic sent an email containing an
arbitration agreement to many of its employees.
The email asked recipients to confirm that they
understood and consented to the agreement, or

6

they could request that someone contact them
about it. Pet. App. 2a.

Lewis, a technical writer at Epic, acknowledged
the arbitration agreement and continued to work
at Epic. The agreement provided that by
continuing to work at Epic, Lewis was deemed to
have accepted its terms. In the agreement, Lewis
waived his “right to participate in or receive money
or any other relief from any class, collective, or
representative proceeding.”

Lewis left Epic’s employ and later filed suit in
federal court in Wisconsin on behalf of himself and
other technical writers alleging the company had
violated the Fair Labor Standards Act, 29 U.S.C.
§§ 201-219 (FLSA), by misclassifying them and
depriving them of overtime pay.

Epic moved to dismiss Lewis’s claim and compel
individual arbitration. Lewis responded that the
agreement’s class and collective action waiver was
unenforceable because it interfered with his right
to engage in concerted activities under Section 7 of
the NLRA. The district court agreed with Lewis’s
arguments and Epic appealed to the Seventh
Circuit. Epic appealed, and the Seventh Circuit
affirmed.

The Seventh Circuit’s Decision

The Seventh Circuit Court of Appeals concluded
that “[a] collective, representative, or class legal
proceeding is * * * a ‘concerted activit|y])” under
NLRA Section 7. Pet. App. 10a (brackets in
original), and Section 8 of the NLRA prohibits an

7

employer from interfering with an employee’s right
to engage in concerted activity, 29 U.S.C. §
158(a)(1). Thus, the court held, the NLRA renders
the waiver of class and collective proceedings
“unenforceable.” Pet. App. lla.

The Seventh Circuit began its analysis by
adopting the NLRB’s reasoning — promulgated in
D.R. Horton, Inc., 357 N.L.R.B. 2277 (2012) — that
engaging in class, collective or representative
proceedings is “concerted activity” and a protected
right under Section 7 of the NLRA, and thus it
would be an unfair labor practice under Section 8
of the NLRA for an employer “to interfere with,
restrain, or coerce employees in the exercise” of
this right. According to the court, the NLRA’s
legislative history and purpose indicated that
“concerted activity” unambiguously includes
representative, class, joint and collective actions.
Further, even if the court were to find the term
“concerted activity” ambiguous, it would then have
to defer to the NLRB’s interpretation of that term
and find the class action waiver to be unlawful.

The Seventh Circuit rejected Epic’s three
principal arguments. First, Epic argued that
because class actions under Rule 23 of the Federal
Rules of Civil Procedure did not exist when
Congress enacted the NLRA in 1935, Congress
could not have intended Rule 23 class actions to be
“concerted activity” under the NLRA. The court,
however, held that “concerted activity” is not
limited to what was “concerted activity” in 1935.
Also, the arbitration agreement not only waived

8

Rule 23 class actions, it waived all forms of
representative, collective or joint proceedings, and
these types of proceedings, including collective
actions under §216(b) of the FLSA, existed prior to
1935.

Second, the Seventh Circuit rejected the
argument, accepted by ali the other circuits that
had theretofore ruled on the matter, that the
arbitration agreement must be enforced under the
Federal Arbitration Act (FAA). The court even
went so far as to say that “it is not clear to us that
the FAA has anything to do with this case.”
Nevertheless, the court proceeded to examine
whether there was a conflict between the FAA’s
mandate to place arbitration agreements on the
same footing as any other contract and the NLRA.
In doing so, the court addressed the FAA’s
“savings clause,” contained in 9 U.S.C. § 2, which
provides that arbitration agreements are
“enforceable, save upon such grounds as exist at
law or in equity for the revocation of any contract.”
Pet.App. at 14a-15a (quoting 9 U.S.C. § 2) and
“fijllegality is one of those grounds.” Jd. at 15a.
The court found the savings clause provided a way
to harmonize the NLRA and FAA, by finding the
agreement’s class waiver to be unenforceable.
According to the court, the agreement is illegal
under the NLRA, and because an illegal
agreement is not enforceable under the FAA’s
savings clause, there is no conflict between the
FAA and NLRA. 7d. at 20a.

9

Finally, Epic contended that even if Section 7
protects a right to class or collective actions, the
right is merely procedural not substantive, and the
FAA requires enforcement of the agreement since
it does not involve the forfeiture of a substantive
right. The court rejected this argument because it
found the right to engage in “concerted activity”
through class or collective actions is a substantive
right under the NLRA, even though the class
action device itself is procedural. Since the
arbitration agreement required employees to
relinquish a right that the NLRB has declared to
be substantive, it was not enforceable under the

FAA.

The Seventh Circuit acknowledged that the
Fifth Circuit in D.R. Horton, Inc. v. NLRB, 737
F.3d 344 (5th Cir. 2013), had come “to the opposite
conclusion,” Pet. App. 15a, and proceeded to
“create a conflict in the circuits.” Jd. at 15a n.f.

SUMMARY OF ARGUMENT

The split of authority among several! circuits in
this case is clear, acknowledged, and undisputed.
The federal courts of appeals are divided, three to
two, on whether the NLRA overrides the FAA’s
presumption that arbitration agreements are
enforceable as written, requires’ that
employment-related disputes be resolved by
individual arbitration. Indeed, the two circuits
that have held arbitration agreements in the
labor-relations context are unenforceable
acknowledge a clear circuit split and all of the

10

petitioners in the three cases now pending before
the Court that raise this issue — employers and the
NLRB alike — agree that there is a serious and
direct circuit split.

Likewise, all three petitions pending before the
Court raising the issue presented in this case —
from employers and the NLRB ~— argue that the
circuit split is fully developed, acknowledged, and
ripe for resolution by this Court.

Review is also warranted because the decision
below was incorrect. It ignores this Court’s
teaching that the FAA embodies “a liberal federal
policy favoring arbitration agreements” and that
arbitration agreements must be enforced according
to their terms, that the foregoing principle applies
even when the claims at issue are federal statutory
claims, unless the FAA’s mandate has been
overridden by a contrary congressional command
which must be expressed with “clarity.”

ARGUMENT

I. THERE IS AN ACKNOWLEDGED
AND INDISPUTABLE SPLIT OF
AUTHORITY AMONG THE CIRCUITS
ON THE QUESTION PRESENTED.
The split of authority in this case is clear,
acknowledged, and undisputed. The federal courts
of appeals are divided, three to two, on whether
the NLRA overrides the FAA’s presumption that
arbitration agreements are enforceable as written,
requires that employment-related disputes be

11

resolved by individual arbitration. Indeed, the two
circuits that have held arbitration agreements in
the labor-relations context are unenforceable
acknowledge a clear circuit split and all of the
petitioners in the three cases now pending before
the Court that raise this issue —- employers and the
NLRB alike — agree that there is a serious and
direct circuit split.

The Second, Fifth, and Eighth Circuits have
held that arbitration agreements that incorporate
waivers of class and collective arbitration and
litigation in the employment context are
enforceable under the FAA.

The Fifth Circuit has squarely and repeatedly
upheld class waivers in employment-related
arbitration agreements. In D.R. Horton, Inc. v.
NLRB, 737 F.3d 344, 362 (5th Cir. 2013), the court
rejected a decision by the National Labor Relations
Board (NLRB or Board), which had found the class
waiver at issue unenforceable under the FAA and
the NLRA. See D.R. Horton, Inc., 357 N.L.R.B.
2277 (2012). The Fifth Circuit considered and
rejected the NLRB’s decision that the FAA’s saving
clause was a basis for invalidating class waivers
because of alleged “ illegality” under the NLRA.
737 F.3d at 360. The NLRB’s analysis was flawed,
the Fifth Circuit explained, because its finding of
illegality had “the effect of * * * disfavor[ing]
arbitration.” Jd. at 359 (citing AT&T Mobility LLC
v. Concepcion, 563 U.S. 333, 346 (2011)). The court
therefore concluded that the defense falls outside
the saving clause. Jd.

12

The Fifth Circuit then analyzed the issue in the
schema required by this Court’s in cases in which
a party seeks to avoid arbitration based on a
purported conflict with another federal statute
such as the NLRA. The court asked whether the
NLRA is “a contrary congressional command”
that overcomes the FAA’s presumption in favor of
arbitration. Jd. (quoting CompuCredit Corp. v.
Greenwood, 132 S. Ct. 665, 669 (2012). The Fifth
Circuit determined that “there is no basis on which
to find that the text of the NLRA supports a
congressional command to override the FAA.” Jd.
In so holding, the Fifth Circuit recognized that
“le]very one of our sister circuits to consider the
issue” has “held arbitration agreements containing
class waivers enforceable,” and the court was
“loath to create a circuit split.” Jd. at 362 and the
proper result was that a class waiver “must be
enforced according to its terms.” Id.

The Fifth Circuit has adhered to this view
consistently since its decision in D.R. Horton, in
the face of serial challenges to its decisions from
the NLRB, challenges that are brought when
aggrieved parties elect to file petitions to review
NLRB rulings in the Fifth Circuit. See Citi Trends,
Inc. v. NLRB, No. 15-60913, 2016 WL 4245458, at
*1 (5th Cir. Aug. 10, 2016) (per curiam)
(unpublished); PJ Cheese, Inc. v. NLRB, No.
15-60610, 2016 WL 3457261, at *1 (5th Cir. June
16, 2016) (per curiam); and, most recently, in
Murphy Oil USA, Inc. v. NLRB, 808 F.3d 1013,

13

1021 (5th Cir. 2015), petition for cert. pending, No.
16-307 (filed Sept. 9, 2016).

In Murphy Oil, the Fifth Circuit again
addressed the legality of individual arbitration
agreements under Sections 7 and 8(a) of the NLRA
and once again upheld the legality of an
arbitration agreement that contains a waiver of
the right to commence or participate in class-wide
arbitration or litigation. The Fifth Circuit
considered a nearly identical case only two years
earlier in D.R. Horton.

Murphy Oil’s arbitration agreement included a
waiver of the employee’s right to pursue class and
collective actions. The agreement provided that
employees must individually “resolve any and all
disputes or claims...which relate...to Individual’s
employment...by binding arbitration.” Several
employees filed a FLSA collective action and
Murphy Oil sought dismissal of the suit and to
compel arbitration. One of the plaintiff employees
filed an unfair labor charge with the NLRB
alleging that the agreement unlawfully interfered
with employees’ Section 7 rights guaranteed by the
NLRA.

In October 2014, ten months after the Fifth
Circuit’s ruling in D.R. Horton, the NLRB issued
ils Murphy Oil opinion, Murphy Oil USA, Inc., 361
N.L.R.B. No. 72 (2014). The Board disregarded the
Fifth Circuit’s ruling in D.R. Horton and chose
instead to reaffirm its previous position that an
arbitration agreement similar to Murphy Oil’s
violated the NLRA because the agreement

14

restricted Section 7 rights to engage in concerted
activity. The NLRB applied its D.R. Horton
decision, In re D.R. Horton, Inc., 357 N.L.R.B. No.
184 (2012), to Murphy Oil’s arbitration agreement
and similarly concluded that both the original and
amended Murphy Oil arbitration agreements could
be interpreted as unlawfully prohibiting employees
from filing unfair labor practice charges, and thus
required corrective action.” Murphy Oil USA, Inc.,
361 N.L.R.B. No. 72 (20:4).

Before the NLRB issued its Murphy Oil ruling,
the Fifth Circuit had overturned the NLRB’s D.R.
Horton decision. D.R. Horton, Inc. v. N.L.R.B., 737
F.3d 344 (5th Cir. 2013). Murphy Oil petitioned
the Fifth Circuit to review the NLRB’s decision
that ignored the Court’s D.R. Horton ruling. The
Fifth Circuit held in Murphy Oil that the original
arbitration agreement violated employees’ Section
7 rights, but that the amended agreement was
lawful. The court considered Murphy Oil’s pre- and
post-D.R. Horton agreements separately because
the agreements had different language. The Fifth
Circuit concluded that the original agreement was
problematic because its language that employees
waived the right to pursue collective or class
claims for “any and all disputes or claims...which
relate...to Individual’s employment” could be

* After the Fifth Circuit’s D.R. Horton decision Murphy
Oil revised its agreement to include language clarifying
that the agreement did not bar employees from
“participating in proceedings to adjudicate unfair labor
practice[] charges before the Board.”

15

interpreted to mean that the employee could not
file unfair labor practice charges with the NLRB,
since “any and all” claims related to employment
had to proceed to individual arbitration, could
have a chilling effect on employees’ ability to act
collectively, and thus constituted an unfair labor
practice.

But the Court found Murphy Oil’s revised
arbitration agreement did not violate the NLRA
because an employee could not reasonably
interpret the revised agreement to prohibit filing
unfair labor practice charges, because the
agreement clearly stated the opposite. The Fifth
Circuit’s Murphy Oil decision held that individual
arbitration agreements are not a per se unfair
labor practices and held further that “an express
statement” preserving employees’ right to file
Board charges is not required. See NLRB Petition
in Murphy Oil, No. 16-307, Pet.App. 11a.

The Eighth Circuit also has concluded that
employment arbitration agreements containing
class waivers are enforceable under the FAA,
notwithstanding federal labor laws or the NLRB’s
interpretation of those laws. See Cellular Sales of
Mo., LLC v. NLRB, 824 F.3d 772, 776 (8th Cir.
2016); Owen v. Bristol Care, Inc., 702 F.3d 1050,
1052, 1054-1055 (8th Cir. 2013). In Owen, the
Eighth Circuit acknowledged the NLRB’s
determination that class waivers in employment
arbitration agreements are unenforceable, but
explicitly “reject[ed)” the “invitation to follow the
NLRB’s rationale.” 702 F.3d at 1055, and instead

16

found the FAA’s presumption in favor of the
enforcement of arbitration agreements to be
dispositive. See id. at 1052-1055.

The Eighth Circuit followed this Court’s
teaching that “there must be a ‘contrary
congressional command’ for another statute to
override the FAA’s mandate.” Jd. at i052 (quoting
CompuCredit, 132 S. Ct. at 669), and found that
the two potential contrary congressional!
commands alleged in Owen — the FLSA and the
NLRA — did not constitute such a “contrary
congressional command.” 7d. at 1053-1054. The
Eighth Circuit concluded that neither statute
sufficed to “override[] the mandate of the FAA in
favor of arbitration.” Jd. at 1055. Because Congress
had reenacted the FAA in 1947, after passing both
of the labor statutes, the court reasoned, “Congress
intended its arbitration protections to remain
intact even in light of the earlier passage of * * *
major labor relations statutes.” Jd. at 1053.

The Eighth Circuit reaffirmed its Owen decision
recently in Cellular Sales, 824 F.3d 772. That case
came before the court of appeals on a petition to
review the NLRB’s ruling “that a mandatory
agreement requiring individual arbitration of
work-related claims’ violates the NLRA.” Id. at
776. The court granted the petition in relevant
part, explaining that the “holding in Owen is fatal”
to the NLRB’s position because following Owen, an
“arbitration agreement that include[s] a waiver of
class or collective actions in all forums to resolve
employment-related disputes” is enforceable. Jd.

17

The Second Circuit is in agreement with the
Fifth and Eighth Circuits. See Sutherland v. Ernst
& Young LLP, 726 F.3d 290, 297 & n.8 (2d Cir.
2013) (per curiam); it, too, held that a class waiver
in an arbitration clause in the employment context
is enforceable. Sutherland worked for Ernst &
Young and agreed to resolve all disputes with
Ernst & Young through individual arbitration. Id.
at 293-294. After the plaintiff filed a class action in
federal court, Ernst & Young moved to compel
arbitration. Jd. at 294. The district court denied
the motion, but the Second Circuit reversed. Jd. at
299. Like the Eighth Circuit in Owen, the Second
Circuit began from the premise that “arbitration
agreements should be enforced according to their
terms unless the FAA’s mandate has been overrid-
den by a contrary congressional command.” Id. at
295 (internal quotation marks and citation
omitted). The court found that neither the FLSA
nor the NLRA was a “contrary congressional
command” that overrode the FAA. Id. at 296-297
& n.8. Like the Eighth Circuit, the Second Circuit
reached this conclusion even though the NLRB
had decided otherwise; the court “decline[d] to
follow” the Board’s views. Id. at 297 n.8. It held
that an employment arbitration agreement is
enforceable under the FAA. Id. at 292-293, 299
(citing American Express Co. v. Italian Colors
Rest., 133 S. Ct. 2304 (2013)).°

* The Sixth and Eleventh circuits have also held that
(continued...)

18

On the other side of the split are the Seventh
and Ninth Circuits. The Seventh Circuit deviated
from its sister circuits in the decision below. It
expressly recognized that its opinion “would create
a conflict in the circuits.” Pet. App. l5an ft. Unlike
the Second, Fifth, and Eighth Circuits, the
Seventh Circuit held that agreements to submit
employment disputes to individual arbitration are
not enforceable under the NLRA and the FAA. The
panel concluded that class waivers in employment
arbitration agreements are “illegal” under the
NLRA because they interfere with employees’ right
to engage in concerted activities. Jd. at 10a-11a. It
determined that such waivers are unenforceable
under the FAA’s saving clause because illegality is
a “ground[ ] * * * for the revocation of any
contract.” Id. at 14a-15a (quoting 9 U.S.C. § 2); see
id. at 20a.

The Seventh Circuit acknowledged that the
Fifth Circuit had reached “the opposite
conclusion.” Jd. at 15a, but the Seventh Circuit
minimized the Fifth Circuit’s reasoning as relying
on mere “dicta” from this Court’s decisions in
Concepcion and Italian Colors. Id. As for the
Second and Eighth Circuits, the panel did not

*(...continued)
the FAA requires enforcement of class waivers in
employment arbitration agreements, but without
discussing the NLRA in their decisions. See Killion v. KeHE
Distribs., LLC, 761 F.3d 574, 592 (6th Cir. 2014); Walthour
v. Chipio Windshield Repair, LLC, 745 F.3d 1326,
1334-1336 (11th Cir. 2014).

19

dispute that these “two circuits agree with the
Fifth,” citing Sutherland and Owen, but it viewed
the analysis by those circuits as insufficient. Jd. at
19a.

The Ninth Circuit has joined the Seventh. In
Morris v. Ernst & Young, LLP, No. 13-16599, 2016
WL 4433080 (9th Cir. Aug. 22, 2016), a divided
panel held that a waiver provision requiring
employees to bring legal claims through individual
arbitration violates the NLRA and therefore is
unenforceable. Jd. at *1, *5. The Ninth Circuit
majority concluded that the FAA’s saving clause
“caus|[es] the FAA’s enforcement mandate to yield”
to the NLRA. Id. at *7.

The majority acknowledged that it was
widening a circuit split. Although it “agree[d] with
the Seventh Circuit,” the majority “recognize[d]
that sister Circuits are divided on this question.”
Id. at *10 n.16.

Judge Ikuta dissented. She described the
majority’s decision as “breathtaking in its scope
and in its error.” Jd, at *11. In her view, the NLRA
was not a contrary congressional command that
overrode the FAA’s enforcement mandate. Id. at
*12-*14. Judge Ikuta stressed that the majority's
decision was “directly contrary to Supreme Court
precedent and join[ed] the wrong side of a circuit
split.” Jd. at *11.

The split in the circuits promises only more
turmoil and expensive, time-wasting litigation. It
frustrates Congress’s intent in passing the FAA “to
move the parties to an arbitrable dispute out of

20

court and into arbitration as quickly and easily as
possible” so as not to “frustrate[] the statutory
policy of rapid and unobstructed enforcement of
arbitration agreements.” Moses H. Cone Memorial
Hospital v. Mercury Constr. Corp., 460 U.S. 1,
22-23 (1983).

Il. THE QUESTION PRESENTED IS
EXCEPTIONALLY IMPORTANT AND
WARRANTS REVIEW.

All three petitions pending before the Court
raising the issue presented in this case — from
employers and the NLRB — argue that the circuit
split is fully developed, acknowledged, and ripe for
resolution by this Court. See Pet. at 20, Petition in
Ernst & Young v. Morris, No. 16-300 at 19, and
Petition in NLRB v. Murphy Oil, No. 16-307 at 24.

The competing decisions by several courts of
appeal have examined and evaluated the
arguments on both sides. The Second, Fifth and
Eighth Circuits have upheld class and collective
waivers under the FAA and the NLRA; the
Seventh and Ninth Circuits have invalidated the
waivers.

The split is unlikely to resolve itself. This Court
should intervene now to resolve it.

Ill. THE SEVENTH CIRCUIT’S
DECISION IS INCORRECT.
Review is also warranted because the decision
below was incorrect.

As this Court has repeatedly stated, the FAA

«“

embodies “a liberal federal policy favoring

21

arbitration agreements.” Moses H. Cone Memorial
Hospital, 460 U.S. 1, 24 (1983). Consistent with
that policy, the Court has repeatedly held that “as
a matter of federal law, any doubts concerning the
scope of arbitrable issues should be resolved in
favor of arbitration”) and has consistently upheld
the FAA’s policy favoring enforcement of
arbitration agreements as written. See, e.g.,
DIRECTV, Inc. v. Imburgia, 136 S. Ct. 463 (2015);
Italian Colors, 133 S. Ct. 2804; CompuCredit, 132
S. Ct. 665; Concepcion, 563 U.S. 333; Stolt-Nielsen
S.A. uv. AnimalFeeds Int'l Corp., 559 U.S. 662
(2010); Gilmer v. Interstate/Johnson Lane Corp.,
500 U.S. 20 (1991); Shearson / American Express,
482 U.S. 220; Mitsubishi Motors Corp. v. Soler
Chrysler-Plymouth, Inc., 473 U.S. 614 (1985);
Moses H. Cone, 460 U.S. 1). arbitration
agreements must be enforced according to their
terms. See, e.g., Italian Colors, 133 S. Ct. at 2309;
Concepcion, 563 U.S. 333, 339, 346.

The foregoing principle applies “even when the
claims at issue are created by federal statutory
claims, unless the FAA’s mandate has been
overridden by acontrary congressional command.”
CompuCredit, 132 S. Ct. at 669 (citation and
internal quotation marks omitted). The party
challenging the arbitration agreement has the
burden of showing that “Congress intended to
preclude a waiver of the judicial forum.” Gilmer,
500 U.S. 20, 26 (1991) and Congress’ intent to
supersede the FAA must be expressed with
“clarity.” CompuCredit, 132 S. Ct. at 672.

22

The Seventh Circuit did not evaluate whether
the NLRA supplies the necessary “contrary
congressional command” that overrides the FAA’s
overarching policy in favor of enforcing arbitration
agreements according to their terms. The NLRA
contains no congressional command contrary to
collective-action waivers. The collective bargaining
provisions of the NLRA do not mention arbitration
and do not confer a specific right to take legal
action at all, whether individually or collectively.
Section 7 gives employees the right to “engage in
* * * concerted activities for the purpose of
collective bargaining or other mutual aid or
protection,” 29 U.S.C. § 157, but it contains no
“command” that this Court has indicated would
override the presumption that arbitration
agreements should be enforced according to their
terms. The NLRA does not contain the requisite
“contrary congressional command,” that overrides
the parties’ arbitration agreement according to its
terms. CompuCredit, 132 S. Ct. at 669, 672.

In CompuCredit, the Court found that more
direct statutory language lacked the kind of clear
congressional command necessary to nullify an
arbitration agreement. The Court found the
language in the Credit Repair Organizations Act
(CROA), 15 U.S.C. § 1679-1679), insufficient to
override the FAA’s policy. Plaintiffs in that case
argued the CROA precluded enforcement of an
arbitration agreement that contained a waiver of
consumers’ right to litigate in court, 132 S. Ct. at

23

669* and held that Congress did not intend to
preclude arbitration of claims under CROA. See id.
at 672-673. The Court remarked that if Congress
had intended to bar arbitration of consumers’
claims, “it would have done so in a manner less
obtuse than what respondents suggest.” /d. at 672,
and it gave examples of congressional commands
that would be sufficiently clear. Jd.

Nothing in the language of the NLRA
establishes congressional intent to override the
FAA with the requisite clarity, and nothing in the
legislative history of the NLRA suggests an intent
to confer a right to file class or consolidated claims
against employers or that overrides the FAA. See
D.R. Horton, Inc. v. NLRB, 737 F.3d 344, 361 (5th
Cir. 2013). Nothing in the NLRA suggests that
employees’ right to bargain collectively includes
the right to resolve disputes using a particular
legal procedure.

Moreover, there is no conflict between collective
action waivers and the NLRA’s underlying
purposes. See Gilmer, 500 U.S. at 26. Indeed,
“arbitration of labor disputes under collective bar-
gaining agreements is part and parcel of the
collective bargaining process itself.” See United

* Plaintiffs in CompuCredit cited language in the CROA
that provided that “[aJny waiver by any consumer of any
protection provided by or any right of the consumer” was
void and could “not be enforced by any Federal or State
court,” 15 U.S.C. § 1679f(a). See 132 S. Ct. at 669.

24

Steelworkers of Am. v. Warrior & Gulf Navigation
Co., 363 U.S. 574, 578 (1960).

The Seventh Circuit’s application of the FAA’s
saving clause is inconsistent with this Court’s
decision in Concepcion. There, the Court explained
that, “when a doctrine normally thought to be
generally applicable * * * [is] applied in a fashion
that disfavors or interferes with arbitration,” it
does not trigger the saving clause. Concepcion, 563
U.S. at 341. This Court determined that a defense
that precludes the waiver of class or collective
arbitration is not generally applicable because
“[rlequiring the availability of classwide
arbitration interferes with fundamental] attributes
of arbitration and thus creates a scheme
inconsistent with the FAA.” Id. at 344.

CONCLUSION

For the foregoing reasons, this Court should
grant the Petition.
Respectfully submitted,

Martin S. Kaufman

Counsel of Record

Atlantic Legal Foundation
2039 Palmer Avenue, #104
Larchmont, New York 10538
(914) 834-3322
mskaufman@atlanticlegal.org
Attorneys for Amicus Curiae
Atlantic Legal Foundation

October 2016

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0699%3A05. Public record. Not legal advice.