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

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## Record

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

## Text

AND
BRIEFS

Supreme Coie
FILED

; JUN 16 2017
Nos. 16-285, 16-300, 16-307 OFFICE OF THE CL CAA

— —

IN THE
Supreme Court of the Anited States

Epic SYSTEMS CORP., PETITIONER,
Vv

JACOB LEWIS.

ERNST & YOUNG LLP, ET AL., PETITIONERS,
Vv.
STEPHEN MORRIS, ET AL.

NATIONAL LABOR RELATIONS BOARD, PETITIONER,
Vv.
MURPHY OIL USA, INC., ET AL.

On Writs of Certiorari
to the United States Courts of Appeals
for the Fifth, Seventh, and Ninth Circuits

BRIEF FOR THE BUSINESS ROUNDTABLE
AS AMICUS CURIAE SUPPORTING EPIC
SYSTEMS CORP., ERNST & YOUNG LLP, AND

MURPHY OIL USA, INC.

MARIA GHAZAL WILLIAM M. JAY

BUSINESS ROUNDTABLE Counsel of Record

300 New Jersey Ave., N.W. ANDREW KIM

Suite 800 GOODWIN PROCTER LLP

Washington, DC 20001 901 New York Ave., N.W.
Washington, DC 20001
wjay@goodwinlaw.com
(202) 346-4000

June 16, 2017

TABLE OF CONTENTS

Page

INTEREST OF THE AMICUS CURIAE.................... 1
SUMMARY OF ARGUMENT ......00............ccccecceeeeeeeeess 2
a cal 3
A. Arbitration agreements have long been

used in individual employment

agreements, rooted in a strong federal

policy of favoring arbitration............................ 3
B. Class action waivers are a recent

phenomenon intended to preserve a

protection long understood to be a key

characteristic of arbitration: the

individual resolution of claims. ....................- 11
C. Invalidating class action waivers under the

National Labor Relations Act’s collective
bargaining provisions and imposing class
arbitration on employers would largely

undo the benefits of arbitration. .................... 17

IIIT alii icccdctncnteccstamneninaniasttionrte sacavensiniasouinied 20

(i)

iB

TABLE OF AUTHORITIES

Page(s)

Cases
Abshire v. City Ry. Co.,

4 Ohio Law Abs. 144,

1925 WL 3954 (Ohio 1925)...................0.22...-. e222. 4
Alexander v. Gardner-Denver Co.,

ee 6, 7
Allied-Bruce Terminix Cos. v. Dobson,

a ccnsesennnsindeceneoaahs 19
AT&T Mobility LLC v. Concepcion,

Se i 5 oh ccetoscenosnsoiecsesasooss 18, 19
Bernhardt v. Polygraphic Co. of Am.,

Neen ac scmesbunechieons 5
Bhd. of R.R. Trainmen, Enter. Lodge,

No. 27 v. Toledo, Peoria & W. R.R..,

321 U.S. 50 (1944)............... BL odle A eS oee ee 4
Circuit City Stores, Inc. v. Adams,

532 U.S. 105 (2001).................. Ae ena 6, 17
Dickler v. Shearson Lehman Hutton, Inc.,

596 A.2d 860 (Pa. Super. Ct. 1991) ..................... 13

Dickstein v. duPont,
443 F.2d TES (Lat Cir. 1971) ....ccccccccccccrcccsccccccceees 5

ill

Erving v. Virginia Squires Basketball Club,

468 F.2d 1064 (2d Cir. 1972).....................

Fabricand v. Noritz,

170 N.E. 129 (N.Y. 1929) (per curiam)......

Gateway Coal Co. v.
United Mine Workers of Am.,

4E4 UG, BOB CDI oss ccc ence ccnnc ess cecses soe:

Gilmer v. Interstate/Johnson Lane Corp.,

Ee RE SE antciscricsicnecssinssesesseceesesces

Green Tree Financial Corp. v. Bazzle,

539 U.S. 444 (20038). ......cccecececceceseeceecereeeeee

Harris v. Shearson Hayden Stone, Inc.,

441 N.Y.S.2d 70 (N.Y. App. Div. 1981) .....

Keating v. Superior Court,

167 Cal. Rptr. 481 (Cal. Ct. App. 1980) ....

Legg, Mason & Co., Inc. v.
Mackall & Coe, Inc.,

351 F. Supp. 1367 (D.D.C. 1972)...............

Lewis v. Merrill Lynch, Pierce,
Fenner & Smith, Inc.,

431 F. Supp. 271 (E.D. Pa. 1977) ..............

Lewis v. Prudential Bache Secs., Inc.,

225 Cal. Rptr. 69 (Cal. Ct. App. 1986) ................

lv

Local 174, Teamsters, Chauffeurs,
Warehousemen & Helpers of Am. v.

Lucas Flour Co.,

REE ee ee 4
Nicholson v. CPC Intl Inc.,

Re re re SS BD rcccteccencincnccocovcnevececsees 12
NLRB v. Acme Indus. Co.,

LN a a 4
Oxford Health Plans LLC v. Sutter,

ee cscevinbuaiumondaosesuns 3,16
Republic Steel Corp. v. Maddox,

EE a 19
Southland Corp. v. Keating,

Se 12
Stolt-Nielsen S.A. v.

AnimalFeeds Int'l Corp.,

enon J a passim
Swenson v. Mgmt. Recruiters Int'l, Inc.,

868 F.2d 1304 (Sth Cir. 1966)..........ccccreccccsesescosecee 7
Utley v. Goldman Sachs & Co.,

683 F.3d 184 (let Cir. 1068) ..............2....0cccesccecesee 7
Vernon v. Drexel Burnham & Co.,

BS eres 11
Statutes

Eg Ii sah ipniieesadausiinpnsibvncndenntsehinitasioiaas Pr 6

Other Authorities

Am. Arbitration Ass'n,
Proud Past, Bold Future (2000)................2.......0+ 10

William H. Baker, Class Action Arbitration,
10 Cardozo J. Conflict Resol. 335 (2009)............. 19

Mei L. Bickner et al., Developments in
Employment Arbitration,
52 Disp. Resol. J. 8 (Jan. 1997) ................2.-.22-2.---- 9

David S. Clancy & Matthew M.K. Stein,
An Uninvited Guest: Class Arbitration
and the Federal Arbitration Act’s
Legislative History,
Se I I ic ic cinicimpcunibcndoncscnccnavecensens 13

Alexander J.S. Colvin,
Empirical Research on Employment
Arbitration: Clarity Amidst the Sound
and Fury?,
11 Employee Rts. & Emp. Pol’y J. 405

STS NSE ROL E92 SO a 10
Edward W. Dunham, The Arbitration

Clause as Class Action Shield,

16 Franchise L.J. 141 (1997) ..........................0008. 11
EEOC Notice No. 915.002 (July 10, 1997) ............... 10

Samuel Estreicher & Steven C. Bennett,
Using Express No-Class Action
Provisions to Halt Class-Claims,
SBS N.Y. Lid. 3 Gime 10, BOOB) .2.0..000.-cccceessee2ec00. 15

v1

Myriam Gilles, Opting Out of Liability: The
Forthcoming, Near-Total Demise of the
Modern Class Action,
104 Mich. L. Rev. 373 (2008) ..............c.cecccceseesseee 14

Michael Hoenig & Linda M. Brown,
Arbitration and Class Action Waivers
Under Conception: Reason and
Reasonableness Deflect Strident Attacks,
le Bis Ss CI I occas cccceccsctccsnccccesescoscess 16

Michael H. Leroy & Peter Feuille,
Judicial Enforcement of Predispute
Arbitration Agreements: Back to the
Future,
18 Ohio St. J. on Disp. Resol. 249 (2003)........ 8, 10

Joshua S. Lipshutz, Note,
The Court’s Implicit Roadmap: Charting
the Prudent Course at the Juncture of
Mandatory Arbitration Agreements and
Class Action Lawsuits,
ye PA ve 2.) Eee 18, 19

James E. McGuire & Bette J. Roth,
Class Action Arbitrations: A First Circuit
Update, 52 Boston Bar J. 17 (2008) .................... 15

Geraldine S. Moohr, Arbitration and the
Goals of Employment Discrimination
Law, 56 Wash. & Lee L. Rev. 395 (1999)............ 10

Kate W. Moss, ERISA and Arbitration:
How Safe Is Your 401(k)?,
64 Deraul L.. Bev. T7S CHO1B) ...........c.0..002..0000000- 16

vil

Richard A. Nagareda, Aggregation and Its
Discontents: Class Settlement Pressure,
Class-wide Arbitration, and CAFA,

106 Colum. L. Rev. 1872 (2006)........................2. 14

Hans Smit, Class Actions in Arbitration,
14 Am. Rev. Int’l Arb. 175 (2008)........................ 11

Jean R. Sternlight, As Mandatory Binding
Arbitration Meets the Class Action, Will
the Class Action Survive?,
42 Wm. & Mary L. Rev. 1 (2000)................0.0...... 13

Imre S. Szalai, Aggregate Dispute
Resolution: Class and Labor Arbitration,
13 Harv. Negot. L. Rev. 399 (2008) ..................... 17

U.S. Gen. Accounting Office, Employment
Discrimination: Most Private-Sector
Employers Use Alternative Dispute
a, cas xedusnninanenesencten )

Stephen J. Ware, Employment Arbitration
& Voluntary Consent,
25 Hofstra L. Rev. 83 (1996).................ccc.cccccsseccnees 5

David G. Wirtes, Jr., Suggestions for
Defeating Arbitration,
24 Am. J. Trial Advoc. 111 (2000) ....................... 14

INTEREST OF THE AMICUS CURIAE'

The Business Roundtable (BRT) is an association of
chief executive officers who lead companies with nearly
15 million employees and more than $6 trillion in an-
nual revenues. The combined market capitalization of
the BRT’s member companies is the equivalent of near-
ly one-quarter of total U.S. stock market capitalization,
and BRT members invest more than $100 billion an-
nually in research and development—equal to 30 per-
cent of U.S. private R&D spending. The BRT’s mem-
ber companies pay over $220 billion in dividends to
shareholders and generate more than $400 billion in
revenues for small and medium-sized businesses an-
nually. BRT companies also make more than $7 billion
a year in charitable contributions. The BRT was
founded on the belief that businesses should play an
active and effective role in the formulation of public
policy, and participate in litigation as amici curiae
where important business interests are at stake.

These consolidated cases present the question
whether the National Labor Relations Act (NLRA) in-
validates employment agreements that require em-
ployee-employer disputes to be resolved through indi-
vidual arbitration, not collective adjudication such as a
class action. For years, many of the BRT’s members

' All parties have consented to the filing of this brief. Blanket
consents by all parties in Nos. 16-285 and 16-300 and respondent
in No. 16-307 are on file with the Clerk. Consent by petitioner in
No. 16-307 is submitted with this brief. No counsel for a party
authored any part of this brief, and no such counsel or party made
a monetary contribution intended to fund the preparation or
submission of this brief. No person other than amicus curiae, its
members, or its counsel made a monetary contribution to the
briefs preparation or submission.

(1)

2

have entered into contractual relationships with their
employees that incorporate similar arbitration provi-
sions. Rulings that render class-action waivers unen-
forceable, like the Seventh and Ninth Circuits’ deter-
minations below, jeopardize the reliance that many of
the BRT’s members have placed on having a speedy,
efficient, and cost-effective means of resolving disputes
with their employees.

SUMMARY OF ARGUMENT

A. For over a century, employment agreements
have contained arbitration provisions in varying forms.
These provisions grew in popularity with employers
after courts began enforcing them under the Federal
Arbitration Act (FAA). That popular momentum
reached its peak after this Court’s decision in Gilmer v.
Interstate/Johnson Lane Corp., 500 U.S. 20 (1991),
which effectively held that an arbitration provision
may be enforced under the FAA for a broad range of
employee claims—including allegations of employment
discrimination. The practice of including arbitration
provisions in individual employment agreements has
only grown since Gilmer.

B. Class action waivers are relatively new, crafted
in response to an erosion of the understanding that an
arbitration provision necessarily excludes’ the
possibility of a classwide proceeding. Class
arbitrations were largely an anomaly (and thus
unaddressed) until 2003, when a plurality of this Court
implicitly recognized the validity of such proceedings in
Green Tree Financial Corp. v. Bazzle, 539 U.S. 444
(2003). The Bazzle plurality opined that an arbitration
provision’s silence as to class arbitrations could
potentially be construed by an arbitrator as allowing
for class arbitrations. In response, employers began

3

incorporating class action waivers into. their
employment agreements. A majority of this Court
corrected the Bazzle plurality’s observation in Stolt-
Nielsen S.A. v. AnimalFeeds International Corp., 559
U.S. 662 (2010), but by then, the waivers had become
de rigueur in many employment agreements.
Uncertainty caused by this Court’s decision in Oxford
Health Plans LLC v. Sutter, 133 S. Ct. 2064 (2013),
only solidified the trend.

C. Class action waivers are the only means of
ensuring that arbitration remains a “matter of
consent.” Stolt-Nielsen, 559 U.S. at 684. A holding
that renders such waivers void under the NLRA would
force employers to undergo “arbitration” that is bereft
of the benefits of arbitration, shorn of the efficiency
and cost savings that make arbitration favored in the
first place. Nothing in the collective bargaining
provisions of the NLRA compels such a result.

ARGUMENT

A. Arbitration agreements have long been used
in individual employment agreements, root-
ed in a strong federal policy favoring arbi-
tration.

Contracts between employers and employees have
incorporated arbitration provisions for a century, even
before the Federal Arbitration Act (FAA). Over that
period, a series of this Court’s decisions have reaf-
firmed that the parties to a contract may select an ar-
bitral forum by mutual consent, and that employers
and employees are no exception. Each decision in that
line of cases has heightened employers’ justifiable reli-
ance on the efficiency and enforceability of arbitration
provisions.

4

Some early arbitration provisions called for only
limited review. See, e.g., Fabricand v. Nortz, 170 N.E.
129, 129 (N.Y. 1929) (per curiam) (arbitration of a cer-
tain clause of an employment agreement). Others were
broad in scope, allowing all manner of employment
disputes to be heard in arbitration. See, e.g., Abshire v.
City Ry. Co., 4 Ohio Law Abs. 144, 144, 1925 WL 3954
(Ohio 1925) (under employment contract, “any griev-
ances which might arise in the future would be submit-
ted for arbitration”).

Arbitration proceeded to gain greater acceptance,
including through Congress’s endorsement of the prin-
ciple that disputes over rights secured in a collective
bargaining agreement should be arbitrated. See, e.g.,
Gateway Coal Co. v. United Mine Workers of Am., 414
U.S. 368, 377 (1974) (observing, in a Labor Manage-
ment Relations Act case, that “[t]he federal policy fa-
voring arbitration of labor disputes is firmly grounded
in congressional command”); Bhd. of R.R. Trainmen,
Enter. Lodge, No. 27 v. Toledo, Peoria & W. R.R., 321
U.S. 50, 58 (1944) (Railway Labor Act and Norris-
LaGuardia Act were intended to “encourage use of the
nonjudicial processes of negotiation, mediation, and
arbitration for the adjustment of labor disputes”); cf.
NLRB v. Acme Indus. Co., 385 U.S. 432, 439 (1967)
(upholding NLRB order based on the “express terms of
the [NLRA]” and “the national labor policy favoring ar-
bitration”); Local 174, Teamsters, Chauffeurs, Ware-
housemen & Helpers of Am. v. Lucas Flour Co., 369
U.S. 95, 105 (1962) (the “basic policy” of “national labor
legislation” is “to promote the arbitral process as a
substitute for economic warfare”).

5

During that same period, some courts were suspi-
cious of agreements to arbitrate individual employ-
ment claims. See Stephen J. Ware, Employment Arbi-
tration & Voluntary Consent, 25 Hofstra L. Rev. 83, 95-
96 (1996). The result was fewer arbitration clauses in
individual employment agreements than there might
otherwise have been. See id. at 95. But despite that
modest disincentive, some employers continued insert-
ing arbitration provisions into individual employment
agreements. Bernhardt v. Polygraphic Co. of America,
350 U.S. 198 (1956), for example, concerned a provision
in an employment contract that required arbitration
administered by the American Arbitration Association
under New York law. An employee brought an unlaw-
ful-discharge claim in Vermont state court. Jd. at 199.
This Court held that the agreement was not governed
by the FAA (because the contractual relationship did
not satisfy the jurisdictional element), id. at 200-01,
but that the question of enforceability was a question
of Vermont law.

In the 1970s, a new trend began to emerge in which
federal courts found that arbitration provisions in indi-
vidual employment agreements were indeed enforcea-
ble under the FAA. These courts based their enforcea-
bility determinations on section 2 of the FAA, some-
thing that the Bernhardt Court refused to do. See, e.z.,
Dickstein v. duPont, 443 F.2d 783 (1st Cir. 1971); Legg,
Mason & Co., Inc. v. Mackall & Coe, Inc., 351 F. Supp.
1367, 1371 (D.D.C. 1972). In Erving v. Virginia
Squires Basketball Club, 468 F.2d 1064 (2d Cir. 1972),
for example, the Second Circuit held that a basketball
club could rely on section 2 of the FAA, 9 U.S.C. § 2, to
enforce an “arbitration clause .. . as broad as can be
imagined” against one of its star athletes, Julius “Dr.

6

J.” Irving. Id. at 1067. Irving tried to argue that his
contract did not “involv[e] commerce,” and that in any
event, section 1, which exempts “contracts of employ-
ment of seamen, railroad employees, or any other class
of workers engaged in foreign or interstate commerce,”
prevented enforcement of the subject arbitration clause
under the FAA. Id. at 1068-69. The court of appeals
disagreed, concluding that: (1) professional athlete
contracts for any sport other than baseball are “a sub-
ject of interstate commerce”; and (2) section 1 of the
FAA did not prohibit enforcement because that provi-
sion applies “only to those actually in the transporta-
tion industry,” i.e., “employees involved in, or closely
related to the actual movement of goods in interstate
commerce.” /d.?

Even with this trend, however, enforcement of em-
ployment arbitration provisions under the FAA was by
no means guaranteed. For example, courts were reluc-
tant to send certain statutory claims to arbitration as a
matter of policy. See, e.g., Lewis v. Merrill Lynch,
Pierce, Fenner & Smith, Inc., 431 F. Supp. 271, 277
(E.D. Pa. 1977) (“[T]he competing policies of the Feder-
al Arbitration Act and ERISA are not easily recon-
ciled.”). In particular, courts found employment dis-
crimination claims to be unsuitable for arbitration, cit-
ing this Court’s decision in Alexander v. Gardner-
Denver Co., 415 U.S. 36 (1974), and its conclusion that

2 This Court later adopted the Second Circuit’s position in Cir-
cuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001). See id. at
119 (“In sum, the text of the FAA forecloses the construction of
§ 1 followed by the Court of Appeals in the case under review, a
construction which would exclude all employment contracts
from the FAA.”).

7

“the federal policy favoring arbitration of labor dis-
putes and the federal policy against discriminatory
employment practices can best be accommodated by
permitting an employee to pursue fully both his reme-
dy under the grievance-arbitration clause of a collec-
tive-bargaining agreement and his cause of action un-
der Title VII,” id. at 59-60. See, e.g., Utley v. Goldman
Sachs & Co., 883 F.2d 184, 186 (1st Cir. 1989); Swen-
son v. Mgmt. Recruiters Int'l, Inc., 858 F.2d 1304, 1305-
06 (8th Cir. 1988) (“The analysis of Alexander lends
strong support that Congress did not intend federal ju-
dicial proceedings in discrimination cases to be
preempted by employment arbitration provisions en-
forceable under the FAA.”). While these courts recog-
nized that broad deference to the federal policy favor-
ing arbitration was given in other areas, employment
discrimination lawsuits were simply of a different kind
and character. See Utley, 883 F.2d at 186 (“Notwith-
standing this policy [favoring arbitration], however,
the Court has done nothing to disturb its prior ruling
in Alexander that arbitration agreements do not pre-
clude an independent right of access to a judicial forum
for resolution of Title VII claims.”). While employers’
confidence in the enforceability of individual employ-
ment arbitration provisions grew in the 1970s and
1980s, the exceptions carved out by courts left employ-
ers uncertain as to the arbitration provisions’ enforce-
ability and versatility in enforcement.

It was not until this Court’s decision in Gilmer uv.
Interstate/Johnson Lane Corp., 500 U.S. 20 (1991),
that employers could believe with certainty that indi-
vidual employment arbitration provisions could be
used to resolve a broad range of disputes. See Michael
H. Leroy & Peter Feuille, Judicial Enforcement of Pre-

8

dispute Arbitration Agreements: Back to the Future, 18
Ohio St. J. on Disp. Resol. 249, 281 (2003) (suggesting
that the FAA did not “reemerge[] as a workplace dis-
pute resolution law” until 1991, when the Court decid-
ed Gilmer). In Gilmer, a manager employed by a stock
brokerage sued his employer over an alleged violation
of the Age Discrimination in Employment Act of 1967
(“ADEA”). The employer moved to compel arbitration,
citing an arbitration provision that the employee had
agreed to when he first joined the employer in 1981.
The employee argued that allowing arbitration of dis-
crimination claims such as ones brought under the
ADEA would be inconsistent with “the statutory
framework and purposes of” the anti-discrimination
statutes. Gilmer, 500 U.S. at 26-27.

This Court disagreed. And in doing so, it gave em-
ployers guidance as to the broad scope of arbitration
provisions—to wit, what could and could not be arbi-
trated. The Gilmer Court began with a sweeping reaf-
firmation of the principle that “statutory claims may be
the subject of an arbitration agreement.” /d. at 26. It
also reiterated that, “[h]aving made the bargain to ar-
bitrate, the party should be held to it unless Congress
itself has evinced an intention to preclude a waiver of
judicial remedies for the statutory rights at issue.” Jd.
(quoting Mitsubishi Motors Corp. v. Soler Chrysler-
Plymouth, 473 U.S. 614, 628 (1985)).

There was no exception to this rule for anti-
discrimination statutes—they, too, were subject to the
“healthy regard for the federal policy favoring arbitra-
tion.” Id. (quoting Moses H. Cone Mem'l Hosp. v. Mer-
cury Constr. Corp., 460 U.S. 1, 24 (1983)). While the
Court acknowledged that “the ADEA is designed not

9

only to address individual grievances, but also to fur-
ther important social policies,” it did not “perceive any
inherent inconsistency between those policies . . . and
enforcing agreements to arbitrate age discrimination
claims.” Id. at 27. Arbitration, like litigation, could be
used to “further broader social purposes” through the
resolution of individual claims. Id. at 28. Although
certain procedural aspects of arbitration, such as dis-
covery, were more limited than ordinary litigation, the
Court did not perceive that as an impediment because
“a party ‘trades the procedures and opportunity for re-
view of the courtroom for the simplicity, informality,
and expedition of arbitration.” Jd. at 31 (quoting
Mitsubishi, 473 U.S. at 628).

After Gilmer, arbitration provisions were more
widely incorporated into individual employment
agreements. In 1995, the General Accounting Office
reported that about 10% of employers with more than
100 employees used arbitration as a dispute resolution
mechanism, with an additional 8.4% of employers con-
sidering arbitration. U.S. Gen. Accounting Office, Em-
ployment Discrimination: Most Private-Sector Employ-
ers Use Alternative Dispute Resolution 7-8 (July 1995).
A 1997 survey of 36 mostly “well-known, national com-
panies” showed that, while certain employment arbi-
tration policies dated back “50 and 40 years,” “[e]ighty-
five percent of the [arbitration] procedures reported in
the survey were implemented within the last five
years, since Gilmer was decided,” with 20% of arbitra-
tion policies being implemented between 1995 and
1997. Mei L. Bickner et al., Developments in Employ-
ment Arbitration, 52 Disp. Resol. J. 8, 77-78 (Jan.
1997). The Equal Employment Opportunity Commis-
sion (“EEOC”), resisting Gilmer but acknowledging its

10

precedential value, observed in 1997 that “[a]n increas-
ing number of employers are requiring as a condition of
employment that applicants and employees .. . agree
to resolve disputes through binding arbitration.”
EEOC Notice No. 915.002 (July 10, 1997). The EEOC
also observed that all manners of employers, such as
“the securities industry, retail, restaurant and hotel
chains, health care, broadcasting, and security ser-
vices” were increasingly incorporating arbitration pro-
visions in their individual employment agreements.
Id. In 2000, the American Arbitration Association
(“AAA”) reported that “more than 500 employers and 5
million employees worldwide” relied on the AAA to re-
solve disputes. Am. Arbitration Ass’n, Proud Past,
Bold Future 27 (2000), available at https://www.adr.
org/sites/default/files/document_repository/2000%20
Annual%20Report_0.pdf. There was little question
that Gilmer encouraged employers to “increasingly re-
quire employees to sign pre-dispute compulsory arbi-
tration agreements.” Geraldine S. Moohr, Arbitration
and the Goals of Employment Discrimination Law, 56
Wash. & Lee L. Rev. 395, 398 n.6 (1999). The popular-
ity of individual employment arbitration provisions on-
ly grew as lower courts made clear that Gilmer applied
to “arbitration agreements involving occupations out-
side the securities industry . . . and [] to federal em-
ployment statutes other than the ADEA.” Leroy, su-
pra, at 284-85.

In short, since Gilmer, there has been “a consistent
pattern of significant expansion of employment arbi-
tration.” Alexander J.S. Colvin, Empirical Research on
Employment Arbitration: Clarity Amidst the Sound
and Fury?, 11 Employee Rts. & Emp. Pol’y J. 405, 411
(2007). And the overall trend over the life of the FAA

ll

has shown ever-increasing reliance on arbitration in
the employment context: substantial numbers of em-
ployment contracts contain arbitration provisions and
depend on their enforceability.

B. Class action waivers are a recent phenome-
non intended to preserve a protection long
understood to be a key characteristic of ar-
bitration: the individual resolution of
claims.

Even as arbitration has grown in utility, popularity,
and acceptance, one point has remained constant: ar-
bitration has long been known as a device for deciding
individual disputes. Even in the last 20 years, the no-
tion that arbitral proceedings could entertain class-
wide claims—much less be compelled to entertain
classwide claims as some sort of workplace entitle-
ment—was foreign to the practice of arbitration.®
Courts had perceived class actions and arbitrations as
mutually exclusive devices—thus, there was little need
to contemplate how the two would intersect. See, e.g.,
Harris v. Shearson Hayden Stone, Inc., 441 N.Y.S.2d
70, 94 (N.Y. App. Div. 1981) (“[I]t is clear. . . that the
interests favoring arbitration should prevail over those
favoring the class action, both in general and in the
present instance.”), aff'd, 56 N.Y.2d 627 (1982); Vernon

* E.g., Edward W. Dunham, The Arbitration Clause as Class
Action Shield, 16 Franchise L.J. 141, 142 (1997) (“An arbitra-
tion clause may not be an invincible shield against class action
litigation, but it is surely one of the strongest pieces of armor
available to the franchisor.”); see Hans Smit, Class Actions in
Arbitration, 14 Am. Rev. Int'l Arb. 175, 176 (2003) (“{T]he pref-
erence for arbitration may be inspired in part by the perceived
lack of class actions in arbitration ... .”).

10

precedential value, observed in 1997 that “[a]n increas-
ing number of employers are requiring as a condition of
employment that applicants and employees... agree
to resolve disputes through binding arbitration.”
EEOC Notice No. 915.002 (July 10, 1997). The EEOC
also observed that all manners of employers, such as
“the securities industry, retail, restaurant and hotel
chains, health care, broadcasting, and security ser-
vices” were increasingly incorporating arbitration pro-
visions in their individual employment agreements.
Id. In 2000, the American Arbitration Association
(“AAA”) reported that “more than 500 employers and 5
million employees worldwide” relied on the AAA to re-
solve disputes. Am. Arbitration Ass’n, Proud Past,
Bold Future 27 (2000), available at https://www.adr.
org/sites/default/files/document_repository/2000%20
Annual%20Report_O.pdf. There was little question
that Gilmer encouraged employers to “increasingly re-
quire employees to sign pre-dispute compulsory arbi-
tration agreements.” Geraldine S. Moohr, Arbitration
and the Goals of Employment Discrimination Law, 56
Wash. & Lee L. Rev. 395, 398 n.6 (1999). The popular-
ity of individual employment arbitration provisions on-
ly grew as lower courts made clear that Gilmer applied
to “arbitration agreements involving occupations out-
side the securities industry .. . and [] to federal em-
ployment statutes other than the ADEA.” Leroy, su-
pra, at 284-85.

In short, since Gilmer, there has been “a consistent
pattern of significant expansion of employment arbi-
tration.” Alexander J.S. Colvin, Empirical Research on
Employment Arbitration: Clarity Amidst the Sound
and Fury?, 11 Employee Rts. & Emp. Pol’y J. 405, 411
(2007). And the overall trend over the life of the FAA

11

has shown ever-increasing reliance on arbitration in
the employment context: substantial numbers of em-
ployment contracts contain arbitration provisions and
depend on their enforceability.

B. Class action waivers are a recent phenome-
non intended to preserve a protection long
understood to be a key characteristic of ar-
bitration: the individual resolution of
claims.

Even as arbitration has grown in utility, popularity,
and acceptance, one point has remained constant: ar-
bitration has long been known as a device for deciding
individual disputes. Even in the last 20 years, the no-
tion that arbitral proceedings could entertain class-
wide claims—much less be compelled to entertain
classwide claims as some sort of workplace entitle-
ment—-was foreign to the practice of arbitration.®
Courts had perceived class actions and arbitrations as
mutually exclusive devices—thus, there was little need
to contemplate how the two would intersect. See, e.g.,
Harris v. Shearson Hayden Stone, Inc., 441 N.Y.S.2d
70, 94 (N.Y. App. Div. 1981) (“[I]t is clear. . . that the
interests favoring arbitration should prevail over those
favoring the class action, both in general and in the
present instance.”), aff'd, 56 N.Y.2d 627 (1982); Vernon

3 E.g., Edward W. Dunham, The Arbitration Clause as Class
Action Shield, 16 Franchise L.J. 141, 142 (1997) (“An arbitra-
tion clause may not be an invincible shield against class action
litigation, but it is surely one of the strongest pieces of armor
available to the franchisor.”); see Hans Smit, Class Actions in
Arbitration, 14 Am. Rev. Int'l Arb. 175, 176 (2003) (“[T]he pref-
erence for arbitration may be inspired in part by the perceived
lack of class actions in arbitration ... .”).

12

v. Drexel Burnham & Co., 125 Cal. Rptr. 147, 153
(1975) (“Finally the substantive law of contractual
agreement [an arbitration provision] takes precedence
over the class action, which is merely a procedural de-
vice for consolidating matters properly before the
court.”).

Class arbitration waivers therefore have a shorter
pedigree than arbitration clauses themselves, for the
simple reason that the notion of a class arbitration is
itself a recent one. In the 1970s and 1980s, the com-
mercial arbitration rules of certain arbitral forums,
such as the American Arbitration Association (AAA),
were silent as to the availability of classwide relief.
That silence, combined with arbitral rules limiting
remedies to “the scope of the agreement of the parties,”
was understood to prohibit class arbitration. See Ni-
cholson v. CPC Intl Inc., 877 F.2d 221, 228 (3d Cir.
1989), abrogated on other grounds by Gilmer v. Inter-
state/Johnson Lane Corp., 500 U.S. 20 (1991).

The first judicial decision opening the door to class
arbitration was Keating v. Superior Court, 167 Cal.
Rptr. 481 (Cal. Ct. App. 1980), in which the California
Court of Appeal held that there was “no insurmounta-
ble obstacle to conducting an arbitration on a class-
wide basis.” Jd. at 492.4 The only court to follow suit
(at least in a reported decision) was the Pennsylvania

‘ This case eventually came before this Court in the form of
Southland Corp. v. Keating, 465 U.S. 1 (1984). But the Court
did not reach the issue of class arbitration because the Califor-
nia Supreme Court had not passed upon “the question whether
superimposing class action procedures on a contract arbitration
was contrary to the federal [Arbitration] Act.” Z/d. at 9.

13

Superior Court. See Dickler v. Shearson Lehman Hut-
ton, Inc., 596 A.2d 860 (Pa. Super. Ct. 1991).

By and large, however, “very few arbitrations ha[d]
been handled as class actions” up until 2000.5 And ar-
bitral forums were largely unprepared for them.® For
most of its existence, the AAA administered class arbi-
trations only when it was forced to do so, in the rare
instances when a state court called for an anomalous
classwide arbitration proceeding. See Lewis v. Pruden-
tial Bache Secs., Inc., 225 Cal. Rptr. 69, 71, 75-76 (Cal.
Ct. App. 1986) (“The superior court shall appoint the
American Arbitration Association to arbitrate this
matter.”).

In the 1990s, arbitral forums began stating express-
ly whether class arbitration was allowed or disallowed.
The New York Stock Exchange in Gilmer, for example,
expressly allowed “collective proceedings,” a fact that
this Court ultimately deemed immaterial to its holding
that employment discrimination suits could be decided
by a private arbitrator, rather than a court. See 500
U.S. at 32 (“But ‘even if the arbitration could not go
forward as a class action or class relief could not be
granted by the arbitrator, the fact that the [ADEA]
provides for the possibility of bringing a collective ac-
tion does not mean that individual attempts at concili-

5 Jean R. Sternlight, As Mandatory Binding Arbitration Meets
the Class Action, Will the Class Action Survive?, 42 Wm. &
Mary L. Rev. 1, 40 n.148 (2000).

8 David S. Clancy & Matthew M.K. Stein, An Uninvited Guest:
Class Arbitration and the Federal Arbitration Act’s Legislative
History, 63 Bus. Law. 55, 56 & n.1 (2007) (noting that the
American Arbitration Association adopted class arbitration
provisions in 2003).

14

ation were intended to be barred.” (quoting Nicholson,
877 F.2d at 241 (Becker, J., dissenting))). In contrast,
the National Arbitration Forum disallowed class arbi-
trations,’ going so far as to encourage “imple-
ment|ation of] arbitration provisions containing terms
that expressly waive the right to class treatment” as a
cautionary measure. Myriam Gilles, Opting Out of Li-
ability: The Forthcoming, Near-Total Demise of the
Modern Class Action, 104 Mich. L. Rev. 373, 397
(2005).

Given the relative infancy of class arbitrations, it is
no surprise that class action waivers are of an even
more recent vintage. Jd. These waivers were first pub-
licly suggested in the late 1990s, with “trade-journal
articles .. . encouraging corporate counsel to consider
redrafting contracts to include provisions requiring
consumers and others to waive the right to participate
in class actions or even group arbitrations.” Jd. at 396.
“Practice soon followed these practice pointers, such
that waivers of class-wide arbitration [became] com-
mon features of arbitration clauses in consumer con-
tracts.” Richard A. Nagareda, Aggregation and Its Dis-
contents: Class Settlement Pressure, Class-wide Arbi-
tration, and CAFA, 106 Colum. L. Rev. 1872, 1898
(2006). Employers, too, began using such waivers to
“avoid classwide exposure _n the employment context.”
Gilles, supra, at 419.

7 David G. Wirtes, Jr., Suggestions for Defeating Arbitration, 24
Am. J. Trial Advoc. 111, 112 n.4 (2000) (“And under the rules of
the National Arbitration Forum .. . consumers cannot join in
class action lawsuits ... .” (quoting Consumers Losing Right to
Sue, USA Today, Feb. 1, 2000, at 13A))).

15

Businesses began incorporating class action waivers
apace after this Court’s decision in Green Tree Finan-
cial Corp. v. Bazzle, 539 U.S. 444 (2003). James E.
McGuire & Bette J. Roth, Class Action Arbitrations: A
First Circuit Update, 52 Boston Bar J. 17, 18 (2C08).
In Bazzle, a plurality of the Court held that an arbitra-
tion provision was silent as to the availability of class
arbitration and left it to the arbitrator to decide
“whether the agreement forbids class arbitration.” 539
U.S. at 451.

Rather than take the “non-trivial risk that an arbi-
trator will entertain class or collective actions in the
absence of” a clause governing such actions, “many
employers . . . incorporate[d] explicit ‘no-class action’
clauses” into their arbitration policies, as a prophylac-
tic response to Bazzle. Samuel Estreicher & Steven C.
Bennett, Using Express No-Class Action Provisions to
Halt Class-Claims, 233 N.Y. L.J. 3 (June 10, 2005).
They did so by “amend[ing] their standard employment
contract and requir[ing] existing employees to agree to
the new terms as a condition of continued employ-
ment.” McGuire, supra, at 17.

This Court addressed the interpretive issue head-on
in Stoli-Nielsen S.A. v. AnimalFeeds International
Corp., 559 U.S. 662 (2010), holding that a silent
agreement did not permit class arbitration by its si-
lence. The Court held that silence could not be neces-
sarily construed as consent to class arbitration—that
“a party may not be compelled under the FAA to sub-
mit to class arbitration under there is a contractual ba-
sis for concluding that the party agreed to do so.” Id. at.
684.

16

Businesses nevertheless continued to include “ex-
plicit class action waivers in their arbitration agree-
ments,” even after Stolt-Nielsen.* They remained nerv-
ous about the possibility that silence on the issue of
class actions in the employment agreement could still
be construed as consent to class arbitration, in light of
this Court’s subsequent decision in Oxford Health
Plans LLC v. Sutter, 133 S. Ct. 2064 (2013). The Ox-
ford Court determined that an arbitrator could discern
approval for class proceedings from an arbitration pro-
vision that lacked any express clause concerning class
arbitration, so long as the parties consented to the ar-
bitrator’s authority to interpret the contract. Jd. at
2070-71. Because of Oxford, silence as to the issue of
class adjudication in an arbitration provision continued
to “spell[] potential danger’ for businesses seeking to
avoid class actions”—-thus encouraging businesses to
continue incorporating express class action bars in
their agreements. Michael Hoenig & Linda M. Brown,
Arbitration and Class Action Waivers Under Concep-
tion: Reason and Reasonableness Deflect Strident At-
tacks, 68 Ark. L. Rev. 669, 723 (2015). That practice
continues to this day.

* Kate W. Moss, ERISA and Arbitration: How Safe Is Your
401(k)?, 64 DePaul L. Rev. 773, 793 (2015).

17

C. Invalidating class action waivers under the
National Labor Relations Act’s collective
bargaining provisions and imposing class
arbitration on employers would largely un-
do the benefits of arbitration.

This Court is well familiar with the benefits of bi-
lateral arbitration, which are the same regardless of
whether the arbitration takes place in the context of
employment or some other business relationship. “Ar-
bitration agreements allow parties to avoid the costs of
litigation, a benefit that may be of particular im-
portance in employment litigation, which often in-
volves smaller sums of money than disputes concerning
commercial contracts.” Circuit City Stores, Inc. v. Ad-
ams, 532 U.S. 105, 123 (2001). The bargain of bilateral
arbitration is straightforward: “parties forgo the pro-
cedural rigor and appellate review of the courts in or-
der to realize the benefits of private dispute resolution:
lower costs, greater efficiency and speed, and the abil-
ity to choose expert adjudicators to resolve specialized
disputes.” Stolt-Nielsen, 559 U.S. at 685. Administer-
ing arbitral disputes on an individual basis is the only
way of accomplishing the objectives of the FAA: the
“quick, simple, and inexpensive” resolution of disputes.
Imre 8S. Szalai, Aggregate Dispute Resolution: Class
and Labor Arbitration, 13 Harv. Negot. L. Rev. 399,
433 (2008).

If the Court holds that class action waivers are no
longer valid because they lie in tension with the
NLRA’s collective bargaining provisions, there is only
one result that follows in light of existing arbitration
provisions: employers will unwillingly be subject to
class arbitrations, to which they never agreed and in-

18

deed expressly disavowed. As this Court recognized in
Stolt-Nielsen, “class-action arbitration changes the na-
ture of arbitration to such a degree that it cannot be
presumed the parties consented to it by simply agree-
ing to submit their disputes to an arbitrator.” 559 U.S.
at 685. Compared to traditional bilateral arbitration,
“the relative benefits of class-action arbitration are
much less assured, giving reason to doubt the parties’
mutual consent to resolve disputes through class-wide
arbitration.” Jd. at 685-86. “(T]he switch from bilat-
eral to class arbitration sacrifices the principal ad-
vantage of arbitration—its informality—and makes the
process slower, more costly, and more likely to gener-
ate procedural morass than final judgment.” AT&T’
Mobility LLC v. Concepcion, 563 U.S. 333, 348 (2011).
Class arbitration imposes a level of procedural formali-
ty that is anomalous for a typical arbitration and “in-
creases risks to defendants” by stripping certain proce-
dural protections accorded to class actions in court. /d.
at 349-50.

Class arbitration “eliminates many of the benefits
of having arbitration in the first place.” Joshua S. Lip-
shutz, Note, The Court’s Implicit Roadmap: Charting
the Prudent Course at the Juncture of Mandatory Arbi-
tration Agreements and Class Action Lawsuits, 57
Stan. L. Rev. 1677, 1710 (2005). “When class action-
like procedures are grafted onto arbitration,” the arbi-
tration process loses the benefits of lower costs and
higher efficiency attendant to the arbitration of indi-
vidual claims. Jd. at 1712. Aclass arbitration instead
becomes encumbered with “due process problems in-
herent in class arbitration that must be resolved
through increased judicial supervision,” which defeats
the point of having an arbitration in the first place—

19

removing a court from the equation. /d. That loss of
efficiency and cost savings has a bottom-line impact on
consumers and employees: it “reduces savings which
would otherwise be passed on . . . in the form of lower
product prices [for consumers] and higher employee
salaries.” William H. Baker, Class Action Arbitration,
10 Cardozo J. Conflict Resol. 335, 364 (2009).

Federal labor law endorses labor arbitration in or-
der to minimize disruption and to fashion a “uniform
and exclusive method for orderly settlement of employ-
ee grievances.” Republic Steel Corp. v. Maddox, 379
U.S. 650, 653 (1965). The same twin goals of minimiz-
ing disruption and promoting uniformity apply to indi-
vidual, bilateral arbitrations. See Allied-Bruce Ter-
minix Cos. v. Dobson, 513 U.S. 265, 280 (1995). Not so
with class arbitrations. Class arbitrations can hardly
be considered uniform, given that they pick up the bal-
last of “additional and different procedures,” generat-
ing “procedural morass” that “makes the process go
slower [and] more costly.” AT&T' Mobility, 563 U.S. at
348. The cumbersome nature of that anomalous pro-
ceeding has a disruptive effect for both employers and
employees alike, with ripple effects reaching consum-
ers served by those employers.

In light of this Court’s post-Bazzle precedents and
their erosion of the presumption that arbitration provi-
sions preclude class actions, see Harris, 441 N.Y.S.2d
at 94, the only means of ensuring that arbitration re-
mains “a matter of consent,” Stolt-Nielsen, 559 U.S. at
684, is to allow for express class action waivers. Noth-
ing in the NLRA strips an employer of its ability to
withhold that consent.

20

CONCLUSION

The judgments of the courts of appeals should be
reversed in Epic Systems Corp. v. Lewis, No. 16-285,
and Ernst & Young LLP v. Morris, No. 16-300. The
judgment of the court of appeals in National Labor Re-
lations Board v. Murphy Oil USA, Inc., No. 16-307,
should be affirmed.

Respectfully submitted.

MARIA GHAZAL WILLIAM M. JAY
BUSINESS ROUNDTABLE Counsel of Record
300 New Jersey Ave., N.W. ANDREW KIM

Suite 800 GOODWIN PROCTER LLP

Washington, DC 20001 901 New York Ave., N.W.
Washington, DC 20001
wjay@goodwinlaw.com
(202) 346-4000

June 16, 2017

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0699%3A20. Public record. Not legal advice.