Amicus Curiae Brief — Ernst & Young, LLP v. Morris, 138 S. Ct. 51 (2017) (No. 16-300)

RECORD Suprame Coun, US.

FILED

BRIEFS No. 16-300 OCT 10 2016

OFFICE OF 1: a

IN THE

Supreme Court of the Anited States

ERNST & YOUNG LLP AND

ERNST & YOUNG U.S. LLP,

Petitioners,

Vv.

STEPHEN MORRIS AND KELLY MCDANIEL,

Respondents.

On a Petition for Writ of Certiorari to the

United States Court of Appeals

for the Ninth Circuit

cntinienenanstiniitioncndegs Aabpibenttatainimstasine

BRIEF AMICUS CURIAE OF

ATLANTIC LEGAL FOUNDATION

IN SUPPORT OF PETITIONERS

-—_- —_-——. @ —_____——_

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

' eee of Conarer

i

QUESTION PRESENTED

Whether the collective-bargaining provisions of

the National Labor Relations Act prohibit the

enforcement under the Federal Arbitration Act of

an agreement requiring an employee to arbitrate

claims against an employer on an individual,

rather than collective, basis.

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.

i

TABLE OF CONTENTS

Page

QUESTION PRESENTED.................. I

CORPORATE DISCLOSURE STATEMENT. . ii

pe Beg Sty, iv

INTEREST OF AMICUS CURIAE........... 1

PRELIMINARY STATEMENT.............. 2

Tee ee i sb eae wee eis 5

SUMMARY OF ARGUMENT. .............. )

es a Bells cals ue eek ey ie.b eb od ows 10

I. There is an acknowledged and

indisputable split of authority

among the circuits on the

question presented................ 10

Il. The Ninth Circuit’s decision is

ES hd ae dl die a el eee ow & 0. 18

Ill. The question presented is

exceptionally important and

Ee ee 23

ED hi ele OSE a Pee wee ae 24

lv

TABLE OF AUTHORITIES

Page(s)

CASES:

American Express Co. v. Italian Colors

Restaurant, 133 S. Ct. 2304

EES i. ae ae 3, 11, 17, 20

AT&T Mobility LLC v. Concepcion,

EE, svc esses stan 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Aug. 10, 2016) (per curiam)({unpublished).. 13

CompuCredit Corp. v. Greenwood,

RN rae passim

D.R. Horton, Inc. v. NLRB,

737 F.3d 344 (5th Cir. 2013). ...... 12, 13, 14

D.R. Horton, Inc., 357 N.L.R.B. 2277

Sg RORRSANE 2 9 3 Nee 12,14

DIRECTV, INC. v. Imburgia,

Re 2, 20

Epic Systems Corp. v. Lewis, No. 16-285

(docketed Sept. 2, 2016).......... 2. 4, 17, 20

Gilmer v. Interstate/Johnson Lane Corp.,

i ic ccccuves 20

Killion v. KeHE Distribs., LLC,

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

Lewis v. Epic Systems Corp.,

823 F.3d 1147 (7th Cir. 2016), petition for

cert. pending, No. 16-285 (filed

ee ek ewees 2-3, 17

Vv

TABLE OF AUTHORITIES (cont'd)

Page(s)

CASES (cont'd):

Mitsubishi Motors Corp. v. Soler Chrysler-

Plymouth, Inc., 473 U.S. 614 (1985). ...... 20

Moses H. Cone Memorial Hospital v. Mercury

Construction Corp., 460 U.S. 1 (1983).. passim

Murphy Oil USA, Inc.,

sae et SG) Fe. eran 14

Murphy Oil, U.S.A., Inc. v. NLRB,

808 F.3d 1013 (5th Cir. 2015),

petition for cert. pending, No. 16-307

Ge ee en passim

NLRB v. Murphy Oil, No. 16-307 petition

es ts OI, cs vo neces 3, 4, 15, 23

Owen v. Bristol Care, Inc.,

702 F.3d 1050 (8th Cir. 2013). ... 7, 15, 16, 17

Patterson v. Raymours Furniture Co.,

No. 15-2820, 2016 WL 4598542

(2d Cir. Sept. 2, 2016) (summary order)... . 12

PJ Cheese, Inc. v. NLRB, No. 15-60610,

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

June 16, 2016) (per curiam).............. 13

Shearson/American Express Inc. v. McMahon,

reer 20

Stolt-Nielsen S.A. v. AnimalFeeds International

Corp., GEO UT. GG Gace ccc cccncces 20

Sutherland v. Ernst & Young LLP,

726 F.3d 290 (2d Cir. 2013).......... passim

Walthour v. Chipio Windshield Repair, LLC,

745 F.3d 1326 (11th Cir. 2014)........... 11

vl

TABLE OF AUTHORITIES (cont'd)

Page(s)

STATUTES:

Fair Labor Standards Act,

29 §§ U.S.C. §§ 201-219......... 6, 12, 14, 16

Federal Arbitration Act, 9 U.S.C. §§ 1-16. passim

ee eke 6c oes cece se passim

National Labor Relations Act,

ES passim

Ee passim

§ 8(a), 29 U.S.C. § 158(a)(1)............ 3,13

l

INTEREST OF AMICUS CURIAE'

The Atlantic Legal Foundaiion 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 goa!

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(e), 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). The Foundation has also filed an amicus

brief in support of petitioner in Epic Systems Corp.

v. Lewis, No. 16-285, which raises issues very

similar to the issues in this case.

PRELIMINARY STATEMENT

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 this case, 2016 WL

4433080 (9th Cir. Aug. 22, 2016), and the Seventh

Circuit, in Lewis v. Epic Systems Corp. 823 F.3d

* Section 2 of the Federal Arbitration Act (FAA),

arbitration agreements “shall be valid, irrevocable, and

enforceable, save upon such grounds as exist at law or in

equity for the revocation of any contract.” 9 U.S.C. § 2.

3

1147 (7th Cir. 2016), 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 “illegality.”

Petitioners in all three cases — employers and

the NLRB (charged with protecting the interests of

employees) — argue in strikingly similar language

that 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 Ernst &

Young Petition at 10, Epic System Petition in No.

16-285 at 4, and NLRB Petition in No. 16-307 at

9.

* Section 7 of the National Labor Relations Act (NLRA)

provides that “[e]mployees shall have the right to

self-organization * * * and to engage in other concerted

activities for the purpose of collective bargaining or other

mutual aid or protection.” 29 U.S.C. § 157. And under

Section 8(a) »f the NLRA, it is an unfair labor practice for

an employer to “interfere with, restrain, or coerce

employees” in the exercise of their Section 7 rights. 29

U.S.C. § 158(a).

4

The NLRB’s petition in Murphy Oil and the

employers’ petitions in this case and in Epic

Systems diverge primarily in their respective

positions on the substantive issue in each case.

This Court is being asked to resolve a clear

circuit split arising from contrary conclusions

drawn recently by several circuit courts of appeal

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, in the instant case, in Epic Systems Corp. v.

Lewis, No. 16-285 (docketed Sept. 2, 2016) and in

NLRB v. Murphy Oil, No. 16-307 (docketed Sept.

9, 2016). The filing of three petitions with this

Court in such a short period of time by both

employers and the NLRB, involving very similar

legal and factual issues, is evidence of the

importance of the issues and the need for the

Court to determine the scope of employers’ and

employees’ rights as applied to arbitration

agreements that contain a waiver of the right to

engage in class litigation or class arbitration under

the FAA and the NLRA, the two federal statutory

schemes at issue.

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

5

Second, Fifth, and Eighth Circuits. If this Court

does not resolve the circuit split and establish a

uniform nationwide rule, employers in other

circuits that have not ruled on the issue, and even

employers in the Second, Fifth, and Eighth

Circuits, and face the real threat of class litigation

or enforcement action before NLRB

administrative tribunals.

BACKGROUND

Respondents were employees in petitioners’

audit division. See App. 45a. of petitioners.

Petitioners are related international accounting,

auditing and consulting firms. Each respondent

signed an employment agreement that included an

arbitration provision requiring all employment

related disputes be resolved in individual, rather

than collective, arbitration. Virtually all of

petitioners’ thousands of employees in the United

States have signed an arbitration provision as a

condition of employment.‘

Respondent Morris filed a class-action lawsuit

against petitioners in federal court (which

* The arbitration provision states, in relevant part, “All

claims, controversies or other disputes between

[petitioners] and an Employee that could otherwise be

resolved by a court” will be resolved through a program of

alternative dispute resolution known as the “Common

Ground Dispute Resolution Program.” Under the program,

“Covered Disputes pertaining to different [e]mployees will

be heard in separate proceedings’; class or collective

proceedings are not permitted. App. 44a.

6

respondent McDaniel later joined) alleging that

petitioners had mis-classified them and other

employees for purposes of overtime pay under the

Fair Labor Standards Act (FLSA) and California

law. Petitioners moved to compel arbitration. The

district court granted the motion, holding that the

arbitration provision was enforceable. App.

43a-67a.

A divided panel of the Ninth Circuit reversed.

The Ninth Circuit Decision

A divided panel of the court of appeals reversed

and remanded. App. 1a-42a. The court of appeals

began its analysis with the NLRA, and, citing case

law construing Section 7 of the NLRA, concluded

that Section 7 “protects a range of concerted

employee activity, including the right to seek to

improve working conditions through resort to

administrative and judicial forums,” App. 7a

(internal quotation marks and citation omitted),

and establishes a “substantive right” for employees

“to pursue work-related legal claims, and to do so

together.” App. 8a, 10a.

Petitioners’ arbitration provision, the majority

held, “prevents concerted activity by employees in

arbitration proceedings, and the requirement that

employees only use arbitration prevents the

initiation of concerted legal action anywhere else.”

App. 1la. Thus, the majority held, the arbitration

provision interferes with “a protected § 7 right in

violation of § 8” and “[t]hus, the ‘separate

proceedings’ terms in the Ernst & Young contracts

cannot be enforced.” Id.

7

The court of appeals stated that the FAA “does

not dictate a contrary result,” App. 12a, “[t]he

illegality of the ‘separate proceedings’ term here

has nothing to do with arbitration as a forum,”

App. 13a, and “[i]rrespective of the forum in which

disputes are resolved, employees must be able to

act in the forum together,” App. 23a (emphasis in

original). The Ninth Circuit majority concluded

that petitioners’ arbitration provision was

prohibited by the NLRA and thus unenforceable,

App. 16a, 24a, under the FAA’s saving clause,

which provides that an arbitration agreement is

enforceable “save upon such grounds as exist at

law or in equity for the revocation of any contract,”

9 U.S.C. § 2.

The majority “recognize[d) that our sister

Circuits are divided on this question,” and

acknowledged that the majority of the courts of

appeal that have considered the issue have ruled

the other way (citing Murphy Oil v. NLRB, 808

F.3d at 1018; Sutherland v. Ernst & Young LLP,

726 F.3d 290, 297 n.8 (2d Cir. 2013); and Owen v.

Bristol Care, Inc., 702 F.3d 1050, 1053-54 (8th Cir.

2013), and agreed with the Seventh Circuit, the

only one that “has engaged substantively with the

relevant arguments.” App. 24a n.16. The court of

appeals specifically rejected the analytical

framework of the courts of appeal which reached

the conclusion that requires an identifiable

“contrary congressional command” in a statute in

order to override the FAA’s mandate to enforce

arbitration agreements. App. 17a.

8

Judge Ikuta dissented. App. 25a-42a. She

cogently wrote that “This decision is breathtaking

in its scope and in its error; it is directly contrary

to Supreme Court precedent App. 25a, because

“(clontrary to the majority’s focus on whether the

NLRA confers ‘substantive rights,’ in every case

considering a party’s claim that a federal statute

precludes enforcement of an _ arbitration

agreement, the Supreme Court begins by

considering whether the statute contains an

express ‘contrary congressional command’ that

overrides the FAA.” App. 29a and that the NLRA

contained nothing “remotely close” to a “contrary

congressional command” that mention arbitration

nor specify the right to take legal action at all,

whether individually or collectively.” App. 35a.

Judge Ikuta also rejected the majority’s reliance

on the FAA’s saving clause. See App., infra,

38a-4la. She contended that the majority’s

reasoning was based on the erroneous ;,;remise

that collective-action waivers are illegal, when, in

reality, such a waiver “would be illegal only if it

were precluded by a ‘contrary congressional

command’ in the NLRA, and here there is no such

command.” App. 40a. Judge Ikuta further

reasoned that, even if the NLRA could be

interpreted as “giving employees a substantive,

nonwaivable right to classwide actions, such a

purported right would “disproportionately and

negatively impact arbitration agreements by

requiring procedures that ‘interfere[{] with

fundamental attributes of arbitration.” Id.

9

(quoting AT&T Mobility LLC v. Concepcion, 563

U.S. 333 at 344 (2011), which “expressly rejected”

the reasoning behind the majority’s conclusion

that “the nonwaivable right to class-wide

procedures [that the majority] has discerned in

[Section] 7” complies with the FAA simply because

it “applies equally to arbitration and litigation.” Jd.

Judge Ikuta concluded by observing that the

majority’s rule was “directly contrary to Congress’s

goals in enacting the FAA.” App. 40a and the

majority “exhibit/ed] the very hostility to

arbitration that the FAA was passed to

counteract.” App. 41a.

The Ninth Circuit majority recognized that its

ruling is at odds with decisions of three other

courts of appeals — including a decision of the

Second Circuit involving then same defendants

(petitioners here) — which held that the identical

arbitration provision at issue here is enforceable,

Sutherland v. Ernst & Young LLP, 726 F.3d 290

(2d Cir. 2013).

SUMMARY OF ARGUMENT

The split among several circuits on the question

whether arbitration clauses that require

employment-related disputes are to be resolved by

individual arbitration are enforceable, or whether

the NLRA overrides the FAA’s presumption that

arbitration agreements are enforceable as written,

is clear, acknowledged, and undisputed. Indeed,

the two circuits that have held arbitration

agreements in the labor-relations context are

10

unenforceable acknowledge the clear circuit split.

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 direct and serious circuit split. Likewise, all

three petitions pending before the Court raising

the issue presented in this case — from employers

and the NLRB — agree that the circuit split is fully

developed 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 principles apply

even when the claims at issue are federal statutory

claims, unless the FAA’s mandate has been

overridden by a contrary congressional command

that is 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 on whether the NLRA

overrides the FAA’s presumption that arbitration

agreements which require that

employment-related disputes be resolved by

individual arbitration are enforceable as written.

11

Indeed, the two circuits that have held arbitration

agreements in the labor-relations context are

unenforceable acknowledge a clear circuit split. 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 most direct

conflict is between the Ninth Circuit’s decision

below and the Second Circuit’s ruling in

Sutherland v. Ernst & Young LLP, 726 F.3d 290

(2d Cir. 2013) (per curiam), which held, contrary to

the Ninth Circuit, that the very Ernst & Young

arbitration clause at issue here is enforceable

under the FAA. Id. at 292-293, 299 (citing

American Express Co. v. Italian Colors Rest., 133

S. Ct. 2304 (2013)).

The Second Circuit began from the premise that

“arbitration agreements should be _ enforced

according to their terms unless the FAA’s mandate

has been overridden by a contrary congressional

° The Sixth and Eleventh circuits have also held that

the FAA requires enforcement of class waivers in

employment arbitration agreements, but did not discuss

the NLRA in those 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).

12

command.” 726 F.3d at 295 (internal quotation

marks and citation omitted). The Second Circuit

found that neither the FLSA nor the NLRA was a

“contrary congressional command” that overrode

the FAA. Id. at 296-297 & n.8. The Second Circuit

reached this conclusion even though the NLRB

had ruled otherwise; the court “decline[d] to

follow” the Board’s views. Id. at 297 n.8. The

Second Circuit has very recently followed its

Sutherland precedent in Patterson v. Raymours

Furniture Co., No. 15-2820, 2016 WL 4598542 (2d

Cir. Sept. 2, 2016) (summary order).

The Fifth Circuit has upheld class waivers in

employment-related arbitration agreements. In

D.R. Horton, Inc. v. NLRB, 737 F.3d 344, 362 (5th

Cir. 2013), that court overrode 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 analyzed the issue following

the schema adopted by this Court in cases in

which a party seeks to avoid arbitration on the

basis of a purported conflict with another federal

statute. The Fifth Circuit asked whether the

NLRA is “a contrary congressional command” that

overcomes the FAA’s presumption in favor of

arbitration. Jd. (citing CompuCredit Corp. uv.

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.” /d.

13

The Fifth Circuit 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

because the Board’s finding of “illegality” had “the

effect of * * * disfavor{ing] arbitration,” id. at 359

(citing Concepcion, 563 U.S. 333, 346 (2011)).

The Fifth Circuit has adhered to this view in

the face of repeated challenges by the NLRB after

its decision in D.R. Horton. 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 Murphy Oil USA, Inc. v. NLRB, 808

F.3d 1013, 1021 (5th Cir. 2015), petition for cert.

pending, No. 16-307 (filed Sept. 9, 2016).

In Murphy Oil, the Fifth Circuit again

addressed the alleged illegality of arbitration

agreements under Sections 7 and 8(a) of the NLRA

and again upheld the enforceability of an

arbitration agreement that contains a waiver of

the right to commence or participate in class-wide

arbitration or litigation.

Murphy Oil’s original arbitration agreement*®

providec that employees must individually resolve

®° After the Fifth Circuit’s D.R. Horton decision Murphy

Oil revised its arbitration agreement to include language

stating that the agreement did not bar employees from

“participating in proceedings to adjudicate unfair labor

practice[] charges before the Board.”

14

any and all disputes or claims which relate to the

employment relationship by binding arbitration.

Several employees filed an FLSA collective action.

Murphy Oil moved to dismiss the suit and to

compel arbitration.

One of the piaintiff employees also filed an

unfair labor charge with the NLRB, alleging that

the arbitration agreement unlawfully interfered

with employees’ Section 7 rights. In October 2014,

ten months after the Fifth Circuit’s ruling in D.R.

Horton, the NLRB issued its opinion, in 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, applying its own D.R. Horton

decision and not the Fifth Circuit’s D.R. Horton

ruling, reaffirmed its position that arbitration

provisions that waived the right to class relief

violated the NLRA because the agreement

restricted the Section 7 right to engage in

concerted activity. The NLRB ruled that both the

original and amended Murphy Oil arbitration

language could be interpreted as unlawfully

prohibiting employees from filing unfair labor

practice charges.

Murphy Oil petitioned the Fifth Circuit to

review the NLRB’s ruling that ignored the Fifth

Circuit’s D.R. Horton decision. 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 versions of the arbitration agreement and

15

concluded that the original agreement was

problematic because its language that employees

waived the right to pursue collective or class

claims for could be interpreted to mean that the

employee could not file unfair labor practice

charges with the NLRB, could therefore had a

chilling effect on employees’ ability to act

collectively, and thus constitute an unfair labor

practice.

However, the Fifth Circuit held that 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 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. lla.

The Eighth Circuit also has concluded that

arbitration agreements containing class waivers

are enforceable under the FAA, notwithstanding

federal labor laws or the NLRB’s interpretation of

those laws. See Owen v. Bristol Care, Inc., 702

F.3d 1050, 1052, 1054-1055 (8th Cir. 2013) and

Cellular Sales of Mo., LLC v. NLRB, 824 F.3d 772,

776 (8th Cir. 2016).

In Owen, the Eighth Circuit acknowledged the

NLRB’s determination that class waivers in

employment arbitration agreements are

16

unenforceable, but explicitly “reject{ed]” the

“invitation to follow the NLRB’s rationale.” 702

F.3d at 1055, and instead 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 1052 (quoting

CompuCredit, 132 S. Ct. at 669), and found that

the two potential contrary congressional

enactments cited by the employees in Owen — the

FLSA and the NLRA -— did not constitute such a

“contrary congressional command.” Td. at

1053-1054. The Eighth Circuit concluded that

neither labor statute overrode “the mandate of the

FAA in favor of arbitration.” Jd. at 1055. The

Eighth Circuit noted that Congress had reenacted

the FAA in 1947, after passing both of the labor

statutes, and that “Congress intended its

arbitration protections to remain intact even in

light of the earlier passage” of the labor relations

statutes. Id. at 1053.

The Eighth Circuit reaffirmed its Owen decision

earlier this year in Cellular Sales of Mo., LLC v.

NLRB, 824 F.3d 772 (8th Cir. 2016), in which it

reviewed an NLRB ruling that a mandatory

agreement requiring individual arbitration of

work-related claims violates the NLRA. /d. at 776.

The court adhered to its decision in Owen, which,

it said, “is fatal” to the NLRB’s position. The court

held that an “arbitration agreement that include[s]

17

a waiver of class or collective actions in all forums

to resolve employment-related disputes” is

enforceable. Jd.

On the other side of the circuit split, the

Seventh Circuit expressly recognized that its

ruling “would create a conflict in the circuits.”

Lewis v. Epic Systems Corp. 823 F.3d 1147, n. +

(7th Cir. 2016), Pet. App. in Epic Systems v. Lewis,

No. 16-285, at 15a n t. Unlike the Second, Fifth,

and Eighth Circuits, the Seventh Circuit held that

agreements to submit employment disputes to

individual arbitration are not enforceable. That

court, like the Ninth Circuit here, concluded that

class waivers in employment arbitration

agreements are “illegal” under the NLRA because

they interfere with employees’ right to engage in

concerted activities. Epic Systems, No. 16-285, Pet.

App. at 10a-lla. It also determined that such

waivers are unenforceable under the FAA’s saving

clause because “illegality” is a “ground| ] * * * for

the revocation of any contract.” Jd. at 14a-15a

(quoting 9 U.S.C. § 2) and id. at 20a.

The Seventh Circuit acknowledged that the

Fifth Circuit had reached “the opposite

conclusion.” Jd. at 15a, but the Seventh Circuit

characterized the Fifth Circuit’s reasoning as

relying on mere dicta in Concepcion and Italian

Colors. Id. The Seventh Circuit also recognized

that the Second and Eighth Circuits “agree with

the Fifth,” citing Sutherland and Owen, but it

viewed the analyses in those decisions as

insufficient. Id. at 19a.

18

Il. THE DECISION BELOW IS

INCORRECT AND CONFLICTS

WITH THIS COURT’S

ARBITRATION PRECEDENTS.

The Ninth Circuit’s decision was mistaken on

the merits of the important question presented

and must be rectified.

The Ninth Circuit majority erred when it began

its analysis with an interpretation of the NLRA as

conferring substantive rights on employees, and

then concluding that those rights override the

employee’s agreement to arbitrate employment-

related disputes. As Judge Ikuta wrote in her

detailed dissent, sections 7 and 8 of the NLRA do

not “expressly preserve any right for employees to

use a specific procedural mechanism to litigate or

arbitrate disputes collectively.” App. 36a

(emphasis in original).

The court of appeals should have begun with

the FAA’s presumption that arbitration

agreements are enforceable as written. See 9

U.S.C. § 2; CompuCredit, 132 S. Ct. at 668-669;

Moses H. Cone, 460 U.S. at 24-25 and it should

have asked whether the NLRA was an explicit

congressional command “contrary” to the FAA.

CompuCredit, 1328S. Ct. at 669. Under this Court’s

criteria, the NLRA is not a “contrary congressional

command” that bars class waivers in arbitration

agreements. CompuCredit, 132 S. Ct. at 669.

19

In this case, the Ninth Circuit 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 enforcement mandate yields to the

NLRA under the “saving clause.” Jd. at *7.

The FAA “establishes ‘a liberal federal policy

favoring arbitration agreements.” CompuCredit,

132 S. Ct. at 669 (quoting Moses H. Cone Mem’

Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24

(1983)).’ The FAA is “[t]he background law

governing” questions of enforcement of arbitration

agreements, even when other federal statutes are

allegedly inconsistent with the FAA. CompuCredit,

132 S. Ct. at 668. Further, the FAA “establishes

that, as a matter of federal law, any doubts

concerning the scope of arbitrable issues should be

resolved in favor of arbitration.” Moses H. Cone,

460 U.S. at 24-25.

Under the FAA “[a] written provision * * * to

settle by arbitration a controversy * * * shall be

valid, irrevocable, and enforceable, save upon such

grounds as exist at law or in equity for the

revocation of any contract.” 9 U.S.C. § 2, and

“(t]he burden is on the party opposing arbitration

** * to show that Congress intended to preclude a

waiver of judicial remedies for the statutory rights

" The type of arbitration “envisioned by the FAA” is

“bilateral” (individual) arbitration, not class arbitration.

See Concepcion, 563 U.S. at 348, 351.

20

at issue.” Shearson/American Express Inc. v.

McMahon, 482 U.S. 220, 227 (1987).

This Court 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. 2304; CompuCredit, 132 S. Ct. 665;

Concepcion, 563 U.S. 333; Stolt-Nielsen S.A. v.

AnimalFeeds Int'l Corp., 559 U.S. 662 (2010);

Gilmer v. Interstate/Johnson Lane Corp., 500 U.S.

20 (1991); Shearson/American Express, supra;

Mitsubishi Motors Corp. uv. Soler

Chrysler-Plymouth, Inc., 473 U.S. 614 (1985);

Moses H. Cone, 460 U.S. 1.

The FAA “requires courts to enforce agreements

to arbitrate according to their terms[,] * * * even

when the claims at issue are federal statutory

claims, unless the FAA’s mandate has been

‘overridden by a contrary congressional

command.” CompuCredit, 132 S. Ct. at 669

(quoting Shearson/American Express, 482 U.S. at

226). The congressional command must indicate

Congress’s contrary intent with “clarity.”

CompuCredit, 132 S. Ct. at 672. Section 7 of the

NLRA grants 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 does not give employees the

right to arbitrate or litigate an employment

dispute as a class or collective action nor does it

expressly prohibit class waivers. As Judge Ikuta

forcefully argued in dissent, the

21

collective-bargaining provisions of the NLRA

“neither mention arbitration nor specify the right

to take legal action at all, whether individually or

collectively,” App. 35a, and those provisions do not

“expressly preserve any right for employees to use

a specific procedural mechanism to litigate or

arbitrate disputes collectively.” App. 36a

(emphasis in original).

The court below also erred in its reliance on the

FAA’s “saving clause” to avoid enforcing the

arbitration provision. The FAA’s saving clause

provides that an arbitration agreement is

enforceable “save upon such grounds as exist at

law or in equity for the revocation of any contract.”

9 U.S.C. § 2. The saving clause permits courts to

decline to enforce arbitration agreements based on

generally applicable contract defenses provide for

revocation of an agreement.

The Ninth Circuit court reasoned that because

Ernst & Young’s arbitration provision contains a

class action waiver that is “illegal” under Section

7 of the NLRA and because “illegality” is a general

defense to enforcement of a contract, this case falls

within the FAA’s saving clause. App. 16a, 24a.°

* Judge Ikuta criticized the majority’s reliance on the

FAA’s saving clause for a number of reasons. App. 38a-41a.

First, this Court does not apply the saving clause to federal

statutes unless the supposedly conflicting statute contains

a congressional command contrary to the use of arbitration.

App. 39a. Second, the majority incorrectly concluded that

collective-action waivers are illegal, but such a waiver

(continued...)

22

Under ine Ninth Circuit majority’s reasoning,

there is no need to determine whether another

federal statute qualifies as a “contrary

congressional command” because the saving clause

allows courts to decline to enforce an arbitration

agreement if there is another that federal law

could be interpreted to conflict with the agreement

to arbitrate, and there is no need to identify an

explicit “contrary congressional command.” Sucha

rule would render nugatory the FAA’s

presumption of enforceability of arbitration

agreements as written. But as this Court in

Concepcion explained, “when a doctrine normally

thought to be generally applicable, such as duress

or * * * unconscionability, is * * * applied in a

fashion that disfavors arbitration,” it falls outside

the saving clause. 563 U.S. at 341. Judicial refusal

to enforce a waiver of class or collective arbitration

is inimical to a core purpose of the FAA because

“(rlequiring the availability of classwide

arbitration interferes with fundamental attributes

*(...continued)

“would be illegal only if it were precluded by a ‘contrary

congressional command’ in the NLRA, and here there is no

such command.” App. 40a. Further, even if the FAA’s

saving clause were applicable to federal statutes, it would

not save the majority’s construction of the NLRA as “giving

employees a substantive, nonwaivable right to classwide

actions” because such a right would “disproportionately and

negatively impact arbitration agreements by requiring

procedures that ‘interfere[] with fundamental attributes of

arbitration.” Jd. (quoting Concepcion, 563 U.S. at 344).

23

of arbitration and thus creates a scheme

inconsistent with the FAA.” Jd. at 344.

Protracted litigation frustrates Congress’s

intent in passing the FAA “to move the parties to

an arbitrable dispute out of 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, 460 U.S. at 22-23.

The Ninth Circuit’s decision would negate

numerous agreements to arbitrate, is wrong on the

merits and should be reversed.

Ill, 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 Petition at 19,

Petition in Epic Systems v. Lewis, No. 16-285, at

20, and Petition in NLRB v. Murphy Oil, No. 16-

307 at 24.

The split among the circuits promises only

turmoil, forum shopping and more expensive,

time-consuming litigation. The split is unlikely to

resolve itself and this Court should intervene now

to resolve it.

24

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