# Reply Brief — Long John John Silver's Inc. Inc. v. Cole (No. 07-1370) > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386020_1422%3A3 ## Record - **Collection:** Supreme Court brief - **Document type:** Reply Brief - **Published:** January 1, 2008 ## Text No. 07-1370 Jn the Supreme Court of the Gnited States LONG JOHN SILVER’S, INC., 3 Petitioner, 3 fe a ERIN COLE, ET AL. a Respondents. 4 On Petition for a Writ of Certiorari to the United States Court of Appeals for the Fourth Circuit REPLY BRIEF FOR PETITIONER PETER J. GREGORA DAN HIMMELFARB LAURA W. BRILL Counsel of Record Treli & Manella LLP ROBERT P. DAVIS 1800 Avenue of the Stars TAMARA S. KILLION Los Angeles, CA 90067 Mayer Brown LLP (310) 277-1010 1909 K Street, NW HENRY L. PARR, JR. Washington, DC 20006 Davin H. Koysza (202) 263-3000 Wyche, Burgess, Freeman and Parham, P.A. Post Office Box 728 Greenville, S.C. 29602 (864) 242-8200 Counsel for Petitioner aeRO SN = PE iS ea a Wiison-Ercs PrintinG Co., inc. — (202) 789-0096 — WasHacTon, D. C. 20002 i i RULE 29.6 STATEMENT Reference is hereby made to the Rule 29.6 Statement in Petitioner’s Petition for a Writ of Cer- tiorari filed in this action. ha the arte 5a ti RELAY IES is ae eS Se! eee, GPF OF, PI ERP y nn LL Ne SCE Pee ge pae b me A! li TABLE OF CONTENTS Page EE RES Sy tle 4) 14 a eee i TAP PF AUTHORITIES. ..0..0........0cc.ccccsccscccccsceces iii A. Petitioner Raised The Issue Below. ...................... 1 B. The Fourth Circuit’s Decision Is Inconsistent With McMahon And Gilmer............. 2 ics latipes cibnsesicecbsdeccoceeseeséncvoneenesee 3 oo ccnchbyeussnévevenctoscessvecsecvesieec 4 3. Limited judicial review................:cccseeseessesseeeees 6 C. There Is A Clear Circuit Split On The Issue Presented By The Petition.........................ccce sees eeee 7 D. Proper Resolution Of The Issue Presented Affects The Result In This Case.................0.......... 9 1. The critical questions posed by the petition are not “fact- and document- EET 8 EER CE 10 2. It is irrelevant whether the written consent mandate is characterized as “substantive” or “procedural.” ......................0 11 3. Certification of an opt-out class does not “effectively vindicate” the parties’ ais id. dacauahiiiesidcecarestedessoseserseveyens 12 SNAMEIIIE ITN occcccpnwcccsesccccsscconccssascccsscccccnnssccessnseenes 13 oad iii TABLE OF AUTHORITIES Page(s) CASES Cole v. Burns Int'l Security Services, 105 F.3d RAG CI, GRR BIT) ia isich cdscvcnsecevevecssccdsacss passim De Asencio v. Tyson Foods, Inc., BOD Fe BE Cl CE. BOOS) ons scccsicccccescccvccscscccess 11 Gilmer v. Interstate/Johnson Lane Corp., CO Se Be io ovd ac isacouvidendicnanwocodsasiees passim Hall Street Associates L.L.C. v. Mattel, Inc., TORS. Ce 1GOS CIOS aoa oeseccensssscciecsessne 3,6,7 Johnson v. Long John Silver’s Restaurants, Inc., 320 F. Supp. 2d 656 (M.D. Tenn. 2004) ..... 10 Kergosien v. Ocean Energy, Inc., 390 F.3d 346 RI a seacussesunucdidebecaderedeuseves 9 Kurke v. Oscar Gruss & Son, Inc., 454 F.3d RF PR Ty BAPE osiceccseixcdsosocccedavachevacessacsencesess 9 LaPrade v. Kidder, Peabody & Co., Inc. 246 Bete Tee RR, Rat PE is sv scvenes edntvesevacesonscvacceovass 9 Shearson/American Express Inc. v. McMahon, BE Gir EE CED niivenkiciactencdtasssdamenclbesiweres passim United Steel Workers of Am. v. Warrior and Gulf Navigation Co., 363 U.S. 574 (1960)............ 5 Williams v. Cigna Fin. Advisors, Inc., 197 F.3d 752 (6th Cir. 1999).............c0.0006 2,7, 8,9 POS Cae CO, ey FOP ey LEY BO gst RY Pa ee eee ne ee MS CS SP LE eA at ae ee ee ee ee eee eae a ae ee » at Te ee ee iV TABLE OF AUTHORITIES—continued Page(s) STATUTES Yau Labor Standards Act, | © 36h), 29 U.S.C. § ZICH) ...........000-s..c00 19. 33,22 OTHER AUTHORITIES Robert A. Gorman, The Gilmer Decision and the Private Arbitration of Public-Law Disputes, 1995 U. ILL. L. REV. 635 (1995) ........ 5, 6 FRR he CONE oe Te Tee EEE, Ee PR TPS et hy ee Oe Re, ARLE A EO UE SSE Sy ES OE Se Ne Mee, Se | ae ee ee ee ee eee REPLY BRIEF FOR PETITIONER Respondents’ Opposition to the Petition for a Writ of Certiorari (““Opp.”) demonstrates why the Pe- tition should be granted. As the Petition explains, the Fourth Circuit’s de- cision in this case conflicts with this Court’s deci- sions in Shearson/American Express Inc. v. McMa- hon, 482 U.S. 220 (1987), and Gilmer v. Inter- state/Johnson Lane Corp., 500 U.S. 20 (1991). Pet. 14-18. It also exacerbates an already serious circuit split, since the D.C. and Fifth Circuits hold that McMahon and Gilmer require heightened scrutiny of arbitrators’ interpretation and application of federal statutes, while the Fourth, Second and Eleventh Cir- cuits have rejected any suggestion that the courts have a responsibility to ensure that arbitrators cor- rectly interpret and apply federal statutes. Pet. 18- 25. Respondents assert that (1) Petitioner did not raise the issue below, (2) the Fourth Circuit’s deci- sion is not inconsistent with McMahon and Gilmer, (3) there is no circuit split on the issue, and (4) the result in this case would be the same even if Peti- tioner’s position were correct. None of these contentions its accurate. Respon- dents’ arguments do nothing to minimize the signifi- cance of the issue presented or the reasons why this Court should decide it. A. Petitioner Raised The Issue Below. Respondents claim that Petitioner never raised the issue presented by the Petition in the lower courts. Opp. 7-10. Respondents are incorrect. In its brief before the Fourth Circuit, Petitioner argued: ere Ree or ge AS sees S lech i Sn SAU Acs, Sint Harn RE GATT TLE, Pipl i sok ney 5 3 PEL ETE AU Ge eee) DE ee age Bi aah si roe or 2 Thus, especially in cases in which statutory rights are at stake, it is not enough that an arbitrator analyzed a question of law; judi- cial review of an arbitration award must be thorough enough “to ensure that arbitrators comply with the requirements of the statute’ at issue.” Gilmer, 500 U.S. at 32 n.4 (1991) (emphasis added) (quoting Shearson/Am. 4 Express Inc. v. McMahon, 482 U.S. 220, 232 q (1987)); Williams v. Cigna Fin. Advisors, Inc., ae 197 F.3d 752, 759 (5th Cir. 1999) (recogniz- q ing that Gilmer requires “judicial scrutiny of 4 arbitration awards under the FAA involving 4 [federal statutory] claims sufficient to ensure that. arbitrators comply with the require- ments of those * * * statutes”). 2006 WL 2726265, at *34. Petitioner made the iden- tical argument in the district court. CA JA 23; see CA JA 26. Petitioner thus raised precisely the issue it pre- sents in the Petition — whether McMahon and Gil- mer require a heightened level of scrutiny of arbitra- tors’ interpretation and application of federal stat- utes. B. The Fourth Circuit’s Decision Is Incon- sistent With McMahon And Gilmer. Respondents argue that the Fourth Circuit’s de- cision in this case is consistent with McMahon and Gilmer because, according to Respondents, those cases dc not suggest that the courts should deter- mine whether arbitrators misinterpreted or misap- plied federal statutes but merely express satisfaction that a complete absence of substantive review is “suf- ficient to ensure that arbitrators comply with the re- 3 quirements of the statute.” Therefore (Respondents argue), the Fourth Circuit’s refusal even to consider whether the arbitrator misinterpreted the FLSA was fully consistent with McMahon and Gilmer. Respon- dents also assert that any other conclusion would contravene the Court’s decision in Hall Street Asso- ciates L.L.C. v. Mattel, Inc., 128 S. Ct. 1396 (2008), emphasizing the limited nature of judicial review of arbitral decisions. Opp. 11-18. Respondents are incorrect on all grounds. There is no way to reconcile the Fourth Circuit’s decision with McMahon and Gilmer. The language and con- text of McMahon and Gilmer do not support Respon- dents’ contention, and this Court’s requirement that review be sufficient to ensure arbitral compliance with statutory mandates is fully consistent with the limited nature of judicial review of arbitral awards. 1. Language The language used by this Court in McMahon and Gilmer is utterly inconsistent with the standard enunciated by the Fourth Circuit in this case. McMahon and Gilmer state that “although judicial scrutiny of arbitration awards necessarily is limited, such review is sufficient to ensure that arbitrators comply with the requirements of the statute.” McMahon, 482 U.S. a. 232; Gilmer, 500 U.S. at 32 n.4. By contrast, the Fourth Circuit stated that “a reviewing court is entitled to ‘determine only whether the arbitrator did his job — not whether he did it well, correctly, or reasonably.” Pet. App. 7a. To say that McMahon and Gilmer are consistent with the Fourth Circuit's standard is to say that this Court is incapable of expressing itself. If this Court wanted to say that arbitrators’ misinterpretation of a 4 federal statute was essentially uncorrectable, it would hardly have referred to judicial review as “suf- ficient to ensure that arbitrators comply with the re- quirements of the statute.” 2. Context The context of the discussions of judicial review in McMahon and Gilmer — both textual and historical — also contradicts Respondents’ assertion that these cases approved a standard of review incapable of vindicating congressionally mandated rights. McMahon and Gilmer view an arbitration agree- ment as merely a type of forum selection clause, with the parties having the same substantive rights they would have in litigation. 482 U.S. at 229-230; 500 U.S. at 26. That is the context in which the Court provided assurance that judicial review would be “sufficient to ensure” arbitral compliance with the requirements of the statute. In that light, it is im- possible that the Court was saying — as Respondents contend — that arbitrators’ violation of statutory mandates was essentially uncorrectable. The historical context also supports this conclu- sion. Respondents are simply wrong in their asser- tion that McMahon and Gilmer implicitly rely on “decades of jurisprudence” (Opp. 12) rejecting sub- stantive review of arbitral decisions. In fact, McMahon was the first case to approve domestic ar- bitration of statutory claims. The Court’s previous cases involved review of arbitral awards under col- lective bargaining agreements — situations that the Court recognized were not analogous to arbitration of 5 statutory claims.! As Chief Judge Edwards noted in Cole, “[a}]rbitration in collective bargaining has... a plethora of case law to support it. Arbitration of statutory claims, however, is the proverbial ‘new kid on the block’... .” 105 F.3d at 1473. The Court has recognized that arbitration of fed- eral statutory claims implicates unique issues be- cause rights under public laws are involved. Thus, the Court originally held that such claims were not arbitrable at all (Pet. 15), and changed its view in McMahon only with the assurance that judicial re- view would be sufficient to vindicate statutory rights. This assurance was critical, because there was no history of arbitration in this field — the Court was treading new ground, and therefore creating new rules. These new rules necessarily required ade- quate means for vindicating statutory rights. As Professor Gorman has explained: It is one thing when an arbitrator deciding a grievance under a collective agreement makes a foolish error in interpreting or ap- plying the contract terms; it is unlikely that any significant public policy will be impaired and, in any event, the parties are free to at- ' In United Steel Workers of America v. Warrior and Gulf Navigation Co., 363 U.S. 574 (1960), the Court noted that arbi- trators under collective bargaining agreements apply the “common law of the shop,” rather than public law. Id. at 579- 580. The D.C. Circuit in Cole v. Burns International Security Services, 105 F.3d 1465 (D.C. Cir. 1997), emphasized the sig- nificant differences between the two types of arbitration (id. at 1473-1477) and said that reliance upon cases involving collec- tive bargaining arbitration as a template for review of arbitral decisions of claims under federal employment laws is “a mis- chievous idea, one that we categorically reject” (id. at 1473). 6 tempt promptly to rectify the error... at the next contract renegotiation. When the arbi- trator’s error relates to statutory interpreta- tion or application, there is legitimate con- cern that a larger public objective has been frustrated. Robert A. Gorman, The Gilmer Decision and the Pri- vate Arbitration of Public-Law Disputes, 1995 U. ILL. L. REV. 635, 669-670 (1995). Thus, the historical context of McMahon and Gil- mer belies Respondents’ claim that the Court was in- formed by “decades of jurisprudence” — never cited — in purportedly concluding that the complete absence of substantive review was “sufficient to ensure that arbitrators comply with the requirements of the statute.” If that were the case, then the Court was making an empty promise when it stated that a party agreeing to arbitrate a statutory claim “does not forgo the substantive rights afforded by the stat- ute.” McMahon, 482 U.S. at 229. 3. Limited judicial review Respondents further claim that McMahon and Gilmer could not have contemplated substantive re- view of arbitral interpretation and application of fed- eral statutes because that would be inconsistent with the nature of arbitration, which demands limited ju- dicial review. They argue that this Court’s recent decision in Hall Street emphasizes the limited nature of such review. Opp. 14-18. Nobody doubts that judicial review of arbitral de- cisions should be limited. No court has held — and Petitioner does not suggest — that arbitral decisions of statutory claims are subject to plenary review. McMahon and Gilmer expressly recognize that judi- 7 cial review “is limited,” but nonetheless “sufficient to ensure” arbitral compliance with statutory man- dates. Similarly, the D.C. Circuit in Cole said only that review should “ensure that arbitrators have properly interpreted and applied statutory law.” 105 F.3d at 1487. And the Fifth Circuit in Williams uv. Cigna Financial Advisors Inc., 197 F.3d 752 (5th Cir. 1999), held only that review “must be sufficient to ensure that arbitrators comply with the require- ments of the statute’ at issue.” Jd. at 761. Halil Street is not to the contrary. Hall Street — which did not involve statutory claims and never cit- es Gilmer or McMahon — holds that the Federal Arbi- tration Act did not permit plenary review of arbitral awards, noting the “need[] to maintain arbitration’s essential virtue of resolving disputes straightaway.” 128 S. Ct. at 1405. Hall Street expresses concern re- garding the potential of “open[ing] the door to... full-bore legal and evidentiary appeals” (id.) and re- jects the argument that the FAA allowed “eviden- tiary and legal review generally” (id. at 1404). Since McMahon and Gilmer do not contemplate plenary review — or anything close to it — they are fully con- sistent with Hall Street and the nature of arbitra- tion. C. There Is A Clear Circuit Split On The Is- sue Presented By The Petition. As the Petition explains, there is a clear circuit split regarding the standard of review applicable to arbitral interpretation and application of federal statutes. The D.C. Circuit and the Fifth Circuit have held that McMahon and Gilmer require heightened review of arbitral interpretation and application of federal statutes, while the Second, Fourth and Elev- enth Circuits have held that the courts have virtu- 8 ally no ability to correct such critical arbitral errors. Pet. 18-25. Respondents deny the existence of a “genuine” circuit split, claiming that the D.C. and Fifth Cir- cuits did not really adopt a heightened standard of review for arbitral interpretations and applications of federal statutes. To support this assertion, Re- spondents cite later cases from these circuits apply- ing a deferential standard of review in cases review- ing arbitral awards under federal statutes. Opp. 20- 26. Respondents are patently wrong. Any fair reading of the D.C. Circuit’s decision in Cole and the Fifth Circuit’s decision in Williams demonstrates that both courts expressly adopted a heightened standard of review for arbitral interpre- tations and applications of federal statutes — both courts said they were doing so, and explained that this heightened standard was required by McMahon and Gilmer. Cole, 105 F.3d at 1487; Williams, 197 F.3d at 760-762. Significantly, both Cole and Wil- liams adopted standards for reviewing arbitral in- terpretations and applications of federal statutes that permitted vacatur regardless of whether the ar- bitrators’ misapplication of the statute was inten- tional. 105 F.3d at 1487; 197 F.3d at 761-762. This placed the D.C. and Fifth Circuits in direct conflict with the Second, Fourth and Eleventh Circuits, which require intentional error to justify vacatur. Pet. 19-22. This is no mere “semantic difference” — one standard permits correction of error and the other does not. Respondents are similarly misguided in assert- ing that later cases in the D.C. and Fifth Circuits undermined this conflict by applying the normal def- erential standard of review to arbitral awards under 9 federal statutes. Opp. 22-26. In fact, the cases they cite did not involve challenges to the arbitrators’ in- terpretation or application of the statutes.2 Since Cole and Williams limited heightened review to arbi- trators’ interpretation and application of the statute, these later cases properly applied the deferential standard of review to challenges on other grounds. Therefore, these later cases do not detract from the circuit split illustrated by Cole and Williams. D. Proper Resolution Of The Issue Pre- sented Affects The Result In This Case. This case provides an ideal vehicle for resolution of the issue presented because the result would be different if the proper standard were applied. Pet. 26-32. Respondents argue that the result would be the same, claiming that (1) the arbitrator’s decision was “fact- and document-specific,” (2). the FLSA’s written consent requirement is merely “procedural,” and therefore inapplicable in arbitration, and (3) all of the parties’ rights are adequately protected by dis- regarding the congressionally-mandated written con- sent requirement. Opp. 28-38. These arguments are erroneous. 2 Although the cases cited by Respondents involved federal statutory claims, none of them involved challenges to the arbi- trators’ interpretation or application of the statute. See La- Prade v. Kidder, Peabody & Co., Inc., 246 F.3d 702, 705-706 (D.C. Cir. 2001) (discretionary imposition of a portion of forum costs on partially successful plaintiff); Kurke v. Oscar Gruss & Son, Inc., 454 F.3d 350, 355 (D.C. Cir. 2006) (rejection of de- fenses of ratification and failure to mitigate damages); Ker- gosien v. Ocean Energy, Inc., 390 F.3d 346, 352-356 (5th Cir. 2004) (interpretation of scope of arbitration clause and deter- mination of conflict of interest). 10 1. The critical questions posed by the petition are not “fact- and document- specific.” Respondents contend that resolution of the issue presented by the Petition would not change the re- sult in this case because the arbitrator based his rul- ing upon an interpretation of the parties’ arbitration agreement and the procedural history of the case. Opp. 28-32. Not so. The only language the arbitrator “interpreted” to reach his desired result was the parties’ agreement to arbitrate before the AAA. Based on this agree- ment to arbitrate, the arbitrator concluded that the AAA class arbitration rules trumped the congres- sionally-mandated written consent requirement of § 16(b). Pet. App. 3la-35a. That does not make the arbitrator's decision “document-specific,” since it would apply to every agreement to arbitrate before the AAA. Moreover, the arbitrator’s reliance upon the “pro- cedural history” of this case also presents a pure is- sue of law, which would be resolved by the Court’s decision. The arbitrator decided that Petitioner’s en- forcement of an arbitration agreement in a different case? made it “equitable” to disregard § 16(b) and 3 In Johnson v. Long John Silver’s Restaurants, Inc., 320 F. Supp. 2d 656 (M.D. Tenn. 2004), affd 414 F.3d 583 (6th Cir. 2005), a plaintiff instituted an FLSA collective action against Petitioner. The district court granted Petitioner’s motion to compel arbitration, and the Sixth Circuit affirmed. The arbi- trator in this case decided that “equity is better served” by certi- fying an opt-out class because potential plaintiffs might have obtained relief in the Johnson case if Petitioner had not suc- cessfully compelled arbitration. Pet. App. 36a. 11 certify an opt-out class. Pet. App. 33a-36a. This is- sue is not “fact-specific” because the question is not whether the arbitrator’s result was “equitable,” but whether an arbitrator (or 2 court) may disregard the unequivocal written consent requirement of § 16(b) whenever it decides that an opt-out class would be more “equitable” than the congressionally-mandated written consent requirement. Neither the arbitrator nor Respondents provide any support for this pecu- liar notion. 2. It is irrelevant whether the written consent mandate is characterized as “substantive” or “procedural.” Respondents also assert that the written consent requirement of § 16(b) is merely “procedural” and therefore inapplicable in arbitration. Opp. 32-36. This assertion does not argue against certiorari. The relevant question is not whether the written consent requirement is “procedural” or “substantive,” but whether it must be applied in arbitration be- cause it is an integral part of the entire statutory scheme, representing a critical congressional policy choice. Respondents do not address that issue. Respondents never deny that Congress’ decision to adopt the written consent requirement reflected a conscious public policy choice (Pet. 27-30), and con- stitutes a “crucial policy decision.” De Asencio v. Ty- son Foods, Inc., 342 F.3d 301, 311 (3d Cir. 2003). Even the Fourth Circuit in this case acknowledged that Congress intended that the written consent re- quirement would apply in arbitration. Pet. App. lla. Respondents also do not deny that the written con- sent requirement is such an integral part of the statutory scheme that it is impossible to apply the 12 FLSA’s statute of limitations without applying the written consent requirement. Pet. 20-31.4 Even if the issue is whether the written consent requirement is “procedural” or “substantive,” the proper conclusion is that the requirement is substan- tive for the reasons specified by the Secretary of La- bor in her amicus brief, i.e., the written consent re- quirement recognizes an employee’s “fundamental right not to be included as a plaintiff’ without his or her consent. CA JA 213. 3. Certification of an opt-out class does not “effectively vindicate” the par- ties’ rights. Respondents’ final argument is that the arbitra- tor’s certification of an opt-out class “effectively vin- dicated” the parties’ rights under the written consent mandate of § 16(b), because the arbitrator directed that the class members be given the “best notice practicable under the circumstances.” Opp. 36-38. This bizarre contention warrants little response. Obviously, the written consent requirement man- dated by Congress — a requirement representing a critical policy choice — is not “effectively vindicated” by an order that completely eliminates that require- ment. * Respondents concede that “there is certainly a connection” between tthe FLSA statute of limitations and the written con- sent mandate, but argue that the statute of limitations was tolled in this case. Opp. 35-36. That misses the point. Peti- - tioner’s argument is that the written consent requirement is an integral part of the statutory scheme and therefore must be ap- plied in arbitration. That is true whether or not the statute of limitations might be tolled in a particular case. 13 CONCLUSION The petition for a writ of certiorari should be granted. : Respectfully submitted. PETER J. GREGORA DAN HIMMELFARB LAURA W. BRILL Counsel of Record Trell & Manella LLP ROBERT P. DAVIS 1800 Avenue of the Stars TAMARA S. KILLION Los Angeles, CA 90067 Mayer Brown LLP (310) 277-1010 1909 K Street, NW HENRY L. PARR, JR. Washington, DC 20006 Davip H. Koysza (202) 263-3000 Wyche, Burgess, Free- man and Parham, PA. Post Office Box 728 Greenville, S.C. 29602 (864) 242-8200 Counsel for Petittoner SEPTEMBER 2008 --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386020_1422%3A3. Public record. Not legal advice.