Today, we get a most excellent decision from the Second Circuit striking out a “class action waiver” from an arbitration agreement in a huge case pitting retailers against the charge-card giant, AmEx. Two other decisions of note from yesterday, both pro-employee: An Eighth Circuit decision vacating a ADEA bench verdict for the USDA as clearly erroneous, and a Ninth Circuit unpublished decision reversing summary judgment under Oregon state civil rights law.
In re American Express Merchants` Litigation, No. 06-1871 (2d Cir. Jan. 30, 2009): A great bugaboo in the class action and mandatory arbitration field is the use of language like this in form contracts —
IF ARBITRATION IS CHOSEN BY ANY PARTY WITH RESPECT TO A CLAIM, NEITHER YOU NOR WE WILL HAVE THE RIGHT TO LITIGATE THAT CLAIM IN COURT OR HAVE A JURY TRIAL ON THAT CLAIM . . . . FURTHER, YOU WILL NOT HAVE THE RIGHT TO PARTICIPATE IN A REPRESENTATIVE CAPACITY OR AS A MEMBER OF ANY CLASS OF CLAIMANTS PERTAINING TO ANY CLAIM SUBJECT TO ARBITRATION. THE ARBITRATOR’S DECISION
WILL BE FINAL AND BINDING. NOTE THAT OTHER RIGHTS THAT YOU WOULD HAVE IF YOU WENT TO COURT MAY ALSO NOT BE AVAILABLE IN ARBITRATION.
There shall be no right or authority for any Claims to be arbitrated on a class action basis or on any basis involving Claims brought in a purported representative capacity on behalf of the general public, other establishments which accept the Card (Service Establishments),
or other persons or entities similarly situated. Furthermore, Claims brought by or against a Service Establishment may not be joined or consolidated in the arbitration with Claims brought by or against any other Service Establishment(s), unless otherwise agreed to in writing
by all parties.
District courts and commentators, as well as the Ninth Circuit (which has pioneered this area in the federal arena, and most recently in Lowden v. T-Mobile USA, Inc., 512 F.3d 1213 (9th Cir. 2008), struck down such a term as unconscionable under Washington state law), have carried on vehemently and at some length about the validity and public policy implications of such “class actions waivers.” The Second Circuit in this case declines the invitation to set its own broad rule (laid out by 25 sets of lawyers, representing the parties and four amici), instead finding this provision unenforceable in a mass arbitration of antitrust claims.
The district court believed that he lacked authority to rule on the enforceability of the provision, finding that the issue rightly belonged to the arbitrator. But the Second Circuit holds that because the provision bears directly upon the enforceability of the arbitration clause itself, that it was the office of the federal court to decide: “The plaintiffs are plainly challenging the Card Acceptance Agreement’s arbitration clause insofar as they dispute the enforceability of its class action waiver and, by extension, the validity of the parties’ agreement to arbitrate. Their ‘challenge is to the arbitration clause itself,’ rather than to the entirety of the Card Acceptance Agreement” (citation omitted).
The panel then “conclude[s] that the plaintiffs here have demonstrated that enforcement of the class action waiver in the Card Acceptance Agreement to cover their claims against Amex under federal antitrust statutes would be incompatible with the federal substantive law of arbitration.” It did so through expert testimony establishing the unreasonable expense of proceeding by way of individual proceedings:
“This argument is compellingly set forth in an affidavit filed in the district court by Gary L. French, Ph.D., an economist associated with Nathan Associates Inc., a financial consulting firm retrained by the plaintiffs. . . .’In my opinion as a professional economist . . . it would not be worthwhile for an individual plaintiff . . . to pursue individual arbitration or litigation where the out-of-pocket costs, just for the expert economic study and services, would be at least several hundred thousand dollars, and might exceed $1 million.'”
Although the Clayton Act provides for costs, fees and treble damages, the panel recognizes that this only partly mitigates the enormous expense, all of which must be advanced before a judgment on the claim. So, concluding that Amex has brought no serious challenge to the plaintiffs’ demonstration that their claims cannot reasonably be pursued as individual actions, whether in federal court or in arbitration, we find ourselves in agreement with the plaintiffs’ contention that enforcement of the class action waiver in the Card Acceptance Agreement ‘flatly ensures that no small merchant may challenge American Express’s tying arrangements under the federal antitrust laws.'”
King v. Vilsack, No. 08-1766 (8th Cir. Jan. 29, 2009): The U.S.Supreme Court now has before it Gross v. FBL Fin. Sevs., No. 08-441, a case from the Eighth Circuit presenting the question whether a plaintiff need present “direct evidence” of age discrimination under the ADEA to obtain a shift of the burden on causation to the defendant.
So, what have we here, but another Eighth Circuit case applying the same “direct evidence” rule in another ADEA case. But this time, instead of reversing a verdict for the employee, it vacates a judgment for the employer (here, the USDA) on the ground that the “direct evidence” was right under the judge’s nose and he didn’t sniff it out.
The facts in a nutshell:
“In January 2005, the United States Department of Agriculture (‘USDA’) announced a position opening for a ‘single family housing specialist’ in the rural development section of its office in Le Mars, Iowa. Several people applied for the specialist position, including employees Jean King and Catherine Evans. At the time, King was fifty-four years old and Evans was twenty-five years old. The selection committee for the specialist position consisted of Director Dr. Daniel Brown, Regional Director David Dunfee, Program Specialist Tim Helmbrecht, and Human Resources
Manager Denise Toney.”
* * * *
“At the bench trial, King elicited testimony from fellow rural development section employees regarding statements allegedly made by selection committee members that King claims are direct evidence of age discrimination. First, Karen Triplett testified that in April 2003, Brown told her he wanted to bring ‘educated, young blood’ into the USDA. Second, Kimberly Clay and Sonia Pierce testified that in February 2004, Dunfee told them he had just hired a ‘young, skinny blonde’ with a master’s degree. Third, Cherie Byrum testified that at a work party in September or October 2004, Brown told her and two other employees that the ‘has-been need to listen to the newbies.’ Fourth, Triplett testified that at a retirement party in March or
April 2005, she and Dunfee discussed the strained relations in the Le Mars office and
Brown’s philosophy of hiring younger, educated people.”
While the judge found that the first three statements did not constitute “direct evidence” — a finding, notably, not upset by the Eighth Circuit — the panel reverses based on the judge’s failure to making a finding on the fourth, and possibly most incriminating statement. “We cannot, however, determine whether the last of these four statements, Dunfee’s alleged statement to Triplett at a retirement party in March or April 2005, is direct evidence of age discrimination because the district court failed to make a factual finding about whether Triplett’s testimony about Dunfee’s alleged statement was credible, and if so, whether the statement specifically pertrained to the selection committee’s March 4, 2005 decision to select Evans.”
The panel goes on to state:
“The court’s omission of this statement stands in stark contrast to its thorough recitation and analysis of the other three statements by Brown and Dunfee alleged by King to be direct evidence. The court’s omission is particularly significant because the court noted that it would have found any ‘statements made after the hiring decision was implemented, explaining why the
decision maker chose one candidate over another’ to be relevant if such evidence had been presented. At least one reasonable interpretation of Triplett’s testimony, if accepted as true, fits the court’s criterion because it shows that Dunfee’s statement in March or April 2005 was made shortly after the selection committee’s March 4, 2005 decision and it arguably demonstrated discriminatory animus in the decision making process.”
So back the case goes for more findings.
Schoen v. Freightliner LLC, No. 07-35336 (9th Cir. Jan. 29, 2009): Though the facts are presented incompletely in this unpublished order, this case is an appeal from a summary judgment of an Oregon state-law retaliation claim. The employee alleges that she was fired not for running afoul of the absenteeism rules, but because she had filed a (prior) lawsuit against it. The panel reverses, summarizing as follows:
“We hold that there is sufficient evidence in the record to create a genuine issue of material fact whether Freightliner’s reasons for terminating Schoen were pretextual. Freightliner’s written medical leave policy provides that, in order to take a medical leave of absence for three days or more, an employee must submit a time-loss authorization (“TLA”)-which is documentation supporting this absence-by the end of her shift on the third day of absence. In order to extend a
previously authorized medical leave, an employee must submit a new TLA by the end of her shift on the day after which her previous TLA has expired. When an employee misses work without meeting these requirements, Freightliner issues a ‘reporting requirements letter’ (‘RRL’), and the collective bargaining agreement between Freightliner and Schoen’s union mandates termination for any employee who receives three RRLs.
“Schoen argues either that there were informal exceptions to Freightliner’s written medical leave policy that should have excused Schoen or that, if these exceptions did not exist, Freightliner induced her into believing they did. She presented evidence that creates an issue of fact on both of these questions. Because Schoen was terminated for receiving three RRLs, she need only present such evidence for any one of the three RRLs in order to undermine Freightliner’s
stated rationale for terminating her.”
The panel then takes apart the excuses for each RRL the plaintiff received, noting record evidence of lax enforcement, a “practice of allowing late submissions when an employee could not get a note” (which the plaintiff had done), and the employee’s own evidence that “she was personally given assurances by Freightliner that she could submit her TLAs late.” Finding that these deviations were evidence of pretext, the case returns for trial
More fascinating is the statement in the midst of the opinion that, despite that state law provided the rule of decision, that the panel would nevertheless apply the federal McDonnell Douglas burden-shifting standard to evaluate the claim. Oregon’s rule requires only that the employee adduce a prima facie case of discrimination to defeat employer’s motion for summary judgment. But “[i]n this circuit, the McDonnell Douglas burden shifting framework for discrimination and retaliation claims is considered to be a procedural rule, so we apply this framework to Schoen’s state law claims. Snead v. Metro. Prop. & Cas. Ins. Co., 237 F.3d 1080, 1092 (9th Cir. 2001).”
Show of hands, now — how many people believe that this rule makes any sense under Hanna v. Plumer, 380 U.S. 460 (1965)?