E&Y asks for SCOTUS review of employee class waivers, days after Epic petition

September 8, 2016

(Reuters) – How big is the issue of whether employers can bar workers from acting as a group to enforce their rights? So big that on Thursday, the accounting firm Ernst & Young became the second employer in the past seven days to ask the U.S. Supreme Court to resolve a deep split between the federal appellate courts on the legality of mandatory arbitration clauses that require employees to arbitrate disputes individually.

And keep in mind: The circuit split developed only in May. Employers, in other words, really, really want the Supreme Court to confirm that they can bar group actions by their employees – and fast.

Ernst & Young filed its petition Thursday for Supreme Court review, less than three weeks after a split panel at the 9th U.S. Circuit Court of Appeals determined that the company’s mandatory arbitration clause violated the National Labor Relations Act. The 9th Circuit majority’s reasoning paralleled analysis from the 7th Circuit, which ruled in May that Epic Systems’ individual arbitration requirement improperly prohibited employees from banding together in an action against their employer.

The 7th and 9th Circuits said, in effect, that when workers’ rights under federal labor laws are in tension with the Federal Arbitration Act’s deference to arbitration, the National Labor Relations Act prevails. Their rulings contrasted with precedent from the 2nd, 5th and 8th Circuits, all of which have held in the past three years that arbitration law, rather than labor laws, governs the apparent discrepancy between the statutes.

Last week, a three-judge panel at the 2nd Circuit cast doubt on that court’s precedent, writing that the 7th and 9th Circuits may be right after all. It’s fair to say, in other words, that the federal circuits badly need guidance from the Supreme Court justices. Outsiders never know for sure whether the court will agree to take up an issue, but this one ticks all of the obvious boxes.

Epic Systems, the Wisconsin medical records software company on the losing side of the 7th Circuit’s decision in May, filed its petition for certiorari on Friday. The company had a Sept. 23 deadline for its filing, but, as I said in a post Tuesday, its lawyers at Hogan Lovells must have thought the issue was too hot to leave alone for another three weeks. Ernst & Young’s new petition, filed by Williams & Connolly, proved that instinct to be right. The petitions pose the same question, albeit in different language: Do the collective bargaining provisions of the National Labor Relations Act bar employers from mandating individual arbitration of employee disputes under the Federal Arbitration Act?

So which case will the Supreme Court take?

The justices can grant cert in two (or more!) cases presenting the same question, though they rarely do. (On software patentability, for instance, the court granted cert in Alice v. CLS Corp and not WildTangent v. Ultramercial, which had a simultaneous petition on the same issue.) Sometimes the court wants the Justice Department to represent one side of an issue; to decide the legality of drugmakers’ pay-for-delay agreements, to cite one example, the justices took the FTC’s case against Watson Pharmaceuticals but denied a parallel cert petition in a case involving private litigation over the drug K-Dur.

Both Epic and E&Y said in their petitions that the class waiver question is best presented in a case between employees and an employer, since those are the parties directly affected by mandatory arbitration provisions. Both companies noted that the National Labor Relations Board appeared as an amicus in their appellate cases, so the government’s views are part of the record.

But don’t count out a separate petition for certiorari from the NLRB, which has been on the losing side in class waiver cases at the 5th and 8th Circuits. The NLRB has until tomorrow, Sept. 9, to file a cert petition in Murphy Oil v. NLRB, the latest case in which the 5th Circuit ruled the Federal Arbitration Act allows employers to require workers to arbitrate disputes individually. An NLRB spokeswoman didn’t respond to my email requests for comment on the competing Epic and Ernst & Young petitions.

Ernst & Young argues that its case is the best vehicle for Supreme Court review because the accounting firm embodies the split among the circuits. The very same E&Y mandatory arbitration provision – which all of the firm’s 40,000 employees in offices across the country are required to sign – was okayed by the 2nd Circuit in a 2013 decision yet deemed invalid by the 9th Circuit last month.

“Should the court grant review in this case, it will have the luxury of knowing that it is comparing apples to apples, considering an arbitration agreement that has divided the circuits without any concern about complicating peculiarities in the language (or method of adoption) of a less widely used agreement,” the petition said.

Moreover, E&Y said, the split 9th Circuit decision included a thoughtful dissent from Judge Sandra Ikuta, so the Supreme Court can be assured that the 9th Circuit considered all aspects of the class waiver question. (The 7th Circuit panel in the Epic case was unanimous.)

Clearly, Epic and E&Y are going all out at the Supreme Court. Epic hired Neal Katyal of Hogan, a former acting U.S. Solicitor General in the Obama administration, for its petition. E&Y brought in Kannon Shanmugam of W&C, a former assistant to the SG in the George W. Bush administration. It’s going to be fun to watch these top-notch appellate litigators vie for the attention of the justices.

I left a phone message asking for comment on the E&Y filing with the plaintiffs’ lawyer in the case, Max Folkenflik of Folkenflik & McGerity. He didn’t immediately get back to me.

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