Arbitrator and NAA member Lise Gelenter discusses a recent federal district court decision upholding an arbitration award dealing with class arbitration.
A federal district court in Washington upheld an arbitrator’s award interpreting a contract to allow class action arbitration, even though the arbitration agreement did not explicitly mention class actions. NCR Corporation v. Goh, Civ. No. C16-127 (W.D. Wash. 5/30/17). The case involved Chris Goh, a former employee of NCR Corporation. When he was hired, he signed an agreement to arbitrate all his employment claims. The arbitration clause stated:
This agreement to arbitrate includes every possible claim . . . arising out of or relating in any way to my employment . . .
Any issue or dispute concerning the interpretation or enforceability of this Agreement shall be resolved by the arbitrator . . .
We intend for this Agreement to be interpreted broadly to allow arbitration of as many disputes as possible.
Goh quit his job in 2014, but in 2015, he filed a demand for arbitration against NCR, claiming NCR had not disclosed it was running background checks on employees and applicants as it was required to do under the Fair Credit Reporting Act. He made the demand on behalf of himself and all other people for whom NCR had requested background reports. NCR claimed that the arbitration agreement did not permit class actions but ultimately agreed to have an arbitrator decide that issue. NCR then tried to have a court stop the arbitrator from ruling on the issue, but the Court denied its request.
The arbitrator determined that the agreement permitted class arbitrations. NCR then sued in federal court, requesting that the court vacate the award because the arbitrator disregarded the applicable law, pointing to the Supreme Court’s decisions in Stolt-Nielsen Int’l Corp. v. Animal Feeds Int’l Corp., 559 U.S. 62 (2010) and Oxford Health Plans, LLC v. Sutter, 133 S. Ct. 2064 (2013). In Stolt-Nielsen, the parties had stipulated that they had not reached an agreement on class actions when they entered into an arbitration agreement that was silent on the issue. The Supreme Court had held that under those circumstances it was improper for an arbitration panel to have inferred that class actions were permissible.
In Oxford Health Plans, the Supreme Court found no reason to vacate an arbitrator’s finding that an arbitration agreement permitted class actions even though there was no explicit language on the issue in the contract. Unlike the parties in Stolt-Nielsen, the parties in Oxford had not stipulated that they had not discussed or agreed on the class action issue. The Court held: “an arbitral decision even arguably construing or applying the contract must stand, regardless of a court’s view of its (de)merits.” Since the arbitrator had clearly construed the language in the contract, there was no basis to vacate the award.
In the NCR case, the district court in Washington held that the arbitrator also had “arguably” construed the contract in determining that class actions were permitted. For example, the arbitrator noted that the arbitration agreement covered “every possible claim” arising out of the employment relationship. He found that the language was “expansive enough to cover concerns of other employees where those concerns/claims are the same as with the employee executing the document.” The arbitrator’s analysis and application of Washington state contract law to the contract language was also rational, the court said.
Unlike the arbitration panel in Stolt-Nielsen, which appeared to have imposed “its own policy choice,” the arbitrator in the NCR case grounded his decision on the actual language of the contract and applicable state law. The district court agreed with the Third Circuit’s holding that “Stolt-Nielsen did not establish a bright line rule that class arbitration is allowed only under an arbitration agreement that incants ‘class arbitration’ or otherwise expressly provides for aggregate procedures.” Sutter v. Oxford Health Plans LLC, 675 F.3d 215, 222 (3rd Cir. 2012); accord Fantastic Sams Franchise Corp. v. FSRO Ass’n, 683 F.3d 18, 22 (1st Cir. 2012); Jock v. Sterling Jewlers Inc., 646 F.3d 113, 123 (2d Cir. 2011).
The NCR case shows that courts will resist attempts to interpret Stolt-Nielsen to ban arbitrators from interpreting ambiguous contracts to permit class action arbitration proceedings. It also illustrates that in order to ensure an award is not vacated, an arbitrator must explain his or her reasoning in an award and ensure that he or she shows that the arbitrator examined the language of the contract carefully.