Waiting For Gorsuch: SCOTUS Kicks Important Class-Action Waiver Case To Next Term

Last week, the United States Supreme Court informed litigants in Epic Systems Corp. v. Lewis that it is pushing the case to its October 2017 term. The lawsuit, which rose up through the Western District of Wisconsin and the Seventh Circuit, presents the High Court with a chance to resolve a robust circuit split on the question whether mandatory arbitration clauses in employment contracts may contain class action waivers without running afoul of the National Labor Relations Act (NLRA). Last spring, the Seventh Circuit ruled that such clauses were unenforceable, deviating from rulings by the Second, Fifth, and Eighth Circuits, and prompting the Supreme Court to grant certiorari on January 13, 2017.

The resolution of the issue turns on whether NLRA Section 7's (29 U.S.C. § 157) protection of employees' right to engage in "concerted activities" qualifies as a "contrary congressional command" (under CompuCredit Corp. v. Greenwood, 132 S. Ct. 665, 669 (2012)) sufficient to override the Federal Arbitration Act's (FAA) presumption that arbitration agreements are enforceable as written. The National Labor Relations Board (NLRB) has taken the position for years that class action waivers in employment agreements are unenforceable under the NLRA. See D.R. Horton, Inc., 357 N.L.R.B. 2277, 2289 (2012). In Lewis, Judge Barbara Crabb of the Western District of Wisconsin followed the NLRB's interpretation, based on Supreme Court precedent directing courts to give "considerable deference" to the agency's interpretations of the NLRA. Lewis, No. 15-cv-82-bbc, 2015 U.S. Dist. LEXIS 121137, at *4 (W.D. Wis. Sept. 11, 2015) (quoting ABF Freight System, Inc. v. NLRB, 510 U.S. 317, 324 (1994)).

On appeal, the Seventh Circuit ruled that such class action waivers were "illegal" under the NLRA, making them unenforceable because the FAA contains a "savings clause" that allows courts to refuse to recognize arbitration agreements on grounds sufficient "for the revocation of any contract." Lewis, 823 F.3d 1147, 1159 (7th Cir. 2016) (quoting 9 U.S.C. § 2). The Seventh Circuit acknowledged that its decision departed from precedents in its sister circuits but dismissed their reasoning. Following Lewis, a divided Ninth Circuit panel joined the Seventh Circuit, deepening the circuit split and teeing the issue up for Supreme Court review.

Because the case has now been deferred until next term, President Trump's recent nomination of Judge Neil Gorsuch leads inquisitive minds to...