The opinion of the court was delivered by: Hall, Circuit Judge:
Jock et al. v. Sterling Jewelers Inc.
Before: WINTER, POOLER, and HALL, Circuit Judges.
Plaintiffs, a group of retail sales employees of defendant Sterling Jewelers, Inc.'s national jewelry chain stores, appeal from an order of the United States District Court for the Southern
District of New York (Rakoff, J.) vacating an arbitration award on the ground that the arbitrator had exceeded her authority in light of the Supreme Court's decision in Stolt-Nielsen S.A. v. AnimalFeeds International Corp., __ U.S. __, 130 S. Ct. 1758 (2010). We hold that the district court, rather than examining whether the arbitrator had exceeded her authority under the precedent of this circuit, improperly substituted its own interpretation of the parties' arbitration agreement for that of the arbitrator's to conclude that the arbitrator had reached an incorrect determination that the parties' arbitration agreement did not prohibit class arbitration. We, therefore, reverse the judgment of the district court vacating the arbitration award and remand with instructions to confirm the award.
Judge Winter dissents in a separate opinion.
Plaintiffs, a group of retail sales employees of defendant Sterling Jewelers, Inc.'s national jewelry chain stores, appeal from an order of the United States District Court for the Southern District of New York (Rakoff, J.) vacating an arbitration award on the ground that the arbitrator had exceeded her authority in light of the Supreme Court's decision in Stolt-Nielsen S.A. v. AnimalFeeds International Corp., __ U.S. __, 130 S. Ct. 1758 (2010). The issue presented by this appeal is whether a district court has the authority to vacate an arbitration award where it believes that the arbitrator improperly interpreted the terms of an arbitration agreement. Because the district court did not undertake the appropriate inquiry--whether, based on the parties' submissions or the arbitration agreement, the arbitrator had the authority to reach an issue, not whether the arbitrator decided the issue correctly--and instead substituted its own legal analysis for that of the arbitrator's, we reverse the judgment of the district court. Because we find that the arbitrator acted within her authority to reach an issue properly submitted to her by the parties and reached her decision by analyzing the terms of the agreement in light of applicable law, the award should not have been vacated. We remand with instructions to confirm the award.
In May 2005, plaintiff Laryssa Jock filed a discrimination suit with the Equal
Employment Opportunity Commission ("EEOC") against her employer Sterling Jewelers, Inc. ("Sterling"), alleging that she and other female workers were being paid less because of their gender in violation of Title VII of the Civil Rights Act of 1964, 42 U.S.C. §§ 2000(e) et seq., and the Equal Pay Act, 29 U.S.C. § 206(d). Eighteen other female employees filed charges against Sterling before the EEOC. Jock and the other employees simultaneously initiated dispute resolution procedures pursuant to their employment contract, which mandated a three-step alternative dispute resolution program, known as RESOLVE. Step One of the RESOLVE program requires the employee to notify Sterling of her complaint in writing, and include references to any supporting evidence. Sterling then makes a determination with respect to the merits of the complaint. If the employee is dissatisfied with Sterling's determination, she may then initiate Step Two, which calls for referring the claim to a mediator or a panel of employees, both of which are determined by Sterling. If the employee remains dissatisfied, in Step Three she may request arbitration, which is to be conducted in accordance with the rules of the American Arbitration Association ("AAA"). Agreeing to the RESOLVE dispute resolution process is a mandatory condition of employment.
In January 2008, the EEOC issued its letter of determination, finding reasonable cause to believe that Sterling had violated Title VII and the Equal Pay Act. According to its letter, the EEOC's "investigation determined that [Sterling] subjected [plaintiffs-appellants] and a class of female employees with retail sales responsibilities nationwide to a pattern or practice of sex discrimination in regard to promotion and compensation." The letter goes on to state that "[s]tatistical analysis of pay and promotion data . . . reveals that [Sterling] promoted male employees at a statistically significant, higher rate than similarly situated female employees and that [Sterling] compensated male employees at a statistically significant, higher rate than similarly situated female employees."
Following the EEOC's determination, in March 2008, Jock and the other plaintiffs- appellants (collectively, the "plaintiffs") filed a class action suit in the United States District Court for the Southern District of New York on behalf of themselves and others similarly situated, and asserting claims under Title VII, the Equal Pay Act, and the Age Discrimination in Employment Act, alleging that Sterling's discriminatory promotion and compensation policies denied promotional opportunities to qualified female employees and paid female employees less than male employees performing the same work. That same month, the plaintiffs filed a class arbitration complaint with the AAA, making the same allegations and challenging the same practices. After Sterling addressed several of the plaintiffs' concerns, they moved to stay their federal court litigation in favor of the arbitration. In September 2008, the EEOC filed a parallel action against Sterling in the United States District Court for the Western District of New York.
On June 18, 2008, over Sterling's objection, the district court granted the plaintiffs' motion to refer the matter to arbitration and stay the litigation. The parties submitted to the arbitrator the question whether the RESOLVE agreement permitted or prohibited class arbitration. In its clause construction brief, Sterling asked the arbitrator to "find . . . [t]hat RESOLVE does not allow for class arbitration." The plaintiffs conversely asked the arbitrator to "find that the RESOLVE Arbitration Agreements at issue permit class arbitration." On June 1, 2009, the arbitrator found in favor of the plaintiffs, issuing a "Clause Construction Award" (the "award") holding that the RESOLVE arbitration agreements "cannot be construed to prohibit class arbitration." In undertaking her analysis, the arbitrator began by quoting the language of the arbitration provision at issue:
I hereby utilize the Sterling RESOLVE program to pursue any dispute, claim, or controversy ("claim") against Sterling . . . regarding any alleged unlawful act regarding my employment or termination of my employment which could have otherwise been brought before an appropriate government or administrative agency or in a [sic] appropriate court, including but not limited to, claims under . . . Title VII of the Civil Rights Act of 1964; the Civil Rights Act of 1991, . . . the Fair Labor Standards Act. . .. I understand that by signing this Agreement I am waiving my right to obtain legal or equitable relief (e.g. monetary, injunctive or reinstatement) through any government agency or court, and I am also waiving my right to commence any court action. I may, however, seek and be awarded equal remedy through the RESOLVE program.
The Arbitrator shall have the power to award any types of legal or equitable relief that would be available in a court of competent jurisdiction including, but not limited to, the costs of arbitration, attorney fees and punitive damages for causes of action when such damages are available under law.
The arbitrator noted that there was no express prohibition on the pursuit of class claims and that "indeed, there is no mention of class claims." The arbitrator stated that "[u]nder Ohio law, contracts are to be interpreted so as to carry out the intent of the parties, as that intent is evidenced by the contractual language." Construing the agreement in accordance with Ohio law, as required by the terms of the agreement, the arbitrator determined she would not read into the agreement an intent to prohibit class claims because "'[t]he law will not insert by construction for the benefit of one of the parties an exception or condition which the parties either by design or neglect have omitted from their own contract.'" (quoting Montgomery v. Bd. of Educ. of Liberty Township, Union Cty., 102 Ohio St. 189, 193 (1921)).
In other words, the arbitrator construed the absence of an express prohibition on class claims against the contract's drafter, Sterling. Noting that the issue of intent was "problematic in the context of a contract of adhesion," the arbitrator held that "[b]ecause this contract was drafted by Sterling and was not the product of negotiation, it was incumbent on Sterling to ensure that all material terms, especially those adverse to the employee, were clearly expressed." In her analysis of the agreement, the arbitrator noted that Sterling acknowledged it had deliberately chosen not to revise the RESOLVE contract despite several arbitral decisions permitting class claims in the absence of an express prohibition. She reasoned that to read a prohibition on class arbitration into the terms of the agreement "would impermissibly insert a term for the benefit of one of the parties that it has chosen to omit from its own contract." (citing Montgomery, 102 Ohio St. at 193). Noting that the agreement expressly gave the arbitrator the "power to award any types of legal or equitable relief that would be available in a court of competent jurisdiction," the arbitrator determined that merely agreeing to the RESOLVE step process could not constitute a waiver of the employee's right to participate in a collective action. Finally, she concluded that "[t]he RESOLVE arbitration agreements cannot be construed to prohibit class arbitration," which thus permitted the plaintiffs to proceed with an effort to pursue their claims on a class-wide basis. The arbitrator allowed the parties to move in the district court to confirm or vacate that determination.
On June 30, 2009, Sterling moved in the district court case to vacate the arbitration award. On August 31, 2009, the district court denied the motion to vacate the award, laying out its reasoning in an opinion dated December 28, 2009. In that opinion, the district court decided as a preliminary matter that the motion was ripe for consideration despite the fact that the arbitrator had not yet certified a class. It went on to hold that the arbitrator had not exceeded her powers by reaching the issue whether the arbitration agreements prohibited class certification and that the decision was not made in manifest disregard of the law, citing the Second Circuit's decision in Stolt-Nielsen SA v. Animalfeeds International Corp., 548 F.3d 85, 99 (2d Cir. 2008). The court declined to stay its order pending the outcome of the Supreme Court's decision in Stolt-Nielsen.
On January 26, 2010, Sterling appealed the district court's order denying its motion to vacate the award or, in the alternative, stay the arbitration. Three months later, the Supreme Court issued its decision in Stolt-Nielsen, and on May 13, 2010, Sterling moved pursuant to Federal Rules of Civil Procedure 62.1 and 60(b) in the district court for relief from its December 28, 2009 order. The appeal to this court was held in abeyance pending the outcome of the district court's decision on that motion.
On July 27, 2010, the district court issued a ruling holding that, if jurisdiction was restored to it, it would reconsider its December 28, 2009 order and vacate the arbitrator's award that permitted the plaintiffs to pursue class certification. Jock v. Sterling Jewelers, Inc., 725 F. Supp. 2d 444, 450 (S.D.N.Y. 2010). The district court concluded that in light of the Supreme Court's decision in Stolt-Nielsen v. Animalfeeds International Corp., 130 S. Ct. 1758 (2010), "the arbitrator's construction of the RESOLVE agreements as permitting class certification was in excess of her powers and therefore cannot be upheld." Jock, 725 F. Supp. 2d at 448. The district court first held that the arbitrator's approach--determining whether there was any indication of an intent to preclude class arbitration--"was plainly incompatible with the Supreme Court's subsequent pronouncements in Stolt-Nielsen." Id. Then, addressing the issue whether the record "evince[d] the parties' shared intent to permit class arbitration," the court found the record devoid of any indication that the parties intended to permit arbitration of class claims. Id. Although the district court conceded that Stolt-Nielsen "does not foreclose the possibility that parties may reach an 'implicit'--rather than express--'agreement to authorize class-action arbitration,'" it held that "the record here provides no support for such an implied agreement." Id. at 449 (quoting Stolt-Nielsen, 130 S. Ct. at 1775). In so ruling, the district court determined that Stolt-Nielsen was not distinguishable on the facts. Id. at 449-50.
On August 3, 2010, this court issued a limited remand of the appeal to permit the district court to rule on the pending Rule 60(b) motion. Six days later, the district court officially granted Sterling's motion to vacate the arbitrator's award permitting ...