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Stephanie Sutherland, On Behalf of Herself and All Others Similarly Situated v. Ernst & Young Llp

January 17, 2012

STEPHANIE SUTHERLAND, ON BEHALF OF HERSELF AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFF,
v.
ERNST & YOUNG LLP, DEFENDANT.



The opinion of the court was delivered by: Kimba M. Wood, U.S.D.J.:

Opinion and Order

Defendant Ernst & Young LLP ("Ernst & Young") moves for reconsideration of this Court's March 3, 2011 Order denying its motion to dismiss or stay the proceedings and compel arbitration. Sutherland v. Ernst & Young LLP, 768 F. Supp. 2d 547 (S.D.N.Y. 2011).

I. Overview

Plaintiff Stephanie Sutherland ("Sutherland") brings this putative class action against her former employer, Ernst & Young LLP ("Ernst & Young"), pursuant to the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201 et seq., and Title 12 of the Codes, Rules and Regulations of the State of New York, 12 N.Y.C.R.R. § 142--2.2. Sutherland alleges that Ernst & Young wrongfully classified her as exempt from the overtime requirements of FLSA and New York law and failed to properly compensate her, and others similarly situated, for hours worked in excess of 40 hours per week. Sutherland seeks compensatory damages for 151.5 hours of unpaid overtime wages, which amounts to an actual loss of $1,867.02.

As a condition of her employment, Sutherland consented to the "Ernst & Young Common Ground Dispute Resolution Program" (the "Agreement"). The Agreement requires binding arbitration and permits the arbitration on an individual basis only.

Ernst & Young moved to dismiss or stay the proceedings and to compel arbitration of Sutherland's claims on an individual basis. (Dkt. No. 27.) After examining the evidence submitted, this Court found that the particular Agreement in this case was unenforceable because it prevents Sutherland from vindicating her statutory rights. Sutherland, 768 F. Supp. 2d at 554.

Ernst & Young now moves for reconsideration of this Court's order. (Dkt. No. 82.) Ernst & Young argues that this Court's finding that Sutherland would be unable to vindicate her statutory rights was clearly erroneous. (Ernst & Young's Mot. for Recons. ("Def.'s Mot.") at 2-5.) Ernst & Young also argues that the statements of Sutherland's counsel regarding discovery constitute new evidence of Sutherland's willingness to proceed on an individual basis. (Def.'s Mot. at 5-8.) Finally, Ernst & Young points to what it believes are two changes in controlling law. First, Ernst & Young argues that the Second Circuit's holding in Italian Colors Rest. v. Am. Express Travel Related Servs. Co., 634 F.3d 187, 197 (2d Cir. 2011) altered the burden that Sutherland must meet to prove that arbitration is cost-prohibitive. (Def.'s Mot. at 8-10.) Second, Ernst & Young contends that the Supreme Court's holding in AT&T Mobility LLC v. Concepcion ("Concepcion"), 131 S.Ct. 1740 (2011) effectively overruled this Court's prior analysis. (Def.'s Supplemental Mem. in Supp. of Ernst & Young LLP's Mot. for Recons. ("Def.'s Suppl. Mem.") at 2.)

II. Legal Standard

Local Civil Rule 6.3 provides that a party may submit a motion for reconsideration "setting forth concisely the matters or controlling decisions which counsel believes the court has overlooked." Reconsideration is appropriate only where there is "an intervening change of controlling law, newly available evidence, or the need to correct a clear error or prevent manifest injustice." Official Comm. of Unsecured Creditors of Color Tile, Inc. v. Coopers & Lybrand, LLP, 322 F.3d 147, 167 (2d Cir. 2003). The moving party bears the burden of proof. United States v. Int'l Bhd. of Teamsters, 247 F.3d 370, 391 (2d Cir. 2001). "Reconsideration of a previous order by the court is an extraordinary remedy to be employed sparingly in the interests of finality and conservation of scarce judicial resources." Floyd v. City of New York, No. 08 CV 1034, 2011 WL 5879428, at *5 (S.D.N.Y. Nov. 23, 2011) (Scheindlin, J.).

III. Ernst & Young's Motion

Ernst & Young raises three separate grounds for reconsideration: clear error, new evidence, and intervening changes in controlling law. The Court addresses each in turn.

A. Clear Error

In this Court's order denying the motion to compel arbitration, the Court found that "[t]he record supports Sutherland's argument that [pursuant to the Agreement] her maximum potential recovery would be too meager to justify the expenses required for the individual prosecution of her claim." Sutherland, 768 F. Supp. 2d at 551.

Ernst & Young contends that this finding was clearly erroneous. It argues that the Agreement "ensures that fees and costs are recoverable in arbitration to the same degree as in court."*fn1 (Def.'s Reply Mem. in Supp. of Ernst & Young LLP's Mot. for Recons. ("Def.'s Reply") at 2.) Sutherland, however, faces a situation very similar to that of the plaintiffs in Italian Colors Rest. v. Am. Express Travel Related Servs. Co. ("AmEx I"), 554 F.3d 300 (2d Cir. 2009) and Italian Colors Rest. v. Am. Express Travel Related Servs. Co. ("AmEx II"), 634 F.3d 187 (2d Cir. 2011).

Similar to Ernst & Young, the defendants in AmEx I argued that the arbitration agreement in that case ensured that costs and fees would be recoverable in arbitration to the same degree as in court. 554 F.3d at 318. The Second Circuit nevertheless invalidated that arbitration agreement, which waived any right to collective proceedings, because the plaintiffs in that case demonstrated that they otherwise would have been unable to bring their statutory claims "in either an individual or collective capacity." Id. at 314. The court in AmEx I found that each plaintiff-if forced to proceed on an individual basis-would incur discovery costs amounting to hundreds of thousands of dollars in order to recover average damages of approximately $5,000. Id. at 308. Such costs, including expert fees, were largely not compensable because "when a prevailing party seeks reimbursement for fees paid to its own expert witnesses, a federal court is bound by the limit of 28 U.S.C. § 1821(b)," which is currently $40 per day. Id. at 318; see also Crawford Fitting Co. v. J.T. Gibbons, Inc., 482 U.S. 437, 439 (1987). Although the Second Circuit found that the cost of prosecuting an individual claim was prohibitive relative to that individual's potential recovery, the court found that, if brought collectively, the sharing of discovery costs across numerous plaintiffs would make prosecution of the claim viable. The Second Circuit therefore held the class action waiver in AmEx I unenforceable under the federal substantive law of arbitration and severed the waiver from the remainder of the arbitration provision, remanding to the district court for further proceedings, either in collective arbitration or as a collective action. 554 F.3d at 321.

American Express appealed the Second Circuit's decision in AmEx I and the Supreme Court granted certiorari, vacated, and remanded the case for further consideration in light of the Supreme Court's holding in Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 130 S.Ct. 1758 (2010).*fn2 Am. Exp. Co. v. Italian Colors Rest. 130 S.Ct. 2401 (2010). On remand, the Second Circuit interpreted Stolt-Nielsen to preclude courts from ordering class arbitration but not from finding contractual language void for public policy or other reasons. AmEx II, 634 F.3d at 199-200. The Second Circuit panel in AmEx II found that "the only economically feasible means for enforcing [plaintiffs'] statutory rights is via a class action" and ...


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