Fifth Circuit Holds Class Arbitration is Issue for Arbitrator in Texas Employment Dispute

A Fifth Circuit Court of Appeals panel has held whether a group of workers may engage in class arbitration under the terms of a broadly worded arbitration agreement should be decided by an arbitrator.  In Robinson, et al. v. J & K Administrative Management Services, Inc., et al., No. 15-10360 (5th Cir., March 17, 2016), a Texas-based management company, J & K, entered into an agreement to arbitrate with each of the company’s workers as a condition of employment.  Under the agreement, J & K workers were required to settle any wage disputes, “claims for a violation of any other federal, state or governmental law, statu[t]e, regulation or ordinance,” and disputes over the validity, enforceability, or applicability of the contract through arbitration proceedings.

In January 2014, a J& K worker, Robinson, filed an arbitration request with the company over her allegedly unpaid overtime wages.  Since the company ignored her request, Robinson sought collective arbitration before JAMS.  In response, JAMS filed a notice of intent to arbitrate with J & K.  The company apparently ignored the notice from JAMS and Robinson filed both a complaint and a motion to compel arbitration with a Texas federal district court.

After examining the holding in Pedcor Management Co. Inc. Welfare Benefit Plan v. Nations Personnel of Texas, Inc. and the terms of the arbitration agreement, the district court ruled that the question of whether class arbitration was permissible under the parties’ contract should be decided by an arbitrator.  The court then ordered the parties to engage in arbitral proceedings and dismissed the complaint with prejudice.

On appeal to the nation’s Fifth Circuit, J & K argued that Pedcor Management was inapplicable because it was abrogated by Stolt-Nielsen S.A. v. Animalfeeds International, Corp.  According to J & K, “Stolt-Nielsen enunciated a national policy against class arbitration that precludes arbitrators from determining the availability of class or collective procedures.”

The Fifth Circuit disagreed and stated:

Stolt-Nielsen does not overrule prior Supreme Court and Fifth Circuit decisions requiring questions of arbitrability, including the availability of class mechanisms, to be deferred to arbitration by agreement. Therefore, we continue to be bound by Pedcor Management under the rule of orderliness. See, e.g., Jacobs v. Nat’l Drug Intelligence Ctr., 548 F.3d 375, 378 (5th Cir. 2008) (“It is a well-settled Fifth Circuit rule of orderliness that one panel of our court may not overturn another panel’s decision, absent an intervening change in the law, such as by a statutory amendment, or the Supreme Court, or our en banc court. Indeed, even if a panel’s interpretation of the law appears flawed, the rule of orderliness prevents a subsequent panel from declaring it void.”).

Similarly, the appellate court dismissed J & K’s claim that the “rule of orderliness is inapplicable where an intervening decision of the Supreme Court or of the en banc Court of Appeals casts doubt on the prior ruling or the analysis employed to arrive at the ruling.” The court said:

Therefore, the rule of orderliness mandates that Pedcor Management is controlling, and we are bound to apply it and its clear rule of law: if parties agree to submit the issue of arbitrability to the arbitrator, then the availability of class or collective arbitration is a question for the arbitrator instead of the court.

After that, the Fifth Circuit turned to the district court’s application of Pedcor Management to the facts of the case before it.  The appellate court reviewed the language included in the arbitration agreement before holding the contract constituted “unambiguous evidence of the parties [sic] intention to submit arbitrability disputes to arbitration and that arbitration was properly compelled.”

Next, the appellate court panel declined J & K’s request to appoint an independent arbitrator because the district court already appointed JAMS to serve as the arbitral forum and neither party argued the lower court committed error in doing so.

Finally, the United States Court of Appeals for the Fifth Circuit affirmed the district court’s order compelling arbitration.

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