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SCOTUS Hears Oral Argument in Lewis FAA Preemption Case. Lots of Questions for All Sides
Posted on Categories Arbitration Agreements, Class Action/Collective Waivers, Federal, NewsTags , , , , ,

Oral argument took place October 2nd before the Supreme Court in Epic Systems Corp. v. Lewis, 137 S.Ct. 809 (2017), the first case of the Court's new Term.

As we reported several times, the Supreme Court in January granted certiorari in three cases involving whether the Federal Arbitration Act (“FAA”) prevails over the National Labor Relations Act when it comes to enforcing class action waivers in employment arbitration agreements. The issue under review: The National Labor Relations Board (“NLRB” or “Board”) contends that class action waivers in predispute arbitration agreements (“PDAA”) violate section 8(a)(1) of the National Labor Relations Act (“NLRA”) because they interfere with the employees’ statutory right to “concerted activities.” The question before the Court, as framed in the Petition for Certiorari: “Whether an agreement that requires an employer and an employee to resolve employment-related disputes through individual arbitration, and waive class and collective proceedings, is enforceable under the Federal Arbitration Act, notwithstanding the provisions of the National Labor Relations Act.”

Shared Oral Argument Time

The Acting Solicitor General (“SG”) on June 15th filed an Amicus Brief siding with the employers and against the Board. On September 25, the Court granted motions by the SG and the NLRB for divided oral argument. Thus, the employers split their 30 minutes of argument time with the SG as did the employees with the NLRB. We perused the 70-page oral argument transcript and offer a few representative questions posed by the Justices (using a page:line number convention in parenthesis). All attorneys were peppered with questions within a minute of uttering “May it please the Court,” although Justices Gorsuch and Thomas posed no questions.

Questions to Employers’ Counsel (starting page 4)

Justice Kennedy (5:1): Is that a concession that this is a concerted action? I mean, if we adopted that premise for the opinion of the Court, wouldn't we have to say we assume that this is concerted action under the NLRA Section 7, but the FAA prevails?    

Justice Breyer (8:23): That's the argument against you. I want to be sure that I didn't see, you know, a Concepcion, I've read it too, we all have, but I haven't seen a way that you can, in fact, win the case, which you certainly want to do, without undermining and changing radically what has gone back to the New Deal, that is, the interpretation of Norris-LaGuardia and the NLRA.

Justice Ginsburg (11:7): You recognize that this kind of contract, this -- there is no true bargaining. It's the employer says you want to work here, you sign this. It is what was called a "yellow dog" contract…. (12:11) Isn't it -- isn't it so that the -- the FAA, in its inception, was meant to deal with bargains between merchants, bargains between merchants who said the arbitration forum is much less expensive, so we want to go there, rather than the court, but it was commercial contracts that -- that triggered the FAA?

Justice Sotomayer (12:13): Now, the problem that I have with this bilateral issue is you seem to be thinking that somehow the NLRB can't invalidate a contractual term, just as state law concepts like fraud, duress, the normal contract terms that invalidate contracts, Section 7 and Section 8 of the NLRB basically declare a contract -- a contract illegal if it does a certain thing.

Justice Kagan (19:22): Well, it's an agreement, but it's an agreement to waive a Section 7 [of the NLRA] right. I mean that's what it is. It's saying I used to have this right for concerted activity, and now I don't.

Questions to the Solicitor General (starting page 20)

Justice Ginsburg (21:15): To proceed alone in the arbitral forum will cost much more than any potential recovery for one. That's why this is truly a situation where there is strength in numbers, and that was the core idea of the NLRA. There is strength in numbers.

Justice Sotomayer (27:7): What is stopping the concerted activity is not that -- which forum they choose, whether it's court or arbitration. Where you are stopping the concerted activity is in the very act of saying this can only be an individual arbitration, an individual court action.

Questions to the NLRB (starting page 33)

Chief Justice Roberts (35:25): But if they agree to act -- the agreement requires that they act individually, although, to arbitrate, but there is a collective arbitral forum, that that's all right? In other words, just they have to arbitrate, whether they do it individually or collectively, you cannot restrict that? … Okay. So, the point is they – [employees] can, in their arbitration agreement, waive the right to proceed collectively in Court, so long as they have the right to do it in arbitration?

Justice Ginsburg (40:5): What about the position that the Board … for 70 odd years, the Board was not taking the position that it is now taking, that it was not objecting to bilateral one-on-one arbitration?

Questions to Employees’ Counsel (starting page 54)

Chief Justice Roberts (55:4): So [a] decision in your favor would invalidate the 25 -- agreements covering 25 million employees? … (57:17) Well, but, of course, there's another statute [the FAA] that has either equally or plainer language which says that arbitration agreements will be enforced according to their terms.

Justice Sotomayer (63:10): What would be wrong by choosing an arbitral forum that limits class actions to 50 people?

Justice Alito (64:22): On the right to -- if the right to engage in concerted activity includes the right to have -- to file a class action in federal court, how can an agreement provide that -- waive that right and require arbitration, even if arbitrations -- even if class arbitration is allowed, or can it not do that?

Post-Hearing Clarification from NLRB

Bloomberg reported on October 3 that NLRB General Counsel Richard Griffin, who argued the case for the Board, had written to the Court to restate his responses to a hypothetical posed by Chief Justice Roberts. At the oral argument, Mr. Griffin, whose term as GC ends this November, seemed to respond that employers could utilize a PDAA that called for arbitration before a provider whose rules barred class arbitrations involving 50 or less employees. His letter said the answers were “the result of my misunderstanding the Chief Justice’s questions and were inaccurate.” The discussion can be found starting on page 47 of the transcript. At press time there was no word yet on whether opposing counsel had reacted or whether the Court will accept Mr. Griffin’s letter.

(ed: *Hot court! We thought all counsel did an excellent job, often engaging in debates with the Justices. **Audio recordings follow by the end of the week; they can be found at ***There are Amicus Briefs galore, which can be found at While SIFMA did not participate, readers should be aware that FINRA has not closed the door on class action waivers in the employment context, as it has (a la the Charles Schwab disciplinary action), in the customer arena. If the court is ready to elevate the FAA over the NLRA and permit class action waivers in the rest of industry, we would not expect that FINRA would regulate an exception that blocks the brokerage industry from claiming the same right. ****With the October 2nd oral argument now behind us, the countdown begins on when the Court will rule in the case. Among those anxiously awaiting a decision are the parties and counsel in O’Connor v. Uber Technologies, Inc., No. 14-16078, an appeal now pending in the Ninth Circuit. That case involves consolidated appeals of several Northern District of California decisions on whether nearly a quarter of a million drivers can be compelled to individually arbitrate employment claims against Uber. Because the issues of law are essentially the same as those before SCOTUS in Lewis, the Ninth Circuit issued an Order on September 22nd freezing the case until the Supreme Court rules. The facts, procedural history, issues, and arguments in the Uber cases are described in Uber’s Opening Brief. *****The NLRB now has a majority GOP composition. The Senate on September 25th confirmed by a 49-47 vote President Trump’s nominee, William Emanuel, filling the last vacancy in the five-member Board. Coincidentally, he was sworn in October 2nd.) (SAC Ref. No. 2017-37-01)

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