Authored by Loren Gesinsky

Last week, on August 21, 2013, the Ninth Circuit joined the chorus of courts declining to follow the National Labor Relations Board’s controversial D.R. Horton decision. 

Richards v. Ernst & Young LLP [here] held that wage-and-hour claims already litigated for years against Ernst & Young and certified as a class action by the district court must be arbitrated individually in accordance with a pre-dispute arbitration agreement, thus undercutting the D.R. Horton viewpoint that employees have a non-waivable right to pursue statutory wage-and-hour claims on a class or collective basis.  Richards also continues the recent string of decisions we summarized [here] enforcing Ernst & Young’s individual-arbitration program, including the Second Circuit’s August 9, 2013 decision in Sutherland v. Ernst & Young LLP.

Although the Ninth Circuit stated it was applying a general rule against entertaining the D.R. Horton argument because plaintiff-appellee Richards had not raised it before the district court, the Ninth Circuit also noted with approval “that the only court of appeals, and the overwhelming majority of the district courts, to have considered the issue have determined that they should not defer to the NLRB’s decision in D.R. Horton because it conflicts with the explicit pronouncements of the Supreme Court concerning the policies undergirding the Federal Arbitration Act.”  (The “only court of appeals” to which the Ninth Circuit refers is the Eighth Circuit, presumably because the Richards decision was drafted without awareness of the Second Circuit’s Sutherland decision).  Moreover, the Ninth Circuit interpreted the Supreme Court’s recent American Express v. Italian Colors Restaurant decision as supporting rigorous enforcement of the Ernst & Young arbitration agreement according to its terms.

 Ernst & Young’s victory seems all the sweeter because: 

  • Ernst & Young did not move to compel arbitration until many years after the putative class claims of Richards and others had been filed.
  • Richards’ claim for injunctive relief had been dismissed by the district court.
  • Richards’ claim for unpaid meal and rest breaks under California law had also been dismissed, albeit without prejudice.
  • Multi-year discovery caused Richards to incur expenses.

Richards argued to both the district court and Ninth Circuit that Ernst & Young waived the right to compel arbitration because of these factors.  The district court agreed with Richards and added insult to injury by certifying a class for which Richards became the representative plaintiff.  The Ninth Circuit disagreed entirely and reversed because Richards was not prejudiced enough by these factors to warrant waiver of the contractual right to arbitration, a waiver that doctrinally “is  not favored.”  More specifically, the Ninth Circuit held that Richards was not prejudiced by the:  (i) dismissal of two claims because neither dismissal was a determination on the merits; and (ii) discovery expenses because these were a “self-inflicted” byproduct of her “deliberate choice of an improper forum” and information might also be gained in arbitration.  These findings made it unnecessary for the Ninth Circuit to even address Ernst & Young’s argument that enforcement of the arbitration agreement became possible only after the Supreme Court’s April 2011 AT&T Mobility v. Concepcion decision, and thus were timely asserted.

We recently described Sutherland as signaling that the end of uncertainty regarding the enforceability of class-action waivers in arbitration agreements is nigh.  Richards magnifies this signal and provides additional support for employers interested in enforcing or implementing such waivers.