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November 28, 2017 Article

Second Circuit Questions Arbitrator’s Authority to Bind Absent Members to Class Arbitration

The court overturned a district court decision affirming the arbitrator’s decision.

By Melinda G. Gordon

In Jock v. Sterling Jewelers, Inc., No. 15-3947 (2d Cir. July 24, 2017), the U.S. Court of Appeals for the Second Circuit cast doubt on whether an arbitrator can certify a class that includes absent class members. The case poses potentially big implications for resolving class arbitration cases with finality.

In this class action case, the plaintiffs charged Sterling Jewelers with sex discrimination in the promotion and compensation of current and former employees. The case, ultimately sent to arbitration, traveled a circuitous route to the Second Circuit. The Second Circuit overturned a decision by U.S. District Court Judge Rakoff, which affirmed the arbitrator’s decision that the women could proceed as a class to arbitration. The proclaimed “narrow question” presented to the Second Circuit in this case was “whether the arbitrator had the authority to certify a class that included absent class members, i.e., employees other than the named plaintiffs and those who had opted into the class.” Id.

The Second Circuit queried whether the arbitrator had the authority to adjudicate absent members’ claims, given that the absent class members had never consented to the arbitrator determining whether class arbitration was permissible under the agreement in the first place. The court noted that Judge Rakoff’s reliance on Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064, 2066 (2013), left unanswered whether an arbitrator who decides whether an arbitration agreement provides for a class procedure may thereafter purport to bind nonparties to the class procedure. The Second Circuit vacated the district court’s ruling and remanded the case to the district court to consider whether the arbitrator had exceeded her authority in certifying a class that contained absent members who had not opted in.

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