Welcome
The United States Law Week

Sterling Jewelers Pay Bias Class Properly Certified: 2nd Cir. (1)

Nov. 18, 2019, 4:46 PMUpdated: Nov. 18, 2019, 11:42 PM

Sterling Jewelers Inc. must arbitrate with a class of tens of thousands of female retail sales employees accusing the company of paying women less than men doing the same work based on sex, the Second Circuit ruled Nov. 18.

Sterling’s agreement gave the arbitrator hearing the matter the authority to decide whether it should proceed as a class arbitration, the appeals court said. In this case, the arbitrator said it should. The agreement expressly incorporates American Arbitration Association rules on class arbitration, which provide that an arbitrator should decide class arbitrability as a threshold issue, the court said.

Arbitrators have been certifying classes for years, but their authority to do so hadn’t been decided by a federal appellate court prior to the Second Circuit’s ruling, said the womens’ lawyer, Joseph Sellers of Cohen Milstein Sellers & Toll. The decision gives arbitrators the authority to continue that practice, he said.

Case law on arbitrators’ power to certify classes is underdeveloped because courts routinely enforce provisions in arbitration contracts that waive the right to pursue class or collective actions, said Kristen Blankley, a law professor with the University of Nebraska who writes about arbitration.

The U.S. Supreme Court ruled in 2010 that class arbitration isn’t allowed if the arbitration agreement was “silent” about it, Adam Zimmerman, a professor at Loyola Law School in Los Angeles, said via Twitter. Only 293 class arbitrations have been filed with the American Arbitration Association since then, Zimmerman said. Bloomberg Law confirmed that count in the American Arbitration Association’s database.

Sterling likely will appeal the Second Circuit’s ruling, said David Bouffard, a spokesman for parent company Signet Jewelers. Sterling will continue to defend against the claims, which are without merit, Bouffard said in an emailed statement.

Massive Class

In the Sterling case, the arbitrator certified a class of 44,000 women. But in the more than five years since that certification order, the class has grown and will likely include approximately 70,000 women, Sellers said.

A three-judge Second Circuit panel said the arbitrator had the power to bind to arbitration all potential class members, not just the 254 women who authorized her to decide whether arbitration could proceed on a classwide basis. Like the other 254 current and former employees, the absent class members signed the arbitration agreement as a condition of their employment, Judge Peter W. Hall wrote for the panel.

By doing so, they agreed that an arbitrator hearing a future proceeding initiated by any co-worker “would be empowered to decide class-arbitrability” and to include them in any certified class, the panel said.

The issue before the appeals court, and a lower court that got it wrong, was simply whether the arbitrator acted within the scope of her authority, and she did, the Second Circuit panel said. “It is not for us” to decide if the arbitrator was correct on the merits of class certification, the panel said.

The case’s tangled procedural history—this was the fourth time the Second Circuit has weighed in—may have caused the district court’s mistake, according to the ruling. But the arbitrator properly included the absent class members in a class she certified to pursue declaratory and injunctive relief on disparate impact claims under Title VII of the 1964 Civil Rights Act, the panel said.

The arbitrator declined to grant class certification of the women’s Title VII claims for monetary damages or their separate claims under the Equal Pay Act, the panel said.

But the arbitrator reserved the right to award back pay if Sterling is found liable and the arbitrator has a viable method to estimate damages, Sellers told Bloomberg Law.

The only remaining issue is whether that class should have been certified as a mandatory class or whether potential members ought to have the right to opt out of it, the Second Circuit said. That question should be decided by the district court on remand, it said.

Judges Susan L. Carney and John G. Koeltl joined the opinion.

Cohen Milstein Sellers & Toll PLLC, Burr & Smith LLP, and Jenner & Block LLP represent the women. Seyfarth Shaw LLP and Weil, Gotshal & Manges LLP represent Sterling.

The case is Jock v. Sterling Jewelers Inc, 2d Cir., No. 18-00153, 11/18/19.

To contact the reporters on this story: Patrick Dorrian in Washington at pdorrian@bloomberglaw.com; Robert Iafolla in Washington at riafolla@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Steven Patrick at spatrick@bloomberglaw.com; Terence Hyland at thyland@bloomberglaw.com