One of the interesting open questions after AT&T v. Concepcion was decided by the Supreme Court is to what extent an arbitration clause must be plaintiff-friendly in order for a ban on class actions to be fully enforceable. A recent opinion by Judge Kimba M. Wood of the Southern District of New York addressed this issue, and concluded that an arbitration clause was unenforceable where the plaintiff had made a persuasive showing, in an employment case, that the maximum recovery obtainable in an individual arbitration under the arbitration clause was not large enough to make it sensible to pursue such an arbitration on an individual basis. See Sutherland v. Ernst & Young, LLP, 2012 U.S. Dist. LEXIS 5024 (S.D.N.Y. Jan. 17, 2012).
Here is what I viewed as the heart of the court’s opinion:
To support its argument that Sutherland’s ability to vindicate her rights is irrelevant, Ernst & Young points to the statement by the majority in Concepcion that “[t]he dissent claims that class proceedings are necessary to prosecute small-dollar claims that might otherwise slip through the legal system. . . . But States cannot require a procedure that is inconsistent with the FAA, even if it is desirable for unrelated reasons.” 131 S.Ct. at 1753. There is a difference, however, between claims that might slip through the cracks because plaintiffs choose not to prosecute them individually, and claims for which a plaintiff seeks redress but is precluded from vindicating her rights. This difference is the difference between the situation faced by the Concepcions and that faced by Sutherland. The terms of the arbitration agreement at issue in Concepcion ensured that the Concepcions could bring their claim in arbitration on an individual basis, either representing themselves or with counsel. The fact that a plaintiff in the same situation as the Concepcions might choose not to make a claim for such a small overcharge is not the Court’s concern, even if a class-action lawyer might be eager to bring the case on behalf of all similarly situated plaintiffs, but for the class-action waiver. By contrast, the terms of the arbitration agreement and the cost of discovery in Sutherland’s case preclude her from redressing alleged FLSA violations.
Sutherland’s case is similar instead to situations discussed by the Supreme Court in which it has stated that it may not enforce contractual agreements that would operate “as a prospective waiver of a party’s right to pursue statutory remedies.” Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 637, n.19 (1985); see also Green Tree Fin. Corp.— Alabama v. Randolph, 531 U.S. 79, 90 (2000).
Id. at *20-22.
This ruling is contrary to some other decisions, including the Eleventh Circuit’s opinion in Cruz v. Cingular Wireless, LLC, 648 F.3d 1205 (11th Cir. 2011). It will be interesting to see how this plays out as more courts address it. I’m not going to hazard a guess at this point. This is something to consider in drafting an arbitration clause to try to take advantage of Concepcion.