The Supreme Court began its new Term yesterday with oral arguments in cases involving whether arbitration agreements permitting only individual (non-class) arbitrations are enforceable under the Federal Arbitration Act, or prohibited by the National Labor Relations Act as an improper restriction on collective action. It is a case that essentially pits one federal statute against another. The decision could impact the enforceability of arbitration provisions with class action waivers in other contexts where there is another relevant federal statute.
The position in favor of the employers was perhaps most persuasively articulated by Jeffrey Wall, the Principal Deputy Solicitor General, when he said “It is a fundamental attribute of arbitration, and this Court said it three times, to pick the parties with whom you arbitrate. And our simple point is this case is at the heartland of the FAA. It is, at best, at the periphery of the NLRA, on the margins of its ambiguity, and you simply can’t get there under the court’s cases.” Justices Ginsburg, Sotomayor and Kagan seemed to push strongly against that position, suggesting that the right to collective action was at the heart of the NLRA.
The justices were so eager to get their questions and comments in that Justices Alito and Kagan had to reserve in advance the opportunity to ask questions and Chief Justice Roberts stepped in to referee that process. Perhaps the Court could develop a new electronic system for that process, with justices pressing a button to create a waiting line of sorts to ask questions.
Justice Kennedy, who is often the swing vote in these types of cases, seemed to be focused on whether it would make a difference if a small number of employees retained the same lawyer and sought arbitration individually. His questions and comments could be read to suggest that as long as that type of action were permitted, there would not be a conflict with the NLRA. Justice Breyer also seemed to focus on whether the answer to the question presented was not tied to a prohibition on class actions, but rather whether prohibiting employees from joining together even in a non-class action context would violate the NLRA, which he seemed to think would be prohibited. Chief Justice Roberts posed a hypothethical in which the rules of the arbitration forum (selected by the employer) allowed a class arbitration, but only if there were 51 or more people who joined. The NLRB’s lawyer said that would be permissible. Justice Alito then asked about whether it would be permissible if the rules of the arbitration forum prohibited class arbitration, and the NLRB’s lawyer appeared to agree that that would be permissible, just as if there were no class actions allowed in court. If those propositions are correct, an employer could potentially reach the same outcome simply by selecting a a particular arbitration forum with a particular set of rules. Justice Sotomayor pointed out that many union contracts provide exclusively for arbitration, suggesting that the Court may not want to reach a result that could invalidate those. Paul Clement, arguing for the employers, pointed out that the notion of a class arbitration was unheard of when the FAA was enacted in 1925 (and the same would be true with respect to the NLRA).