14 Penn Plaza LLC v. Pyett

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Authorship: Tiffany Smith, a 3L at Ohio State University Moritz College of Law and a 2008 Akin summer associate.

Contents

[edit] Briefs and Documents

Docket: 07-581

Issue: Whether an arbitration clause in a collective bargaining agreement waiving employees’ right to file statutory discrimination claims is enforceable.

Merit briefs

Amicus briefs

Oral Argument: Transcript

Decision: Reversed and Remanded in an opinion by Justice Thomas

[edit] Pre-Argument Articles

[edit] Argument Preview

In No. 07-581, 14 Penn Plaza v. Pyett, the Supreme Court will consider whether a mandatory arbitration provision included in a collective bargaining agreement (“CBA”) negotiated by a union and an employer that waives the union members’ rights to bring statutory claims in a judicial forum is enforceable.

[edit] Background

This case arises from a provision contained within the CBA agreed to by Local 32BJ of the Service Employees International Union (the “Union”) and the Realty Advisory Board on Labor Relations, Inc., the multi-employer bargaining association for the New York City real estate industry. At issue is an anti-discrimination provision that requires all employees to submit any employment discrimination claim to binding arbitration under procedures set out in the CBA.

Respondents are three former employees of Temco Service Industries who worked as night watchmen at 14 Penn Plaza LLC’s commercial office building. All three of the employees were covered under the Union’s CBA. In August 2003, 14 Penn Plaza hired a security services company and reassigned respondents to duties in other locations in the building. The Union filed a grievance alleging both contractual and statutory claims, including the allegation that Temco had violated the CBA and discriminated against respondents based on age. Prior to arbitration, however, the statutory claims were withdrawn, and the arbitrator later denied all of respondents’ contractual claims.

After their contractual claims were denied, respondents filed a lawsuit in federal court against petitioners 14 Penn Plaza LLC and Temco, alleging that their transfers amounted to age discrimination in violation of the CBA. Petitioners moved to dismiss the suit or, in the alternative, compel arbitration of respondents’ claims pursuant to the CBA. The district court denied the motion to compel arbitration, and although it noted that “the Supreme Court had not spoken clearly on this issue,” decided it was “constrained” to follow the Second Circuit decision in Rogers' v. New York University.

On appeal, the Second Circuit affirmed and held that it was bound by its earlier decision in Rogers. In that case, the Second Circuit held that union-negotiated CBAs waiving an employee’s right to bring a statutory claim in court are unenforceable. The Second Circuit’s decision in Rogers rested on the Supreme Court’s opinion in Alexander v. Gardner-Denver, which held that a contractual grievance arbitration hearing could not preclude bringing such claims in a judicial forum. However, this decision was in contrast with the Supreme Court’s more recent decision in Gilmer v. Interstate/Johnson Lane Corp., which upheld an arbitration agreement negotiated by an individual employee in which that employee waived the right to sue for statutory claims. These two cases are obviously in some tension, as Gardner-Denver implies that the right to sue cannot be waived by anyone in a CBA, while Gilmer held that an individual employee could waive those rights. Although the Second Circuit noted this tension, the panel still chose to follow its ruling in Rogers.

[edit] Petition for Certiorari

In their petition for certiorari, petitioners argue that the Second Circuit erred in following Gardner-Denver, noting that Gilmer should be controlling for three reasons. First, the arbitration provision in that case dealt only with purely contractual grievances, whereas the CBA here requires arbitration of all statutory claims. Second, the decision in Gardner-Denver was not made under the Federal Arbitration Act (the “FAA”), whereas the holdings in both Gilmer and Circuit City Stores, Inc. v. Adams suggest that such cases should be treated under the FAA. Lastly, the Gardner-Denver CBA presented a tension between collective representation and statutory rights that is not present in either Gilmer or the CBA, because in both cases the employees retained the right to bring statutory claims to arbitration without any other party’s consent. In Gilmer, the Court held that an arbitration agreement signed by an individual non-union employee could compel arbitration of statutory claims. Moreover, petitioners contend, although the Court in Wright v. Universal Maritime Services Co. ultimately declined to decide whether a CBA can waive employees’ rights to bring statutory claims in a judicial forum because the CBA provision at issue in that case was too vague, the arbitration provision at issue in this case contains precisely the kind of “clear and unmistakable” waiver that the Court found lacking in Wright.

Petitioners also draw attention to the Second Circuit’s Rogers decision in an attempt to show that Second Circuit precedent cannot be squared with Supreme Court precedent. Moreover, petitioners distinguish the CBA in Rogers from the Union’s CBA on two grounds. First, the Rogers CBA did not meet the “clear and unmistakable” test laid out by the Supreme Court in Wright. Second, the CBA in Rogers did not explicitly incorporate statutory claims into its arbitration provision. On the other hand, the Union’s CBA was crafted specifically to track the “clear and unmistakable” language set forth in Wright. The arbitral clause not only states that arbitration was to be the “sole and exclusive” remedy for discrimination claims, but it was also drafted to apply to all discrimination claims by listing a variety of statutes, followed by “or any other similar laws, rules or regulations.”

Certiorari is further warranted, the petition argues, because – in the absence of further guidance from the Court – the circuits have split on the question presented. There is a direct conflict, petitioners emphasize, between the Second Circuit’s holding and decisions of the Fourth Circuit, which has held that union-negotiated waivers of an individual’s right to sue for statutory claims in a judicial forum are enforceable. Specifically, the Fourth Circuit has found two ways to meet Wright’s “clear and unmistakable” test. First, employees can agree to an explicit arbitration clause whereby all federal causes of action are submitted to arbitration. Alternatively, statutory anti-discrimination requirements can be explicitly incorporated elsewhere in the agreement. Moreover, petitioners note, although most other circuits have reached the same conclusion as the Second Circuit, those circuits have expressed uncertainty about the law. State courts are also in conflict with the federal courts on this matter. For example, although New York courts have held that clear and unmistakable union-negotiated arbitration agreements are enforceable, these holdings are in direct conflict with the Second Circuit. The same conflict exists between Ohio state courts and the Sixth Circuit, as well as between California state courts and the Ninth Circuit.

Petitioners also briefly argue that the current uncertainty on this matter creates several policy concerns. First, petitioners maintain that such uncertainty has an adverse effect on employers, unions, and unionized employees, as many businesses exist in different circuits and therefore must adhere to several different obligations and policies. Petitioners also maintain that the uncertainty also has an adverse effect on labor-management relations, as employers in certain districts could effectively bypass the union and require unionized employees to sign individual employment agreements. Such a situation could result in those employees losing the leverage typically available to them through the collective bargaining process.

Opposing certiorari, respondents make only one main point: the case is a bad vehicle for the Court to resolve the question presented. Respondents explain that the statutory claims were withdrawn by the Union before arbitration commenced, and that the Union subsequently offered them the opportunity to bring their statutory claims before the arbitrator using their own private counsel. Because only the Union could invoke the arbitration provision, respondents argue, and it failed to do so, the waiver provision is unenforceable and thus “may not be relied upon by Petitioners to preclude them from litigating their age discrimination claims in a judicial forum.”

[edit] Merits Brief

In their merits brief, petitioners set forth many of the same arguments made in their petition for certiorari. They reiterate that Congress in the FAA expressed its support for the enforcement of contractual promises to arbitrate, and that the Court in Gilmer and Circuit City approved of upholding such agreements. They again emphasize the policy concern that invalidating such agreements undermines the role of the union, thereby taking away from benefits earned by employees through union negotiation. Petitioners’ second main argument is that Gardner-Denver is not on point, as it held only that arbitrating a contractual claim does not preclude a plaintiff from suing in a judicial forum on a statutory claim when the parties had not agreed to arbitration of the statutory claim. It decided nothing, petitioners continue, about whether negotiated agreements for arbitration of statutory claims are enforceable. Moreover, petitioners argue, none of the policy concerns cited in Gardner-Denver support the notion that enforcing the CBA would be inconsistent with statutory rights set forth in the ADEA. First, enforcing arbitration agreements does not strip employees of substantive rights. Next, the fact that a union controls the arbitral forum is no basis for disregarding a clear and unmistakable agreement to arbitrate statutory claims. Last, unionized employees have the same, if not greater, ability to consent or reject arbitration clauses and therefore are not at any disadvantage.


[edit] Opinion Analysis

Erica Goldberg wrote the following for SCOTUSblog.

Justice Thomas’s majority opinion held that nothing in either the National Labor Relations Act, which controls collective bargaining agreements made on behalf of union members, or the ADEA forbids unions from mandating arbitration to resolve statutory discrimination claims. The majority touted the importance of allowing parties to bargain contractually for exchanges of rights and responsibilities, and it noted that courts should generally not interfere in this process. According to the majority, “[t]he decision to fashion a [collective bargaining agreement] to require arbitration of employment-discrimination claims is no different from the many other decisions made by parties in designing grievance machinery.”

Justice Thomas then confronted the thorny relevant precedent. Over three decades ago in Alexander v. Gardner-Denver Co., the Court held that unions cannot contractually waive an individual employee’s substantive guarantees against workplace discrimination. More recently, in Gilmer v. Interstate/Johnson Lane Corp., the Court held that individual employees who waive their right to a federal forum on their own behalf may be compelled to arbitrate employment discrimination claims. As a result of these two rulings, the Second Circuit below in 14 Penn Plaza ruled that, while individuals may waive the right to a judicial forum for federal discrimination claims, the same provision in a collective bargaining agreement was unenforceable.

The Court overruled the Second Circuit’s decision by distinguishing Gardner-Denver, which in the majority’s view was narrower than depicted by either the Second Circuit or the dissents. In Gardner-Denver, the Court held that despite a collective bargaining agreement requiring arbitration of all grievances, the employee was entitled to a federal forum to resolve statutory discrimination claims. However, in that case, the collective bargaining agreement contractually prohibited certain types of employment discrimination and compelled arbitration for any disagreement between the company and its employees regarding the meaning and application of the contract. Because the collective bargaining agreement did not explicitly mandate arbitration of statutory discrimination claims, but compelled arbitration of the established contractual guarantees against discrimination, the majority interpreted Gardner-Denver as involving only the doctrine of election of remedies.

Justice Thomas then elaborated upon the language in Gardner-Denver condemning collective bargaining agreements that waive an employee’s federally guaranteed substantive rights. According to Justice Thomas, the substantive right at issue is the right to a workplace free of age discrimination, not the right to litigate the age discrimination claim in a federal forum. The majority explained that earlier decisions deriding the efficacy and fairness of arbitration in resolving federal claims have been since repudiated, and that arbitration is a perfectly acceptable, if not more efficient, forum for addressing grievances related to employment discrimination.

Justice Souter’s dissent, joined by Justices Stevens, Ginsburg, and Breyer, faulted the majority for evading Gardner-Denver by ignoring its much broader holding that federal forum rights cannot be waived in union-negotiated contracts. According to Justice Souter, the fact that the agreement in Gardner-Denver did not explicitly mention statutory claims was only one of many reasons for its holding. “One need only read Gardner-Denver itself to know that it was not at all so narrowly reasoned,” reprimanded Justice Souter. The dissent also noted that, although flawed in its reasoning and approach, the majority opinion may be quite limited because it did not address whether a waiver of a judicial forum is enforceable when the union can block arbitration of employment discrimination claims.

Justice Stevens wrote a separate dissent to stress that, although the Court’s recent decisions have retreated on its former suspicion of arbitration, a Court’s newly embraced policy favoring arbitration cannot substitute for a genuine reading of the statutes and the precedent.

[edit] Links and further information

"A New Day Dawning or Dark Clouds on the Horizon? The Potential Impact of the Pyett Case," by Barry Winograd, Labor Law Journal, October 2008 (pdf)

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