Wisconsin Federal Court Confirms Class Arbitration Award Ahead of SCOTUS Decision

As much of the nation eagerly anticipates a pending United States Supreme Court ruling regarding whether a collective action ban included in an employer’s arbitration agreement is lawful under the National Labor Relations Act, a Wisconsin federal court has decided to uphold a class arbitration award in a wage and hour case.  In Herrington v. Waterstone Mortgage Corp., No. 11-cv-779-bbc (W.D. Wisconsin, December 4, 2017), a loan officer, Herrington, filed a proposed collective action lawsuit against her employer, Waterstone Mortgage, seeking overtime pay.  The dispute was sent to arbitration and an arbitrator determined the mortgage company “was liable under the Fair Labor Standards Act for unpaid minimum wages and overtime and attorney fees and costs, but not liable under Wisconsin statutory or contract law.”  As a result, the arbitrator issued an award stating the mortgage company owed “$7,267,919.00 in damages, $3,318,851.00 in attorney fees and costs and an incentive fee in the sum of $20,000 to be paid to named plaintiff Herrington.”

Following arbitral proceedings, Herrington sought to confirm the award in the Western District of Wisconsin.  In response, Waterstone Mortgage filed a motion to stay “until the United States Supreme Court reaches a decision in the consolidated cases of Ernst & Young, LLP v. Morris, 137 S. Ct. 809 (2017); Epic Systems Corp. v. Lewis, 137 S. Ct. 809 (2017); and National Labor Relations Board v. Murphy Oil USA, Inc., 137 S. Ct. 809 (2017)(collectively “Morris”), in which the Court is considering whether class and collective action waivers in arbitration agreements violate the National Labor Relations Act.”

The federal court denied Waterstone Mortgage’s motion by stating:

Defendant has not shown that a stay is warranted. Nken v. Holder, 556 U.S. 418, 433-34 (2009) (“The party requesting a stay bears the burden of showing that the circumstances justify an exercise of that discretion.”) This case has been pending since 2011 and is not at an early stage. A further delay would prejudice plaintiff, who has been waiting several years through numerous delays to recover unpaid wages. Additionally, despite defendant’s assertion that a stay would “greatly simplify the issues and reduce the burden of litigation,” Dft.’s Br., dkt. #119, at 6, I am not persuaded that the Supreme Court’s decision will necessarily simplify the issues in this case, however it rules.

Defendant suggests that if the Supreme Court concludes that class and collective action waivers do not violate the National Labor Relations Act, defendant will be able to rely on that decision to file a motion under Federal Rule of Civil Procedure 60(b)(6) challenging this court’s March 2012 decision. But defendant’s assumption is flawed. As I explained previously when denying a similar Rule 60 motion filed by defendant, “a change in law showing that a previous judgment may have been incorrect is not an `extraordinary circumstance’ justifying relief under Rule 60(b)(6).” Dkt. #92 at 4 (quoting Nash v. Hepp, 740 F.3d 1075, 1078 (7th Cir. 2014)). See also Selective Insurance Co. of South Carolina v. City of Paris, 769 F.3d 501, 509 (7th Cir. 2014) (“Rule 60(b) cannot be used to reopen the judgment in a civil case just because later authority shows that the judgment may have been incorrect.”) Defendant has made no attempt to explain why a change in the law would justify reconsideration of a decision made in this case five years ago.

Moreover, the ultimate decision whether to allow this case to proceed on a collective basis was made by the arbitrator, not this court. In concluding that plaintiff should be permitted to proceed with arbitration on a collective basis, the arbitrator noted that this court had held that the class waiver provision was invalid under the National Labor Relations Act and that he was bound by that decision. Dkt. #99-3 at 8. However, the arbitrator also noted that the arbitration clause in the employment agreement was ambiguous: although it contained a waiver clause, it also stated that arbitration should proceed “in accordance with the rules of the American Arbitration Association,” which permits class arbitration. Id. at 9. The arbitrator noted that defendant “at the very least created an ambiguity, which must be construed against [defendant,] the party who drafted the Agreement.” Id. The arbitrator also noted plaintiff’s argument that the language of the so-called “waiver” clause should actually be read as permitting class or collective arbitration, rather than prohibiting it, though the arbitrator chose not to resolve that dispute. Id. at 8. In other words, the arbitrator’s discussion suggests that he believed there were independent bases for permitting collective arbitration, aside from this court’s previous decision. Thus, it is far from clear that the Supreme Court’s decision in the Morris cases would cause the arbitrator to change his decision to permit collective arbitration.

Finally, regardless whether this case should have proceeded on a collective basis, it would have been necessary to take up defendant’s claims of arbitrator bias and misconduct as they relate to plaintiff’s individual claim. Additionally, it is possible that the arbitrator’s merits decisions would apply in subsequent individual arbitrations under the doctrine of issue preclusion. E.g., Brown v. R.J. Reynolds Tobacco Co., 611 F.3d 1324, 1332 (11th Cir. 2010) (holding that factual findings in prior class action that had been decertified could have preclusive effect on subsequent individual actions). In short, the Supreme Court’s decision will not clearly simplify the issues in this case. Under these circumstances, I decline to grant defendant’s request for a discretionary stay of this case.

After that, the Wisconsin federal court dismissed Waterstone Mortgage’s arbitrator bias claims, ruled that the company was not prejudiced by the arbitrator’s alleged sleeping during the arbitral proceedings, and ultimately confirmed the arbitration award after correcting a mathematical error related to Herrington’s legal costs.

H/T to S.I. Strong for alerting us to this case!

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