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A recent Second Circuit decision has renewed the debate over when silence in an arbitration agreement can form the basis for class proceeding.&nbsp; On July 1, a divided Second Circuit found that an arbitrator did not exceed her authority in ruling that an employment arbitration agreement that did not specifically address class proceedings &ldquo;permitted the plaintiffs to proceed with their effort to certify a class in the arbitration proceeding.&rdquo;&nbsp; This ruling, in <a href="https://employmentclassactionreport.bakerhostetlerblogs.com/wp-content/uploads/sites/8/2011/07/Jock-v.-Sterling-Jewelers-Inc.pdf">Jock v. Sterling Jewelers, Inc.pdf</a>., Case No. 10-3247, 2d Cir., 7-1-11, allows a putative class of female retail sales employees to advance their claims of sex discrimination in promotion and pay to arbitration despite the United States Supreme Court decision in Stolt-Nielsen S.A. v. Animalfeeds International Corp., ______ U.S. ______, 130 S. Ct. 1758 (2010).&nbsp; In summary, the issue in Stolt-Nielsen was &ldquo;Whether imposing class arbitration on parties whose arbitration clauses are &lsquo;silent&rsquo; is consistent with the Federal Arbitration Act.&rdquo;&nbsp; The court held it was not. (See our related <a href="http://www.employmentclassactionreport.com/class-action/supreme-court-sets-new-rules-for-class-actions-in-arbitration/">post </a>on Stolt-Nielsen from June 1, 2010.) District Judge Jed S. Rakoff had earlier vacated the underlying Clause Construction Award in Jock on the grounds that the arbitrator, Kathleen A. Roberts, exceeded her authority in light of the Stolt-Nielsen decision.&nbsp; (Jock v. Sterling Jewelers, Case No. 2:08-cv-02875, <a href="https://employmentclassactionreport.bakerhostetlerblogs.com/wp-content/uploads/sites/8/2011/07/Order-of-August-6-2010.pdf">Order of August 6, 2010.pdf</a>, 2010).&nbsp; (Judge Rakoff was uniquely familiar with the Stolt-Nielsen case since the case was originally assigned to him and he wrote the decision reversed by the Second Circuit Opinion which was ultimately reversed by the Supreme Court).&nbsp; The appellate court reversed, holding that the District Court &ldquo;improperly substituted its own interpretation of the parties&rsquo; arbitration agreement for that of the arbitrator&rsquo;s to conclude that the arbitrator reached an incorrect determination . . . that the . . . agreement did not prohibit class arbitration.&rdquo;&nbsp; The Second Circuit distinguished Stolt-Nielsen, finding the Supreme Court&rsquo;s interpretation there of the parties&rsquo; &ldquo;silence&rdquo; pivotal.&nbsp; &ldquo;[T]he Court interpreted the stipulated silence to mean that &lsquo;the parties agreed their agreement was silent in the sense that they had not reached any agreement on the issue of class arbitration.&rsquo;&nbsp; *&nbsp; *&nbsp; *&nbsp; According to the majority in Stolt-Nielsen, there was no express or implicit intent to submit to class arbitration.&rdquo;&nbsp; And, with that conclusion, the Second Circuit set off to determine if &ldquo;implicit agreement&rdquo; were present in the Sterling Jewelers&rsquo; Agreement. The Arbitration Agreements and the Arbitrator&rsquo;s Award As the dissent noted, neither party in Jock argued that the various arbitration clauses at issue either specifically authorize or preclude class arbitration.&nbsp; Indeed, some of the agreements&rsquo; provisions are inconsistent with class treatment.&nbsp; For example, the agreements contain provisions which require completion of a multi-step process before arbitration, require arbitration in a local venue, require locally-licensed arbitrators, require the arbitrator to apply local law and have different limitation periods and descriptions of relief available. <a href="https://employmentclassactionreport.bakerhostetlerblogs.com/wp-content/uploads/sites/8/2011/07/Arbitrator-Roberts-Award.pdf">Arbitrator Roberts' Award.pdf</a>&nbsp;found that while &ldquo;there is no mention of class claims in any version of the Agreement&rdquo;, they &ldquo;do not prohibit class claims&rdquo;, reasoning: Because this contract was drafted by Sterling and was not the product of negotiation, it was incumbent on Sterling to ensure that all material terms, especially those adverse to the employee were clearly expressed.&nbsp; . . . Sterling acknowledges . . .&nbsp; that it has deliberately not revised the . . . arbitration agreement to include an express prohibition [of class proceedings].&nbsp; [C]onstruing the Agreement to contain a waiver of a significant procedural right would . . . insert a term for the benefit of one of the parties that it has chosen to omit . . . . I further find that agreeing to a step process for individual claims does not manifest an intent to waive the right to participate in a collective action, where . . . the Agreement expressly gives the Arbitrator the &lsquo;power to award any types of legal or equitable relief that would be available in a court of competent jurisdiction.&nbsp; (June 1, 2009 Clause Construction Award, at pp. 3-5). And, after finding Ohio law applicable, the Award found that no Ohio decision addressed the question of whether class claims are prohibited or permitted by an arbitration agreement. The Second Circuit Finds Implied Agreement to Class Arbitration Notwithstanding the paucity of the Award&rsquo;s contractual analysis, the Second Circuit&rsquo;s majority opinion premised its decision on the arbitrator&rsquo;s finding that an agreement to class arbitration was &ldquo;implied.&rdquo;&nbsp; &ldquo;It is clear from the terms of the arbitration agreement . . . that the parties intended to make available in arbitration all remedies and rights that would otherwise be available in court or before a governmental agency.&nbsp; It was not unreasonable, and clearly not manifestly wrong, for the arbitrator to construe this to mean that the parties also intended to include the right to proceed as a class and seek class remedies.&rdquo;&nbsp; Yet, this reasoning seems to find &ldquo;consent&rdquo; to class arbitration from generalized language concerning relief available.&nbsp; Is this approach consistent with Stolt-Nielsen?&nbsp; Can broad language about potential relief coupled with deference to an arbitrator&rsquo;s award, be sufficient to overcome a challenge to the Award &ndash; particularly given the seismic impact of class proceedings? The Bottom Line:&nbsp; Metaphysics still reigns when it comes to divining the parties&rsquo; intent to permit class proceedings in arbitration agreements.&nbsp; The Second Circuit panel decision may not be the last word on these important issues.

When Does “Silence” Become “Implicit” Agreement? The Saga of Jock v. Sterling Jewelers, Inc.