Rame v. Popovich: Arbitration Provision Allows for Collective Actions, Despite Silence

New York’s Southern District has generated another arbitration-related decision that contributes to a far less dire post-Concepcion narrative than many had predicted.  See Rame, LLC v. Popovich, No. 12-cv-01684 (S.D.N.Y. Jul. 9, 2012) (Opinion re: petition to vacate) (available here).  Rather than expounding on whether cases are referred to arbitration in the first instance, which was the primary focus of Concepcion, Popovich addresses whether or not classwide arbitration is permissible where parties neither expressly waive nor expressly agree to classwide arbitration.

The underlying FLSA action was filed in the Southern District of New York by employees of Café Centro, a Park Avenue-based bistro and subsidiary of the elite Patina Restaurant Group.  The defendants moved to compel arbitration based on a Dispute Resolution Agreement (DRA) and Dispute Resolution Policy (DRP) that all employees were subject to.  In response, plaintiffs voluntarily dismissed the action and stipulated to arbitration, seemingly handing the defendants a victory.  See Opinion at 3.  The parties also stipulated to preliminary motion practice before an arbitrator as to the threshold issue of whether the claims for unpaid wages “could be brought in arbitration on a class or collective action basis,” since both the DRA and DRP were (as noted by the court) “devoid of any reference to arbitration on a class-wide or collective basis.”  Id. at 3, 6.  The arbitrator found that the FLSA action could proceed through arbitration on a classwide basis, prompting defendants to file a petition with the Southern District to vacate that decision.  Id. at 4.

Defendants primarily based their petition on a pre-Concepcion Supreme Court case, Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758 (2010), which was widely assumed to stand for the inflexible proposition that, where an arbitration clause is silent as to collective or class treatment, classwide arbitration is impermissible, notwithstanding that the parties did not in fact expressly agree to foreclose it.  The defendants argued that collective or class treatment may not be compelled in such an instance, and an arbitrator who finds otherwise has exceeded his or her power under the Federal Arbitration Act.  See Opinion at 15-16.

However, the Popovich court distinguished Stolt-Nielsen, insofar as the parties in that case had stipulated to the at-issue arbitration clause being “silent” as to collective or class treatment.  See Opinion at 23.  The Second Circuit drew a similar distinction in Jock v. Sterling Jewelers Inc., 646 F.3d 113 (2d Cir. 2011), holding that, with no “silence” stipulation, a broadly-drafted arbitration clause constituted an implicit agreement to authorize class treatment.  Here, the DRA and DRP dictated that an arbitrator determine “all damages and relief allowed by law.”  Opinion at 25.  Analyzing Stolt-Nielsen, Jock, and New York state law principles of contract interpretation, the Popovich court found that, absent a stipulation of “silence,” broad language like that used in the DRA and DRP does in fact constitute an implicit agreement to submit to class arbitration.  Opinion at 23-25.  The Popovich court concluded that the arbitrator’s decision was not based upon the “alleged silence” on classwide arbitration in the DRA and DRP, but was instead based on the broad language that was actually present, to wit, that an arbitrator will decide “all claims” of an employee arising out of the employment and award “all damages and relief allowed by law.”  Id. at 24-25.  As such, the court found no basis for vacating the arbitrator’s decision.

Popovich, like Jock, demonstrates the limitations of the Stolt-Nielsen holding.  Indeed, Popovich demonstrates that, under Stolt-Nielsen, class arbitration may be proper even if the at-issue arbitration agreement contains no express authorization to that effect, and reaffirms that class arbitration is proper when parties have implicitly agreed to it.