Pamela Herrington, individually and on behalf of all others similarly situated, Plaintiff-Appellee,
Waterstone Mortgage Corporation, Defendant-Appellant.
May 29, 2018
from the United States District Court for the Western
District of Wisconsin. No. 3:ll-cv-00779 - Barbara B. Crabb,
Bauer, Barrett, and St. Eve, Circuit Judges.
BARRETT, CIRCUIT JUDGE.
Herrington filed class and collective actions against
Waterstone Mortgage Corporation, her former employer, for
wage and hour violations. The district court compelled
arbitration pursuant to an agreement between Herrington and
Waterstone, but it struck as unlawful a waiver clause that
appeared to forbid class or collective arbitration of
Herrington's claims. The arbitrator conducted a
collective arbitration over Water stone's objection and
ultimately awarded more than $10 million in damages and fees
to Herrington and 174 similarly situated employees.
recent Supreme Court decision has now put this award in
doubt. In Epic Systems Corp. v. Lewis, ___ U.S. ___,
138 S.Ct. 1612 (2018), the Court upheld the validity of
waiver provisions like the one in Herrington's agreement
with Water stone. If imposing collective arbitration on
Waterstone violated that waiver, we must instruct the
district court to vacate the award, which would put
Herrington back at square one.
Herrington does not concede that the collective arbitration
violated the waiver. In an attempt to save her award, she
insists that her agreement with Waterstone affirmatively
permits class or collective arbitration of her claims despite
the presence of a valid waiver indicating otherwise. While
this argument is weak, someone must evaluate it-and we must
decide who has that job. If the availability of class or
collective arbitration is a threshold question of
arbitrability, the district court has to decide it.
Otherwise, it falls to the arbitrator.
reasons we explain below, we conclude that the availability
of class or collective arbitration is a threshold question of
arbitrability. On remand, the district court, rather than the
arbitrator, must evaluate Herrington's contract with
Waterstone to determine whether it permits class or
Herrington sued Waterstone Mortgage Corporation in federal
court, asserting two claims. First, she alleged that
Waterstone had failed to pay her minimum wages and overtime
pay under the Fair Labor Standards Act. She brought that
claim as a collective action under the Act, which meant that
other employees could opt in to the lawsuit. 29 U.S.C. §
216(b). Second, she claimed that Waterstone had breached its
contract with her. She brought that claim as a class action
under Federal Rule of Civil Procedure 23, which meant that
Herrington would represent a class of absent claimants unless
they opted out.
Herrington had signed an agreement to arbitrate employment
disputes, and Waterstone moved to enforce it.
Herrington's employment agreement with Waterstone
contained an arbitration clause, which provided in part:
In the event that the parties cannot resolve a dispute by the
[alternative dispute resolution] provisions contained herein,
any dispute between the parties concerning the wages, hours,
working conditions, terms, rights, responsibilities or
obligations between them or arising out of their employment
relationship shall be resolved through binding arbitration in
accordance with the rules of the American Arbitration
Association applicable to employment claims. Such arbitration
may not be joined with or join or include any claims by any
persons not party to this Agreement.
on this language, Waterstone asked the district court to
either dismiss the suit for lack of jurisdiction or stay it
and compel arbitration.
responded that the arbitration clause was unenforceable. She
argued that the entire clause, which required her to pay half
of the arbitration costs, was invalid because it imposed
excessive costs on her. She also challenged the validity of
the sentence waiving her right to join the claims of others
in the proceeding. According to Herrington, this waiver
violated both the Fair Labor Standards Act, which permits
collective actions, and the National Labor Relations Act,
which protects concerted activity. She did not contest
Water-stone's position that her claims were within the
scope of the waiver in the arbitration clause; ...