Lamps Plus v. Varela
In A Victory For NELF And Its Supporters, The United States Supreme Court Holds That Mere Ambiguity In An Arbitration Agreement Does Not Satisfy The Federal Arbitration Act’s Requirement That Parties Must Consent To Class Arbitration.
Lamps Plus, Inc. v. Varela (United States Supreme Court)
At issue in this case was whether the Federal Arbitration Act (FAA) permits a court to order class arbitration when the parties’ agreement makes no express mention of class arbitration, but the court concludes nonetheless that certain contractual language is ambiguous and could be interpreted to support class arbitration. Nearly a decade ago, in Stolt-Nielsen S.A. v. AnimalFeeds Internat’l Corp., 559 U.S. 662, 684 (2010), the Supreme Court held that, because class arbitration is so inimical to the individual arbitration contemplated by the FAA, “a party may not be compelled under the FAA to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so.” (Emphasis in original). In that case, however, the Court did not have to explain what constitutes a “contractual basis” authorizing class arbitration because the parties had stipulated that there was none. (Not only was their agreement silent on the issue, but the parties in Stolt-Nielsen also made the unusual stipulation before the arbitral panel that this silence meant that they had not agreed to class arbitration.) Faced in this case with an arbitration agreement that was purportedly ambiguous on the issue of class arbitration, the Court had to decide whether contractual ambiguity alone could provide the necessary contractual basis authorizing class arbitration under Stolt-Nielsen and the FAA.
Lamps Plus and one of its employees, Frank Varela, executed the company’s standard arbitration agreement, in which the two parties (“I” and “the company”) agreed to “resolve[,] by final and binding arbitration as the exclusive remedy,” “all disputes, claims or controversies arising out of or relating to this Agreement, the employment relationship between the parties, or the termination of the employment relationship . . . .” The agreement also provided Varela with express notice that, by agreeing to arbitrate all employment-related disputes, he was thereby waiving his right to sue in court and obtain a jury trial for those claims. (E.g., “I agree that arbitration shall be in lieu of any and all lawsuits or other civil legal proceedings relating to my employment.” (emphasis added.)). The agreement further provided Varela with detailed notice of the kinds of employment-related claims that he was agreeing to arbitrate with his employer.
Notwithstanding the parties’ arbitration agreement, Varela filed a class action complaint in federal court for the Central District of California, alleging that Lamps Plus, through one of its employees, had wrongfully disclosed personal identifying information of its employees, in a mistaken response to a phishing scam requesting such information. Lamps Plus moved to compel arbitration on an individual basis. The district court ordered arbitration, but on a classwide basis. The Ninth Circuit affirmed, crediting Varela’s argument that there was contractual language (namely, “lawsuits or other civil legal proceedings,” quoted above) that could be interpreted to include class arbitration. (Needless to say, Lamps Plus argued strenuously that the agreement contemplated individual arbitration only.) The Ninth Circuit resolved this purported ambiguity by construing it against the drafter, Lamps Plus, under California contract law. Accordingly, the lower court held that the parties had consented to class arbitration.
NELF filed an amicus brief supporting Lamps Plus’s position, arguing that, in fact, the parties’ standard arbitration agreement provided no contractual basis supporting class arbitration. NELF argued that the agreement unambiguously provided for individual arbitration only. It was a simple contract between two parties to arbitrate their disputes, and nothing more. Not only was the agreement dead silent on the issue of class arbitration, but also, NELF argued, none of its boilerplate language could reasonably be interpreted to permit class arbitration. In particular, NELF argued that the language purportedly authorizing class arbitration (“lawsuits or other civil legal proceedings”) added nothing new to the agreement. That language merely explained to the employee what it meant to agree, in the first sentence of the agreement, to submit all employment disputes with his employer to binding and final arbitration.
In a 5-4 decision issued on April 24, 2019, the Court agreed with NELF that the arbitration agreement at issue did not authorize class arbitration, but for different reasons. Surprisingly in NELF’s view, the Court, in a majority opinion by Chief Justice Roberts, deferred to the Ninth Circuit’s conclusion that the agreement was ambiguous on the issue of class arbitration, as a matter of California contract law (identifying such deference to state law as the Court’s “normal practice”). In NELF’s view, however, the entire question of whether an arbitration agreement supplies a contractual basis for class arbitration is a matter of federal law under the FAA. Even though the Court did defer to state law on that issue, the Court nonetheless went on to hold that this purported ambiguity made no difference under federal law, because neither contractual silence nor contractual ambiguity is sufficient to authorize class arbitration under the FAA. “Like silence,” the Court explained, “ambiguity does not provide a sufficient basis to conclude that parties to an arbitration agreement agreed to sacrifice the principal advantage[s] of [individual] arbitration” contemplated by the FAA, namely, “its speed and simplicity and inexpensiveness.” (Citation and internal punctuation marks omitted). In short, a court may not presume that a party has consented to the costly, burdensome and virtually unreviewable procedure of class arbitration, based on merely ambiguous contract language.
Importantly, the Court also held that the FAA preempted the lower court’s attempt to resolve the purported contractual ambiguity on class arbitration by applying the general rule of state contract law that construes an ambiguity against the drafter. As the Court explained, that rule resolves a contractual ambiguity as a matter of public policy, based on considerations of relative bargaining strength. It does not address in any way what the parties actually agreed to. The FAA, however, requires the parties’ consent to class arbitration. Therefore, the application of that general rule of state contract law to resolve the purported ambiguity would have impermissibly imposed class arbitration without the parties’ consent. This the FAA does not permit
While the Court did hold that neither silence nor ambiguity is enough to satisfy the FAA, the Court never did state affirmatively what contractual language is required to warrant class arbitration under the FAA. At the very least, such language would have to be unambiguous, but most likely it would have to be clear and unmistakable, given the high stakes involved in submitting to class arbitration. Notably, the Court relied for support on an analogous area of its FAA jurisprudence, in which the Court requires “clear and unmistakable” contract language to overcome the presumption that certain “gateway” issues of arbitrability (such as the validity and scope of the agreement) should be decided by a court, not an arbitrator. Just as the Court will not presume that parties who have agreed to arbitrate have also agreed to class arbitration:
Gammella v. P. F. Chang
In a major victory for NELF and its supporters, the Massachusetts Supreme Judicial agreed with NELF that an employee bringing a class action under the Massachusetts Wage Act must satisfy the requirements of Mass. R. Civ. P. 23, even though the Wage Act independently provides that an employee may sue “on his own behalf, or for himself and for others similarly situated.”
Gammella v. P. F. Chang’s Chinese Bistro, Inc. (Massachusetts Judicial Supreme Court)
This case raised the important question whether the Massachusetts Wage Act, which provides that an employee may sue “on his own behalf, or for himself and for others similarly situated,” M. G. L. c. 149, § 150, permitted employees to pursue a class action without satisfying the class action requirements of Rule 23 of the Massachusetts Rules of Civil Procedure. Rule 23governs all class actions in the Massachusetts courts, unless the Legislature expressly provides otherwise. In this connection, the plaintiff here argued that the Wage Act’s “similarly situated” language indicated such a legislative intent, because the Legislature added that language to the Wage Act in 1993 when it created a private remedy, even though Mass. R. Civ. P. 23 (adopted in 1973) already existed.
NELF submitted an amicus brief in support of the employer, urging the SJC to reject the plaintiff’s argument and affirm—as the Court already had done by implication in at least one decision—that Rule 23’s requirements must apply to a motion for class certification under the Wage Act.
In a unanimous decision issued on April 12, 2019, the SJC agreed with NELF and held that Rule 23 governs class actions brought under the Massachusetts Wage Act. As NELF had argued, the Court held that, far from announcing a different standard for class certification, the statute’s “similarly situated” language merely clarified that, for the first time in the Wage Act’s history, employees had the private right to pursue both individual and class claims under that statute. (Indeed, as NELF also had pointed out in its brief, and as the Court had noted in prior decisions, the Wage Act was an exclusively criminal statute until the 1993 amendment.)
As NELF had also argued, the Court explained that, when the Legislature has intended to depart from the general court rules governing civil actions, it has done so expressly, and in some detail. Notably, when G. L. c. 93A, § 9, was amended in 1969 to provide a private remedy for both individual and class claims, the Legislature provided, in a separate paragraph, the specific class certification requirements for a consumer wishing to pursue a c. 93A claim on behalf of “numerous other persons similarly situated.” Those requirements, drafted before Massachusetts had adopted the rules of civil procedure, incorporated Fed. R. Civ. P. 23(a), but not Fed. R. Civ. P. 23(b)(3) (predominance and superiority). No such detailed and selective language occurs in the Wage Act.
Finally, the Court agreed with NELF that “it is clear from our previous application of rule 23 to class actions brought under the wage laws in Salvas v. Wal-Mart Stores, Inc., 452 Mass. 337, 371-372 (2008), that rule 23 has the necessary structure and adaptability to advance the very legitimate policy rationales underlying the Legislature’s decision to provide for class proceedings under the Wage Act.” Indeed, the Court and NELF quoted the same language from Salvas praising the efficacy of Rule 23 for Wage Act claims: “One of the great strengths of the rule 23 class action device is its plasticity. Case-by-case considerations of practicality and fairness have enabled rule 23 certification decisions to adapt appropriately to a variety of contexts, even within the same litigation.” Salvas, 452 Mass. at 371.
Ironically, after agreeing with NELF that Rule 23 applies to the Wage Act, the Court concluded that the plaintiff had satisfied Rule 23’s requirements for class certification, contrary to the lower court’s ruling. Therefore, the Court reversed the lower court’s denial of class certification. Nonetheless, the decision is a victory for employers because the Court rejected the plaintiff’s effort to provide an essentially “free form” class action procedure under the Wage Act.
NEW ENGLAND LEGAL FOUNDATION
The Massachusetts Supreme Judicial Court Agreed With NELF That An Award of “Back Pay” Under the Worker Adjustment and Relocation Notification Act, 20 U.S.C. § 2101 et al., Due To An Employer’s Failure To Give Employees 60 Days’ Notice Before Closing Operations, Does Not Constitute “Wages Earned” and, therefore, is not recoverable Under the Massachusetts Wage Act
Calixto and another v. Coughlin, et al. (Massachusetts Supreme Judicial Court)
At issue in this case was an unsatisfied judgment of approximately $2 million in back pay that a class of plaintiffs had obtained in federal court against their former employer for violating the notice requirement of the federal WARN Act before shutting down. Unable to recover the judgment from their now-defunct employer, the plaintiffs sued their employer’s former executive officers personally for treble that amount under the Massachusetts Wage Act. NELF filed an amicus brief in support of the defendants, arguing principally that the plaintiffs could not recover under the Wage Act because, simply put, an award of “back pay” under the WARN Act does not compensate employees for “wages earned.” As NELF pointed out, back pay is a traditional remedy to compensate an employee for the wages the employee would have earned if the employer had not violated the law, here by failing to provide the employee with 60 days’ notice. Because, however, the Wage Act permits recovery only of the wages that an employee has actually earned, NELF argued that the Court should affirm the Superior Court’s dismissal of the plaintiffs’ complaint. In its brief, NELF also argued that a decision equating “back pay” under the WARN Act with “wages earned” under the Wage Act would eviscerate the WARN Act’s “faltering company” defense. Under that defense, a financially troubled company can avoid liability by showing that it was “actively seeking capital or business” to salvage the company and the company believed, “reasonably and in good faith,” that giving timely notice of a plant closing would have jeopardized those business opportunities. NELF also noted that allowing the plaintiffs to sue their employer’s former executives was inconsistent with the WARN Act, which does not impose personal liability on a company’s officers. NELF argued that this was arguably a deliberate choice by Congress to allow executive officers to exercise their business judgment and take the necessary steps to protect a financially troubled company and its workforce, without having to fear incurring personal liability for their efforts.
In a major victory for Massachusetts employers, the SJC agreed with NELF, and held that an award of back pay under the WARN Act is not for “wages earned” and, therefore, the plaintiffs had not valid cause of action under the Wage Act.
The United States Supreme Court Agreed With NELF That The Federal Arbitration Act Does Not Permit A Court To Disregard The Parties’ Agreement To Delegate Threshold Disputes Over Arbitrability To The Arbitrator, Even If the Court Thinks That Such A Dispute Is “Wholly Groundless.”
Henry Schein, Inc. et al. v. Archer and White Sales, Inc. (United States Supreme Court)
The parties in this case had a pre-dispute arbitration agreement, which stated that “[a]ny dispute arising under or related to this Agreement (except for actions seeking injunctive relief . . . .) shall be resolved by binding arbitration in accordance with the arbitration rules of the American Arbitration Association [ (AAA) ].” AAA Rule 7(a), in turn, provides that “the arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope or validity of the arbitration agreement.” (Emphasis added.) Notwishtanding this agreement, Archer and White Sales, Inc. sued Henry Schein, Inc. in federal court under the anti-trust laws, seeking both damages and injunctive relief. Predictably, Schein moved to compel arbitration under the parties’ agreement, to which Archer responded on the ground that because its complaint sought injunctive relief, as well as damages, it was not arbitrable. Despite the clear language of the arbitration provision and the AAA rules, the Fifth Circuit refused to compel arbitration over the question of arbitrability. The Court took the position that, even assuming the agreement did clearly and unmistakably delegate the arbitrabiity issue to the arbitrator, the court nonetheless had the discretion to decline to enforce the agreement if it concluded that the dispute was “wholly groundless.” The court so concluded and refused to enforce the arbitration agreement on that basis, allowing Archer to proceed with its antitrust claims in federal court.
NELF filed an amicus brief in support of Schein, arguing that, where the parties have so provided, the FAA requires a court to enforce a valid agreement to arbitrate threshold disputes concerning the arbitrability of claims. NELF argued that the FAA simply does not permit a court to usurp the arbitrator’s contractually delegated power to decide threshold questions of arbitrability, such as under the Fifth Circuit’s “wholly groundless” standard.
In another major victory for NELF, the Supreme Court agreed unanimously that the Federal Arbitration Act requires a court to enforce the parties’ agreement to delegate to the arbitrator any threshold dispute over arbitrability, here the scope of the arbitration agreement. Thus the Court forcefully reaffirmed the well-established principles that, while questions of arbitrability presumptively belong in court, parties may nonetheless assign those preliminary questions to the arbitrator, “so long as the delegation is clear and unmistakable.” Id., 561 U.S. at 79. And, the Court affirmed, the parties decision in this regard must be enforced.
however, In another important arbitration decision, the Supreme Court disagreed with nelf and held that the Federal Arbitration Act’s exemption for “contracts of employment of seamen, railroad employees or any other class of workers engaged in foreign or interstate commerce” exempts not only employees, but also independent contractors in those areas from the FAA.
New Prime, Inc. v. Oliveira (United States Supreme Court)
In a unanimous decision issued January 15, 2019, the Supreme Court rejected NELF’s position in this case and concluded that the Federal Arbitration Act exempts all transportation worker contracts, whether they establish an employee-employee or independent contractor relationship.
The FAA exempts “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” 9 U.S.C. § 1 (emphasis added). At issue was the meaning of “contracts of employment.” (In Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001), the Court had held that the exemption applied only to interstate transportation workers, not to all workers generally. In that case, however, the Court was not asked to interpret the “contract of employment” language that is now in dispute.) This case mattered to NELF and its supporters because a broad interpretation of “contracts of employment” would mean that no interstate transportation carrier could ever enforce its arbitration agreements and class action waivers against any of its contract workforce under the FAA, be they employees or independent contractors.
The First Circuit in this case concluded that the term “contract of employment” was sufficiently broad at the time of the FAA’s enactment, in 1925, to embrace any contract to perform work, regardless of the legal status of the worker. And the Supreme Court essentially agreed, reinforcing its general rule that statutory language should be interpreted in its historical context, to give full effect to congressional intent. Accordingly, bothe courts held held that the FAA exempts the Independent Contractor Operating Agreement that the plaintiff, truck driver Dominic Oliveira, had signed with New Prime, Inc. (“Prime”), the operator of an interstate trucking company. That agreement specified the terms of Oliveira’s independent contractor relationship with Prime. It also required Oliveira to arbitrate all work-related disputes on an individual basis.
In its amicus brief, NELF had argued that the phrase “contracts of employment” should be interpreted in its immediate context, under the rule of noscitur a sociis (“it is known from its associates”). The phrase modifies “seamen” and “railroad employees,” two prominent classes of transportation employees. This indicated, NELF argued, that “contracts of employment” must establish an employer-employee relationship. This meaning is confirmed by applying the related rule of ejusdem generis (“of the same kind”), to the residual phrase “any other class of workers,” which immediately follows seamen and railroad employees in the exemption. In Circuit City, the Court applied ejusdem generis to narrow the meaning of that residual phrase “any other class of workers” to other transportation workers only, because the phrase followed specific examples of transportation workers. Here, application of ejusdem generis takes the analysis one step further, by limiting the same residual phrase to other transportation workers who are employees, because seamen and railway employees are specific examples of transportation workers who are employees. These rules of statutory construction serve the overarching purpose of the FAA. The exemption is embedded in a statute whose purpose is to ensure the judicial enforcement of arbitration agreements according to their terms. This broad statutory purpose counsels in favor of enforcing, not exempting, arbitration agreements under the FAA.
In its brief, NELF also offered a plausible historical explanation for this exemption. The FAA’s exemption for the employment contracts of seamen and railroad employees was apparently intended to leave undisturbed those employees’ statutory right, under the Jones Act and the Federal Employers’ Liability Act (FELA), respectively, to sue their employer in court for work-related injuries. The FELA and the Jones Act granted those transportation employees a liberalized tort remedy, due to their particularly hazardous working conditions and the inadequacy of state tort law to compensate them for their injuries. Since independent contractors are not covered by the FELA or the Jones Act, Congress would have had no reason to exempt them from the FAA’s scope.
The Court essentially rejected those arguments. First, the Court concluded that seamen and railroad employees apparently included all kinds of workers under those and other related federal statutes and regulatory decisions when the FAA was enacted in 1925. The Court also noted that Congress chose the word “worker” in the catch-all phrase “any other class of workers,” as opposed to “employees” or “servants.” As the Court explained: “That word choice may not mean everything, but it does supply further evidence still that Congress used the term ‘contracts of employment’ in a broad sense to capture any contract for the performance of work by workers.”
Arguing that, in a Regulatory Taking case, Penn Central Does Not Establish a Rule that Two Legally and Economically Distinct Parcels Must be Combined as the “Parcel as a Whole” in the Takings Analysis Simply Because They are Contiguous and Commonly Owned.
This case had presented the Supreme Court with an opportunity to take a first step toward defining, or at least setting some limits to, the “parcel as a whole,” which has been a key concept in regulatory takings law since the phrase first appeared in the Court’s 1978 decision Penn Central Transportation Co. v. City of New York, 438 U.S. 104. It is against the value of the parcel as a whole that the extent of any alleged regulatory taking is measured.
The Murrs had attempted sell one of two contiguous lakeside lots they own. The lot, left (unlike the neighboring lot) undeveloped, was bought and retained specifically for the purpose of appreciation and sale. They found, however, that the sale was blocked by environmental regulations that rendered the lot individually unsaleable and largely worthless. After the Wisconsin courts had found that there had been no regulatory taking of the lot because the regulations had legally merged it with the developed lot, the Murrs petitioned the U.S. Supreme Court.
NELF filed a brief in support of the Murrs, urging the court to clarify the concept of the parcel as a whole and arguing that the court should reject the rigid rule used by the Wisconsin courts whereby contiguity of lots plus common ownership equals the parcel as a whole.
NELF first argued on equitable principles that the Court should strike a fair and just balance when identifying the “parcel as a whole.” Invoking the principles of fairness and justice on which the Court has avowedly founded its takings jurisprudence, NELF expressed its concern, echoed by distinguished legal commentators, that the tendency of courts to expand the “parcel as a whole” concept has created a serious risk of under-compensation of property owners.
NELF then went on to illustrate analytically the insufficiency of the rigid two factor rule (based on adjacency and common ownership) that had been applied by the Wisconsin court. NELF argued that these two factors alone are too tenuous to justify evaluating separate parcels as one, and it urged the Court to require at least integrated “unity of economic use” as a third factor (the Murrs’ two parcels, of course, always had different economic uses, one being a developed residential parcel and the other being an investment asset). NELF developed its argument by drawing a close analogy to well-established principles of eminent domain law. As NELF pointed out, both eminent domain law and takings law sometimes must answer a common question: what parcel (if any), other than the one directly affected by government action, must be considered along with the affected parcel in order to evaluate the claim for compensation in a fair and just way in relation to the whole of the relevant property? In eminent domain law this question arises when there has been a taking of one parcel, and additional damages are sought for the economic effects of that taking on a second parcel. The key factor, widely recognized by the states, is that there must be an integrated unity of economic use of the two parcels; mere contiguity and common ownership are insufficient. NELF urged the Supreme Court to reject the two-factor test of the Wisconsin court and to adopt “unity of economic use” as the crucial factor.
When the case was argued before the Supreme Court on March 20, 2017, NELF was encouraged to see that its analogy played a role in the oral argument.
However, on June 23, 2017, the Supreme Court, in a five-justice majority opinion written by Justice Kennedy, rejected NELF’s arguments and affirmed the judgment below. The majority rejected the “formalistic” appeals to state rules made by both sides for determining the parcel as a whole. The state parties had relied on the merger regulation to supply the defining principle, while the Murrs had argued that state laws that establish the identity of legally separate lots should be taken to identify the presumptive parcel as a whole (a position NELF endorsed). Instead, the Court used a multifactor test that first gives substantial weight to state laws regarding how land is bounded and divided, then looks at the physical characteristics of the land in question, especially its topography and environmental features, and then assesses the value of the land under the regulation, with special attention to the value of the burdened land to other holdings. By this test the Court found that the parcel as a whole comprised both Murr lots, and it then concluded that there had been no regulatory taking because the lots, taken together, retained sufficient value.
In a “dissent” which read more like a concurrence in the judgment, Chief Justice Roberts, joined by Justices Alito and Thomas, wrote that while the outcome “does not trouble me,” the majority’s methodology does. He said that the majority double-counted the factors of the takings analysis proper by incorporating them into the threshold analysis of what constitutes the parcel as a whole. The result of this error, he said, is to “tip the scales in favor of the government.” He favored the methodology of the Murrs for identifying the presumptive the parcel as a whole, but apparently believed that the facts of the case overcame the presumption. (Justice Gorsuch did not take part in the decision.)
Arguing that, when an Employee Prevails in An Action Brought for Wages Under G.L. c. 149, § 150, for Unpaid Wages, and Receives the “Liquidated” Treble Damages Mandated By the Statute, Prejudgment Interest is Not Available on Any Portion of the Recovery.
In 2008, the Massachusetts legislature amended G.L. c. 149, § 150, which governs the right to bring suit for violation of a number of state wage laws. As relevant here, previous to the amendment, § 150 had permitted an award of treble damages to be made to a prevailing plaintiff, but the Supreme Judicial Court had held that such an award was discretionary and that, because the enhanced damages were punitive in nature, they required the plaintiff to prove the employer’s bad faith, willfulness, or other culpable conduct, in order to avoid due process problems connected with the imposition of punitive damages. The 2008 amendment worked a major change in § 150—it made the treble damages unconditionally mandatory so that plaintiffs no longer would have the burden of proving bad faith. Perhaps to get around the due process problem such mandatory treble damages might create, in the 2008 amendment the legislature expressly characterized the new mandatory treble damages as “liquidated,” hence compensatory and not punitive.
The present case raised the question of what effect, if any, the amendment has on a plaintiff’s right to prejudgment interest, which is the primary means of compensating a plaintiff for the loss of use of money or its unlawful detention during the time before judgment enters. In other words, does the declared “liquidated” character of the new treble damages mean (as it ordinarily would in other legal contexts) that the damages are intended to compensate comprehensively for all injuries, including those that may be difficult to prove or quantify, such as those arising out of loss of use of money or its wrongful detention?
The plaintiffs here had settled their wage claims with the employer, with the exception of a dispute over their alleged right to prejudgment interest under one of the state’s general prejudgment interest statutes. They construed literally the apparently mandatory language of the prejudgment interest statute. The company’s view, by contrast, was that § 150’s treble liquidated damages function as any liquidated damages provision would, i.e., they displace all other forms of compensatory damages, including prejudgment interest. At the parties’ request, the U.S. District Court certified to the Massachusetts Supreme Judicial Court the question of whether plaintiffs who are awarded liquidated treble damages under § 150 retain a right to separate prejudgment interest in addition.
NELF filed an amicus brief in support of the employer, asking the court to answer no to the question. In the first half of its brief, after recounting the history leading up to the amendment to § 150, NELF focused on the term “liquidated,” noting that it sharply alters the nature of the treble damages from punitive, with all the latter’s attending legal due process complications, to simply compensatory. In particular, NELF observed that the SJC itself has stated that courts owe deference to the legislature’s legal characterizations, like “liquidated,” when the constitutionality of a law may be involved. NELF cited also the U.S. Supreme Court’s decision in Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697 (1945). There, against the background of a mandatory state prejudgment interest statute, much like the one in this case, the court ruled that the liquidated multiple damages awarded under the federal Fair Labor Standard Act precluded application of the state prejudgment interest statutes because liquidated damages compensate for all harms, including those usually addressed by prejudgment interest.
In the second half of its brief, NELF critiqued the plaintiffs arguments directly. First, NELF cited SJC cases holding that the mandatory language of the prejudgment interest statutes must not be taken literally when to do so would defeat the purpose of the statutes and over-compensate a party by awarding duplicative damages. For this reason, NELF rejected the plaintiffs’ contention that there is a “clash” between the mandatory prejudgment interest statutes and mandatory language of § 150. NELF also rebutted the contention that § 150 plaintiffs would be under-compensated if they do not receive prejudgment interest. NELF pointed out that all liquidated damages inherently are an approximation of full compensation, and NELF urged the Court not to modify by judicial decision the general “treble liquidated damages” formula inserted into § 150 by the legislature in its sound discretion. Moreover, NELF argued, the Court should not violate its traditional policy of not taking a “second look” at liquidated damages, in order to see, after the fact, whether they provide full compensation. NELF concluded by pointing out the deficiencies in the plaintiffs’ understanding of the 1945 Brooklyn decision and by explaining to the Court the difficulties that would arise if it accepted the plaintiffs’ last-ditch suggestion to treat the “liquidated” treble damages as punitive.
In its decisions, issued in June, 2017, the Supreme Judicial Court disagreed with NELF and answered yes to the certified question. The court expressed doubt that the legislature would have intended some plaintiffs to receive smaller damages after the amendment than they would have received before the amendment, as might happen in certain circumstances if prejudgment interest were no longer to be available. In effect, the court took a “second look” at the statutory damages and second-guessed the sufficiency of the liquidated formula decreed by the legislature.
Epic Systems v. Lewis; Ernst & Young LLP v. Morris; National Labor Relations Board v. Murphy Oil USA, INC. (United States Supreme Court on the merits) - Pending Case
Arguing that the National Labor Relations Act does not override the Federal Arbitration Act’s mandate to enforce class and collective action waivers in employment arbitration agreements
On October 2, the Supreme Court heard oral argument in these three consolidated cases, in which NELF filed an amicus brief in support of the employers, both at the certiorari stage and on the merits.. NELF argued that the Supreme Court should decide that the NLRA does not displace the FAA’s mandate to enforce class action waivers in employment arbitration agreements. The FAA is the necessary starting point here, and the FAA requires the enforcement of a class action waiver that is contained in a valid arbitration agreement. AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 344 (2011) (“The overarching purpose of the FAA . . . is to ensure the enforcement of arbitration agreements according to their terms so as to facilitate streamlined proceedings.”). The FAA’s mandate to enforce class action waivers applies equally in “claims that allege a violation of a federal statute, unless the FAA’s mandate has been ‘‘overridden by a contrary congressional command.” American Exp. Co. v. Italian Colors Restaurant, 133 S.Ct. 2304, 2309 (2013) (emphasis added) (citation and internal quotation marks omitted). In this case, the burden rests on the employees and the NLRB, as the parties opposing the class action waiver, to show that the NLRA displaces the FAA’s mandate to enforce that contract provision. See Shearson/American Express Inc. v. McMahon, 482 U.S. 220, 227 (1987). And to meet their burden, the parties must show that “such an intent [if any] will be deducible from [the NLRA’s] text or legislative history, or from an inherent conflict between arbitration and the [NLRA’s] underlying purposes.” McMahon, 482 U.S. at 227. And even if this issue of statutory interpretation were a close one, any doubts should be resolved in favor of enforcing the class action waiver under the FAA. See CompuCredit Corp. v. Greenwood, 565 U.S. 95, 109 (2012) (Sotomayor, J., concurring) (“[W]e resolve [any] doubts in favor of arbitration.”).
The Seventh and Ninth Circuits in this consolidated case held that § 7 of the NLRA, enacted in 1935 at the height of the Great Depression, contains a “contrary congressional command” that displaces the FAA’s mandate to enforce class action waivers in employment arbitration agreements. That section protects an employee’s right to “to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” 29 U.S.C. § 157 (emphasis added).
NELF argued that neither the employees nor the NLRB can show that the NLRA displaces the FAA’s mandate to enforce class action waivers in arbitration agreements. The residual phrase “other concerted activities,” in § 7 of the NLRA, does not mean that employees have the right to join together and sue their employer. Quite to the contrary, this language simply means that employees have the right to join together in the workplace to discuss working conditions among themselves and with their employer, without having to form a union. Interpreting this catch-all phrase “other concerted activities” in isolation, as the lower courts have done, would contravene the basic canon of statutory construction that the specific governs the general. The enumerated examples of concerted activities in § 7 must limit the meaning of the residual phrase “other concerted activities” to similar conduct. And all of the enumerated examples address employees’ right to associate in the workplace in order to form a union and negotiate a collective bargaining agreement with their employer.
The lower courts’ interpretation of “other concerted activities” would also contravene the NLRA’s statement of purpose, which is to avoid “industrial strife” (such as strikes and lock-outs) by promoting “the friendly adjustment of industrial disputes,” chiefly by protecting employees’ “full freedom of association” in the workplace, so that they may achieve an “equality of bargaining power” with their employer “for the purpose of negotiating the terms and conditions of their employment . . . .” 29 U.S.C. § 151 (“Findings and declaration of policy”) (emphasis added). Clearly, the NLRA’s stated purpose is to protect employees’ freedom of association in the workplace, not in a courtroom or before an arbitrator, so that they may negotiate their differences, not litigate over them. Group legal action would be antithetical to this broad aspirational goal of achieving industrial peace through negotiation and compromise.
NELF also argued that there are other clear indications in the NLRA that Congress did not intend to endow employees with a nonwaivable right of group legal action against their employer. Most conspicuously, Congress chose the phrase “concerted activities,” as opposed to “concerted legal action” or even just “concerted action”--phrases that could entail the right to sue. When Congress wants to protect or proscribe certain conduct, it uses the word “activity,” as it has done here. But when Congress wants to create a right to sue, it generally uses the word “action,” whether by itself or in such phrases as “civil action” or “cause of action.” (And, in some instances, Congress has used both words--“activity” and “action”--in the same statutory section, precisely to distinguish between regulated conduct (the activity) and a right to sue over that regulated conduct (the action).) This point is reinforced by the fact that the NLRA does not provide employees with a private right of action against their employer. Instead, Congress saw fit to delegate exclusive enforcement powers to the NLRB to prosecute claims of unfair labor practices. See 29 U.S.C. § 160(a) (“Powers of Board generally”) (“The Board is empowered, as hereinafter provided, to prevent any person from engaging in any unfair labor practice . . . .”). It is unlikely, then, that Congress would have intended the term “other concerted activities” to include group legal action when Congress did not even allow employees to sue on their own behalf. Moreover, the NLRA was enacted in 1935, decades before the invention of the modern-day, Rule 23 class action, in 1966. Thus, it is unlikely that Congress would have considered group legal action as a form of “concerted activity” in 1935, since there was no such procedural mechanism as we now understand it.
The NLRA’s legislative history also works against the employees’ and NLRB’s position. “Concerted activity” was a loaded word with a specific historical meaning when the NLRA was enacted. In the years preceding the NLRA’s passage, workers were prosecuted under state criminal conspiracy laws, and even under the Sherman Antitrust Act, whenever they acted “in concert” in the workplace, whether to unionize or engage in any other kind of collective conduct. And so the term “concerted activities,” which appeared in two other Depression-era federal labor statutes immediately preceding the NRLA, was intended to provide affirmative legal protection to collective workplace conduct that had been sanctioned in earlier years.
Finally, NELF argued that the Seventh and Ninth Circuits’ reliance on Eastex, Inc. v. NLRB, 437 U.S. 556 (1978), is entirely misplaced. Eastex did not involve the FAA, did not involve a dispute over the NLRA’s “other concerted activities” language, and it did not involve any judicial action taken by employees. Instead, that case decided the unrelated issue whether the purpose or object of certain concerted workplace activity satisfied the NLRA’s “other mutual aid or protection” requirement. In particular, employees wanted to distribute a union newsletter in the workplace, during nonworking hours, urging employees to oppose recent legislative and executive action on wage and other work-related matters. The Court held that the political purpose of this concerted workplace activity did satisfy the “other mutual aid or protection” requirement.
Does the Dodd-Frank Act’s whistleblower anti-retaliation provision apply to employees who have not reported a violation of the securities laws to the Securities Exchange Commission, when the Act defines a “whistleblower” as an individual who “provide[s] information relating to a violation of the securities laws to the Commission?”
NELF, joined by Associated Industries of Massachusetts, filed an amicus brief in the certiorari and merits stages of this case, on behalf of the employer, Digital Realty Trust. The case is now scheduled for oral argument on November 28. At issue is the meaning of a subsection of Dodd-Frank’s “Securities whistleblower incentives and protection” section, 15 U.S.C. § 78u-6, which protects “a whistleblower [from retaliation in the workplace] . . . because of any lawful act done by the whistleblower . . . in making disclosures that are required or protected under the Sarbanes-Oxley Act [SOX] . . . .” 15 U.S.C. § 78u-6(h)(1)(A)(iii). That same section of Dodd-Frank defines a “whistleblower” as “any individual who provides . . . information relating to a violation of the securities laws to the [SEC] . . . .” 15 U.S.C. § 78u-6(a)(6). SOX, however, affords protection to the employee who only reports a potential securities law violation to his employer. And the Ninth Circuit in this case interpreted the disputed subsection of Dodd-Frank to mean that Dodd-Frank also protects the employee who only reports to his employer.
This case matters to NELF and its supporters because an employee who sues for whistleblower retaliation under Dodd-Frank is entitled to very generous remedies--a six-to-ten year limitations period, double back pay damages, and a direct right of action in federal court, without having to exhaust any administrative remedies. 15 U.S.C. § 78u-6(h)(1)(B)-(C). Dodd-Frank also awards the whistleblower a substantial monetary bounty if her reporting to the SEC results in a successful administrative or judicial enforcement action by that agency. § 78u-6(b). 
The lower court erred because it abandoned Dodd-Frank’s clear provision that a “whistleblower” is an employee who reports to the SEC. This definition must apply whenever the word “whistleblower” appears in the disputed subsection of Dodd-Frank. And applying this definition to the disputed language yields only one meaning. The employee who reports information to the SEC is protected when he also reports that information to his employer and then suffers retaliation because of his internal reporting.
This subsection of Dodd-Frank therefore protects an employee who has reported to both the SEC and her employer, when the employer does not know that the employee has reported to the SEC. And this subsection is necessary because, without it, such an employee would not be protected under Dodd-Frank. She would only be protected under SOX for her internal reporting. By affording Dodd-Frank protection under these circumstances, then, the disputed subsection encourages an employee to report to both the SEC and her employer.
The Ninth Circuit apparently rejected the statute’s plain meaning. In that court’s view, the disputed language identified a set of circumstances that was “narrow to the point of absurdity . . . .” Appendix to Petitioner’s Petition for Certiorari 8a. But it is not for the courts to pass judgment on congressional line drawing of this sort. Nor is it a court’s role to conform an unambiguous statute such as this one to the court’s own notion of what Congress may have had in mind.
But this is precisely what the Ninth Circuit did here, when it “interpreted” the disputed language to protect employees who are not Dodd-Frank whistleblowers because they have not reported to the SEC. The Ninth Circuit impermissibly substituted the word “employee” for the defined term “whistleblower.” And Dodd-Frank’s specific definition of a whistleblower excludes all other possible meanings of that term. Moreover, Congress chose the word “employee” in SOX’s whistleblower provision but did not do so when it later enacted Dodd-Frank. It must be presumed that this choice was deliberate.
In any event, it is hardly absurd for Congress to assume that an employee may choose to report to both the SEC and her employer, and that the employer may not know that such an employee has reported to the SEC. Consistent with SOX’s purposes, an employee may wish to report a potential violation to her employer, for speedy internal resolution of the matter. But, consistent with Dodd-Frank’s purposes, that same employee may also wish to alert the SEC to the matter, to secure her right to pursue Dodd-Frank’s special financial incentives (a potentially large bounty) and legal protection (including the right to recover double back pay). And the employer may not know that such an employee has reported to the SEC because Dodd-Frank and the SEC regulations both preserve the confidentiality of a whistleblower’s identity.
If allowed to stand, the Ninth Circuit’s decision would certainly eviscerate Dodd-Frank’s definition of a whistleblower. But in so doing, the lower court’s approach would also contravene Congress’ purpose of linking Dodd-Frank’s special financial incentives with its enhanced remedial protection. In the lower court’s view, an employee can sue for retaliation under Dodd-Frank even though he is not eligible for a bounty under that statute, because he has not reported to the SEC. But Dodd-Frank’s incentives and remedies are not severable from each other. Instead, they go hand in hand. And they are only available to the employee who has earned them both, by reporting information to the SEC.
 In particular, Dodd-Frank’s whistleblower provision creates the SEC Investor Protection Fund, § 78u-6(g), and requires the SEC to pay employees between 10% and 30% of the penalties collected by the SEC in a “covered judicial or administrative action,” which is defined as “any judicial or administrative action brought by the Commission under the securities laws that results in monetary sanctions exceeding $1,000,000.” 15 U.S.C. § 78u-6(b).
Cullinane v. Uber Technologies, Inc. (United States Court of Appeals for the First Circuit). - Pending Case
Arguing that an online business should be allowed to enforce its mandatory arbitration policy and class action waiver against a customer, when those contract terms are viewable by clicking on a clearly marked hyperlink to the business’s “terms and conditions,” and the business has clearly provided that the customer is deemed to accept those terms once she has created an account.
On October 2, the First Circuit heard oral argument in this case, which raises an important issue of online contract formation that arises from a large and growing category of online standardized consumer agreements. At issue is whether a business has provided the online customer with sufficient notice of its mandatory arbitration policy and class action waiver, and whether the customer has consented to those terms, when the arbitration provisions are viewable only by clicking on a hyperlink to the agreement’s terms and conditions, and the customer is not required to check an online box indicating that she has accepted those terms. Instead, the business has clearly provided that the customer will be deemed to have accepted all of the contract terms once she has created an online account.
The plaintiff and putative lead class representative, Rachel Cullinane, argues, so far without success, that she had inadequate notice of Uber’s arbitration provisions because they were viewable only in a separate document, and because Uber did not require her to state affirmatively that she had accepted those terms. In essence, she argues that Uber structured the online sign-up process to discourage her from finding out about Uber’s arbitration policy. Consequently, Cullinane filed a putative class action in court, rather than submit her underlying claim to individual arbitration. (In her underlying claim, she alleges that Uber imposed fictitious fees that were hidden in charges for legitimate local tolls to and from Logan Airport, in violation of Mass. G. L. c. 93A.)
NELF filed an amicus brief in support of Uber, arguing that, under well-established principles of Massachusetts contract law, a customer has indeed consented to a business’s arbitration policy once the customer has indicated her consent to all of the terms contained in the agreement, in the manner of acceptance defined by the business. It is well settled in Massachusetts that a party who enters into a contract is bound by all of its terms, whether she has read them or not. That is, the contracting party is presumed to know all of the agreement’s terms and has a duty to read them. This duty applies equally to contract terms that are incorporated by reference in that agreement, such as Uber’s arbitration provisions that are viewable through a hyperlink in this case. It is also well settled in Massachusetts that the offeror, here Uber, controls the manner of acceptance. Accordingly, Cullinane accepted Uber’s arbitration policy once she completed the online registration process, because Uber clearly stated that completion of that process would indicate her acceptance of Uber’s contract terms.
In short, NELF argues that Massachusetts law treats contract formation as an objective process, in which the contracting party’s actual state of mind is irrelevant once that party has manifested her consent to the terms of an agreement, in the manner of acceptance prescribed by the offeror. NELF points out that a decision in Cullinane’s favor would contravene these bedrock principles of contract formation. Such a decision would allow a consumer to evade her contractual responsibility to read and understand the agreement’s terms before she accepts them. She would then be free to attempt to undo the countless transactions that occur over the internet every day, by pleading ignorance of contract terms that she does not like. This, in turn, would disrupt and undermine free enterprise on the internet, to the financial detriment of the business community.
Worldwide TechServices v. Committioner of Revenue, et al. (Massachusetts Supreme Judicial Court) - Pending Case
Rejecting the Massachusetts Commissioner of Revenue’s Position That, Under the Massachusetts Sales Tax Statutes, a Purchaser of Goods Who Believes She Has Been Erroneously Charged A Sales Tax May Sue a Vendor For Breach of Contract To Recover The Amount Paid
This case arises from litigation related to the long-running dispute between Dell (the plaintiff in this case is a Dell subsidiary) and Massachusetts purchasers of Dell computers who allege allege that Dell improperly charged them a Massachusetts sales tax on service contracts that they purchased with their Dell computers. Initially, the purchasers attempted to bring a Mass. G.L. c. 93A class action in the Massachusetts courts. NELF was heavily involved in supporting Dell’s eventually successful arguments before the Massachusetts Supreme Judicial Court that the dispute was subject to the service contracts’ mandatory arbitration provision and class action waiver. Accordingly, the case was ordered to arbitration on an individual basis, and Dell prevailed before the arbitrator.
While the challenge to Dell’s collection of sales taxes was pending in court and, then, in arbitration, Dell, as a protective measure, applied to the Massachusetts Department of Revenue (“DOR”) for an abatement of the disputed sales taxes so that, if it lost on the merits, it would have funds to pay back the sales taxes it had collected. (This was done because, as required under Massachusetts law, Dell had already remitted to the Department of Revenue the disputed sales taxes that it had collected from its purchasers.) When the DOR denied the abatement request, Dell appealed that decision to the Massachusetts Appellate Tax Board (“ATB”). While Dell’s appeal was pending before the ATB, one of the plaintiffs in the c. 93A action, Econo-Tennis Management Corporation, d/b/a Dedham Health and Athletic Complex (“Dedham”), successfully intervened in the ATB appeal. The ATB issued a preliminary decision finding that the sales tax had been wrongly collected by Dell.
Dell, having won in the arbitration, moved to dismiss its ATB appeal, with which motion the DOR concurred. The ATB dismissed the appeal over Dedham’s objection.
The central issue before the Massachusetts court in this appeal is whether the ATB was correct in dismissing Dell’s appeals, even though Dedham objected.
NELF’s participation was requested because the DOR, in its brief supporting the dismissal of the cases, argued that, even if the ATB appeals were dismissed, Dedham still had a remedy. The DOR claimed that Dedham had a statutory right to sue Dell for the improper sales tax under a theory of breach of contract. Dell’s attorneys asked NELF to file an amicus brief disputing the DOR’s position on this issue.
In its amicus brief, NELFargued that neither the Massachusetts sales tax statutes nor the common law of agency authorizes a purchaser to sue a vendor to recover an allegedly erroneous sales tax, which the vendor has collected as an agent of the Commonwealth. Nowhere does the relevant provision of the sales tax code, G. L. c. 64H, § 3(a), mention or even suggest any right of action by the purchaser against the vendor. By contrast, the plain language of § 3(a) protects the rights of the vendor, not the purchaser. Section 3(a) requires the purchaser to reimburse the vendor for the sales tax that the vendor must pay to the Commonwealth under § 2 of the same statute. Simply put, the sales tax statute establishes the respective obligations of the vendor and the purchaser in the payment of a sales tax to the Commonwealth. The statute creates a steady stream of revenue flowing from the purchaser through the vendor to the Commonwealth, and nothing more.
Indeed, the SJC recognized in an earlier stage of this very case that the sales tax statute places the vendor in the role of the Commonwealth’s agent or trustee, for the purpose of collecting a sales tax from the purchaser and remitting it to the Commonwealth, as Dell has done here. See Feeney v. Dell Inc., 454 Mass. 192, 213 (2009) (“[V]endors who, on behalf of the Commonwealth, compute, collect, and file sales tax returns, and remit full sales tax for each customer transaction[,] serve as trustees for the Commonwealth’s retail sales taxes . . . .”) (citation and internal quotation marks omitted). Moreover, the Department of Revenue in this case expressly instructed Dell that, based on the Department’s own regulation, Dell had the duty to collect the disputed sales tax.
Under these circumstances, it is black letter law that Dell, as an agent acting on behalf of the Commonwealth, the known principal, cannot be held liable for any acts performed within the scope of its authority. This foundational principle of agency law recognizes that Dell acted merely as a conduit between the purchaser and the Commonwealth, for the purpose of delivering the sales tax to the Commonwealth. Therefore, any dispute over this tax collection is between the Commonwealth (the principal) and the purchaser (the third party).
NELF also argued that adoption of the DOR’s position would contravene the purposes of the tax statutes and would lead to untenable results. In particular, permitting purchasers to sue vendors every time there is a sales tax dispute would contravene the basic purpose of the sales tax statute, which is to secure a reliable stream of revenue for the Commonwealth. Recognizing such a right of action would actually encourage vendors to under-collect a sales tax whenever the tax law is unclear (a not infrequent occurrence), to avoid their potential exposure to civil liability. As a result, the Commonwealth could suffer a decrease in the amount of sales tax collected. And vendors would be forced to make the impossible choice of incurring either state penalties for under-collection or civil liability for over-collection. The Legislature could not have intended such absurd and draconian results.
In addition, the Commissioner’s position would create the untenable result of allowing purchasers to sue vendors over a sales tax after the expiration of the time period for seeking an abatement of the sales tax. Specifically, an application for abatement must be made within one to three years of the disputed tax assessment, under G. L. c. 62C, § 37. Under the Commissioner’s approach, however, a purchaser would have four or six years to sue the vendor over the validity of the same sales tax. See G. L. c. 106, § 2-725(1)(four-year statute of limitations for sale of goods); G. L. c. 260, § 2 (six-year statute of limitation for express or implied contract claim). As a result, a vendor could be exposed to liability over a sales tax long after the vendor’s right to recoup the sales taxes from the Commonwealth has expired.
And finally, the Commissioner’s position would allow a court to decide in the first instance whether a tax abatement is due. This would deprive both DOR and the ATB of their primary jurisdiction to decide such tax issues.
 That section of the sales tax statute provides, in relevant part:
[R]eimbursement for the [sales] tax hereby imposed [on the vendor under G. L. c. 64H, § 2] shall be paid by the purchaser to the vendor . . . and such tax shall be a debt from the purchaser to the vendor, when so added to the sales price, and shall be recoverable at law in the same manner as other debts.
G. L. c. 64H, § 3(a).
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