Employee Arbitration: The Ninth Circuit Cries Uncle?

We’ve been writing a lot about arbitration of late, and so have the courts. Just today, the Ninth Circuit Court of Appeals issued an opinion on arbitration in the employee rights area reversing its own prior decisions, but it has potential application to many other areas of the law.

In Dorman v. Charles Schwab Corp., a dispute arose out of an arbitration requirement in an employee retirement plan. The plaintiff ignored this requirement, and instead filed a class action lawsuit in federal court. The U.S. District Court refused to send the case to arbitration, but the Court of Appeals reversed in a short opinion.

At its core, the question presented in Dorman was whether federal ERISA claims are arbitrable. Previously, the Ninth Circuit had held that they were not, but an intervening U.S. Supreme Court decision in American Express Co. v. Italian Colors Restaurant, 570 U.S. 228 (2013), cast doubt on that conclusion. The Amex case made it clear that there was nothing peculiar about federal statutory claims that rendered them non-arbitrable — provided that claimants have the ability to vindicate fully their statutory rights in the arbitration proceeding.

This case is important for several reasons. First, it represents an increasing willingness on the part of federal appellate courts to acknowledge and act in accordance with relentlessly strong signals from the U.S. Supreme Court that it means business about arbitration. This is so even in the Ninth Circuit, which could be seen as having offered some resistance to this trend. Second, it reinforces the need to have arbitration provisions that ensure participants are able to obtain the same kinds of relief that they might obtain in court. Third, it acknowledges that the important federal principle of strongly enforcing arbitration agreements sweeps in federal statutory claims that historically have been resolved by the courts.

We will keep an eye out for additional developments in this important area.