Arbitration, Class Action Waivers, Class Actions, Class Arbitration, Employment Litigation

D.R. Horton Déjà Vu: Will NLRB be Forced to Respect Class Action Waivers for Employers Doing Business in 5th Circuit?

24258913As it stands, the National Labor Relations Board (“NLRB”) has taken the position that class action waivers in individual employee/employer arbitration agreements are illegal and the agency continues to invalidate these agreements even though the Fifth Circuit Court of Appeals has held that they are enforceable.  In D.R. Horton (2012), the NLRB invalidated class action waivers in individual employment agreements on the grounds that such waivers interfere with an employee’s rights to collective action provided by the National Labor Relations Act (“NLRA”).  The Fifth Circuit Court of Appeals disagreed and struck down the agency’s decision in D.R. Horton, Inc. v. NLRB, 737 F.3d 344 (5th Cir. 2013).  While this was a significant victory for employers, the NLRB asserts that it is not bound by Circuit Court of Appeals opinions and it will continue to strike down class waivers unless and until the U.S. Supreme Court rules against it on the issue.  The agency has reiterated its firm position several times, and explicitly reaffirmed its D.R. Horton ruling in Murphy Oil (2014).  As a result, companies like Murphy Oil that do business in the Fifth Circuit (TX, MS, LA) find themselves caught in a legal conundrum, having the NLRB strike down their arbitration agreements based on its D.R. Horton ruling despite having judicial approval for class action waivers.  As with Murphy Oil, these companies must seek judicial review to overturn the agency’s adverse decision even though D.R. Horton already was resolved by the court in their favor.  The tides could turn for companies doing business in the Circuit, however, if Murphy Oil prevails in its current appeal before the Fifth Circuit.  Murphy Oil has requested that the Fifth Circuit either hold the NLRB in contempt for refusing to honor the court’s D.R. Horton ruling, or issue a Writ ordering the NLRB to comply.  The August 31, 2015 oral arguments reveal that there may be questions regarding the scope of the Fifth Circuit’s authority to put an end to this nonsensical cycle, but members of the panel certainly expressed their distaste for the agency’s practices and noted the tension between executive and judicial branch authority raised by this case.

“Look, don’t argue D.R. Horton to us” 

One point resonated throughout the Murphy Oil oral arguments – this issue already was decided by the Fifth Circuit in D.R. Horton.  There is nothing to distinguish Murphy Oil from D.R. Horton, yet the parties stood before the Fifth Circuit presenting the exact same issue…déjà vu.  Murphy Oil asserted that in this case “the decision was written before the appeal was even filed,” given the principle of stare decisis and the NLRB’s acknowledgement that Murphy Oil’s case is indistinguishable from D.R. Horton.  Judge Jones went so far as to admonish the NLRB for even attempting to argue the substantive points underlying its position, stating:

Look, don’t argue D.R. Horton to us, because you’ve argued it in your brief and we’re bound by it, and I don’t think you can expect us to be writing against the binding precedent of this court. Now my colleagues might want to hear all of these arguments…they will fall on my deaf ears as a matter of stare decisis.

In response, the NLRB noted that this is the reason the agency requested an en banc panel to hear this matter, but that request had been denied.  The NLRB believes that the Fifth Circuit’s D.R. Horton decision “relies on a principle of FAA jurisprudence that the U.S. Supreme Court has not yet addressed.”  Nonetheless, the outcome of Murphy Oil likely will come as no surprise.  But, what of future cases presented to the Fifth Circuit by Murphy Oil or other companies if the NLRB persists?  Murphy Oil noted the recent appeal filed by Neiman Marcus against the NLRB.  Can the court put an end to the “circus of uncertainty,” as it has been coined by Murphy Oil?

Preventing the “Circus of Uncertainty” – An Attack on Executive Authority?

In addition to requesting that the NLRB’s decision be overturned, Murphy Oil petitioned the Fifth Circuit to restrain the NLRB from continuing its practice of striking down arbitration agreements with class waivers in contravention of the Fifth Circuit’s D.R. Horton decision.  Citing the Contempt Statute, 18 U.S.C. §401 and the All Writs Act, 28 U.S.C. § 1651 as authority, Murphy Oil urged the court to grant the extraordinary remedy given the NLRB’s “abundantly explicit” defiance of the court’s D.R. Horton decision.  But, would this be “a broadside attack” on executive authority? Judge Jones inquired of Murphy Oil.

During arguments the panel probed whether Murphy Oil seeks an order that pertains only to the NLRB’s treatment of Murphy Oil or whether it seeks a broader order that would impact other companies as well.  While Murphy Oil’s counsel stated that his interest is in protecting the interest of his client, the court noted that Murphy Oil’s petition does seek a broader scope of relief.  Should and could such an order extend to all employers who operate within the three states in the Fifth Circuit, they discussed.  This question is complicated by the venue provisions of the NLRA, which allow companies to appeal to the Circuit Courts in the jurisdictions in which they do business, as well as the D.C. Circuit.  A company operating in multiple circuits can choose where to appeal, making it difficult to predict whether an appeal ultimately would end up before the Fifth Circuit.  The Fifth Circuit currently is the only one to address the issue presented by D.R. Horton, although the parties noted a pending case in the Eighth Circuit.  While it can be assumed that companies that are able to appeal in the Fifth Circuit will choose to do so for the favorable law, there is no guarantee.  In fact, one member of the Murphy Oil panel inquired as to why Murphy Oil did not choose to file in a different circuit to facilitate the possibility of creating a circuit split and hasten U.S. Supreme Court review of the issue.

“It just seems to me an abuse of companies” – A Matter of Perspective

The NLRB stood its ground in the midst of the court’s criticisms of its practices, which include striking down these arbitration agreements despite D.R. Horton and seeking attorneys’ fees from these companies because in the NLRB’s view the attempt to enforce these arbitration agreements seeks an illegal end.  Judge Jones verbalized her disdain for the NLRB’s tactics:

So, basically you’re saying that any company that has this kind of agreement is vulnerable to having to defend something before an ALJ…before the Board, spend thousands of dollars doing that and then if they transact business in the Fifth Circuit come and file a petition for review costing thousands of dollars more?…It just seems to me an abuse of companies when you’ve received an adverse decision in a Circuit Court to pummel them…and make them litigate back to the Circuit that’s already decided in their favor….So basically everybody’s gonna to have to pay the penalty until you either vindicate or have your policy repudiated, is that right?

The NLRB’s counsel “disagree[d] with the characterization that they would have to pay the penalty,” and stated that “if they want to continue…to impose arbitration agreements that deprive their employees of their core Section 7 substantive right to engage in concerted activity, then the Board will maintain its well established principle that these agreements cannot be enforced.”  So, it seems we may be at an impasse.  We will be watching for the Fifth Circuit’s ruling and whether it will offer a reprieve for Murphy Oil and other companies doing business in the Circuit.

Tony Lathrop

About Tony Lathrop

Tony Lathrop brings experience and a high level of analytical ability, professional credibility and creativity to handling litigation matters. He rigorously represents his clients' interests in a diverse range of claims and actions. A certified mediator, Mr. Lathrop has extensive experience representing business clients in mediation. His service to the legal profession in North Carolina has allowed him to develop relationships across the state that benefit the firm's clients.

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