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April 18, 2014

Second Circuit Upholds Enforceability of Arbitration Agreements that Bar Title VII Class Actions, Finding that there is no Substantive Statutory Right to Pursue a Pattern-or-Practice Claim

On March 21, 2013, the Second Circuit issued its opinion in Parisi v. Goldman Sachs & Co., Case No. 11-5229, reversing a decision from the Southern District of New York, and holding that arbitration agreements which preclude Title VII class actions are enforceable. In reaching this decision, the Second Circuit affirmed the “liberal federal policy in favor of arbitration” and found that “there is no substantive statutory right to pursue a pattern-or-practice claim” as a class action.

In September 2010, Plaintiffs commenced a class action in the Southern District of New York, alleging that Goldman Sachs had engaged in a systematic policy, practice or pattern of discrimination against female employees. Goldman Sachs moved, pursuant to the Federal Arbitration Act, to compel individual arbitration under Plaintiff Parisi’s employment agreement which required the arbitration of “any dispute, controversy or claim arising out of or based upon or relating to Employment Related Matters.” Magistrate Judge Francis denied the motion and, while he found that the arbitration agreement covered Plaintiffs’ employment discrimination claims and did not provide for arbitration on a class-wide basis, he concluded that the agreement’s preclusion of class arbitration would make it impossible for Parisi to arbitrate a Title VII pattern-or-practice claim and, as a result, the agreement effectively operated as a waiver of a substantive right under Title VII. The District Court adopted Magistrate Francis’ opinion.

On appeal, the Second Circuit determined that the question is whether Congress intended for Title VII pattern-or-practice claims to be arbitrable. While Plaintiff argued that she has a substantive right to pursue pattern-or-practice claims, the Second Circuit held otherwise. The Second Circuit found that “there is no substantive statutory right to pursue a pattern-or-practice claim . . . [and that] in Title VII jurisprudence ‘pattern-or-practice’ simply refers to a method of proof and does not constitute a ‘freestanding cause of action.’” In support of its conclusion, the Second Circuit, relying upon the Supreme Court’s decision in Int’l Bd. of Teamsters v. United States, 431 U.S. 343 (1977), observed that “references to ‘pattern-or-practice’ in the statute do not confer a particular right per se . . . .” In conclusion, the Second Circuit held that “we see no reason to deviate from the liberal federal policy in favor of arbitration and conclude that the district court erred in denying the motion to compel arbitration.”

The Second Circuit’s opinion is another positive development for employers in connection with ongoing battle over the enforceability of arbitration agreements. In light of this ruling, employers can be more confident that their arbitration agreements, if sufficiently broad, will bar Title VII class actions, including pattern-or-practice claims brought by employees under Title VII.

Copyright © 2014, Sheppard Mullin Richter & Hampton LLP.

About the Author

Associate

Sean Kirby is an associate in the Labor and Employment Practice Group and a member of the Business Trial Practice Group in the firm's New York Office.

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