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Sixth Circuit Continues to Expand Class Action Waivers, Following the Supreme Court's Lead

The U.S. Supreme Court's ruling in Epic Systems Corp. v. Lewis was extended by the U.S. Court of Appeals for the Sixth Circuit yesterday in Gaffers v. Kelly Services, Inc. The court ruled that employers can lawfully require employees to resolve employment disputes through individual arbitration, and not through class or collective actions, notwithstanding the Fair Labor Standards Act (FLSA).

Although this case arose in the context of employment law, we anticipate that the ruling, like the prior Epic decision, will have implications for consumer financial services class actions, which frequently allege violations of one or more federal consumer protection statutes, such as the Equal Credit Opportunity Act, the Truth in Lending Act, the Electronic Fund Transfer Act, the Fair Credit Reporting Act, and the Fair Debt Collection Practices Act.

In a unanimous decision authored by Judge Amul Thapar, the Sixth Circuit found that a class action waiver in an arbitration agreement signed by employees was not rendered unenforceable by either the National Labor Relations Act (NLRA) or the FLSA. The decision was, in part, directly controlled by Epic, which held that class and collective actions are not "protected concerted activities" under the NLRA so that the NLRA does not bar enforcement of class action waivers under the Federal Arbitration Act (FAA).

The Gaffers court followed Epic's lead in holding that the FLSA is not an obstacle to enforcement of arbitration agreements. A plaintiff challenging enforcement of an individual arbitration agreement "faces a stout uphill climb," and must demonstrate "clear and manifest" congressional intent to make such an agreement unenforceable. The FLSA, like the NLRA and all other statutes considered by the Supreme Court, includes no such language demonstrating clear congressional intent overriding arbitration agreements or class waivers. Instead, the FLSA's authorization of collective action is permissive, not mandatory: lawsuits may be maintained "by any one or more employees . . . in behalf of himself or themselves and other employees similarly situated." 28 U.S.C. § 216(b). Without clear statutory language referencing arbitration, the Gaffers court rejected the plaintiff's arguments.

This ruling signals a continued expansion of Epic's rationale to class action claims brought by plaintiffs under other statutes. Despite this expansion of Epic, employers should still carefully draft or review and revise any employment arbitration agreements to ensure they will achieve the legal objectives intended.

Copyright © by Ballard Spahr LLP

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Kaplinksy, partner, New York, finance
Partner

Alan S. Kaplinsky is Co-Practice Leader of the firm's Consumer Financial Services Group, which has more than 115 lawyers. Mr. Kaplinsky devotes his practice exclusively to counseling financial institutions on bank regulatory and transactional matters, particularly consumer financial services law, and defending financial institutions that have been sued by consumers in individual and class action lawsuits and by government enforcement agencies. Visit Mr. Kaplinsky's profile in Wikipedia.

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Mark Levin, Ballard Spahr Law Firm, Litigation Attorney
Partner

Mark J. Levin is known for his work in complex commercial, insurance, and class-action litigation, with particular experience in consumer finance litigation, the structuring and enforcement of consumer arbitration clauses, and the defense of insurance companies in class actions. He testified in 2007 for the lending industry before a subcommittee of the U.S. House Judiciary Committee at an oversight hearing on whether mandatory arbitration in consumer contracts is fair to consumers.

Mr. Levin has represented banks in defending against the first private class-action lawsuits under the Federal Trust Indenture Act, nuclear power plant owners in a year-long arbitration against an international insurance consortium, and school districts in a major funding lawsuit to recover state funds. He is currently involved in defending banks, other lending companies, and insurance companies in a wide variety of consumer class actions, including numerous class actions brought under the Pennsylvania Unfair Trade Practices and Consumer Protection Law.

215-864-8235
Michelle McGeogh, Ballard Spahr Law Firm, Baltimore, Labor and Employment, Real Estate Litigation Attorney
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Michelle McGeogh has extensive experience in real estate litigation on behalf of property owners, investors, and developers. Michelle is experienced in a diverse range of real estate and commercial litigation, including commercial foreclosures, lender liability and landlord/tenant law. She regularly represents commercial landlords in state court proceedings and bankruptcy proceedings, and has defended landlords from breach of contract, negligence, and fraud claims. Michelle also represents financial institutions and special servicers of mortgage loans in disputes...

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David Mooers Putzer, Ballard Spahr Law Firm, Salt Lake City, Finance Litigation Attorney
Associate

David Mooers-Putzer represents a diverse array of clients in a variety of areas, including consumer financial and mortgage banking services, complex civil litigation, business governance disputes, public financing litigation, and land use and development disputes.

Before joining Ballard Spahr, Mr. Mooers-Putzer was a judicial law clerk for the Hon. Carolyn B. McHugh, U.S. Court of Appeals for the 10th Circuit.

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