Ninth Circuit Is the Latest Circuit Court to Reject Horton Analysis Regarding Class Action Waivers

Last week, the United States Court of Appeals for the Ninth Circuit became the latest federal appellate court, joining the Eighth and Second Circuits, to reject the National Labor Relations Board’s analysis in D.R. Horton, Inc.

In D.R. Horton, the NLRB ruled that a mandatory class action waiver provision in an employment arbitration agreement is unenforceable because it violates an employee’s rights under Section 7 of the National Labor Relations Act to engage in concerted activity, which, the NLRB held, includes the right to lead or be part of a class. Plaintiffs’ class action attorneys have attempted to rely on D.R. Horton to invalidate class action waiver provisions, but almost all of the courts that have considered the argument have rejected it, including all three federal appellate court that have addressed the issue.

First, the Eighth Circuit in Owen v. Bristol Care, Inc. rejected the D.R. Horton analysis, stating that it “owed no deference” to the NLRB’s interpretation of the Federal Arbitration Act (FAA) or Supreme Court precedent. Moreover, the court noted, “nearly all of the district courts to consider the decision have declined to follow it.” Likewise, on August 9, 2013, in Sutherland v. Ernst & Young LLP, the Second Circuit also declined to follow the D.R. Horton.

With its decision in Richards v. Ernst & Young, LLP, the Ninth Circuit became the latest circuit court to reject D.R. Horton. Although the Ninth Circuit found that the plaintiff failed to preserve the D.R. Horton argument, it went on to reject the NLRB’s reasoning. The court noted that “the only court of appeals, and the overwhelming majority of the district courts, to have considered the issue have determined that they should not defer to the NLRB’s decision in D.R. Horton because it conflicts with the explicit pronouncements of the Supreme Court concerning the policies undergirding the Federal Arbitration Act, 9 U.S.C. §§ 1-16.” The court also quoted the U. S. Supreme Court’s recent decision in American Express Co. v. Italian Colors Restaurant, which reiterated that “‘courts must rigorously enforce arbitration agreements according to their terms’ and that this ‘holds true for claims that allege a violation of a federal statute, unless the FAA’s mandate has been overridden by a contrary congressional command.’” In Richards, the Ninth Circuit concluded that Congress did not override any provision in the FAA when it enacted the NLRA.

D.R. Horton is currently on appeal before the Fifth Circuit Court of Appeals, and a decision could be issued any day. This latest decision by the Ninth Circuit increases anticipation of the Fifth Circuit’s decision.

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Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.