An Epic (and Compounded) Mistake in Epic Systems

 

In my 2015 article, Justice Scalia’s Hat Trick and the Supreme Court’s Flawed Understanding of Twenty-First Century Arbitration, I pointed out a factual mistake in the majority opinion in American Express v. Italian Colors, 133 S. Ct. 2304 (2013). In that opinion, Justice Scalia wrote:

A pair of our cases brings home the point [that a class action waiver does not equate to ineffective vindication]. In [Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991)], we had no qualms in enforcing a class waiver in an arbitration agreement even though the federal statute at issue, the Age Discrimination in Employment Act, expressly permitted collective actions.

Thus, at least in part, Justice Scalia justified the Italian Colors holding to enforce a class action waiver on the ground that the Court had done this before.  However, the Court did NOT enforce a class action waiver in Gilmer. Rather, as I wrote in 2015:

Unlike what Justice Scalia wrote in Italian Colors, the question of the availability of a class action for the employee was never an issue in Gilmer. In fact, the parties did not enter into a class action waiver in that case. The Fourth Circuit quoted the arbitration agreements governing the parties’ dispute; those agreements said nothing about a class action waiver.  Rather, the NYSE as a forum had a policy expressed through a rule that it would not accept class arbitrations; investors or employees retained the right to bring those claims in court.

In the most recent Supreme Court case enforcing a class action waiver, Epic Systems Corp. v. Lewis, 138 S.Ct. 1612 (2018), Justice Gorsuch, writing for the majority, compounded Justice Scalia’s mistake by repeating it. He justifies enforcing a collective action waiver for employees on the ground, in part, that the Court did this before in Gilmer, and cites Italian Colors, which, in turn, cited Gilmer.

Now the Supreme Court TWICE has written that Gilmer involved enforcement of a class action waiver in a securities case when, in fact, no class action waiver existed and the employees retained the right to bring their class claims in court. Indeed, to this day, the Securities and Exchange Commission (through its power to regulate securities industry arbitration) maintains that policy of not permitting class arbitration in the FINRA forum and preserving the right of customers of broker-dealers as well as associated persons of those firms to bring their class and collective claims to court.

Perhaps the Court is adopting a current political maneuver: if you repeat a fallacy often enough, it becomes true?

2 thoughts on “An Epic (and Compounded) Mistake in Epic Systems”

  1. Very sloppy research by Supreme Court law clerks. Twice!! They probably don’t understand arbitration, but there was absolutely no excuse the second time after you had previously pointed out this error.

  2. Great catch, Jill! The Court could very easily have done without this language and still gotten to the same place – Gilmer can easily justify the holding, even without tying it into class action arbitration jurisprudence.

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