In an amicus brief to the Ninth Circuit Court of Appeals in California in the case Sakkab v. Luxottica Retail North America, Inc., retailers argue that a recent decision by the Court's panel to permit a lawsuit akin to a class action to move forward in lieu of individual arbitration threatens the goals of bilateral arbitration as envisioned by the Federal Arbitration Act (FAA), and therefore, warrants reconsideration by the full Court. The brief was filed jointly by the Retail Litigation Center and the Chamber of Commerce.
This case comes as a result of Sakkab's attempt to circumvent an agreement to arbitrate by filing a representative Private Attorneys General Act (PAGA) claim, which is materially identical to a class action, despite waiving his right to participate in such litigation.
"The panel's decision incentivizes individuals to engage in costly, complex, and unnecessary civil litigation as oppose to resolving disputes via arbitration," said Deborah White, president of the RLC and RILA's executive vice president and general counsel. "Retailers prefer to resolve issues quickly and fairly, and this decision sets a dangerous that undermines the goals of the FAA."
According to the brief:
"The panel majority's decision threatens to disrupt existing arbitration agreements and to erode the benefits of bilateral arbitration as an alternative to litigation."
"If allowed to stand, the panel majority's decision will open a gaping loophole in the FAA. Employees will plead their individual wage and hour claims as representative PAGA claims, thereby permitting them to end-run their otherwise binding agreements to arbitrate all employment-related claims on an individual basis."
The brief concludes:
"The Supreme Court has stated clearly that the FAA cannot be circumvented with mere formalities, such as by calling representative actions 'PAGA claims' instead of 'class actions.' En banc review is urgently needed to bring this Court's law in line with those controlling principles."
The brief, drafted by Sullivan & Cromwell LLP's Brendan Cullen and Jeffrey Wall, can be read here.
The Retail Litigation Center is a public policy organization that identifies and engages in legal proceedings which affect the retail industry. The RLC, whose members include some of the country's largest retailers, was formed to provide courts with retail industry perspectives on significant legal issues, and highlight the potential industry-wide consequences of legal principles that may be determined in pending cases.