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Herrington v. Waterstone Mortgage Corp.

United States District Court, W.D. Wisconsin

April 25, 2019

PAMELA HERRINGTON, individually and on behalf of all other similarly situated persons, Plaintiffs,



         Plaintiff Pamela Herrington, a former loan originator for defendant Waterstone Mortgage Corporation, filed this class and collective action against defendant for wage and hour violations and breach of contract. In an order entered in March 2012, I concluded that plaintiff's claims had to be resolved through arbitration under an agreement between the parties. Dkt. #57. However, I concluded that the class action waiver in the parties' arbitration agreement was unenforceable under the National Labor Relations Act. The case was closed administratively and the parties proceeded with a collective arbitration. Ultimately, the arbitrator awarded more than $10 million in damages and fees to plaintiff and 175 similarly situated employees. The arbitration award was confirmed in December 2017, dkt. #133, and appealed by defendant.

         While defendant's appeal was pending, the United States Supreme Court decided Epic Systems Corp. v. Lewis, 138 S.Ct. 1612 (2018), in which it held that the inclusion of a class action waiver in an arbitration agreement did not violate the National Labor Relations Act. Id. at 1624-29. As applied to this case, the Supreme Court's decision in Lewis means that the waiver in plaintiff's arbitration agreement with defendant does not violate the NLRA. However, plaintiff contends that Lewis did not resolve the question whether the parties' arbitration agreement authorized the collective arbitration despite the waiver. In the court of appeals, plaintiff contended that when “read as a whole, ” her agreement with defendant affirmatively permits class or collective arbitration of her claims despite the presence of the waiver's contrary indication otherwise. She also argued that because the arbitrator was acting within his authority to interpret the contract when he concluded that the agreement permitted class arbitration, the court could not reach a contrary conclusion.

         The court of appeals concluded that because “the availability of class or collective arbitration is a threshold question of arbitrability, ” the question had to be resolved by the district court, not the arbitrator. Herrington v. Waterstone Mortgage Corp., 907 F.3d 502, 504 (7th Cir. 2018). The court then described plaintiff's interpretation of the agreement as permitting class or collective arbitration as “weak” and “implausible, ” but nonetheless remanded the case with the instruction to this court to “evaluate [plaintiff's] contract with defendant] to determine whether it permits class or collective arbitration.” Id. at 503, 506.

         The court of appeals stated:

On remand, the district court should conduct the threshold inquiry regarding class or collective arbitrability to determine whether Herrington's agreement with Waterstone authorizes the kind of arbitration that took place. If the district court determines that the agreement allows such an arbitration, our decision leaves the district court free to confirm the award. If, however, the district court determines that Herrington's agreement with Waterstone requires single-plaintiff arbitration, it should vacate the award and send the dispute to the arbitrator for a new proceeding.

Id. at 511. Plaintiff moved the court of appeals for rehearing, by asking it to clarify whether, on remand, the district court could also consider (1) whether the parties had delegated the class arbitrability question to the arbitrator; (2) whether defendant had waived its right to have the arbitrability question decided by the court; and (3) whether plaintiff's individual award should be affirmed. The court of appeals denied the petition for rehearing without opinion.

         After the case was remanded, the parties were given the opportunity to brief the question whether their agreement authorizes class or collective arbitration despite the valid waiver indicating otherwise. Dkt. #159. Plaintiff then filed a brief in which it asked the court to resolve the following matters:

1. Whether the parties' arbitration agreement delegates questions of arbitrability to the arbitrator by incorporating the rules of the American Arbitration Association;
2. Whether defendant waived its right to have the district court decide the class arbitration question by asking the arbitrator to decide the question;
3. Whether the parties' arbitration agreement permits class arbitration despite the valid class waiver;
4. Whether the court should confirm plaintiff's individual arbitration award;
5. Whether the court should confirm the arbitration awards of 75 opt-ins whose arbitration agreements permitted joinder or collective proceedings and 37 opt-ins who never signed arbitration agreements at all;
6. Whether the court should permit 154 opt-ins whose agreements allow them to pursue their claims in court to intervene in this action and file an amended complaint ...

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