United States: Arbitration Agreements With Class and Collective Action Waivers Enforced

Last Updated: August 22 2013
Article by Ross H. Friedman and Thomas A. Linthorst

Second Circuit applies Supreme Court's recent ruling in American Express case and further rules that the FLSA collective action procedure can be waived and class and collective action waivers do not violate the NLRA.

In August 2013, the U.S. Court of Appeals for the Second Circuit handed down two decisions enforcing arbitration agreements with class and collective action waivers. These decisions continue the trend of enforcing arbitration agreements with class and collective action waivers in accordance with their terms.

On August 9, in Sutherland v. Ernst & Young LLP,[1] the Second Circuit applied the U.S. Supreme Court's recent decision in American Express Co. v. Italian Colors Restaurant[2] and reversed the district court's denial of Ernst & Young's (E&Y's) motion to compel arbitration. The Second Circuit ruled that the allegation that it would cost the plaintiff far more to litigate her claim for overtime under the Fair Labor Standards Act (FLSA) than the claim is worth was insufficient to avoid enforcement of the arbitration agreement. The court also ruled that the FLSA collective action procedure can be waived and refused to defer to the National Labor Relations Board's (NLRB's) decision in D.R. Horton that class and collective action waivers violate the National Labor Relations Act (NLRA).

On August 12, the court reaffirmed that ruling in Raniere v. Citigroup Inc.,[3] relying on Sutherland II and Amex II to reverse the district court's rulings that "(1) 'a waiver of the right to proceed collectively under the FLSA is unenforceable as a matter of law,' and (2) 'if any one potential class member meets the burden of proving that his costs preclude him from effectively vindicating his statutory rights in arbitration, the clause is unenforceable as to that class or collective[.]'"[4] 


Sutherland concerned an arbitration agreement entered into between E&Y and plaintiff Stephanie Sutherland, an auditor who sought to bring a putative class and collective action against the company for unpaid overtime. The arbitration agreement contained a waiver of the right to bring class or collective actions in arbitration or in court. Sutherland argued that the arbitration agreement was unenforceable for a host of reasons, including that she could not effectively vindicate her federal statutory rights under the FLSA through individual arbitration because the process would be too expensive. Specifically, Sutherland sought to recover only $1,867.02 in unpaid overtime and claimed that the costs and fees associated with prosecuting her claims on an individual basis would be nearly $200,000, dwarfing her potential recovery. The U.S. District Court for the Southern District of New York agreed, denying E&Y's motion to compel arbitration. In so doing, the district court relied heavily on the Second Circuit's holding in In re American Express Merchants' Litigation,[5] which invalidated an arbitration agreement barring class actions where plaintiffs would be unable to vindicate their statutory rights if that provision was enforced because individual arbitration would be prohibitively expensive.[6]

Following the district court's ruling in Sutherland I, however, the U.S. Supreme Court reversed the Second Circuit's Amex I decision, finding that the Federal Arbitration Act (FAA) requires the enforcement of an arbitration agreement in accordance with its terms, including a class action waiver, and that the expense of proving an individual claim in arbitration is not a basis to refuse to enforce the arbitration agreement.[7]

Like Sutherland, Raniere I concerned an arbitration agreement that made individual, nonclass "arbitration the required and exclusive forum for the resolution of all disputes arising out of or in any way related to employment . . ." including actions under the FLSA. The district court found that plaintiffs had agreed to arbitrate the claims at issue but nonetheless declined to compel arbitration, reasoning that the arbitration agreement was not enforceable because the right to pursue a collective action under the FLSA cannot be waived. This district court also found that, although the named plaintiffs could vindicate their statutory rights in individual arbitration, the plaintiffs had shown that at least one potential class member proved that "'his costs preclude him from effectively vindicating his statutory rights in arbitration.'"

Second Circuit Decisions

On the heels of Amex II, the Second Circuit in Sutherland II found that "in light of the Supreme Court's holding that the 'effective vindication doctrine' cannot be used to invalidate class-action waiver provisions in circumstances where the recovery sought is exceeded by the costs of individual arbitration, we are bound to conclude that Sutherland's arguments are insufficient to invalidate the class-action waiver provision at issue here."[8]

Similarly, in Raniere II, the Second Circuit applied the rationales from Amex II and Sutherland II to "conclude that the District Court erred in concluding that . . . if any one potential class member meets the burden of proving that his costs preclude him from effectively vindicating his statutory rights in arbitration, the clause is unenforceable as to that class or collective."[9]

In addition, the court also ruled in both Sutherland II and Raniere II that the right to proceed as a collective action under the FLSA can be waived, noting that "'every Court of Appeals to have considered this issue has concluded that the FLSA does not preclude the waiver of collective action claims.'"[10] Finally, in Sutherland II, the court considered—and expressly declined to follow—the NLRB's decision in In re D.R. Horton, Inc.,[11] which held that a waiver of the right to pursue an FLSA claim collectively violates the NLRA, stating that it "owe[d] no deference" to the NLRB's decision and questioning the validity of that decision.[12] The Second Circuit's rejection of D.R. Horton follows the U.S. Court of Appeals for the Eighth Circuit's similar decision earlier this year and a host of district court decisions also rejecting the NLRB's holding.


The Second Circuit's decisions in Sutherland II and Raniere II continue the trend of enforcing arbitration agreements with class and collective action waivers in accordance with their terms. In light of this trend, companies should consider the risks and benefits of alternative dispute resolution programs with class and collective actions waivers in deciding an approach that meets the needs of the company.

[1]. Sutherland v. Ernst & Young LLP (Sutherland II), No. 12-304-cv, 2013 WL 4033844 (2d Cir. Aug. 9, 2013), available here.

[2]. American Express Co. v. Italian Colors Rest. (Amex II), 133 S. Ct. 2304 (2013).

[3]. Raniere v. Citigroup Inc. (Raniere II), No. 11-5213-cv (2d Cir. Aug. 12, 2013) (summary order reversing district court decision), available here.

[4]. Raniere II, No. 11-5213-cv, slip op. at 5 (quoting Raniere v. Citigroup Inc. (Raniere I), 827 F. Supp. 2d 294, 314, 317 (S.D.N.Y. 2011)).

[5]. In re American Express Merchs.' Litig. (Amex I), 554 F.3d 300 (2d Cir. 2009).

[6]. Sutherland v. Ernst & Young LLP (Sutherland I), 768 F. Supp. 2d 547, 549 (S.D.N.Y. 2011).

[7]. For a full discussion of the Supreme Court's Amex II decision and its implications for employers, see our June 21, 2013 LawFlash, "Supreme Court Again Enforces an Arbitration Agreement with a Class Action Waiver," available here.

[8]. Sutherland II, 2013 WL 4033844, at *6.

[9]. Raniere II, No. 11-5213-cv, slip op. at 5 (internal quotations omitted).

[10]. Sutherland II, 2013 WL 4033844, at *4; Raniere II, No. 11-5213-cv, slip op. at 5 (quoting Sutherland II, 2013 WL 4033844, at *4).

[11]. In re D.R. Horton, Inc., 357 N.L.R.B. No. 184 (Jan. 3, 2012).

[12]. Sutherland II, 2013 WL 4033844, at *5 n.8.

Copyright 2013. Morgan, Lewis & Bockius LLP. All Rights Reserved.

This article is provided as a general informational service and it should not be construed as imparting legal advice on any specific matter.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.