Collective Arbitration in New York
Bennett, Steven C., Dispute Resolution Journal
STATE COURT DEVELOPMENTS
ANew York intermediate ap - peals court has taken a different view of collective actions, distinguishing them from class arbitration.
On Oct. 20, 2011, in JetBlue Air - ways Corp. v. Stephenson,1 a four-judge panel of New York's Appellate Divi - sion, First Department, held that whether collective arbitration is permissible under an arbitration agreement governed by the Federal Arbi - tration Act (FAA)2 is a question for an arbitrator-not a court-to decide, refusing to expand the narrow list of gateway arbitrability issues reserved for courts. The court held that, when an arbitration agreement is silent on the issue of collective arbitration, an arbitrator may permit the ac tion to proceed on a collective basis. In reaching this conclusion, the court distinguished collective arbitration from class arbitration addressed by the U.S. Su preme Court in Stolt- Nielsen S.A. v. AnimalFeeds International Corp.3
The respondents in Stephenson were 728 unnamed current and 18 named former JetBlue pilots, each of whom had entered into an identical employment agreement with JetBlue. All of the agreements re quired an adjustment in the pilot's base salary if the base salary of newly hired pilots in creased. The agreements also contained an arbitration clause, which provided, in pertinent part:
[I]n the event of any difference of opinion or dispute between the Pilot and the Airline with respect to the construction or interpretation of this Agreement or the al - leged breach thereof which cannot be settled amicably by agreement of the parties ... such dispute shall be submitted to and determined by arbitration by a single arbitrator in the city where the Pilot's base of operations is located in accordance with the rules of the American Arbitration Association.4
The pilots contended that JetBlue improperly failed to increase their sa - laries and filed a single demand for collective arbitration with the Ameri - can Ar bitration Association for breach of the employment agreements. The demand stated that the pilot's individual claims asserted an issue of common law and fact be - tween the par ties and that collective ar bitration was needed to resolve those issues. In response, JetBlue petitioned the trial court, seeking to stay the collective arbitration and compel individual arbitration of the claims pursuant to the FAA.
The trial court considered two issues: (1) whether the FAA applied to employment contracts of passenger airline pilots, and (2) whether the court or the arbitrators should decide whether the arbitrations could be held jointly. Deter mining that the FAA governed the dispute, the trial court denied Jet Blue's petition and remanded the matter to an arbitrator to determine whether the agreements permitted collective arbitration. Jet - blue appealed to the Ap pel late Divi - sion, which af firmed on both is sues. It also ruled that an arbitrator could re quire that the action proceed on a collective basis, even though the agreement was silent on that issue.
Ruling on FAA Section 1 Exclusion
The Appellate Division first ad - dressed the pilots' argument that the arbitration agreement was not covered by the FAA because it fell within the exclusion in Section 1 of the FAA for "any other class of workers en - gaged in foreign or interstate commerce." 5 The pilots cited a trial court decision in Lepera v. ITT Corp.,6 which held that a pilot whose primary re - sponsibility was to transport corporate executives in a private jet was not subject to the FAA by reason of the Section 1 exclusion. JetBlue, however, cited a different trial court case (Kowalewski v. Saman - darov7), which reached the opposite conclusion in the case of car service drivers, ruling that they were subject to the FAA because they only transported passengers, not goods. The court in Kowalewiski had the benefit of the U.S. Supreme Court's analysis in Circuit City Stores v. …